Stock-Based Compensation

Compensation Plans

We currently have: five plans under which outstanding options to purchase common stock, shares of restricted stock or restricted stock units have been, or may in the future be, granted to our officers, employees and non-employee directors (the 2000 Incentive Compensation Plan (Employee Plan), the 2004 Stock Plan for Directors, the 2006 Incentive Plan, the 2006 Stock Plan for Directors, and the 2012 Incentive Plan); one plan under which executive officers may receive common stock in lieu of compensation (the Executive Deferred Stock Compensation Plan); and one plan under which certain non-employee directors have received or may receive common stock in lieu of director fees (the Nonemployee Directors’ Deferred Stock Compensation Plan). These plans are referred to collectively as the “Plans.”

During the year ended December 31, 2015, we were permitted to issue shares and grant options, restricted stock and restricted stock units only under the Executive Deferred Stock Compensation Plan, the Nonemployee Directors’ Deferred Stock Compensation Plan and the 2012 Incentive Plan. The 2006 Incentive Plan and the 2006 Stock Plan for Directors (collectively, the “2006 Plans”) expired on December 31, 2012, and no additional grants were permitted under those Plans after that date.

The number of shares initially reserved for issuance and the number of shares available for future grants or issuance under these Plans as of December 31, 2015 were as follows:


•	Executive Deferred Stock Compensation Plan—594,070 shares were reserved initially for issuance to our executive officers in lieu of the payment of all or a portion of their salary, at their option, and 594,070 shares were available for future issuance as of December 31, 2015.


•	Nonemployee Directors’ Deferred Stock Compensation Plan—594,070 shares were reserved initially for issuance to nonemployee directors in lieu of the payment of all or a portion of their retainer and meeting fees, at their option, and 478,048 shares were available for future issuance as of December 31, 2015.

•

2012 Incentive Plan—10,499,135 shares (plus the number of shares or options outstanding under the 2006 Plans as of December 31, 2012 that were or are subsequently forfeited or expire unexercised) were reserved initially for grants or issuance to employees and non-employee directors, and 7,876,301 shares (plus the number of shares or options outstanding under the 2006 Plans as of December 31, 2015 that were or are subsequently forfeited or expire unexercised) were available for future issuance as of December 31, 2015.

Outstanding options issued under the Plans are exercisable at the market price on the date of grant, expire ten years from the date of grant, and vest or have vested over periods of two or three years. If provided in the applicable Plan or award agreement, the vesting of stock options may accelerate upon a change of control (as defined in the applicable Plan) of Ventas, Inc. and other specified events.

In connection with the NHP acquisition, we assumed certain outstanding options, shares of restricted stock and restricted stock units previously issued to NHP employees pursuant to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, as amended (the “NHP Plan”). Any remaining outstanding awards continue to be subject to the terms and conditions of the NHP Plan and the applicable award agreements.

Conversion of Equity Awards at the CCP Spin-Off Date

The Plans were established with anti-dilution provisions, such that in the event of an equity restructuring of Ventas (including spin-off transactions), equity awards would preserve their value post-transaction. In order to achieve an equitable modification of the existing awards following the CCP Spin-Off, we applied the concentration method of converting pre-spin awards to their post-spin value, meaning that Ventas employees remaining at Ventas following the CCP Spin-Off would receive equitably adjusted awards denominated solely in Ventas common stock. The modification assumed a conversion ratio on all awards calculated as the final pre-spin closing price of Ventas common stock divided by the 10-trading day average post-spin closing price of Ventas common stock (the “10 Day Average Price”). The conversion impacted 120 participants, resulted in additional awards being granted (as summarized in the tables below) and an incremental fair value of both vested awards ($3.5 million) and unvested awards ($1.6 million) due to the difference between the 10 Day Average Price and the closing price on the CCP Spin-Off date. The vesting periods were unchanged for unvested grants at the CCP Spin-Off date. The incremental fair value of vested awards were recognized immediately and are considered separation costs that are reported in discontinued operations in our Consolidated Statements of Income. The incremental fair value of unvested awards, which are also considered separation costs, will be recognized over the remaining requisite service periods. The number of shares reserved for each of the Plans, as well as the ESPP Plan, were adjusted using the same conversion methodology applied to the outstanding awards.

Stock Options

In determining the estimated fair value of our stock options as of the date of grant, we used the Black-Scholes option pricing model with the following assumptions:



	2015		2014		2013
Risk-free interest rate	1.02 - 1.38%		1.3 - 1.4%		0.59 - 0.63%
Dividend yield	5.00	%	5.00	%	5.00	%
Volatility factors of the expected market price for our common stock	19.0 - 20.0%		17.8 - 18.0%		24.2 - 31.7%
Weighted average expected life of options	4.0 years		4.17 years		4.25 - 7.0 years

The following is a summary of stock option activity in 2015:



	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Intrinsic Value ($000’s)
Outstanding as of December 31, 2014	2,460,628	$	57.45
Options granted in 2015 pre-spin	792,434	76.62
Options exercised in 2015 pre-spin	130,273	43.30
Options forfeited in 2015 pre-spin	12,058	62.47
Options expired in 2015 pre-spin	2,802	66.43
Options outstanding pre-spin	3,107,929	62.90
Options forfeited/expired at spin	511,832	65.51
Options issued at spin	488,360	52.51
Options outstanding post-spin	3,084,457	52.51
Options granted in 2015 post-spin	—	0.00
Options exercised in 2015 post-spin	20,814	35.13
Options forfeited in 2015 post-spin	11,914	55.67
Options expired in 2015 post-spin	—	0.00
Outstanding as of December 31, 2015	3,051,729	52.62		7.03	$	18,216
Exercisable as of December 31, 2015	2,183,113	$	49.73	6.36	$	16,815

Compensation costs for all share-based awards are based on the grant date fair value and are recognized on a straight-line basis during the requisite service periods. Compensation costs related to stock options for the years ended December 31, 2015, 2014 and 2013 were $4.2 million, $4.7 million and $4.5 million, respectively.

As of December 31, 2015, we had $1.8 million of total unrecognized compensation cost related to non-vested stock options granted under the Plans. We expect to recognize that cost over a weighted average period of 1.22 years.

The weighted average grant date fair value of options issued during the years ended December 31, 2015, 2014 and 2013 was $5.89, $4.37 and $9.25, respectively.

Aggregate proceeds received from options exercised under the Plans or the NHP Plan for the years ended December 31, 2015, 2014 and 2013 were $6.4 million, $26.2 million and $7.2 million, respectively. The total intrinsic value at exercise of options exercised during the years ended December 31, 2015, 2014 and 2013 was $4.7 million, $19.3 million and $4.0 million, respectively.

Restricted Stock and Restricted Stock Units

We recognize the fair value of shares of restricted stock and restricted stock units on the grant date of the award as stock-based compensation expense over the requisite service period, with charges to general and administrative expenses of approximately $15.2 million in 2015, $16.2 million in 2014 and $16.1 million in 2013. Restricted stock and restricted stock units generally vest over periods ranging from two to five years. If provided in the applicable Plan or award agreement, the vesting of restricted stock and restricted stock units may accelerate upon a change of control (as defined in the applicable Plan) of Ventas and other specified events.

A summary of the status of our non-vested restricted stock and restricted stock units as of December 31, 2015, and changes during the year ended December 31, 2015 follows:



	Restricted Stock	Weighted Average Grant Date Fair Value		Restricted Stock Units	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2014	402,741	$	58.51	11,392	$	58.79
Granted in 2015 pre-spin	190,429	75.46		7,252	71.70
Vested in 2015 pre-spin	237,461	61.69		6,856	59.79
Forfeited in 2015 pre-spin	5,602	61.12		0	0.00
Non-vested post-spin	350,107	65.53		11,788	66.15
Forfeited at spin	61,166	64.94		0	0.00
Granted at spin	54,364	2.34		2,216	2.34
Non-vested post-spin	343,305	57.60		14,004	58.02
Granted in 2015 post-spin	31,176	56.12		0	0.00
Vested in 2015 post-spin	3,323	50.49		0	0.00
Forfeited in 2015 post-spin	8,065	52.57		0	0.00
Nonvested at December 31, 2015	363,093	$	57.65	25,500	$	58.02

As of December 31, 2015, we had $9.3 million of unrecognized compensation cost related to non-vested restricted stock and restricted stock units under the Plans. We expect to recognize that cost over a weighted average period of 1.51 years. The total fair value at the vesting date for restricted stock and restricted stock units that vested during the years ended December 31, 2015, 2014 and 2013 was $18.3 million, $17.7 million and $16.9 million, respectively.

Employee and Director Stock Purchase Plan

We have in effect an Employee and Director Stock Purchase Plan (“ESPP”) under which our employees and directors may purchase shares of our common stock at a discount. Pursuant to the terms of the ESPP, on each purchase date, participants may purchase shares of common stock at a price not less than 90% of the market price on that date (with respect to the employee tax-favored portion of the plan) and not less than 95% of the market price on that date (with respect to the additional employee and director portion of the plan). We initially reserved 2,970,350 shares for issuance under the ESPP. As of December 31, 2015, 79,893 shares had been purchased under the ESPP and 2,890,457 shares were available for future issuance.

Employee Benefit Plan

We maintain a 401(k) plan that allows eligible employees to defer compensation subject to certain limitations imposed by the Code. In 2015, we made contributions for each qualifying employee of up to 3.5% of his or her salary, subject to certain limitations. During 2015, 2014 and 2013, our aggregate contributions were approximately $1,227,000, $1,136,000 and $1,036,000, respectively.