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 7, 2019

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 21030, on Friday, June 7, 2019, at 10:00 A.M. EDT, for the following purposes:

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To elect eight 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 2019;

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To hold an advisory vote on executive compensation;

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To approve the Omega Healthcare Investors, Inc. Employee Stock Purchase 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, Norman R. Bobins, Craig R. Callen, Barbara B. Hill, Edward Lowenthal, C. Taylor Pickett, Stephen D. Plavin and Burke W. Whitman. Ben W. Perks will retire from the Board of Directors at the completion of the Annual Meeting and is not standing for re-election. Each of the director nominees presently serves as a director of Omega.

Our Board of Directors has fixed the close of business on April 15, 2019 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 3, 2019, we will first mail to our stockholders our 2019 Proxy Statement and Annual Report to Stockholders for fiscal year 2018.

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 Employee Stock Purchase 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 24, 2019
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 7, 2019

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 7, 2019, and any adjournments or postponements of the meeting.

This Proxy Statement, and our Annual Report to Stockholders for fiscal year 2018, which includes our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2019, are available electronically at www.proxyvote.com or www.omegahealthcare.com.

RECORD DATE

Our Board of Directors has fixed April 15, 2019, 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 207,021,096 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 0.65% 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

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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.

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 2019, 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 2019 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 Employee Stock Purchase Plan

The approval of the Employee Stock Purchase 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 outcome of the vote on this proposal.

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PROPOSAL 1 — ELECTION OF DIRECTORS

Director Nominees

Our Board of Directors currently consists of nine directors. Mr. Ben W. Perks 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. Perks for his service on the Board since the Company’s acquisition of Aviv REIT, Inc. in 2015.

Our Nominating and Corporate Governance Committee of the Board of Directors has nominated Kapila K. Anand, Norman R. Bobins, Craig R. Callen, Barbara B. Hill, Edward Lowenthal, C. Taylor Pickett, Stephen D. Plavin and Burke W. Whitman for re-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 2020 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.

Information about each director nominee is set forth below.

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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.

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.

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, 2019 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, 2019. 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, 2019) 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, earned but not yet vested PRSUs and Profits Interest Units in Omega OP 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, 2019, there were 207,021,096 shares of our common stock outstanding and no preferred stock outstanding.

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Less than 0.10%

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(1)

Includes unvested RSUs, which in each case vest more than 60 days from April 10, 2019, subject to continued employment. It also includes earned but not yet vested PRSUs, which vest quarterly in 2019 subject to continued employment, except in the case of a Qualifying Termination or change in control in which they will vest immediately. Each unit represents the right to receive one share of common stock. Includes earned but not yet vested Profit Interest Units, which vest quarterly in 2019 subject to continued employment, except in the case of a Qualifying Termination or change in control in which they will vest immediately. See “Outstanding Equity Awards at Fiscal Year End.”

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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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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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Percent of class reflects 207,021,096 shares of common stock outstanding as of April 10, 2019, plus a total of 8,458,512 common stock equivalents, consisting of 750,146 unvested restricted stock units and Profit Interest Units, 376,224 deferred stock units and approximately 7,332,142 OP Units.

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Includes 4,941 shares of restricted stock, subject to forfeiture until vested.

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Includes 7,588 shares of restricted stock, subject to forfeiture until vested.

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Includes deferred stock units with respect to 7,917 shares of restricted stock, subject to forfeiture until vested.

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Includes 7,588 shares of restricted stock, subject to forfeiture until vested.

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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. 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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Includes 1,000 shares of restricted stock, subject to forfeiture until vested

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Includes deferred stock units with respect to 4,941 shares of restricted stock, subject to forfeiture until vested.

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Includes 5,941 shares of restricted stock, subject to forfeiture until vested.

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Includes 5,941 shares of restricted stock, subject to forfeiture until vested. The remainder of Mr. Plavin’s shares is owned jointly with his wife.

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Includes 2,700 shares of restricted stock, subject to forfeiture until vested.

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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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(16)

Based on a Schedule 13G/A filed with the SEC on February 11, 2019 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 273,520 of the shares, shared voting power with respect to 231,848 of the shares, sole dispositive power with respect to 28,708,077 of the shares and shared dispositive power with respect to 308,891 of the shares.

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(17)

Based on a Schedule 13G/A filed with the SEC on January 31, 2019 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 22,827,904 of the shares and sole dispositive power with respect to 23,677,458 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 seven meetings during 2018. 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 2018. While we invite our directors to attend its annual meeting of stockholders, it currently does not have a formal policy regarding director attendance. Mr. Pickett chaired Omega’s 2018 annual meeting of stockholders and was the sole representative of the Board of Directors for such meeting.

Director Independence

All of the members of the Board of Directors 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 our Chairman of the Board of Directors rather than the 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 Company, implementing risk management strategies that are appropriate for the Company’s business and

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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 Audit Committee reviews and discusses with management periodically the Company’s program, policies and procedures related to information security and data protection, including data privacy and network security. The Audit Committee also monitors the implementation and administration of the Company’s Code of Business Conduct and Ethics.

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 enterprise risk management and enterprise risk management issues otherwise arising in the Company’s business and operations.

Standing Committee Information

The Audit Committee met five times in 2018, 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 Omega’s independent auditors and provides an avenue for communication between the independent auditors, financial management and the Board of Directors. The responsibilities of the Audit Committee are more fully described in its Charter, which is available on the Company’s website at www.omegahealthcare.com.

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 Mr. Perks and Ms. Anand 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. 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 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.

The Board has appointed Ms. Anand to chair the Audit Committee effective as of the completion of the Annual Meeting, when Mr. Perks will retire from the Board.

The Compensation Committee has responsibility for determining the compensation of our executive officers and administering our equity incentive plan. During 2018, the Compensation Committee met four 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.

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 twice during 2018.

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The Nominating and Corporate Governance Committee met three times during 2018. The Nominating and Governance Committee has responsibility for identifying potential nominees to the Board of Directors and reviewing their qualifications and experience. The Nominating and Corporate Governance Committee also develops and implements policies and practices relating to corporate governance.

In addition to the Committees listed above, in February 2015 the Board established a Special Administrative Committee under the Omega 2013 Stock Incentive Plan consisting solely of Mr. Pickett, with the authority to allocate and grant awards thereunder to employees of Omega and its affiliates who are not executive officers of Omega up to a maximum number of units or shares authorized by the Board from time to time.

Identification of Director Nominees and Board Diversity

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. In 2018, Ms. Anand and Mr. Whitman were recommended to the Nominating and Corporate Governance Committee as director candidates by a third-party search firm engaged by the Company under the direction of the Nominating and Corporate Governance Committee to assist in identifying potential director candidates.

The Nominating and Corporate Governance Committee endeavors to identify nominees that possess diverse educational backgrounds, business experiences, life skills, as well as diverse gender, racial, sexual orientation, national origin and ethnic characteristics. Over 22% of our Board members are women, and one director brings ethnic diversity to our Board. Also, the current directors range in age from 57 to 77; the average age is 67. Over 22% of our Board members were elected to the Board of Directors for the first time in the last year, and 2/3 of our Board members were first elected to our Board in the last six years. The Nominating and Corporate Governance Committee does not assign specific weight to any particular criteria; the goal is to identify nominees that, considered as a group, will possess the talents, skill sets and characteristics necessary for the Board of Directors to fulfill its responsibilities.

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.

Communicating with the Board of Directors and the Audit Committee

Our 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 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 Omega’s internal audit consultant, 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

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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.

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. Entities controlled by Craig M. Bernfield were obligated to potentially reimburse approximately $292,000 as of October 23, 2018, the date of Mr. Bernfield’s resignation from the our Board.

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. 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.

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Additionally, directors and officers may not purchase our Company’s securities on margin or borrow against any account in which our securities are held. All of our directors and officers are in compliance with this policy as of December 31, 2018.

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 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 designated Bernard J. Korman as “Director Emeritus” upon his retirement as member of the Board of Directors effective as of the 2018 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 is eligible to attend Board meetings. Mr. Korman is not entitled to vote on any business coming before the Board, nor is he not counted as a member of the Board for the purpose of determining a quorum or for any other purpose. Mr. Korman is reimbursed for reasonable expenses incurred to attend in-person Board meetings or committee meetings to which he is invited, but does not receive any other compensation for service as Director Emeritus. Mr. Korman is not a member of the Board or a “director” as that term is used in our Amended and Restated Bylaws 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. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this document or any other report or document filed with or furnished to the SEC.

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PROPOSAL 2 — PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS OUR
INDEPENDENT AUDITOR FOR THE FISCAL YEAR 2019

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 2019.

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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 W. Perks and Kapila K. Anand each qualify as an “audit committee financial expert,” as defined by SEC rules.

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

Audit Committee Report

The Audit Committee, with respect to the audit of the Company’s 2018 audited consolidated financial statements, reports as follows:

•

The Audit Committee has reviewed and discussed with management and Ernst & Young LLP the 2018 audited financial statements in the Company’s Annual Report on Form 10-K, including a discussion of the quality — not just the acceptability — of the accounting principles, and the reasonableness of significant judgments;

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•

The Audit Committee discussed with Ernst & Young LLP such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (“PCAOB”) (including Auditing Standard No. 1301 “Communications with Audit Committees”);

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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 the Company;

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•

The Audit Committee discussed with the Company’s auditors the overall scope and plans for their respective audits, and then met with the auditors, with and without management present, to review the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting;

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•

The Audit Committee reviewed the professional services provided by Ernst & Young LLP discussed below, considered whether provision of such services is compatible with maintaining auditor independence and concluded that the services provided by Ernst & Young LLP with respect to the 2018 audit were compatible with maintaining auditor independence; and

​

17

•

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s 2018 audited financial statements be included in the Company’s Annual Report on Form 10-K.

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Audit Committee of the Board of Directors

Ben W. Perks, Chairman
Kapila K. Anand
Craig R. Callen
Edward Lowenthal

Independent Auditors

Ernst & Young LLP audited our consolidated financial statements as of December 31, 2018 and 2017 and for each of the years ended December 31, 2018, 2017, and 2016. 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 2018 and 2017 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 2018 and 2017, 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 2018 and 2017, the reviews of the financial statements included in our Company’s Forms 10-Q for fiscal years 2018 and 2017, and services relating to securities and other filings with the SEC, including comfort letters and consents, were approximately $1,560,000 and $1,522,000, 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 2018 and 2017.

Tax Fees

The tax fees billed by Ernst & Young LLP to our Company for tax compliance and preparation services for fiscal years 2018 and 2017 were approximately $758,000 and $737,000 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 2018 and 2017 were approximately $96,000 and $166,000, respectively.

All Other Fees

The aggregate other fees billed by Ernst & Young LLP to our Company were approximately $2,000 for fiscal years 2018 and 2017, respectively, for access to an online accounting research tool.

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 25 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 2017 and 2018 were described in the CD&A included in the Company’s proxy statement for our 2018 annual meeting of stockholders, at which approximately 91% 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 structured 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 2019 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 EMPLOYEE STOCK PURCHASE PLAN

Background of the Employee Stock Purchase Plan

The Omega Healthcare Investors, Inc. Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board on April 9, 2019, to be effective January 1, 2020, subject to approval by the Company’s stockholders within twelve months of the Board’s adoption of the ESPP. The Board believes that approval of the ESPP is in the best interests of the Company and our stockholders. The ESPP will help give the Company and its eligible subsidiaries the ongoing ability to attract and retain the employee talent necessary for the Company’s continued success by enabling eligible employees to acquire a proprietary interest in the Company by purchasing shares of the Company’s common stock through payroll deductions.

Description of the ESPP

The following description of the ESPP is qualified in its entirety by the full text of the ESPP attached to this Proxy Statement as Appendix A, which is incorporated herein by reference. Please refer to Appendix A for the complete terms of the ESPP.

Purpose.   The purpose of the ESPP is to provide eligible employees of the Company and its eligible subsidiaries with an opportunity to acquire an equity interest in the Company by providing a convenient means to purchase shares of the Company’s common stock through payroll deductions. Executive officers of the Company will not be eligible to participate in the ESPP, unless the Compensation Committee decides to allow them to participate. See the discussion under the “Eligibility” heading below for a more complete discussion. As of the date hereof, the Compensation Committee has no plans to allow participation by executive officers of the Company.

Administration.   The ESPP will be administered by a committee appointed by the Board (the “ESPP Committee”). The Board has appointed C. Taylor Pickett in his capacity as a member of the Board as the sole member of the ESPP Committee, unless the Compensation Committee approves participation in the ESPP by executive officers of the Company, in which case the Board has determined that the Compensation Committee will serve as the ESPP Committee. Subject to the terms of the ESPP, the ESPP Committee has the power to interpret and construe any provision of the ESPP and to adopt and amend rules for administering the ESPP. The ESPP Committee may delegate certain functions or services to be performed in connection with the administration of the ESPP. Determinations, decisions and actions of the ESPP Committee are final and binding. The ESPP Committee also has discretion to provide for participation on terms different from those specified in the ESPP and adopt sub-plans, to the extent necessary or advisable to comply with laws of countries other than the U.S. or jurisdictions outside the U.S. in which the Company or subsidiary operates or has employees; provided, however, the ESPP Committee may not take any action that would constitute a material revision of the ESPP under NYSE rules, and any such material revision can be implemented only by ESPP amendment, subject to stockholder approval if required under applicable law or NYSE rules.

Authorized Shares.   The maximum number of shares of Company common stock that may be issued under the ESPP is 500,000 shares, subject to adjustment upon changes in the capitalization of the Company in accordance with the terms of the ESPP. Shares of Company common stock issued under the ESPP may consist of treasury shares held by the Company, newly issued shares or shares purchased in the open market. Shares of Company common stock that are deducted from issuance to satisfy tax withholding shall not reduce the share reserve.

Adjustments.   In the event of certain changes in the capitalization of the Company, such as mergers, consolidations, reorganizations, stock dividends or other similar changes in corporate structure or capitalization, to prevent substantial dilution or enlargement of the rights granted under the ESPP, the Board will make proportionate adjustments to the number of shares of the Company’s common stock available for issuance under the ESPP, the purchase price of shares subject to outstanding purchase rights under the ESPP and the number of shares subject to outstanding purchase rights under the ESPP.

Effective Date, Amendment and Termination.   The ESPP was approved by the Board on April 9, 2019, to be effective as of January 1, 2020, subject to approval by our stockholders within twelve months of the Board’s adoption of the ESPP. Without such stockholder approval, the ESPP will not become effective and will become null and void.

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The Board may amend, modify, suspend, discontinue or terminate the ESPP at any time, subject to stockholder approval for amendments or modifications if required under applicable law or NYSE rules.

Eligibility.   All employees of the Company, all employees of the Company’s subsidiaries that have been designated by the Board to adopt the ESPP, and all employees of the Company’s subsidiaries that may in the future be designated by the ESPP Committee (each such subsidiary that has or is in the future so designated, a “Participating Subsidiary”), will be eligible to participate in the ESPP, with the exception of certain employees who are excluded. The Board has designated OHI Asset Management, LLC, which is the sole subsidiary of the Company that has employees as of April 9, 2019, as the only Participating Subsidiary, and as of April 9, 2019, the Company has no employees. Except as provided below, executive officers of the Company will be excluded, as well as employees of the Company or a Participating Subsidiary who have been employed less than six months, are customarily employed for twenty hours or less per week or are customarily employed for not more than five months in any calendar year. However, as to any future offering period that has not yet commenced, the ESPP Committee may reduce or increase the required period of employment, the minimum number of required hours per week or the minimum number of months worked in a calendar year. In addition, the Compensation Committee may determine that executive officers of the Company will be permitted to participate, in which case, pursuant to the Board’s action in adopting the ESPP, C. Taylor Pickett will cease administering the ESPP and the Compensation Committee will become the ESPP administrator. In addition, no employee may acquire rights to purchase common stock under the ESPP at a rate that exceeds $25,000 of fair market value of our common stock for any calendar year.

Number of Eligible Employees.   As of April 9, 2019, approximately 49 employees of OHI Asset Management, LLC (and no other employees of the Company or any of its other subsidiaries) would be eligible to participate in the ESPP if the ESSP were effective as of that date instead of its January 1, 2020 proposed effective date and if the Compensation Committee does not authorize participation by the Company’s executive officers.

Offering Periods.   Unless otherwise determined by the ESPP Committee, the offering periods will be quarterly periods, beginning on the first day of each calendar quarter, starting with January 1, 2020. The ESPP Committee may specify different offering periods, provided that no offering period may exceed 27 months.

Participation.   Individuals who are eligible employees as of the first day of an offering period may elect to participate in the ESPP by completing and filing an enrollment form with the Company or its designee. In the enrollment form, each participant will elect to contribute a whole percentage of his or her “compensation” (as defined below) through payroll deductions of no less than 1% and no more than 20%, or such other maximum percentage as may be approved by the ESPP Committee. The enrollment form must be filed prior to the offering period in accordance with ESPP rules. Unless expressly permitted by the Committee, an employee may not make any separate contributions or payments to the ESPP. “Compensation” means wages subject to income tax withholding, plus an employee’s pre-tax contributions to the 125 plan and the 401(k) plan and qualified transportation fringe benefits. However, the ESPP Committee may apply a different definition of compensation for all participants for any offering period.

Participant Accounts.   The Company will hold a participant’s payroll deductions in a non-interest bearing account, which will be established for each participant, until the contributions are used to purchase shares of Company common stock or returned to the participant in accordance with the terms of the ESPP.

Purchase of Common Stock.   As of the last business day of each offering period, the balance of each participant’s account will be used to purchase shares of Company common stock, subject to a per participant limit of  $25,000 of fair market value of our common stock for any calendar year (determined in accordance with more detailed rules in the ESPP). The purchase price of each share of Company common stock will be the lesser of 85% of the “fair market value” (as defined below) per share of Company common stock as of  (i) the first day of the Offering Period (as defined in the ESPP) or (ii) the last day of the Offering Period; provided, however, that the ESPP Committee may designate a per share purchase price that is higher (but not lower) than as determined under the preceding formula. For these purposes, “fair market value” is defined as the closing price on our stock on the NYSE as of the last business day before the day or date indicated, or if Company common stock ceases to be traded on the NYSE, the fair market value as determined in any reasonable manner by the ESPP Committee.

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On April 9, 2019, the closing sale price per share of the Company’s common stock as reported on the NYSE was $36.33.

Holding Period.   Unless otherwise determined by the ESPP Committee, participants will be required to hold shares of Company common stock purchased under the ESPP for a minimum of twelve months, subject to earlier disposition upon death.

Transferability.   Neither the funds in a participant’s account nor the participant’s right to purchase shares under the ESPP may be transferred, assigned or alienated, other than by will or by the laws of descent and distribution. During a participant’s lifetime, the participant’s right to purchase shares is exercisable only by the participant.

Changes in Contributions.   Unless otherwise determined by the ESPP Committee, a participant may reduce or stop the amount of the participant’s payroll deductions during the offering period by providing written notice to the Company in accordance with the ESPP rules. Unless otherwise permitted by the ESPP Committee, a participant may not increase the amount of the participant’s payroll deductions during the offering period.

Withdrawal.   Unless otherwise determined by the ESPP Committee, a participant may revoke the participant’s election to participate in the current offering period, reduce the amount of payroll deductions for the remainder of the offering period to $0 and withdraw the entire cash balance already accumulated in the participant’s account, provided that the participant gives written notice to the Company in accordance with the ESPP rules. Withdrawal terminates the participant’s right to purchase any shares under the ESPP during that offering period, and the participant must file a new enrollment form prior to a subsequent offering period to participate in that subsequent offering period.

Termination of Employment or Other Cessation of Eligibility.   Unless otherwise determined by the ESPP Committee with respect to a future offering period, if a participant terminates employment during an offering period or ceases to be an eligible employee during an offering period, contributions held in the participant’s account during the offering period will be refunded to the participant (or, in the case of a termination due to death, the participant’s beneficiary). However, the ESPP Committee may determine before an offering period to permit each such participant to have the participant’s payroll contributions used at the end of the offering period to purchase our common stock.

ESPP New Plan Benefits

No benefits or amounts under the ESPP will be received by or allocated to any current non-employee director of the Company, because non-employees directors of the Company are not eligible to participate in the ESPP. No benefits or amounts under the ESPP will be received by or allocated to any current executive officer of the Company, as long as the Compensation Committee does not authorize the participation of executive officers of the Company. See “— Eligibility” above. If the Compensation Committee authorizes participation by executive officers of the Company (which as of the date hereof, it has no plans to do), the benefits to be received by the executive officers of the Company would not be determinable because participation would be voluntary, ESPP contributions would be discretionary, and benefits would be based on future prices of the Company common stock. The benefits to be received by employees other than executive officers are not determinable because participation will be voluntary, ESPP contributions will be discretionary, and benefits will be based on future prices of the Company common stock.

Federal Tax Consequences

The following provides a general summary of certain U.S. federal income tax consequences to participants and the Company with respect to shares purchased under the ESPP, based upon laws in effect on the date hereof. The discussion is general in nature and does not take into account a number of considerations that may apply in light of the circumstances of a particular participant under the ESPP. The income tax consequences under applicable state and local tax laws may not be the same as under U.S. federal income tax laws.

The ESPP is not qualified as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code (the “Code”).

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As of each date Company common stock is purchased for a participant under the ESPP, the participant recognizes taxable wages in an amount equal to the aggregate discount on the shares purchased as compared to the fair market value of the shares on the purchase date. That amount is subject to federal and state income taxes and payroll taxes (such as Social Security, Medicare and Federal Unemployment taxes). That same amount is subject to tax withholding. To satisfy tax withholding requirements, unless the ESPP Committee determines to require tax withholding in cash, the Company will withhold a whole number of shares of Company common stock with a fair market value closest to (but not more than) the amount of the tax withholding and withhold any remaining tax withholding attributable to the fact that fractional shares of Company common stock from other compensation of the participant. The Company or the Participating Subsidiary that employs the participant will remit the tax withholding amount in cash to the applicable taxing authorities. When a participant disposes of shares of Company common stock purchased under the ESPP, any difference between the aggregate sale price of the shares and the aggregate fair market value of those shares on the purchase date will be capital gain or capital loss. The Company is entitled to a deduction equal to the amount the employee recognizes as taxable wages as a result of purchasing shares of Company common stock under the ESPP.

Equity Compensation Plan Information

The following table provides information about shares of common stock available for future issuance under our equity compensation plans as of December 31, 2018:

(1)

Reflects (i) 128,006 restricted stock units that were granted on March 17, 2016, (ii) 472,336 shares related to the March 17, 2016 award of performance restricted stock units or LTIPs, (iii) 140,416 restricted stock units that were granted on January 1, 2017, (iv) 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 or LTIPs, (v) 169,900 restricted stock units that were granted on January 1, 2018, (vi) 1,012,032 shares that could be issued if certain performance conditions are achieved related to the January 1, 2018 award of performance restricted stock units or LTIPs and, (vii) 403,427 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 2018 Stock Incentive Plans.

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Voting Required for Approval

For the ESPP 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.

Recommendation of the Board

Accordingly, our Board of Directors unanimously recommends that the stockholders vote FOR the proposal to approve the ESPP.

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation Discussion and Analysis

Our Compensation Discussion and Analysis (“CD&A”) addresses the following topics:

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2018 Achievements and 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 Omega’s Executive Compensation Program;

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•

Omega’s Compensation Decisions and Results for 2018; and

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•

Omega’s Compensation Decisions for 2019.

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2018 Achievements and Performance Results

We believe that our operating results in 2018 display the strength of our conservative balance sheet and operating model against the backdrop of a dynamic operating environment. As healthcare delivery continues to evolve, we continuously evaluate our assets, operators and markets to position our portfolio for long-term success. Our strategy includes applying our proprietary data analytics platform to enhance facility operations, investment underwriting and asset management, as well as selling or transitioning assets that do not meet our portfolio criteria. In 2018, using our proprietary data analytics platform, we completed substantially all of our strategic asset repositions and transitioning objectives, which included selling 78 facilities (22 previously held for sale at December 31, 2017) subject to operating leases for approximately $309.6 million in net proceeds, recognizing a gain on sale of approximately $24.8 million.

Significant specific accomplishments in 2018 included the completion of the following transactions totaling approximately $471 million in new investments:

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$131.3 million secured term loan with an unrelated third party. The loan is secured by a collateral assignment of mortgages covering seven skilled nursing facilities (“SNFs”), three independent living facilities (“ILFs”), and one assisted living facility (“ALF”) located in Pennsylvania and Virginia. The loan bears an interest rate of 9.35%. On or before its maturity in 2019, Omega expects to obtain fee simple title to the facilities and add the facilities to an existing operator’s master lease.

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•

$44.2 million first mortgage loan with an existing operator. The loan is secured by five SNFs with 522 beds located in Michigan. The loan is cross-defaulted and cross-collateralized with Omega’s existing loans and master lease with the operator and bears interest at an initial annual rate of 9.5%, which increases each year by 0.225%.

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•

$35.1 million of new investments with an existing operator. The investment included the acquisition of three SNFs and one ILF from an unrelated third party. Four Pennsylvania facilities with 420 beds were added to the existing operator’s master lease with an initial cash yield of 9.5% with 2.5% annual rent escalators.

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•

$9.1 million of new investments with an existing operator in the U.K. The investments included two care homes (similar to ALFs in the U.S.) acquired from an unrelated third party and leased to an existing operator. The two care homes were added to the existing operator’s master lease with an initial annual cash yield of 8.5% with 2.5% annual escalators.

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•

$60.7 million to acquire nine SNFs and one ALF throughout the U.S. and an additional $10.0 million invested in an existing $50.0 million mezzanine loan. The annual interest rate on the mezzanine loan was fixed at 12.0% per annum and the maturity date was extended to May 2023.

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•

$180.9 million of investments in Omega’s capital expenditure programs.

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Also, on January 2, 2019, we and our subsidiary operating partnership (“Omega OP”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MedEquities Realty Trust, Inc. (“MedEquities”) and its subsidiary operating partnership pursuant to which we will acquire MedEquities in a transaction valued at approximately $600 million.

On January 11, 2019, we completed the sale to affiliates of Orianna Health Systems (“Orianna”) of the remaining 15 SNFs subject to a direct financing lease with Orianna for $176 million of consideration. On the same date, Orianna repaid in full the DIP financing that Omega had provided, including all related interest. On January 16, 2019, Orianna’s plan of reorganization was confirmed creating a Distribution Trust (the “Trust”) to distribute the proceeds from Orianna’s sale of the remaining 15 SNFs, as well as the Trust’s collections of Orianna’s accounts receivable portfolio. As a result of the foregoing, Orianna’s restructuring efforts are largely completed.

TSR Performance Results for One, Three, Five and Ten Year Periods ending 2018

Our total shareholder return (“TSR”) of approximately 39.9% for 2018 ranked it as the best performing public equity REIT in 2018. In addition to our strong 2018 TSR performance, we outperformed the FTSE NAREIT Equity Health Care Index by approximately 370 basis points on a compounded, annualized basis over the most recently completed three-year period ending 2018. The charts below illustrate our TSR performance over a variety of short-term and long-term time-periods.

TSR Annualized Performance for Multi-Year Periods ending December 31, 2018

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Pay for Performance Alignment

Our Compensation Committee (sometimes referred to as the “Committee” within the CD&A section of this document) has endeavored to structure the compensation program of our named executive officers (sometimes referred to herein as “NEOs”) to align performance with enhanced stockholder value. The information below demonstrates how the compensation our named executive officers received in 2018 was aligned with the Company’s performance.

Variable Pay Linked to Performance

For 2018, approximately 84% of our Chief Executive Officer’s total target compensation and 78% of the total target compensation for our other named executive officers was variable, performance-based compensation and/or at-risk (including annual cash bonus, annual performance-based equity awards, and annual time-based grants that are subject to stock price fluctuations). Further, 64% of our Chief Executive Officer’s target compensation for 2018 and 62% of our other named executive officers’ target compensation for 2018 was in the form of equity-based compensation.

2018 Target Compensation Mix

2018 Annual Cash Incentives Earned

For 2018, our Chief Executive Officer earned an annual cash incentive equal to 113% of his target annual cash incentive and the other named executive officers earned annual cash incentives equal to, on average, 100% of their target annual cash incentive compensation. The graph below contains the earned cash bonus payouts as a percentage of target over the most recent five fiscal years and depicts a pay for performance system that the Compensation Committee believes is well aligned. See “Omega’s Compensation Decisions and Results for 2018 —  2018 Annual Cash Incentive Program Performance Goals and Results.”

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Annual Cash Incentive Payouts 2014 – 2018

Long-Term Incentive Compensation

Performance goals incorporated into our annual performance-based equity awards drive a significant portion of what our named 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 named executive officers will earn more than their target level of compensation and in periods when our TSR and Relative TSR under-perform, our named executive officers will earn less than their target level of compensation.

To make even more of our named executive officer’s long-term compensation performance-based, the Committee increased the percentage of the named 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, after a disappointing year of stock price performance in 2017, the Committee substantially increased the level of TSR required to achieve the performance goals for 2018 awards. See “Omega’s Compensation Decisions and Results for 2018 — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2018 — TSR Performance-Based Profits Interest Units.”

Long-Term Incentive Compensation Earned in 2018

Our Relative TSR for the three-year performance period ending December 31, 2018 of 240 basis points in excess of the FTSE NAREIT Equity Health Care Index was between the target performance level of  +50 basis points and the high performance level of  +350 basis points. Therefore, the Relative TSR-based equity incentives for that period were earned at an interpolated level between the target and high levels of performance.

Our TSR for the three-year performance period ending December 31, 2018 of 10.52% was between the target level of performance of 10% and the high level of performance of 12%. Therefore, the TSR-based equity incentives for that period were also earned at an interpolated level between the target and high levels of performance.

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Our Relative TSR and TSR for these purposes are based on November and December average closing stock prices before the beginning and at the end of the three year performance period. As a result, the numbers are different than shown in the “3-Year Total Return” bar chart under “TSR Annualized Performance for the Multi-Year Periods ending December 31, 2018.”

For more detail and discussion regarding long-term incentive compensation earned and tracking over other three-year performance periods, see “Omega’s Compensation Decisions and Results for 2018 — Performance Results for Long-Term Equity Incentives ending December 31, 2018.”

Consideration of Prior “Say-on-Pay” Advisory Votes

At our 2018 annual meeting of stockholders, holders of approximately 93.1% of the votes cast on such proposal approved the advisory vote (“say-on-pay”) on the 2017 compensation of our named executive officers, which was consistent with the level of support we received in 2017 and 2016, when 96.3% and 97.6% of stockholders voted for our “say-on-pay” proposal. The Committee considered the results of the advisory vote when setting executive compensation for 2018 and plans to continue to do so in future executive compensation policies and decisions.

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 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 with the Company’s performance. Below is a summary of certain executive compensation programs and governance practices – both the practices implemented to drive performance and the practices we have avoided because we does not believe they would serve our stockholders’ long-term interests.

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Our compensation system seeks to maintain best practices and support strong corporate governance.

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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 named 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 and was paid approximately $49,100 for these services in 2018. At the direction of the Nominating and Corporate Governance Committee of the Board, the Company also engaged affiliates of FPL to assist the Company and the Board of Directors in developing talent assessment and development programs, and to assist the Nominating and Corporate Governance Committee in identifying potential candidates to the Board of Directors. The Company paid affiliates of FPL approximately $145,500 for these additional services in 2018. The Committee does not believe the additional services provided by affiliates of FPL create any conflict of interest.

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Peer Group Benchmarking

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

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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.

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Since 2015, the Committee has endeavored to minimize changes to the peer group to maintain consistency of year over year comparisons. For 2018, the Committee made minimal changes to the peer group, adding Healthcare Realty Trust Incorporated and Welltower Inc. based on its healthcare focus and removing Care Capital Properties because it was acquired in 2017, and therefore, no longer a suitable peer.

2018 Peer Group

Omega as Compared to 2018 Peer Group

($ in billions as of December 31, 2018)

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 named executive officers. The

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Committee also requests and receives recommendations from our Chief Executive Officer regarding the compensation for each of the named executive officers and the business and performance targets for long-term incentive awards and annual cash bonuses for each named executive officer.

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 named 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 named 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 named executive officers and the elements that comprise that compensation are made solely by the Committee.

Components of Our Executive Compensation Program

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

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annual base salary,

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annual cash incentive awards, and

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annual long-term equity incentive awards.

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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 named 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.

Objectives and Important Features of Our Executive Compensation Program

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Long-Term Equity Incentive Program

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

Our TSR and Relative TSR drive a significant portion of what Omega’s named 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 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 named executive officer that are earned over a three-year period running from January 1 of the year of grant.

A percentage of each named 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 awards granted in 2016 and later, the Performance-based Portion of each equity award was 60% (expressed as a dollar amount at the target performance level) and the Time-based Portion was 40%.

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

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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 ”Profits Interest Units” (which are potentially convertible into our common stock) for 2015 through 2018; and

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

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

Additional details of the 2018 annual equity award grants for our named executive officers are discussed under the heading “Our Compensation Decisions and Results for 2018 — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2018.”

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 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 table below.

Our Compensation Decisions and Results for 2018

2018 Annual Base Salaries

The Committee established annual base salaries for the named executive officers for 2018 to be generally in line with the approximate 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 named executive officers for 2018 were increased by 2% over 2017 and are set forth below:

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2018 Annual Cash Incentive Opportunities

The Committee established the following annual cash bonus opportunities for 2018 for our named executive officers:

2018 Annual Cash Incentive Performance Goals and Results

Why is this metric important?   Adjusted FFO per share is important as it is used as a supplemental measure of Omega’s operating performance.

How is this metric calculated?   Adjusted FFO is calculated as FFO excluding the impact of non-cash stock-based compensation and certain revenue and expense items, where FFO is calculated 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.

Performance:   In 2018, Omega achieved $3.04 in Adjusted FFO per share, resulting in an achievement between the target and high hurdles.

Why is this metric important?   FAD per share is important as it provides an enhanced measure of the operating performance of Omega’s core portfolio.

How is this metric calculated?   FAD is calculated as Adjusted FFO less non-cash interest expense and non-cash revenue, such as straight-line rent.

Performance:   In 2018, Omega achieved $2.70 FAD per share, resulting in an achievement between the target and high hurdles.

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Why is this metric important?   Tenant quality is important as it helps to measure the financial strength of our tenants and the quality of our underwriting, and accordingly, the reliability of our projected income stream.

How is this metric calculated?   Calculated as the percentage of actual cash collected (within 30 days of the due date) in relation to the Board approved 2018 budgeted operator cash lease and mortgage revenue.

Performance:   In 2018, Omega achieved 98.25% tenant quality, resulting in an achievement between the threshold and target hurdles.

Why is this metric important?   It allows the Committee to consider other financial and non-financial factors and to recognize and appropriately reward each officer’s particular contributions to the success of Omega.

Performance:   The percentages earned under the individual performance metric and material factors considered include the following:

C. Taylor Pickett — 75% of maximum

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Spearheaded MedEquities acquisition effectively

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Knows and uses industry data effectively

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Provides excellent thought leadership

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Improved the human resource function

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Realigned and improved effectiveness of reporting structure

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Daniel J. Booth — 77% of maximum

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Effectively managed a significant number of troubled situations

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Sourced and successfully closed a number of transactions

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Managed the diligence and high level MedEquities communications

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Stephen J. Insoft — 71% of maximum

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Managed the Maplewood relationship and the development of various properties including Inspir at Carnegie Hill

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Performs well as an integral member of the data management team

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Robert O. Stephenson — 77% of maximum

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Developed and improved investor relations function

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Continued to improve corporate back office

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Made a significant contribution to the MedEquities acquisition effort

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Michael D. Ritz — 75% of maximum

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Continued to improve and find value added opportunities in the accounting function

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•

Made an important contribution in developing the MedEquities deal structure and considering related accounting ramifications

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Accordingly, the Committee approved the following cash bonuses relating to 2018 performance:

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. 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

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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.

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 in the Company’s earnings release included as Exhibit 99.1 to the Form 8-K furnished on February 11, 2019.

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

As discussed under the heading “Components of Omega’s Executive Compensation Program — Long-Term Equity Incentive Program — Overview of Long-Term Equity Incentives,” the Committee granted an annual equity award to each named executive officer for 2018 that is earned over a three-year period running from January 1, 2018. 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 Profits Interest Units that are earned based on TSR. The following illustration visually depicts the construct of our 2018 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, 2018 and is subject to the named 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

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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.

Relative TSR Performance-Based Restricted Stock Units

The PRSUs are earned based on the Company’s TSR over the three-year performance period beginning January 1, 2018, relative to the FTSE NAREIT Equity Health Care 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 Profits Interest 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 before the beginning and at 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 named 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 named 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 then paid currently, before vesting.

TSR Performance-Based Profits Interest Units

In 2015, the Committee began granting “Profits Interest Units” (formerly called “LTIP Units”), which are earned based on the Company’s TSR over the three-year performance period. Profits Interest Units are limited partnership units structured as profits interests of Omega OP. Pursuant to Omega OP’s partnership agreement, Profits Interest Units are convertible into OP Units, at the election of the holder or Omega OP, on a one-to-one basis, subject to conditions on minimum allocation to the capital accounts of the holders of Profits Interest Units for federal income tax purposes. Each OP Unit is redeemable at the election of the

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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 the granting of Profits Interest Units was possible. The Committee granted TSR-based Profits Interest Units to the named executive officers in lieu of TSR-based PRSUs primarily because the Profits Interest Units could provide tax advantages to the named executive officers as compared to PRSUs. Many REITs that have similar structures as Omega grant, in lieu of PRSUs, limited partnership interests in an operating partnership similar to Profits Interest Units.

The Profits Interest 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 Profits Interest 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.

In 2018, the Compensation Committee made a one-time adjustment to increase the performance hurdles of TSR to account for the prior year’s subpar performance. Based on a review of peer long-term plans that use a TSR measurement, FPL advised the Committee that with this adjustment Omega’s performance hurdles were the most rigorous hurdles within its peer group. The charts below contain the required performance levels and resulting payouts for the TSR component of the long-term incentive program for 2017 and 2018.

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

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Performance Results for Long-Term Equity Incentives as of December 31, 2018

Our Relative TSR and TSR for purposes of calculating long-term incentive performance are based on November and December average closing stock prices before the beginning and at the end of the three year performance period. As a result, the numbers in the chart immediately above are different than shown in the 3 Year Total Return bar chart under “TSR Annualized Performance for the Multi-Year Periods ending December 31, 2018.”

Summary of Performance Results as of December 31, 2018 for Long-Term Equity Incentives

Our Relative TSR for the three-year performance period ending December 31, 2018 of 240 basis points in excess of the FTSE NAREIT Equity Health Care Index was between the target performance level of  +50 basis points and the high performance level of  +350 basis points. Therefore, the Relative TSR-based equity incentives for that period were earned at an interpolated level between the target and high level of performance. In addition, our Relative TSR for the one and two periods ending December 31, 2018 is tracking above the required level of performance for earning the Relative TSR-based equity incentives for the three-year performance periods ending 2019 and 2020 at the high level. The required high level for the three-year performance period ending in 2019 and 2020 is 300 basis points in excess of the index.

Our TSR for the three-year performance period ending December 31, 2018 of 10.52% was between the target level of performance of 10% and the high level of performance of 12%. Therefore, the TSR-based equity incentives for that period were earned at an interpolated level between the target and high level of performance. In addition, Omega’s TSR for the one and two periods ending December 31, 2018 is tracking above the required level of performance level for earning the TSR-based equity incentives (i) for the three-year performance period ending 2019 at the high level and (ii) for the three-year performance period ending 2020 between the target and high levels. The required high level for the three-year performance period ending in 2019 is 12% and for the three-year performance period ending in 2020 is 18%.

Our Compensation Decisions for 2019

Consideration of Market Data

For 2019, the Committee maintained the same peer group composition as the prior year.

FPL determined that median aggregate total compensation for the top five named executive officers for the 2019 peer group had increased on average by 4% over the level for the prior year. The Committee decided to increase the base salary and bonus opportunity of each of Omega’s named executive officers by 2.5% for 2019. The Committee also increased the long-term incentive compensation opportunities of Mr. Booth, Mr. Insoft and Mr. Stephenson by 2.5%. The Committee increased the long-term incentive compensation opportunity of Mr. Pickett by 13% to bring Mr. Pickett’s total annual compensation at the target level of performance up to the median level of the chief executive officers of the peer group. The Committee increased the long-term incentive compensation opportunity of Mr. Ritz by 15% to bring his total annual compensation at the target level of performance closer to the median level of the fifth highest compensated executive officer of each company in the peer group.

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2019 Annual Base Salaries

The Committee established the following annual base salaries for 2019 for each of our named executive officers:

2019 Annual Cash Incentive Opportunities

The annual cash bonus opportunities for 2019 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 2018.

For 2019, the Committee made some changes to the annual cash bonus performance measures and weighting that it used to determine annual cash bonuses for 2018 performance. For 2019, the Committee deleted the AFFO per share performance measure (15% weighting for 2018) and increased the FAD per share weighting from 15% for 2018 to 30% for 2019. The Committee made this change because it viewed the AFFO and FAD performance measures as similar. The FAD per share performance goal for 2019 was based on Omega’s operating budget for 2019 which includes the pro forma effect of the acquisition of MedEquities. The Committee also added a leverage performance measure to emphasize the importance of debt management to Omega’s business. Finally, the Committee reduced the subjective performance measure weighting from 40% for 2018 to 30% for 2019. The Committee did this because it believes that objective financial data are the most relevant indicators of performance and therefore should be more heavily weighted. The tenant quality measure weighting for 2018 remained the same for 2019 as for 2018, i.e., 30%. Below is a comparison of the performance measures for 2018 and 2019 and the weightings.

2018 Annual Cash Incentive Performance Measures2019 Annual Cash Incentive Performance Measures

Leverage is a non-GAAP financial measure which equals funded debt/adjusted pro forma annualized EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA eliminates items such as acquisition costs and stock-based compensation expense and adds back certain non-cash expenses, if any, to EBITDA. Adjusted pro forma EBITDA adds to adjusted EBITDA the incremental EBITDA from (i) new investments and divestitures made during the 4th quarter assuming an October 1st purchase or sale date and (ii) inception to date funding of construction in progress multiplied by the estimated contractual quarterly yield assuming an October 1st in-service date. EBITDA, adjusted EBITDA, adjusted pro forma EBITDA and related ratios are non-GAAP financial measures. Annualized EBITDA, adjusted annualized EBITDA, and adjusted pro forma EBITDA assume the current quarter results multiplied by four, and are not projections of future performance.

Long-Term Equity Incentives for Three-Year Period commencing January 1, 2019

The Committee approved grants to the named executive officers of long-term incentive compensation awards effective January 1, 2019. For determining the amount of the 2019 grants, the Committee used an approach similar to that used for determining the amount of the 2018 grants, except that the long-term incentive opportunity of each of our five executive officers was increased for 2019 as discussed under the heading “Omega’s Compensation Decisions for 2019 -Consideration of Market Data.” Subsequent to the one

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time increase to the TSR performance hurdles for 2018 as previously noted, and subsequent to Omega’s industry leading TSR performance in 2018, in calibrating the 2019 TSR-based grants the Committee reverted back to the traditional performance goals used, as shown in the table immediately below. Except for this change, the material terms (other than amounts) of the 2019 grants of long-term incentive awards are substantially similar to the 2016, 2017 and 2018 long-term incentive awards.

2016, 2017 and 2019 Long-Term Incentive Awards Performance Goals

Other Matters

Clawback Policy

The Board has adopted a recoupment policy that allows the Company to recover incentive compensation paid to our executive officers in certain situations. Under this policy, if we are required to restate financial results due to material noncompliance with financial reporting requirements, the Board of Directors may, in its discretion, require executive officers to repay certain incentive compensation received in the three completed fiscal years prior to the year in which it was determined that a restatement was required. Incentive compensation is potentially subject to recovery to the extent that the compensation paid based on erroneous financial reporting measures exceeded what would have been paid based on the data used in the restated financial restatements. In addition, incentive compensation that was paid based on the subjective determination of the Compensation Committee of an executive officer’s performance is also potentially subject to recovery. Any right of recovery under the policy is in addition to any other legal rights of recovery and remedies that the Company may have, including under the Sarbanes-Oxley Act of 2012 and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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 $280,000 (for 2019, 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.

Beginning with the 2019 long-term equity incentive grants, the Committee approved a program that would allow each officer to elect to receive (i) time-based Profits Interest Units in lieu of all or a part of the time-based RSUS and (ii) performance-based Profits Interest Units in lieu of all or a part of the performance-based PRSUS. The Profits Interest Units have the same value from an accounting perspective and have substantially similar terms and conditions as the RSUs or PRSUs that they replace. In addition, in 2018 the Committee approved a non-qualified deferred cash compensation plan that allows officers to elect to defer receipt of all or a portion of annual cash bonuses or annual base salary. We will maintain a recordkeeping account for each officer who elects to defer under the plan that will be adjusted with the rate of return applicable to the plan investments. However, the plan is unfunded and the assets of the plan therefore constitute the general assets of the Company.

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

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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 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 named 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 named 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 named executive officers to focus on stock price appreciation and maintaining dividends; 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 change to Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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 2018 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 2018 described under Compensation Discussion and Analysis — Compensation Decisions and Results for 2018 — 2018 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 Profits Interest Units is based on the probable outcome of the performance conditions as of the grant date. For 2018, includes the grant date fair value of the RSUs, PRSUs and Profits Interest Units granted January 2018. For 2017, includes the grant date fair value of the RSUs, PRSUs and Profits Interest Units granted January 2017. For 2016, includes the grant date fair value of the RSUs, PRSUs and Profits Interest Units granted March 2016. See Note 18 — “Stock-Based Compensation” in the Omega Annual Report on Form 10-K for the year ended December 31, 2018 for a detailed description of the assumptions that were used in determining the dollar amounts recognized for financial statement reporting purposes of the PRSUs and Profits Interest 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 2018 and 2017; adjusted FFO per share and tenant quality for 2016) of annual cash incentive program payments, described for 2018 under Compensation Discussion and Analysis — Compensation Decisions and Results for 2018 — 2018 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 2018 Summary Compensation Table above.

(1)

Represents the fair value as of the applicable grant date. See the Stock Vested table below for information regarding amounts earned with respect to awards vesting in 2018.

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(2)

Reflects the range of bonus payments that were possible as of the grant date under the objective metric components of Omega’s annual cash incentive program for 2018. Based on actual performance, bonus payments were made under the objective metric components for 2018. For more information regarding annual bonus opportunities including the subjective component, see Compensation Discussion and Analysis — Compensation Decisions and Results for 2018 — 2018 Annual Cash Incentive Opportunities.

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(3)

RSUs subject to three-year cliff vesting on December 31, 2020 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 Omega’s Executive Compensation Program — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2018 — Time-based RSUs.

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(4)

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 that will be earned depends on the level of Relative TSR over the three-year performance period ending December 31, 2020 (unless a change in control occurs before that date). Vesting occurs in four equal quarterly installments in 2021, 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 or change in control occurs during 2021, the previously earned PRSUs immediately vest. If the Qualifying Termination occurs during the performance period and is not in connection with a change in control, the number of units earned will be determined at the end of the performance period and vesting will be

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prorated based on days elapsed through the date of the Qualifying Termination. If the change in control occurs during the performance period, the performance period will end on the date of the change in control. In such case, 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 are earned. Accrued dividend equivalents are only payable if and to the extent the PRSUs are earned. See Compensation Discussion and Analysis — Components of Omega’s Executive Compensation Program — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2018 — Relative TSR Performance-Based Restricted Stock Units.

(5)

Reflects the range of Profits Interest Units that may be earned by each executive officer, based on the level of performance over the performance period. The actual number of Profits Interest Units that will be earned depends on the level of TSR over the three-year performance period ending December 31, 2020 (unless a change in control occurs before that date). Vesting occurs in four equal quarterly installments in 2021, 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 or change in control occurs during 2021, the previously earned Profits Interest Units immediately vest. If the Qualifying Termination occurs during the performance period and is not in connection with a change in control, the number of units earned will be determined at the end of the performance period and vesting will be prorated based on days elapsed through the date of the Qualifying Termination. If the change in control occurs during the performance period, the performance period will end on the date of the change in control. In such case, 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 Profits Interest Units will be earned and vested on the date of the change in control. Each unvested and unearned Profits Interest 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 Profits Interest Unit entitles the holder to receive a distribution (and a corresponding allocation of Net Income and Net Loss per Earned Profits Interest Unit) equal to the excess of: (i) the amount of distributions from Omega OP that would have been paid per Profits Interest Unit if the Profits Interest Unit had been an OP Unit on January 1, 2018 over (ii) the Interim Distribution per Profit Interest Unit. In addition, each earned Profits Interest Unit entitles the holder to receive distributions and allocations of Net Income and Net Loss that accrues following the date that the Profits Interest Units become an Earned Profits Interest Unit pursuant to the partnership agreement of Omega OP determined without regard to the adjustments described above. See Compensation Discussion and Analysis, Components of Omega’s Executive Compensation Program — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2018 — TSR Performance-Based Profits Interest 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, 2018. Since the information is set forth as of December 31, 2018, it does not include equity awards that vested or forfeited as of December 31, 2018 or awards granted in 2019. There are no options outstanding.