DEF 14A: Definitive proxy statements

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No. __)

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Definitive Proxy Statement

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Soliciting Material Pursuant to Rule 14a-12

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Omega Healthcare Investors, Inc.

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OMEGA HEALTHCARE INVESTORS, INC.
303 International Circle, Suite 200
Hunt Valley, Maryland 21030
(410) 427-1700

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 8, 2018

To our Stockholders:

The Annual Meeting of Stockholders of Omega Healthcare Investors, Inc. (“Omega” or the “Company”) will be held at the Company’s principal executive offices at 303 International Circle, Suite 200, Hunt Valley, Maryland, on Friday, June 8, 2018, at 10:00 A.M. EDT, for the following purposes:

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To elect nine members to Omega’s Board of Directors;

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To ratify the selection of Ernst & Young LLP as our independent auditor for fiscal year 2018;

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To hold an advisory vote on executive compensation;

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To approve the Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan; and

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To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

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The nominees for election as directors are Kapila K. Anand, Craig M. Bernfield, Norman R. Bobins, Craig R. Callen, Barbara B. Hill, Edward Lowenthal, Ben W. Perks, C. Taylor Pickett and Stephen D. Plavin. Kapila K. Anand is nominated to fill the seat on the Board of Directors that will be created upon the retirement of Bernard J. Korman as of the completion of his current term at the Annual Meeting. Each of the other director nominees presently serves as a director of Omega.

Our Board of Directors has fixed the close of business on April 23, 2018 as the record date for the determination of stockholders who are entitled to notice of and to vote at our Annual Meeting or any adjournments or postponements thereof.

On or about May 1, 2018, we will first mail to our stockholders our 2018 Proxy Statement and Annual Report to Stockholders for fiscal year 2017.

We encourage you to attend our Annual Meeting. Whether you are able to attend or not, we urge you to indicate your vote (i) FOR the election of the director nominees, (ii) FOR the ratification of the selection of Ernst & Young LLP as our independent auditor (iii) FOR the approval of the Company’s executive compensation in an advisory vote and (iv) FOR the approval of the 2018 Stock Incentive Plan, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described in the proxy statement. If you attend the meeting, you may vote in person even if you have previously mailed a proxy card or otherwise submitted a vote by Internet or telephone voting.

By order of Omega’s Board of Directors,

C. Taylor Pickett

April 27, 2018
Hunt Valley, Maryland

Table of Contents

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OMEGA HEALTHCARE INVESTORS, INC.
303 International Circle, Suite 200
Hunt Valley, Maryland 21030
(410) 427-1700

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
June 8, 2018

The accompanying proxy is solicited by the Board of Directors to be voted at the Annual Meeting of Stockholders of Omega Healthcare Investors, Inc. (the “Annual Meeting”) to be held at the Company’s principal executive offices at 303 International Circle, Suite 200, Hunt Valley, Maryland, at 10:00 A.M. EDT on June 8, 2018, and any adjournments or postponements of the meeting.

This Proxy Statement, and our Annual Report to Stockholders for fiscal year 2017, which includes our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2018, are available electronically at www.proxyvote.com or www.omegahealthcare.com.

RECORD DATE

Our Board of Directors has fixed April 23, 2018, as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. As of the close of business on the record date, there were 198,600,102 shares of our common stock, par value $0.10 per share, outstanding and entitled to vote. As of the record date, our directors and executive officers beneficially owned 1.65% of the shares of our common stock.

QUORUM AND VOTING

Quorum

Holders of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting as of the record date must be present in person or represented by proxy at the Annual Meeting to constitute a quorum for the conduct of business at the Annual Meeting. Proxies marked as abstaining and “broker non-votes” will be treated as shares present for purposes of determining the presence of a quorum.

Voting

Each holder of record of common stock on the record date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting. We urge stockholders to vote promptly either by:

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Online Internet Voting:   Go to www.proxyvote.com and follow the instructions

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By Telephone:   Call toll-free 1-800-690-6903 and follow the instructions

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By Mail:   Complete, sign, date and return your proxy card in the enclosed envelope

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If your shares are held in “street name,” the availability of telephone and internet voting will depend on the voting processes of the applicable bank or brokerage firm; therefore, it is recommended that you follow the voting instructions on the form you receive from your bank or brokerage firm.

If you vote by proxy, the individuals named on the enclosed proxy card will vote your shares in the manner you indicate. If you do not specify voting instructions, then the proxy will be voted in accordance with recommendations of the Board of Directors as described in this Proxy Statement. If any other matter properly comes before the Annual Meeting, the designated proxies will vote on that matter in their discretion.

Ability to Revoke Proxies

A stockholder voting by proxy has the power to revoke it at any time before it is exercised. A proxy may be revoked by filing with our Secretary (i) a signed instrument revoking the proxy or (ii) a duly executed proxy bearing a later date. A proxy also may be revoked if the person executing the proxy is present at the meeting and elects to vote in person. If the proxy is not revoked, it will be voted by those named in the proxy.

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Broker Non-Votes

A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner.

The vast majority of our stockholders hold their shares through a broker, trustee or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

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Stockholder of Record — If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, the “stockholder of record.” As the stockholder of record, you have the right to grant your voting proxy directly to us or to a third party, or to vote in person at the Annual Meeting.

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Beneficial Owner  — If your shares are held in a brokerage account, by a trustee or by another nominee, you are considered, with respect to those shares, the “beneficial owner.” As the beneficial owner of those shares, you have the right to direct your broker, trustee or nominee how to vote, and you also are invited to attend the Annual Meeting in person. Because a beneficial owner is not the stockholder of record, however, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.

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Each stockholder should instruct his/her/its broker on how to vote on the issues presented for consideration. Brokers who do not receive instructions are entitled to vote those shares ONLY with respect to the ratification of the selection of Ernst & Young LLP as our independent auditor for fiscal year 2018, but not with respect to any other matter to be presented at the Annual Meeting.

VOTES REQUIRED

Election of Directors

You may vote “FOR” or “WITHHELD” with respect to each nominee for the Board of Directors. Because the election of directors is not a contested election, each director will be elected by the vote of the majority of the votes cast. A “contested election” means an election in which the number of candidates exceeds the number of directors to be elected. A “majority of the votes cast” means that the number of the votes cast “FOR” a director exceeds the number of votes “WITHHELD.” Abstentions and broker non-votes, if any, will have no effect on the outcome of the election of directors.

Ratification of Selection of Ernst & Young LLP as Our Independent Auditor

The ratification of the selection of Ernst & Young LLP as our independent auditor for fiscal year 2018 will require the affirmative vote of a majority of the votes cast by all stockholders. Abstentions and broker non-votes, if any, will have no effect on the outcome of the vote on this proposal.

Advisory Vote on Executive Compensation

The approval, on an advisory basis, of the compensation of our executive officers will be decided by a majority of the votes cast by all stockholders. Abstentions and broker non-votes, if any, will have no effect on the outcome of the vote on this proposal. This vote on executive compensation is not binding on the Board of Directors or the Company. Our Board of Directors, however, will consider the results of the vote when considering future executive compensation arrangements.

Approval of 2018 Stock Incentive Plan

The approval of the 2018 Stock Incentive Plan will be decided by a majority of the votes cast by all stockholders. Abstentions and broker non-votes, if any, will have no effect on the on the outcome of the vote on this proposal.

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PROPOSAL 1 — ELECTION OF DIRECTORS

Director Nominees and Voting Requirements

Our Board of Directors currently consists of nine directors. Mr. Bernard J. Korman will retire as a member of the Board upon the completion of his current term as a director as of the Annual Meeting in accordance with our director retirement policy. The Company is grateful to Mr. Korman for his years of dedicated service since the founding of the Company and has designated Mr. Korman as “Director Emeritus” for a one-year term following the Annual Meeting to recognize his years of service and valuable contributions to the Company. See “Director Emeritus Designation” on page 16.

Our Nominating and Corporate Governance Committee of the Board of Directors has nominated Kapila K. Anand, Craig M. Bernfield, Norman R. Bobins, Craig R. Callen, Barbara B. Hill, Edward Lowenthal, Ben W. Perks, C. Taylor Pickett and Stephen D. Plavin for election as directors. Unless authority to vote for the election of directors has been specifically withheld, the persons named in the accompanying proxy card intend to vote FOR the election of the nominees named above to hold office until the 2019 Annual Meeting or until their respective successors have been duly elected and qualified.

If any nominee becomes unavailable for any reason (which event is not anticipated), the shares represented by the enclosed proxy may (unless the proxy contains instructions to the contrary) be voted for such other person or persons as may be determined by the holders of the proxies.

Your broker may not vote your shares in the election of directors unless you have specifically directed your broker how to vote your shares. As a result, we urge you to instruct your broker how to vote your shares.

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Information Regarding Directors

Information about each director nominee, and the other individuals who currently serve on our Board of Directors, is set forth below.

Director Nominees

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Voting Required for Election

Each director will be elected by the vote of the majority of the votes cast. A “majority of the votes cast” means that the number of the votes cast “FOR” a director exceeds the number of votes “WITHHELD.” Abstentions and broker non-votes, if any, will have no effect on the outcome of the election of directors.

Recommendation of the Board

The Board of Directors unanimously recommends a vote FOR the election of each of the director nominees identified above.

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STOCK OWNERSHIP INFORMATION

The following table sets forth information regarding the beneficial ownership of our common stock as of April 10, 2018 for:

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each of our directors and the executive officers appearing in the table under “Executive Compensation Tables and Related Information, Summary Compensation Table” included elsewhere in this Proxy Statement; and

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all persons known to us to be the beneficial owner of more than 5% of our outstanding common stock.

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Beneficial ownership of our common stock, for purposes of this Proxy Statement, includes shares of our common stock as to which a person has voting and/or investment power, or the right to acquire such power within 60 days of April 10, 2018. Except for shares of restricted stock and unvested units as to which the holder does not have investment power until vesting or as otherwise indicated in the footnotes, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them, subject to community property laws where applicable. The “Common Stock Beneficially Owned” columns do not include unvested time-based restricted stock units (“RSUs”), unvested performance-based restricted stock units (“PRSUs”), and deferred stock units under our Deferred Compensation Plan (except to the extent such units vest or the applicable deferral period expires within 60 days of April 10, 2018) or common stock issuable in respect of operating partnership units (“OP Units”) or profits interests in OHI Healthcare Properties Limited Partnership (“Omega OP”). Accordingly, we have provided supplemental information regarding deferred stock units, unvested RSUs, and earned but not yet vested PRSUs under the caption “Common Stock Equivalents.” For information regarding unearned, unvested PRSUs for performance periods not yet completed, see “Outstanding Equity Awards at Fiscal Year End” below.

The business address of the directors and executive officers is 303 International Circle, Suite 200, Hunt Valley, Maryland 21030. As of April 10, 2018 there were 198,594,841 shares of our common stock outstanding and no preferred stock outstanding.

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Less than 0.10%

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(1)

Incudes unvested RSUs, which in each case vest more than 60 days from March 31, 2018, subject to continued employment. Each unit represents the right to receive one share of common stock. See “Outstanding Equity Awards at Fiscal Year End.”

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(2)

Deferred stock units representing the deferral of vested equity awards pursuant to the Company’s Deferred Stock Plan. Includes deferred stock units associated with RSUs and PRSUs vesting within 60 days which the holder has elected to defer. The deferred stock units will not be converted until the date or event specified in the applicable deferred stock agreement. See “Nonqualified Deferred Compensation.”

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(3)

Messrs. Bernfield and Insoft beneficially own OP Units in Omega OP. OP Units are redeemable at the election of the holder for cash equal to the value of one share of our common stock priced at the average closing price for the 10-day trading period ending on the date of the holder’s notice of election to redeem the OP Units, subject to the Company’s election to exchange the OP Units tendered for redemption for shares of Omega common stock on a one-for-one basis, in each case subject to adjustment.

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(4)

Percent of class reflects 198,594,841 shares of common stock outstanding as of April 10, 2018, plus a total of 9,583,388 common stock equivalents, consisting of 438,322 unvested restricted stock units, 377,944 deferred stock units and approximately 8,767, 122 OP Units.

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(5)

Common Stock Beneficially Owned includes 7,803 shares of restricted stock, subject to forfeiture until vested. OP Units include (i) 94,619 OP units held by CMB Aviv Acquisition, L.L.C., a limited liability company of which Mr. Bernfield is the sole member and manager and (ii) 2,797,836 OP units held by Craig M. Bernfield C Unit, L.L.C., a limited liability company of which Mr. Bernfield is a member and the sole manager. Mr. Bernfield disclaims beneficial ownership of the securities held by Craig M. Bernfield C Unit, L.L.C. and such trusts except to the extent of his pecuniary interest therein. A total of 16,065 of the OP Units are held by Mr. Bernfield subject to a phantom unit award grant to Mr. Insoft. Mr. Bernfield has no pecuniary interest in the OP Units subject to the phantom unit award and disclaims of such securities.

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(6)

Includes 9,404 shares of restricted stock, subject to forfeiture until vested.

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Includes deferred stock units with respect to 9,164 shares of restricted stock, subject to forfeiture until vested.

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Includes 9,404 shares of restricted stock, subject to forfeiture until vested.

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(9)

Operating Partnership Units includes 78,742 Omega OP Units held by Steven J. Insoft Investments, L.L.C., which is 99% owned by Mr. Insoft and 1% owned by his wife, Susan M. Insoft. 48,194 of Mr. Insoft’s shares are pledged as collateral to secure a loan in favor of Mr. Insoft. Does not include 32,130 OP Units subject to a phantom unit award grant to Mr. Insoft because Mr. Insoft does not have the right to acquire voting or dispositive power with respect to such securities within 60 days.

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(10)

Includes deferred stock units with respect to 9,903 shares of restricted stock, subject to forfeiture until vested.

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Includes 7,803 shares of restricted stock, subject to forfeiture until vested.

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Includes 7,803 shares of restricted stock, subject to forfeiture until vested.

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(13)

Includes 7,803 shares of restricted stock, subject to forfeiture until vested. The remainder of Mr. Plavin’s shares are owned jointly with his wife.

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(14)

Except as otherwise indicated below, information regarding 5% beneficial owners is based on information reported on Schedule 13G filings by the beneficial owners indicated with respect to the common stock of Omega.

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(15)

Based on a Schedule 13G/A filed with the SEC on February 9, 2018 by The Vanguard Group, Inc., including on behalf of certain subsidiaries. The Vanguard Group, Inc. is located at 100 Vanguard Blvd. Malvern, PA 19355. The Vanguard Group, Inc., has sole voting power with respect to 332,714 of the shares, shared voting power with respect to 258,625 of the shares, sole dispositive power with respect to 32,261,323 of the shares and shared dispositive power with respect to 347,306 of the shares.

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(16)

Based on a Schedule 13G/A filed with the SEC on February 2, 2018 by Vanguard Specialized Funds — Vanguard REIT Index Fund. Vanguard Specialized Funds — Vanguard REIT Index Fund is located at 100 Vanguard Blvd. Malvern, PA 19355. Vanguard Specialized Funds — Vanguard REIT Index Fund has sole voting power with respect to 13,280,441 of the shares.

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(17)

Based on a Schedule 13G/A filed with the SEC on January 23, 2018 by BlackRock, Inc., including on behalf of certain subsidiaries. BlackRock Inc. is located at 55 East 52nd Street New York, New York 10055. BlackRock, Inc., has sole voting power with respect to 20,451,212 of the shares and sole dispositive power with respect to 21,258,742 of the shares.

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BOARD COMMITTEES AND CORPORATE GOVERNANCE

Board of Directors and Committees of the Board

The members of the Board of Directors on the date of this Proxy Statement and the Committees of the Board on which they serve are identified below.

The Board of Directors held nine meetings during 2017. Each member of the Board of Directors attended more than 75% of the meetings of the Board of Directors and of the committees of which such director was a member in 2017. While we invite our directors to attend our Annual Meeting of Stockholders, we currently do not have a formal policy regarding director attendance. Mr. Pickett, in his capacity as a director of the Company, was the sole representative of the Board of Directors at, and acted as Chairman of, the 2017 Annual Meeting.

Director Independence

All of the members of the Board of Directors and director nominees meet the NYSE listing standards for independence, other that our Chief Executive Officer Mr. Pickett. While the Board of Directors has not adopted any categorical standards of independence, in making these independence determinations, the Board of Directors noted that no director other than Mr. Pickett (a) received direct compensation from our Company other than director annual retainers and meeting fees, (b) had any relationship with our Company or a third party that would preclude independence or (c) had any material business relationship with our Company and its management, other than as a director of our Company. Each of the members of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee meets the NYSE listing standards for independence.

Board Leadership Structure and Risk Oversight

Since 2001, an independent non-employee director has served as the Chairman of the Board of Directors rather than our Chief Executive Officer. We separate the roles of Chief Executive Officer and Chairman of the Board in recognition of the difference between the two roles. The Chief Executive Officer is responsible for implementing the strategic direction for the Company as approved by the Board of Directors and the management of the day-to-day operations of the Company, while the Chairman of the Board provides guidance to the Chief Executive Officer, and sets the agenda for and presides over meetings of the Board. Mr. Callen, as Chairman of the Board, presides over any meeting, including regularly scheduled executive sessions of the non-management directors. If Mr. Callen is not present at such a session, the presiding director is chosen by a vote of those present at the session.

Risk Oversight

The Board of Directors, as a whole and at the committee level, plays an important role in overseeing the management of risk. Management is responsible for identifying the significant risks facing the

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Company, implementing risk management strategies that are appropriate for the Company’s business and risk profile, integrating consideration of risk and risk management into the Company’s decision-making process and communicating information with respect to material risks to the Board or the appropriate committee.

Portfolio and investment risk is one of the principal risks faced by the Company. We manage portfolio and investment risk by, among other things, seeking Investment Committee and/or Board approval for new investments over designated thresholds and providing detailed underwriting information on such proposed investments to the Investment Committee or the Board, as the case may be. In addition, our full Board regularly reviews the performance, credit information and coverage ratios of our operators.

Consistent with the rules of the NYSE, the Audit Committee provides oversight with respect to risk assessment and risk management, the Company’s financial statements and internal control over financial reporting. The Compensation Committee reviews risks associated with the Company’s compensation plans and arrangements. While each committee monitors certain risks and the management of such risks, the full Board is regularly informed about such matters. The full Board generally oversees risk and risk management issues otherwise arising in the Company’s business and operations.

Audit Committee

The Audit Committee met six times in 2017, which included one joint meeting with the Board and other committees. Its primary function is to assist the Board of Directors in fulfilling its oversight responsibilities with respect to: (i) the financial information to be provided to stockholders and the SEC; (ii) the system of internal controls that management has established; and (iii) the external independent audit process. In addition, the Audit Committee selects our Company’s independent auditors and provides an avenue for communication between the independent auditors, financial management and the Board of Directors.

Each of the members of the Audit Committee is independent and financially literate, as required of audit committee members by the NYSE. The Board of Directors has determined that Messrs. Plavin and Perks each qualify as an “audit committee financial expert” as such term is defined in Item 401(h) of Regulation S-K promulgated by the SEC. The Board of Directors made a qualitative assessment of Mr. Plavin’s level of knowledge and experience based on a number of factors, including his formal education and his experience as Chief Executive Officer and a director of Blackstone Mortgage Trust, Inc. (formerly Capital Trust, Inc.), a New York City-based mortgage REIT managed by Blackstone, where he is responsible for all management activities. Additionally, Mr. Plavin holds an M.B.A. from J.L. Kellogg Graduate School of Management at Northwestern University. The Board of Directors made a qualitative assessment of Mr. Perks’ level of knowledge and experience based on his 22 years of experience as an audit partner at PricewaterhouseCoopers and its predecessors, and his experience as Chief Financial Officer of Navigant Consulting, Inc.

The Board has appointed Ms. Anand to the Audit Committee, effective as of her election to the Board at the Annual Meeting. The Board has determined that Ms. Anand qualifies as an audit committee financial expert based on her substantial experience in accounting and auditing as a partner of KPMG LLP and as a public company audit committee member.

Compensation Committee

The Compensation Committee has responsibility for determining the compensation of our executive officers and administering our equity incentive plan. During 2017, the Compensation Committee met six times, which included two joint meetings of the Board and other committees and one joint meeting of the Board and the Compensation Committee. The responsibilities of the Compensation Committee are more fully described in its Charter, which is available on our website at www.omegahealthcare.com.

Investment Committee

The Investment Committee works with management to develop strategies for growing our portfolio and has authority to approve investments up to established thresholds. The Investment Committee met three times during 2017.

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Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee met seven times during 2017, which included two joint meetings of the Board and other committees. The Nominating and Governance Committee has responsibility for identifying potential nominees to the Board of Directors and reviewing their qualifications and experience. The process for identifying and evaluating nominees to the Board is initiated by identifying candidates who meet the criteria for selection as a nominee and have the specific qualities or skills being sought based on input from members of the Board of Directors and, if the Nominating and Corporate Governance Committee deems appropriate, a third-party search firm. Nominees for director are selected based on their depth and breadth of experience, industry experience, financial background, integrity, ability to make independent analytical inquiries and willingness to devote adequate time to director duties, among other criteria. The Company does not have a policy with regard to consideration of diversity in identifying nominees, and historically diversity has not been a material factor in selecting nominees to the Board. The Nominating and Corporate Governance Committee also develops and implements policies and practices relating to corporate governance.

The Nominating and Corporate Governance Committee will consider written proposals from stockholders for nominees as director. Any such nomination should be submitted to the Nominating and Corporate Governance Committee through our Secretary in accordance with the procedures and time frame described in our Bylaws and as set forth under “Stockholder Proposals” below.

Stock Plan Special Administrative Committee

In addition to the Committees listed above, in February 2015 the Board established a Special Administrative Committee under our 2013 Stock Incentive Plan consisting solely of Mr. Pickett, with the authority to allocate and grant awards thereunder to employees of the Company and its affiliates who are not executive officers of the Company up to a maximum number of units or shares authorized by the Board from time to time. For 2017, the Special Administrative Committee is authorized to grant awards of up to 130,000 RSUs, PRSUs and profits interests in Omega OP (“LTIP Units”), of which up to 40,000 can be time-based and up to 90,000 (at the high level of performance) can be performance-based. For 2018, the Special Administrative Committee is authorized to grant awards of up to 160,000 RSUs, PRSUs and LTIP Units, of which up to 50,000 can be time-based and up to 110,000 (at the high level of performance) can be performance-based.

Communicating with the Board of Directors and the Audit Committee

The Board of Directors and our Audit Committee have established procedures to enable anyone who has a concern about our conduct, or any employee who has a concern about our accounting, internal controls or auditing matters, to communicate that concern directly to the non-management members of the Board of Directors or the Audit Committee, as applicable. These communications may be confidential or anonymous and may be submitted in writing or through the Internet. The employees have been provided with direct and anonymous access to each of the members of the Audit Committee. Our Company’s Code of Business Conduct and Ethics (“Code of Ethics”) prohibits any employee of our Company from retaliating or taking adverse action against anyone raising or helping resolve a concern about our Company.

Interested parties may contact our non-management directors by writing to them at our headquarters: Omega Healthcare Investors, Inc., 303 International Circle, Suite 200, Hunt Valley, Maryland 21030, or by contacting them through our website at www.omegahealthcare.com. Communications addressed to the non-management members of the Board of Directors will be reviewed by our corporate communications liaison, which is our outside legal counsel, and will be directed to the appropriate director or directors for their consideration. The corporate communications liaison may not “filter out” any direct communications from being presented to the non-management members of the Board of Directors and Audit Committee members without instruction from the directors or committee members. The corporate communications liaison is required to maintain a record of all communications received that were addressed to one or more directors, including those determined to be inappropriate communications. Such record will include the name of the addressee, the disposition by the corporate communications liaison and, in the case of communications determined to be inappropriate, a brief description of the nature of the communication. The corporate communications liaison is required to provide a copy of any additions to the record upon request of any member of the Board of Directors.

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Policy on Related Party Transactions

We have a written policy regarding related party transactions under which we have determined that we will not engage in any purchase, sale or lease of property or other business transaction in which our officers or directors have a direct or indirect material interest without the approval by resolution of a majority of those directors who do not have an interest in such transaction. It is generally our policy to enter into or ratify related party transactions only when our Board of Directors, acting through our Audit Committee, determines that the related party transaction in question is in, or is not inconsistent with, our best interests and the interests of our stockholders.

Security Deposit Indemnification Agreements

Prior to 2002, certain of the entities that were combined in connection with the formation of Aviv’s predecessor partnership distributed security deposits paid by certain of their tenants to the owners of those entities in exchange for an agreement by those owners to repay the amounts distributed if and when the applicable tenant became entitled to a return of the security deposit or the deposit was otherwise applied under the applicable lease. These arrangements were kept in place in connection with the formation of Aviv’s predecessor partnership. As of December 31, 2014, entities controlled by Mr. Bernfield were obligated to potentially reimburse approximately $292,000.

Code of Business Conduct and Ethics

We have adopted a written Code of Ethics that applies to all of our directors and employees, including our Chief Executive Officer, Chief Operating Officer, Chief Corporate Development Officer and Chief Financial Officer. A copy of our Code of Ethics is available on our website at www.omegahealthcare.com, and print copies are available upon request without charge. You can request print copies by contacting our Chief Financial Officer in writing at Omega Healthcare Investors, Inc., 303 International Circle, Suite 200, Hunt Valley, Maryland 21030, or by telephone at 410-427-1700. Any amendment to our Code of Ethics or any waiver of our Code of Ethics will be disclosed on our website at www.omegahealthcare.com promptly following the date of such amendment or waiver.

Stock Ownership Guidelines

The Board of Directors has adopted stock ownership guidelines to foster long-term stock holdings by Company leadership. These guidelines create a strong link between stockholders’ and management’s interest. The Chief Executive Officer is required to own shares in the Company with a value equal to at least six times his annual base salary. The Chief Operating Officer, Chief Corporate Development Officer and Chief Financial Officer are required to own shares in the Company with a value equal to at least three times their respective annual base salaries. Each non-employee director is required to own shares in the Company with a value equal to at least five times the annual cash retainer for serving as a member of the Board of Directors within five years of the director’s appointment. The complete stock ownership guidelines contained in the Corporate Governance Guidelines are available through our website at www.omegahealthcare.com.

Policy on Hedging and Pledging of Company Securities

We consider it inappropriate for any director or officer to enter into speculative transactions in our Company’s securities. Therefore, we prohibit the purchase of or sale of puts, calls, options or other derivative instruments related to our Company’s securities or debt. Our policy also prohibits hedging or monetization transactions, such as forward sale contracts, in which the stockholder continues to own the underlying security without all the risks or rewards of ownership.

Additionally, directors and officers may not purchase our Company’s securities on margin or borrow against any account in which our securities are held. The transition provision allowing existing pledging in place as of 2015 to remain in place through February 27, 2018 has now expired. All of our directors and officers are in compliance with this policy.

Director Retirement Policy

It is the general policy of the Board of Directors that after reaching 77 years of age, directors shall not stand for re-election and thereafter shall retire from the Board of Directors upon the completion of the

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term of office to which they were elected. On the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors may waive this requirement as to any director if it deems such waiver to be in the best interests of the Company.

Director Emeritus Designation

At the recommendation of the Nominating and Corporate Governance Committee, the Board has designated Bernard J. Korman as “Director Emeritus” upon his retirement as member of the Board of Directors effective as of the Annual Meeting and continuing until the 2019 Annual Meeting. Mr. Korman served as Chairman of the Board from 2004 to 2017. As Director Emeritus, Mr. Korman will be eligible to attend Board meetings. Mr. Korman will not be entitled to vote on any business coming before the Board, nor will he be counted as a member of the Board for the purpose of determining a quorum or for any other purpose. Mr. Korman will be reimbursed for reasonable expenses incurred to attend in-person Board meetings or committee meetings to which he is invited, but will not receive any other compensation for service as Director Emeritus. Following the Annual Meeting, Mr. Korman will not be a member of the Board or a “director” as that term is used in our Amended and Restated Bylaws, this Proxy Statement or otherwise.

Corporate Governance Materials

The Corporate Governance Guidelines, Code of Ethics and the charters of the committees of the Board are available free of charge through our website at www.omegahealthcare.com and are available in print to any stockholder who requests them.

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PROPOSAL 2 — PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITOR FOR THE FISCAL YEAR 2018

The Audit Committee has selected Ernst & Young LLP as our Company’s independent auditor for the current fiscal year, and the Board of Directors is asking stockholders to ratify that selection. Although current law, rules and regulations, as well as the charter of the Audit Committee, require our Company’s independent auditor to be engaged, retained and supervised by the Audit Committee, the Board of Directors considers the selection of the independent auditor to be an important matter of stockholder concern and is submitting the selection of Ernst & Young LLP for ratification by stockholders as a matter of good corporate governance. However, if the stockholders do not ratify the selection, the Board of Directors and the Audit Committee will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the Board of Directors and the Audit Committee in their discretion may change the appointment at any time during the year if they determine that such a change would be in the best interest of us and our stockholders. Information concerning the services Ernst & Young LLP provided to us can be found beginning on page 18 below.

Voting Required for Approval

The affirmative vote of holders of a majority of all votes cast on the matter is required to ratify the selection of Ernst & Young LLP as our Company’s independent auditor for the current fiscal year. Accordingly, abstentions and broker non-votes, if any, will have no effect on the outcome of the vote on any of these proposals.

Recommendation of the Board

The Board of Directors and the members of the Audit Committee unanimously recommend a vote FOR the proposal to ratify the selection of Ernst & Young LLP as our independent auditor for the fiscal year 2018.

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AUDIT COMMITTEE AND INDEPENDENT AUDITOR MATTERS

The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of our Company, the audits of our financial statements, the qualifications of the public accounting firm engaged as our independent auditor to prepare and issue an audit report on our financial statements and the related internal control over financial reporting, and the performance of our independent auditors. The Audit Committee has the sole authority and responsibility to select, evaluate and, when appropriate, replace our Company’s independent auditors, as well as determine the amount of the fees paid to the Company’s independent auditors. The Audit Committee’s function is more fully described in its charter, which is available on our website at www.omegahealthcare.com. The Board of Directors and the Audit Committee review the Audit Committee Charter annually.

The Board of Directors has determined that each Audit Committee member is independent under the standards of director independence established under our corporate governance policies and the NYSE listing requirements and is also “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Board of Directors has determined that Ben Perks and Stephen Plavin each qualify as an “audit committee financial expert,” as defined by SEC rules. The Board of Directors has appointed Kapila Anand to the Audit Committee, effective as of her election to the Board at the Annual Meeting and has determined that she is independent and qualifies as an audit committee financial expert.

Management is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles, internal control over financial reporting and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. Our Company’s independent auditor, Ernst & Young LLP, is responsible for auditing and expressing opinions on the conformity of our Company’s consolidated financial statements with accounting principles generally accepted in the United States, and the effectiveness of our Company’s internal control over financial reporting based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).

Audit Committee Report

The Audit Committee, with respect to the audit of Omega’s 2017 audited consolidated financial statements, reports as follows:

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The Audit Committee has reviewed and discussed our 2017 audited consolidated financial statements with Omega’s management;

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The Audit Committee has met with and discussed with Ernst & Young LLP, our independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 1301, as amended, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”);

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•

The Audit Committee has received written disclosures and the letter from Ernst & Young LLP required by the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP its independence from Omega;

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•

Based on reviews and discussions of Omega’s 2017 audited consolidated financial statements with management and discussions with Ernst & Young LLP, the Audit Committee recommended to the Board of Directors that Omega’s 2017 audited consolidated financial statements be included in our Company’s Annual Report on Form 10-K; and

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•

The Audit Committee has also reviewed the services provided by Ernst & Young LLP discussed below and has considered whether provision of such services is compatible with maintaining auditor independence.

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Audit Committee of the Board of Directors

Ben W. Perks, Chairman
Craig R. Callen
Edward Lowenthal
Stephen D. Plavin

Independent Auditors

Ernst & Young LLP audited our consolidated financial statements as of December 31, 2017 and 2016 and for each of the years ended December 31, 2017, 2016, and 2015. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will be given the opportunity to make a statement if they desire to do so. It is also expected that they will be available to respond to appropriate questions from stockholders at the Annual Meeting. Approval of our independent auditors is not a matter required to be submitted to stockholders; however, the Board considers the selection of the independent auditor to be an important matter of stockholder concern and is submitting the selection of Ernst & Young LLP for ratification by stockholders as a matter of good corporate practice.

Fees

The following table presents fees for professional services rendered by Ernst & Young LLP for the audit of our Company’s annual financial statements for the fiscal years 2017 and 2016 and fees billed for other services rendered by Ernst & Young LLP during those periods, all of which were pre-approved by the Audit Committee.

Audit Fees

The aggregate fees billed by Ernst & Young LLP for professional services rendered to our Company for the audit of our Company’s annual financial statements for fiscal years 2017 and 2016, the audit of the effectiveness of our Company’s internal control over financial reporting related to Section 404 of the Sarbanes-Oxley Act of 2002 for fiscal years 2017 and 2016, the reviews of the financial statements included in our Company’s Forms 10-Q for fiscal years 2017 and 2016, and services relating to securities and other filings with the SEC, including comfort letters and consents, were approximately $1,522,000 and $1,418,000, respectively.

Audit Related Fees

Ernst & Young LLP was not engaged to perform services for our Company relating to due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation, or consultation concerning financial accounting and reporting standards for fiscal years 2017 and 2016.

Tax Fees

The tax fees billed by Ernst & Young LLP to our Company for tax compliance and preparation services for fiscal years 2017 and 2016 were approximately $737,000 and $719,000, respectively. The tax fees

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billed by Ernst & Young LLP to our Company for tax advice and tax planning services for fiscal years 2017 and 2016 were approximately $166,000 and $578,000, respectively.

All Other Fees

The aggregate other fees billed by Ernst & Young LLP to our Company were approximately $2,000 for fiscal years 2017 and 2016, respectively

Determination of Auditor Independence

The Audit Committee considered the provision of non-audit services by our independent auditor and has determined that the provision of such services was consistent with maintaining the independence of Ernst & Young LLP.

Audit Committee’s Pre-Approval Policies

The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all fees paid to, and all services performed by, our Company’s independent auditor, provided, however, pre-approval requirements for non-audit services are not required if all such services: (1) do not aggregate to more than five percent of total fees paid by us to our accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.

At the beginning of each year, the Audit Committee approves the proposed services, including the nature, type and scope of service contemplated and the related fees, to be rendered by the firm during the year. In addition, Audit Committee pre-approval is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees approved by the Audit Committee. For each category of proposed service, the independent auditing firm is required to confirm that the provision of such services does not impair its independence. Pursuant to the Sarbanes-Oxley Act of 2002, the fees and services provided as noted in the table above were authorized and approved by the Audit Committee in compliance with its pre-approval policies and procedures described herein.

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PROPOSAL 3  —  ADVISORY VOTE ON EXECUTIVE COMPENSATION

Background on Advisory Vote

Federal legislation (Section 14A of the Exchange Act) requires that we include in this Proxy Statement a non-binding stockholder vote on our executive compensation as described in this Proxy Statement (commonly referred to as “Say-on-Pay”).

Our Executive Compensation Program

As described more fully in our Compensation Discussion and Analysis section beginning on page 29 of this Proxy Statement (“CD&A”) and the related tables and narrative, we design our executive compensation program to reward, retain and, in the case of new hires, attract executive officers to support our business strategy, achieve our short-term and long-term goals, and provide continued success for our operators, stockholders, employees and communities. At the core of our executive compensation program is our pay-for-performance philosophy that links competitive levels of compensation to achievements of our overall strategy and business goals, as well as predetermined objectives. We believe our executive compensation program is strongly aligned with the interests of our stockholders and sound corporate governance principles.

The Compensation Committee engages in an annual review to establish the annual salaries and the terms and conditions of annual cash bonus opportunities, long-term incentive awards and employment agreements with our executive officers. The compensation programs for 2016 and 2017 were described in the CD&A included in the Company’s proxy statement for our 2017 annual meeting of stockholders, at which over 96% of the votes cast approved the Company’s executive compensation in the advisory “Say-on-Pay” vote.

We urge you to read the CD&A section of this Proxy Statement for the details on the Company’s executive compensation program, including the executive compensation programs implemented for 2017-2019 and 2018-2020. Our executive compensation programs emphasize pay for performance, such that the interests of all of our executive officers are aligned with the interests of stockholders. For a detailed description of how we have structure performance based compensation programs and the recent results, see “Compensation Discussion and Analysis — Pay for Performance Alignment.”

Proposed Vote

The following resolution will be submitted for a stockholder vote at the Annual Meeting:

RESOLVED, that the Company’s stockholders approve the compensation of the Company’s executive officers as described in the Proxy Statement issued in connection with the 2018 Annual Meeting of stockholders, including in the “Compensation Discussion and Analysis” section, the compensation tables and the other narrative compensation disclosures contained therein.

Because the vote is advisory, the outcome of the vote will not be binding upon the Board of Directors, the Compensation Committee or the Company, and neither the Board of Directors nor the Compensation Committee will be required to take any action as a result of the outcome of the vote on this proposal; however, the Compensation Committee will consider the outcome of the vote when evaluating future executive compensation arrangements.

Voting Required for Approval

Approval, on an advisory basis, of the compensation of our executive officers will be decided by the affirmative vote of a majority of the votes cast by all stockholders entitled to vote. Abstentions and broker non-votes, if any, will have no effect on the outcome of the vote on this proposal.

Recommendation of the Board

The Board of Directors unanimously recommends a vote FOR the approval of the compensation of the Company’s executive officers as described in this Proxy Statement.

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PROPOSAL 4 — APPROVAL OF 2018 STOCK INCENTIVE PLAN

Recommendation of the Board

The Board of Directors unanimously recommends that the stockholders vote FOR this Proposal 4, the proposal to approve the 2018 Stock Incentive Plan (the “2018 Plan”).

Background of the 2018 Plan

The 2018 Plan is a comprehensive incentive compensation plan that allows for various types of equity-based compensation, including restricted stock units (including performance restricted stock units), stock awards (including restricted stock), incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, performance unit awards, cash-based awards and other stock-based awards. The purposes of the 2018 Plan are to (a) to provide incentives to officers, employees, directors and consultants of the Company and its affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company, (b) encourage stock ownership by officers, employees, directors and consultants by providing them with a means to acquire a proprietary interest in the Company, acquire shares of our common stock, or to receive compensation which is based upon appreciation in the value of our common stock, and (c) provide a means of obtaining, rewarding and retaining officers, employees, directors, and consultants.

The 2018 Plan is an amendment and restatement of, and upon stockholder approval will replace, the Omega Healthcare Investors, Inc. 2013 Stock Incentive Plan (the “2013 Plan”). The total number of shares of our common stock authorized for issuance under equity compensation awards has not been increased since the 2013 Plan was approved by stockholders in June 2013. As of March 31, 2018, 3,229,090 shares are subject to outstanding awards under the 2013 Plan, (based on the number of shares issuable under the outstanding PRSU awards at high performance) and 428,998 shares remain available for future awards under our 2013 Plan.

Because the 2018 Plan is an amendment and restatement of the 2013 Plan, the shares reserved under the 2018 Plan will be the only shares reserved for issuance in connection with equity compensation following stockholder approval of the 2018 Plan.

We wish to increase the number of shares available for issuance as equity compensation to be able to offer appropriate equity incentives going forward. Approval of the 2018 Plan would result in a 4,500,000 share increase in the number of shares of our common stock currently reserved for issuance under our 2013 Plan. We are seeking to reserve these additional shares for issuance as equity compensation because our executive compensation program heavily relies on the use of performance awards where the number of shares actually earned and issued varies substantially based on performance. In order to appropriately motivate and incentivize our employees, the performance awards are structured to provide the opportunity for greater awards for higher performance. As a result, the Company needs to reserve sufficient shares for issuance at the high performance level, even though actual performance may vary from year to year. For example, no shares were issued under the PRSUs and LTIP Units granted in 2015. However, the Company needs to have enough shares available for issuance in the event outstanding awards are earned in full.

NYSE listing requirements require that we submit the 2018 Plan to our stockholders for approval. In addition, Internal Revenue Code rules require that we obtain stockholder approval of the 2018 Plan in order to be able to issue incentive stock options under the 2018 Plan. Our Board of Directors has approved the 2018 Plan, subject to stockholder approval of the 2018 Plan. If approved by the stockholders, the 2018 Plan will become effective June 8, 2018 (the “Effective Date”). The following discussions of the 2018 Plan is qualified in its entirety by reference to the applicable provisions of the 2018 Plan document, which is attached as Annex A to this proxy statement.

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How the 2018 Plan is Designed to Protect Stockholders’ Interests

The following features of the 2018 Plan are intended to continue to protect the interests of our stockholders:

•

Limits on terms of options and stock appreciation rights.   The maximum terms of each stock option and stock appreciation right that can be granted under the 2018 Plan is ten years.

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•

Limits on share recycling.   As discussed under the heading “Material Changes in the 2018 Plan,” the 2018 Plan does not permit liberal share recycling.

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•

No repricing of options or stock appreciation rights.   The 2018 Plan prohibits the repricing of “underwater” options and stock appreciation rights, whether by amending an existing award, substituting a new award at a lower price or executing a cash buyout, unless specifically approved by the Company’s stockholders.

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•

No discounted options or stock appreciation rights.   The 2018 Plan prohibits granting options or stock appreciation rights with an exercise price less than the fair market value per share of our common stock on the date of grant.

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•

No automatic change in control benefits.   The 2018 Plan does not provide any automatic benefits upon a change in control or any excise tax gross-ups.

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•

No liberal change in control definition.   As discussed under the heading “Material Changes in the 2018 Plan,” the 2018 Plan does not allow the use of a liberal change in control definition and prohibits accelerated vesting in connection with a liberal change in control definition.

​

•

Limits on non-employee director compensation.   As discussed under the heading “Material Changes in the 2018 Plan,” the 2018 Plan places a meaningful limit on each non-employee director’s annual compensation.

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•

Limits on Dividend Equivalent Rights.   The 2018 Plan does not permit dividend equivalent rights to apply to options or stock appreciation rights.

​

•

No Transfer for Value.   The 2018 Plan provides that awards are not transferable or assignable, except by the laws of descent and distribution or as permitted by the Compensation Committee, except that the Committee may not allow a participant to transfer an award for value.

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•

Clawback.   Awards are subject to forfeiture to the extent provided in any clawback policy adopted by the Company.

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In voting on the 2018 Plan, we also urge stockholders to note the factors regarding our executive compensation program and pay-for-performance practices highlighted under “Proposal 3 — Advisory Vote on Executive Compensation.”

Material Changes in the 2018 Plan

The 2018 Plan makes some changes to the 2013 Plan. The material changes are summarized below:

•

The 2018 Plan increases the number of shares of common stock available for issuance under the 2013 Plan by 4,500,000 shares. After this change, the number of shares available for future awards under the 2018 Plan is the sum of the number of shares available under the 2013 Plan for issuance of future awards immediately before the Effective Date plus 4,500,000 shares. Shares attributable to awards (including prior awards under the 2013 Plan) which are forfeited, cancelled, expired, terminated or paid or settled in cash or otherwise without the issuance of common stock (except for shares that cannot be recycled into the 2018 Plan as discussed in the next bullet point) are again available for grant under the 2018 Plan. The maximum number of shares that can be made subject to the grant of incentive stock options is the maximum number of shares available under the 2018 Plan.

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•

The 2018 Plan prohibits liberal share recycling, consistent with best current practices. Specifically, shares that have been (i) tendered or withheld to pay the exercise price of options or stock appreciation rights, (ii) withheld to satisfy tax withholding, (iii) repurchased by the Company

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using cash proceeds from the exercise of options or (iv) subject to a stock appreciation right or option and not issued upon net settlement or net exercise of the stock appreciation right or option. In contrast, the 2013 Plan permitted such shares to be recycled into the plan.

•

The 2018 Plan limits the amount of compensation in the form of Omega common stock payable to each non-employee director of the Company for service in such capacity. Specifically, the grant date fair value of awards in the form of Omega common stock or that are payable in Omega common stock cannot exceed $750,000 per director per year. In contrast, the 2013 Plan did not contain a limit that applied to non-employee directors.

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•

The 2018 Plan provides in general that the term “change in control,” will (if used) be defined in the applicable award agreement, but provides that a liberal change in control definition cannot be used. Specifically, the 2018 Plan provides that a change in control cannot be triggered upon any event that does not result in an actual change in control of the Company, such as an announcement or commencement of a tender offer or exchange offer, a potential takeover, stockholder approval (as opposed to consummation) of a merger or other transaction, acquisition of less than 15% or less of the outstanding voting securities of the Company, an unapproved change in less than a majority of the Board or other similar provisions in which the Committee determines that an actual change in control does not occur. Further, the 2018 Plan prohibits the Committee from accelerating vesting of an award in connection with a liberal change in control definition.

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•

The 2018 Plan deletes many provisions that were previously in the 2013 Plan solely to qualify certain performance-based compensation payable to named executive officers for a tax deduction under Section 162(m) of the Internal Revenue Code to the extent that the compensation exceeded $1,000,000 per year per officer. This includes, for example, deleting the specific list of performance goals and deleting per officer annual limits on awards under the plan. The Compensation Committee of the Board of Directors (referred to as the “Committee” in this Proposal 4 section of this Proxy Statement) believes that these provisions no longer need to be in the plan as the exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to any of our covered executive officers in excess of   $1 million will not be deductible unless it qualifies for transition relief applicable to binding written contracts that were in effect on November 2, 2017. However, the 2018 Plan preserves the ability of the Committee to make performance-based grants, and the Committee plans to continue to do this.

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Summary of Other Provisions of the 2018 Plan

Eligibility

Awards under the 2018 Plan may be granted to our officers, employees, directors, and consultants, or any of our affiliates; provided, however, incentive stock options may be granted only to our employees or employees of our subsidiaries.

Administration

Awards under the 2018 Plan will be granted, and the terms and conditions of awards will be determined, by the Committee. However, the Board is permitted under the 2018 Plan to authorize one or members of the Board other than the Committee as a whole to make grants to employees of the Company or its affiliates who are not executive officers of the Company, subject to any limitations on the number of awards and any other terms and conditions established by the Board.

Awards

The 2018 Plan permits the Committee to grant various types of equity-based compensation, including restricted stock units (including performance restricted stock units), stock awards (including restricted stock), incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, performance unit awards, cash-based awards and other stock-based awards.

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The type and amount of each award and to whom each award is granted shall be determined by the Committee, subject to the provisions of the 2018 Plan. Awards may be made exercisable or settled at such prices and may be made terminable under such terms as are established by the Committee, to the extent not otherwise inconsistent with the terms of the 2018 Plan.

The terms of particular awards may provide that they terminate, among other reasons, upon the holder’s termination of employment or other status with respect to the Company, upon a specified date, upon the holder’s death or disability, or upon the occurrence of a change in control of the Company. Awards may also include exercise, conversion or settlement rights to a holder’s estate or personal representative in the event of the holder’s death or disability. At the Committee’s discretion, awards that are held by an individual who terminates service may be cancelled, accelerated, paid or continued, subject to the terms of the applicable award agreement and to the provisions of the 2018 Plan. After the date of grant, the Committee may modify the terms and conditions of an award, except to the extent the modification would be inconsistent with the 2018 Plan.

Options

The Committee may permit an option exercise price to be paid in cash or by the delivery of previously-owned shares of our common stock, or to be satisfied through a cashless exercise executed through a broker or by having a number of shares of our common stock otherwise issuable at the time of exercise withheld. The 2018 Plan permits the grant of both incentive and non-qualified stock options.

Stock Appreciation Rights

Stock appreciation rights may be granted separately or in connection with another award, and the Committee may provide that they are exercisable at the discretion of the holder or that they will be paid at a time or times certain or upon the occurrence or non-occurrence of certain events. Stock appreciation rights may be settled in shares of our common stock or in cash, according to terms established by the Committee with respect to any particular award.

Stock Awards

The Committee may grant shares of our common stock, subject to such restrictions and conditions, if any, as the Committee shall determine.

Performance Unit Awards

Performance awards entitle the participant to receive, at a specified future date or event, payment of an amount equal to, either the value of a specified or determinable number of units stated in terms of a designated or determinable dollar amount per unit or a percentage or multiple of a specified dollar amount determined by the Committee, and payment will be subject to such conditions or restrictions as the Committee shall determine, including achievement of specified performance goals, and shall be payable in cash or shares of our common stock, as the Committee may determine.

Other Awards

Restricted stock unit, other stock-based awards and dividend equivalent right awards may be granted with respect to such number of shares of our common stock and may be subject to such conditions or restrictions as the Committee shall determine and shall be payable in cash or shares of our common stock as the Committee may determine. Restricted stock unit awards entitle the participant to receive at a future specified date or event a determinable number of shares of common stock or the cash value thereof, subject to factors determined by the Committee, including in the case of performance restricted stock units, performance criteria established in the Committee’s discretion that must be achieved or that depending on the level of achievement will affect the number of shares earned. Other stock-based awards are awards that may be denominated, payable in, convertible into or otherwise based on our common stock. This includes interests in units of limited partnerships that are under common control with the Company and are convertible into our common stock, such as LTIP Units.

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Cash Awards

The Committee may grant cash awards under the 2018 Plan.

Deferrals

The Committee has the ability to allow or require participants to defer the receipt of payment attributable to awards under the 2018 Plan. Deferred restricted stock units are issued if a participant elects or the Committee requires a participant to defer the receipt of common stock attributable to an award, and are payable at a specified date or upon a specified event in shares of common stock or the cash value thereof.

Recapitalizations and Reorganizations

The number of shares of our common stock reserved for issuance in connection with the grant or settlement of awards and to which an award is subject and the exercise price of each option or a stock appreciation right are subject to proportional adjustment by the Committee in the event of any recapitalization of our company or similar event effected without receipt of consideration.

In the event of certain corporate reorganizations, awards may be substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the Compensation Committee, provided such adjustment is not inconsistent with the express terms of the 2018 Plan or the applicable award agreement. In general, however, the Committee cannot reduce a participant’s rights under an award agreement.

Federal Income Tax Information

The following discussion outlines generally the federal income tax consequences of participation in the 2018 Plan. Individual circumstances may vary and each participant should rely on his or her own tax counsel for advice regarding federal income tax treatment under the 2018 Plan.

Non-Qualified Options

A participant will not recognize income upon the grant of an option or at any time prior to the exercise of the option or a portion thereof. At the time the participant exercises a non-qualified option or portion thereof, he or she will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of our common stock on the date the option is exercised over the price paid for our common stock, and we will then be entitled to a corresponding deduction.

Depending upon the period shares of our common stock are held after exercise, the sale or other taxable disposition of shares acquired through the exercise of a non-qualified option generally will result in a short or long-term capital gain or loss equal to the difference between the amount realized on such disposition and the fair market value of such shares when the non-qualified option was exercised.

Incentive Stock Options

A participant who exercises an incentive stock option will not be taxed at the time he or she exercises the option or a portion thereof. Instead, he or she will be taxed at the time he or she sells our common stock purchased pursuant to the option. The participant will be taxed on the difference between the price he or she paid for our common stock and the amount for which he or she sells our common stock. If the participant does not sell the stock prior to two years from the date of grant of the option and one year from the date the stock is transferred to him or her, the participant will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and the aggregate exercise price and we will not get a corresponding deduction. If the participant sells the stock at a gain prior to that time, the difference between the amount the participant paid for the stock and the lesser of the fair market value on the date of exercise or the amount for which the stock is sold, will be taxed as ordinary income and the Company will be entitled to a corresponding deduction; if the stock is sold for an amount in excess of the fair market value on the date of exercise, the excess amount is taxed as capital gain. If the participant sells the stock for less than the amount he or she paid for the stock prior to the one or two year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss.

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Exercise of an incentive option may subject a participant to, or increase a participant’s liability for, the alternative minimum tax.

Stock Awards

A participant will not be taxed upon the grant of a stock award if such award is not transferable by the participant or is subject to a “substantial risk of forfeiture,” as defined in the Code. However, when the shares of our common stock that are subject to the stock award are transferable by the participant and are no longer subject to a substantial risk of forfeiture, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the stock subject to the stock award, less any amount paid for such stock, and we will then be entitled to a corresponding deduction. However, if a participant so elects at the time of receipt of a stock award, he or she may include the fair market value of the stock subject to the stock award, less any amount paid for such stock, in income at that time and we also will be entitled to a corresponding deduction at that time.

Other Awards

A participant will not recognize income upon the grant of certain equity incentives such as restricted stock units, deferred restricted stock units, performance awards, stock appreciation rights or dividend equivalent rights. Generally, at the time a participant receives payment under any such award, he or she will recognize compensation taxable as ordinary income in an amount equal to the cash or the fair market value of our common stock received, and we will then be entitled to a corresponding deduction.

Potential Limitation on Company Tax Deductions

Before January 1, 2018, Section 162(m) of the Internal Revenue Code denied a tax deduction to any publicly held corporation for compensation over $1 million to any of the named executive officers (other than the Chief Financial Officer) unless the compensation was paid pursuant to a plan that is performance-based and was approved by our stockholders. Effective January 1, 2018, Section 162(m) was amended to disallow a federal income tax deduction for compensation over $1 million to any of the named executive officer, regardless of whether the compensation is performance-related. Under a transition rule, Section 162(m) as in effect before the amendment continues to apply to compensation payable to a binding written contract in effect on November 2, 2017 that is not materially modified.

It is possible that compensation attributable to equity compensation, when combined with cash compensation and all other types of compensation received by a covered employee from the Company, may cause this limitation to be exceeded in any particular year.

We believe that, because we qualify as a REIT under the Internal Revenue Code and therefore are not subject to federal income taxes on our income to the extent distributed, the payment of compensation that does not satisfy the requirements of Section 162(m) will not generally affect our net income, although to the extent that compensation does not qualify for deduction under Section 162(m), a larger portion of stockholder distributions may be subject to federal income taxation as dividend income rather than return of capital. We do not believe that Section 162(m) will materially affect the taxability of stockholder distributions, although no assurance can be given in this regard due to the variety of factors that affect the tax position of each stockholder. For these reasons, Section 162(m) does not directly govern the Committee’s compensation policy and practices.

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Equity Compensation Plan Information

The table below sets forth information regarding shares issuable under our equity compensation plans as of December 31, 2017.

(1)

Reflects (i) 109,985 restricted stock units that were granted on March 31, 2015, (ii) 38,914 restricted stock units that were granted on April 1, 2015, (iii) 128,006 restricted stock units that were granted on March 17, 2016, (iv) 675,716 shares that could be issued if certain performance conditions are achieved related to the March 17, 2016 award of performance restricted stock units, (v) 140,416 restricted stock units that were granted on January 1, 2017, (vi) 685,064 shares that could be issued if certain performance conditions are achieved related to the January 1, 2017 award of performance restricted stock units and, (vii) 423,296 shares in respect of outstanding deferred stock units.

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(2)

No exercise price is payable with respect to the restricted stock units and performance restricted stock units.

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(3)

Reflects shares of common stock remaining available for future awards under our 2013 Stock Incentive Plans.

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Voting Required for Approval

For the 2018 Plan to be approved, the number of  “FOR” votes cast at the meeting for this proposal must be at least a majority of all votes cast on the proposal. For purposes of the vote on this Proposal 4, abstentions and broker non-votes will not be counted as shares entitled to vote and will have no effect on the results of the vote. If the 2018 Plan is not approved, it will be null and void and the 2013 Plan will remain in place.

Recommendation of the Board

Accordingly, our Board of Directors unanimously recommends that the stockholders vote FOR this Proposal 4, the proposal to approve the 2018 Plan.

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COMPENSATION DISCUSSION AND ANALYSIS

Our CD&A addresses the following topics:

•

2017 Performance Results;

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•

Pay for Performance Alignment;

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•

Summary of Executive Compensation Program and Governance Practices;

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•

Components of our Executive Compensation Program;

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•

Our Compensation Decisions and Results for 2017; and

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•

Our Compensation Decisions for 2018.

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2017 Performance Results

The skilled nursing industry (“SNF”), in general, and certain of our operators, in particular, encountered challenges, difficult market conditions and unanticipated developments that adversely affected our 2017 financial results. Our management team continues to focus on the core themes of acquisitions, physical plant improvements and strengthening our balance sheet. We also embarked on a strategic asset repositioning project to improve our portfolio (i.e. either by way of operator changes or eliminating non-performing assets). Key 2017 accomplishments included the following:

•

Completed new investments totaling approximately $559 million, comprised of:

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•

$124 million of investments with a new operator in the U.K., including 18 care homes, similar to assisted living facilities (“ALFs”) in the U.S.;

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•

$220 million of new investments with an existing operator, including 15 SNFs located in Indiana;

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•

the acquisition of 7 SNFs and 2 ALFs for $58.5 million throughout the U.S.;

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•

an $11 million mortgage loan with an existing operator; and

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•

$145 million of investments through our capital expenditure programs.

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•

Initiated strategic asset disposition efforts by disposing of 52 facilities subject to operating leases for $258 million in net proceeds, recognizing combined gains of  $54 million.

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•

Completed capital market transactions including:

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•

issued $60 million of common stock;

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•

issued a total of  $700 million in senior notes ($550 million of 4.75% senior notes due 2028 and $150 million of 4.5% senior notes due 2025);

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•

closed on a $1.8 billion senior unsecured revolving and term loan credit facility, reducing interest rate pricing from our prior unsecured revolving and term loan credit facility;

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•

closed on a $100 million senior unsecured term loan credit facility, replacing a prior term loan facility, with the proceeds used to refinance existing indebtedness; and

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•

redeemed $400 million of high yield senior notes with proceeds from newly issued senior notes.

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TSR Performance Results for Three, Five and Ten Year Periods ending 2017

For the three-year period ending 2017, total shareholder return (growth in stock price plus dividends) (“TSR”) for the health care REIT sector significantly underperformed the REIT sector as a whole. Although our TSR performance for the three-year period ending 2017 was sub-optimal, as it also was for many health care REITs, our longer-term TSR performance has generally been superior. Our strong long-term annualized TSR performance as compared to the FTSE NAREIT Equity Health Care Index and the MSCI U.S. REIT index is illustrated in the charts below. (TSR is rounded to the closest 0.1%.)

TSR Annualized Performance for Multi-Year Periods ending December 31, 2017

Pay for Performance Alignment

Our Compensation Committee has proactively endeavored to structure our executive officer compensation program to align performance with enhanced stockholder value. The information below demonstrates how the compensation our officers received in 2017 was aligned with the Company’s performance.

Variable Pay Linked to Performance

For 2017, 58% of our Chief Executive Officer’s total target compensation and 53% of the total target compensation for our other named executive officers was variable, performance-based compensation (including annual cash bonus and annual performance-based equity awards). Further, 64% of our Chief Executive Officer’s target compensation for 2017 and 62% of our other named executive officers’ target compensation for 2017 was in the form of equity-based compensation.

2017 Target Compensation Mix

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2017 Annual Cash Incentives Earned

For 2017, our Chief Executive Officer earned an annual cash incentive equal to 64% of his target annual cash incentive and the other executive officers earned annual cash incentives equal to 53% of their target annual cash incentives. The graph below contrasts the annual cash incentives paid for 2016 performance and for 2017 performance. The difference between the payments for 2016 and 2017 was performance-driven, as the objective performance goals under the 2016 annual incentive plan were achieved at the high performance level, whereas the objective performance goals under the 2017 annual incentive plan were not achieved. See “Our Compensation Decisions and Results for 2017 — Performance Results for 2017 Annual Cash Incentive Program.”

Annual Cash Incentive Payouts 2016 – 2017

Long-Term Incentive Compensation

As to long-term incentives, performance goals incorporated into our annual performance-based equity awards drive a significant portion of what our executive officers actually earn over time by directly linking both TSR and TSR relative to an index (which we call “Relative TSR”) to the amounts earned over the three-year performance periods. As a result, in periods when our TSR and Relative TSR have superior performance, our executive officers will earn more than their target level of compensation and in periods when our TSR and Relative TSR under-perform, our executive officers will earn less than their target level of compensation.

To make even more of our executive officer’s long-term compensation performance-based, the Compensation Committee (referred to as the “Committee” within the CD&A section of this Proxy Statement) increased the percentage of our executive officers’ target long-term compensation that is linked to performance to 60% for 2016, up from 50% in 2015. For the 2017 and 2018 awards, the Committee continued to maintain this increased percentage. Further, the Committee substantially increased the level of TSR required to achieve the performance goals for 2018 awards. See “Components of our Executive Compensation Program — Long-Term Equity Incentive Program — Overview of Long-Term Equity Incentives” and “Our Compensation Decisions for 2018 — Long-Term Equity Incentives for Three-Year Period Commencing January 1, 2018.”

Long-Term Incentive Compensation Earned in 2017

Our Chief Executive Officer and the other executive officers did not earn any performance-based compensation for the three-year period ending December 31, 2017. The only long-term equity awards that our Chief Executive Officer and the other executive officers earned in 2017 were the time-based portions of the 2015 awards that vested at the end of 2017. For more detail, see “Our Compensation Decisions and Results for 2017 — Performance Results for Long-Term Equity Incentives ending December 31, 2017 and Performance Results as of December 31, 2017 for Continuing Long-Term Equity Incentives.” The two graphs immediately below show the long-term incentive compensation earned in 2017 by our Chief Executive Officer, as well as the amount of long-term incentive compensation that would have been earned by our Chief Executive Officer in 2017 if the performance periods of the 2016 and 2017 awards had ended at December 31, 2017 (“Tracking”), as compared in each case to the grant date fair value of the awards.

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CEO’s Performance-based Long-Term Incentive Compensation
Earned and Tracking in 2017 vs. Grant Date Fair Value

Performance Period

CEO’s Long-Term Incentive Compensation
(including Performance and Time-based)

Earned and Tracking in 2017 vs. Grant Date Fair Value

Performance Period

Summary

The information in this “Pay for Performance Alignment” section shows how the majority of the compensation our executive officers receive is aligned with the Company’s performance and demonstrates our Compensation Committee’s commitment to maintaining that alignment.

Summary of Executive Compensation Program and Governance Practices

Our executive compensation programs are designed to attract and retain the highest quality executive talent possible and, more importantly, to provide meaningful incentives for our executive officers to strive to enhance stockholder value over both near- and longer-term periods by aligning their total compensation

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with the Company’s performance. Below we summarize certain executive compensation programs and governance practices – both the practices we have implemented to drive performance and the practices we avoid because we do not believe they would serve our stockholders’ long-term interests.

Our compensation system seeks to maintain best practices and support strong corporate governance, as illustrated below.

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What We Pay and Why

Following is a summary of  (i) the Compensation Committee’s objectives for the compensation of our executive officers and (ii) how the Compensation Committee believes its decisions on executive officer compensation achieve the stated objectives:

Independent Compensation Consultant

The Committee has retained FPL Associates, L.P. (“FPL”) as its independent compensation consulting firm to advise the Committee with respect to the compensation of our named executive officers and the compensation of our directors. FPL has been engaged to provide the Committee with relevant data concerning the marketplace, benchmarking against our peer group and FPL’s own independent analysis and recommendations concerning executive compensation. In 2017, affiliates of FPL were engaged to assist the Company and the Board of Directors in developing talent assessment and development programs.

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Peer Group Benchmarking

The Committee benchmarks executive officer compensation in relation to a peer group of public REITs identified by FPL as being comparable to the Company based on one or more of the following factors:

•

similarity to Omega in terms of property focus,

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•

net lease structure,

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•

market capitalization, and

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•

geographic business region.

​

Since 2015, the Committee has made few changes to the peer group, to the end of maintaining consistency of year over year comparisons. For 2017, the Committee made minimal changes to the peer group for 2016, adding Medical Properties Trust, Inc. based on its healthcare focus and removing LaSalle Hotel Properties because it does not have a healthcare focus and was no longer comparable to Omega based on market capitalization.

2017 Peer Group

Omega as Compared to 2017 Peer Group

($ in billions as of December 31, 2017)

Note: Data for Care Capital Properties is excluded as Care Capital Properties was acquired during 2017.

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Compensation Setting Process

The Committee uses data and information provided by FPL, including comparisons of Omega’s executive compensation programs to those of Omega’s peer group, to assist the Committee in undertaking a comprehensive annual review to establish base salaries and the terms and conditions of annual cash bonus opportunities, and long-term incentive awards of our executive officers. In addition, our Chief Executive Officer provides the Committee information regarding management’s performance as well as other factors the Chief Executive Officer believes should impact the compensation of our executive officers. The Committee also requests and receives recommendations from our Chief Executive Officer regarding the compensation for each of the executive officers and the business and performance targets for long-term incentive awards and annual cash bonuses.

Market data provided by FPL is an important tool for analysis and decision-making. The Committee takes into account the recommendations of FPL and our Chief Executive Officer in applying its own independent judgment in determining the compensation of our executive officers. In reaching compensation decisions, the Committee also considers the decision-making responsibilities of each position and the experience, work performance, team-building and talent development skills of each executive officer, as well as the Company’s overall performance and the achievement of our strategic objectives and budgets during the prior year. The ultimate determination of the compensation that will be paid to our executive officers and the elements that comprise that compensation are made solely by the Committee.

Components of Our Executive Compensation Program

Our executive officers’ compensation currently has three primary components, which are discussed in more detail below:

•

annual base salary,

​

•

annual cash incentive awards, and

​

•

annual long-term equity incentive awards.

​

Variable pay constitutes the majority of our executives’ compensation, which allows the Committee to reward superior performance and penalize under-performance, while the long-term equity incentive portions of our compensation programs serve to align the interests of our executive officers with the interests of our stockholders. With respect to the aggregate annual long-term incentive opportunity, compensation for threshold and high performance has been designed to approximate 75% and 150%, respectively, of compensation for target performance.

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Objectives and Important Features of Our Executive Compensation Program

Long-Term Equity Incentive Program

Total Shareholder Return and Relative Total Shareholder Return Drive Actual Realized Pay

Our TSR and Relative TSR drives a significant portion of what our executive officers actually earn over time while management’s performance against strategic, operational, capital allocation and management goals drives the Committee’s annual compensation decisions. The Committee believes that the

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long-term equity incentive program’s design reflects a high degree of rigor, aligns management’s focus on achieving the Company’s strategy with the TSR and Relative TSR expectations of our stockholders and provides executives with quantifiable incentives and an opportunity to acquire meaningful levels of ownership of our common stock. Based on advice from FPL, the Committee also believes that the long-term equity incentive program’s design is competitive as compared with current market practice in the REIT industry for similar plans and provides an appropriate risk-reward trade-off.

Overview of Long-Term Equity Incentives

The Committee makes annual grants of equity awards to each executive officer that are earned over a three-year period running from January 1 of the year of grant.

A percentage of each executive officer’s annual grant is earned based on the Company’s performance over the three-year period (the “Performance-based Portion”), and a percentage is earned based on the officer’s continuing employment (subject to certain exceptions) over the three-year period (the “Time-based Portion”). For the 2014 and 2015 grants, the percentage of each award that was the Performance-based Portion was 50% (expressed as a dollar amount at the target performance level) and the percentage that was the Time-based Portion was also 50%. For the 2016, 2017 and 2018 grants, the Committee increased the Performance-based Portion to 60% and decreased the Time-based Portion to 40%, based on its desire to make more of the Executive’s long-term compensation contingent upon the Company’s performance.

Of the Performance-based Portion of the annual equity award:

•

50% of the value (at the target level) is earned based on the Company’s TSR over the three-year performance period. These awards were in the form of the performance-based restricted stock units (“PRSUs”) before 2015 and have been in the form of  “LTIP Units” (which are potentially convertible into our common stock) for 2015 and future years; and

​

•

the other 50% of the value (at the target level) of the Performance-based Portion of the annual equity award is earned based on the Company’s Relative TSR over the three-year performance period. These awards are in the form of PRSUs.

​

The Time-based Portion of the annual equity award are in the form of restricted stock units (“RSUs” or “time-based RSUs”).

Additional details of the 2017 annual equity award grants for our executive officers are discussed under the heading “Our Compensation Decisions and Results for 2017 — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2017.”

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Year-over-Year Changes

The Committee annually reviews the structure of the Company’s long-term equity incentive program, to ensure its competitiveness externally as well as effectiveness internally in supporting the Company’s compensation philosophy. The Committee receives input from its consultant, FPL, and also considers evolving best practices and stockholder feedback. As a result, despite the historically high level of stockholder support with the Company’s executive compensation program, the Committee has proactively made enhancements to the long-term incentive program, as outlined in the chart below.

Our Compensation Decisions and Results for 2017

2017 Annual Base Salaries

The Committee established annual base salaries for 2017 at approximately the median for our peer group, based on analysis provided by FPL, with appropriate adjustments to preserve internal pay equity. The annual base salaries for our executive officers for 2017 were increased by 2% over 2016 and are set forth below:

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2017 Annual Cash Incentive Opportunities

The Committee established the following annual cash bonus opportunities for 2017 for our executive officers:

The Committee increased Mr. Ritz’s annual cash bonus opportunities for 2017 to bring his opportunities into line with the other executive officers (other than the Chief Executive Officer). In 2016 Mr. Ritz’s annual cash bonus opportunity was 40%, 60% and 80% at threshold, target and high.

For 2017, the Committee revised annual cash bonus performance goals and weighting that it used to determine annual cash bonuses from 2016 performance. The Committee decided to add the FAD metric for determining 2017 performance based on its belief that while Adjusted FFO is a useful measure of earnings, FAD provides a more useful measure in evaluating the Company’s internal operating performance. The Committee also decided to increase the subjective component weighting from 30% for 2016 to 40% for 2017 to provide the Committee with greater flexibility to take into account the effects of challenging market conditions facing the skilled nursing industry, in general, and certain of our operators, in particular, as well as unanticipated events in determining the executive officers’ annual bonus compensation, while maintaining other objective metrics that measure annual performance.

2017 Annual Cash Incentive Performance Goals

(1)

The Adjusted FFO per share and Funds available for distribution (“FAD”) performance goals were subject to adjustment to reflect the pro forma impact of changes to the Company’s capital structure that were not contemplated in the annual budget approved by the Board of Directors in January 2017. Adjusted FFO and FAD are non-GAAP financial measures. No such adjustments were made for 2017.

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(2)

2017 uncollected rents as a percentage of 2017 gross revenues.

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(3)

Determination of the Committee, including among other things, factors such as the subjective evaluation of individual performance (i) by the CEO of his direct reports and (ii) by the Board of Directors of the CEO.

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(4)

As to any performance goal except the subjective performance goal, if the level of achievement of the relevant performance goal was between threshold and target or between target and high, then the portion of the bonus earned with respect to that performance goal would have been based on linear interpolation.

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FFO, Adjusted FFO and FAD are non-GAAP financial measures. The Company believes that FFO, Adjusted FFO and FAD are important supplemental measures of its operating performance. The Company calculates and reports FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“NAREIT”), and consequently, FFO is defined as net income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairments on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.

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Depreciation adjustments are made because the historical cost accounting convention used for real estate assets requires depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time, while real estate values instead have historically risen or fallen with market conditions. FFO described herein is not necessarily comparable to FFO of other real estate investment trusts, or REITs, that do not use the same definition or implementation guidelines or interpret the standards differently from the Company.

Adjusted FFO is calculated as FFO excluding the impact of non-cash stock-based compensation and certain revenue and expense items identified above. FAD is calculated as Adjusted FFO less non-cash interest expense and non-cash revenue, such as straight-line rent. The Company believes these measures provide an enhanced measure of the operating performance of the Company’s core portfolio as a REIT. The Company’s computation of Adjusted FFO and FAD are not comparable to the NAREIT definition of FFO or to similar measures reported by other REITs, but the Company believes that they are appropriate measures for this Company.

The Company uses these non-GAAP measures among the criteria to measure the operating performance of its business. The Company also uses Adjusted FFO among the performance metrics for performance-based compensation of officers. The Company further believes that by excluding the effect of depreciation, amortization, impairments on real estate assets and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and between other REITs. The Company offers these measures to assist the users of its financial statements in analyzing its operating performance and not as measures of liquidity or cash flow. These non-GAAP measures are not measures of financial performance under GAAP and should not be considered as measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP. Investors and potential investors in the Company’s securities should not rely on these non-GAAP measures as substitutes for any GAAP measure, including net income. A reconciliation of FFO, Adjusted FFO and FAD to the most comparable GAAP measure is fully set forth the Company’s earnings release included as Exhibit 99.1 to the Form 8-K furnished on February 13, 2018.

Performance Results for 2017 Annual Cash Incentive Program

For 2017, Adjusted FFO per share was $3.30 (rounded to the closest one cent), FAD per share was $3.00 (rounded to the closest one cent) and tenant quality (uncollected rents as a percentage of gross revenues) for 2017 was 7.74%, none of which reached the threshold level of performance under the 2017 annual cash bonus program.

2017 Annual Cash Incentive Objective Performance Results

In connection with determining the level of subjective bonuses earned with respect to 2017 performance, the Chief Executive Officer provided the Committee with an assessment of each executive officer’s performance in 2017 and contribution to the Company. The principal factors noted in the assessment of the executive officers’ 2017 performance included the achievements noted under the heading “— 2017 Performance Results.”

From an overall operational point of view, the Committee believed that in 2017 management performed well in a challenging environment involving high levels of industry stress and difficult market conditions. The Committee, after consultation with the Chief Executive Officer except as to his own compensation, determined to award each executive officer the subjective portion of his bonus for 2017 at the high performance level in view of the key accomplishments noted in the bullets on page 29 above.

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Accordingly, the Committee approved the following cash bonuses relating to 2017 performance:

Long-Term Equity Incentives for Three-Year Period commencing January 1, 2017

As discussed under the heading “Components of our Executive Compensation Program — Long-term Equity Incentives — Overview of Long-Term Equity Incentives,” the Committee granted an annual equity award to each executive officer for 2017 that is earned over a three-year period running from January 1, 2017. The grant is split based on the target value of the executive’s long-term incentive award opportunity, which is comprised 60% of performance-based units and 40% of restricted stock units (RSUs or time-based RSUs) that vest based on time in service over a three-year period. The performance-based units are comprised 50% of performance-based restricted stock units (based on target value) that are earned based on Relative TSR (PRSUs) and 50% of LTIP Units that are earned based on TSR. The following illustration visually depicts the construct of our 2017 annual long-term equity incentive program, which is further detailed below.

Time-based RSUs

The time-based RSU award is subject to three-year cliff vesting running from January 1, 2017 and is subject to the executive officer’s continued employment on the vesting date, except in the case of death, “disability,” termination by the Company without “cause,” or resignation for “good reason” (as those terms are defined in the award agreement, each a “Qualifying Termination”). If the Qualifying Termination is not in connection with a “Change in Control” (as defined in the award agreement), the executive officer will vest in one-third of the RSUs for each year or partial year of service performed during the three-year vesting period. If the Qualifying Termination occurs after, or within 60 days before, a Change in Control, vesting will be accelerated 100%. Dividend equivalents accrue on the RSUs and are paid currently on unvested and vested units. Vested RSUs are paid in Company common stock upon vesting.

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Performance-Based Restricted Stock Units

The PSRUs are earned based on the Company’s TSR over the three-year performance period beginning January 1, 2017 relative to the FTSE NAREIT Equity Healthcare Index.

The Committee set the PRSU payout levels so that the aggregate long-term equity incentive opportunity, including time-based RSUs, would be 0.75x, 1.0x, and 1.5x at threshold, target, and high, respectively. The grant date fair value of the time-based RSUs is subtracted from the aggregate long-term equity incentive opportunity at each of the threshold, target and high levels to arrive at the performance-based long-term incentive opportunity and 50% of the grant date fair value of the performance-based long-term incentive opportunity at each performance level is represented by PRSUs, with the other 50% being represented by LTIP Units. If Relative TSR achievement falls below the threshold hurdles, no PRSU award will be earned. If Relative TSR performance falls between threshold and target or target and high achievement levels, the number of PSRUs earned will be determined by an interpolation formula. The starting and ending stock prices used in the achievement calculations are the November and December average closing price per share at the beginning and the end of the performance periods.

The number of shares earned under the PRSUs will be determined as of the last day of the performance period. 25% of the earned PRSUs vest on the last day of each calendar quarter in the year following the end of the three-year performance period, subject to the executive officer’s continued employment on the vesting date, except in the case of a Qualifying Termination or a Change in Control. If the Qualifying Termination is not in connection with a Change in Control, vesting will be prorated based on days elapsed through the date of the Qualifying Termination or will be accelerated 100% if the Qualifying Termination occurs on or after the end of the three-year performance period. If a Change in Control occurs, the performance period will end on the date of the Change in Control. If the executive officer is employed on the date of the Change in Control or has a Qualifying Termination within 60 days before the Change in Control, the PRSUs will be earned and vested on the date of the Change in Control only to the extent that the TSR and Relative TSR performance goals are satisfied as of the date of the Change in Control.

The earned and vested PRSUs will be paid in Company common stock within ten (10) days following vesting or on the date of a Change in Control, if earlier.

Dividend equivalents accrue on PRSUs that are subsequently earned at the end of the performance period and are paid currently, before vesting.

LTIP Units

In 2017, the Committee granted “LTIP Units,” which are earned based on the Company’s TSR over the three-year performance period. LTIP Units are limited partnership units structured as profits interests of Omega OP. Pursuant to Omega OP’s partnership agreement, LTIP Units are convertible into OP Units, at the election of the holder, on a one-to-one basis, subject to conditions on minimum allocation to the capital accounts of the holders of LTIP Units for federal income tax purposes. Each OP Unit is redeemable at the election of the holder for cash equal to the then fair market value of one share of Omega common stock, subject to the Company’s election to exchange the OP Units tendered for redemption for shares of Omega common stock on a one-for-one basis, and further subject to adjustment as set forth in the partnership agreement. Omega OP was formed in 2015, and as a result, that was the first year that grant of LTIP Units was possible. The Committee granted TSR-based LTIP Units to the executive officers in lieu of

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TSR-based PRSUs primarily because the LTIP Units could provide tax advantages to the executive officers as compared to PRSUs. Many REITs that have similar structures as Omega grant limited partnership interests in an operating partnership similar to LTIP Units in lieu of PRSUs.

The LTIP Units are subject to similar rules regarding how they are earned and vested as apply to PRSUs as discussed above, except that the performance goals are based solely on the Company achieving the levels of TSR over the three-year performance period as shown in the table below. The Committee set the LTIP Unit payout levels so that the aggregate long-term equity incentive opportunity, including time-based RSUs, would be 0.75x, 1.0x, and 1.5x at threshold, target, and high, respectively.

While the executive officers hold LTIP Units that are both unvested and unearned, they will receive distributions from Omega OP when a distribution is paid to holders of OP Units of an amount per LTIP Unit (the “Interim Distribution”), and a corresponding percentage allocation of net income and net loss under the partnership agreement of Omega OP, equal to (i) 10% of distributions and allocations in the ordinary course and (ii) 0% of distributions and allocations not in the ordinary course. Providing for initial minimal ordinary course distributions and allocations of 10% while the LTIP Units are unearned is an approach that has been used by other REITs to ensure that the units will satisfy the requirements under federal tax law to be treated as profits interests.

Additionally, after any LTIP Units become earned (but not necessarily vested), the executive officer will receive a distribution from Omega OP (and a corresponding allocation of net income and net loss per earned LTIP Unit) equal to the excess of: (i) the amount of distributions from Omega OP that would have been paid if the LTIP Unit had been an OP Unit on January 1 of the year of grant over (ii) the Interim Distribution per LTIP Unit. Thereafter, the executive officer will receive distributions and allocations of net income and net loss pursuant to the partnership agreement of Omega OP.

Performance Results for Long-Term Equity Incentives ending December 31, 2017

The performance measurement period for the 2015 LTIP Units and the 2015 PRSUs ended on December 31, 2017. The ending stock price for measuring TSR and Relative TSR for the 2015 LTIP Units was $27.47. This, together with dividends, represented TSR for the three-year period ending December 31, 2017 of approximately negative 3.4% (-3.4%), which was less than the 8% TSR level required for earning the award at the threshold level. In addition, the Company’s TSR of negative 3.4% (-3.4%) for the three-year period ending December 31, 2017 was more than 300 basis points (“bps”) lower than the TSR of the MSCI U.S. REIT Index for the same period. As a result, all of the 2015 LTIP Units and the 2015 PRSUs were forfeited as of December 31, 2017.

2015 – 2017 Performance-Based Long-Term Incentives
Forfeited as of December 31, 2017

Performance Results as of December 31, 2017 for Continuing Long-Term Equity Incentives

As of December 31, 2017, the performance measurement periods for the 2016 and 2017 performance-based long-term equity incentive awards were two-thirds and one-thirds complete, respectively.

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The following charts reflect the performance as of December 31, 2017 for our executive officers as a group for both their 2016 and 2017 awards, but determined as if the performance measurement period had ended on December 31, 2017. The actual performance measurement periods will end December 31, 2018 for the 2016 awards and December 31, 2019 for the 2017 awards. Therefore, performance could change over the balance of the respective measurement periods.

2016 – 2018 Performance-Based Long-Term Incentives
Tracking as of December 31, 2017

2017 – 2019 Performance-Based Long-Term Incentives
Tracking as of December 31, 2017

Summary of Performance Results as of December 31, 2017 for Long-Term Equity Incentives

While our TSR and Relative TSR for the one, two and three-year periods ending December 31, 2017 were well below our levels over the longer term, the actual and potential payouts as of December 31, 2017 for the performance-based long-term incentive compensation for our executive officers for those periods reflect the Compensation Committee’s strong pay-for-performance philosophy and rigorous goal setting.

Our Compensation Decisions for 2018

Consideration of Market Data

For 2018, the Committee updated the 2018 peer group based on analysis provided by FPL. Using similar criteria for selection as used for determining the 2017 peer group, the Committee made minimal changes to the 2017 peer group adding Healthcare Realty Trust and removing Care Capital Properties, Inc., which had been acquired in 2017.

FPL determined that median aggregate total compensation for the top five executive officers for the 2018 peer group had increased on average by 2% over the level for the prior year. Accordingly, the Committee decided to increase the base salary, bonus opportunity and long-term incentive opportunity of each of our five executive officers by 2% for 2018.

2018 Annual Base Salaries

The Committee established the following annual base salaries for 2018 for each of our executive officers:

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2018 Annual Cash Incentive Opportunities

The annual cash bonus opportunities for 2018 as a percentage of annual base salary for each of the top five executive officers at the various performance levels remain the same as for 2017.

For 2018, the Committee established essentially similar annual cash bonus performance goals and weighting that it used to determine annual cash bonuses for 2017 performance, but the required dollar amounts of Adjusted FFO and FAD for 2018 were adjusted based on the Company’s operating budget for 2018 and the tenant quality performance goal for 2018 is expressed as rents in relation to budget instead of uncollected rents as a percentage of gross revenue.

Long-Term Equity Incentives for Three-Year Period commencing January 1, 2018

The Committee approved grants to the executive officers of long-term incentive compensation awards, effective January 1, 2018. For determining the amount of the 2018 grants, the Committee used a similar approach to that used for determining the amount of the 2017 grants, except that the long-term incentive opportunity of each of our five executive officers was increased by 2% for 2018. The material terms (other than amounts) of the 2018 grants of long-term incentive awards are substantially similar to the 2017 long-term incentive awards, except that the Committee increased the TSR performance goals for the 2018 LTIP Units based on the Company’s then current stock price and dividend yield as follows:

2018 Long-Term Incentive Awards Performance Goals

In contrast the required TSR levels for the 2015, 2016 and 2017 LTIP Units were as follows:

2015, 2016 and 2017 Long-Term Incentive Awards Performance Goals

Other Matters

Other Benefits

All employees may participate in our 401(k) Retirement Savings Plan (the “401(k) Plan”). We provide this plan to help our employees save some amount of their cash compensation for retirement in a tax-efficient manner. Under the 401(k) Plan, employees are eligible to make contributions. We make an annual matching contribution of 100% of the amount that the employee contributes to the plan up to the first 6% of each employee’s annual compensation up to $270,000 (for 2017, indexed by the IRS for later years). We also provide competitive benefit packages to all full-time employees that includes health and welfare benefits, such as medical, dental, disability insurance and life insurance benefits.

Tax Deductibility of Executive Compensation

Before January 1, 2018, Section 162(m) of the Internal Revenue Code disallowed a federal income tax deduction for compensation over $1 million to any of the named executive officers (other than the Chief Financial Officer) unless the compensation was performance-based and the performance goals were approved by our stockholders. Effective January 1, 2018, Section 162(m) was amended to disallow a federal income tax deduction for compensation over $1 million to any of the named executive officer, regardless of whether the compensation is performance-based. Under a transition rule, Section 162(m) as in effect before the amendment continues to apply to compensation payable to a binding written contract in effect on November 2, 2017 that is not materially modified. We believe that, because we qualify as a REIT under the Internal Revenue Code and therefore are not subject to federal income taxes on our income to the extent distributed, the payment of compensation that does not satisfy the requirements of Section 162(m) will not generally affect our net income, although to the extent that compensation does not qualify for deduction

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under Section 162(m), a larger portion of stockholder distributions may be subject to federal income taxation as dividend income rather than return of capital. We do not believe that Section 162(m) will materially affect the taxability of stockholder distributions, although no assurance can be given in this regard due to the variety of factors that affect the tax position of each stockholder. For these reasons, Section 162(m) does not directly govern the Committee’s compensation policy and practices.

Risks Associated with Compensation

We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Committee believes that the mix and design of the elements of our executive compensation program do not encourage management to assume excessive risks.

The Committee considered various factors that have the effect of mitigating risk and, with assistance of FPL, reviewed the elements of executive compensation to determine whether any portion of executive compensation encourages excessive risk taking. The Committee concluded that the following risk oversight and compensation design features guard against excessive risk-taking:

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The Company adheres to effective processes for developing strategic and annual operating plans and approval of portfolio and capital investments;

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The Company has strong internal financial controls;

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Base salaries are consistent with each executive officer’s responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security;

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The determination of incentive awards is based on a review of a variety of performance indicators as well as, in the case of the annual cash bonus, a meaningful subjective assessment of personal performance, thus diversifying the risk associated with any single indicator of performance;

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The design of our long-term compensation program rewards executive officers for driving sustainable growth for stockholders over three-year performance periods;

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The vesting periods for equity compensation awards encourage executive officers to focus on maintaining dividends and stock price appreciation; and

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The mix between fixed and variable, annual and long-term and cash and equity compensation is designed to encourage balanced strategies and actions that are in the Company’s long-term best interests.

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Compensation Committee Report

The following is a report by the Compensation Committee regarding our executive officer compensation program.

The Compensation Committee has reviewed and discussed with management the disclosure set forth under the heading “Compensation Discussion and Analysis” above and, based on such review and discussion, the Compensation Committee has recommended to the Board that such “Compensation Discussion and Analysis” be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Compensation Committee of the Board of Directors

Edward Lowenthal, Chairman
Barbara Hill
Stephen D. Plavin

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EXECUTIVE COMPENSATION TABLES AND RELATED INFORMATION

The following tables provide information relating to the compensation of our “named executive officers” for the last three fiscal years. Our named executive officers for 2017 are our Chief Executive Officer, our Chief Financial Officer and the three other most highly compensated executive officers.

Summary Compensation Table

(1)

Bonuses are reported in the year earned, whether or not paid before year end. Reflects the subjective component of annual cash bonus program payments, for 2017 described under “Compensation Discussion and Analysis — Our Compensation Decisions and Results for 2017 — 2017 Annual Cash Incentive Opportunities.”

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(2)

Represents the fair value for accounting purposes as of the date of grant (excluding the effect of estimated forfeitures). The fair value of PRSUs and LTIP Units is based on the probable outcome of the performance conditions as of the grant date. For 2017, includes the grant date fair value of the RSUs, PRSUs and LTIP Units granted January 2017. For 2016, includes the grant date fair value of the RSUs, PRSUs and LTIP Units granted March 2016. For 2015, includes the grant date fair value of the RSUs, PRSUs and LTIP Units granted March and April 2015. See Note 17 — “Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2017 for a detailed description of the assumptions that we used in determining the dollar amounts recognized for financial statement reporting purposes of the PRSUs and LTIP Units.

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(3)

Bonuses are reported in the year earned, whether or not paid before year end. Represents the objective performance components (adjusted FFO per share, FAD per share and tenant quality for 2017; adjusted FFO per share and tenant quality for 2016 and 2015) of annual cash incentive program payments, described for 2017 under “Compensation Discussion and Analysis — Our Compensation Decisions and Results for 2017 — 2017 Annual Cash Incentive Opportunities.”

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(4)

“All Other Compensation” reflects 401(k) matching contributions. The RSU awards accrue dividend equivalents from January 1 of the year of grant. The amount of the cash payments from such January 1 until the date of grant is included in “All Other Compensation.” In accordance with SEC rules, dividend equivalents associated with PRSUs are generally not included in “All Other Compensation” because those amounts were factored into the grant date fair values.

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Grants of Plan Based Awards

The following table contains information relating to the plan based awards grants made in 2017 to our named executive officers and is intended to supplement the 2017 Summary Compensation Table above.

(1)

The Compensation Committee approved the January 1, 2017 awards through a series of discussions and email correspondence in late December 2016, and ratified such approval effective as of January 1, 2017 by written consent dated January 9, 2017.

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(2)

Represents the fair value as of the applicable grant date. See the Option Exercises and Stock Vested table below for information regarding amounts earned with respect to awards vesting in 2017.

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(3)

Reflects the range of bonus payments that were possible as of the grant date under the objective metric components of our annual cash incentive program for 2017. Based on actual performance, no bonus payments were made under the objective metric components for 2017. For more information regarding annual bonus opportunities including the subjective component, see “Compensation Discussion and Analysis — Our Compensation Decisions and Results for 2017 — 2017 Annual Cash Incentive Opportunities.”

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(4)

RSUs subject to three-year cliff vesting on December 31 2019 subject to continued employment on the vesting date except in the case of a Qualifying Termination not in connection with a change in control, in which case one-third of the RSUs vest for each year or partial year worked in the three-year period, or in connection with a change in control, in which case the RSUs fully vest. Dividend equivalents accrue on the RSUs and will be paid currently on unvested and vested units. See “Compensation Discussion and Analysis — Components of our Executive Compensation Program — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2017 — , Time-based RSUs.”

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(5)

Reflects the range of shares that may be earned by each executive officer, based on the level of performance over the performance period. The actual number of PRSUs earned is based on performance for the periods ending December 31, 2019. For each performance period, the number of shares that will be earned depends on the level of Relative TSR. Vesting occurs in four equal quarterly installments in 2020, subject to continued employment on the vesting date, except in the case of a Qualifying Termination or a change in control. If the Qualifying Termination is not in connection with a change in control, vesting will be

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prorated based on days elapsed through the date of the Qualifying Termination. The performance period will end on the date of a change in control. If the executive officer is employed on the date of the change in control or has a Qualifying Termination within 60 days before the change in control, depending on the level of Relative TSR as of the date of the change in control, all, a portion or none of the PRSUs will be earned and vested on the date of the change in control. Dividend equivalents accrue on PRSUs that subsequently vest. Accrued dividend equivalents are only payable if and to the extent of vesting of the PRSUs. See “Compensation Discussion and Analysis — Components of our Executive Compensation Program — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2017 — Performance-Based Restricted Stock Units.”

(6)

Reflects the range of LTIP Units that may be earned by each executive officer, based on the level of performance over the performance period. The actual number of LTIP Units earned is based on performance for the periods ending December 31, 2019. For each performance period, the number of LTIP Units that will be earned depends on the level of TSR. Vesting occurs in four equal quarterly installments in 2020, subject to continued employment on the vesting date, except in the case of a Qualifying Termination or a change in control. If the Qualifying Termination is not in connection with a change in control, vesting will be prorated based on days elapsed through the date of the Qualifying Termination. The performance period will end on the date of a change in control. If the executive officer is employed on the date of the change in control or has a Qualifying Termination within 60 days before the change in control, depending on the level of TSR as of the date of the change in control, all, a portion or none of the LTIP Units will be earned and vested on the date of the change in control. Each unvested and unearned LTIP Unit entitles the holder to receive distributions equal to (i) 10% of the regular periodic distributions per OP Unit paid by Omega OP to OP Unit holders and a corresponding percentage allocation of Net Income and Net Loss attributable to the regular periodic distributions per OP Unit and (ii) 0% of the special distributions and other distributions not made in the ordinary course per OP Unit paid by Omega OP to OP Unit holders and a corresponding 0% allocation of Net Income and Net Loss attributable to the special distributions and other distributions per OP Unit not made in the ordinary course. Each Earned LTIP Unit entitles the holder to receive a distribution (and a corresponding allocation of Net Income and Net Loss per Earned LTIP Unit) equal to the excess of: (i) the amount of distributions from Omega OP that would have been paid per LTIP Unit if the LTIP Unit had been an OP Unit on January 1, 2017 over (ii) the Interim Distribution per LTIP Unit. In addition, each earned LTIP Unit entitles the holder to receive distributions and allocations of Net Income and Net Loss that accrues following the date that the LTIP Units become an Earned LTIP Unit pursuant to the partnership agreement of Omega OP determined without regard to the adjustments described above. See “Compensation Discussion and Analysis, Components of our Executive Compensation Program — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2017 — LTIP Units.”

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Outstanding Equity Awards at Fiscal Year End

The following sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2017. Since the information is set forth as of December 31, 2017, it does not include equity awards that vested or forfeited as of December 31, 2017 or awards granted in 2018. There are no options outstanding.