NOTE 18 – STOCK-BASED COMPENSATION

Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock units (“RSUs”) are subject to forfeiture if the holder’s service to us terminates prior to vesting, subject to certain exceptions for certain qualifying terminations of employment or a change in control of the Company. Prior to vesting, ownership of the shares/Omega OP Units cannot be transferred. The restricted stock has the same dividend and voting rights as our common stock. RSUs accrue dividend equivalents but have no voting rights. Restricted stock and RSUs are valued at the price of our common stock on the date of grant. We expense the cost of these awards ratably over their vesting period.

The following table summarizes the activity in restricted stock and RSUs for the years ended December 31, 2016, 2017 and 2018:


		Weighted -
	Number of	Average Grant-		Compensation
	Shares/Omega	Date Fair Value		Cost (1)
	OP Units	per Share		(in millions)
Non-vested at December 31, 2015	413,628	$	34.45
Granted during 2016	158,506		34.49	$	5.5
Cancelled during 2016	(905)		24.92
Vested during 2016	(235,176)		30.41
Non-vested at December 31, 2016	336,053		37.32
Granted during 2017	185,004		31.25	$	5.8
Cancelled during 2017	(1,000)		34.78
Vested during 2017	(182,548)		39.58
Non-vested at December 31, 2017	337,509		32.78
Granted during 2018	217,717		28.19	$	6.1
Cancelled during 2018	(5,941)		30.82
Vested during 2018	(190,412)		33.89
Non-vested at December 31, 2018	358,873	$	29.44

(1)Total compensation cost to be recognized on the awards based on grant date fair value, which is based on the market price of the Company’s common stock on the date of grant.

Performance Based Incentive Stock Units

Performance restricted stock units (“PRSUs”) and LTIPs are subject to forfeiture if the performance requirements are not achieved or if the holder’s service to us terminates prior to vesting, subject to certain exceptions for certain qualifying terminations of employment or a change in control of the Company. The PRSUs awarded in January 2013, December 2013, January 2014, March 2015, April 2015, July 2015, March 2016, January 2017, and January 2018 and the LTIP Units awarded in March 2015, April 2015, July 2015, March 2016, January 2017, and January 2018 have varying degrees of performance requirements to achieve vesting, and each PRSU and LTIP Units award represents the right to a variable number of shares of common stock or partnership units. Each LTIP Unit once earned is convertible into one Omega OP Unit in Omega OP, subject to certain conditions). The vesting requirements are based on either the (i) total shareholders return (“TSR”) of Omega or (ii) Omega’s TSR relative to other real estate investment trusts in the MSCI U.S. REIT Index for awards before 2016 and in the FTSE Nareit Equity Health Care Index for awards granted in or after 2016 (both “Relative TSR”). We expense the cost of these awards ratably over their service period.

Prior to vesting and the distribution of shares, ownership of the PRSUs cannot be transferred. Dividends on the PRSUs are accrued and only paid to the extent the applicable performance requirements are met. While each LTIP Unit is unearned, the employee receives a partnership distribution equal to 10% of the quarterly approved regular periodic distributions per Omega OP Unit. The remaining partnership distributions (which in the case of normal periodic distributions is equal to the total approved quarterly dividend on Omega’s common stock) on the LTIP Units accumulate, and if the LTIP Units are earned, the accumulated distributions are paid.

We used a Monte Carlo model to estimate the fair value for the PRSUs and LTIP Units granted to the employees. The following are the significant assumptions used in estimating the value of the awards for grants made on the following dates:





	March 17,						January 1,						January 1,
	2016						2017						2018
Closing price on date of grant	$	34.78					$	31.26					$	27.54
Dividend yield		6.56	%					7.81	%					9.44	%
Risk free interest rate at time of grant		0.50	%	to	1.14	%		0.66	%	to	1.58	%		1.60	%	to	2.05	%
Expected volatility		23.92	%	to	24.88	%		22.82	%	to	25.26	%		21.03	%	to	23.24	%

The following table summarizes the activity in PRSUs and LTIP Units for the years ended December 31, 2016, 2017 and 2018:


		Weighted-
		Average Grant-		Compensation
	Number of	Date Fair Value		Cost (1)
	Shares	per Share		(in millions)
Non-vested at December 31, 2015	913,087	$	14.87
Granted during 2016	679,549		14.67	$	10.00
Forfeited during 2016	(518,638)		12.10
Vested during 2016 (2)	—		—
Non-vested at December 31, 2016	1,073,998		16.08
Granted during 2017	685,064		14.87	$	10.20
Cancelled during 2017	(5,361)		15.98
Forfeited during 2017	(392,921)		18.33
Vested during 2017	—		—
Non-vested at December 31, 2017	1,360,780		14.82
Granted during 2018	1,012,032		10.40	$	10.50
Cancelled during 2018	—		—
Forfeited during 2018	(203,380)		11.82
Vested during 2018	—		—
Non-vested at December 31, 2018	2,169,432	$	13.04

(1)Total compensation cost to be recognized on the awards was based on the grant date fair value.

(2)PRSUs are shown as vesting in the year that the Compensation Committee determines the level of achievement of the applicable performance measures.

The following table summarizes our total unrecognized compensation cost as of December 31, 2018 associated with restricted stock, restricted stock units, PRSU awards, and LTIP Unit awards to employees:


							Weighted
							Average
			Grant Date		Total		Period of	Unrecognized
			Average		Compensation		Expense	Compensation
	Grant		Fair Value		Cost (in		Recognition	Cost (in		Performance	Vesting
RSUs	Year	Shares/ Units	Per Unit/Share		millions) (1)		(in months)	millions)		Period	Dates

1/1/2017 RSU	2017	140,416	$	31.26	$	4.40	36	$	1.50	N/A	12/31/2019
1/1/2018 RSU	2018	169,900		27.54		4.70	36		3.10	N/A	12/31/2020
Restricted Stock Units Total		310,316		29.22		9.10			4.60

TSR PRSUs and LTIP Units

3/17/2016 2018 LTIP Units	2016	370,152		13.21		4.90	45		1.30	1/1/2016 - 12/31/2018	Quarterly in 2019
1/1/2017 2019 LTIP Units	2017	399,726		12.61		5.00	48		2.50	1/1/2017 - 12/31/2019	Quarterly in 2020
1/1/2018 2020 LTIP Units	2018	677,488		7.31		5.00	48		3.70	1/1/2018 - 12/31/2020	Quarterly in 2021
TSR PRSUs & LTIP Total		1,447,366		10.28		14.90			7.50

Relative TSR PRSUs

3/17/2016 2018 Relative TSR	2016	305,563		16.44		5.00	45		1.30	1/1/2016 - 12/31/2018	Quarterly in 2019
1/1/2017 2019 Relative TSR	2017	285,338		18.04		5.10	48		2.60	1/1/2017 - 12/31/2019	Quarterly in 2020
1/1/2018 2020 Relative TSR	2018	334,544		16.65		5.60	48		4.20	1/1/2018 - 12/31/2020	Quarterly in 2021
Relative TSR PRSUs Total		925,445		17.01		15.70			8.10
Grand Total		2,683,127	$	14.79	$	39.70		$	20.20

(1)Total shares/units and compensation costs are net of shares/units cancelled.

(2)This table excludes approximately $0.7 million of unrecognized compensation costs related to our directors.

Tax Withholding for Stock Compensation Plans

Stock withheld to pay minimum statutory tax withholdings for equity instruments granted under stock-based payment arrangements for the years ended December 31, 2018, 2017 and 2016, was $1.7 million, $2.1 million and $23.4 million, respectively.

Shares Available for Issuance for Compensation Purposes

On June 8, 2018, at the Annual Meeting of Stockholders, our stockholders approved the 2018 Stock Incentive Plan (the “2018 Plan”), which amended and restated the Company’s 2013 Stock Incentive Plan (the “2013 Plan”). The 2018 Plan is a comprehensive incentive compensation plan that allows for various types of equity-based compensation, including restricted stock units (including performance-based restricted stock units), stock awards (including restricted stock), deferred restricted stock units, incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, performance unit awards, certain cash-based awards (including performance-based cash awards) and other stock-based awards. The 2018 Plan increased the number of shares of common stock available for issuance under the 2013 Plan by 4.5 million.

As of December 31, 2018, approximately 5.1 million shares of common stock were reserved for issuance to our employees, directors and consultants under our stock incentive plans.