DEF 14A 1 tm218859-2_def14a.htm DEF 14A tm218859-2_def14a - none - 12.6408162s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.   )
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Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

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Soliciting Material Pursuant to §240.14a-12
Omega Healthcare Investors, Inc.
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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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 3, 2021
To our Stockholders:
The Annual Meeting of Stockholders of Omega Healthcare Investors, Inc. (“Omega” or the “Company”) will be held virtually via live webcast at www.virtualshareholdermeeting.com/OHI2021 on Thursday, June 3, 2021, at 10:00 A.M. EDT. This year, we are adopting a virtual format for our Annual Meeting to enable universal access and a consistent experience to all stockholders regardless of location, and in response to the current restrictions on, and health advice against, public gatherings considering the existing coronavirus emergency. For further information on how to participate in the Annual Meeting via live webcast, please consult the section captioned “Quorum and Voting” on page 1 of this Proxy Statement. The virtual Annual Meeting is being held for the following purposes:
1.
To elect eight members to Omega’s Board of Directors;
2.
To ratify the selection of Ernst & Young LLP as our independent auditor for fiscal year 2021;
3.
To hold an advisory vote on executive compensation; and
4.
To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
The nominees for election as directors are Kapila K. Anand, Craig R. Callen, Barbara B. Hill, Kevin J. Jacobs, Edward Lowenthal, C. Taylor Pickett, Stephen D. Plavin, and Burke W. Whitman. Each of the director nominees presently serves as a director of Omega.
Our Board of Directors has fixed the close of business on April 6, 2021 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 April 23, 2021, we will first mail to our stockholders our 2021 Proxy Statement and Annual Report to Stockholders for fiscal year 2020.
Whether you are able to virtually attend the Annual Meeting 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, and (iii) FOR the approval of the Company’s executive compensation in an advisory vote, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described in the proxy statement. If you virtually attend the Annual Meeting, you may vote your shares 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,
[MISSING IMAGE: sg_taylorpickett-bwlr.jpg]
C. Taylor Pickett
April 23, 2021
Hunt Valley, Maryland
YOUR VOTE IS IMPORTANT. Whether or not you plan to virtually attend the meeting, please vote by using the Internet website or toll-free telephone number shown on the proxy card, or completing, signing, dating and mailing the proxy card promptly in the enclosed envelope. It is important that you return the proxy card or otherwise submit a vote on the Internet or by telephone promptly whether or not you plan to virtually attend the meeting, so that your shares are properly voted.
If you hold shares through a broker, bank or other nominee (in “street name”), you may receive a separate voting instruction form, or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.

 
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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 3, 2021
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 virtually via live webcast at www.virtualshareholdermeeting.com/OHI2021 on Thursday, June 3, 2021, at 10:00 A.M. EDT, and any adjournments or postponements of the meeting. This year, we are adopting a virtual format for our Annual Meeting to enable universal access and a consistent experience to all stockholders regardless of location, and in response to the current restrictions on, and health advice against, public gatherings considering the existing coronavirus emergency. For further information on how to participate in the Annual Meeting via live webcast, please consult the section captioned “Quorum and Voting” on page 1 of this Proxy Statement.
This Proxy Statement, and our Annual Report to Stockholders for fiscal year 2020, which includes our Annual Report on Form 10-K filed with the SEC on February 22, 2021, are available electronically at www.proxyvote.com or www.omegahealthcare.com.
RECORD DATE
Our Board of Directors has fixed April 6, 2021, 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 234,077,052 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 0.37% 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 virtually 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
If your shares are registered directly in your name with our transfer agent, you are a “stockholder of record.” Stockholders of record may vote by:

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

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

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

Virtually In-Person: Virtually attend the Annual Meeting and vote your shares
If your shares are registered in the name of your broker, bank or other nominee, you are the “beneficial owner” of those shares and those shares are considered as held in “street name.” If you are a beneficial owner of shares registered in the name of your broker, bank or other nominee, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than directly from us. Simply complete and mail the proxy card to ensure that your vote is counted. You may be eligible to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms offer Internet and telephone voting. If your bank, brokerage firm or other nominee does not offer Internet or telephone
 
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voting information, please complete and return your proxy card in the self-addressed, postage-paid envelope provided. You may also virtually attend the Annual Meeting and vote your shares.
If you plan to vote other than by virtually attending the Annual Meeting and voting your shares, your vote must be received by 11:59 p.m. EDT, on June 2, 2021.
Attending the Annual Meeting
The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by live webcast. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on the record date or if you hold a valid proxy for the Annual Meeting. There is no physical location for this meeting.
You can attend the Annual Meeting online, vote and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/OHI2021 and entering the 16-digit control number printed on your proxy card. Stockholders may submit questions or comments pertinent to meeting matters by using the question feature at the bottom of the screen on the Annual Meeting website after they log in or during the Annual Meeting. The Company may not be able to answer all questions posed. In order for the Company to address as many stockholders as possible, we ask that questions or comments be limited to a maximum of two per stockholder. Please ensure that questions are concise and cover only one topic per question. Questions from multiple stockholders on the same topic or that are otherwise related may be grouped, summarized and answered together.
The Annual Meeting will begin promptly at 10:00 A.M. EDT, on June 3, 2021. We encourage you to access the meeting prior to the start time in order to log in to the live webcast and test your computer audio system. Please follow the registration instructions below in “— Registering for the Annual Meeting.”
Registering for the Annual Meeting
You do not need to register to virtually attend the Annual Meeting on the Internet. Please follow the instructions on the proxy card that you received with this Proxy Statement. To access the meeting, you will need the 16-digit control number printed on your proxy card.
Ability to Revoke Proxies
A stockholder voting by proxy has the power to revoke it at any time before it is exercised. A proxy may be revoked by filing with our Secretary (i) a signed instrument revoking the proxy or (ii) a duly executed proxy bearing a later date. A proxy also may be revoked if the person executing the proxy is virtually present at the Annual 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. 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 2021, 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
 
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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 2021 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.
 
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PROPOSAL 1 — ELECTION OF DIRECTORS
Director Nominees
Our Board of Directors currently consists of eight directors. Our Nominating and Corporate Governance Committee of the Board of Directors has nominated Kapila K. Anand, Craig R. Callen, Barbara B. Hill, Kevin J. Jacobs, 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 2022 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.
Director (age as of March 1, 2021)
Year First
Became a
Director
Business Experience
Craig R. Callen (65)
2013
Mr. Callen brings to the Board financial and operating experience as an advisor, investment banker and board member in the healthcare industry. Mr. Callen was a Senior Advisor at Crestview Partners, a private equity firm, from 2009 through 2016. Mr. Callen retired as Senior Vice President of Strategic Planning and Business Development for Aetna Inc., where he also served as a Member of the Executive Committee from 2004-2007. In his role at Aetna, Mr. Callen reported directly to the chairman and CEO and was responsible for oversight and development of Aetna’s corporate strategy, including mergers and acquisitions. Prior to joining Aetna in 2004, Mr. Callen was a Managing Director and Head of U.S. Healthcare Investment Banking at Credit Suisse and co-head of Health Care Investment Banking at Donaldson Lufkin & Jenrette. During his 20-year career as an investment banker in the healthcare practice, Mr. Callen successfully completed over 100 transactions for clients and contributed as an advisor to the boards of directors and management teams of many of the leading healthcare companies in the U.S. Mr. Callen has served as a board member of HMS Holdings Corp. (NYSE:HMSY) since October 2013. Previously he served on the boards of Symbion, Inc. (an ambulatory surgery center business), a Crestview portfolio company, Sunrise Senior Living, Inc. (NYSE:SRZ) and Kinetic Concepts, Inc. (NYSE:KCI) (a medical technology company).
Kapila K. Anand (67)
2018
Ms. Anand brings to the board extensive experience in accounting and auditing, particularly in the real estate industry, with a focus on Real Estate Investment Trusts, and healthcare industries. Ms. Anand served as an audit and later advisory partner at KPMG LLP from 1989 until her retirement in March 2016. Ms. Anand joined KPMG LLP in 1979 and served in a variety of roles including the National Partner-in-Charge, Public Policy
 
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Director (age as of March 1, 2021)
Year First
Became a
Director
Business Experience
Business Initiatives (from 2008 to 2013) and segment leader for the Travel, Leisure, and Hospitality industry and member of the Global Real Estate Steering Committee (each from 2013 to 2016). Ms. Anand has served on KPMG LLP boards in the U.S. and Americas, the board of the Franciscan Ministries (an organization with a range of real estate assets, including schools, churches and hospitals) and as the chair of both the KPMG Foundation as well as the Chicago Network (a membership organization of senior executives). She previously served as the Lead Director for the Women Corporate Directors Education and Development Foundation and served on the board of the US Fund for UNICEF, and currently serves on the board for Rush University Medical Center. Ms. Anand has served as a director of Extended Stay America, Inc. (NASDAQ:STAY) since July 2016, where she chairs the Compensation Committee and has also served as a director and Audit Committee Chairwoman of ESH Hospitality, Inc. (a REIT subsidiary of Extended Stay America) since May 2017. In September 2018, she joined the Board of Elanco Animal Health, Inc. (NYSE:ELAN), where she chairs the Audit Committee.
Barbara B. Hill (68)
2013
Ms. Hill brings to the Board years of experience in operating healthcare-related companies. Ms. Hill is currently an Operating Partner of NexPhase Capital (formerly Moelis Capital Partners), a private equity firm, where she focuses on healthcare-related investments and providing strategic and operating support for NexPhase’s healthcare portfolio companies. She began as an Operating Partner of Moelis Capital Partners in March 2011. From March 2006 to September 2010, Ms. Hill served as Chief Executive Officer and a director of ValueOptions, Inc., a managed behavioral health company, and FHC Health Systems, Inc., its parent company. Prior to that, Ms. Hill served as President and a director of Express Scripts, Inc., a pharmacy benefits management company. In previous positions, Ms. Hill was responsible for operations nationally for Cigna HealthCare, and also served as the CEO of health plans owned by Prudential, Aetna, and the Johns Hopkins Health System. She was active with the boards or committees of the Association of Health Insurance Plans and other health insurance industry groups. Currently, she serves as a board member of Integra LifeSciences Holdings Corporation, a medical device and technology company. She previously served as a board member of Owens & Minor, a healthcare distribution company, from 2017 to August 2019; St. Jude Medical Corporation, a medical device company from 2007 to January 2017, until its sale to Abbott Labs;
 
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Director (age as of March 1, 2021)
Year First
Became a
Director
Business Experience
and Revera Inc., a Canadian company operating over 500 senior facilities in Canada, Great Britain and the U.S. from 2010 to March 2017.
Kevin J. Jacobs (48)
2020
Mr. Jacobs brings to our Board significant experience managing both private and public companies in the hospitality and real estate industries, including REITs, knowledge of financial reporting and other regulatory matters, and significant capital markets and real estate investment and management/operational experience. Mr. Jacobs has served as Chief Financial Officer for Hilton Worldwide Holdings Inc. (NYSE:HLT) since 2013, and in 2020 also began serving concurrently as its President, Global Development. In these roles, he leads the company’s finance, real estate, development and architecture and construction functions globally. Mr. Jacobs has held progressive positions at Hilton since joining the company in 2008, including serving as Treasurer and Senior Vice President, Corporate Strategy. Prior to Hilton, Mr. Jacobs was Senior Vice President, Mergers & Acquisitions and Treasurer of Fairmont Raffles Hotels International, and prior to Fairmont Raffles, Mr. Jacobs spent seven years with Host Hotels & Resorts, a NYSE-traded lodging REIT. Prior to Host, Mr. Jacobs held various roles in the Hospitality Consulting practice of PwC and the Hospitality Valuation Group of Cushman & Wakefield.
Mr. Jacobs is a Trustee and member of the Executive Committee of the Federal City Council, a member of the Board of Trustees of the Holton-Arms School, where he chairs the Audit Committee, and serves on the board of directors of Goodwill of Greater Washington. Mr. Jacobs is a graduate of the Cornell University School of Hotel Administration.
Edward Lowenthal (76)
1995
Mr. Lowenthal brings to our Board extensive experience in the development and operation of real estate. Mr. Lowenthal currently serves as Chairman of the Board of Directors of American Campus Communities (NYSE:ACC) (a public developer, owner and operator of student housing at the university level), and serves on the Board of Directors of two 501(c)(3) nonprofit organizations, the Andrew Goodman Foundation and Parlance Chamber Concerts, and serves as a trustee of the Manhattan School of Music.
Mr. Lowenthal also served as non-executive Chairman of REIS, Inc., a public provider of real estate market information and valuation technology (NASDAQ:REIS) from November 2010 until his term expired in 2012. From January 1997 to March 2002, Mr. Lowenthal served as President and Chief Executive Officer of Wellsford Real Properties, Inc. (a real estate
 
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Director (age as of March 1, 2021)
Year First
Became a
Director
Business Experience
merchant bank) and was President of the predecessor of Wellsford Real Properties, Inc. since 1986. He is co-founder of Wellsford Strategic Partners, a private real estate investment company and is non-executive Chairman of Tiburon Lockers, Inc., a private rental locker company.
C. Taylor Pickett (59)
2002
As Chief Executive Officer of the Company, Mr. Pickett brings to the Board a depth of understanding of our business and operations, as well as financial expertise in long-term healthcare services, mergers and acquisitions. Mr. Pickett has served as Chief Executive Officer of the Company since 2001 and as Director of the Company since May 2002. Mr. Pickett has also served as a member of the board of trustees of Corporate Office Properties Trust (NYSE:OFC), an office REIT focusing on U.S. government agencies and defense contractors, since November 2013. From 1993 to June 2001, Mr. Pickett served as a member of the senior management team of Integrated Health Services, Inc. (‘‘IHS’’), most recently as Executive Vice President and Chief Financial Officer. Prior to joining IHS, Mr. Pickett held various positions at PHH Corporation and KPMG Peat Marwick.
Stephen D. Plavin (61)
2000
Mr. Plavin brings to the Board management experience in the banking, investment mortgage-based real estate investment trust sector, as well as significant experience in real estate capital markets transactions. Mr. Plavin is a Senior Managing Director of the Blackstone Group (since December 2012) and the Chief Executive Officer and a Director of Blackstone Mortgage Trust, Inc., a New York City-based mortgage REIT that is managed by Blackstone. Prior to joining Blackstone, Mr. Plavin served as CEO of Capital Trust, Inc. (predecessor of Blackstone Mortgage Trust), since 2009. From 1998 until 2009, Mr. Plavin was Chief Operating Officer of Capital Trust and was responsible for all of the lending, investing and portfolio management activities of Capital Trust, Inc. Prior to that time, Mr. Plavin was employed for 14 years with Chase Manhattan Bank and its securities affiliate, Chase Securities Inc. Mr. Plavin held various positions within the real estate finance unit of Chase, and its predecessor, Chemical Bank, and in 1997 he became co-head of global real estate for Chase. Mr. Plavin was the Chairman of the Board of Directors of WCI Communities, Inc. (NYSE:WCIC), a publicly- held developer of residential communities from August 2009 until it was purchased by Lennar Corporation (NYSE:LEN and LEN.B) in February 2017.
Burke W. Whitman (65)
2018
Mr. Whitman brings to the Board extensive leadership experience in military and corporate board and executive roles, as well as corporate financial and management
 
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Director (age as of March 1, 2021)
Year First
Became a
Director
Business Experience
experience in the healthcare sector. Since January 2019, he has served as CEO of Colmar Holdings, LLC (a private firm providing capital to enterprises committed to the common good). In addition, since June 2019, he has served as a member of the Board of Directors of Amicus Therapeutics (Nasdaq:FOLD) (Audit & Compliance Committee; Nominating & Governance Committee), and since January 2019, as a civilian member of the Reserve Forces Policy Board (Advisor to the Secretary of Defense). Previously, Mr. Whitman served concurrently in national military service and business roles. From 1985 to 2019, he served as a reserve officer of the U.S. Marine Corps, including full-time active duty from 1985 to 1988 and from 2009 to 2018, during which he led multiple combat deployments, served as the Commanding General of the 4th Marine Division and of Marine Forces Reserve, and retired as a Major General and the Corps’ senior reservist. From 1988 to 2008, concurrent with his military roles, he also served as CEO and initially COO of Health Management Associates, Inc. (then NYSE:HMA) from 2005 to 2008, founding CFO of Triad Hospitals, Inc. (then NYSE:TRI) from 1998 to 2005, founding President and a member of the Board of Directors of Deerfield Healthcare (then a private company) from 1994 to 1998, Vice President of Finance of Almost Family (then Nasdaq:AFAM) from 1992 to 1994, and Investment Banker with Morgan Stanley (NYSE:MS) from 1988 to 1992. In his civic roles, he serves as a member of the Board of Trustees of The Lovett School and the Board of Directors of the Marine Corps Heritage Foundation and has also served previously on the Board of Directors of the Toys for Tots Foundation (Chair of the Investment Committee) and the Board of Directors of the Federation of American Hospitals (Chair of the Audit Committee).
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 6, 2021 for:

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

all persons known to us to be the beneficial owner of more than 5% of our outstanding common stock.
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 6, 2021. 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 6, 2021) or common stock issuable in respect of operating partnership units (“OP Units”) or profits interests in OHI Healthcare Properties Limited Partnership (“Omega OP”). Accordingly, we have provided supplemental information regarding deferred stock units, unvested RSUs and earned but not yet vested PRSUs and profits interests in Omega OP (“Profits Interest Units”) under the caption “Other Common Stock Equivalents.” For information regarding unearned, unvested PRSUs and Profits Interest Units 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 6, 2021, there were 234,077,052 shares of our common stock outstanding and no preferred stock outstanding.
Common Stock
Beneficially Owned
Other Common
Stock Equivalents
Beneficial Owner
Number of
Shares
Percentage
of
Class
Unvested
Units(1)
Deferred
Stock
Units(2)
Operating
Partnership
Units(3)
Percent of
Class
including
Common
Stock
Equivalents(4)
Kapila K Anand
13,676(5) * *
Daniel J. Booth
154,792 * 194,553 143,728 0.20%
Craig R. Callen
45,142 * 8,025 46,216 5,836 *
Barbara B. Hill
31,310 * 6,173 5,558 *
Steven J. Insoft
209,588 * 181,186 213,488(6) 0.25%
Kevin J. Jacobs
3,173(7) * *
Edward Lowenthal
56,934 * 4,630 15,519 4,169 *
Gail D. Makode
* 15,989 *
C. Taylor Pickett
4,575 * 379,721 498,056 269,468 0.48%
Stephen D. Plavin
94,753(8) * *
Robert O. Stephenson
222,506 0.10% 172,288 125,763 0.21%
Burke W. Whitman
18,585(9) * *
Directors, director
nominee and
executive officers as a
group (12 persons)
855,034 0.37% 962,565 559,791 768,010 1.30%
 
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Common Stock
Beneficially Owned
Other Common
Stock Equivalents
Beneficial Owner
Number of
Shares
Percentage
of
Class
Unvested
Units(1)
Deferred
Stock
Units(2)
Operating
Partnership
Units(3)
Percent of
Class
including
Common
Stock
Equivalents(4)
5% Beneficial Owners:(10)
The Vanguard Group, Inc.
32,124,029(11) 13.72% 13.27%
BlackRock, Inc.
27,113,630(12) 11.58% 11.20%
State Street Corporation
11,768,448(13) 5.03% 4.86%
*
Less than 0.10%
(1)
Includes RSUs, PRSUs, and Profits Interest Units that in each case vest more than 60 days from April 6, 2021, subject to continued employment. Earned but not yet vested PRSUs and Profits Interest Units held by the executive officers vest quarterly in 2021 subject to continued employment, except in the case of a Qualifying Termination or change in control in which case they will vest sooner. Each unit represents the right to receive one share of common stock. See “Outstanding Equity Awards at Fiscal Year End.” Unvested Profits Interest Units held by the directors other than Mr. Pickett vest upon completion of the current one-year term, subject to accelerated vesting in connection with death, disability of change in control.
(2)
Deferred stock units representing the deferral of vested equity awards pursuant to the Company’s Deferred Stock Plan. Includes deferred stock units associated with RSUs and PRSUs vesting within 60 days which the holder has elected to defer. The deferred stock units will not be converted until the date or event specified in the applicable deferred stock agreement. See “Nonqualified Deferred Compensation.
(3)
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.
(4)
Percent of class reflects 234,077,052 shares of common stock outstanding as of April 6, 2021, plus a total of 8,049,109 common stock equivalents, consisting of 1,091,945 unvested restricted stock units and Profits Interest Units, 559,791 deferred stock units and approximately 6,397,373 OP Units.
(5)
Includes 4,597 shares of restricted stock, subject to forfeiture until vested.
(6)
Includes securities held by a limited liability company controlled by Mr. Insoft. Does not include 32,130 OP Units subject to a phantom unit award grant to Mr. Insoft because Mr. Insoft does not have the right to acquire voting or dispositive power with respect to such securities within 60 days.
(7)
Includes 3,173 shares of restricted stock, subject to forfeiture until vested.
(8)
Includes 4,597 shares of restricted stock, subject to forfeiture until vested, and 33,963 shares of common stock which are held by a limited liability company, of which the reporting person is the manager.
(9)
Includes 4,597 shares of restricted stock, subject to forfeiture until vested.
(10)
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.
(11)
Based on a Schedule 13G/A filed with the SEC on February 10, 2021 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 shared voting power with respect to 689,387 of the shares, sole dispositive power with respect to 31,254,573 of the shares and shared dispositive power with respect to 869,456 of the shares.
(12)
Based on a Schedule 13G/A filed with the SEC on January 27, 2021 by BlackRock, Inc., including on behalf of certain subsidiaries. BlackRock Inc. is located at 55 East 52nd Street, New York, NY 10055. BlackRock, Inc. has sole voting power with respect to 25,809,745 of the shares and sole dispositive power with respect to 27,113,630 of the shares.
(13)
Based on a Schedule 13G filed with the SEC on February 10, 2021 by State Street Corporation, including on behalf of certain subsidiaries. State Street Corporation is located at State Street Financial Center, One Lincoln Street, Boston, MA 02111. State Street Corporation has shared voting power with respect to 10,403,248 of the shares and shared dispositive power with respect to 11,768,448 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.
Director
Board
Audit
Committee
Compensation Committee
Investment Committee
Nominating
and
Corporate
Governance
Committee
Kapila K. Anand
Member
Chair
Member
Craig R. Callen
Chair
Member
Chair
Member
Barbara B. Hill
Member
Member
Member
Kevin J. Jacobs
Member
Edward Lowenthal
Member
Chair
Member
C. Taylor Pickett
Member
Member
Stephen D. Plavin
Member
Member
Chair
Burke W. Whitman
Member
Member
Effective immediately following the Annual Meeting, the Board of Directors appointed Mr. Whitman to the Compensation Committee and Mr. Jacobs to each of the Audit Committee and Investment Committee.
The Board of Directors held eleven meetings during 2020. 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 2020. While we invite our directors to attend our annual meeting of stockholders, the Company currently does not have a formal policy regarding director attendance. Mr. Pickett chaired Omega’s 2020 annual meeting of stockholders and was the sole representative of the Board of Directors at such meeting.
Director Independence
All of the members of the Board of Directors meet the NYSE listing standards for independence, other than 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
Since 2001, an independent non-employee director has served as our Chair of the Board of Directors rather than the Chief Executive Officer. We separate the roles of Chief Executive Officer and Chair 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 Chair 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 Chair 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,
 
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implementing risk management strategies that are appropriate for the Company’s business and risk profile, integrating consideration of risk and risk management into the Company’s decision-making process and communicating information with respect to material risks to the Board or the appropriate committee.
Portfolio and investment risk is one of the principal risks faced by the Company. We manage portfolio and investment risk by, among other things, seeking Investment Committee and/or Board approval for new investments over designated thresholds and providing detailed underwriting information on such proposed investments to the Investment Committee or the Board, as the case may be. In addition, our full Board regularly reviews the performance, credit information and coverage ratios of our operators.
Consistent with the rules of the NYSE, the Audit Committee reviews and discusses with management, periodically, as appropriate, policies with respect to risk assessment and risk management, the Company’s financial risk exposures and the steps management has taken to monitor and control such exposures, it being understood that it is the job of management to assess and manage the Company’s exposure to risk and that the Audit Committee’s responsibility is to discuss guidelines and policies by which risk assessment and risk management are undertaken. 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, as they relate to financial reporting, while the Board reviews these cyber-related risks as they impact at the enterprise at large. 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.
Selected Areas of Board and Committee Oversight in 2020
Audit and
Finance
Committee
Compensation
Committee
Nominating
and Corporate
Governance
Committee
Investment
Committee
Full Board of
Directors
Corporate Strategy
Portfolio Management
Enterprise Risk Management
Privacy and Data Security
Code of Business Conduct and Ethics
Board and Executive
Compensation
ESG
Board and Executive Succession
Investment Activity
Standing Committee Information
The Audit Committee met six times in 2020. 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 our 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 Ms. Anand, Mr. Whitman
 
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and Mr. Jacobs 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 has determined that: (i) 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, (ii) Mr. Whitman qualifies as an audit committee financial expert based on his substantial financial management experience in the healthcare sector, including as a public company chief financial officer and chief executive officer, and (iii) Mr. Jacobs qualifies as an audit committee financial expert based on his substantial financial management experience, including as a public company chief financial officer.
The Compensation Committee has responsibility for determining the compensation of our executive officers and administering our equity incentive plan. During 2020, the Compensation Committee met four times. 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 four times during 2020.
The Nominating and Corporate Governance Committee met four times during 2020. The Nominating and Governance Committee has responsibility for identifying potential nominees to the Board of Directors and reviewing their qualifications and experience, for developing and implementing policies and practices relating to corporate governance, and for overseeing the Company’s progress on ESG and human resources initiatives.
In addition to the standing Committees listed above, the Board has established a Special Administrative Committee under the Company’s equity 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 Compensation Committee 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 addition, 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.
Twenty-five percent of our Board nominees are women, and one director brings ethnic diversity to our Board. Also, the director nominees range in age from 48 to 76 with the average age being 64. Pursuant to our Director Retirement Policy, described further below, it is anticipated that one of our directors will retire from the Board at the 2022 annual meeting due to age. Three of our Board members were first elected to our Board in or after 2018. 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.
 
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Board Diversity: 2015 vs. 2020
[MISSING IMAGE: tm218859d2-fc_board4c.jpg]
Director Age Breakdown: 2015 vs. 2020
[MISSING IMAGE: tm218859d2-pc_directage4c.jpg]
Board Tenure: 2015 vs. 2020
[MISSING IMAGE: tm218859d2-pc_boardten4c.jpg]
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.
Environmental, Social and Governance Oversight
In connection with internal assessments and stockholder engagement, we prioritize environmental, social and governance initiatives that matter most to our business and stockholders. Our Nominating and Corporate
 
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Governance Committee has been charged with oversight of the Company’s environmental, social responsibility and governance (“ESG”) efforts; however, ESG remains the responsibility and focus of our entire Board. Our areas of focus include the following:
[MISSING IMAGE: tm218859d2-pc_environ4clr.jpg]
Environmental Responsibility
We place a high priority on the protection of our assets, communities, and the environment. Based on our business model, the properties in our portfolio are primarily net leased to our tenants, and each tenant is generally responsible for maintaining the buildings, including controlling their energy usage and the implementation of environmentally sustainable practices at each location. Many of our tenants demonstrate a focus on positive environmental and social impacts through their corporate responsibility programs. We support their operations and work with them to promote environmental responsibility at the properties we own and to reiterate the importance of energy efficient facilities, including by:

providing capital to operators to add or upgrade to energy-efficient emergency power generators to limit disruption to patient care in the event of a power outage,

supporting compliance with prevailing environmental laws and regulations throughout our new development, major renovation and capital expenditure projects, and

promoting the adoption of specific environmental practices in our sustainable and innovative new developments, including, but not limited to, the installation of occupancy sensors and water-efficient plumbing fixtures, the use of low VOC paints and adhesives and the use of energy-efficient lighting, with over 51% of Omega’s development from 2015 to 2020 having been built to Leadership in Energy and Environmental Design (“LEED”) certification standards.
[MISSING IMAGE: tm218859d2-pc_hqleed4c.jpg]
 
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Our focus on environmental responsibility is also demonstrated by how we manage our day-to-day activities at our corporate headquarters, which has earned the LEED Silver Certification in Existing Buildings: Operations & Maintenance. We promote energy efficiency with features such as an automatic lighting control system, water efficient features, low-VOC paints and floor adhesives, and a single-stream recycling service.
Social Responsibility, Equal Opportunity and Diversity and Inclusion
We are committed to providing a positive and engaging work environment for our employees and taking an active role in the betterment of the communities in which our employees live and work. Our employees are provided a competitive benefits program, including comprehensive healthcare benefits and a 401(k) plan with a matching contribution from the Company, the opportunity to participate in our employee stock purchase program, bonus and incentive pay opportunities, competitive paid time-off benefits and paid parental leave, wellness programs, continuing education and development opportunities, and periodic engagement surveys. In addition, we believe that giving back to our community is an extension of our mission to improve the lives of our stockholders, our employees, and their families. The Company has implemented a matching program for charitable contributions of employees.
[MISSING IMAGE: tm218859d2-tbl_bloom4c.jpg]

Omega is one of 380 companies globally
included in 2021 and fewer than 15 REITs
The Company has a long-standing commitment to being an equal opportunity employer and has implemented Equal Employer Opportunity policies. In 2021, Omega was included in the Bloomberg Gender-Equality Index (GEI) for the second consecutive year — one of 380 companies globally, and fewer than fifteen REITs, to be included in the 2021 index. In addition, in 2020, the Company implemented several initiatives to further its commitment to diversity and inclusion within its workforce and Board, in its local community and in the industry in which it operates, particularly in light of the racial and social justice challenges that were highlighted in 2020 and during the pandemic.
[MISSING IMAGE: tm218859d2-tbl_diversi4clr.jpg]

Workforce and Board:   The Company has expanded its recruitment practices to reach more diverse candidates for employment and Board positions and is developing an internship program with a focus on increasing diversity in the pipeline of eligible employees. At the executive level, one of the Company’s five NEOs is a woman and brings ethnic diversity to the team, and on the senior management team, 25% are women and 15% bring ethnic diversity to the team.
 
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Community:   The Company has invested in several local charitable partnerships to improve economic, health and social outcomes in the local Baltimore, Maryland community, with a focus on the local Black community and historically underrepresented communities.

Industry:   The Company is providing grants for operator training programs that focus on development of talent from historically underrepresented communities and has initiated a multi-year scholarship program at a local historically Black university.
Corporate Governance
The Company maintains a commitment to high corporate governance standards. We believe that sound corporate governance strengthens the accountability of our Board and management and promotes the long-term interest of stockholders. The bullets below highlight areas of our governance practices, which should be read in conjunction with the information set forth above and in our Corporate Governance Guidelines available through our website at www.omegahealthcare.com:
BOARD STRUCTURE

Annual Election of Directors. Our Board consists of a single class of directors who stand for election each year.

Opt-out of Maryland Law Allowing Staggering the Board without Shareholder Approval. In November 2019, the Board opted out of the provisions of the Maryland Unsolicited Takeovers Act that otherwise would permit the Board, without stockholder approval, to divide the Board into three classes serving staggered three-year terms.

Majority Voting Standard for Director Elections with Resignation Policy. Our Bylaws include a majority voting standard for the election of directors in uncontested elections. Any incumbent director who fails to receive the required vote for re-election must offer to resign from the Board.

Chair and CEO Roles Separated. Our independent Chair of the Board provides independent leadership for our Board.
STOCKHOLDER RIGHTS

Proxy Access. Beginning with our annual stockholders’ meeting in 2022, stockholders will have the right to nominate and require us to include in our proxy materials for an annual meeting stockholder-nominated director candidates equal to the greater of two director seats or 20% of the Board.

Stockholder-Requested Special Meetings. Our stockholders have the ability to call a special meeting of stockholders in accordance with the process set forth in the Bylaws.

Stockholder Amendments to Bylaws. Our Bylaws may be amended by stockholder vote.
COMPENSATION PRACTICES

Stock Ownership Guidelines. We have robust stock ownership guidelines for our senior officers and our non-employee directors.

Clawback Policy. Our Board has voluntarily adopted a formal clawback policy that applies to incentive compensation.

Anti-Hedging and Anti-Pledging. Our directors, officers and employees are subject to anti-hedging and anti-pledging policies.

Annual Say-on-Pay. We annually submit “say-on-pay” advisory votes for our stockholders’ consideration and vote.
BOARD PRACTICES

Annual Strategic Review. The Board conducts a formal annual review of our corporate strategy.

Executive Sessions of Our Board. An executive session of independent directors is generally held at each regularly scheduled Board and Committee meeting.

Board Evaluations. Our directors undergo annual evaluations of the Board as a whole and each director individually.
 
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BOARD PRACTICES

Regular Succession Planning. A high priority is placed on regular and thoughtful succession planning for our senior management.
ETHICS AND RISK MANAGEMENT

Code of Ethics. A robust Code of Business Conduct and Ethics is in place for our directors, officers and employees.

Whistleblower Policy. We maintain a third-party administered hotline and website that enable anonymous reporting of compliance and ethics concerns.

Enterprise Risk Management. Our Board reviews the Company’s risks and enterprise risk management processes regularly.
ESG AND DIVERSITY AND INCLUSION

ESG Steering Committee. The Company has established an ESG Steering Committee that is responsible for advancing the Company’s governance, sustainability and diversity and inclusion programs, with the Nominating and Corporate Governance Committee exercising oversight of the Committee.
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, by a toll-free telephone hotline administered via a third party, or through the Internet, including through a third-party administered website. 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 in good faith 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 Chief Legal Officer and General Counsel, and will be directed to the appropriate director or directors for their consideration. The corporate communications liaison may not “filter out” any direct communications from being presented to the non-management members of the Board of Directors and Audit Committee members without instruction from the directors or committee members. The corporate communications liaison is required to maintain a record of all communications received that were addressed to one or more directors, including those determined to be inappropriate communications. Such record will include the name of the addressee, the disposition by the corporate communications liaison and, in the case of communications determined to be inappropriate, a brief description of the nature of the communication. The corporate communications liaison is required to provide a copy of any additions to the record upon request of any member of the Board of Directors.
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.
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, Chief Financial
 
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Officer, Chief Legal Officer, General Counsel, and Chief Accounting 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 for Executive Officers and Directors (the “Stock Ownership Guidelines”) contained in the Corporate Governance Guidelines are available through our website at www.omegahealthcare.com.
The following graph summarizes the stock ownership of each of the officers above and our non-employee directors as of April 6, 2021, as a multiple of base salary or annual cash retainer, respectively, then in effect, pursuant to our Stock Ownership Guidelines.
[MISSING IMAGE: tm218859d2-bc_stockown4clr.jpg]
 
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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 or sale of puts, calls, options or other derivative instruments related to our Company’s securities or debt. Our policy also prohibits hedging or monetization transactions, such as forward sale contracts, in which the stockholder continues to own the underlying security without all the risks or rewards of ownership.
Additionally, directors and officers may not purchase our Company’s securities on margin, hold our securities in a margin account or pledge the Company’s securities as collateral. All of our directors and officers are in compliance with this policy as of December 31, 2020.
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.
Voluntary Adoption of Proxy Access
In 2021, our Board voluntarily amended and restated our Bylaws to add proxy access rights. Subject to certain requirements, a stockholder, or group of up to 20 stockholders, owning 3% or more of our outstanding common stock continuously for at least three years, may nominate, and require us to include in our proxy materials for an annual meeting, stockholder-nominated director candidates equal to the greater of two director seats or 20% of the Board.
Corporate Governance Materials
The Corporate Governance Guidelines, Code of Ethics and the charters of the committees of the Board of Directors 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 2021
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 in the section “Audit Committee and Independent Auditor Matters” 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 this proposal.
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 2021.
 
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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 Ms. Anand and Mr. Whitman 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 2020 audited consolidated financial statements, reports as follows:

The Audit Committee has reviewed and discussed with management and Ernst & Young LLP the 2020 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;

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”);

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;

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;

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 2020 audit were compatible with maintaining auditor independence; and based on these reviews and
 
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discussions, the Audit Committee recommended to the Board of Directors that the Company’s 2020 audited financial statements be included in the Company’s Annual Report on Form 10-K.
Audit Committee of the Board of Directors
Kapila K. Anand, Chair
Craig R. Callen
Burke W. Whitman
Independent Auditors
Ernst & Young LLP audited our consolidated financial statements as of December 31, 2020 and 2019 and for each of the years ended December 31, 2020, 2019, and 2018. 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 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 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 2020 and 2019 and fees billed for other services rendered by Ernst & Young LLP during those periods, all of which were pre-approved by the Audit Committee.
Year Ended December 31,
2020
2019
Audit Fees
$ 1,774,000 $ 1,896,000
Audit-Related Fees
Tax Fees
1,009,000 1,096,000
All Other Fees
3,000 2,000
Total
$ 2,786,000 $ 2,994,000
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 2020 and 2019, 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 2020 and 2019, the reviews of the financial statements included in our Company’s Forms 10-Q for fiscal years 2020 and 2019, and services relating to securities and other filings with the SEC, including comfort letters and consents, were approximately $1,774,000 and $1,896,000, 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 2020 and 2019.
Tax Fees
The tax fees billed by Ernst &Young LLP to our Company for tax compliance and preparation services for fiscal years 2020 and 2019 were approximately $802,000 and $815,000, respectively. The tax fees billed by Ernst & Young LLP to our Company for tax advice and tax planning services for fiscal years 2020 and 2019 were approximately $207,000 and $281,000, respectively.
 
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All Other Fees
The aggregate other fees billed by Ernst & Young LLP to our Company for access to an online accounting research tool for fiscal years 2020 and 2019 were approximately $3,000 and $2,000, respectively.
Determination of Auditor Independence
The Audit Committee considered the provision of non-audit services by our independent auditor and has determined that the provision of such services was consistent with maintaining the independence of Ernst & Young LLP.
Audit Committee’s Pre-Approval Policies
The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all fees paid to, and all services performed by, our Company’s independent auditor, provided, however, pre-approval requirements for non-audit services are not required if all such services: (1) do not aggregate to more than five percent of total fees paid by us to our accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.
In the first half 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 periodically include in our Proxy Statement a non-binding stockholder vote on our executive compensation as described in this Proxy Statement (commonly referred to as “Say-on-Pay”). In an advisory vote in 2017, our stockholders voted to recommend, and the Board adopted, holding a Say-on-Pay vote on an annual basis.
Our Executive Compensation Program
As described more fully in our Compensation Discussion and Analysis section 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 2019 and 2020 were described in the CD&A included in the Company’s proxy statement for our 2020 annual meeting of stockholders, at which approximately 96% of the votes cast approved the Company’s executive compensation in the advisory “Say-on-Pay” vote, continuing a long-term trend of significant shareholder support. As a result, the Compensation Committee has generally maintained the same construct of its executive compensation program.
Say on Pay Support
(% of votes cast)
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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 2019-2021 and 2020-2022. 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 2021 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.
 
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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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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
Our Compensation Discussion and Analysis (“CD&A”) addresses the following topics:

2020 Achievements and Performance Results;

Pay for Performance Alignment;

Summary of Executive Compensation Program and Governance Practices;

Components of Omega’s Executive Compensation Program;

Omega’s Compensation Decisions and Results for 2020; and

Omega’s Compensation Decisions for 2021.
2020 Achievements and Performance Results
With our industry faced with the challenges of an unprecedented pandemic beginning in 2020, we are grateful for how Omega, our employees, our operating partners and federal and state governments were able to respond to this crisis. Our operating partners, who worked bravely to protect and care for their residents, were supported by our operations team, which maintained dialogue with them throughout the pandemic, sharing best practices and protocols, helping source scarce personal protective equipment, and acting as a preferred capital provider where prudent. Our employees, over half of whom worked remotely through the pandemic, were able to maintain continuity of operations and were largely healthy through this crisis. Additionally, in 2020, government relief measures at the federal and state levels offered meaningful support to offset many of the financial impacts to the Company’s skilled nursing facility operators, and to a lesser extent assisted living facility operators. We believe this governmental support has highlighted their understanding of the vital role our asset classes of skilled nursing and assisted living facilities play within the healthcare continuum.
[MISSING IMAGE: tm218859d2-tbl_covid4clr.jpg]
As such, while the COVID-19 pandemic continues to have a significant impact on Omega’s operators and we continue to monitor the impact of governmental support, for the year ended December 31, 2020, the Company collected substantially all of the contractual rents and mortgage payments owed to it from operators (other than operators under a forbearance agreement prior to the pandemic), and the Company maintained its $0.67 per share quarterly dividend throughout 2020. We believe that our operating results in 2020, including strong quarterly AFFO, FAD and rent collections, display the strength of our conservative balance sheet and operating model against the backdrop of an unprecedented year impacted by the COVID-19 pandemic. During the year, we also took advantage of strong capital markets to issue both debt and equity to enhance our balance sheet and fund new investments. On October 9, 2020, we issued $700 million aggregate principal amount of 3.375% Senior Notes due 2031 and used the net proceeds from the notes offering to refinance existing debt. We also issued over $150 million of equity in 2020, allowing us to reduce leverage and further enhance our strong balance sheet.
 
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As healthcare delivery continues to evolve, we continuously evaluate our assets, operators and markets to position our portfolio for long-term success. With broadening vaccine distribution and national caseloads showing encouraging signs of declining, we are hopeful that the impact of the pandemic on our operators is improving, yet we remain vigilant in our approach. Our strategy includes applying our proprietary data analytics platform to enhance investment underwriting and asset management, as well as selling or transitioning assets that do not meet our portfolio criteria. In 2020, using our proprietary data analytics platform, we completed substantially all of our strategic asset repositions and transitioning objectives, which included selling 43 facilities subject to operating leases for approximately $181 million in net proceeds, recognizing a gain on sale of approximately $19 million. In addition, despite a challenging year for acquisitions, we acquired eleven new facilities for a total investment of $104 million in 2020, invested $43 million in new mortgages and made $111 million of investments in Omega’s capital expenditure programs.
[MISSING IMAGE: tm218859d2-tbl_substan4clr.jpg]
TSR Performance Results for One-, Three-, Five- and Ten-Year Periods ended 2020
While the total shareholder return (“TSR”) across REITs was impacted by the COVID-19 pandemic, Omega outperformed the FTSE Nareit Equity Health Care Index (the “Index”) by approximately 1,460 basis points on a compounded, annualized basis over a three-year period ended 2020. 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 ended December 31, 2020
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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 2020 was aligned with the Company’s performance.
Variable Pay Linked to Performance
For 2020, approximately 86% of our Chief Executive Officer’s total target compensation and 79% 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, 69% of our Chief Executive Officer’s target compensation for 2020 and 63% of our other named executive officers’ target compensation for 2020 was in the form of equity-based compensation.
2020 Target Compensation Mix
[MISSING IMAGE: tm218859d2-pc_ceoneo4clr.jpg]
2020 Annual Cash Incentives Earned
Notwithstanding the uncertainties and challenges presented by COVID-19, our Compensation Committee did not modify or reduce any outstanding incentive awards, or the performance targets for any incentive awards, in 2020 in light of the Company’s strong financial performance, execution on its goals and support for its operators during a challenging environment. The Company and Committee continue to monitor the impact of the pandemic on the Company’s future performance. For 2020, our Chief Executive Officer earned an annual cash incentive equal to 145% of his target annual cash incentive and the other named executive officers earned annual cash incentives equal to, on average, 153% 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 “Our Compensation Decisions and Results for 2020 — 2020 Annual Cash Incentive Program Performance Goals and Results.”
 
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Annual Cash Incentive Payouts 2016 – 2020
[MISSING IMAGE: tm218859d2-bc_cashbonus4c.jpg]
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 objective performance to 60% for 2016, up from 50% in 2015. For the 2018, 2019 and 2020 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 for performance-based awards granted in 2018. See “Our Compensation Decisions and Results for 2020 — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2020 — Relative TSR Units and TSR Units.”
Long-Term Incentive Compensation Earned in 2020
Our Relative TSR for the three-year performance period ended December 31, 2020 of approximately 1,460 basis points in excess of the Index (which delivered a return of 3.65% over the period) significantly exceeded the high performance level of +300 basis points. Therefore, the Relative TSR-based equity incentives for that period were earned at the high level of performance.
Our TSR for the three-year performance period ended December 31, 2020 of 18.3% exceeded the high level of performance of 18%. Therefore, the TSR-based equity incentives for that period were also earned at the high level of performance. 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 Multi-Year Periods ended December 31, 2020.”
For more detail and discussion regarding long-term incentive compensation earned and tracking over other three-year performance periods, see “Our Compensation Decisions and Results for 2020 — Performance Results for Long-Term Equity Incentives ended December 31, 2020.”
 
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Consideration of Prior “Say-on-Pay” Advisory Votes
At our 2020 annual meeting of stockholders, holders of over 96% of the votes cast on such proposal approved the advisory vote (“say-on-pay”) on the 2019 compensation of our named executive officers, which was consistent with the level of support we received in 2019 and 2018 on our “say-on-pay” proposal and continued a long-term trend of significant shareholder support of over 93% in each of the last six years. The Committee considered the results of the advisory vote when setting executive compensation for 2021 and plans to continue to do so in future executive compensation policies and decisions.
Say on Pay Support
(% of votes cast)
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Summary of Executive Compensation Program and Governance Practices
To further align compensation to stockholder returns, 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 do 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.
What we do…
What we do not do…
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We balance our incentive programs to provide an appropriate mix of annual and longer-term incentives, with long-term incentive compensation comprising a substantial percentage of target total compensation.
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A substantial percentage of target total compensation is based on performance; we pay for performance that has a direct alignment with TSR and Relative TSR performance, among other performance goals. Salaries comprise a relatively modest portion of each named executive officer’s overall compensation opportunity.
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We use multiple performance measures as well as different performance measures for cash bonuses and multi-year equity awards, which mitigates compensation-related risk. We also measure performance across various performance periods.
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We enhance executive officer retention with time-based vesting schedules for certain equity incentive awards to provide a balance with performance-based awards.
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We use the market median of our peer group as the starting point for determining the right form and amount of compensation for each named executive officer but also take into account qualitative factors such as an individual’s experience, skill sets, prior performance, and other relevant considerations.
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We aim for aggregate target annual compensation for the named executive officers to be generally in line with the median aggregate annual compensation for the top five executive officers of the peer group.
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We have robust stock ownership guidelines for our senior officers and directors.
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We engage an independent compensation consultant selected by our Compensation Committee to advise the Committee on compensation matters.
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We have a Compensation Committee comprised solely of independent directors.
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We maintain a clawback policy that, in the event of a financial restatement, allows the Company to recover certain incentive compensation paid to executive officers.
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We do not guarantee annual salary increases or bonuses and Omega generally has no guaranteed commitments to grant any equity-based awards.
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We do not pay excise tax gross-ups with respect to payments made in connection with a change in control.
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We do not allow hedging or pledging of Company stock by executive officers (or other employees or directors).
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We do not encourage unnecessary or excessive risk taking; incentive awards are not based on a single performance measure and do not have guaranteed minimum or uncapped payouts.
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We do not pay dividends on unearned performance shares (other than fractional distributions on Profits Interest Units, which are made for tax reasons).
[MISSING IMAGE: tm218859d2-icon_cross4c.jpg] We do not provide any significant perquisites.
 
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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:
OBJECTIVES

Reward performance and initiative

Attract, retain and reward executive officers who have the motivation, experience and skills to continue our track record of profitability, growth and attractive TSR

Be competitive with other REITs viewed as competitors for executive talent

Link compensation with enhancing stockholder value

Reward for short-term and long-term successes, particularly measured in terms of growth in Funds Available for Distribution (“FAD”) per share, and tenant quality, leverage, TSR and Relative TSR performance

Encourage and facilitate our executive officers’ ability to achieve meaningful levels of ownership of our common stock
HOW OMEGA ACCOMPLISHES ITS OBJECTIVES

While we do not employ a formula, base salary generally comprises a relatively small portion of each named executive officer’s total target pay

Annual cash bonus generally comprises a significant portion but less than a quarter of each named executive officer’s total target pay

A majority of each named executive officer’s total target compensation is structured as performance-based using a combination of annual cash bonus and long-term incentive equity awards; a component of the annual cash bonus also includes subjective objectives specific to each NEO

We do not target a specific percentile range within the Company’s peer group when determining an individual named executive officer’s pay; instead, the Compensation Committee uses the peer group median as the starting point and reviews market data from the peer group and internal pay equity as two of several reference points useful for determining compensation for each named executive officer

We utilize a variety of objective performance goals that we consider key drivers of value creation to minimize the potential risk associated with over-weighting any particular performance measure. Goals have historically included FAD per share, tenant quality, leverage, TSR and Relative TSR

The ultimate value of performance-based long-term incentive equity awards is dependent on both the Company’s future TSR and Relative TSR as compared to a REIT index. We think using both performance measures, together with time-based equity awards, provides a balanced approach that does not motivate excessive risk taking
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 $85,000 for these services in 2020. 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 $16,640 for these additional services in 2020. 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:

similarity to Omega in terms of property focus;

net lease structure;

market capitalization; and

geographic business region.
Since 2015, the Committee has endeavored to minimize changes to the peer group to maintain consistency of year over year comparisons. The Committee adopted a new peer group in 2018 and utilized the same peer group for 2020. The peer group is shown below.
Peer
Ticker
Industry
Market
Capitalization
($MM)
Welltower Inc.
WELL
Health Care
$ 27,063
Realty Income Corporation
O
Other Retail
$ 22,491
Ventas, Inc.
VTR
Health Care
$ 18,516
Healthpeak Properties, Inc.
PEAK
Health Care
$ 16,497
Duke Realty Corporation
DRE
Industrial
$ 15,052
W. P. Carey Inc.
WPC
Diversified
$ 12,380
Medical Properties Trust, Inc.
MPW
Health Care
$ 11,801
Omega Healthcare Investors, Inc.
OHI
Health Care
$ 8,625
National Retail Properties, Inc.
NNN
Other Retail
$ 7,171
Federal Realty Investment Trust
FRT
Shopping Center
$ 6,594
Healthcare Trust of America, Inc.
HTA
Health Care
$ 6,117
Spirit Realty Capital, Inc.
SRC
Other Retail
$ 4,612
Healthcare Realty Trust Incorporated
HR
Health Care
$ 4,129
Lexington Realty Trust
LXP
Diversified
$ 2,974
EPR Properties
EPR
Diversified
$ 2,425
Source:   S&P Global as of December 31, 2020.
Omega as Compared to 2020 Peer Group
(as of December 31, 2020)
[MISSING IMAGE: tm218859d2-bc_marketcap4c.jpg]
 
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In 2021, the Committee modified this peer group to replace EPR Properties and Lexington Realty Trust with Physicians Realty and Sabra Health Care, reflecting their size, comparability and focus on the healthcare industry as peers.
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 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 considers 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:

annual base salary,

annual cash incentive awards, and

annual long-term equity incentive awards.
Variable pay constitutes the majority of our executives’ compensation, which allows the Committee to reward superior performance and penalize under-performance, while the long-term equity incentive portions of our compensation programs serve to align the interests of our named executive officers with the interests of our stockholders. With respect to the aggregate annual long-term incentive opportunity for years prior to 2020, compensation for threshold and high performance had been designed to approximate 75% and 150%, respectively, of compensation for target performance, and for 2020 and subsequent years, to approximate 50% and 200%, respectively, of compensation for target performance.
Objectives and Important Features of Our Executive Compensation Program
Link to Program Objectives
Form of
Compensation
Important Features
Base Salary

Fixed level of cash compensation to attract and retain key executives in a competitive marketplace

Preserves an executive’s commitment during downturns
Cash

Determined based on evaluation of individual executives, compensation, internal pay equity and a comparison to the peer group
 
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Link to Program Objectives
Form of
Compensation
Important Features
Annual Cash Bonus

Target cash incentive opportunity (set as a percentage of base salary) to encourage achievement of annual Company financial and operational goals
Cash

Majority (70% for 2020) of incentive opportunity based on objective performance measures, which includes FAD per Share, Tenant Quality and Leverage

Assists in attracting, retaining and motivating executives in the near term
Cash

A portion (30% for 2020) of the payout is also based on individual performance
Long-Term Incentives RSUs and Profits Interest Units (Time-based)

Focuses executives on achievement of long-term financial and strategic goals and TSR, thereby creating long-term stockholder value

Assists in maintaining a stable, continuous management team in a competitive market

Maintains stockholder- management alignment

Easy to understand and track performance

Limits dilution to existing stockholders relative to utilizing stock options
Long-Term Equity

40% of target annual long-term incentive awards in 2020

Provides upside incentive in up-market, with some down-market protection

Three-year cliff vest (subject to certain exceptions)
Long-Term Incentives PRSUs and Profits Interest Units (Performance- based)
Long-Term Equity

60% of target annual long-term incentive award in 2020, requiring significant outperformance to achieve target

Three-year performance periods with the actual payout based on TSR and Relative TSR performance

Provides some upside in up- or down-market based on relative performance

Direct alignment with stockholders

Additional vesting once earned (25% per calendar quarter) for enhanced retention
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.
 
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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 Award”) (based on objective metrics), and a percentage is earned based on the officer’s continuing employment (subject to certain exceptions) over the three-year period (the “Time-based Award”). For awards granted in 2016 and later, the Performance-based Award was 60% (expressed as a dollar amount at the target performance level) of the equity award and the Time-based Award was 40%.
[MISSING IMAGE: tm218859d2-fc_longterm4c.jpg]
Of the Performance-based Awards granted in January 2020:

45% of the value (at the target level) is earned based on the Company’s TSR over the three-year performance period (“TSR-based Awards”); and

the other 55% of the value (at the target level) is earned based on the Company’s Relative TSR over the three-year performance period (“Relative TSR-based Awards”).
Form of Long-Term Equity Incentive Awards
TSR-based and Relative TSR-based Awards were granted in the form of the performance-based restricted stock units (“PRSUs”) before 2015. From 2015 through 2018, TSR-based awards were granted in the form of “Profits Interest Units” ​(defined below), which are potentially convertible into our common stock. Since 2019, each of our named executive officers has been given the option to elect to receive these awards in the form of PRSUs or Profits Interest Units. Prior to 2019, the Time-based Awards were granted in the form of restricted stock units (“RSUs”), and since 2019, each of our named executive officers has been given the option to elect to receive the Time-based Awards in the form of RSUs or Profits Interest Units.
The Profits Interest Units have the substantially same value from an accounting perspective and have substantially similar terms and conditions as the PRSUs or RSUs that they replace. “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 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. Profits Interest Units can provide tax advantages to the named executive officers as compared to RSUs or PRSUs. Many REITs that have similar structures as Omega grant limited partnership interests in an operating partnership similar to Profits Interest Units.
Additional details of the 2020 annual equity award grants for our named executive officers are discussed under the heading “Our Compensation Decisions and Results for 2020 — Long-Term Equity Incentives for Three-Year Period commencing January 1, 2020.”
 
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Year-over-Year Changes
The Committee annually reviews the structure of the Company’s long-term equity incentive program to ensure its competitiveness externally as well as effectiveness internally in supporting the Company’s compensation philosophy. The Committee receives input from 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.
Year
Program Enhancements
2016

Increased the emphasis on Performance-based Awards by moving from a mix of 50%/50% of Performance- and Time-based Awards, respectively, to a mix of 60%/40% of Performance- and Time-based Awards, respectively

Increased the rigor of the Relative TSR comparison by adding an additional 50 bps of required performance at target

Based equity award values on grant date fair value in comparison to the peer group to align with SEC disclosure requirements rather than on the basis of projected estimated economic value

Changed Relative TSR comparator from MSCI U.S. REIT Index to the FTSE Nareit Health Care Index to better compare our performance with that of our direct peers
2018

Increased the rigor of the TSR performance hurdles on a one-time basis for 2018 awards only in light of our stock price performance for 2017, moving from threshold, target and high hurdles of 8%, 10%, and 12%, respectively, up to 12%, 14%, and 18%, respectively
2019

Decreased the amount of the annual cash bonus incentive tied to subjective performance criteria from 40% to 30% of the overall opportunity, thereby putting more weight on objective performance criteria

Adopted a clawback policy allowing the Company, in the event of a financial restatement, to recover certain incentive compensation paid to executive officers
2020

Adopted a retirement policy providing for prorated retirement-based vesting of long-term equity incentive awards granted on or after January 1, 2020 for employees who have reached the age of 62 and provided at least ten years of service to the Company

Delayed vesting of equity awards upon certain termination events, allowing the Company to reduce the earned or vested amount of the award in the event of covenant breaches by the officers, including breach of non-competition, non-solicitation, and intellectual property covenants

Used a wider range of payout levels for 2020 LTI awards than in prior years to better align payout with market practices and peer compensation plans, so that the aggregate long-term equity incentive opportunity would be 0.50x, 1.0x, and 2.0x at threshold, target, and high, respectively, as compared to 0.75x, 1.0x and 1.5x, respectively, for 2019 awards
2021

Did not increase salaries or bonus opportunities for four out of five NEOs, instead incorporating such increase into a 5-7% LTI increase for such NEOs; did not otherwise make any changes to compensation plans in response to COVID-19
Our Compensation Decisions and Results for 2020
2020 Annual Base Salaries
The Committee established annual base salaries for the named executive officers for 2020 to be generally in line with the approximate median for our peer group, based on analyses provided by FPL, with appropriate adjustments to preserve internal pay equity. The annual base salaries for our named executive officers for 2020
 
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were increased by 3% over 2019 (except for Gail Makode, whose initial annual base salary was agreed to when she was hired in late 2019 and remained the same for 2020) and are set forth below:
Name
2020 Base Salary
C. Taylor Pickett
$ 823,800
Daniel J. Booth
$ 532,700
Steven J. Insoft
$ 521,800
Robert O. Stephenson
$ 510,800
Gail D. Makode
$ 400,000
2020 Annual Cash Incentive Opportunities
In 2020, the Committee increased the annual cash bonus opportunities for 2020 as a percentage of annual base salary for each of the top five executive officers other than Mr. Pickett to 125% of base salary at the high level of achievement to provide more parity with the CEO’s bonus opportunities. The Committee established the following annual cash bonus opportunities for 2020 for our named executive officers:
Annual Incentive
(% of Base Salary)
Name
Threshold
Target
High
C. Taylor Pickett
100% 125% 200%
Daniel J. Booth
50% 75% 125%
Steven J. Insoft
50% 75% 125%
Robert O. Stephenson
50% 75% 125%
Gail D. Makode
50% 75% 125%
2020 Annual Cash Incentive Performance Goals and Results
Annual Cash Incentive Performance Goal #1: FAD per Share
Weighting
Threshold
Target
High
2020 Results
30%
$ 2.89 $ 2.94 $ 2.99 $ 3.06
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. 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. See “Use of Non-GAAP Financial Measures” below.
Performance:   In 2020, Omega achieved $3.06 FAD per share, resulting in an achievement at the high hurdle level.
Annual Cash Incentive Performance Goal #2: Tenant Quality
Weighting
Threshold
Target
High
2020 Results
30%
98% 98.5% 99% 99.9%
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.
 
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How is this metric calculated?   Tenant quality is a non-GAAP measured calculated as the percentage of actual cash collected (within 30 days of the due date) in relation to the Board approved 2020 budgeted operator cash lease and mortgage revenue. See “Use of Non-GAAP Financial Measures” below.
Performance:   In 2020, Omega achieved 99.9% tenant quality, resulting in an achievement at the high hurdle level.
Annual Cash Incentive Performance Goal #3: Leverage
Weighting
Threshold
Target
High
2020 Results
10%
5.2x 5.0x 4.8x 5.0x
Why is this metric important?   Leverage is important as it helps to measure our balance sheet and solvency risk and hence our ability to maintain our credit ratings and access the capital markets at favorable rates.
How is this metric calculated?   Leverage is a non-GAAP financial measure which equals funded debt/adjusted pro forma annualized EBITDA. See “Use of Non-GAAP Financial Measures” below.
Performance:   In 2020, Omega achieved 5.0x leverage, resulting in an achievement at the target hurdle level.
Annual Cash Incentive Performance Goal #4: Committee’s Assessment of Individual Performance
Weighting
30%
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. The Committee has also determined that for 2021, a substantial portion of the subjective component of the cash bonus for each NEO will be based on achievement of ESG targets.
Performance:   The percentages earned under the individual performance metric and material factors considered include the following:
C. Taylor Pickett — 81% of maximum

Reacted quickly and effectively to COVID-19 challenges to the business and provided support to operators

Sourced and closed on opportunistic acquisitions and dispositions, as well as capital markets transactions in a challenging environment

Knowledgeable about industry developments, and uses industry data effectively

Provides excellent thought leadership

Continues to improve talent and leadership development in the organization
Daniel J. Booth — 85% of maximum

Effectively managed a significant number of troubled situations and proactively identified risks in the investment portfolio

Sourced and successfully closed a number of transactions

Expanded operator reporting and outreach to address the impacts of COVID-19
Steven J. Insoft — 79% of maximum

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

Evaluated new opportunities with Maplewood and in senior housing
 
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Performs well as an integral member of the data management team
Robert O. Stephenson — 87% of maximum

Managed capital markets activity effectively to support corporate needs during the COVID-19 pandemic

Continued to improve corporate back office and accounting function

Continued to enhance investor relations function and communications with investors and rating agencies
Gail D. Makode — 90% of maximum

Developed internal legal support function, including transaction and disclosure support

Enhanced governance, Board and risk management processes

Effectively managed and enhanced compensation process and programs
Accordingly, the Committee approved the following cash bonuses relating to 2020 performance:
FAD per share (30%)
Executive
Threshold
Target
High
Actual
$2.89
$2.94
$2.99
$3.06
C. Taylor Pickett
$ 247,140 $ 308,925 $ 494,280 $ 494,280
Daniel J. Booth
$ 79,905 $ 119,858 $ 199,763 $ 199,763
Steven J. Insoft
$ 78,270 $ 117,405 $ 195,675 $ 195,675
Robert O. Stephenson
$ 76,620 $ 114,930 $ 191,550 $ 191,550
Gail D. Makode
$ 60,000 $ 90,000 $ 150,000 $ 150,000
Tenant Quality (30%)
Executive
Threshold
Target
High
Actual
98%
98.5%
99%
99.9%
C. Taylor Pickett
$ 247,140 $ 308,925 $ 494,280 $ 494,280
Daniel J. Booth
$ 79,905 $ 119,858 $ 199,763 $ 199,763
Steven J. Insoft
$ 78,270 $ 117,405 $ 195,675 $ 195,675
Robert O. Stephenson
$ 76,620 $ 114,930 $ 191,550 $ 191,550
Gail D. Makode
$ 60,000 $ 90,000 $ 150,000 $ 150,000
Leverage (10%)
Executive
Threshold
Target
High
Actual
5.3x
5.0x
4.8x
5.0x
C. Taylor Pickett
$ 82,380 $ 102,975 $ 164,760 $ 102,975
Daniel J. Booth
$ 26,635 $ 39,953 $ 66,588 $ 39,951
Steven J. Insoft
$ 26,090 $ 39,135 $ 65,225 $ 39,135
Robert O. Stephenson
$ 25,540 $ 38,310 $ 63,850 $ 38,310
Gail D. Makode
$ 20,000 $ 30,000 $ 50,000 $ 30,000
Subjective (30%)
Executive
Threshold
Target
High
Actual
C. Taylor Pickett
$ 247,140 $ 308,925 $ 494,280 $ 398,465
Daniel J. Booth
$ 79,905 $ 119,858 $ 199,763 $ 170,523
Steven J. Insoft
$ 78,270 $ 117,405 $ 195,675 $ 154,515
Robert O. Stephenson
$ 76,620 $ 114,930 $ 191,550 $ 166,590
Gail D. Makode
$ 60,000 $ 90,000 $ 150,000 $ 135,000
 
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Use of Non-GAAP Financial Measures
FFO, Adjusted FFO, FAD, Tenant Quality and Leverage are non-GAAP financial measures. The Company believes that these measures are important supplemental measures of its operating performance. The Company calculates and reports FFO in accordance with the definition and interpretive guidelines issued by 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 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.
Leverage is a non-GAAP financial measure which refers to ratio of funded debt to adjusted pro forma annualized EBITDA. Funded debt is defined as gross balance sheet debt less balance sheet cash. 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.
Tenant quality is a non-GAAP measure calculated as the percentage of actual cash collected (within 30 days of the due date) in relation to the Board approved 2020 budgeted operator cash lease and mortgage revenue.
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 4, 2021.
Long-Term Equity Incentives for Three-Year Period commencing January 1, 2020
As discussed under the heading “Components of Our 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 2020 that is earned over a three-year period running from January 1, 2020. The grant is split based on the target value of the executive’s long-term incentive award opportunity, which is comprised 60% of the Performance-based Award and 40% of the Time-based Award. For awards granted in 2020, the Performance-based Awards are comprised 55% (based on target value) of Relative TSR-based Awards and 45% (based on target value) of TSR-based Awards. For the 2020 grants each named executive officer was permitted to elect to receive RSUs or Profits Interest Units for the Time-Based Award (referred to collectively as “Time-based Units”) and PRSUs or Profits Interest Units for the Performance-based Award (referred to collectively as “Performance-based Units”).
 
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Time-Based Units
The Time-based Units award is subject to three-year cliff vesting running from January 1, 2020 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 at the end of the three-year period in one-third of the Time-based Units for each year or partial year of service performed during the three-year vesting period, subject to the officer’s continuing compliance with non-competition, non-solicitation and intellectual property covenants. If the Qualifying Termination occurs after, or within 60 days before, a Change in Control, vesting will be accelerated 100%. Dividend equivalents (or distributions in the case of Profits Interest Units) accrue on the units and are paid currently on unvested and vested Time-based Units. Vested Time-based Units that were issued in the form of RSUs are paid in Company common stock upon vesting. In the case of Profits Interest Units, the units were already issued upon grant so no issuance occurs upon vesting.
Relative TSR Units and TSR Units
These units are earned based on rigorous performance hurdles. For example, the Company must outperform the Index to achieve a target payout on the relative TSR component and separately achieve a 10% compounded, annual return on the absolute TSR component, in each case over the three-year performance period beginning January 1, 2020, as shown in the table below:
[MISSING IMAGE: tm218859d2-tbl_tsrunits4c.jpg]
In order to better align the payout ranges with market practices and over a majority of peer compensation plans, the Committee used a wider range of payout levels of 2020 LTI awards than in prior years so that the aggregate long-term equity incentive opportunity, including Time-based Units, would be 0.50x, 1.0x, and 2.0x at threshold, target, and high, respectively, as compared to 0.75x, 1.0x and 1.5x, respectively, for 2019 LTI awards. Below, to illustrate the impact of this change, is a comparison of 2019 and 2020 threshold, target and high performance levels for these awards for our CEO. In addition, we have shown the values of his 2019 and 2020 performance-based awards reflected on our summary compensation table as “stock awards” for 2019 and 2020; these values correspond to approximately the high performance level of the award based on the valuation methodology utilized in connection with the table, as described further in the footnotes to the table.
 
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Impact of 2020 Performance-Based Equity Incentive Payout Changes
Annual Equity Performance-Based Incentive
As Reported
in the Summary
Compensation
Table as
Stock Awards(1)
CEO LTI Opportunity
Threshold
Target
High
Payout Level
0.75x 1.0x 1.5x
2019
$ 2,595,500 $ 3,460,500 $ 5,190,750 $ 5,190,748
Payout Level
0.5x 1.0x 2.0x
2020
$ 2,029,482 $ 4,058,964 $ 8,117,927 $ 8,117,974
Year over Year Change
-22% 17% 56% 56%
(1)
Represents the fair value for accounting purposes as of the date of grant (excluding the effect of estimated forfeitures). See note 2 to the Summary Compensation Table below. In addition, the grant date fair value is based on actual shares granted, which are rounded to the nearest whole share. Awards are earned over a three-year performance period only if the Company exceeds rigorous performance hurdles.
The grant date fair value of the Time-based Units 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 45% of the grant date fair value of the performance-based long-term incentive opportunity at each performance level is represented by TSR Units, with the other 55% being represented by Relative TSR Units. If achievement of the Relative TSR Units or the TSR Units falls below the threshold hurdles, no amount of the respective award will be earned; and if it falls between threshold and target or target and high achievement levels, the number of units of such award that is 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 of Company common stock before the beginning and at the end of the performance periods.
The number of units earned will be determined as of the last day of the performance period, with 25% of the earned units vesting 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 100% if the Qualifying Termination occurs on or after the end of the three-year performance period, subject in either case to the officer’s continuing compliance with non-competition, non-solicitation and intellectual property covenants. 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 units 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 units that are granted in the form of 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. In the case of Profits Interest Units, the units were already issued upon grant, so no issuance occurs upon vesting, but any unearned units are forfeited at the end of the performance period and any units that fail to vest are also forfeited.
Dividend equivalents accrue on PRSUs that are subsequently earned at the end of the performance period and are then paid currently, before vesting. In the case of Profits Interest Units, 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. After any Profits Interest Units become earned (but not necessarily vested), the
 
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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.
Performance Results for Long-Term Equity Incentives as of December 31, 2020
[MISSING IMAGE: tm218859d2-tbl_performan4c.jpg]
(1)
Payouts for performance achieved at the “above high” levels are capped at the high payout level. No payout is made for performance achieved at the “below threshold” level.
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 ended December 31, 2020.”
Summary of Performance Results as of December 31, 2020 for Long-Term Equity Incentives
Our Relative TSR for the three-year performance period ended December 31, 2020 of approximately 1,460 basis points in excess of the Index significantly exceeded the high performance hurdle of +300 basis points, and our TSR for the three-year performance period ended December 31, 2020 of 18.3% also significantly exceeded the high performance hurdle of 18%. Therefore, both the Relative TSR-based and the TSR-based equity incentives for that period were earned at the high level of performance.
In addition, while our Relative TSR is tracking above the high performance level for the three-year period ending December 31, 2021 and between target and high performance levels for the three-year period ending December 31, 2022, the TSR for those periods is tracking below the threshold and target performance levels for the three-year period ending December 31, 2021 and below the threshold performance level for the TSR-based equity incentives for the three-year period ending December 31, 2022. There can be no assurance that these measures will track at a similar level for the full performance period, particularly given the uncertainty as to the Company’s and the Index’s performance in light of the COVID-19 pandemic. The required high level for the three-year performance periods ending in 2021 and 2022 is 300 basis points in excess of the Index for the Relative TSR-based equity incentives, and for the TSR-based equity incentives, is 12% for the three-year performance periods ending in 2021 and in 2022.
Our Compensation Decisions for 2021
Consideration of Market Data
For 2021, the Committee revised the peer group composition from the prior year to replace EPR Properties and Lexington Realty Trust with Physicians Realty and Sabra Health Care, reflecting their size, comparability and focus on the healthcare industry, as peers, and otherwise adopted the peer group that had been in place in 2020.
 
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The Committee determined that, given the uncertain impact of COVID-19 on the Company’s business and its operators in 2021, it would be appropriate not to increase the base salary or bonus opportunity for NEOs, other than with respect to Ms. Makode, for whom the Committee decided to increase each her base salary and target bonus opportunity by 5% to bring her compensation further in line with the median compensation of the equivalent role in the peer group. Given peer company benchmarking, in lieu of increasing salary and bonus cash compensation for other named executive officers of the Company for 2021, the Committee decided, for all NEOs other than Ms. Makode, to increase the LTI opportunity for such other NEOs for 2021 by between 5% to 7% over the prior year, and to increase the LTI opportunity for Ms. Makode by 5% to further bring her compensation in line with the median compensation of the equivalent role in the peer group.
2021 Annual Base Salaries
The Committee established the following annual base salaries for 2021 for each of our named executive officers:
Name
2020 Base Salary
2021 Base Salary
Increase
C. Taylor Pickett
$ 823,800 $ 823,800 0%
Daniel J. Booth
$ 532,700 $ 532,700 0%
Steven J. Insoft
$ 521,800 $ 521,800 0%
Robert O. Stephenson
$ 510,800 $ 510,800 0%
Gail D. Makode
$ 400,000 $ 420,000 5%
2021 Annual Cash Incentive Opportunities
For 2021, the Committee retained the 2020 annual cash bonus opportunities for our named executive officers. The opportunities are as follows:
Annual Incentive
(% of Base Salary)
Name
Threshold
Target
High
C. Taylor Pickett
100% 125% 200%
Daniel J. Booth
50% 75% 125%
Steven J. Insoft
50% 75% 125%
Robert O. Stephenson
50% 75% 125%
Gail D. Makode
50% 75% 125%
For 2021, the Committee retained the 2020 annual cash bonus performance measures and weighting that it used to determine annual cash bonuses for 2020 performance but revised the subjective component of the cash bonus to provide that a substantial portion of such subjective component for each NEO will be based on achievement of ESG targets.
2020 and 2021 Annual Cash Incentive Performance Measures
% of Bonus
Opportunity
Measure
10%
Leverage
30%
FAD per share
30%
Tenant quality
30%
Subjective
Long-Term Equity Incentives for Three-Year Period commencing January 1, 2021
The Committee approved grants to the named executive officers of long-term incentive compensation awards effective January 1, 2021. For determining the amount of the 2021 grants, the Committee used an approach similar to that used for determining the amount of the 2020 grants, except that the long-term incentive opportunity of each of our five named executive officers was increased for 2021 as discussed under
 
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the heading “Our Compensation Decisions for 2021 — Consideration of Market Data.” For the 2021 TSR-based grants, the Committee utilized the same performance goals that had been used for 2020. The material terms of the 2021 grants of long-term incentive awards are generally similar to the 2020 long-term incentive awards.
Other Matters
Clawback Policy
The Board of Directors 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.
Retirement Policy
In 2019, the Company adopted a retirement policy covering named executive officers. The policy applies to officers who retire after having reached at least age 62 and performed at least ten years of service. Effective for awards for 2020 or later, the policy provides for prorated vesting of performance-based long term incentive awards that are actually earned based on performance, full vesting of certain time-based long term incentive awards and payment of any earned cash bonus if the employee retires after the end of the performance year but before the date of payment. These retirement benefits are subject to the employee’s compliance with any applicable non-competition and non-solicitation obligations and the intellectual property agreement to which the employee is subject, as well as being subject to the Company’s clawback policy discussed above.
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 $290,000 (for 2021, indexed by the IRS for later years). We also provide competitive benefit packages to all full-time employees that include health and welfare benefits, such as medical, dental, disability insurance and life insurance benefits.
The Company maintains a deferred stock plan that allows officers to elect to defer receipt of common stock otherwise issuable upon vesting of RSUs and PRSUs. The Company also maintains 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 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 the amendment continues to apply to compensation payable pursuant to a binding written contract in effect on November 2, 2017 that is not materially modified. In addition, because our named executive officers are employed by a
 
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subsidiary of Omega that is taxed as a partnership, the Section 162(m) rules have not in years ended before 2019 applied to Omega. However, the Treasury Department issued final regulations on December 18, 2020 that make the Section 162(m) rules generally applicable to Omega for compensation paid after December 18, 2020. In addition, the final regulations extend the transition rule for subsidiaries of public companies that are taxed as partnerships to compensation payable pursuant to a binding written contract in effect on December 20, 2019 that is not materially modified. However, the Committee believes that it is not practicable to consider implementing a $1 million annual compensation limit per executive officer, given the Company’s business need to pay our officers competitive levels of compensation. Further, 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:

The Company adheres to effective processes for developing strategic and annual operating plans and approval of portfolio and capital investments, including through an Investment Committee of the Board of Directors chaired by an independent director;

The Company has strong internal financial controls;

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;

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;

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

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

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.
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
 
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Analysis” be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Compensation Committee of the Board of Directors
Edward Lowenthal, Chair
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 2020 are our Chief Executive Officer, our Chief Financial Officer and the three other most highly compensated executive officers.
Summary Compensation Table
Name and Principal Position
(A)
Year
(B)
Salary
($)
(C)
Bonus
($)(1)
(D)
Stock
Awards
($)(2)
(E)
Option
Awards
($)
(F)
Non-Equity
Incentive Plan
Compensation
($)(3)
(G)
All Other
Compensation
($)(4)
(I)
Total
($)
(J)
C. Taylor Pickett
Chief Executive Officer
2020 823,800 398,465 8,117,974 1,091,535 21,464 10,453,238
2019 799,800 432,012 5,190,748 847,988 16,800 7,287,348
2018 780,300 468,154 4,681,523 635,846 16,500 6,582,323
Daniel J. Booth
Chief Operating Officer
2020 532,700 170,523 3,760,457 439,477 21,464 4,924,621
2019 517,200 124,239 2,559,999 289,761 16,800 3,507,999
2018 504,600 154,633 2,497,546 225,367 16,500 3,398,646
Steven J. Insoft
Chief Corporate Development Officer
2020 521,800 154,515 3,411,241 430,485 21,464 4,539,505
2019 506,600 121,177 2,399,999 283,823 16,800 3,328,399
2018 494,200 140,277 2,341,560 220,723 16,500 3,213,260
Robert O. Stephenson
Chief Financial Officer
2020 510,800 166,590 3,449,803 421,410 21,464 4,570,067
2019 495,900 119,172 2,240,252 277,828 16,800 3,149,952
2018 483,800 149,922 2,185,530 216,078 16,500 3,051,830
Gail D. Makode
Chief Legal Officer
2020 400,000 135,000 1,500,016 330,000 17,100 2,382,116
2019
2018
(1)
Bonuses are reported for the year earned, whether or not paid before year end. Reflects the subjective component of annual cash bonus program payments. See “Compensation Discussion and Analysis — Our Compensation Decisions and Results for 2020 — 2020 Annual Cash Incentive Opportunities.
(2)
Represents the fair value for accounting purposes as of the date of grant (excluding the effect of estimated forfeitures). In the case of PRSUs and performance-based Profits Interest Units, the fair value of as of the grant date is based on the probable outcome of the performance conditions determined as of the date of grant computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. However, while the fair value of the PRSUs and performance-based Profits Interest Units as of the grant date includes the value of the awards that could be earned at the high level of performance, performance-based awards are not earned and paid out at the high level unless the high level of performance is in fact achieved. Equity compensation awards are granted by the Compensation Committee to the named executive officers under the Company’s equity compensation plan, and the amount of PRSU and performance-based Profit Interest Units awards are assessed by the Compensation Committee for comparability relative to the Company’s peer group of companies, based on the assumption that the awards are earned at the target level of performance. See Note 17 — “Stock-Based Compensation” in the Omega Annual Report on Form 10-K for the year ended December 31, 2020 for a detailed description of the assumptions that were used in determining the dollar amounts recognized for financial statement reporting purposes of equity awards.
(3)
Bonuses are reported for the year earned, whether or not paid before year end. Represents the objective performance components (FAD per share, tenant quality and leverage for 2020; adjusted FFO per share, FAD per share and tenant quality for 2019 and 2018) of annual cash incentive program payments, described for 2020 under “Compensation Discussion and Analysis — Our Compensation Decisions and Results for 2020 — 2020 Annual Cash Incentive Opportunities.”
(4)
“All Other Compensation” reflects 401(k) matching contributions and accrued dividend equivalents. 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 and PIUs 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 2020 to our named executive officers and is intended to supplement the 2020 Summary Compensation Table above.
Date of
Compensation
Committee
Action
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards
Grant Date
Fair Value
of Stock
and Option
Awards
($)(1)
Name
Grant Type
Grant
Date
Threshold
($)
Target
($)
High
($)
Threshold
(#)
Target
(#)
High
(#)
C. Taylor Pickett:
Annual Cash Bonus (Objective Metrics)(2)
12/16/2019 1/1/2020 576,660 720,825 1,153,320
Time-based Units(3)
12/16/2019 1/1/2020 1,623,593
Relative TSR-based Units(4)
12/16/2019 1/1/2020 7,727 51,687 166,007 3,571,921
TSR-based Units(5)
12/16/2019 1/1/2020 11,254 71,891 213,606 2,922,460
Daniel J. Booth:
Annual Cash Bonus (Objective Metrics)(2)
12/16/2019 1/1/2020 186,445 279,668 466,113
Time-based Units(3)
12/16/2019 1/1/2020 752,094
Relative TSR-based Units(4)
12/16/2019 1/1/2020 3,580 23,942 76,898 1,654,589
TSR-based Units(5)
12/16/2019 1/1/2020 5,213 33,302 98,949 1,353,774
Steven J. Insoft:
Annual Cash Bonus (Objective Metrics) (2)
12/16/2019 1/1/2020 182,630 273,945 456,575
Time-based Units(3)
12/16/2019 1/1/2020