NOTE 12—STOCK-BASED COMPENSATION

Compensation Plans

We currently have: four 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 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, 2016, 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, 2016 were as follows:


•	Executive Deferred Stock Compensation Plan—0.6 million 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 0.6 million shares were available for future issuance as of December 31, 2016.


•	Nonemployee Directors’ Deferred Stock Compensation Plan—0.6 million 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 0.5 million shares were available for future issuance as of December 31, 2016.

•

2012 Incentive Plan—10.5 million 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 6.5 million shares (plus the number of shares or options outstanding under the 2006 Plans as of December 31, 2016 that were or are subsequently forfeited or expire unexercised) were available for future issuance as of December 31, 2016.

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.

On January 18, 2017, the Executive Compensation Committee (the “Compensation Committee”) of our Board of Directors approved a 2017 long-term incentive compensation program for our named executive officers (the “2017 LTIP”) pursuant to the 2012 Incentive Plan. Several changes were made covering 2017, including: (1) in prior years, long-term incentive compensation awards were granted following and based on the satisfaction of specified performance goals (i.e., “retrospective”), and in 2017, performance-based awards made pursuant to the 2017 LTIP generally will be earned at a higher or lower level based on future performance (i.e., “prospective”); and (2) certain transition awards and modified vesting provisions apply. Under the 2017 LTIP, the aggregate target award value for each named executive officer is allocated such that 60% of the value is performance-based, in the form of performance-based restricted stock units, and 40% of the value is in the form of time-based restricted stock units. The Compensation Committee has eliminated qualitative or discretionary goals from the 2017 LTIP, which previously comprised 50% of the award opportunity.

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:



	2016		2015		2014
Risk-free interest rate	0.93 - 1.27%		1.02 - 1.38%		1.3 - 1.4%
Dividend yield	5.50	%	5.00	%	5.00	%
Volatility factors of the expected market price for our common stock	19.1 - 20.6%		19.0 - 20.0%		17.8 - 18.0%
Weighted average expected life of options	4.0 years		4.0 years		4.17 years

The following is a summary of stock option activity in 2016:



	Shares (000’s)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Intrinsic Value ($000’s)
Outstanding as of December 31, 2015	3,052	$	52.62
Options granted	1,165	62.82
Options exercised	409	49.77
Options forfeited	2	58.84
Options expired	1	46.62
Outstanding as of December 31, 2016	3,805	56.05		7.2	$	30,379
Exercisable as of December 31, 2016	2,629	$	53.23	6.4	$	27,075

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, with charges recorded in general and administrative expenses. Compensation costs related to stock options for the years ended December 31, 2016, 2015 and 2014 were $6.2 million, $4.2 million and $4.7 million, respectively.

As of December 31, 2016, we had $2.2 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 1.18 years.

The weighted average grant date fair value of options issued during the years ended December 31, 2016, 2015 and 2014 was $4.73, $5.89 and $4.37, respectively.

Aggregate proceeds received from options exercised under the Plans or the NHP Plan for the years ended December 31, 2016, 2015 and 2014 were $20.4 million, $6.4 million and $26.2 million, respectively. The total intrinsic value at exercise of options exercised during the years ended December 31, 2016, 2015 and 2014 was $8.0 million, $4.7 million and $19.3 million, respectively. There was no deferred income tax benefit for stock options exercised.

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 $14.7 million in 2016, $15.2 million in 2015 and $16.2 million in 2014. 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, 2016, and changes during the year ended December 31, 2016 follows:



	Restricted Stock (000’s)	Weighted Average Grant Date Fair Value		Restricted Stock Units (000’s)	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2015	363	$	57.65	14	$	58.02
Granted	181	55.25		13	57.06
Vested	226	56.21		12	56.19
Forfeited	6	58.18		0	0.00
Nonvested at December 31, 2016	312	$	57.29	15	$	58.70

As of December 31, 2016, we had $6.9 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 1.40 years. The total fair value at the vesting date for restricted stock and restricted stock units that vested during the years ended December 31, 2016, 2015 and 2014 was $13.9 million, $18.3 million and $17.7 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 3.0 million shares for issuance under the ESPP. As of December 31, 2016, 0.1 million shares had been purchased under the ESPP and 2.9 million 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 2016, we made contributions for each qualifying employee of up to 3.5% of his or her salary, subject to certain limitations. During 2016, 2015 and 2014, our aggregate contributions were approximately $1.3 million, $1.2 million and $1.1 million, respectively.