10-Q

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number 001-32641

BROOKDALE SENIOR LIVING INC.

(Exact name of registrant as specified in its charter)

Delaware			20-3068069
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

330 North Wabash Avenue, Suite 1400, Chicago, Illinois 60611

(Address of principal executive offices)

(312) 977-3700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer                         Accelerated filer                         Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No

As of August 3, 2007, 101,542,960 shares of the Registrant’s common stock, $0.01 par value, were outstanding (excluding unvested restricted shares).

						PAGE
PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements
			Condensed Consolidated Balance Sheets – As of June 30, 2007 (Unaudited) and December 31, 2006					3
			Condensed Consolidated Statements of Operations – Three and Six months ended June 30, 2007 and 2006 (Unaudited)					4
			Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2007 and 2006 (Unaudited)					5
			Notes to Condensed Consolidated Financial Statements (Unaudited)					6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations					20
Item 3.			Quantitative and Qualitative Disclosures About Market Risk					37
Item 4.			Controls and Procedures					37
PART II. OTHER INFORMATION
Item 1.			Legal Proceedings					38
Item 1A.			Risk Factors					38
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds					38
Item 4.			Submission of Matters to a Vote of Security Holders					38
Item 6.			Exhibits					40
Signatures								41

Table of Contents

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except stock amounts)

			June 30, 2007						December 31, 2006
			(Unaudited)
Assets
Current assets
Cash and cash equivalents				$	81,229					$	68,034
Cash and investments – restricted					79,489						61,116
Accounts receivable, net					62,715						58,987
Deferred tax asset					40,021						40,019
Prepaid expenses and other current assets, net					36,330						42,076
Total current assets					299,784						270,232
Property, plant, equipment and leasehold intangibles, net					3,751,666						3,658,788
Cash and investments – restricted					12,743						22,083
Goodwill					339,405						324,750
Other intangible assets, net					274,875						292,448
Other assets, net					176,011						174,154
Total assets				$	4,854,484					$	4,742,455
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt				$	17,313					$	20,869
Trade accounts payable					12,626						15,860
Accrued expenses					153,608						155,577
Refundable entrance fees					194,710						198,613
Tenant security deposits					29,485						24,342
Deferred revenue and entrance fee revenue					49,187						47,056
Dividends payable					51,804						46,588
Total current liabilities					508,733						508,905
Long-term debt, less current portion					1,869,089						1,690,570
Line of credit					260,000						163,500
Deferred entrance fee revenue					71,821						70,479
Deferred tax liability					363,299						399,134
Deferred liabilities					108,810						98,673
Other liabilities					38,790						42,581
Total liabilities					3,220,542						2,973,842
Minority interests					3,620						4,601
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $.01 par value, 50,000,000 shares authorized at June 30, 2007 and December 31, 2006; no shares issued and outstanding					—						—
Common stock, $.01 par value, 200,000,000 shares authorized at June 30, 2007 and December 31, 2006; 105,058,375 shares and 104,542,648 shares issued and outstanding (including 3,518,086 and 3,282,000 unvested restricted shares), respectively					1,051						1,045
Additional paid-in-capital					1,855,056						1,934,571
Accumulated deficit					(224,528	)					(170,713	)
Accumulated other comprehensive loss					(1,257	)					(891	)
Total stockholders’ equity					1,630,322						1,764,012
Total liabilities and stockholders’ equity				$	4,854,484					$	4,742,455

See accompanying notes to condensed consolidated financial statements.

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BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

			Three Months Ended June 30,												Six Months Ended June 30,
			2007						2006						2007						2006
Revenue
Resident fees				$	456,622					$	267,842					$	901,960					$	488,878
Management fees					1,788						585						3,284						1,732
Total revenue					458,410						268,427						905,244						490,610
Expense
Facility operating expense (excluding depreciation and amortization of $72,508, $30,042, $142,275 and $51,452, respectively)					285,866						161,281						566,675						298,226
General and administrative expense (including non-cash stock-based compensation expense of $8,192, $3,755, $19,012 and $6,773, respectively)					35,758						23,125						76,411						44,210
Facility lease expense					67,176						46,623						135,657						92,357
Depreciation and amortization					82,471						30,947						155,455						53,246
Total operating expense					471,271						261,976						934,198						488,039
(Loss) income from operations					(12,861	)					6,451						(28,954	)					2,571
Interest income					1,563						625						3,383						1,677
Interest expense
Debt					(35,078	)					(25,544	)					(68,530	)					(39,234	)
Amortization of deferred financing costs					(2,109	)					(1,335	)					(3,727	)					(2,038	)
Change in fair value of derivatives and amortization					17,619						519						12,838						418
Loss on extinguishment of debt					(803	)					—						(803	)					(1,334	)
Equity in loss of unconsolidated ventures					(601	)					(469	)					(2,054	)					(637	)
Other non-operating income					238						—						238						—
Loss before income taxes					(32,032	)					(19,753	)					(87,609	)					(38,577	)
Benefit (provision) for income taxes					12,715						(273	)					33,283						(659	)
Loss before minority interest					(19,317	)					(20,026	)					(54,326	)					(39,236	)
Minority interest					642						(233	)					511						(349	)
Net loss				$	(18,675	)				$	(20,259	)				$	(53,815	)				$	(39,585	)
Basic and diluted loss per share				$	(0.18	)				$	(0.31	)				$	(0.53	)				$	(0.61	)
Weighted average shares used in computing basic and diluted loss per share					101,520						65,007						101,411						65,007
Dividends declared per share				$	0.50					$	0.35					$	0.95					$	0.70

See accompanying notes to condensed consolidated financial statements.

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BROOKDALE SENIOR LIVING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

			Six Months Ended June 30,
			2007						2006
Cash Flows from Operating Activities
Net loss				$	(53,815	)				$	(39,585	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash portion of loss on extinguishment of debt					—						1,334
Depreciation and amortization					159,182						55,284
Minority interest					(511	)					349
Gain on sale of assets					(403	)					—
Equity in loss of unconsolidated ventures					2,054						637
Distributions from unconsolidated ventures from cumulative share of net earnings					961						—
Amortization of deferred gain					(2,170	)					(2,173	)
Amortization of entrance fees					(8,900	)					(145	)
Proceeds from deferred entrance fee revenue					8,642						613
Deferred income tax benefit					(33,326	)					—
Change in deferred lease liability					12,364						10,498
Change in fair value of derivatives and amortization					(12,838	)					(418	)
Stock-based compensation					19,012						6,773
Changes in operating assets and liabilities:
Accounts receivable, net					(4,363	)					(10,715	)
Prepaid expenses and other assets, net					4,669						7,376
Accounts payable and accrued expenses					(10,763	)					(3,596	)
Tenant refundable fees and security deposits					4,656						2,182
Other					459						(5,175	)
Net cash provided by operating activities					84,910						23,239
Cash Flows from Investing Activities
Decrease in lease security deposits and lease acquisition deposits, net					1,602						5,266
(Increase) decrease in cash and investments – restricted					(12,281	)					14,854
Additions to property, plant, equipment and leasehold intangibles, net of related payables					(68,933	)					(14,957	)
Acquisition of assets, net of related payables and cash received					(149,788	)					(531,895	)
Issuance of notes receivable, net					(10,251	)					—
Investment in unconsolidated ventures					(1,176	)					—
Distributions received from unconsolidated ventures					1,765						—
Net cash used in investing activities					(239,062	)					(526,732	)
Cash Flows from Financing Activities
Proceeds from debt					249,011						321,170
Repayment of debt					(25,999	)					(11,356	)
Buyout of capital lease obligation					(51,114	)					—
Proceeds from line of credit					328,500						215,000
Repayment of line of credit					(232,000	)					(20,000	)
Payment of dividends					(93,178	)					(39,714	)
Payment of financing costs, net of related payables					(5,179	)					(10,636	)
Other					(612	)					—
Refundable entrance fees:
Proceeds from refundable entrance fees					8,322						2,756
Refunds of entrance fees					(10,404	)					(1,011	)
Net cash provided by financing activities					167,347						456,209
Net increase (decrease) in cash and cash equivalents					13,195						(47,284	)
Cash and cash equivalents at beginning of period					68,034						77,682
Cash and cash equivalents at end of period				$	81,229					$	30,398

See accompanying notes to condensed consolidated financial statements.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Description of Business

Brookdale Senior Living Inc. (‘‘Brookdale’’ or the ‘‘Company’’) is a leading owner and operator of senior living facilities throughout the United States. The Company provides an exceptional living experience through properties that are designed, purpose-built and operated to provide the highest quality service, care and living accommodations for residents. Currently, the Company owns and operates independent living, assisted living and dementia-care facilities and continuing care retirement centers.

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows of the Company as of June 30, 2007, and for all periods presented. The condensed consolidated financial statements are prepared on the accrual basis of accounting. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are no t necessarily indicative of the financial position or operating results for an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto, together with management’s discussion and analysis of financial condition and results of operations, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the Securities and Exchange Commission.

In 2006, the Company adopted EITF 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, and as a result, consolidated the operations of three limited partnerships controlled by the Company. In 2006, the Company purchased a facility from one of the limited partnerships and the partnership was liquidated. Additionally in May 2007, the Company purchased another facility from one of the limited partnerships and the partnership was liquidated. The ownership interest in the remaining limited partnership not owned by the Company has been reflected in the consolidated balance sheets as minority interests.

Purchase Accounting

In determining the allocation of the purchase price of companies and facilities to net tangible and identified intangible assets acquired and liabilities assumed, we make estimates of the fair value of the tangible and intangible assets and acquired liabilities using information obtained as a result of pre-acquisition due diligence, marketing, leasing activities and independent appraisals. We allocate the purchase price of facilities to net tangible and identified intangible assets acquired and liabilities assumed based on their fair values in accordance with the provisions of Statement of Financial Accounting Standards (‘‘SFAS’’) No. 141, Business Combinations. The determination of fair value involves the use of significant judgment and estimation. We determine fair values as follows:

Current assets and current liabilities assumed are valued at carryover basis which approximates fair value.

Property, plant and equipment are valued utilizing discounted cash flow projections that assume certain future revenue and costs, and considers capitalization and discount rates using current market conditions.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

We allocate a portion of the purchase price to the value of resident leases acquired based on the difference between the facilities valued with existing in-place leases adjusted to market rental rates and the facilities valued with current leases in place based on current contractual terms. Factors management considers in its analysis include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar resident leases. In estimating carrying costs, management includes estimates of lost rentals during the lease-up period and estimated costs to execute similar leases. The value of in-place leases is amortized to expense over the remaining initial term of the respective leases.

Leasehold operating intangibles are valued utilizing discounted cash flow projections that assume certain future revenues and costs over the remaining lease term. The value assigned to leasehold operating intangibles is amortized on a straight-line basis over the lease term.

Facility purchase options are valued at the estimated value of the underlying facility less the cost of the option payment discounted at current market rates. Management contracts and other acquired contracts are valued at a multiple of management fees and operating income and amortized over the estimated term of the agreement.

Long-term debt assumed is recorded at fair market value based on the current market rates and collateral securing the indebtedness.

Capital lease obligations are valued based on the present value of the minimum lease payments applying a discount rate equal to our estimated incremental borrowing rate at the date of acquisition.

Deferred entrance fee revenue is valued at the estimated cost of providing services to residents over the terms of the current contracts to provide such services. Refundable entrance fees are valued at cost pursuant to the resident lease plus the resident’s share of any appreciation of the facility unit at the date of acquisition, if applicable.

A deferred tax liability is recognized at statutory rates for the difference between the book and tax bases of the acquired assets and liabilities.

The excess of the fair value of liabilities assumed and cash paid over the fair value of assets acquired is allocated to goodwill.

Self-Insurance Liability Accruals

We are subject to various legal proceedings and claims that arise in the ordinary course of our business. Although we maintain general liability and professional liability insurance policies for our owned, leased and managed facilities under a master insurance program, our current policies provide for deductibles of $3.0 million for each claim. As a result, we are self-insured for most claims. In addition, we maintain a self-insured workers compensation program and a self-insured employee medical program for amounts below excess loss coverage amounts, as defined. We review the adequacy of our accruals related to these liabilities on an ongoing basis, using historical claims, actuarial valuations, third party administrator estimates, consultants, advice from legal counsel and industry data, and adjust accruals periodically. Estimated costs related to these self-insurance programs are accrued based on known claims and projected claims incurred but not yet rep orted. Subsequent changes in actual experience are monitored and estimates are updated as information is available.

During the three months ended June 30, 2007, we recorded a $4.2 million receivable related to a collateral recovery from an insurance carrier for amounts owed to Alterra Healthcare Corporation, a wholly-owned subsidiary, pursuant to a pre-bankruptcy insurance policy. Such amount had not previously been recognized by the Company due to the existence of preconfirmation contingencies which were resolved prior to June 30, 2007. The receivable was recorded as a $3.8 million reduction of general and administrative expense and $0.4 million of interest income in the condensed consolidated statements of operations. The receivable was collected in full in July 2007.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (‘‘FIN 48’’). The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. Specifically, the pronouncement prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related derecognit ion, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The interpretation is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 in the current year. See Note 12 for a discussion on the impact of adoption.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (‘‘SFAS 157’’). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (‘‘SFAS 159’’). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Both SFAS 157 and SFAS 159 are effective for fiscal years beginning after November&nbs p;15, 2007. The Company does not believe that the adoption of SFAS 157 and SFAS 159 will materially impact our financial position or results of operations.

Dividends

On June 12, 2007, our board of directors declared a quarterly cash dividend of $0.50 per share of our common stock, or an aggregate of $51.8 million, for the quarter ended June 30, 2007. The $0.50 per share dividend was paid on July 13, 2007, to holders of record of our common stock on June 29, 2007.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on our consolidated financial position or results of operations.

3.	Stock-Based Compensation

Compensation expense in connection with grants of restricted stock of $8.2 million and $3.8 million was recorded for the three months ended June 30, 2007 and 2006, respectively, and $19.0 million and $6.8 million was recorded for the six months ended June 30, 2007 and 2006, respectively. All amounts were net of forfeitures estimated at 5% of the shares granted.

On September 15, 2006, we entered into Separation and General Release Agreements with two officers that accelerated the vesting provision of a portion of their restricted stock grants upon satisfying certain conditions. As a result of the modification, the previous compensation expense related to these grants was reversed during the year ended December 31, 2006. The fair value of the stock at the modification date was expensed over the modified service period. The impact of the adjustment was $4.1 million of additional expense for the six months ended June 30, 2007.

For all awards with graded vesting other than awards with performance-based vesting conditions, the Company records compensation costs for the entire award on a straight-line basis over the requisite service period. For graded-vesting awards with performance-based vesting conditions, total compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as if the award is, in substance, multiple awards once the performance target is deemed probable of achievement. Performance goals are evaluated quarterly. If such goals are not ultimately

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

met or it is probable the goals will not be met, no compensation cost is recognized and any previously recognized compensation cost is reversed.

Current year grants of restricted shares under the Company’s Omnibus Stock Incentive Plan were as follows ($ in 000’s except for grants and per share amounts):

			Grants						Value Per Share						Total Value
Three months ended March 31, 2007					53,000					$	45.02					$	2,399
Three months ended June 30, 2007					544,000				45.02  –  46.06								25,023

4.	Goodwill and Other Intangible Assets, Net

Following is a summary of changes in the carrying amount of goodwill for the six months ended June 30, 2007 presented on an operating segment basis ($ in 000’s):

			Independent Living						Assisted Living						Retirement Centers/CCRCs						Total
Balance at December 31, 2006				$	8,118					$	101,921					$	214,711					$	324,750
Additions					—						—						12,676						12,676
Adjustments					—						862						1,117						1,979
Balance at June 30, 2007				$	8,118					$	102,783					$	228,504					$	339,405

The additions to goodwill related to adjusting the allocation of the purchase price for an acquisition which occurred in the third quarter of fiscal 2006 and an acquisition completed in the first quarter of 2007. The adjustments primarily related to the adoption of FIN 48 in the first quarter of 2007 and its impact on acquired entities.

Intangible assets with definite useful lives are amortized over their estimated lives and are tested for impairment whenever indicators of impairment arise. The following is a summary of other intangible assets at June 30, 2007 and December 31, 2006 ($ in 000’s):

			June 30, 2007																		December 31, 2006
			Gross Carrying Amount						Accumulated Amortization						Net						Gross Carrying Amount						Accumulated Amortization						Net
Facility purchase options				$	147,682					$	(922	)				$	146,760					$	147,682					$	—					$	147,682
Other intangible assets, net					158,041						(29,926	)					128,115						158,849						(14,083	)					144,766
Total				$	305,723					$	(30,848	)				$	274,875					$	306,531					$	(14,083	)				$	292,448

Amortization expense related to definite-lived intangible assets for the three and six months ended June 30, 2007 was $8.8 million and $16.8 million, respectively. There was no amortization expense for the three and six months ended June 30, 2006 as the Company acquired these intangible assets in conjunction with an acquisition in July 2006.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5.	Property, Plant, Equipment and Leasehold Intangibles, Net

Property, plant, equipment and leasehold intangibles, net consist of the following ($ in 000’s):

			June 30, 2007						December 31, 2006
Land				$	263,978					$	236,945
Buildings and improvements					2,626,014						2,301,841
Furniture and equipment					172,005						137,583
Resident and operating lease intangibles					515,865						577,547
Assets under capital and financing leases					513,055						654,337
					4,090,917						3,908,253
Accumulated depreciation and amortization					(339,251	)					(249,465	)
Property, plant, equipment and leasehold intangibles, net				$	3,751,666					$	3,658,788

6.	Acquisitions

Financial results are impacted by the timing, size and number of acquisitions we complete in a period. During the six months ended June 30, 2007, the number of facilities we owned or leased increased by three. The number of facilities we own or lease was unchanged by our acquisition of joint venture partner interests, our acquisition of remaining portions of owned facilities and our acquisition of service businesses. The results of facilities and companies acquired are included in the condensed consolidated financial statements from the effective date of the acquisition.

Seller

Closing Date

Purchase Price, Excluding Fees, Expenses and Assumption of Debt ($ in millions)

Segment

McClaren Medical Management, Inc. and FP Flint, LLC

January 24, 2007

$

3.9

Assisted Living

American Senior Living of Jacksonville-SNF, LLC

February 1, 2007

6.8

Retirement Centers/CCRCs

1st Choice Home Health, Inc.

February 15, 2007

3.0

Retirement Centers/CCRCs, Assisted Living and Independent Living

Healthcare Property Investors, Inc.

February 28, 2007

9.5

Assisted Living

Chancellor Health Care of California L.L.C.

April 1, 2007

10.8

Independent Living

Seminole Nursing Pavilion and Seminole Properties

April 4, 2007

51.1

Retirement Centers/CCRCs

Cleveland Retirement Properties, LLC and Countryside ALF, LLC

April 18, 2007

102.0

Retirement Centers/CCRCs

Paradise Retirement Center, L.P.

May 31, 2007

15.3

Independent Living

Total

$

202.4

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On January 24, 2007, we acquired the interests held by our joint venture partners in a facility located in Flint, Michigan for approximately $3.9 million. This facility is referred to as the ‘‘Flint Facility’’. In connection with the acquisition, the Company obtained $12.6 million of first mortgage financing bearing interest at LIBOR plus 1.15% payable interest only through February 1, 2012 and also entered into interest rate swaps to convert the loan from floating to fixed (note 7).

On February 1, 2007, we acquired the skilled nursing portion of a CCRC facility located in Jacksonville, Florida for approximately $6.8 million. The assisted living and independent living portions of the facility were acquired in 2006 by the Company. We refer to the facility as the ‘‘Atrium SNF’’. In connection with the acquisition, the Company assumed a first mortgage note secured by the property in the amount of $3.7 million. The note bears interest at 6.10% with principal and interest payable until maturity on September 1, 2039.

On February 15, 2007, we acquired certain home health care assets for approximately $3.0 million. The purchase price was assigned entirely to goodwill. We refer to these operations as the ‘‘Home Health Acquisition’’.

On February 28, 2007, we acquired a previously leased facility in Richmond Heights, Ohio for approximately $9.5 million. We refer to the facility as the ‘‘Richmond Heights Facility’’.

Effective as of April 1, 2007, we acquired the leasehold interests of three assisted living facilities located in California for approximately $10.8 million. We refer to these facilities as the ‘‘Chancellor Portfolio’’.

On April 4, 2007, we purchased the real property underlying an entrance fee continuing care retirement community located in Tampa, Florida for an aggregate purchase price of approximately $51.1 million. The community consists of independent living retirement apartments, a skilled nursing facility and an assisted living facility. We previously managed this community pursuant to a cash-flow management agreement and accounted for this community as a capital lease. We refer to the facilities as the ‘‘Freedom Square Portfolio’’.

On April 18, 2007, we acquired two facilities located in Ohio and North Carolina for approximately $102.0 million. The facilities were previously operated by the Company under long term operating lease agreements. We refer to the facilities as the ‘‘Saunders Portfolio’’.

On May 31, 2007, we acquired a facility in Phoenix, Arizona in which we held partnership interests for approximately $15.3 million. We refer to this facility as ‘‘Grand Court Phoenix Facility’’.

The above acquisitions were accounted for using the purchase method of accounting and the purchase prices were allocated to the associated assets and liabilities based on their estimated fair values. The Company has made preliminary purchase price allocations for these transactions resulting in approximately $3.1 million of goodwill being recorded in the Retirement Centers/CCRCs segment and anticipates finalizing the purchase price allocations within one year of the acquisition date.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7.	Debt

Long-term Debt, Capital Leases and Financing Obligations

Long-term debt, capital leases and financing obligations consist of the following ($ in 000’s):

			June 30, 2007						December 31, 2006
Mortgage notes payable due 2008 through 2039; weighted average interest rate of 7.02% in 2007 (weighted average interest rate of 6.98% in 2006)				$	621,451					$	490,997
Mortgages payable due 2009 through 2038; weighted average interest rate of 7.08% in 2007 (weighted average interest rate of 6.57% in 2006)					74,561						74,571
$150,000 Series A notes payable, secured by five facilities, bearing interest at LIBOR plus 0.88% effective August 2006 (3.05% prior to that date), payable in monthly installments of interest only until August 2011 and payable in monthly installments of principal and interest through maturity in August 2013, and secured by a $7.0 million guaranty by a subsidiary of the Company and a $3.0 million letter of credit					150,000						150,000
Mortgages payable due 2012, weighted average interest rate of 5.39% and 5.37%, in 2007 and 2006, respectively, payable interest only through July 2010 and payable in monthly installments of principal and interest through maturity in July 2012, secured by the FIT REN portfolio(1)					171,000						171,000
Mortgages payable due 2010, bearing interest at LIBOR plus 2.25% effective May 1, 2006 (3.0% prior to that date), payable in monthly installments of interest only until April 2009 and payable in monthly installments of principal and interest through maturity in April 2010, secured by the Fortress CCRC Portfolio(1)					105,756						105,756
Variable rate tax-exempt bonds credit-enhanced by Fannie Mae (weighted average interest rates of 5.04% and 4.91% at June 30, 2007 and December 31, 2006, respectively), due 2032, payable interest only until maturity, secured by the Chambrel portfolio(1)					100,841						100,841
Capital and financing lease obligations payable through 2020; weighted average interest rate of 8.90% in 2007 (weighted average interest rate of 8.91% in 2006)					314,052						371,346
Mortgage note, bearing interest at a variable rate of LIBOR plus 0.70%, payable interest only through maturity in August 2012. The note is secured by 16 of our facilities and an $11.5 million guaranty by the Company					333,500						225,000
Mezzanine loan payable to Brookdale Senior Housing, LLC joint venture with respect to The Heritage at Gaines Ranch facility, payable to the extent of all available cash flow (as defined)					12,739						12,739
Mortgages payable due 2010; interest rate of 7.20%, secured by the limited partnerships consolidated pursuant to EITF 04-5 (weighted average interest rate of 6.81% in 2006)					2,502						9,189
Total debt					1,886,402						1,711,439
Less current portion of long-term debt					17,313						20,869
Total long-term debt				$	1,869,089					$	1,690,570

(1) See our Annual Report on Form 10-K for the year ended December 31, 2006 for a description of the referenced portfolios.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

As of June 30, 2007, we had an available secured line of credit of $320.0 million ($70.0 million letter of credit sublimit) and a letter of credit facility of up to $80.0 million. The line of credit agreement bears interest at the base rate plus 0.50% or LIBOR plus 1.50%, at our election. The $80.0 million letter of credit facility bears interest at 1.50%. In connection with entering into the credit facility agreement, we paid a commitment fee of 0.50% and are subject to a non-use fee of 0.25% on all unutilized amounts. The agreement matures on November 15, 2008 subject to extension at our option for six months and payment of a 0.375% commitment fee. As of June 30, 2007, $260.0 million was drawn on the revolving loan facility and $98.0 million letters of credit have been issued under the agreements. The agreements are secured by a pledge of our tier one subsidiaries and, subject to certain limitations, subsidiaries formed to consummate future acquisitions.

On January 16, 2007 and January 24, 2007, we financed a previous acquisition and the Flint Facility with $130.0 million of first mortgage financing bearing interest at LIBOR plus 1.15% payable interest only through February 1, 2012. We also entered into interest rate swaps to convert the loan from floating to fixed. The loan is secured by 27 previously acquired facilities and the Flint Facility and is partially secured by a $7.4 million letter of credit that will be released upon achievement of certain debt service coverage ratios.

On April 18, 2007, we financed a previously acquired facility as well as the Saunders Portfolio with $108.5 million of first mortgage financing bearing interest at LIBOR plus 0.70% payable interest only through August 1, 2012. We have entered into interest rate swaps to convert the loan from floating to fixed.

The financings entered into on January 16, 2007, January 24, 2007 and April 18, 2007, are all part of the same master loan agreement whereby the amounts are secured by all properties under the master agreement.

In the normal course of business, we use a variety of financial instruments to manage or hedge interest rate risk. The Company entered into certain interest rate protection and swap agreements to effectively cap or convert floating rate debt to a fixed rate basis, as well as to hedge anticipated future financing transactions. Pursuant to our hedge agreements, we are required to secure our obligation to the counterparty if the fair value liability exceeds a specified threshold.

The Company does not enter into derivative contracts for trading or speculative purposes. Furthermore, we have a policy of only entering into contracts with major financial institutions based upon their credit rating and other factors.

The following table summarizes our swap instruments at June 30, 2007 ($ in 000’s):

Current notional balance				$	1,176,620
Highest possible notional				$	1,176,620
Lowest interest rate					3.62	%
Highest interest rate					6.87	%
Average fixed rate					4.89	%
Earliest maturity date					2008
Latest maturity date					2012
Weighted average original maturity			4.9 years
Estimated asset fair value (included in other assets, net at June 30, 2007)				$	14,123
Estimated liability fair value (included in other liabilities at June 30, 2007)				$	(699	)

Prior to October 1, 2006, the Company qualified for hedge accounting on designated swap instruments pursuant to SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Activities, with the effective portion of the change in fair value of the derivative recorded in other comprehensive income and the ineffective portion included in the change in fair value of derivatives and amortization in the statement of operations.

On October 1, 2006, the Company elected to discontinue hedge accounting prospectively for the previously designated swap instruments. Consequently, the net gains and losses accumulated in other comprehensive income at that date of $1.3 million related to the previously designated swap instruments are being amortized to interest expense over the life of the underlying hedged debt payments. In the future, if the underlying hedged debt is extinguished or refinanced, the remaining unamortized gain or loss in accumulated other comprehensive income will be recognized in net income. Although hedge accounting was discontinued on October 1, 2006, the swap instruments remain outstanding and are carried at fair value in the consolidated balance sheet and the change in fair value beginning October 1, 2006 has been included in the statements of operations.

In April 2007, the Company entered into two separate treasury rate locks for notional amounts of $70 million and $50 million in anticipation of the Company’s planned future issuance of $120 million of fixed-rate debt. Both rate locks expired in May 2007 and resulted in a cash receipt to the Company of approximately $0.4 million which has been included in the results from operations.

8.	Legal Proceedings

In connection with the sale of certain facilities to Ventas Realty Limited Partnership (‘‘Ventas’’) in 2004, two legal actions have been filed. The first action was filed on September 15, 2005, by current and former limited partners in 36 investing partnerships in the United States District Court for the Eastern District of New York captioned David T. Atkins et al. v. Apollo Real Estate Advisors, L.P., et al. (the ‘‘Action’’). On March 17, 2006, a third amended complaint was filed in the Action. The third amended complaint is brought on behalf of current and former limited partners in 14 investing partnerships. It names as defendants, among others, the Company, Brookdale Living Communities, Inc. (‘‘BLC’’), a subsidiary of the Company, GFB-AS Investors, LLC (‘‘GFB-AS’’), a subsidiary of BLC, the general partners of the 14 investing partnerships, which are alleged to be subsidiaries of GFB-AS, Fortress Investment Group (‘‘Fortress’’), an affiliate of our largest stockholder, and R. Stanley Young, our former Chief Financial Officer. The nine count third amended complaint alleges, among other things, (i) that the defendants converted for their own use the property of the limited partners of 11 partnerships, including through the failure to obtain consents the plaintiffs contend were required for the sale of facilities indirectly owned by those partnerships to Ventas; (ii) that the defendants fraudulently persuaded the limited partners of three partnerships to give up a valuable property right based upon incomplete, false and misleading statements in connection with certain consent solicitations; (iii) that certain defendants, including GFB-AS, the general partners, and ou r former Chief Financial Officer, but not including the Company, BLC, or Fortress, committed mail fraud in connection with the sale of facilities indirectly owned by the 14 partnerships at issue in the Action to Ventas; (iv) that certain defendants, including GFB-AS and our former Chief Financial Officer, but not including the Company, BLC, the general partners, or Fortress, committed wire fraud in connection with certain communications with plaintiffs in the Action and another investor in a limited partnership; (v) that the defendants, with the exception of the Company, committed substantive violations of the Racketeer Influenced and Corrupt Organizations Act (‘‘RICO’’); (vi) that the defendants conspired to violate RICO; (vii) that GFB-AS and the general partners violated the partnership agreements of the 14 investing partnerships; (viii) that GFB-AS, the general partners, and our former Chief Financial Officer breached fiduciary duties to the plaintiffs; and (ix) that the defendant s were unjustly enriched. The plaintiffs have asked for damages in excess of $100.0 million on each of the counts described above, including treble damages for the RICO claims. On April 18, 2006, we filed a motion to dismiss the claims with prejudice, which remains pending before the court, and plan to continue to vigorously defend this Action. A putative class action lawsuit was

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

also filed on March 22, 2006, by certain limited partners in four of the same partnerships involved in the Action in the Court of Chancery for the State of Delaware captioned Edith Zimmerman et al. v. GFB-AS Investors, LLC and Brookdale Living Communities, Inc. (the ‘‘Second Action’’). On November 21, 2006, an amended complaint was filed in the Second Action. The putative class in the Second Action consists only of those limited partners in the four investing partnerships who are not plaintiffs in the Action. The Second Action names as defendants BLC and GFB-AS. The complaint alleges a claim for breach of fiduciary duty arising out of the sale of facilities indirectly owned by the investing partnerships to Ventas and the subsequent lease of those facilities by Ventas to subsidiaries of BLC. The plaintiffs seek, among ot her relief, an accounting, damages in an unspecified amount, and disgorgement of unspecified amounts by which the defendants were allegedly unjustly enriched. On December 12, 2006, we filed an answer denying the claim asserted in the amended complaint and providing affirmative defenses. On December 27, 2006, the plaintiffs moved to certify the Action as a class action. Both the plaintiffs and defendants have served document production requests and the Action is currently in the beginning stages of document discovery. We also intend to vigorously defend this Second Action. Because these actions are in an early stage we cannot estimate the possible range of loss, if any.

In addition, we have been and are currently involved in other litigation and claims incidental to the conduct of our business which are comparable to other companies in the senior living industry. Certain claims and lawsuits allege large damage amounts and may require significant legal costs to defend and resolve. Similarly, our industry is continuously subject to scrutiny by governmental regulators, which could result in litigation related to regulatory compliance matters. As a result, we maintain insurance policies in amounts and with coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards. Because our current policies provide for deductibles of $3.0 million for each claim, we are, in effect, self insured for most claims.

9.	Supplemental Disclosure of Cash Flow Information ($ in 000’s)

			Six Months Ended June 30,
			2007						2006
Supplemental Disclosure of Cash Flow Information:
Interest paid				$	67,564					$	35,362
Income taxes paid				$	501					$	335
Supplemental Schedule of Non-cash Operating, Investing and Financing Activities:
Consolidation of limited partnerships pursuant to EITF 04-5 on January 1, 2006:
Property, plant, equipment and leasehold intangibles, net				$	—					$	31,645
Accounts receivable and other					—						1,410
Cash and investments-restricted					—						1,204
Accrued expenses and other					—						(2,245	)
Tenant refundable fees and security deposits					—						(177	)
Debt					—						(19,723	)
Minority interest					—						(12,114	)
Net				$	—					$	—
De-consolidation of leased development property:
Property, plant, equipment and leasehold intangibles, net				$	(2,978	)				$	—

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

			Six Months Ended June 30,
			2007						2006
Debt					2,978						—
Net				$	—					$	—
Acquisition of assets, net of related payables and cash received, net:
Cash and investments-restricted				$	387					$	1,719
Accounts receivable					64						—
Property, plant, equipment and leasehold intangibles, net					155,957						706,647
Investment in unconsolidated ventures					(1,342	)					—
Goodwill					3,101						—
Other intangible assets, net					(668	)					—
Trade accounts payable, accrued expenses and other					(1,336	)					—
Debt obligations					(5,273	)					—
Capital lease obligations assumed					—						(163,245	)
Deferred tax liability					—						(9,812	)
Minority interest					650						—
Other, net					(1,752	)					(3,414	)
Acquisition of assets, net of related payables and cash received				$	149,788					$	531,895

10.	Facility Leases

A summary of facility lease expense and the impact of straight-line adjustment and amortization of deferred gains are as follows ($ in 000’s):

			Three Months Ended June 30,												Six Months Ended June 30,
			2007						2006						2007						2006
Cash basis payment				$	62,233					$	42,470					$	125,463					$	84,032
Straight-line expense					6,028						5,239						12,364						10,498
Amortization of deferred gain					(1,085	)					(1,086	)					(2,170	)					(2,173	)
Facility lease expense				$	67,176					$	46,623					$	135,657					$	92,357

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11.	Other Comprehensive Loss, Net

The following table presents the after-tax components of the Company’s other comprehensive loss for the periods presented ($ in 000’s):

			Three Months Ended June 30,												Six Months Ended June 30,
			2007						2006						2007						2006
Net loss				$	(18,675	)				$	(20,259	)				$	(53,815	)				$	(39,585	)
Unrealized gain on derivatives					—						1,279						—						9,191
Reclassification of net gains on derivatives into earnings					(393	)					—						(786	)					—
Amortization of payments from settlement of forward interest swaps					94						94						188						188
Other					116						—						232						—
Total comprehensive loss				$	(18,858	)				$	(18,886	)				$	(54,181	)				$	(30,206	)

12.	Income Taxes

The Company’s effective tax rate for the three months ending June 30, 2007 and 2006 are 39.7% and 1.4%, respectively, and for the six months ending June 30, 2007 and 2006 are 38.0% and 1.7%, respectively. The difference between the periods is primarily due to the ability to benefit book losses in the first two quarters of 2007 compared to the same period in 2006 as a result of the deferred tax liabilities generated in connection with the acquisitions of American Retirement Corporation (‘‘ARC’’) and Southern Assisted Living, Inc. (‘‘SALI’’).

The Company adopted the provisions of FIN 48 on January 1, 2007. The adoption of FIN 48 resulted in a transition adjustment to goodwill of $1.6 million, comprised of $1.4 million in taxes and $0.2 million in interest and penalties. The adoption impacted goodwill versus retained earnings as the original benefit recorded on these positions was not recorded through earnings as the Company previously reserved for all deferred tax assets. Due to the recognition of deferred tax liabilities in connection with the ARC and SALI acquisitions, the previously recorded valuation allowance was reversed through purchase accounting and thus the benefit was reflected as a component of goodwill. Interest and penalties related to these tax positions are classified as tax expense in the Company’s financial statements. Tax returns for all wholly owned subsidiaries for the years 2002 through 2006 are subject to future examination by tax authorities. In addition, for one wholly owned subsidiary, Alterra Healthcare Corporation, tax returns are open from 1999 through 2001 to the extent of the net operating losses generated during those periods. The Company has reviewed its FIN 48 position as of June 30, 2007, and has determined that, with the exception of updating the interest computation for the period, no additional reserve is required.

13.	Segment Results

Under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company determined that it has four reportable segments based on the way that our chief operating decision makers organize the Company’s business activities for making operating decisions and assessing performance. The four segments are independent living; assisted living; retirement centers/CCRCs; and management services.

	•	Independent Living.    Our independent living facilities are primarily designed for middle to upper income senior citizens age 70 and older who desire an upscale residential environment providing the highest quality of service. The majority of our independent living facilities consist of both independent living and assisted living units in a single facility, which allows residents to ‘‘age-in-place’’ by providing them with a continuum of senior independent and assisted living services.

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	•	Assisted Living.    Our assisted living facilities offer housing and 24-hour assistance with activities of daily life to mid-acuity frail and elderly residents. Our assisted living facilities include both freestanding, multi-story facilities and freestanding, single-story facilities. We also operate memory care facilities, which are freestanding assisted living facilities specially designed for residents with Alzheimer’s disease and other dementias.

	•	Retirement Centers/CCRCs.    Our retirement centers/CCRCs are large communities that offer a variety of living arrangements and services to accommodate all levels of physical ability and health. Most of our retirement centers/CCRCs have independent living, assisted living and skilled nursing available on one campus, and some also include memory care and Alzheimer’s units.

	•	Management Services.    Our management services segment includes facilities owned by others and operated by us pursuant to management agreements. Under our management agreements for these facilities, we receive management fees as well as reimbursed expenses, which represent the reimbursement of certain expenses we incur on behalf of the owners.

The following table sets forth certain segment financial and operating data ($ in 000’s)

			Three Months Ended June 30,												Six Months Ended June 30,
			2007						2006						2007						2006
Revenue(1)
Independent Living				$	112,197					$	95,697					$	219,307					$	186,404
Assisted Living					196,847						146,234						390,314						258,097
Retirement Centers/CCRCs					147,578						25,911						292,339						44,377
Management Services					1,788						585						3,284						1,732
				$	458,410					$	268,427					$	905,244					$	490,610
Segment operating income(2)
Independent Living				$	50,217						43,048					$	96,999						82,829
Assisted Living					72,006						58,997						143,860						99,263
Retirement Centers/CCRCs					48,533						4,516						94,426						8,560
Management Services					1,252						410						2,299						1,212
				$	172,008					$	106,971					$	337,584					$	191,864
General and administrative (including non-cash stock-based compensation expense)(3)				$	35,222					$	22,950					$	75,426					$	43,690
Facility lease expense					67,176						46,623						135,657						92,357
Deprecation and amortization					82,471						30,947						155,455						53,246
(Loss) income from operations				$	(12,861	)				$	6,451					$	(28,954	)				$	2,571
Total Assets
Independent living																$	1,156,772					$	1,080,744
Assisted living																	1,296,941						852,156
Retirement Centers/CCRCs																	2,069,645						334,494
Corporate and Management Services																	331,126						113,792
																$	4,854,484					$	2,381,186

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BROOKDALE SENIOR LIVING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) All revenue is earned from external third parties in the United States.

(2) Segment operating income is defined as segment revenues less segment operating expenses (excluding depreciation and amortization).

(3) Net of general and administrative costs allocated to management services reporting segment.

14.	Subsequent Events

In July 2007, the Company entered into a series of forward starting interest rate swaps in the aggregate notional amount of $553.1 million in anticipation of planned future financing transactions as well as the replacement of certain existing hedges that will be expiring.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this Quarterly Report on Form 10-Q and other information we provide from time to time may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements relating to our ability to deploy capital, close accretive transactions, anticipate, manage and address industry trends and their effect on our business, grow dividends, generate growth organically or through acquisitions, achieve operating efficiencies and cost savings, expand our offering of ancillary services (therapy and home health) to additional facilities, expand existing facilities, develop new facilities, secure financing and increase revenues, earnings, Adjusted EBITDA, Cash From Facility Operations, and/or Facility Operating Income (as such terms are defined herein) and add residents and statements relating to our expectations for the performance of our entrance fee communities and our expected levels of expenditures. Words such as ‘‘anticipate(s)’’, ‘‘expect(s)’’, ‘‘intend(s)’’, ‘‘plan(s)’’, ‘‘target(s)’’, ‘‘project(s)’’, ‘‘believe(s)’’, ‘‘will’’, ‘‘would’’, ‘‘seek(s)’’, ‘‘estimate(s)’’ and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statemen ts are reasonable, we can give no assurance that our expectations will be attained. Factors that could cause actual results to differ materially from our expectations include, but are not limited to, our ability to integrate the facilities of American Retirement Corporation (‘‘ARC’’) or other acquisitions into our operations; our continued ability to acquire facilities at attractive prices which will generate returns consistent with expectations; the possibility that the facilities that we have recently acquired and will acquire may not generate sufficient additional income to justify their acquisition; possibilities that conditions to closing of certain transactions will not be satisfied; the possibilities that changes in the capital markets, including changes in interest rates and/or credit spreads, or other factors could make financing more expensive or unavailable to us; a decrease in the overall demand for senior housing; general economic conditions and economic conditions in the markets in which we operate; downturns in the real estate markets in the regions where our facilities are located; competitive pressures within the industry and/or markets in which we operate; the creditworthiness of our residents; interest rate fluctuations; licensing risks; our failure to comply with federal, state and local laws and regulations; our failure to comply with environmental laws; the effect of future legislation or regulatory changes on our operations; and other risks detailed from time to time in our filings with the Securities and Exchange Commission, press releases and other communications, including those set forth under ‘‘Risk Factors’’ included in our Annual Report on Form 10-K for the year ended December 31, 2006. Such forward-looking statements speak only as of the date of this Quarterly Report. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Executive Overview

During the second quarter of 2007, we continued to make significant progress in implementing the growth strategy outlined in our most recent Annual Report on Form 10-K. We are focusing on increasing our revenues, cash flows and dividends per share through a combination of: (i) organic growth in our existing operations; (ii) expansion of our ancillary service programs (including therapy and home health services); (iii) selected acquisitions of additional operating companies and facilities; and (iv) expansion of our existing facilities.

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As a result of these efforts, and as more fully described below, our revenues for the second quarter of 2007 increased to $458.4 million, an increase of $190.0 million, or 70.8%, over the second quarter of 2006. Including the effect of the historical results of the ARC facilities not included in our results of operations in the second quarter of 2006, same store revenues grew 7.8% over the second quarter of 2006.

In addition, we declared a dividend of $0.50 per share for the second quarter, an increase of 11.1% over the $0.45 per share dividend declared for the first quarter of 2007 and an increase of 42.9% over the $0.35 per share dividend declared for the second quarter of 2006.

We continued to make progress in expanding our ancillary services programs to additional facilities during the second quarter. For the six months ended June 30, 2007, we have completed the roll-out of our ancillary services program to over 10,000 units.

Our focus on growth through selective acquisition of new properties, as well as previously leased or managed properties, also continued during the second quarter. During the quarter, we closed four acquisitions, with an aggregate purchase price of $179.2 million. As a result of these acquisitions, we acquired ownership of three facilities that were previously leased or managed by us, and acquired leasehold interests in three other facilities. We also acquired ownership of a facility in which we held partnership interests.

In addition, we continued to invest in our facility expansion program during the quarter. For the six months ended June 30, 2007, we have completed expansions at five facilities. As of the end of the quarter, we had another four expansion projects under construction.

As a result of our acquisition and expansion activity, the number of units we operated as of the end of the second quarter increased to 51,616, an increase of 17,270, or 50.3%, over the same prior year quarter.

Although we continued to experience volatility in the entrance fee portion of our business during the second quarter, our net entrance fee sales increased from the previous quarter. The timing of entrance fee sales is subject to a number of different factors and is also inherently subject to variability (positively or negatively) when measured over the short-term. We believe that our entrance fee sales during the quarter continued to be negatively impacted by softness in the housing markets in certain of the markets in which we operate (primarily certain areas of Florida and Arizona). In response, we have increased our sales and marketing efforts in those markets and expect entrance fee sales to normalize over the longer term.

Consolidated Results of Operations

Three Months Ended June 30, 2007 and 2006

The following table sets forth, for the periods indicated, statement of operations items and the amount and percentage of increase or decrease of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our condensed consolidated financial statements and the notes thereto, which are included herein. Our results reflect the inclusion of acquisitions that occurred during the respective reporting periods. Refer to our most recent Annual Report on Form 10-K for the year ended December 31, 2006, filed March 16, 2007, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed May 8, 2007, and the notes to our condensed consolidated financial statements included herein for additional information regarding these acquisitions ($ in 000’s):

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			Three Months Ended June 30,
			2007						2006						Increase (Decrease)						% Increase (Decrease)
Statement of Operations Data:
Revenue
Resident fees
Independent Living				$	112,197					$	95,697					$	16,500						17.2	%
Assisted Living					196,847						146,234						50,613						34.6	%
Retirement Centers/CCRCs					147,578						25,911						121,667						469.6	%
Total resident fees					456,622						267,842						188,780						70.5	%
Management fees					1,788						585						1,203						205.6	%
Total revenue					458,410						268,427						189,983						70.8	%
Expense
Facility operating expense
Independent Living					61,980						52,649						9,331						17.7	%
Assisted Living					124,841						87,237						37,604						43.1	%
Retirement Centers/CCRCs					99,045						21,395						77,650						362.9	%
Total facility operating expense					285,866						161,281						124,585						77.2	%
General and administrative expense					35,758						23,125						12,633						54.6	%
Facility lease expense					67,176						46,623						20,553						44.1	%
Depreciation and amortization					82,471						30,947						51,524						166.5	%
Total operating expense					471,271						261,976						209,295						79.9	%
(Loss) income from operations					(12,861	)					6,451						(19,312	)					(299.4	%)
Interest income					1,563						625						938						150.1	%
Interest expense
Debt					(35,078	)					(25,544	)					(9,534	)					(37.3	%)
Amortization of deferred financing costs					(2,109	)					(1,335	)					(774	)					(58.0	%)
Change in fair value of derivatives and Amortization					17,619						519						17,100						3,294.8	%
Loss on extinguishment of debt					(803	)					—						(803	)					(100.0	%)
Equity in loss of unconsolidated ventures					(601	)					(469	)					(132	)					(28.1	%)
Other non-operating income					238						—						238						100.0	%
Loss before income taxes					(32,032	)					(19,753	)					(12,279	)					(62.2	%)
Benefit (provision) for income taxes					12,715						(273	)					12,988						4,757.5	%
Loss before minority interest					(19,317	)					(20,026	)					709						3.5	%
Minority interest					642						(233	)					875						375.5	%
Net loss				$	(18,675	)				$	(20,259	)				$	1,584						7.8	%
Selected Operating and Other Data:
Total number of facilities (at end of period)					548						453						95						21.0	%
Total units/beds operated(1)					51,616						34,346						17,270						50.3	%
Owned/leased facilities units/beds					47,421						33,045						14,376						43.5	%
Owned/leased facilities occupancy rate:
Period end					90.8	%					89.9	%					0.9	%					1.0	%
Weighted average					90.7	%					90.0	%					0.7	%					0.8	%
Average monthly revenue per unit/bed(2)				$	3,562					$	3,098					$	464						15.0	%

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			Three Months Ended June 30,
			2007						2006						Increase (Decrease)						% Increase (Decrease)
Selected Segment Operating and Other Data
Independent Living
Number of facilities (period end)					70						61						9						14.8	%
Total units/beds(1)					12,331						11,191						1,140						10.2	%
Occupancy rate:
Period end					92.9	%					92.4	%					0.5	%					0.5	%
Weighted average					92.7	%					92.5	%					0.2	%					0.2	%
Average monthly revenue per unit/bed(2)				$	3,256					$	3,021					$	235						7.8	%
Assisted Living
Number of facilities (period end)					409						373						36						9.7	%
Total units/beds(1)					21,083						17,687						3,396						19.2	%
Occupancy rate:
Period end					89.3	%					89.7	%					(0.4	%)					(0.4	%)
Weighted average					89.5	%					89.9	%					(0.4	%)					(0.4	%)
Average monthly revenue per unit/bed(2)				$	3,481					$	3,100					$	381						12.3	%
Retirement Centers/CCRCs
Number of facilities (period end)					48						12						36						300.0	%
Total units/beds(1)					14,007						4,167						9,840						236.1	%
Occupancy rate:
Period end					91.2	%					82.4	%					8.8	%					10.7	%
Weighted average					90.7	%					81.3	%					9.4	%					11.6	%
Average monthly revenue per unit/bed(2)				$	3,981					$	3,392					$	589						17.4	%
Management Services
Number of facilities (period end)					21						7						14						200.0	%
Total units/beds(1)					4,195						1,301						2,894						222.4	%
Occupancy rate:
Period end					90.6	%			93.4%								(2.8	%)					(3.0	%)
Weighted average					90.5	%			94.1%								(3.6	%)					(3.8	%)

(1) Total units/beds operated represent the total units/beds operated as of the end of the period. Occupancy rate is calculated by dividing total occupied units/beds by total units/beds operated as of the end of the period.

(2) Average monthly revenue per unit/bed represents the average of the total monthly revenues, excluding amortization of entrance fees, divided by occupied units/beds at the end of the period averaged over the respective period presented.

Resident Fees

The increase in resident fees was driven by revenue growth across all business segments. Resident fees increased over the prior-year second quarter mainly due to the number of acquisitions that the Company completed during the latter part of 2006 and the first half of 2007 whereby resident fees from these acquisitions are partially or entirely excluded from the prior period results. Including the effect of the historical results of the ARC facilities not included in our results of operations in the second quarter of 2006, same store revenues grew 7.8% over the second quarter of 2006.

Independent living revenue increased $16.5 million, or 17.2%, primarily due to an increase in the average monthly revenue per unit/bed on facilities we operated during both periods. Occupancy on these facilities remained fairly constant period over period. Revenue growth was also impacted by the inclusion of facilities acquired during 2006 and 2007 whereby resident fees from these acquisitions are partially or entirely excluded from the prior period results.

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Assisted living revenue increased $50.6 million, or 34.6%, primarily due to the 2006 and 2007 acquisitions. Additionally, resident fees increased as a result of an average monthly revenue per unit/bed increase on facilities we operated during both periods coupled with relatively constant occupancy as compared to the same period in the prior-year.

Retirement Centers/CCRCs revenue increased $121.7 million, or 469.6%, primarily due to the acquisition of ARC in the third quarter of 2006.

Management Fees

The increase in current quarter management fees over same period prior-year is mainly due to the acquisition of management contracts in conjunction with the ARC acquisition in the third quarter of 2006. The increase is partially offset by the termination of four management agreements during 2006.

Facility Operating Expense

Facility operating expense increased over the prior-year same period mainly due to the ARC acquisition as well as other 2006 and 2007 acquisitions. Additionally, there was an approximate $13.1 million increase – primarily due to salaries, wages and benefits – attributable to the 393 facilities we operated during both periods. The increase in expense was partially offset by cost savings from new and renegotiated vendor supply contracts.

Independent living operating expenses increased $9.3 million, or 17.7%, primarily due to the 2006 and 2007 acquisitions. The remaining increase is primarily due to an increase in operating expenses for facilities we operated during both periods, mainly for salaries, wages and benefits.

Assisted living operating expenses increased $37.6 million, or 43.1%, primarily due to increased salaries, wages and benefits resulting from the 2006 acquisitions and additional 2007 acquisitions.

Retirement Centers/CCRC operating expenses increased $77.7 million, or 362.9% primarily due to the 2006 acquisition of ARC.

General and Administrative Expense

General and administrative expenses increased $12.6 million, or 54.6%, primarily as a result of a $4.4 million increase of non-cash compensation expense in connection with restricted stock grants, an increase in salaries, wages and benefits, and an increase in the number of employees in connection with the 2006 acquisition of ARC. Additionally, general and administrative expense was positively impacted during the year by a receivable related to a collateral recovery from an insurance carrier recorded in the second quarter which was largely offset by other quarterly insurance activity. General and administrative expense as a percentage of total revenue, including revenue generated by the facilities we manage, was 4.8% and 5.6% for the three months ended June 30, 2007 and 2006, respectively, calculated as follows ($ in 000’s):

			Three Months Ended June 30,
			2007						2006
Resident fee revenues				$	456,622					$	267,842
Resident fee revenues under management					38,600						11,439
Total				$	495,222					$	279,281
General and administrative expenses (excluding merger and integration expenses and non-cash stock compensation expense totaling $11.8 and $7.4 million in 2007 and 2006, respectively)				$	23,934					$	15,681
General and administrative expenses as a percent of total revenues					4.8	%					5.6	%

Facility Lease Expense

Lease expense increased by $20.6 million, or 44.1%, primarily due to the 2007 and 2006 acquisitions slightly offset for the acquisition of certain facilities which were previously leased. Lease

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expense includes straight-line rent expense of $6.0 million and $5.2 million for the three months ended June 30, 2007 and 2006, respectively, and is partially offset by $1.1 million of additional deferred gain amortization for both respective time periods.

Depreciation and Amortization

Total depreciation and amortization expense increased by $51.5 million, or 166.5%, primarily due to the acquisition of ARC as well as other 2006 and 2007 acquisitions. The increase was partially offset by a decrease in expense for resident in-place lease intangibles which were fully depreciated at the end of 2006.

Interest Income

Interest income increased $0.9 million, or 150.1%, primarily due to our acquisition of ARC in July 2006.

Interest Expense

Interest expense decreased $6.8 million, or 25.8%, primarily due to the change in fair value of our interest rate swaps which was offset by interest expense on additional debt incurred in connection with our acquisitions. The effective portion of the change in fair value of derivatives was excluded from interest expense and was included in other comprehensive loss for the three months ended June 30, 2006. On October 1, 2006, we discontinued hedge accounting prospectively. Changes in fair value of derivatives are now included in interest expense.

Income Taxes

The Company’s effective tax rate for the three months ended June 30, 2007 and 2006 are 39.7% and 1.4%, respectively. The difference between the periods is primarily due to the ability to benefit book losses in the first two quarters of 2007 compared to the same period in 2006 as a result of the deferred tax liabilities generated in connection with the acquisitions of ARC and SALI.

Six Months Ended June 30, 2007 and 2006

The following table sets forth, for the periods indicated, statement of operations items and the amount and percentage of increase or decrease of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our condensed consolidated financial statements and the notes thereto, which are included herein. Our results reflect the inclusion of acquisitions that occurred during the respective reporting periods. Refer to our Annual Report on Form 10-K for the year ended December 31, 2006, filed March 16, 2007, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed May 8, 2007 and the notes to our condensed consolidated financial statements included herein for additional information regarding these acquisitions ($ in 000’s):

			For the Six Months Ended June 30,
			2007						2006						Increase (Decrease)						% Increase (Decrease)
Statement of Operations Data:
Revenue
Resident fees
Independent Living				$	219,307					$	186,404					$	32,903						17.7	%
Assisted Living					390,314						258,097						132,217						51.2	%
Retirement Centers/CCRCs					292,339						44,377						247,962						558.8	%
Total resident fees					901,960						488,878						413,082						84.5	%
Management fees					3,284						1,732						1,552						89.6	%

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			For the Six Months Ended June 30,
			2007						2006						Increase (Decrease)						% Increase (Decrease)
Total revenue					905,244						490,610						414,634						84.5	%
Expense
Facility operating expense
Independent Living					122,308						103,575						18,733						18.1	%
Assisted Living					246,454						158,834						87,620						55.2	%
Retirement Centers/CCRCs					197,913						35,817						162,096						452.6	%
Total facility operating expense					566,675						298,226						268,449						90.0	%
General and administrative expense					76,411						44,210						32,201						72.8	%
Facility lease expense					135,657						92,357						43,300						46.9	%
Depreciation and amortization					155,455						53,246						102,209						192.0	%
Total operating expense					934,198						488,039						446,159						91.4	%
(Loss) income from operations					(28,954	)					2,571						(31,525	)					(1,226.2	%)
Interest income					3,383						1,677						1,706						101.7	%
Interest expense
Debt					(68,530	)					(39,234	)					(29,296	)					(74.7	%)
Amortization of deferred financing costs					(3,727	)					(2,038	)					(1,689	)					(82.9	%)
Change in fair value of derivatives and amortization					12,838						418						12,420						2,971.3	%
Loss on extinguishment of debt					(803	)					(1,334	)					531						39.8	%
Equity in loss of unconsolidated ventures					(2,054	)					(637	)					(1,417	)					(222.4	%)
Other non-operating income					238						—						238						100.0	%
Loss before income taxes					(87,609	)					(38,577	)					(49,032	)					(127.1	%)
Benefit (provision) for income taxes					33,283						(659	)					33,942						5,150.5	%
Loss before minority interest					(54,326	)					(39,236	)					(15,090	)					(38.5	%)
Minority interest					511						(349	)					860						246.4	%
Net loss				$	(53,815	)				$	(39,585	)				$	(14,230	)					(35.9	%)
Selected Operating and Other Data:
Total number of facilities (at end of period)					548						453						95						21.0	%
Total units/beds operated(1)					51,616						34,346						17,270						50.3	%
Owned/leased facilities units/beds					47,421						33,045						14,376						43.5	%
Owned/leased facilities occupancy rate:
Period end					90.8	%					89.9	%					0.9	%					1.0	%
Weighted average					90.8	%					89.8	%					1.0	%					1.1	%
Average monthly revenue per unit/bed(2)				$	3,530					$	3,107					$	423						13.6	%
Selected Segment Operating and Other Data
Independent Living
Number of facilities (period end)					70						61						9						14.8	%
Total units/beds(1)					12,331						11,191						1,140						10.2	%
Occupancy rate:
Period end					92.9	%					92.4	%					0.5	%					0.5	%
Weighted average					92.6	%					92.7	%					(0.1	%)					(0.1	%)
Average monthly revenue per unit/bed(2)				$	3,215					$	2,976					$	239						8.0	%
Assisted Living
Number of facilities (period end)					409						373						36						9.7	%
Total units/beds(1)					21,083						17,687						3,396						19.2	%
Occupancy rate:

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			For the Six Months Ended June 30,
			2007						2006						Increase (Decrease)						% Increase (Decrease)
Period end					89.3	%					89.7	%					(0.4	%)					(0.4	%)
Weighted average					89.5	%					89.3	%					0.2	%					0.2	%
Average monthly revenue per unit/bed(2)				$	3,446					$	3,144					$	302						9.6	%
Retirement Centers/CCRCs
Number of facilities (period end)					48						12						36						300.0	%
Total units/beds(1)					14,007						4,167						9,840						236.1	%
Occupancy rate:
Period end					91.2	%					82.4	%					8.8	%					10.7	%
Weighted average					91.2	%					80.5	%					10.7	%					13.3	%
Average monthly revenue per unit/bed(2)				$	3,958					$	3,512					$	446						12.7	%
Management Services
Number of facilities (period end)					21						7						14						200.0	%
Total units/beds(1)					4,195						1,301						2,894						222.4	%
Occupancy rate:
Period end					90.6	%					93.4	%					(2.8	%)					(3.0	%)
Weighted average					90.6	%					92.8	%					(2.2	%)					(2.4	%)

(1) Total units/beds operated represent the total units/beds operated as of the end of the period. Occupancy rate is calculated by dividing total occupied units/beds by total units/beds operated as of the end of the period.

(2) Average monthly revenue per unit/bed represents the average of the total monthly revenues, excluding amortization of entrance fees, divided by occupied units/beds at the end of the period averaged over the respective period presented.

Resident Fees

The increase in resident fees was driven by revenue growth across all business segments. Resident fees increased over the prior-year same period mainly due to the number of acquisitions that the Company completed during the latter part of 2006 and the first half of 2007 whereby resident fees from these acquisitions are partially or entirely excluded from the prior period results. Additionally, resident fees increased approximately $39.2 million at the 367 facilities we operated during both periods, representing a 8.9% increase driven primarily by an increase of 8.2% in the average monthly revenue per unit/bed.

Independent living revenue increased $32.9 million, or 17.7%, primarily due to an increase in the average monthly revenue per unit/bed on facilities we operated during both periods. Occupancy on these facilities remained fairly constant period over period. Revenue growth was also impacted by the inclusion of facilities acquired during 2006 and 2007 whereby resident fees from these acquisitions are partially or entirely excluded from the prior period results.

Assisted living revenue increased $132.2 million, or 51.2%, primarily due to the 2006 and 2007 acquisitions. Additionally, resident fees increased as a result of an average monthly revenue per unit/bed increase coupled with relatively constant occupancy as compared to the same period in the prior-year.

Retirement Centers/CCRCs revenue increased $248.0 million, or 558.8%, primarily due to the acquisition of ARC in the third quarter of 2006.

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Management Fees

The increase in current quarter management fees over prior-year same period is mainly due to the acquisition of management contracts in conjunction with the ARC acquisition in the third quarter of 2006. The increase is partially offset by the termination of nine management agreements during 2006.

Facility Operating Expense

Approximately $19.1 million of our increased facility operating expense – primarily due to salaries, wages and benefits – was attributable to the 367 facilities we operated during both periods, partially offset by cost savings from new and renegotiated vendor supply contracts. The remaining increase was primarily due to the inclusion of the operations of 2006 acquisitions and additional 2007 acquisitions.

Independent living operating expenses increased $18.7 million, or 18.1%, primarily due to the 2006 acquisitions and additional 2007 acquisitions. The balance was primarily due to increases in salaries, wages and benefits.

Assisted living operating expenses increased $87.6 million, or 55.2%, primarily due to increased salaries, wages and benefits primarily as a result of the 2006 acquisitions and additional 2007 acquisitions.

Retirement Centers/CCRC operating expenses increased $162.1 million, or 452.6%, primarily due to the 2006 acquisition of ARC.

General and Administrative Expense

General and administrative expenses increased $32.2 million, or 72.8%, primarily as a result of a $12.2 million increase of non-cash compensation expense in connection with restricted stock grants (including $4.1 million of expense related to the accelerated vesting of restricted stock grants in conjunction with modifications of certain awards), an increase in salaries, wages and benefits, and an increase in the number of employees in connection with the 2006 acquisition of ARC. Additionally, general and administrative expense was positively impacted during the year by a receivable related to a collateral recovery from an insurance carrier recorded in the second quarter which was largely offset by other insurance activity. General and administrative expense as a percentage of total revenue, including revenue generated by the facilities we manage, was 5.2% and 6.0% for the six months ended June 30, 2007 and 2006, respectively, calculated as follows ($ in 000’s):

			Six Months Ended June 30,
			2007						2006
Resident fee revenues				$	901,960					$	488,878
Resident fee revenues under management					76,201						21,297
Total				$	978,161					$	510,175
General and administrative expenses (excluding merger and integration expenses and non-cash stock compensation expense totaling $25.8 and $13.5 million in 2007 and 2006, respectively)				$	50,642					$	30,742
General and administrative expenses as a percent of total revenues					5.2	%					6.0	%

Facility Lease Expense

Lease expense increased by $43.3 million, or 46.9%, primarily due to the ARC acquisition in July 2006 as well as other 2006 and 2007 acquisitions. The increase in expense is partially offset by the purchase of previously leased assets in the fourth quarter of 2006. Lease expense includes straight-line rent expense of $12.4 million and $10.5 million for the six months ended June 30, 2007 and 2006, respectively, and is partially offset by $2.2 million of additional deferred gain amortization for the same respective time periods.

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Depreciation and Amortization

Total depreciation and amortization expense increased by $102.2 million, or 192.0%, primarily due to the acquisition of ARC as well as other 2006 and 2007 acquisitions. The increase was partially offset by a decrease in expense for resident in-place lease intangibles which were fully depreciated at the end of 2006.

Interest Income

Interest income increased $1.7 million, or 101.7%, primarily due to the acquisition of ARC in July 2006.

Interest Expense

Interest expense increased $18.6 million, or 45.4%, primarily due to additional debt incurred in connection with our acquisitions which was partially offset by the change in fair value of our interest rate swaps for the six months ended June 30, 2007. The effective portion of the change in fair value of derivatives was excluded from interest expense and was included in other comprehensive loss for the six months ended June 30, 2006. On October 1, 2006, we discontinued hedge accounting prospectively. Changes in fair value of derivatives are now included in interest expense.

Income Taxes

The Company’s effective tax rate for the six months ended June 30, 2007 and 2006 are 38.0% and 1.7%, respectively. The difference between the periods is primarily due to the ability to benefit book losses in the first two quarters of 2007 compared to the same period in 2006 as a result of the deferred tax liabilities generated in connection with the acquisitions of ARC and SALI.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

Liquidity and Capital Resources

To date, we have financed our operations primarily with cash generated from operations and both short- and long-term borrowings. We financed our acquisitions with long-term borrowings, draws on our credit facility and proceeds from our equity offerings. The following is a summary of cash flow information for the six months ended June 30, 2007 and 2006 ($ in 000’s):

			Six Months Ended June 30,
			2007						2006
Cash provided by operating activities				$	84,910					$	23,239
Cash used in investing activities					(239,062	)					(526,732	)
Cash provided by financing activities					167,347						456,209
Net increase (decrease) in cash and cash equivalents					13,195						(47,284	)
Cash and cash equivalents at beginning of period					68,034						77,682
Cash and cash equivalents at end of period				$	81,229					$	30,398

We had $81.2 million of cash and cash equivalents at June 30, 2007, excluding cash and investments-restricted and lease security deposits of $116.6 million. Additionally, we had $32.7 million available under our credit facility and $9.3 million of unused capacity under our letter of credit facility.

The increase in cash provided by operating activities was primarily due to the acquisition of ARC in July 2006 and other 2006 and 2007 acquisitions as well as strength of the performance of the facilities we operated during both six month periods.

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The decrease in cash used in investing activities was primarily due to the size of prior year acquisitions funded as compared to the current year. This decrease was partially offset by an increase in additions to property, plant, equipment and leasehold intangibles at our existing facilities and those under development in conjunction with the Company’s current year focus on its expansion of its existing facilities as well as an increase in restricted cash in the current year based on timing of escrow deposits and the substitution of letters of credit for cash previously securing our obligations in the prior year.

The decrease in cash provided by financing activities was primarily due to an increase in repayments under the Company’s line of credit and borrowings, an increase in the payment of dividends and a decrease in debt proceeds during the year. Additionally, during the current quarter, the Company bought out a capital lease obligation in conjunction with the acquisition of the Freedom Square Portfolio real property.

We believe that cash on hand, together with funds from operations, other current assets, and existing credit facilities will satisfy our expected working capital, contractual obligations, capital expenditures, and investment requirements for at least the next 12 months and the foreseeable future.

At June 30, 2007, we had $1,886.4 million of debt outstanding, including capital lease obligations, excluding our line of credit, at a weighted-average interest rate of 6.94%, of which $17.3 million was due in the next 12 months.

At June 30, 2007, we had $208.9 million of negative working capital, which includes the classification of $194.7 million of refundable entrance fees and $29.5 million in tenant deposits as current liabilities as required by applicable accounting pronouncements. Based upon our historical operating experience, we anticipate that only approximately 9% to 12% of those entrance fee liabilities will actually come due, and be required to be settled in cash, during the next 12 months. We expect that any entrance fee liabilities due within the next 12 months will be fully offset by the proceeds generated by subsequent entrance fee sales. Entrance fee sales, net of refunds paid, provided $6.6 million of cash for the six months ended June 30, 2007.

Our liquidity requirements have historically arisen from, and we expect they will continue to arise from, working capital, general and administrative costs, debt service and lease payments, acquisition costs, employee compensation and related benefits, capital improvements and dividend payments. In the past, we have met our cash requirements for operations using cash flows from operating revenues, the receipt of resident fees and the receipt of management fees from third-party managed facilities. In addition to using cash flows from operating revenues, we use available funds from our indebtedness and long-term leasing of our facilities to meet our cash obligations. The primary use of our cash is for operating costs, which includes debt service and lease payments and capital expenditures. We currently estimate that our existing cash flows from operations, together with existing working capital and the proceeds of our credit facility will be sufficient to fund our short-term liquidity needs. For the year ending December 31, 2007, in addition to normal recurring capital expenditures and expenditures in connection with our expansion and development program, we expect to spend approximately $75.0 million for major capital projects and renovations at our existing and recently acquired facilities (including projects related to the implementation of our ancillary services program). We presently estimate that we will also spend approximately $25.0 million during the year ending December 31, 2007 for corporate branding, integration of corporate functions and enhancement of our infrastructure operations. The source of these funds is expected to be cash on hand and cash generated from operations and financings. We anticipate funding our expansion and development program through debt and lease financing. There can be no assurance that financing or refinancing will be available to us or available on acceptable terms.

We expect to continue to fund the growth of our business through cash flows from operations and cash flows from financing activities, such as equity offerings, and through the incurrence of additional indebtedness or leasing arrangements. We expect to continue to assess our financing alternatives periodically and access the capital markets opportunistically. If our existing resources are insufficient to satisfy our liquidity requirements, or if we enter into an acquisition or strategic arrangement with another company, we may need to sell additional equity or debt securities. Any such sale of additional

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equity securities will dilute the interests of our existing stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain this additional financing, we may be required to delay, reduce the scope of, or eliminate one or more aspects of our business development activities, which could harm the growth of our business. We may incur additional indebtedness or lease financing to fund such acquisitions. In addition, we may incur additional indebtedness or lease financing to fund future dividends.

In July 2007, the Company entered into a series of forward starting interest rate swaps in the aggregate notional amount of $553.1 million in anticipation of planned future financing transactions as well as the replacement of certain existing hedges that will be expiring.

Our actual liquidity and capital funding requirements depend on numerous factors, including our operating results, our ability to acquire new facilities, general economic conditions and the cost of capital.

Contractual Commitments

Significant ongoing commitments consist primarily of leases, debt, purchase commitments and certain other long-term liabilities. For a summary and complete presentation and description of our ongoing commitments and contractual obligations, see the ‘‘Contractual Commitments’’ section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Material changes in these commitments resulting from debt incurred during the six months ended June 30, 2007 are as follows ($ in 000’s):

			Total						2007						2008						2009						2010						2011						Thereafter
Long-term debt obligations				$	311,875					$	12,103					$	14,280					$	14,257					$	14,257					$	14,257					$	242,721

There have been no other material changes in our contractual commitments during the six months ended June 30, 2007.

Off-Balance Sheet Arrangements

The equity method of accounting has been applied in the accompanying financial statements with respect to our investment in unconsolidated ventures that are not considered variable interest entities we do not possess a controlling financial interest. We do not believe these off-balance sheet arrangements have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Non-GAAP Financial Measures

A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. In this report, we define and use the non-GAAP financial measures Adjusted EBITDA, Cash From Facility Operations and Facility Operating Income, as set forth below.

Adjusted EBITDA

Definition of Adjusted EBITDA

We define Adjusted EBITDA as follows:

Net income before:

	•	provision (benefit) for income taxes;

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	•	non-operating (income) loss items;

	•	depreciation and amortization;

	•	straight-line rent expense (income);

	•	amortization of deferred gain;

	•	amortization of deferred entrance fees; and

	•	non-cash compensation expense;

and including:

	•	entrance fee receipts and refunds.

Management’s Use of Adjusted EBITDA

We use Adjusted EBITDA to assess our overall financial and operating performance. We believe this non-GAAP measure, as we have defined it, is helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.

Adjusted EBITDA provides us with a measure of financial performance, independent of items that are beyond the control of management in the short-term, such as depreciation and amortization, straight-line rent expense (income), taxation and interest expense associated with our capital structure. This metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one of the metrics used by senior management and the board of directors to review the financial performance of the business on a monthly basis. Adjusted EBITDA is also used by research analysts and investors to evaluate the performance of and value companies in our industry.

Limitations of Adjusted EBITDA

Adjusted EBITDA has limitations as an analytical tool. It should not be viewed in isolation or as a substitute for GAAP measures of earnings. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA, and using this non-GAAP financial measure as compared to GAAP net income (loss), include:

	•	the cash portion of interest expense, income tax (benefit) provision and non-recurring charges related to gain (loss) on sale of facilities and extinguishment of debt activities generally represent charges (gains), which may significantly affect our financial results; and

	•	depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our facilities, which affects the services we provide to our residents and may be indicative of future needs for capital expenditures.

An investor or potential investor may find this item important in evaluating our performance, results of operations and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA is not an alternative to net income, income from operations or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. You should not rely on Adjusted EBITDA as a substitute for any such GAAP financial measure. We strongly urge you to review the reconciliation of Adjusted EBITDA to GAAP net income (loss), along with our consolidated financial statements included herein. We also strongly urge you to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA is not a

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measure of financial performance under GAAP and is susceptible to varying calculations, the Adjusted EBITDA measure, as presented in this report, may differ from and may not be comparable to similarly titled measures used by other companies.

The table below shows the reconciliation of net loss to Adjusted EBITDA for the three and six months ended June 30, 2007 and 2006 ($ in 000’s):

			Three Months Ended June 30,												Six Months Ended June 30,
			2007 (1)						2006(1)						2007(1)						2006(1)
Net loss				$	(18,675	)				$	(20,259	)				$	(53,815	)				$	(39,585	)
Minority interest					(642	)					233						(511	)					349
(Benefit) provision for income taxes					(12,715	)					273						(33,283	)					659
Equity in loss of unconsolidated ventures					601						469						2,054						637
Loss on extinguishment of debt					803						—						803						1,334
Other non-operating income					(238	)					—						(238	)					—
Interest expense:
Debt					27,953						18,963						53,192						30,493
Capitalized lease obligation					7,125						6,581						15,338						8,741
Amortization of deferred financing costs					2,109						1,335						3,727						2,038
Change in fair value of derivatives and amortization					(17,619	)					(519	)					(12,838	)					(418	)
Interest income					(1,563	)					(625	)					(3,383	)					(1,677	)
(Loss) income from operations					(12,861	)					6,451						(28,954	)					2,571
Depreciation and amortization					82,471						30,947						155,455						53,246
Straight-line lease expense					6,028						5,239						12,364						10,498
Amortization of deferred gain					(1,085	)					(1,086	)					(2,170	)					(2,173	)
Amortization of entrance fees					(4,641	)					(62	)					(8,900	)					(145	)
Non-cash compensation expense					8,192						3,755						19,012						6,773
Entrance fee receipts(2)					8,790						1,300						16,964						3,369
Entrance fee disbursements					(4,089	)					(308	)					(10,404	)					(1,011	)
Adjusted EBITDA				$	82,805					$	46,236					$	153,367					$	73,128

(1) The calculation of Adjusted EBITDA includes merger, integration, and certain other non-recurring expenses, as well as acquisition transition costs, totaling $3.9 million and $3.7 million for the three months ended June 30, 2007 and 2006, respectively and $7.0 million and $6.7 million for the six months ended June 30, 2007, respectively.

(2) Includes the receipt of refundable and nonrefundable entrance fees.

Cash From Facility Operations

Definition of Cash From Facility Operations

We define Cash From Facility Operations as follows:

Net cash provided by (used in) operating activities adjusted for:

	•	changes in operating assets and liabilities;

	•	deferred interest and fees added to principal;

	•	refundable entrance fees received;

	•	entrance fee refunds disbursed;

	•	other; and

	•	recurring capital expenditures.

Recurring capital expenditures include expenditures capitalized in accordance with GAAP that are funded from Cash From Facility Operations. Amounts excluded from recurring capital

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expenditures consist primarily of unusual or non-recurring capital items and facility purchases and/or major renovations that are funded using financing proceeds and/or proceeds from the sale of facilities that are held for sale.

Management’s Use of Cash From Facility Operations

We use Cash From Facility Operations to assess our overall liquidity. This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial and liquidity goals as well as to achieve optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.

This metric measures our liquidity based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Cash From Facility Operations is one of the metrics used by our senior management and board of directors (i) to review our ability to service our outstanding indebtedness (including our credit facilities and long-term leases), (ii) our ability to pay dividends to stockholders, (iii) our ability to make regular recurring capital expenditures to maintain and improve our facilities on a period-to-period basis, (iv) for planning purposes, including preparation of our annual budget and (v) in setting various covenants in our credit agreements. These agreements generally require us to escrow or spend a minimum of between $250 and $450 per unit/bed per year. Historically, we have spent in excess of these per unit/bed amounts; however, there is no assurance that we will have funds available to escrow or spend these per unit/bed amounts in the future. If we do not escrow or spend the required minimum annual amounts, we would be in default of the applicable debt or lease agreement which could trigger cross default provisions in our outstanding indebtedness and lease arrangements.

Limitations of Cash From Facility Operations

Cash From Facility Operations has limitations as an analytical tool. It should not be viewed in isolation or as a substitute for GAAP measures of cash flow from operations. Cash From Facility Operations does not represent cash available for dividends or discretionary expenditures, since we may have mandatory debt service requirements or other non-discretionary expenditures not reflected in the measure. Material limitations in making the adjustment to our cash flow from operations to calculate Cash From Facility Operations, and using this non-GAAP financial measure as compared to GAAP operating cash flows, include:

	•	the cash portion of interest expense, income tax (benefit) provision and non-recurring charges related to gain (loss) on sale of facilities and extinguishment of debt activities generally represent charges (gains), which may significantly affect our financial results; and

	•	depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our facilities, which affects the services we provide to our residents and may be indicative of future needs for capital expenditures.

We believe Cash From Facility Operations is useful to investors because it assists their ability to meaningfully evaluate (1) our ability to service our outstanding indebtedness, including our credit facilities and capital and financing leases, (2) our ability to pay dividends to stockholders and (3) our ability to make regular recurring capital expenditures to maintain and improve our facilities.

Cash From Facility Operations is not an alternative to cash flows provided by or used in operations as calculated and presented in accordance with GAAP. You should not rely on Cash From Facility Operations as a substitute for any such GAAP financial measure. We strongly urge you to review the reconciliation of Cash From Facility Operations to GAAP net cash provided by (used in) operating activities, along with our consolidated financial statements included herein. We also strongly urge you to not rely on any single financial measure to evaluate our business. In addition, because Cash From Facility Operations is not a measure of financial performance under GAAP and is susceptible to varying calculations, the Cash From Facility Operations measure, as presented in this report, may differ from and may not be comparable to similarly titled measures used by other companies.

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The table below shows the reconciliation of net cash provided by operating activities to Cash From Facility Operations for the three and six months ended June 30, 2007 and 2006 ($ in 000’s)

			Three Months Ended June 30,												Six Months Ended June 30,
			2007(1)						2006(1)						2007(1)						2006(1)
Net cash provided by operating activities				$	56,082					$	11,120					$	84,910					$	23,239
Changes in operating assets and liabilities					(6,797	)					9,097						5,342						9,928
Refundable entrance fees received(2)					4,064						1,135						8,322						2,756
Entrance fee refunds disbursed					(4,089	)					(308	)					(10,404	)					(1,011	)
Recurring capital expenditures, net					(7,049	)					(5,299	)					(13,274	)					(7,360	)
Reimbursement of operating expenses and other					812						1,350						1,942						2,850
Cash From Facility Operations				$	43,023					$	17,095					$	76,838					$	30,402

(1) The calculation of Cash From Facility Operations includes merger, integration and certain other non-recurring expenses, as well as acquisition transition costs, totaling $3.9 million and $3.7 million for the three months ended June 30, 2007 and 2006, respectively and $7.0 million and $6.7 million for the six months ended June 30, 2007 and 2006, respectively.

(2) Total entrance fee receipts for the three months ended June 30, 2007 and 2006 were $8.8 million and $1.3 million, respectively, including $4.7 million and $0.2 million, respectively, of nonrefundable entrance fee receipts included in net cash provided by operating activities. Total entrance fee receipts for the six months ended June 30, 2007 and 2006 were $17.0 million and $3.4 million, respectively, including $8.6 million and $0.6 million, respectively, of nonrefundable entrance fee receipts included in net cash provided by operating activities.

Facility Operating Income

Definition of Facility Operating Income

We define Facility Operating Income as follows:

Net income before:

	•	provision (benefit) for income taxes;

	•	non-operating (income) loss items;

	•	depreciation and amortization;

	•	facility lease expense;

	•	general and administrative expense, including non-cash stock compensation expense;

	•	amortization of deferred entrance fee revenue; and

	•	management fees.

Management’s Use of Facility Operating Income

We use Facility Operating Income to assess our facility operating performance. We believe this non-GAAP measure, as we have defined it, is helpful in identifying trends in our day-to-day facility performance because the items excluded have little or no significance on our day-to-day facility operations. This measure provides an assessment of revenue generation and expense management and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as to achieve optimal facility financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.

Facility Operating Income provides us with a measure of facility financial performance, independent of items that are beyond the control of management in the short-term, such as

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depreciation and amortization, lease expense, taxation and interest expense associated with our capital structure. This metric measures our facility financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Facility Operating Income is one of the metrics used by our senior management and board of directors to review the financial performance of the business on a monthly basis. Facility Operating Income is also used by research analysts and investors to evaluate the performance of and value companies in our industry by investors, lenders and lessors. In addition, Facility Operating Income is a common measure used in the industry to value the acquisition or sales price of facilities and is used as a measure of the returns expected to be generated by a facility.

A number of our debt and lease agreements contain covenants measuring Facility Operating Income to gauge debt or lease coverages. The debt or lease coverage covenants are generally calculated as facility net operating income (defined as total operating revenue less operating expenses, all as determined on an accrual basis in accordance with GAAP). For purposes of the coverage calculation, the lender or lessor will further require a pro forma adjustment to facility operating income to include a management fee (generally 4% to 5% of operating revenue) and an annual capital reserve (generally $250 to $450 per unit/bed). An investor or potential investor may find this item important in evaluating our performance, results of operations and financial position, particularly on a facility-by-facility basis.

Limitations of Facility Operating Income

Facility Operating Income has limitations as an analytical tool. It should not be viewed in isolation or as a substitute for GAAP measures of earnings. Material limitations in making the adjustments to our earnings to calculate Facility Operating Income, and using this non-GAAP financial measure as compared to GAAP net income (loss), include:

	•	interest expense, income tax (benefit) provision and non-recurring charges related to gain (loss) on sale of facilities and extinguishment of debt activities generally represent charges (gains), which may significantly affect our financial results; and

	•	depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our facilities, which affects the services we provide to our residents and may be indicative of future needs for capital expenditures.

An investor or potential investor may find this item important in evaluating our performance, results of operations and financial position on a facility-by-facility basis. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. Facility Operating Income is not an alternative to net income, income from operations or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. You should not rely on Facility Operating Income as a substitute for any such GAAP financial measure. We strongly urge you to review the reconciliation of Facility Operating Income to GAAP net income (loss), along with our consolidated financial statements included herein. We also strongly urge you to not rely on any single financial measure to evaluate our business. In addition, because Facility Operating Income is not a measure of financial perf ormance under GAAP and is susceptible to varying calculations, the Facility Operating Income measure, as presented in this report, may differ from and may not be comparable to similarly titled measures used by other companies.

The table below shows the reconciliation of net loss to Facility Operating Income for the three and six months ended June 30, 2007 and 2006 ($ in 000’s):

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			Three Months Ended June 30,												Six Months Ended June 30,
			2007						2006						2007						2006
Net loss				$	(18,675	)				$	(20,259	)				$	(53,815	)				$	(39,585	)
(Benefit) provision for income taxes					(12,715	)					273						(33,283	)					659
Minority interest					(642	)					233						(511	)					349
Equity in loss of unconsolidated ventures					601						469						2,054						637
Loss on extinguishment of debt					803						—						803						1,334
Other non-operating income					(238	)					—						(238	)					—
Interest expense:
Debt					27,953						18,963						53,192						30,493
Capitalized lease obligation					7,125						6,581						15,338						8,741
Amortization of deferred financing costs					2,109						1,335						3,727						2,038
Change in fair value of derivatives and amortization					(17,619	)					(519	)					(12,838	)					(418	)
Interest income					(1,563	)					(625	)					(3,383	)					(1,677	)
(Loss) income from operations					(12,861	)					6,451						(28,954	)					2,571
Depreciation and amortization					82,471						30,947						155,455						53,246
Facility lease expense					67,176						46,623						135,657						92,357
General and administrative (including non-cash stock compensation expense)					35,758						23,125						76,411						44,210
Amortization of entrance fees					(4,641	)					(62	)					(8,900	)					(145	)
Management fees					(1,788	)					(585	)					(3,284	)					(1,732	)
Facility Operating Income				$	166,115					$	106,499					$	326,385					$	190,507

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risks from changes in interest rates charged on our credit facilities used to finance acquisitions on an interim basis, floating-rate indebtedness and lease payments subject to floating rates. The impact on earnings and the value of our long-term debt and lease payments are subject to change as a result of movements in market rates and prices. As of June 30, 2007, we had approximately $293.4 million of long-term fixed rate debt, $1,279.0 million of long-term variable-rate debt, and $314.1 million of capital lease obligations. As of June 30, 2007, our total fixed-rate debt and variable-rate debt outstanding had weighted-average interest rates of 6.94%.

We do not expect changes in interest rates to have a material effect on earnings or cash flows since approximately 96% of our debt, excluding credit facilities, and lease payments either have fixed rates or variable rates that are subject to swap or interest rate cap agreements with major financial institutions to manage our risk. As of June 30, 2007, a 100 basis point change in short-term interest rates would affect our operating cash flow no more than $1.8 million per annum.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Co-Chief Executive Officers and Chief Financial Officer each concluded that, as of June 30, 2007, our disclosure controls and procedures were effective.

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Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

The information contained in Note 8 to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Form 10-Q is incorporated herein by this reference.

Item 1A.    Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds    

The following table contains information regarding purchases of our common stock made during the quarter ended June 30, 2007 by or on behalf of the Company or any ‘‘affiliated purchaser,’’ as defined by Rule 10b-18(a)(3) of the Exchange Act:

Period			Total Number of Shares Purchased(1)						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
04/01/07 – 04/30/07					—					$	—						—						—
05/01/07 – 05/31/07					—						—						—						—
06/01/07 – 06/30/07					997						46.69						—						—
Total					997						46.69						—						—

(1) Consists entirely of shares withheld to satisfy tax liabilities due upon the vesting of restricted stock.

Item 4.    Submission of Matters to a Vote of Security Holders

(a)    We held our annual meeting of stockholders on June 5, 2007.

(b)    William B. Doniger, Jackie M. Clegg and Jeffrey G. Edwards were reelected as Class II directors at the annual meeting, to hold office for a term of three years and until their respective successors are duly elected and qualified. The terms of office of the following directors continued after the annual meeting: Wesley R. Edens, Frank M. Bumstead, Jeffrey R. Leeds, and Dr. Samuel Waxman.

(c)    The following votes were taken in connection with the election of directors at the annual meeting:

Director Nominees			Votes For						Withhold Authority
William B. Doniger					98,773,515						8,418
Jackie M. Clegg					98,320,345						461,588
Jeffrey G. Edwards					98,773,358						8,575

The proposal to ratify the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2007 fiscal year was approved. The following

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votes were taken in connection with the proposal:

Proposal			Votes For						Votes Against						Abstentions						Broker Non-Votes
Ratification of the Audit Committee’s appointment of Ernst & Young LLP as independent registered public accounting firm for fiscal 2007					98,104,125						503,823						173,985						—

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Item 6.    Exhibits

Exhibit No.						Description
	3	.1				Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2006).
	3	.2				Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (Amendment No. 2) (No. 333-127372) filed on October 11, 2005).
	4	.1				Form of Certificate for common stock (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 3) (No. 333-127372) filed on November 7, 2005).
	4	.2				Stockholders Agreement, dated as of November 28, 2005, by and among Brookdale Senior Living Inc., FIT-ALT Investor LLC, Fortress Brookdale Acquisition LLC, Fortress Investment Trust II and Health Partners (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on March 31, 2006).
	4	.3				Amendment No. 1 to Stockholders Agreement, dated as of July 26, 2006, by and among Brookdale Senior Living Inc., FIT-ALT Investor LLC, Fortress Registered Investment Trust, Fortress Brookdale Investment Fund LLC, FRIT Holdings LLC, and FIT Holdings LLC (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2006).
	10	.1				Brookdale Senior Living Inc. Omnibus Stock Incentive Plan, as amended and restated effective June 12, 2007.
	10	.2				Form of Restricted Share Agreement under the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (Three Year Time-Vesting; No Dividends).
	10	.3				Form of Restricted Share Agreement under the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (Five Year Time-Vesting; With Dividends).
	10	.4				Form of Restricted Share Agreement under the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (Four Year Performance/Time-Vesting; With Dividends).
	10	.5				Form of Restricted Share Agreement under the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (Four Year Performance/Time-Vesting; No Dividends).
	31	.1				Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2				Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.3				Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32					Certification of Chief Executive Officers and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BROOKDALE SENIOR LIVING INC.

(Registrant)

By:    /s/ Mark W. Ohlendorf                                       

Name:    Mark W. Ohlendorf
Title:       Duly authorized officer and
                Chief Financial Officer

Date:       August 8, 2007

By:    /s/ Bryan D. Richardson                                    

Name:     Bryan D. Richardson
Title:       Duly authorized officer and
                Chief Accounting Officer

Date:       August 8, 2007

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EX-10.1

EXHIBIT 10.1

BROOKDALE SENIOR LIVING INC.
OMNIBUS STOCK INCENTIVE PLAN,
As Amended and Restated June 12, 2007

Section 1.    Purpose of Plan.

The name of this plan is the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (as amended from time to time, the ‘‘Plan’’). The Plan was adopted by the Board (as hereinafter defined) on October 14, 2005 and approved by the stockholders of the Company (as hereinafter defined) on October 14, 2005, prior to the initial public offering of Company common stock, was subsequently amended by the Board and approved by the stockholders on May 12, 2006, and amended and restated by the Board on June 12, 2007. The purpose of the Plan is to provide additional incentive to selected management employees, directors and Consultants (as hereinafter defined) of the Company or its Subsidiaries (as hereinafter defined) whose contributions are essential to the growth and success of the Company’s business, in order to strengthen the commitment of such persons to the Company and its Subsidiaries, motivate suc h persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts shall result in the long-term growth and profitability of the Company. The Plan is also designed to encourage stock ownership by such persons, thereby aligning their interest with the interests of the Company’s stockholders, and to permit the payment of compensation that qualifies as performance-based compensation under Section 162(m) of the Code (as hereinafter defined). To accomplish such purposes, the Plan provides that the Company may grant (a) Options, (b) Stock Appreciation Rights, (c) awards of Restricted Shares, Deferred Shares, Performance Shares, unrestricted Shares or Other Stock-Based Awards, or (d) any combination of the foregoing. Notwithstanding any provision of the Plan, to the extent that any Award (as hereinafter defined) would be subject to Section 409A of the Code, no such Award may be granted if it would fail to comply with the requirements set forth in Section 409A of the Code and any regulations or guidance promulgated thereunder.

Section 2.    Definitions.

For purposes of the Plan, the following terms shall be defined as set forth below:

(a)    ‘‘Administrator’’ means the Board, or if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 3 hereof.

(b)    ‘‘Affiliate’’ means an affiliate of the Company (or other referenced entity, as the case may be) as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

(c)    ‘‘Award’’ means any Option, Stock Appreciation Right, Restricted Share, Deferred Share, Performance Share, unrestricted Share or Other Stock-Based Award granted under the Plan.

(d)    ‘‘Award Document’’ means any written agreement, contract or other instrument or document evidencing an Award.

(e)    ‘‘Beneficial Owner’’ (or any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.

(f)    ‘‘Board’’ means the Board of Directors of the Company.

(g)    ‘‘Cause’’ shall have the meaning set forth in the Participant’s employment or other agreement with the Company, any Subsidiary or any Affiliate, provided that if the Participant is not a party to any such employment or other agreement or such employment or other agreement does not contain a definition of Cause, then Cause shall mean (i) the continued failure by the Participant to substantially perform his or her duties and obligations to the Company or any Subsidiary or Affiliate, including without limitation, repeated refusal to follow the reasonable directions of his or her employer, intentional violation of law in the course of performance of the duties of Participant’s employment with the Company or any Subsidiary or Affiliate, engagement in misconduct which is

materially injurious to the Company or any Subsidiary or Affiliate, repeated absences from work without a reasonable excuse, or intoxication with alcohol or illegal drugs while on the Company’s or any Subsidiary’s or Affiliate’s premises during regular business hours (other than any such failure resulting from his or her incapacity due to physical or mental illness); (ii) fraud or material dishonesty against the Company or any Subsidiary or Affiliate; or (iii) a conviction or plea of guilty or nolo contendere for the commission of a felony or a crime involving material dishonesty. Determination of Cause shall be made by the Administrator in its sole discretion.

(h)    ‘‘Change in Capitalization’’ means any (i) merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate transaction or event, (ii) dividend (whether in the form of cash, Common Stock, or other property), stock split or reverse stock split, (iii) combination or exchange of shares, (iv) other change in corporate structure or (v) declaration of a special dividend (including a cash dividend) or other distribution, which, in any such case, the Administrator determines, in its sole discretion, affects the Shares such that an adjustment pursuant to Section 5 hereof is appropriate.

(i)    ‘‘Change in Control’’ shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:

(1)    any Person other than any Permitted Transferee is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its affiliates as defined in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended, the ‘‘Exchange Act’’) representing 50% or more of the combined voting power of the Company’s then outstanding securities; or

(2)    there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the Board of the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the ultimate parent thereof; or

(3)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than (i) a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions as their ownership of the Company immediately prior to such sale or (ii) a sale or disposition of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or, if such entity is a su bsidiary, the ultimate parent thereof.

Notwithstanding the foregoing, a ‘‘Change in Control’’ shall not be deemed to have occurred by virtue of (i) an Initial Public Offering or (ii) the consummation of any transaction or series of integrated transactions immediately following which the holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

(j)    ‘‘Code’’ means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

(k)    ‘‘Committee’’ means any committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee shall be composed entirely of individuals who meet the qualifications of an ‘‘outside director’’ within the meaning of Section 162(m) of the Code, a ‘‘non-employee director’’ within the meaning of Rule 16b-3 under the Exchange Act and any other qualifications required by the applicable stock exchange on which the Common Stock is traded. If at any time or to any extent the Board shall not administer the Plan, then

the functions of the Administrator specified in the Plan shall be exercised by the Committee. Except as otherwise provided in the Company’s Certificate of Incorporation or Bylaws, as amended from time to time, any action of the Committee with respect to the administration of the Plan shall be taken by a majority vote at a meeting at which a quorum is duly constituted or unanimous written consent of the Committee’s members.

(l)    ‘‘Common Stock’’ means the common stock, par value $.01 per share, of the Company.

(m)    ‘‘Company’’ means Brookdale Senior Living Inc. (or any successor corporation).

(n)    ‘‘Consultant’’ means a consultant or advisor who is a natural person, engaged to render bona fide services to the Company or any Subsidiary.

(o)    ‘‘Deferred Shares’’ means the right to receive Shares at the end of a specified deferral period granted pursuant to Section 9 below.

(p)    ‘‘Disability’’ means that a Participant (i) as determined by the Administrator in its sole discretion, is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company or an Affiliate of the Company.

(q)    ‘‘Eligible Recipient’’ means a key employee, director or Consultant of the Company or any Subsidiary who has been selected as an eligible participant by the Administrator.

(r)    ‘‘Exchange Act’’ shall mean the Securities Exchange Act of 1934, as amended from time to time.

(s)    ‘‘Exercise Price’’ means the per share price at which a holder of an award granted hereunder may purchase the Shares issuable upon exercise of such award.

(t)    ‘‘Fair Market Value’’ as of a particular date shall mean the fair market value of a share of Common Stock as determined by the Administrator in its sole discretion; provided, however, that (i) if the Common Stock is admitted to trading on a national securities exchange, fair market value of a share of Common Stock on any date shall be the closing sale price reported for such share on such exchange on such date, or, if no sale was reported on such date, the closing sale price reported for such share on such exchange on the last day preceding such date on which a sale was reported, (ii) if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation (‘‘Nasdaq’’) System or other comparable quotation system and has been designated as a National Market System (‘‘NMS’’) security, fair market value of a share of Common St ock on any date shall be the closing sale price reported for such share on such system on such date, or, if no sale was reported on such date, the closing sale price reported for such share on such system on the last day preceding such date on which a sale was reported, or (iii) if the Common Stock is admitted to quotation on the Nasdaq System but has not been designated as an NMS security, fair market value of a share of Common Stock on any date shall be the average of the highest bid and lowest asked prices of such share on such date, if both bid and ask prices were reported on such date, or, if not, on the last date preceding such date on which both bid and ask prices were reported.

(u)    ‘‘Incentive Stock Option’’ shall mean an Option that is an ‘‘incentive stock option’’ within the meaning of Section 422 of the Code, or any successor provision, and that is designated in the applicable Award Document as an Incentive Stock Option.

(v)    ‘‘Initial Public Offering’’ shall mean the date of the initial public offering of the Company.

(w)    ‘‘Non-Employee Director’’ means a director of the Company who is not (i) an officer or employee of the Company or of any Subsidiary or (ii) the Beneficial Owner, whether directly or indirectly, of ten percent (10%) or more of the Common Stock.

(x)    ‘‘Nonqualified Stock Option’’ means any Option that is not an Incentive Stock Option, including any Option that provides (as of the time such Option is granted) that it shall not be treated as an Incentive Stock Option.

(y)    ‘‘Option’’ means an option to purchase shares of Common Stock granted pursuant to Section 7 hereof.

(z)    ‘‘Other Stock-Based Awards’’ means a right or other interest granted to a Participant under the Plan that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Common Stock, including but not limited to restricted stock units, dividend equivalents or performance units, each of which may be subject to the attainment of Performance Goals or a period of continued employment or other terms or conditions as permitted under the Plan.

(aa)    ‘‘Participant’’ means (i) any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority in Section 3 below, to receive grants of Options, Stock Appreciation Rights, awards of Restricted Shares, awards of unrestricted Shares, Deferred Shares, Performance Shares, Other Stock-Based Awards or any combination of the foregoing, and upon his or her death, his or her successors, heirs, executors and administrators, as the case may be, and (ii) any Non-Employee Director who is eligible to receive Shares pursuant to Section 11 below.

(bb)    ‘‘Performance Goals’’ means performance goals based on one or more of the following criteria: (i) earnings including operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, or extraordinary or special items or book value per share (which may exclude nonrecurring items); (ii) pre-tax income or after-tax income; (iii) earnings per Share (basic or diluted); (iv) operating profit; (v) revenue, revenue growth or rate of revenue growth; (vi) return on assets (gross or net), return on investment, return on capital, or return on equity; (vii) returns on sales or revenues; (viii) operating expenses; (ix) stock price appreciation; (x) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xi) implementation or completion of critical projects or processes; (xii) economic value created; (xiii) cumulative earnings per share growth; (xiv) operating margin or profit margin; (xv) common stock price or total stockholder return; (xvi) cost targets, reductions and savings, productivity and efficiencies; (xvii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (xviii) personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions; and (xix) any combination of, or a specified incr ease in, any of the foregoing. Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company, a Subsidiary or Affiliate, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The Performance Goals may include a threshold level of performance below which no payment shall be made (or no vesting shall occur), levels of performance at which specified payments shall be made (or specified vesting shall occur), and a maximum level of performance above which no additional payment shall be made (or at which full vesting shall occur). Each of the foregoing Performance Goals shall be determined in accordance with generally accepted accounting principles and sh all be subject to certification by the Committee; provided that the Committee shall have the authority to make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, in response to changes in applicable laws or regulations, or to account for

items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles.

(cc)    ‘‘Performance Shares’’ means Shares that are subject to restrictions based upon the attainment of specified performance objectives granted pursuant to Section 9 below.

(dd)    ‘‘Permitted Transferee’’ means, (a) any Affiliate (a ‘‘FIG Affiliate’’) of Fortress Investment Group LLC, a Delaware limited liability company (‘‘FIG’’), (b) any managing director, general partner, director, limited partner, officer or employee of any FIG Affiliate, (c) any investment fund or other entity managed directly or indirectly by FIG or any of its Affiliates (a ‘‘FIG Fund’’), or (d) any general partner, limited partner, managing member or person occupying a similar role of or with respect to any FIG Fund.

(ee)    ‘‘Person’’ shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(ff)    ‘‘Restricted Shares’’ means Shares subject to certain restrictions granted pursuant to Section 9 below.

(gg)    ‘‘Retirement’’ means a termination of a Participant’s employment, other than for Cause, on or after attainment of age 65.

(hh)    ‘‘Shares’’ means shares of Common Stock reserved for issuance under the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a merger, consolidation or other reorganization) security.

(ii)    ‘‘Stock’’ means Common Stock.

(jj)    ‘‘Stock Appreciation Right’’ means the right pursuant to an award granted under Section 8 below to receive an amount equal to the excess, if any, of (i) the aggregate Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the Shares covered by such right or such portion thereof, over (ii) the aggregate Exercise Price of such right or such portion thereof.

(kk)    ‘‘Subsidiary,’’ when used to determine whether an individual service provider can be an Eligible Recipient of an Award hereunder, means any corporation or other entity in a chain of corporations or other entities (beginning with the Company and ending with the Subsidiary to which the service provider provides direct services on the date of grant of the Award) in which each corporation or other entity has a ‘‘controlling interest’’ in another corporation or other entity in the chain and as to which the Company is consequently an ‘‘eligible issuer of service recipient stock’’ (within the meaning of Internal Revenue Regulation Section 1.409A-1(b)(5)(iii)(E)). An additional requirement applies when ‘‘Subsidiary’’ is used to determine whether an employee can be an Eligible Recipient of an Incentive Stock Option Award: ‘‘Subsidiary&rs quo;’ then is also required to be a corporation in an unbroken chain of corporations beginning with the Company, with each of the corporations (other than the last corporation in the unbroken chain) owning stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain at the time of the granting of the Incentive Stock Option Award.

Section 3.    Administration.

(a)    The Plan shall be administered by the Administrator and shall be administered in accordance with the requirements of Section 162(m) of the Code (but only to the extent necessary and desirable to maintain qualification of awards under the Plan intended to be qualified under Section 162(m) of the Code) and, to the extent applicable, Rule 16b-3 under the Exchange Act (‘‘Rule 16b-3’’).

(b)    Pursuant to the terms of the Plan, the Administrator, subject, in the case of any Committee, to any restrictions on the authority delegated to it by the Board, shall have the power and authority, without limitation:

(1)    to select those Eligible Recipients who shall be Participants;

(2)    to determine whether and to what extent Stock Options, Stock Appreciation Rights, awards of Restricted Shares, Deferred Shares, Performance Shares, Other Stock-Based Awards or a combination of any of the foregoing, are to be granted hereunder to Participants;

(3)    to determine whether Options are intended to be Incentive Stock Options or Nonqualified Stock Options, provided, however, that Incentive Stock Options can only be granted to employees of the Company or any Subsidiary (within the meaning of Sections 424(e) and (f) of the Code);

(4)    to determine the number of Shares to be covered by each award granted hereunder;

(5)    to determine the terms and conditions, subject to the requirements of Section 409A of the Code and not inconsistent with the terms of the Plan, of each Award granted hereunder (including, but not limited to, (i) the restrictions applicable to awards of Restricted Shares or Deferred Shares and the conditions under which restrictions applicable to such awards of Restricted Shares or Deferred Shares shall lapse, (ii) the performance goals and periods applicable to awards of Restricted Shares, Deferred Shares and Performance Shares, provided that performance goals shall be determined no later than such time as is required to ensure that any underlying Award which is intended to comply with the requirements of Section 162(m) of the Code so complies, (iii) the Exercise Price, (iv) the vesting schedule applicable to Awards, (v) the number of Shares subject to Awards and (vi) any amendments to the terms and conditions of outstanding Awards, in cluding, but not limited to reducing the Exercise Price of such Awards, extending the exercise period of such Awards and accelerating the vesting schedule of such Awards);

(6)    to determine the terms and conditions, subject to the requirements of Section 409A of the Code and not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Stock Options, Stock Appreciation Rights, awards of Restricted Shares, Deferred Shares or Performance Shares or any combination of the foregoing granted hereunder;

(7)    to determine the Fair Market Value;

(8)    to determine the duration and purpose of leaves of absence which may be granted to a Participant without constituting termination of their employment for purposes of Nonqualified Stock Options and Incentive Stock Options granted under the Plan;

(9)    to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and

(10)    to construe and interpret the terms and provisions of the Plan and any award issued under the Plan (and any Award Document relating thereto), and to otherwise supervise the administration of the Plan and to exercise all powers and authorities either specifically granted under the Plan or necessary and advisable in the administration of the Plan.

(c)    Notwithstanding paragraph (b) of this Section 3, (i) the automatic, nondiscretionary grants of Shares shall be made to Non-Employee Directors pursuant to and in accordance with the terms of Section 11 below, (ii) neither the Board, the Committee nor their respective delegates shall have the authority to reprice (or cancel and regrant) any Option or, if applicable, other Award at a lower exercise, base or purchase price without first obtaining the approval of the Company’s stockholders, and (iii) neither the Board, the Committee nor their respective delegates shall have the authority to take any action that would cause any Award granted under the Plan to fail to comply with Section 409A of the Code and any regulations or guidance promulgated thereunder.

(d)    All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants. No member of the Board or the Committee, nor any officer or employee of the Company or any Subsidiary acting

on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company and of any Subsidiary acting on their behalf shall, to the maximum extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.

Section 4.    Shares Reserved for Issuance Under the Plan.

Subject to Section 5 hereof, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is 4,500,000 shares, as increased on the first day of each fiscal year beginning in calendar year 2006 by a number of shares equal to the lesser of (1) 400,000 shares of Common Stock and (2) 2% of the number of outstanding shares of Common Stock on the last day of the immediately preceding fiscal year. The share reserve of 4,500,000 shares (to which the annual increases shall apply) includes a 2,500,000 share increase authorized by the Board on May 12, 2006 and approved by the Company’s stockholders on May 12, 2006. All such shares of Common Stock that are available for the grant of Awards under the Plan may be granted as Incentive Stock Options. From and after such time as the Plan is subject to Code Section 162(m), the aggregate Awards granted during any fiscal year to any single individual who is likely to be a ‘‘covered employee’’ as defined under Code Section 162(m) shall not exceed (i) 400,000 shares subject to Options or Stock Appreciation Rights or (ii) 400,000 shares subject to Restricted Stock, Deferred Shares, unrestricted Shares or Other Stock-Based Awards. Determinations made in respect of the limitation set forth in the preceding sentence shall be made in a manner consistent with Section 162(m) of the Code.

Shares issued under the Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any Shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Participant, the Shares of stock with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan.

Section 5.    Equitable Adjustments.

In the event of any Change in Capitalization, an equitable substitution or proportionate adjustment shall be made, in each case, as may be determined by the Administrator, in its sole discretion, in (i) the aggregate number of shares of Common Stock reserved for issuance under the Plan and the maximum number of Shares that may be subject to Awards granted to any Participant in any calendar or fiscal year, (ii) the kind, number and Exercise Price relating to outstanding Options and Stock Appreciation Rights granted under the Plan, (iii) Performance Goals and (iv) the kind, number and purchase price of Shares subject to outstanding awards of Restricted Shares, Deferred Shares, Performance Shares or Other Stock-Based Awards granted under the Plan, in each case as may be determined by the Administrator, in its sole discretion, provided, however, that any fractional shares resulting from the adjustment shall be eliminated. Such other equitable substitutions or adjust ments shall be made as may be determined by the Administrator, in its sole discretion. Without limiting the generality of the foregoing, in connection with a Change in Capitalization, the Administrator may provide, in its sole discretion, for the cancellation of any outstanding award granted hereunder in exchange for payment in cash or other property of the aggregate Fair Market Value of the Shares covered by such award, reduced by the aggregate Exercise Price or purchase price thereof, if any. Notwithstanding the foregoing, with respect to Incentive Stock Options, any adjustment shall be made in accordance with the provisions of Section 424(h) of the Code and any regulations or guidance promulgated thereunder, and provided further that no such adjustment shall cause any Award hereunder which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of such Section. The Administrator’s determinations pursuant to this Section 5 shall be final, binding and conclusive.

Section 6.    Eligibility.

Except as set forth in Section 11 below, the Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among Eligible Recipients; provided, however, that Incentive Stock Options may only be granted to employees of the Company or any Subsidiary. Notwithstanding the foregoing, Non-Employee Directors shall be eligible for awards other than those set forth in Section 11, as determined by the Administrator from time to time.

Section 7.    Options.

(a)    General.    The grant of an Option shall be evidenced by an Award Document, containing such terms and conditions as the Administrator shall determine, in its discretion, which Award Document shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option granted thereunder. Each Option shall be clearly identified in the applicable Award Document as either an Incentive Stock Option or a Nonqualified Stock Option. The provisions of each Option need not be the same with respect to each Participant. More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in this Section 7 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desi rable and set forth in the applicable Award Document.

(b)    Exercise Price.    The Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of grant, provided that the Exercise Price of an Incentive Stock Option or any Option intended to qualify as performance-based compensation under Section 162(m) of the Code shall not be less than 100% of the Fair Market Value of the Stock on the date of grant. If a Participant owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or of any Subsidiary and an Incentive Stock Option is granted to such Participant, the option price of such Incentive Stock Option (to the extent required at the time of grant by the Code) shall be no less than 110% of the Fair Market Value on the date such Incentive Stock Option is granted.

(c)    Option Term.    The maximum term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten years after the date such Option is granted, except that Incentive Stock Options granted to a Participant who owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or of any Subsidiary, shall not be exercisable more than five years after the date such Option is granted. Each Option’s term is subject to earlier expiration pursuant to the applicable provisions in the Plan and the Award Document. Notwithstanding the foregoing, the Administrator shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate.

(d)    Exercisability.    Each Option shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of preestablished corporate performance goals, as shall be determined by the Administrator in the applicable Award Document. The Administrator may also provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine in its sole discretion. Notwithstanding anything to the contrary contained herein, an Option may not be exercised for a fraction of a share.

(e)    Method of Exercise.    Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of Shares to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the Administrator. As determined by the Administrator, in its sole discretion, with respect to any Option or category of Options, payment in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure approved by the Administrator

(including the withholding of Shares otherwise issuable upon exercise), (ii) in the form of unrestricted Shares already owned by the Participant which, (x) in the case of unrestricted Shares acquired upon exercise of an Option, have been owned by the Participant for more than six months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate option price of the Shares as to which such Option shall be exercised, (iii) any other form of consideration approved by the Administrator and permitted by applicable law or (iv) any combination of the foregoing.

(f)    Limitations on Incentive Stock Options.    To the extent that the aggregate Fair Market Value with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company shall exceed $100,000, the portion of such Incentive Stock Options in excess of $100,000 shall be treated as Nonqualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted. No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns (or is deemed to own under the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary unless (i) the Exercise Price of such Incentive Stock Option is at least 110% of the Fair Market Value of a share of Com mon Stock at the time such Incentive Stock Option is granted and (ii) such Incentive Stock Option is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted.

(g)    Rights as Stockholder.    A Participant shall have no rights to dividends or any other rights of a stockholder with respect to the Shares subject to an Option until the Participant has given written notice of exercise, has paid in full for such Shares, has satisfied the requirements of Section 15 hereof and, if requested, has given the representation described in paragraph (b) of Section 16 hereof.

(h)    Transfers of Options.    Except as otherwise determined by the Administrator, and in any event in the case of an Incentive Stock Option, no Option granted under the Plan shall be transferable by a Participant other than by will or the laws of descent and distribution. Unless otherwise determined by the Administrator in accord with the provisions of the immediately preceding sentence, an Option may be exercised, during the lifetime of the Participant, only by the Participant or, during the period the Participant is under a legal disability, by the Participant’s guardian or legal representative. The Administrator may, in its sole discretion, subject to applicable law, permit the gratuitous transfer during a Participant’s lifetime of a Nonqualified Stock Option, (i) by gift to a member of the Participant’s immediate family, (ii) by transfer by instrument to a trust for the benefit of such immedia te family members, or (iii) to a partnership or limited liability company in which such family members are the only partners or members; provided, however, that, in addition to such other terms and conditions as the Administrator may determine in connection with any such transfer, no transferee may further assign, sell, hypothecate or otherwise transfer the transferred Option, in whole or in part, other than by will or by operation of the laws of descent and distribution. Each permitted transferee shall agree to be bound by the provisions of this Plan and the applicable Award Document.

(i)    Termination of Employment or Service.

(1)    Unless the applicable Award Document provides otherwise, in the event that the employment or service of a Participant with the Company or any Subsidiary shall terminate for any reason other than Cause, Retirement, Disability, or death, (A) Options granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable until the date that is 90 days after such termination, on which date they shall expire, and (B) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. The 90-day period described in this Section 7(i)(1) shall be extended to one year after the date of such termination in the event of the Participant’s death during such 90-day period. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term.

(2)    Unless the applicable Award Document provides otherwise, in the event that the employment or service of a Participant with the Company or any Subsidiary shall terminate on

account of the Retirement, Disability, or death of the Participant, (A) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the date that is one year after such termination, on which date they shall expire and (B) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term.

(3)    In the event of the termination of a Participant’s employment or service for Cause, all outstanding Options granted to such Participant shall expire at the commencement of business on the date of such termination.

(j)    Other Change in Employment Status.    An Option shall be affected, both with regard to vesting schedule and termination, by leaves of absence, changes from full-time to part-time employment, partial disability or other changes in the employment status of an Participant, in the discretion of the Administrator. The Administrator shall follow any applicable provisions and regulations with respect to the treatment of Incentive Stock Options and the written policies of the Company (if any), including such rules, guidelines and practices as may be adopted pursuant to Section 3 hereof, as they may be in effect from time to time, with regard to such matters.

Section 8.    Stock Appreciation Rights.

(a)    General.    Stock Appreciation Rights may be granted either alone (‘‘Free Standing Rights’’) or in conjunction with all or part of any Stock Option granted under the Plan (‘‘Related Rights’’), provided that, in each case, the Common Stock underlying the Stock Appreciation Right is traded on an ‘‘established securities market’’ within the meaning of Section 409A of the Code. In the case of a Nonqualified Stock Option, Related Rights may be granted either at or after the time of the grant of such Stock Option. In the case of an Incentive Stock Option, Related Rights may be granted only at the time of the grant of the Incentive Stock Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Stock Appreciation Rights shall be made; the number of Shares to be awarded, the price per share, and all other conditions of Stock Appreciation Rights. Notwithstanding the foregoing, no Related Right may be granted for more shares than are subject to the Stock Option to which it relates and any Stock Appreciation Right must be granted with an Exercise Price not less than the Fair Market Value of Common Stock on the date of grant. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 8 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable, as set forth in the applicable Award Document.

(b)    Awards.    Participants who are granted Stock Appreciation Rights shall have no rights as stockholders of the Company with respect to the grant or exercise of such Stock Appreciation Rights.

(c)    Exercisability.

(1)    Stock Appreciation Rights that are Free Standing Rights (‘‘Free Standing Stock Appreciation Rights’’) shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.

(2)    Stock Appreciation Rights that are Related Rights (‘‘Related Stock Appreciation Rights’’) shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be exercisable in accordance with the provisions of Section 7 above and this Section 8 of the Plan; provided, however, that a Related Stock Appreciation Right granted in connection with an Incentive Stock Option shall be exercisable only if and when the Fair Market Value of the Common Stock subject to the Incentive Stock Option exceeds the Exercise Price of such Option.

(d)    Payment Upon Exercise.

(1)    Upon the exercise of a Free Standing Stock Appreciation Right, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the

Fair Market Value as of the date of exercise over the price per share specified in the Free Standing Stock Appreciation Right (which price shall be no less than 100% of the Fair Market Value on the date of grant) multiplied by the number of Shares in respect of which the Free Standing Stock Appreciation Right is being exercised, with the Administrator having the right to determine the form of payment.

(2)    A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the Fair Market Value as of the date of exercise over the Exercise Price specified in the related Option (which price shall be no less than 100% of the Fair Market Value on the date of grant) multiplied by the number of Shares in respect of which the Related Stock Appreciation Right is being exercised, with the Administrator having the right to determine the form of payment. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.

(3)    Notwithstanding the foregoing, the Administrator may determine to settle the exercise of a Stock Appreciation Right in cash (or in any combination of Shares and cash) to the extent that such settlement does not violate Section 409A of the Code.

(e)    Non-Transferability.

(1)    Free Standing Stock Appreciation Rights shall be transferable only when and to the extent that an Option would be transferable under Section 7 of the Plan.

(2)    Related Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Option would be transferable under Section 7 of the Plan.

(f)    Termination of Employment or Service.

(1)    In the event of the termination of employment or service with the Company or any Subsidiary of a Participant who has been granted one or more Free Standing Stock Appreciation Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after grant.

(2)    In the event of the termination of employment or service with the Company or any Subsidiary of a Participant who has been granted one or more Related Stock Appreciation Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the related Stock Options.

(g)    Term.

(1)    The term of each Free Standing Stock Appreciation Right shall be fixed by the Administrator, but no Free Standing Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted.

(2)    The term of each Related Stock Appreciation Right shall be the term of the Stock Option to which it relates, but no Related Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted.

Section 9.Restricted Shares, Deferred Shares and Performance Shares.

(a)    General.    Awards of Restricted Shares, Deferred Shares or Performance Shares may be granted either alone or in addition to other awards granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, awards of Restricted Shares, Deferred Shares or Performance Shares shall be made; the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Shares, Deferred Shares or Performance Shares; the Restricted Period (as defined in paragraph (b) of this Section 9), if any, applicable to awards of Restricted Shares or Deferred Shares; the performance objectives applicable to awards of Restricted Shares, Deferred Shares or Performance Shares; and all other conditions of the awards of Restricted Shares, Deferred Shares and Performance Shares. The

Administrator may also condition the grant of the award of Restricted Shares, Deferred Shares or Performance Shares upon the exercise of Options, or upon such other criteria as the Administrator may determine, in its sole discretion. If the restrictions, performance objectives and/or conditions established by the Administrator are not attained, a Participant shall forfeit his or her shares of Restricted Shares, Deferred Shares or Performance Shares. The provisions of the awards of Restricted Shares, Deferred Shares or Performance Shares need not be the same with respect to each Participant.

(b)    Restrictions and Conditions.    The awards of Restricted Shares, Deferred Shares and Performance Shares granted pursuant to this Section 9 shall be subject to the following restrictions and conditions and any additional restrictions or conditions as determined by the Administrator at the time of grant or thereafter:

(1)    Subject to the provisions of the Plan and the Restricted Shares Award Document, Deferred Shares Award Document or Performance Shares Award Document, as appropriate, governing any such award, during such period as may be set by the Administrator commencing on the date of grant (the ‘‘Restricted Period’’), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Shares, Deferred Shares or Performance Shares awarded under the Plan; provided, however, that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain performance related goals, the Participant’s termination of employment or service as a di rector or Consultant to the Company or any Subsidiary, the Participant’s death or Disability. Notwithstanding the foregoing, upon a Change in Control, the outstanding Awards shall be subject to Section 12 hereof.

(2)    Except as may be otherwise provided in a Restricted Share Award Document or Performance Share Award Document, the Participant shall have no right with respect to Restricted Shares or Performance Shares to vote as a stockholder of the Company during the Restricted Period or to receive dividends which are declared with respect to Restricted Shares or Performance Shares with a record date during the Restricted Period. Unless otherwise provided in the applicable Award Document, any Shares receivable with respect to the Restricted Shares or Performance Shares pursuant to an equitable adjustment under Section 5 hereof in connection with a Change in Capitalization shall be subject to the same restrictions as the Restricted Shares or Performance Shares. The Participant shall generally not have the rights of a stockholder with respect to awards of Deferred Shares during the Restricted Period; provided, however, that, subject to the requirements of Section 409A of the Code, the Deferred Shares Award Document may provide the Participant with the right to receive dividend equivalent payments with respect to the Deferred Shares subject to the Award during the Restricted Period (either currently or upon the vesting of the Deferred Shares). Unless otherwise provided in an Award Document or except as otherwise provided in the Plan, upon the vesting of a Deferred Shares Award (or any portion thereof), there shall be delivered to the Participant, as soon as practicable following the date on which such Award (or any portion thereof) vests (but in any event within such period as is required to avoid the imposition of a tax under Section 409A of the Code), the number of Shares equal to the number of Deferred Shares becoming so vested.

(3)    The rights of Participants granted awards of Restricted Shares, Deferred Shares or Performance Shares upon termination of employment or upon termination of service as a director or Consultant to the Company or to any Subsidiary for any reason during the Restricted Period shall be set forth in the Award Document.

Section 10.    Other Stock-Based Awards.

(a)    The Administrator is authorized to grant Awards to Participants in the form of Other Stock-Based Awards, as deemed by the Administrator to be consistent with the purposes of the Plan and as evidenced by an Award Document. The Administrator shall determine the terms and conditions of such Awards, consistent with the terms of the Plan, at the date of grant or thereafter, including any Performance Goals and performance periods. Common Stock or other securities or

property delivered pursuant to an Award in the nature of a purchase right granted under this Section 10 shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, Shares, other Awards, notes or other property, as the Administrator shall determine, subject to any required corporate action.

(b)    To the extent that the Plan is subject to Section 162(m) of the Code, no payment shall be made to a ‘‘covered employee’’ (within the meaning of Section 162(m) of the Code) prior to the certification by the Committee that the Performance Goals have been attained. The Committee may establish such other rules applicable to the Other Stock-Based Awards, provided, however, that in the event that the Plan is subject to Section 162(m) of the Code, such rules, as they apply to Awards intended to comply with Section 162(m) of the Code, shall be in compliance with Section 162(m) of the Code.

Section 11.    Non-Employee Director Grants.

(a)    Annual Grant.    Except as otherwise provided by the Administrator, on the first business day after the annual stockholders’ meeting of the Company and each annual stockholders’ meeting thereafter during the term of the Plan (beginning with the annual stockholders’ meeting in 2006), each Non-Employee Director shall be granted that number of Shares, the aggregate Fair Market Value of which shall equal $15,000 on the date of grant (the ‘‘Non-Employee Director Shares’’). The Non-Employee Director Shares shall be fully vested as of the date of grant.

(b)    Stock Availability.    In the event that the number of Shares available for grant under the Plan is not sufficient to accommodate the awards of Non-Employee Director Shares, the remaining Shares available for such automatic awards shall be granted to each Non-Employee Director who is to receive such an award on a pro-rata basis. No further grants shall be made until such time, if any, as additional Shares become available for grant under the Plan.

Section 12.    Accelerated Vesting In Connection With a Change in Control.

In the event of a Change in Control, any outstanding Option that is not assumed or continued, or an equivalent option or right is not substituted therefor pursuant to the Change in Control transaction’s governing document, shall become fully vested and exercisable ‘‘immediately prior to’’ the effective date of such Change in Control and shall expire upon the effective date of such Change in Control. For purposes of this Section 12, ‘‘immediately prior to’’ shall mean sufficiently in advance of the Change in Control transaction such that there will be time for each affected Participant to exercise his or her Option and participate in the Change in Control transaction in the same manner as all other holders of Common Stock. If an Option becomes fully vested and exercisable immediately prior to a Change in Control, the Administrator shall notify the affected Participant in writing or electronically that the Opti on has become fully vested and exercisable, and that the Option will terminate upon the Change in Control.

Unless otherwise determined by the Administrator and evidenced in an Award Document, in the event that (i) a Change in Control occurs and (ii) the Participant’s employment is terminated by the Company, its successor or affiliate thereof without Cause on or after the effective date of the Change in Control but prior to 12 months following such Change in Control, then:

(a)    any unvested or unexercisable portion of any Award carrying a right to exercise shall become vested and exercisable with respect to 50% of the Shares covered by such unvested portion of such Award; and

(b)    the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any other Award granted under the Plan shall lapse with respect to 50% of the Shares covered thereby and 50% of such unvested Awards shall be deemed fully vested and performance conditions imposed with respect to such Awards shall be deemed to be fully achieved with respect to 50% of the Shares covered thereby.

Section 13.    Amendment and Termination.

The Board may amend, alter or terminate the Plan, but no amendment, alteration, or termination shall be made that would impair the rights of a Participant under any award theretofore granted

without such Participant’s consent. Unless the Board determines otherwise, the Board shall obtain approval of the Company’s stockholders for any amendment that would require such approval in order to satisfy the requirements of Sections 162(m) or 422 of the Code, any rules of the stock exchange on which the Common Stock is traded or other applicable law. If any Award is subject to Section 409A of the Code and fails to comply with the requirements of Section 409A of the Code, the Administrator reserves the right to (but is not obligated to) amend, modify or supplement such Award in order to cause it to either not be subject to Section 409A of the Code or to comply with the applicable provisions of Section 409A of the Code. The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 5 of the Plan, no such amendment shall impair the rights of any Participant without his or her consent.

Section 14.    Unfunded Status of Plan.

The Plan is intended to constitute an ‘‘unfunded’’ plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.

Section 15.    Withholding Taxes.

Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of the Participant for federal and/or state income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld with respect to the Award. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. Whenever cash is to be paid pursuant to an award granted hereunder, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any federal, state and local withholding tax requirements related thereto. Whenever Shares are to be delivered pursuant to an award, the Company shall have t he right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any federal, state and local withholding tax requirements related thereto. With the approval of the Administrator, a Participant may satisfy the foregoing requirement by electing to have the Company withhold from delivery of Shares or by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash. Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an award. The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy its withholding obligation with respect to any Option or other Award.

Section 16.    General Provisions.

(a)    Shares shall not be issued pursuant to the exercise of any Option granted hereunder unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act and the requirements of any stock exchange upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)    The Administrator may require each person acquiring Shares to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof. The certificates for such Shares may include any legend that the Administrator deems appropriate to reflect any restrictions on transfer which the Administrator determines, in its sole discretion, arise under applicable securities laws or are otherwise applicable.

(c)    All certificates for Shares delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations,

and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock may then be listed, and any applicable federal or state securities law, and the Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.

(d)    The Administrator may require a Participant receiving Shares pursuant to the Plan, as a condition precedent to receipt of such Shares, to enter into a stockholder agreement or ‘‘lock-up’’ agreement in such form as the Committee shall determine is necessary or desirable to further the Company’s interests.

(e)    The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued employment or service with the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment or service of any of its Eligible Recipients at any time.

Section 17.    Effective Date.

The Plan became effective upon adoption by the Board on October 14, 2005 (the ‘‘Effective Date’’), and approval by stockholders of the Company on October 14, 2005.

Section 18.    Term of Plan.

No award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but awards theretofore granted may extend beyond that date.

Section 19.    Section 409A.

This Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. To the extent that an Award, issuance and/or payment is subject to Section 409A of the Code, it shall be awarded and/or issued or paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Any provision of this Plan that would cause an Award, issuance and/or payment to fail to satisfy Section 409A of the Code shall have no force and effect until amended to comply with Code Section 409A (which amendment may be retroactive to the extent permitted by applicable law).

EX-10.2

EXHIBIT 10.2

RESTRICTED SHARE AGREEMENT
UNDER THE BROOKDALE SENIOR LIVING INC.
OMNIBUS STOCK INCENTIVE PLAN

This Award Agreement (this ‘‘Restricted Share Agreement’’), dated as of [, 20] (the ‘‘Date of Grant’’), is made by and between Brookdale Senior Living Inc., a Delaware corporation (the ‘‘Company’’), and [      &n bsp;             ] (the ‘‘Participant’’).Capitalized terms not defined herein shall have the meaning ascribed to them in the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (as amended and/or restated from time to time, the ‘‘Plan’’). Where the context permits, references to the Company shall include any successor to the Company.

1.    Grant of Restricted Shares.    The Company hereby grants to the Participant [] shares of Common Stock (such shares, the ‘‘Restricted Shares’’), subject to all of the terms and conditions of this Restricted Share Agreement and the Plan.

2.    Lapse of Restrictions.

(a)    Vesting.

(i)    General.    Subject to the provisions set forth below, the restrictions on transfer set forth in Section 2(b) hereof shall lapse with respect to one-third of the Restricted Shares on each of [, 20], [, 20] and [, 20], subject to the continued employment of the Participant by the Company or one of its Subsidiaries or Affiliates as of each such vesting date; provided, however, that, upon the occurrence of a Change in Control, the restrictions on transfer with respect to the Restricted Shares normally subject to vesting at the next vesting date shall immediately lapse and such Restricted Shares shall be fully vested effective upon the date of the Change in Control. Notwithstanding anything herein to the contrary, no fractional shares shall be issuable upon any vesting date.

(ii)    Following Certain Terminations of Employment.    Subject to the following paragraph, upon termination of the Participant’s employment with the Company and its Subsidiaries and Affiliates for any reason, any Restricted Shares as to which the restrictions on transferability described in this Section shall not already have lapsed shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind and neither the Participant nor any of the Participant’s successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such Restricted Shares.

Notwithstanding the foregoing or any other provision hereof to the contrary, in the event that the Participant’s employment is terminated by the Company (or its successor) or a Subsidiary or Affiliate without Cause at any time following a Change in Control, then any Restricted Shares that are not vested as of the date of such termination shall immediately vest. In addition, in the event that the Participant’s employment is terminated by death or Disability (either before or after a Change in Control), the tranche of Restricted Shares normally subject to vesting at the next vesting date shall remain subject hereto until the vesting date that immediately follows such termination and shall vest on such date (subject to earlier vesting upon the occurrence of an intervening Change in Control), with any remaining Restricted Shares being forfeited upon the date of such termination.

(b)    Restrictions.    Until the restrictions on transfer of the Restricted Shares lapse as provided in Section 2(a) hereof, or as otherwise provided in the Plan, no transfer of the Restricted Shares or any of the Participant’s rights with respect to the Restricted Shares, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Unless the Administrator determines otherwise, upon any attempt to transfer Restricted Shares or any rights in respect of Restricted Shares before the lapse of such restrictions, such Restricted Shares, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.

3.    Adjustments.    Pursuant to Section 5 of the Plan, in the event of a change in capitalization as described therein, the Administrator shall make such equitable changes or adjustments, as it deems

necessary or appropriate, in its discretion, to the number and kind of securities or other property (including cash) issued or issuable in respect of outstanding Restricted Shares.

4.    Legend on Certificates.    The Participant agrees that any certificate issued for Restricted Shares (or, if applicable, any book entry statement issued for Restricted Shares) prior to the lapse of any outstanding restrictions relating thereto shall bear the following legend (in addition to any other legend or legends required under applicable federal and state securities laws):

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE (THE ‘‘RESTRICTIONS’’) AS SET FORTH IN THE BROOKDALE SENIOR LIVING INC. OMNIBUS STOCK INCENTIVE PLAN AND A RESTRICTED SHARE AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BROOKDALE SENIOR LIVING INC., COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY. ANY ATTEMPT TO DISPOSE OF THESE SHARES IN CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID AND WITHOUT EFFECT AND SHALL RESULT IN THE FORFEITURE OF SUCH SHARES AS PROVIDED BY SUCH PLAN AND AGREEMENT.

5.    Certain Changes.    The Administrator may accelerate the date on which the restrictions on transfer set forth in Section 2(b) hereof shall lapse or otherwise adjust any of the terms of the Restricted Shares; provided that, subject to Section 5 of the Plan, no action under this Section shall adversely affect the Participant’s rights hereunder.

6.    Notices.    All notices and other communications under this Restricted Share Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties, as follows: (i) if to the Company, at Brookdale Senior Living Inc., 111 Westwood Place, Suite 200, Brentwood, TN 37027, Facsimile: (615) 564-8204, Attn: General Counsel and (ii) if to the Participant, using the contact information on file with the Company. Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

7.    Securities Laws Requirements.    The Company shall not be obligated to transfer any Common Stock to the Participant free of the restrictive legend described in Section 4 hereof or of any other restrictive legend, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (or any other federal or state statutes having similar requirements as may be in effect at that time).

8.    No Obligation to Register.    The Company shall be under no obligation to register the Restricted Shares pursuant to the Securities Act or any other federal or state securities laws.

9.    Protections Against Violations of Agreement.    No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the Restricted Shares by any holder thereof in violation of the provisions of this Restricted Share Agreement will be valid, and the Company will not transfer any of said Restricted Shares on its books nor will any of such Restricted Shares be entitled to vote, nor will any distributions be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce said provisions.

10.    Taxes.    The Participant shall pay to the Company promptly upon request, and in any event at the time the Participant recognizes taxable income with respect to the Restricted Shares (or, if the Participant makes an election under Section 83(b) of the Code in connection with such grant), an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Shares. The Participant may satisfy the foregoing requirement by making a payment to the Company in cash or, with the approval of the Administrator, in it sole

2

discretion, by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares of Common Stock shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash. The Participant shall promptly notify the Company of any election made pursuant to Section 83(b) of the Code. A form of such election is attached hereto as Exhibit A.

THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.

The Participant acknowledges that the tax laws and regulations applicable to the Restricted Shares and the disposition of the Restricted Shares following vesting are complex and subject to change.

11.    Failure to Enforce Not a Waiver.    The failure of the Company to enforce at any time any provision of this Restricted Share Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12.    Confidentiality.    The Participant acknowledges that during the period of his or her employment with the Company or any Subsidiary or Affiliate, he or she shall have access to the Company’s Confidential Information (as defined below). All books of account, records, systems, correspondence, documents, and any and all other data, in whatever form, concerning or containing any reference to the works and business of the Company or its affiliated companies shall belong to the Company and shall be given up to the Company whenever the Company requires the Participant to do so. The Participant agrees that the Participant shall not at any time during the term of the Participant’s employment or thereafter, without the Company’s prior written consent, disclose to any person (i ndividual or entity) any information or any trade secrets, plans or other information or data, in whatever form (including, without limitation, (a) any financing strategies and practices, pricing information and methods, training and operational procedures, advertising, marketing, and sales information or methodologies or financial information and (b) any Proprietary Information (as defined below)), concerning the Company’s or any of its affiliated companies’ or customers’ practices, businesses, procedures, systems, plans or policies (collectively, ‘‘Confidential Information’’), nor shall the Participant utilize any such Confidential Information in any way or communicate with or contact any such customer other than in connection with the Participant’s employment by the Company or any Subsidiary or Affiliate. The Participant hereby confirms that all Confidential Information constitutes the Company’s exclusive property, and that all of the restrictions on t he Participant’s activities contained in this Restricted Share Agreement and such other nondisclosure policies of the Company are required for the Company’s reasonable protection. Confidential Information shall not include any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement. This confidentiality provision shall survive the termination of this Restricted Share Agreement and shall not be limited by any other confidentiality agreements entered into with the Company or any of its affiliates.

With respect to any Confidential Information that constitutes a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force for so long as the particular information remains a trade secret or for the two year period immediately following termination of Participant’s employment for any reason, whichever is longer. With respect to any Confidential Information that does not constitute a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force during Participant’s employment and for the two year period immediately following termination of Participant’s employment for any reason.

The Participant agrees that the Participant shall promptly disclose to the Company in writing all information and inventions generated, conceived or first reduced to practice by him or her alone or in conjunction with others, during or after working hours, while in the employ of the Company (all of which is collectively referred to in this Restricted Share Agreement as ‘‘Proprietary Information’’); provided, however, that such Proprietary Information shall not include (a) any information that has

3

otherwise been disclosed to the public not in violation of this Restricted Share Agreement and (b) general business knowledge and work skills of the Participant, even if developed or improved by the Participant while in the employ of the Company. All such Proprietary Information shall be the exclusive property of the Company and is hereby assigned by the Participant to the Company. The Participant’s obligation relative to the disclosure to the Company of such Proprietary Information anticipated in this Section shall continue beyond the Participant’s termination of employment and the Participant shall, at the Company’s expense, give the Company all assistance it reasonably requires to perfect, protect and use its right to the Proprietary Information.

For purposes of this Section, the ‘‘Company’’ refers to the Company and any incorporated or unincorporated affiliates of the Company, including any entity which becomes the Participant’s employer as a result of any reorganization or restructuring of the Company for any reason. The Company shall be entitled, in connection with its tax planning or other reasons, to terminate the Participant’s employment (which termination shall not be considered a termination for any purposes of this Restricted Share Agreement, any employment agreement or otherwise) in connection with an invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Participant’s employment relationship with such entity mutatis mutandis.

13.    Governing Law.    This Restricted Share Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

14.    Incorporation of Plan.    The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Shares and this Restricted Share Agreement shall be subject to all terms and conditions of the Plan.

15.    Amendments; Construction.    The Administrator may amend the terms of this Restricted Share Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the Participant hereunder without his or her consent. To the extent the terms of Section 12 above conflict with any prior agreement between the parties related to such subject matter, the more restrictive provision shall be deemed to apply. Headings to Sections of this Restricted Share Agreement are intended for convenience of reference only, are not part of this Restricted Share Agreement and shall have no effect on the interpretation hereof.

16.    Survival of Terms.    This Restricted Share Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. The terms of Section 12 shall expressly survive the forfeiture of the Restricted Shares and this Restricted Share Agreement.

17.    Rights as a Stockholder.    The Participant shall have no right with respect to Restricted Shares to vote as a stockholder of the Company during the period in which such Restricted Shares remain subject to a substantial risk of forfeiture (the ‘‘Restricted Period’’) or to receive dividends (or other distributions) which are declared with respect to Restricted Shares with a record date during the Restricted Period.

18.    Compliance with Stock Ownership Guidelines.    The Participant hereby agrees to comply with the Company’s Stock Ownership Guidelines (as amended from time to time, the ‘‘Guidelines’’), to the extent such Guidelines are applicable, or become applicable, to the Participant. The Participant further acknowledges that, if he or she is not in compliance with such Guidelines (if applicable), the Administrator may refrain from issuing additional equity awards to the Participant and/or elect to pay the Participant’s annual bonus in the form of vested or unvested Common Stock.

19.    Agreement Not a Contract for Services.    Neither the Plan, the granting of the Restricted Shares, this Restricted Share Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue to provide services as an officer, director, employee, consultant or advisor of the Company or any Subsidiary or Affiliate for any period of time or at any specific rate of compensation.

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20.    Authority of the Administrator.    The Administrator shall have full authority to interpret and construe the terms of the Plan and this Restricted Share Agreement. The determination of the Administrator as to any such matter of interpretation or construction shall be final, binding and conclusive.

21.    Representations.    The Participant has reviewed with the Participant’s own tax advisors the Federal, state, local and foreign tax consequences of the transactions contemplated by this Restricted Share Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that he or she (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Restricted Share Agreement.

22.    Severability.    Should any provision of this Restricted Share Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Restricted Share Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Restricted Share Agreement. Moreover, if one or more of the provisions contained in this Restricted Share Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provision or provisions in any other jurisdiction.

23.    Acceptance.    The Participant hereby acknowledges receipt of a copy of the Plan and this Restricted Share Agreement. The Participant has read and understands the terms and provisions of the Plan and this Restricted Share Agreement, and accepts the Restricted Shares subject to all the terms and conditions of the Plan and this Restricted Share Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Restricted Share Agreement.

[Signature page to follow.]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Share Agreement as of the day and year first above written.

BROOKDALE SENIOR LIVING INC.

By:
Name: Mark J. Schulte
Title: Co-Chief Executive Officer

By:
Name: W.E. Sheriff
Title: Co-Chief Executive Officer

[Name of Participant]

Participant

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EXHIBIT A
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

1.    The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME OF TAXPAYER:

NAME OF SPOUSE:

ADDRESS:                                                                                                                                                      ;

IDENTIFICATION NO. OF TAXPAYER:

IDENTIFICATION NUMBER OF SPOUSE:

TAXABLE YEAR:

2.    The property with respect to which the election is made is described as follows:

shares of Common Stock, par value $.01 per share, of Brookdale Senior Living Inc. (‘‘Company’’).

3.    The date on which the property was transferred is: , 20.

4.    The property is subject to the following restrictions:

The property may not be transferred and is subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions in such agreement.

5.    The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $.

6.    The amount (if any) paid for such property is: $.

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated: , 200						Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: , 200						Spouse of Taxpayer

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EX-10.3

EXHIBIT 10.3

RESTRICTED SHARE AGREEMENT
UNDER THE BROOKDALE SENIOR LIVING INC.
OMNIBUS STOCK INCENTIVE PLAN

This Award Agreement (this ‘‘Restricted Share Agreement’’), dated as of [, 20] (the ‘‘Date of Grant’’), is made by and between Brookdale Senior Living Inc., a Delaware corporation (the ‘‘Company’’), and [       &n bsp;            ] (the ‘‘Participant’’).Capitalized terms not defined herein shall have the meaning ascribed to them in the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (as amended and/or restated from time to time, the ‘‘Plan’’). Where the context permits, references to the Company shall include any successor to the Company.

1.    Grant of Restricted Shares.    The Company hereby grants to the Participant [] shares of Common Stock (such shares, the ‘‘Restricted Shares’’), subject to all of the terms and conditions of this Restricted Share Agreement and the Plan.

2.    Lapse of Restrictions.

(a)    Vesting.

(i)     General.    Subject to the provisions set forth below, the restrictions on transfer set forth in Section 2(b) hereof shall lapse with respect to one-fifth of the Restricted Shares on each of [, 20], [, 20], [, 20], [, 20] and [, 20], subject to the continued employment of the Participant by the Company or one of its Subsidiaries or Affiliates as of each such vesting date; provided, however, that, upon the occurrence of a Change in Control, the restrictions on transfer with respect to the Restricted Shares normally subject to vesting at the next vesting date shall immediately lapse and such Restricted Shares shall be fully vested effective upon the date of the Change in Control. Notwithstanding anything herein to the contrary, no fractional shares shall be issuable upon any vesting date. With respect to all Restricted Shares, the Participant shall be entitled to receive, and retain, all ordinary and extraordinary cash and stock dividends which may be declared on the Res tricted Shares with a record date on or after the Date of Grant and before any forfeiture thereof (regardless of whether a share later vests or is forfeited).

(ii)     Following Certain Terminations of Employment.    Subject to the following paragraph, upon termination of the Participant’s employment with the Company and its Subsidiaries and Affiliates for any reason, any Restricted Shares as to which the restrictions on transferability described in this Section shall not already have lapsed shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind and neither the Participant nor any of the Participant’s successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such Restricted Shares.

Notwithstanding the foregoing or any other provision hereof to the contrary, in the event that the Participant’s employment is terminated by the Company (or its successor) or a Subsidiary or Affiliate without Cause at any time following a Change in Control, then any Restricted Shares that are not vested as of the date of such termination shall immediately vest. In addition, in the event that the Participant’s employment is terminated by death or Disability (either before or after a Change in Control), the tranche of Restricted Shares normally subject to vesting at the next vesting date shall remain subject hereto until the vesting date that immediately follows such termination and shall vest on such date (subject to earlier vesting upon the occurrence of an intervening Change in Control), with any remaining Restricted Shares being forfeited upon the date of such termination.

(b)    Restrictions.    Until the restrictions on transfer of the Restricted Shares lapse as provided in Section 2(a) hereof, or as otherwise provided in the Plan, no transfer of the Restricted Shares or any of the Participant’s rights with respect to the Restricted Shares, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Unless the Administrator determines otherwise, upon any attempt to transfer Restricted Shares or any rights in respect of Restricted Shares

before the lapse of such restrictions, such Restricted Shares, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.

3.    Adjustments.    Pursuant to Section 5 of the Plan, in the event of a change in capitalization as described therein, the Administrator shall make such equitable changes or adjustments, as it deems necessary or appropriate, in its discretion, to the number and kind of securities or other property (including cash) issued or issuable in respect of outstanding Restricted Shares.

4.    Legend on Certificates.    The Participant agrees that any certificate issued for Restricted Shares (or, if applicable, any book entry statement issued for Restricted Shares) prior to the lapse of any outstanding restrictions relating thereto shall bear the following legend (in addition to any other legend or legends required under applicable federal and state securities laws):

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE (THE ‘‘RESTRICTIONS’’) AS SET FORTH IN THE BROOKDALE SENIOR LIVING INC. OMNIBUS STOCK INCENTIVE PLAN AND A RESTRICTED SHARE AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BROOKDALE SENIOR LIVING INC., COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY. ANY ATTEMPT TO DISPOSE OF THESE SHARES IN CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID AND WITHOUT EFFECT AND SHALL RESULT IN THE FORFEITURE OF SUCH SHARES AS PROVIDED BY SUCH PLAN AND AGREEMENT.

5.    Certain Changes.    The Administrator may accelerate the date on which the restrictions on transfer set forth in Section 2(b) hereof shall lapse or otherwise adjust any of the terms of the Restricted Shares; provided that, subject to Section 5 of the Plan, no action under this Section shall adversely affect the Participant’s rights hereunder.

6.    Notices.    All notices and other communications under this Restricted Share Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties, as follows: (i) if to the Company, at Brookdale Senior Living Inc., 111 Westwood Place, Suite 200, Brentwood, TN 37027, Facsimile: (615) 564-8204, Attn: General Counsel and (ii) if to the Participant, using the contact information on file with the Company. Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

7.    Securities Laws Requirements.    The Company shall not be obligated to transfer any Common Stock to the Participant free of the restrictive legend described in Section 4 hereof or of any other restrictive legend, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (or any other federal or state statutes having similar requirements as may be in effect at that time).

8.    No Obligation to Register.    The Company shall be under no obligation to register the Restricted Shares pursuant to the Securities Act or any other federal or state securities laws.

9.    Protections Against Violations of Agreement.    No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the Restricted Shares by any holder thereof in violation of the provisions of this Restricted Share Agreement will be valid, and the Company will not transfer any of said Restricted Shares on its books nor will any of such Restricted Shares be entitled to vote, nor will any distributions be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce said provisions.

10.    Taxes.    The Participant shall pay to the Company promptly upon request, and in any event at the time the Participant recognizes taxable income with respect to the Restricted Shares (or, if the

2

Participant makes an election under Section 83(b) of the Code in connection with such grant), an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Shares. The Participant may satisfy the foregoing requirement by making a payment to the Company in cash or, with the approval of the Administrator, in it sole discretion, by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares of Common Stock shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash. The Participant shall promptly notify the Company of any election made pursuant to Section 83(b) of the Code. A form of such election is attached hereto as Exhibit A.

THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.

The Participant acknowledges that the tax laws and regulations applicable to the Restricted Shares and the disposition of the Restricted Shares following vesting are complex and subject to change.

11.    Failure to Enforce Not a Waiver.    The failure of the Company to enforce at any time any provision of this Restricted Share Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12.    Confidentiality.    The Participant acknowledges that during the period of his or her employment with the Company or any Subsidiary or Affiliate, he or she shall have access to the Company’s Confidential Information (as defined below). All books of account, records, systems, correspondence, documents, and any and all other data, in whatever form, concerning or containing any reference to the works and business of the Company or its affiliated companies shall belong to the Company and shall be given up to the Company whenever the Company requires the Participant to do so. The Participant agrees that the Participant shall not at any time during the term of the Participant’s employment or thereafter, without the Company’s prior written consent, disclose to any person (i ndividual or entity) any information or any trade secrets, plans or other information or data, in whatever form (including, without limitation, (a) any financing strategies and practices, pricing information and methods, training and operational procedures, advertising, marketing, and sales information or methodologies or financial information and (b) any Proprietary Information (as defined below)), concerning the Company’s or any of its affiliated companies’ or customers’ practices, businesses, procedures, systems, plans or policies (collectively, ‘‘Confidential Information’’), nor shall the Participant utilize any such Confidential Information in any way or communicate with or contact any such customer other than in connection with the Participant’s employment by the Company or any Subsidiary or Affiliate. The Participant hereby confirms that all Confidential Information constitutes the Company’s exclusive property, and that all of the restrictions on t he Participant’s activities contained in this Restricted Share Agreement and such other nondisclosure policies of the Company are required for the Company’s reasonable protection. Confidential Information shall not include any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement. This confidentiality provision shall survive the termination of this Restricted Share Agreement and shall not be limited by any other confidentiality agreements entered into with the Company or any of its affiliates.

With respect to any Confidential Information that constitutes a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force for so long as the particular information remains a trade secret or for the two year period immediately following termination of Participant’s employment for any reason, whichever is longer. With respect to any Confidential Information that does not constitute a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force during Participant’s employment and for the two year period immediately following termination of Participant’s employment for any reason.

3

The Participant agrees that the Participant shall promptly disclose to the Company in writing all information and inventions generated, conceived or first reduced to practice by him or her alone or in conjunction with others, during or after working hours, while in the employ of the Company (all of which is collectively referred to in this Restricted Share Agreement as ‘‘Proprietary Information’’); provided, however, that such Proprietary Information shall not include (a) any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement and (b) general business knowledge and work skills of the Participant, even if developed or improved by the Participant while in the employ of the Company. All such Proprietary Information shall be the exclusive property of the Company and is hereby assigned by the Participant to the Company. The Participant’s obligation relative to the disclosur e to the Company of such Proprietary Information anticipated in this Section shall continue beyond the Participant’s termination of employment and the Participant shall, at the Company’s expense, give the Company all assistance it reasonably requires to perfect, protect and use its right to the Proprietary Information.

For purposes of this Section, the ‘‘Company’’ refers to the Company and any incorporated or unincorporated affiliates of the Company, including any entity which becomes the Participant’s employer as a result of any reorganization or restructuring of the Company for any reason. The Company shall be entitled, in connection with its tax planning or other reasons, to terminate the Participant’s employment (which termination shall not be considered a termination for any purposes of this Restricted Share Agreement, any employment agreement or otherwise) in connection with an invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Participant’s employment relationship with such entity mutatis mutandis.

13.    Governing Law.    This Restricted Share Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

14.    Incorporation of Plan.    The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Shares and this Restricted Share Agreement shall be subject to all terms and conditions of the Plan.

15.    Amendments; Construction.    The Administrator may amend the terms of this Restricted Share Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the Participant hereunder without his or her consent. To the extent the terms of Section 12 above conflict with any prior agreement between the parties related to such subject matter, the more restrictive provision shall be deemed to apply. Headings to Sections of this Restricted Share Agreement are intended for convenience of reference only, are not part of this Restricted Share Agreement and shall have no effect on the interpretation hereof.

16.    Survival of Terms.    This Restricted Share Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. The terms of Section 12 shall expressly survive the forfeiture of the Restricted Shares and this Restricted Share Agreement.

17.    Rights as a Stockholder.    The Participant shall have no right with respect to Restricted Shares to vote as a stockholder of the Company during the period in which such Restricted Shares remain subject to a substantial risk of forfeiture.

18.    Compliance with Stock Ownership Guidelines.    The Participant hereby agrees to comply with the Company’s Stock Ownership Guidelines (as amended from time to time, the ‘‘Guidelines’’), to the extent such Guidelines are applicable, or become applicable, to the Participant. The Participant further acknowledges that, if he or she is not in compliance with such Guidelines (if applicable), the Administrator may refrain from issuing additional equity awards to the Participant and/or elect to pay the Participant’s annual bonus in the form of vested or unvested Common Stock.

19.    Agreement Not a Contract for Services.    Neither the Plan, the granting of the Restricted Shares, this Restricted Share Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant

4

has a right to continue to provide services as an officer, director, employee, consultant or advisor of the Company or any Subsidiary or Affiliate for any period of time or at any specific rate of compensation.

20.    Authority of the Administrator.    The Administrator shall have full authority to interpret and construe the terms of the Plan and this Restricted Share Agreement. The determination of the Administrator as to any such matter of interpretation or construction shall be final, binding and conclusive.

21.    Representations.    The Participant has reviewed with the Participant’s own tax advisors the Federal, state, local and foreign tax consequences of the transactions contemplated by this Restricted Share Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that he or she (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Restricted Share Agreement.

22.    Severability.    Should any provision of this Restricted Share Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Restricted Share Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Restricted Share Agreement. Moreover, if one or more of the provisions contained in this Restricted Share Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provision or provisions in any other jurisdiction.

23.    Acceptance.    The Participant hereby acknowledges receipt of a copy of the Plan and this Restricted Share Agreement. The Participant has read and understands the terms and provisions of the Plan and this Restricted Share Agreement, and accepts the Restricted Shares subject to all the terms and conditions of the Plan and this Restricted Share Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Restricted Share Agreement.

[Signature page to follow.]

5

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Share Agreement as of the day and year first above written.

BROOKDALE SENIOR LIVING INC.

By:

Name: Mark J. Schulte
Title: Co-Chief Executive Officer

By:

Name: W.E. Sheriff
Title: Co-Chief Executive Officer

[Name of Participant]

Participant

6

EXHIBIT A
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

1.    The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME OF TAXPAYER:

NAME OF SPOUSE:

ADDRESS:                                                                                                                                                      ;   

IDENTIFICATION NO. OF TAXPAYER:

IDENTIFICATION NUMBER OF SPOUSE:

TAXABLE YEAR:

2.    The property with respect to which the election is made is described as follows: shares of Common Stock, par value $.01 per share, of Brookdale Senior Living Inc. (‘‘Company’’).

3.    The date on which the property was transferred is: , 20.

4.    The property is subject to the following restrictions:

The property may not be transferred and is subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions in such agreement.

5.    The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $.

6.    The amount (if any) paid for such property is: $.

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated: , 200                                               &nbs p;                                                         

Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated: , 200                                               &nbs p;                                                         

Spouse of Taxpayer

7

EX-10.4

EXHIBIT 10.4

RESTRICTED SHARE AGREEMENT
UNDER THE BROOKDALE SENIOR LIVING INC.
OMNIBUS STOCK INCENTIVE PLAN

This Award Agreement (this ‘‘Restricted Share Agreement’’), dated as of [, 20] (the ‘‘Date of Grant’’), is made by and between Brookdale Senior Living Inc., a Delaware corporation (the ‘‘Company’’), and [       &n bsp;            ] (the ‘‘Participant’’).Capitalized terms not defined herein shall have the meaning ascribed to them in the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (as amended and/or restated from time to time, the ‘‘Plan’’). Where the context permits, references to the Company shall include any successor to the Company.

1.    Grant of Restricted Shares.    The Company hereby grants to the Participant [] shares of Common Stock (such shares, the ‘‘Restricted Shares’’), subject to all of the terms and conditions of this Restricted Share Agreement and the Plan.

2.    Lapse of Restrictions.

(a)    Vesting.

(i)    General.    Subject to the provisions set forth below, the restrictions on transfer set forth in Section 2(b) hereof shall lapse as follows:

(A)    Up to twenty-five percent (25%) of the Restricted Shares may vest on the first vesting date, [, 20], with the exact percentage vesting being determined by the degree to which the performance goal based on the Company’s Cash From Facility Operations (‘‘CFFO’’) for the preceding fiscal year, [20    ], has been met, in accor dance with the schedule set forth on Exhibit A hereto. Any Restricted Shares scheduled to vest on the first vesting date which do not vest on the first vesting date shall be forfeited.

(B)    Up to twenty-five percent (25%) of the Restricted Shares may vest on the second vesting date, [, 20], with the exact percentage vesting being determined by the degree to which the performance goal based on the Company’s CFFO for the preceding fiscal year, [20    ], has been met, in accordance with the schedule set forth on Exhibit A hereto. Any Restricted Shares scheduled to vest on the second vesting date which do not vest on the second vesting date shall be forfeited.

(C)    Up to twenty-five percent (25%) of the Restricted Shares may vest on the third vesting date, [, 20], with the exact percentage vesting being determined by the degree to which the performance goal based on the Company’s CFFO for the preceding fiscal year, [20    ], has been met, in accordance with the schedule set forth on Exhibit A hereto. Any Restricted Shares scheduled to vest on the third vesting date which do not vest on the third vesting date shall be forfeited.

(D)    Twenty-five percent (25%) of the Restricted Shares shall vest on the fourth vesting date, [, 20], subject only to the continued employment of the Participant on such vesting date.

Except as otherwise specifically set forth herein, vesting on any vesting date is subject to the continued employment of the Participant by the Company or one of its Subsidiaries or Affiliates as of such vesting date; provided, however, that, upon the occurrence of a Change in Control, the restrictions on transfer with respect to the Restricted Shares normally subject to vesting at the next vesting date shall immediately lapse and such Restricted Shares shall be fully vested effective upon the date of the Change in Control. In addition, upon the occurrence of a Change in Control, any tranches of Restricted Shares that would otherwise be subject to any of the performance-vesting requirements set forth in this subsection 2(a)(i) will be converted into time-vesting only tranches, vesting on the same vesting dates initially established for each such tranche, subject only to the Participant’s continued employment by the Company or one of its Subsidiaries or Aff iliates, and regardless of whether, or the extent to which, any such performance-vesting goals are achieved.

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Notwithstanding anything herein to the contrary, no fractional shares shall be issuable upon any vesting date. With respect to all Restricted Shares, the Participant shall be entitled to receive, and retain, all ordinary and extraordinary cash and stock dividends which may be declared on the Restricted Shares with a record date on or after the Date of Grant and before any forfeiture thereof (regardless of whether a share later vests or is forfeited).

(ii)    Following Certain Terminations of Employment.    Subject to the following paragraph, upon termination of the Participant’s employment with the Company and its Subsidiaries and Affiliates for any reason, any Restricted Shares as to which the restrictions on transferability described in this Section shall not already have lapsed shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind and neither the Participant nor any of the Participant’s successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such Restricted Shares.

Notwithstanding the foregoing or any other provision hereof to the contrary, in the event that the Participant’s employment is terminated by the Company (or its successor) or a Subsidiary or Affiliate without Cause at any time following a Change in Control, then any Restricted Shares that are not vested as of the date of such termination shall immediately vest. In addition, in the event that the Participant’s employment is terminated by death or Disability (either before or after a Change in Control), the tranche of Restricted Shares normally subject to vesting at the next vesting date shall remain subject hereto until the vesting date that immediately follows such termination (subject to earlier vesting upon the occurrence of an intervening Change in Control), with any remaining Restricted Shares being forfeited upon the date of such termination. If the Restricted Shares scheduled to vest on the next vesting date are subject to performance-vesting u nder subsections 2(a)(i)(A), (B) or (C) above, upon such vesting date the same number of Restricted Shares shall vest as would have vested if the Participant had remained employed by the Company on such vesting date (if any), and the remaining Restricted Shares (if any) shall be forfeited. If the Restricted Shares scheduled to vest on the next vesting date are subject only to time-vesting (whether pursuant to subsection 2(a)(i)(D) above or as a result of a previous Change in Control), such Restricted Shares shall vest on the next vesting date.

(b)    Restrictions.    Until the restrictions on transfer of the Restricted Shares lapse as provided in Section 2(a) hereof, or as otherwise provided in the Plan, no transfer of the Restricted Shares or any of the Participant’s rights with respect to the Restricted Shares, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Unless the Administrator determines otherwise, upon any attempt to transfer Restricted Shares or any rights in respect of Restricted Shares before the lapse of such restrictions, such Restricted Shares, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.

3.    Adjustments.    Pursuant to Section 5 of the Plan, in the event of a change in capitalization as described therein, the Administrator shall make such equitable changes or adjustments, as it deems necessary or appropriate, in its discretion, to the performance-vesting goals set forth in subsection 2(a)(i) and to the number and kind of securities or other property (including cash) issued or issuable in respect of outstanding Restricted Shares.

4.    Legend on Certificates.    The Participant agrees that any certificate issued for Restricted Shares (or, if applicable, any book entry statement issued for Restricted Shares) prior to the lapse of any outstanding restrictions relating thereto shall bear the following legend (in addition to any other legend or legends required under applicable federal and state securities laws):

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE (THE ‘‘RESTRICTIONS’’) AS SET FORTH IN THE BROOKDALE SENIOR LIVING INC. OMNIBUS STOCK INCENTIVE PLAN AND A RESTRICTED SHARE AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BROOKDALE SENIOR LIVING INC., COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY. ANY ATTEMPT TO DISPOSE OF THESE SHARES IN

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CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID AND WITHOUT EFFECT AND SHALL RESULT IN THE FORFEITURE OF SUCH SHARES AS PROVIDED BY SUCH PLAN AND AGREEMENT.

5.    Certain Changes.    The Administrator may accelerate the date on which the restrictions on transfer set forth in Section 2(b) hereof shall lapse or otherwise adjust any of the terms of the Restricted Shares; provided that, subject to Section 5 of the Plan and Section 20 hereof, no action under this Section shall adversely affect the Participant’s rights hereunder.

6.    Notices.    All notices and other communications under this Restricted Share Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties, as follows: (i) if to the Company, at Brookdale Senior Living Inc., 111 Westwood Place, Suite 200, Brentwood, TN 37027, Facsimile: (615) 564-8204, Attn: General Counsel and (ii) if to the Participant, using the contact information on file with the Company. Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

7.    Securities Laws Requirements.    The Company shall not be obligated to transfer any Common Stock to the Participant free of the restrictive legend described in Section 4 hereof or of any other restrictive legend, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (or any other federal or state statutes having similar requirements as may be in effect at that time).

8.    No Obligation to Register.    The Company shall be under no obligation to register the Restricted Shares pursuant to the Securities Act or any other federal or state securities laws.

9.    Protections Against Violations of Agreement.    No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the Restricted Shares by any holder thereof in violation of the provisions of this Restricted Share Agreement will be valid, and the Company will not transfer any of said Restricted Shares on its books nor will any of such Restricted Shares be entitled to vote, nor will any distributions be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce said provisions.

10.    Taxes.    The Participant shall pay to the Company promptly upon request, and in any event at the time the Participant recognizes taxable income with respect to the Restricted Shares (or, if the Participant makes an election under Section 83(b) of the Code in connection with such grant), an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Shares. The Participant may satisfy the foregoing requirement by making a payment to the Company in cash or, with the approval of the Administrator, in it sole discretion, by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares of Common Stock shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash. The Participant shall promptly notify the Company of any election made pursuant to Section 83(b) of the Code. A form of such election is attached hereto as Exhibit B.

THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.

The Participant acknowledges that the tax laws and regulations applicable to the Restricted Shares and the disposition of the Restricted Shares following vesting are complex and subject to change.

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11.    Failure to Enforce Not a Waiver.    The failure of the Company to enforce at any time any provision of this Restricted Share Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12.    Confidentiality.    The Participant acknowledges that during the period of his or her employment with the Company or any Subsidiary or Affiliate, he or she shall have access to the Company’s Confidential Information (as defined below). All books of account, records, systems, correspondence, documents, and any and all other data, in whatever form, concerning or containing any reference to the works and business of the Company or its affiliated companies shall belong to the Company and shall be given up to the Company whenever the Company requires the Participant to do so. The Participant agrees that the Participant shall not at any time during the term of the Participant’s employment or thereafter, without the Company’s prior written consent, disclose to any person (i ndividual or entity) any information or any trade secrets, plans or other information or data, in whatever form (including, without limitation, (a) any financing strategies and practices, pricing information and methods, training and operational procedures, advertising, marketing, and sales information or methodologies or financial information and (b) any Proprietary Information (as defined below)), concerning the Company’s or any of its affiliated companies’ or customers’ practices, businesses, procedures, systems, plans or policies (collectively, ‘‘Confidential Information’’), nor shall the Participant utilize any such Confidential Information in any way or communicate with or contact any such customer other than in connection with the Participant’s employment by the Company or any Subsidiary or Affiliate. The Participant hereby confirms that all Confidential Information constitutes the Company’s exclusive property, and that all of the restrictions on t he Participant’s activities contained in this Restricted Share Agreement and such other nondisclosure policies of the Company are required for the Company’s reasonable protection. Confidential Information shall not include any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement. This confidentiality provision shall survive the termination of this Restricted Share Agreement and shall not be limited by any other confidentiality agreements entered into with the Company or any of its affiliates.

With respect to any Confidential Information that constitutes a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force for so long as the particular information remains a trade secret or for the two year period immediately following termination of Participant’s employment for any reason, whichever is longer. With respect to any Confidential Information that does not constitute a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force during Participant’s employment and for the two year period immediately following termination of Participant’s employment for any reason.

The Participant agrees that the Participant shall promptly disclose to the Company in writing all information and inventions generated, conceived or first reduced to practice by him or her alone or in conjunction with others, during or after working hours, while in the employ of the Company (all of which is collectively referred to in this Restricted Share Agreement as ‘‘Proprietary Information’’); provided, however, that such Proprietary Information shall not include (a) any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement and (b) general business knowledge and work skills of the Participant, even if developed or improved by the Participant while in the employ of the Company. All such Proprietary Information shall be the exclusive property of the Company and is hereby assigned by the Participant to the Company. The Participant’s obligation relative to the disclosur e to the Company of such Proprietary Information anticipated in this Section shall continue beyond the Participant’s termination of employment and the Participant shall, at the Company’s expense, give the Company all assistance it reasonably requires to perfect, protect and use its right to the Proprietary Information.

For purposes of this Section, the ‘‘Company’’ refers to the Company and any incorporated or unincorporated affiliates of the Company, including any entity which becomes the Participant’s employer as a result of any reorganization or restructuring of the Company for any reason. The Company shall be entitled, in connection with its tax planning or other reasons, to terminate the Participant’s employment (which termination shall not be considered a termination for any purposes of this Restricted Share Agreement, any employment agreement or otherwise) in connection with an

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invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Participant’s employment relationship with such entity mutatis mutandis.

13.    Governing Law.    This Restricted Share Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

14.    Incorporation of Plan.    The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Shares and this Restricted Share Agreement shall be subject to all terms and conditions of the Plan.

15.    Amendments; Construction.    The Administrator may amend the terms of this Restricted Share Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the Participant hereunder without his or her consent. To the extent the terms of Section 12 above conflict with any prior agreement between the parties related to such subject matter, the more restrictive provision shall be deemed to apply. Headings to Sections of this Restricted Share Agreement are intended for convenience of reference only, are not part of this Restricted Share Agreement and shall have no effect on the interpretation hereof.

16.    Survival of Terms.    This Restricted Share Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. The terms of Section 12 shall expressly survive the forfeiture of the Restricted Shares and this Restricted Share Agreement.

17.    Rights as a Stockholder.    The Participant shall have no right with respect to Restricted Shares to vote as a stockholder of the Company during the period in which such Restricted Shares remain subject to a substantial risk of forfeiture.

18.    Compliance with Stock Ownership Guidelines.    The Participant hereby agrees to comply with the Company’s Stock Ownership Guidelines (as amended from time to time, the ‘‘Guidelines’’), to the extent such Guidelines are applicable, or become applicable, to the Participant. The Participant further acknowledges that, if he or she is not in compliance with such Guidelines (if applicable), the Administrator may refrain from issuing additional equity awards to the Participant and/or elect to pay the Participant’s annual bonus in the form of vested or unvested Common Stock.

19.    Agreement Not a Contract for Services.    Neither the Plan, the granting of the Restricted Shares, this Restricted Share Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue to provide services as an officer, director, employee, consultant or advisor of the Company or any Subsidiary or Affiliate for any period of time or at any specific rate of compensation.

20.    Authority of the Administrator.    The Administrator shall have full authority to interpret and construe the terms of the Plan and this Restricted Share Agreement (including, without limitation, the authority to determine whether, and the extent to which, any performance-vesting goals have been achieved). Pursuant to the terms of the Plan, the Administrator shall also have full authority to make equitable adjustments to any performance-vesting goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or i nfrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles. The determination of the Administrator as to any such matter(s) set forth in this Section 20 shall be final, binding and conclusive.

21.    Representations.    The Participant has reviewed with the Participant’s own tax advisors the Federal, state, local and foreign tax consequences of the transactions contemplated by this Restricted Share Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that he or she (and not the Company) shall be responsible for any tax liability that may arise as a result of the

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transactions contemplated by this Restricted Share Agreement.

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22.    Severability.    Should any provision of this Restricted Share Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Restricted Share Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Restricted Share Agreement. Moreover, if one or more of the provisions contained in this Restricted Share Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provision or provisions in any other jurisdiction.

23.    Acceptance.    The Participant hereby acknowledges receipt of a copy of the Plan and this Restricted Share Agreement. The Participant has read and understands the terms and provisions of the Plan and this Restricted Share Agreement, and accepts the Restricted Shares subject to all the terms and conditions of the Plan and this Restricted Share Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Restricted Share Agreement.

[Signature page to follow.]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Share Agreement as of the day and year first above written.

BROOKDALE SENIOR LIVING INC.

By:
Name: Mark J. Schulte
Title: Co-Chief Executive Officer

By:
Name: W.E. Sheriff
Title: Co-Chief Executive Officer

[Name of Participant]

Participant

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EXHIBIT A

[Intentionally omitted.]

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EXHIBIT B
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

1.    The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME OF TAXPAYER:

NAME OF SPOUSE:

ADDRESS:                                                                                                                                                      ;  

IDENTIFICATION NO. OF TAXPAYER:

IDENTIFICATION NUMBER OF SPOUSE:

TAXABLE YEAR:

2.    The property with respect to which the election is made is described as follows:

shares of Common Stock, par value $.01 per share, of Brookdale Senior Living Inc. (‘‘Company’’).

3.    The date on which the property was transferred is: , 20.

4.    The property is subject to the following restrictions:

The property may not be transferred and is subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions in such agreement.

5.    The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $.

6.    The amount (if any) paid for such property is: $.

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated: , 200						Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: , 200						Spouse of Taxpayer

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EX-10.5

EXHIBIT 10.5

RESTRICTED SHARE AGREEMENT
UNDER THE BROOKDALE SENIOR LIVING INC.
OMNIBUS STOCK INCENTIVE PLAN

This Award Agreement (this ‘‘Restricted Share Agreement’’), dated as of [, 20] (the ‘‘Date of Grant’’), is made by and between Brookdale Senior Living Inc., a Delaware corporation (the ‘‘Company’’), and [       &n bsp;            ] (the ‘‘Participant’’).Capitalized terms not defined herein shall have the meaning ascribed to them in the Brookdale Senior Living Inc. Omnibus Stock Incentive Plan (as amended and/or restated from time to time, the ‘‘Plan’’). Where the context permits, references to the Company shall include any successor to the Company.

1.    Grant of Restricted Shares.    The Company hereby grants to the Participant [] shares of Common Stock (such shares, the ‘‘Restricted Shares’’), subject to all of the terms and conditions of this Restricted Share Agreement and the Plan.

	2.	Lapse of Restrictions.

(a)    Vesting.

(i)    General.    Subject to the provisions set forth below, the restrictions on transfer set forth in Section 2(b) hereof shall lapse as follows:

(A)    Up to twenty-five percent (25%) of the Restricted Shares may vest on the first vesting date, [, 20], with the exact percentage vesting being determined by the degree to which the performance goal based on the Company’s Cash From Facility Operations (‘‘CFFO’’) for the preceding fiscal year, [20], has been met, in accordance with the schedule set forth on Exhibit A hereto. Any Restricted Shares scheduled to vest on the first vesting date which do not vest on the first vesting date shall be forfeited.

(B)    Up to twenty-five percent (25%) of the Restricted Shares may vest on the second vesting date, [, 20], with the exact percentage vesting being determined by the degree to which the performance goal based on the Company’s CFFO for the preceding fiscal year, [20    ], has been met, in accordance with the schedule set forth on Exhibit A hereto. Any Restricted Shares scheduled to vest on the second vesting date which do not vest on the second vesting date shall be forfeited.

(C)    Up to twenty-five percent (25%) of the Restricted Shares may vest on the third vesting date, [, 20], with the exact percentage vesting being determined by the degree to which the performance goal based on the Company’s CFFO for the preceding fiscal year, [20    ], has been met, in accordance with the schedule set forth on Exhibit A hereto. Any Restricted Shares scheduled to vest on the third vesting date which do not vest on the third vesting date shall be forfeited.

(D)    Twenty-five percent (25%) of the Restricted Shares shall vest on the fourth vesting date, [, 20], subject only to the continued employment of the Participant on such vesting date.

Except as otherwise specifically set forth herein, vesting on any vesting date is subject to the continued employment of the Participant by the Company or one of its Subsidiaries or Affiliates as of such vesting date; provided, however, that, upon the occurrence of a Change in Control, the restrictions on transfer with respect to the Restricted Shares normally subject to vesting at the next vesting date shall immediately lapse and such Restricted Shares shall be fully vested effective upon the date of the Change in Control. In addition, upon the occurrence of a Change in Control, any tranches of Restricted Shares that would otherwise be subject to any of the performance-vesting requirements set forth in this subsection 2(a)(i) will be converted into time-vesting only tranches, vesting on the same vesting dates initially established for each such tranche, subject only to the Participant’s continued employment by the Company or one of its Subsidiaries or Aff iliates, and regardless of whether, or the extent to which, any such performance-vesting goals are achieved. Notwithstanding anything herein to the contrary, no fractional shares shall be issuable upon any vesting date.

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(ii)     Following Certain Terminations of Employment.    Subject to the following paragraph, upon termination of the Participant’s employment with the Company and its Subsidiaries and Affiliates for any reason, any Restricted Shares as to which the restrictions on transferability described in this Section shall not already have lapsed shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind and neither the Participant nor any of the Participant’s successors, heirs, assigns, or personal representatives shall thereafter have any further rights or interests in such Restricted Shares.

Notwithstanding the foregoing or any other provision hereof to the contrary, in the event that the Participant’s employment is terminated by the Company (or its successor) or a Subsidiary or Affiliate without Cause at any time following a Change in Control, then any Restricted Shares that are not vested as of the date of such termination shall immediately vest. In addition, in the event that the Participant’s employment is terminated by death or Disability (either before or after a Change in Control), the tranche of Restricted Shares normally subject to vesting at the next vesting date shall remain subject hereto until the vesting date that immediately follows such termination (subject to earlier vesting upon the occurrence of an intervening Change in Control), with any remaining Restricted Shares being forfeited upon the date of such termination. If the Restricted Shares scheduled to vest on the next vesting date are subject to performance-vesting u nder subsections 2(a)(i)(A), (B) or (C) above, upon such vesting date the same number of Restricted Shares shall vest as would have vested if the Participant had remained employed by the Company on such vesting date (if any), and the remaining Restricted Shares (if any) shall be forfeited. If the Restricted Shares scheduled to vest on the next vesting date are subject only to time-vesting (whether pursuant to subsection 2(a)(i)(D) above or as a result of a previous Change in Control), such Restricted Shares shall vest on the next vesting date.

(b)    Restrictions.    Until the restrictions on transfer of the Restricted Shares lapse as provided in Section 2(a) hereof, or as otherwise provided in the Plan, no transfer of the Restricted Shares or any of the Participant’s rights with respect to the Restricted Shares, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Unless the Administrator determines otherwise, upon any attempt to transfer Restricted Shares or any rights in respect of Restricted Shares before the lapse of such restrictions, such Restricted Shares, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.

3.    Adjustments.    Pursuant to Section 5 of the Plan, in the event of a change in capitalization as described therein, the Administrator shall make such equitable changes or adjustments, as it deems necessary or appropriate, in its discretion, to the performance-vesting goals set forth in subsection 2(a)(i) and to the number and kind of securities or other property (including cash) issued or issuable in respect of outstanding Restricted Shares.

4.    Legend on Certificates.    The Participant agrees that any certificate issued for Restricted Shares (or, if applicable, any book entry statement issued for Restricted Shares) prior to the lapse of any outstanding restrictions relating thereto shall bear the following legend (in addition to any other legend or legends required under applicable federal and state securities laws):

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE (THE ‘‘RESTRICTIONS’’) AS SET FORTH IN THE BROOKDALE SENIOR LIVING INC. OMNIBUS STOCK INCENTIVE PLAN AND A RESTRICTED SHARE AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BROOKDALE SENIOR LIVING INC., COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY. ANY ATTEMPT TO DISPOSE OF THESE SHARES IN CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID AND WITHOUT EFFECT AND SHALL RESULT IN THE FORFEITURE OF SUCH SHARES AS PROVIDED BY SUCH PLAN AND AGREEMENT.

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5.    Certain Changes.    The Administrator may accelerate the date on which the restrictions on transfer set forth in Section 2(b) hereof shall lapse or otherwise adjust any of the terms of the Restricted Shares; provided that, subject to Section 5 of the Plan and Section 20 hereof, no action under this Section shall adversely affect the Participant’s rights hereunder.

6.    Notices.    All notices and other communications under this Restricted Share Agreement shall be in writing and shall be given by facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours after transmission by facsimile to the respective parties, as follows: (i) if to the Company, at Brookdale Senior Living Inc., 111 Westwood Place, Suite 200, Brentwood, TN 37027, Facsimile: (615) 564-8204, Attn: General Counsel and (ii) if to the Participant, using the contact information on file with the Company. Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

7.    Securities Laws Requirements.    The Company shall not be obligated to transfer any Common Stock to the Participant free of the restrictive legend described in Section 4 hereof or of any other restrictive legend, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (or any other federal or state statutes having similar requirements as may be in effect at that time).

8.    No Obligation to Register.    The Company shall be under no obligation to register the Restricted Shares pursuant to the Securities Act or any other federal or state securities laws.

9.    Protections Against Violations of Agreement.    No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the Restricted Shares by any holder thereof in violation of the provisions of this Restricted Share Agreement will be valid, and the Company will not transfer any of said Restricted Shares on its books nor will any of such Restricted Shares be entitled to vote, nor will any distributions be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce said provisions.

10.    Taxes.    The Participant shall pay to the Company promptly upon request, and in any event at the time the Participant recognizes taxable income with respect to the Restricted Shares (or, if the Participant makes an election under Section 83(b) of the Code in connection with such grant), an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Shares. The Participant may satisfy the foregoing requirement by making a payment to the Company in cash or, with the approval of the Administrator, in it sole discretion, by delivering already owned unrestricted shares of Common Stock, in each case, having a value equal to the minimum amount of tax required to be withheld. Such shares of Common Stock shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined. Fractional share amounts shall be settled in cash. The Participant shall promptly notify the Company of any election made pursuant to Section 83(b) of the Code. A form of such election is attached hereto as Exhibit B.

THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.

The Participant acknowledges that the tax laws and regulations applicable to the Restricted Shares and the disposition of the Restricted Shares following vesting are complex and subject to change.

11.    Failure to Enforce Not a Waiver.    The failure of the Company to enforce at any time any provision of this Restricted Share Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12.    Confidentiality.    The Participant acknowledges that during the period of his or her employment with the Company or any Subsidiary or Affiliate, he or she shall have access to the

3

Company’s Confidential Information (as defined below). All books of account, records, systems, correspondence, documents, and any and all other data, in whatever form, concerning or containing any reference to the works and business of the Company or its affiliated companies shall belong to the Company and shall be given up to the Company whenever the Company requires the Participant to do so. The Participant agrees that the Participant shall not at any time during the term of the Participant’s employment or thereafter, without the Company’s prior written consent, disclose to any person (individual or entity) any information or any trade secrets, plans or other information or data, in whatever form (including, without limitation, (a) any financing strategies and practices, pricing information and methods, training and operational procedures, advertising, marketing, and sales information or methodologies or financial information and (b) any Proprietary Information (as defined below)), concer ning the Company’s or any of its affiliated companies’ or customers’ practices, businesses, procedures, systems, plans or policies (collectively, ‘‘Confidential Information’’), nor shall the Participant utilize any such Confidential Information in any way or communicate with or contact any such customer other than in connection with the Participant’s employment by the Company or any Subsidiary or Affiliate. The Participant hereby confirms that all Confidential Information constitutes the Company’s exclusive property, and that all of the restrictions on the Participant’s activities contained in this Restricted Share Agreement and such other nondisclosure policies of the Company are required for the Company’s reasonable protection. Confidential Information shall not include any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement. This confidentiality provision shall survive the terminat ion of this Restricted Share Agreement and shall not be limited by any other confidentiality agreements entered into with the Company or any of its affiliates.

With respect to any Confidential Information that constitutes a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force for so long as the particular information remains a trade secret or for the two year period immediately following termination of Participant’s employment for any reason, whichever is longer. With respect to any Confidential Information that does not constitute a ‘‘trade secret’’ pursuant to applicable law, the restrictions described above shall remain in force during Participant’s employment and for the two year period immediately following termination of Participant’s employment for any reason.

The Participant agrees that the Participant shall promptly disclose to the Company in writing all information and inventions generated, conceived or first reduced to practice by him or her alone or in conjunction with others, during or after working hours, while in the employ of the Company (all of which is collectively referred to in this Restricted Share Agreement as ‘‘Proprietary Information’’); provided, however, that such Proprietary Information shall not include (a) any information that has otherwise been disclosed to the public not in violation of this Restricted Share Agreement and (b) general business knowledge and work skills of the Participant, even if developed or improved by the Participant while in the employ of the Company. All such Proprietary Information shall be the exclusive property of the Company and is hereby assigned by the Participant to the Company. The Participant’s obligation relative to the disclosur e to the Company of such Proprietary Information anticipated in this Section shall continue beyond the Participant’s termination of employment and the Participant shall, at the Company’s expense, give the Company all assistance it reasonably requires to perfect, protect and use its right to the Proprietary Information.

For purposes of this Section, the ‘‘Company’’ refers to the Company and any incorporated or unincorporated affiliates of the Company, including any entity which becomes the Participant’s employer as a result of any reorganization or restructuring of the Company for any reason. The Company shall be entitled, in connection with its tax planning or other reasons, to terminate the Participant’s employment (which termination shall not be considered a termination for any purposes of this Restricted Share Agreement, any employment agreement or otherwise) in connection with an invitation from another affiliate of the Company to accept employment with such affiliate in which case the terms and conditions hereof shall apply to the Participant’s employment relationship with such entity mutatis mutandis.

13.    Governing Law.    This Restricted Share Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

4

14.    Incorporation of Plan.    The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Shares and this Restricted Share Agreement shall be subject to all terms and conditions of the Plan.

15.    Amendments; Construction.    The Administrator may amend the terms of this Restricted Share Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights of the Participant hereunder without his or her consent. To the extent the terms of Section 12 above conflict with any prior agreement between the parties related to such subject matter, the more restrictive provision shall be deemed to apply. Headings to Sections of this Restricted Share Agreement are intended for convenience of reference only, are not part of this Restricted Share Agreement and shall have no effect on the interpretation hereof.

16.    Survival of Terms.    This Restricted Share Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. The terms of Section 12 shall expressly survive the forfeiture of the Restricted Shares and this Restricted Share Agreement.

17.    Rights as a Stockholder.    The Participant shall have no right with respect to Restricted Shares to vote as a stockholder of the Company during the period in which such Restricted Shares remain subject to a substantial risk of forfeiture (the ‘‘Restricted Period’’) or to receive dividends (or other distributions) which are declared with respect to Restricted Shares with a record date during the Restricted Period.

18.    Compliance with Stock Ownership Guidelines.    The Participant hereby agrees to comply with the Company’s Stock Ownership Guidelines (as amended from time to time, the ‘‘Guidelines’’), to the extent such Guidelines are applicable, or become applicable, to the Participant. The Participant further acknowledges that, if he or she is not in compliance with such Guidelines (if applicable), the Administrator may refrain from issuing additional equity awards to the Participant and/or elect to pay the Participant’s annual bonus in the form of vested or unvested Common Stock.

19.    Agreement Not a Contract for Services.    Neither the Plan, the granting of the Restricted Shares, this Restricted Share Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue to provide services as an officer, director, employee, consultant or advisor of the Company or any Subsidiary or Affiliate for any period of time or at any specific rate of compensation.

20.    Authority of the Administrator.    The Administrator shall have full authority to interpret and construe the terms of the Plan and this Restricted Share Agreement (including, without limitation, the authority to determine whether, and the extent to which, any performance-vesting goals have been achieved). Pursuant to the terms of the Plan, the Administrator shall also have full authority to make equitable adjustments to any performance-vesting goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or Affiliate or the financial statements of the Company or any Subsidiary or Affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or i nfrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles. The determination of the Administrator as to any such matter(s) set forth in this Section 20 shall be final, binding and conclusive.

21.    Representations.    The Participant has reviewed with the Participant’s own tax advisors the Federal, state, local and foreign tax consequences of the transactions contemplated by this Restricted Share Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that he or she (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Restricted Share Agreement.

22.    Severability.    Should any provision of this Restricted Share Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not affect the validity of the remainder of this Restricted Share Agreement, the balance of which shall

5

continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this original Restricted Share Agreement. Moreover, if one or more of the provisions contained in this Restricted Share Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear, and such determination by such judicial body shall not affect the enforceability of such provision or provisions in any other jurisdiction.

23.    Acceptance.    The Participant hereby acknowledges receipt of a copy of the Plan and this Restricted Share Agreement. The Participant has read and understands the terms and provisions of the Plan and this Restricted Share Agreement, and accepts the Restricted Shares subject to all the terms and conditions of the Plan and this Restricted Share Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Restricted Share Agreement.

[Signature page to follow.]

6

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Share Agreement as of the day and year first above written.

BROOKDALE SENIOR LIVING INC.

By:
Name: Mark J. Schulte
Title: Co-Chief Executive Officer

By:
Name: W.E. Sheriff
Title: Co-Chief Executive Officer

[Name of Participant]

Participant

7

EXHIBIT A

[Intentionally omitted.]

8

EXHIBIT B
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

1.    The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME OF TAXPAYER:

NAME OF SPOUSE:

ADDRESS:                                                                                                                                                      ;   

IDENTIFICATION NO. OF TAXPAYER:

IDENTIFICATION NUMBER OF SPOUSE:

TAXABLE YEAR:

2.    The property with respect to which the election is made is described as follows:

shares of Common Stock, par value $.01 per share, of Brookdale Senior Living Inc. (‘‘Company’’).

3.    The date on which the property was transferred is: , 20.

4.    The property is subject to the following restrictions:

The property may not be transferred and is subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions in such agreement.

5.    The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $.

6.    The amount (if any) paid for such property is: $.

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.    

Dated: , 200                                              &nbs p;                                        

Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated: , 200                                              &nbs p;                                        

Spouse of Taxpayer

9

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark J. Schulte, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Brookdale Senior Living Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007						/s/ Mark J. Schulte
						Mark J. Schulte Co-Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, W.E. Sheriff, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Brookdale Senior Living Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007			/s/ W.E. Sheriff
			W.E. Sheriff Co-Chief Executive Officer

EX-31.3

EXHIBIT 31.3

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark W. Ohlendorf, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Brookdale Senior Living Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007			/s/ Mark W. Ohlendorf
			Mark W. Ohlendorf Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICERS AND CHIEF FINANCIAL
OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Brookdale Senior Living Inc. (the ‘‘Company’’) for the period ended June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), Mark J. Schulte, as Co-Chief Executive Officer of the Company, W.E. Sheriff, as Co-Chief Executive Officer of the Company, and Mark W. Ohlendorf, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark J. Schulte                                
Name: Mark J. Schulte
Title: Co-Chief Executive Officer
Date: August 8, 2007

/s/ W.E. Sheriff                                        
Name: W.E. Sheriff
Title: Co-Chief Executive Officer
Date: August 8, 2007

/s/ Mark W. Ohlendorf                            
Name: Mark W. Ohlendorf
Title: Chief Financial Officer
Date: August 8, 2007