Item 11.    Executive Compensation

In 2017, Mr. Smith served as our President and Chief Executive Officer and a member of the Board, Ms. Baier served as our Chief Financial Officer and Mr. Richardson served as our Executive Vice President and Chief Administrative Officer. Effective February 28, 2018, the Board appointed Ms. Baier as our President and Chief Executive Officer and a member of the Board, at which time Mr. Smith's service was terminated without cause. Mr. Richardson's service as our Executive Vice President and Chief Administrative Officer was terminated without cause effective March 9, 2018. Mr. Diab resigned from his role as Chief Operating Officer effective October 28, 2017.

	What We Do			What We Do Not
	– Pay for Performance  – A significant portion of our NEOs’ target direct compensation is awarded in the form of variable, at-risk compensation. – Caps on Payouts  – We cap payouts under our annual cash incentive plan and long term incentive awards (no additional shares beyond target performance). – Preserving Tax Deductibility  – For 2017 and prior years, we have structured incentive compensation opportunities with the intent that they will qualify as performance-based compensation under Section 162(m) of the Code to the extent possible. – Stock Ownership and Retention Guidelines  – We maintain stock ownership and retention guidelines (5x base salary for the CEO; 4x base salary for the CFO; 3x base salary/cash retainer for the other NEOs and directors). – Annual Say on Pay  – We annually conduct a “say-on-pay” advisory vote (rather than on a less frequent basis) to solicit our stockholders’ views on our executive compensation programs. – Independent Committee and Consultant  – The Committee is comprised solely of independent directors, and it retains F.W. Cook as its independent compensation consultant.			– No Above Median Benchmarking  – We do not benchmark target compensation above the median of our peer group. – No Excessive Guaranteed Compensation  – Our annual cash incentive plan and our performance-based restricted stock awards do not have minimum guaranteed payout levels, and therefore this compensation is “at risk.” – No Excise Tax Gross Ups  – We do not provide tax gross-ups on change-in-control payments. – No Pledging or Hedging  – Our insider trading policy prohibits executive officers and directors from pledging shares or engaging in short-sale, hedging, or other derivative transactions involving our securities. – No Defined Benefit Pension Plans  – We do not offer pensions or supplemental executive retirement plans (SERPs), only a 401(k) Plan on the same terms as other employees. – No Stock Options  – We have never granted stock options.

The Compensation Committee of the Board (the “Committee”) administers our executive compensation program, including overseeing our compensation plans and policies, performing an annual review of executive compensation plans, and reviewing and approving all decisions regarding the compensation of executive officers. At the request of the Committee, our Chief Executive Officer and certain of our other executive officers participate in Committee meetings (other than when their own compensation is determined) and assist the Committee by, for example, providing information to the Committee and making recommendations regarding our compensation program and levels. Our Chief Executive Officer recommends to the Committee the compensation of our other executive officers, subject to the Committee’s ultimate authority and responsibility for determining the form and amount of executive compensation.

The Committee values the opinions expressed by stockholders in the annual say-on-pay vote and considers the outcomes of such votes when making executive compensation decisions. At our 2017 annual meeting of stockholders, approximately 87% of the votes cast on the annual vote to approve the compensation of our named executive officers (referred to as “say-on-pay”) supported our executive compensation program. The Committee believes this vote affirmed our stockholders’ support of our executive compensation approach and provided assurance the program is reasonable and aligned with stockholder expectations.

Our executive compensation program is designed to reward performance, align executives’ interests with those of our stockholders and attract and retain key executives responsible for our success. To accomplish these objectives, we intend to provide compensation that is competitive externally, fair internally, and tied to performance.

Our executive compensation program consists of these key elements:

Competitive market practices, including those of a self-selected peer group, are one of many factors the Committee typically considers in making executive compensation decisions. The Committee reviews market data to provide an external frame of reference on range and reasonableness of our compensation levels and practices, but not as a primary or determinative factor. The Committee’s objective continues to be, over the long-term, to target executive compensation at or slightly below the median of our peer group for comparable positions, with potential upside opportunity if supported by company financial and operating performance.

In recent years, the Committee annually has engaged Frederic W. Cook & Co., Inc. ("F.W. Cook") to review and, if advisable, recommend updates to, the peer group used by the Committee for reviewing our executive

compensation program, and to conduct an independent market analysis using that peer group. F.W. Cook's report from 2016 had indicated that the target total direct compensation for our named executive officers (other than Mr. Coco, who joined the Company in 2016) was at or near the median of our peer group for similarly titled roles and that the design of our short-term incentive plan, including the performance criteria and amounts, and relative weighting thereof, were generally consistent with peer practices. In light of F.W. Cook's prior-year report, the Company's performance falling below expectations in 2016, and the Committee's determination that the realized pay of the named executive officers for 2016 appropriately reflected such performance, the Committee determined that no material changes would be made to the 2017 executive compensation program. As a result, the Committee did not request F.W. Cook to conduct a peer-group review or market analysis for 2017 compensation decisions.

The peer group used for 2016 executive compensation decisions, shown below, included 18 companies in the health care facilities, healthcare services, managed healthcare, healthcare REIT, hospitality and restaurant industries. The companies contained in the peer group were chosen to be reflective of our levels of revenue, market capitalization and enterprise value, and number of employees

F.W. Cook reports directly to the Committee and does not provide any services to the Company other than services provided to the Committee. The Committee conducted a specific review of its relationship with F.W. Cook, and determined that its work for the Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Act of 2010 by the SEC and by the NYSE.

In accordance with its charter, the Committee conducts an assessment annually of the relationship between our risk management policies and practices, corporate strategy and our compensation arrangements. As part of this assessment, the Committee evaluates whether any incentive and other forms of pay encourage unnecessary or excessive risk taking. For our 2017 executive compensation program, the Committee concluded that the program, including the performance goals and targets used for incentive compensation, is appropriately structured not to encourage unnecessary or excessive risk taking.

In light of F.W. Cook's prior-year report, the Company's performance falling below expectations in 2016, and the Committee's determination that the realized pay of the named executive officers for 2016 appropriately reflected such performance, the Committee determined that no material changes would be made to the 2017 executive compensation program. The Committee noted that Mr. Coco's compensation arrangements had recently been determined in connection with his joining the Company in the fourth quarter of 2016.

Specifically, the Committee determined not to increase the base salary of the named executive officers and determined that the target annual cash incentive opportunity for 2017 would remain at 125% of base salary for Mr.

Smith and 100% of each of the other named executive officers, consistent with 2016 levels. The Committee also determined to continue to use the relative weighting of company financial performance measures (75% for Mr. Smith and 70% for the other named executive officers) and individual performance measures (25% for Mr. Smith and 30% for the other named executive officers). For the company financial measures, the Committee determined to continue to use Combined Adjusted Free Cash Flow and resident fee revenue, and to begin to use Facility Operating Income, as the company financial performance measures.

The Committee determined to grant long-term incentive awards with grant date fair values consistent with the awards made in 2016, with the exception of Mr. Smith, who did not receive an award, and Mr. Coco, whose award amount was set forth in his offer letter in connection with his joining the Company in the fourth quarter of 2016. The Committee was prepared to make annual grants of time- and performance-based restricted stock to Mr. Smith with an aggregate grant date fair value of $5,225,000, consistent with the grant date fair values of his 2016 awards. However, Mr. Smith unilaterally requested that the Committee not consider him for the 2017 awards. The Committee accepted Mr. Smith’s request, and Mr. Smith waived any rights to such awards and any rights resulting from the Committee’s failure to make such awards and confirmed that failure to receive such awards would not entitle him to terminate his employment agreement for “good reason.”

The table below sets forth the target total direct compensation (base salary, annual cash incentive, and long-term equity) approved by the Committee for each of our named executive officers for 2017, other than Mr. Diab who resigned effective October 28, 2017. Performance-based opportunities are presented at target and long-term incentive awards are presented at grant date fair value.

To provide a better understanding of the results of our 2017 executive compensation program, the following table sets forth the amount of total direct compensation actually realized by our named executive officers, other than Mr. Diab, which includes actual salary earned, actual payments under our 2017 annual cash incentive plan and the value of restricted stock awards that vested during 2017. For comparison purposes, the following table also sets forth the amount of total direct compensation actually realized for 2015 and 2016 by our named executive officers who served a full year and were named executive officers during such years.

We believe the amount of total direct compensation realized by our named executive officers demonstrates the pay-for-performance nature of our executive compensation program in the context of our 2017 and 2016 results being below our expectations, as reflected by Mr. Smith's earning significantly less in 2017 than his two prior years' total compensation reported in the Summary Compensation Table and our other named executive officers' earning significantly less than the amounts targeted by the Committee and amounts reported in the Summary Compensation Table for 2017.

With respect to the annual cash incentive opportunity, during 2017 we failed to achieve the threshold level of performance of the Combined Adjusted Free Cash Flow and resident fee revenue performance measures, and we achieved 28.3% of the target level of performance of the Facility Operating Income performance measure (reflecting the Committee's equitable adjustment of our results for the impact of Hurricanes Harvey and Irma and the California wildfires). The Committee determined that Mr. Smith achieved 97.5% of his individual performance goals, and that the other named executive officers shown in the table achieved between 76.0% and 100.0% of their individual performance goals. As a result, Mr. Smith earned 30.0% , and each of the other named executive officers earned between 28.5% and 35.7% , of his or her target annual cash incentive opportunity.

In addition, shares of performance-based restricted stock granted to Mr. Smith, Ms. Patchett and Mr. Richardson in 2014 were eligible to vest on February 27, 2017, dependent on the level of achievement of performance targets based on our three-year compound annual growth rate (“CAGR”) of Cash From Facility Operations (“CFFO”) per share measured based on our CFFO per share in 2016 versus a 2013 base year. We failed to achieve the threshold performance for this measure, and as a result the shares eligible to vest on such date were forfeited (Mr. Smith––45,122 shares; Ms. Patchett––4,998; and Mr. Richardson––9,789 shares).

During 2017, the named executive officers realized the amounts shown in the table above upon the vesting of time-based restricted stock granted in 2013 through 2016 (Ms. Baier— 24,967 shares; Mr. Smith–– 92,746 shares; Mr. Coco–– 9,779 shares; Ms. Patchett–– 16,226 shares; and Mr. Richardson–– 24,878 shares), and performance-based restricted stock. Shares of performance-based restricted stock granted in 2013 to Mr. Smith, Ms. Patchett and Mr. Richardson were eligible to vest on February 27, 2017 dependent upon the level of achievement of performance targets based on our 2016 return on investment (“ROI”) on all Program Max projects approved in 2013 and completed prior to the end of 2014. Our actual ROI exceeded the target performance level and, therefore, each of such individuals vested with respect to 100% of the shares eligible to vest on such date (Mr. Smith––16,276 shares; Ms. Patchett––1,677 shares; and Mr. Richardson––3,279 shares). In addition, Mr. Smith’s 26,871 shares of performance-based restricted stock granted during 2015 and eligible to vest on February 27, 2017 vested on such date upon the Committee’s determination that the performance goals established by the Committee based on integration of purchasing systems and processes related to our acquisition of Emeritus Corporation had been met.

During 2017, each of the named executive officers was eligible to receive cash incentive compensation based on company and individual performance. The cash incentive opportunities were denominated as separate cash-settled performance awards under our 2014 Omnibus Incentive Plan, which was approved by our stockholders, so that amounts paid would be deductible under Section 162(m) of the Internal Revenue Code. As set forth in our 2014 Omnibus Incentive Plan, the aggregate maximum payout to an individual for the 2017 annual cash incentive plan was $2,000,000. The annual cash incentive opportunity and results under the annual cash incentive plan are described below.

2017 Annual Cash Incentive Opportunity

The 2017 target total cash incentive opportunity for each of our named executive officers, calculated as a percentage of 2017 base salary, was consistent with our 2016 executive compensation program. Pursuant to his offer letter in connection with his hiring in the fourth quarter of 2016, Mr. Coco's target total cash incentive opportunity was set at 100% of base salary for 2017.

The company performance objectives of the cash incentive opportunity were to be paid following the end of the fiscal year, dependent on company performance results (weighted 75% for Mr. Smith and 70% for the other named executive officers) and individual performance results (weighted 25% for Mr. Smith and 30% for the other named executive officers). The company performance objectives were Combined Adjusted Free Cash Flow, Facility Operating Income and resident fee revenue. The following table shows the target cash incentive opportunity and the relative weighting of the company financial objectives and individual objectives.

The company performance objectives were developed by management and approved by the Committee. The Committee determined to use such measures for 2017 because the measures were used by management and the Board in the budgeting process and when evaluating our results. In addition, the constituent parts of Combined Adjusted Free Cash Flow were used in the Company’s forward-looking earnings guidance provided to the investment community and in its quarterly financial reporting.

For the individual objectives component of the annual cash incentive plan, the Committee determined to continue to use a rigorous process in setting goals, identifying achievement criteria and scoring goal achievement to maintain the pay-for-performance nature of the individual objectives and to differentiate results among executives and their objectives. The individual performance objectives for each named executive officer, other than Mr. Smith, were recommended by Mr. Smith and approved by the Committee. Mr. Smith’s individual performance objectives were approved by the Committee and reviewed with the Board.

Company Financial Measures and Targets

Combined Adjusted Free Cash Flow was defined as the Company's consolidated Adjusted Free Cash Flow plus its proportionate share of its unconsolidated ventures' Adjusted Free Cash Flow. The calculation of Combined Adjusted Free Cash Flow excluded transaction, transaction-related and severance costs, and the performance targets could be equitably adjusted at the discretion of the Committee to reflect transaction activity and capital expenditures associated with catastrophic casualty losses. The targeted level of Combined Adjusted Free Cash Flow under the annual cash incentive plan was $207.4 million, which was consistent with our initial 2017 budget and business plan approved by the Board in January 2017 and 11.2% higher than our actual 2016 Combined Adjusted Free Cash Flow results.

Facility Operating Income was defined as the Company's senior housing segment operating income plus ancillary services segment operating income. The calculation of Facility Operating Income performance targets could be equitably adjusted at the discretion of the Committee to reflect transaction activity. The targeted level of Facility Operating Income for 2017 was $1,248.1 million, which was consistent with our 2017 budget and business plan approved by the Board in January 2017. The targeted level of Facility Operating Income represented a year-over-year decline of 8.8% for 2017, which reflected the impact of disposition activity completed since the beginning of 2016 and planned for 2017.

The targeted level of resident fee revenue for 2017 was $3,839.1 million. The revenue performance targets could be equitably adjusted at the discretion of the Committee to reflect transaction activity. The targeted level of resident fee revenue represented a year-over-year decline of 7.9% for 2017, which reflected the impact of disposition activity completed since the beginning of 2016 and planned for 2017.

Payouts as a percentage of target for each of the company performance measures are shown below and were to be interpolated between the steps shown below.

Individual Objectives

The individual objectives for 2017 were intended to focus executives on key strategic initiatives supporting our business plan, based on their roles in achieving such initiatives. The objectives were designed to be reasonably achievable, but because they would require significant additional efforts on behalf of each of the executives, the cash incentive opportunity linked to individual performance was at risk. The level of achievement of the individual objectives for each named executive officer other than Mr. Smith was to be determined by the Committee following the end of the fiscal year upon the recommendation of Mr. Smith. The level of achievement of Mr. Smith’s individual objectives was to be determined by the Committee and reviewed with the Board. Achievement of the targeted level of performance would have resulted in 100% of this component of the opportunity of the being paid, which represented the maximum amount payable to an executive with respect to the individual performance objectives.

Combined Adjusted Free Cash Flow

We achieved Combined Adjusted Free Cash Flow for 2017, excluding transaction, transaction-related and severance costs, of approximately $156.3 million, which was below the threshold performance target. When evaluating our performance relative to the performance targets, the Committee considered exercising its discretion under our 2014 Omnibus Incentive Plan to equitably adjust the payout to reflect our actual 2017 results excluding costs and lost revenue related to Hurricanes Harvey and Irma and the California wildfires, insurance proceeds from such events, the unplanned reduction in our proportionate responsibility in the capital expenditure budget of one of our unconsolidated ventures and debt modification costs. However, even if such adjustments were made, our adjusted 2017 Combined Adjusted Free Cash Flow performance would have been below the threshold performance target. Accordingly, the Committee determined that no portion of the opportunity based on this objective would be paid.

Combined Adjusted Free Cash Flow is a financial measure that is not calculated in accordance with generally accepted accounting principles, or GAAP, and should not be considered in isolation from, as superior to or as a substitute for net income (loss), income (loss) from operations, cash flows provided by or used in operations, or other financial measures determined in accordance with GAAP. Our definition of Adjusted Free Cash Flow and a reconciliation showing how we calculated Combined Adjusted Free Cash Flow for 2017 is presented in Appendix A to this Amendment.

Facility Operating Income

We achieved Facility Operating Income of $1,178 million for 2017, which represents the aggregate segment operating income of our Retirement Centers, Assisted Living, CCRCs-Rental and Brookdale Ancillary Services segments of $271.4 million, $749.1 million, $106.2 million and $51.3 million, respectively. Our actual 2017 Facility Operating Income was below the threshold performance target. When evaluating our performance relative to the performance targets, the Committee exercised its discretion under our 2014 Omnibus Incentive Plan to equitably adjust the payout to reflect our actual 2017 results excluding $7.3 million of facility operating expenses related to Hurricanes Harvey and Irma and the California wildfires and to include an estimated $5.7 million of revenue lost due to Hurricane Irma. As a result, our 2017 Facility Operating Income, as adjusted, was $1,191 million, which corresponded to the 28.3% level of performance. Accordingly, the Committee determined to pay 28.3% of the target opportunity based on such performance, as shown above.

Resident Fee Revenue

We achieved resident fee revenue of $3,780 million for 2017, which was below the threshold level of performance for this component of the annual cash incentive plan. When evaluating our performance relative to the performance targets, the Committee considered equitably adjusting the payout to reflect our actual results adjusted to include lost

revenue related to Hurricane Irma. However, even if such adjustment were made, our resident fee revenue performance would have been below the threshold performance target. Accordingly, the Committee determined that no portion of the opportunity based on this objective would be paid.

Individual Objectives

Following the conclusion of the 2017 fiscal year, the Committee determined that Mr. Smith had achieved 97.5% of his individual performance objectives. In addition, based upon Mr. Smith’s recommendation and the Committee’s own evaluation of each named executive officer’s performance against the individual performance objectives that had been previously established, the Committee determined the level of achievement of the other named executive officers. The level of achievement of the named executive officers’ individual performance objectives and associated payouts are shown above.

The grant date fair value of the long-term incentive awards granted to our named executive officers in 2017 were as follows. Mr. Smith did not receive long-term incentive awards in 2017. The number of shares of restricted stock granted to each named executive officer was based on $14.84 , the closing price of our common stock on February 13, 2017 , the date of grant.

The restricted share agreements associated with such long-term incentive awards contain non-competition, non-solicitation, non-disparagement and confidentiality covenants. With respect to any termination of a named executive officer’s employment, treatment of the restricted stock awards will be as provided in the applicable award agreement governing such awards, as described under “Potential Payments Upon Termination or Change in Control.” Each of the named executive officers will also be entitled to receive dividends on outstanding unvested restricted shares, to the extent that any such dividends are declared in the future.

The awards of time-based restricted stock vested or will vest ratably in four annual installments beginning on February 27, 2018, subject to continued employment.

Up to 75% of the awards of performance-based restricted stock are eligible to vest on February 27, 2020 and up to 25% are eligible to vest on February 27, 2021, in each case subject to continued employment and dependent upon the level of achievement of performance goals established for each tranche by the Committee. Achievement of the threshold level of performance for a tranche will result in the vesting of 20% of the shares eligible to vest in such tranche, and achievement of the targeted level of performance (or above) for a tranche will result in the vesting of 100% of such shares, which is the maximum that may be earned. Any performance-based shares which do not vest in either tranche will be forfeited. Management viewed the performance targets to be challenging.

The performance targets for the shares eligible to vest in 2020 are based on our three-year CAGR of Combined Adjusted Free Cash Flow, with results to be measured based on our Combined Adjusted Free Cash Flow in 2019 compared to our Combined Adjusted Free Cash Flow in 2016. For purposes of the calculation, Combined Adjusted Free Cash Flow means the sum of our consolidated Adjusted Free Cash Flow for such year and our proportionate share of Adjusted Free Cash Flow of unconsolidated ventures for such year, in each case as reported and defined in our public releases and/or filings. The calculation of Combined Adjusted Free Cash Flow will exclude transaction, transaction-related and severance costs, and will also exclude federal income taxes to the extent that we become a federal income taxpayer in future periods. The exclusions will be consistent with the methodology used in our public

releases and/or filings. The performance targets can be equitably adjusted to reflect transaction activity at the discretion of the Committee.

The performance targets for the shares eligible to vest in 2021 are based on our calendar year 2020 ROI on all Program Max projects either (i) approved in 2017 and completed prior to the end of 2018 or (ii) approved prior to 2017 and completed during 2018. Our Program Max initiative is a capital expenditure program through which we expand, renovate, redevelop and reposition certain of our existing communities where economically advantageous. Achievement of the threshold level of performance will result in the vesting of 20% of the shares eligible to vest in 2021, and achievement of the targeted level of performance (or above) will result in the vesting of 100% of such shares, which is the maximum that may be earned.

Pursuant to the terms of Mr. Richardson's restricted share agreements for his 2017 awards of restricted stock, as a result of his termination without cause effective March 9, 2018, 7,413 shares of time-based restricted stock immediately vested, 14,825 shares of time-based restricted stock immediately forfeited, 14,825 shares of performance-based restricted stock will remain outstanding and eligible to vest based on our two-year CAGR of Combined Adjusted Free Cash Flow, and 14,825 shares of performance-based restricted stock immediately forfeited. Pursuant to the terms of Mr. Diab's restricted share agreements for his 2017 awards of restricted stock, all of such shares were immediately forfeited upon his resignation effective October 28, 2017.

2014 Annual Awards of Performance-Based Restricted Stock

During 2014, the Committee granted annual awards of performance-based restricted stock awards to Mr. Smith, Ms. Patchett and Mr. Richardson. Up to 75% of the shares were eligible to vest on February 27, 2017 and up to 25% were eligible to vest on February 27, 2018, in each case subject to continued employment and dependent upon the level of achievement of performance goals established for each tranche by the Committee. With respect to each tranche of awards, achievement of the threshold level of performance would result in the vesting of 20% of the shares in that tranche. Achievement of the targeted level of performance (or above) would result in the vesting of 100% of the shares in that tranche. Any shares which do not vest in either tranche would be forfeited.

As previously disclosed, vesting of the shares eligible to vest on February 27, 2017 was dependent on the level of achievement of performance targets based on our three-year CAGR of CFFO per share, which measured our CFFO per share for 2016 versus a 2013 base year, and all of the shares eligible to vest on February 27, 2017 were forfeited based on our actual results.

The vesting of the shares eligible to vest on February 27, 2018 was dependent upon the level of achievement of performance targets based on our 2017 ROI on all Program Max projects approved in 2014 and completed prior to the end of 2015. The table below shows the percentage of such tranche that would vest based on our actual 2017 ROI on such Program Max projects. Vesting percentages were to be interpolated between the steps shown below.

Based on our actual ROI on such Program Max projects of 15% for 2017, all of the shares vested on February 27, 2018. The number of shares that vested on February 27, 2018 were as follows:

2015 Annual Awards of Performance-Based Restricted Stock

During 2015, the Committee granted annual awards of performance-based restricted stock to Mr. Smith, Ms. Patchett and Mr. Richardson. Up to 75% of the shares were eligible to vest on February 27, 2018 and up to 25% are eligible to vest on February 27, 2019, in each case subject to continued employment and dependent upon the level of achievement of performance goals established for each tranche by the Committee.

The performance targets for the shares eligible to vest on February 27, 2018 were based on our three year CAGR of CFFO per share, which measured our CFFO per share for 2017 versus a 2014 base year. For purposes of the calculation, CFFO per share excluded acquisition, integration, EMR and other transaction costs and federal income taxes to the extent that we became a federal income taxpayer during the performance period. Achievement of the threshold level of performance would result in the vesting of 40% of the shares in the tranche, and achievement of the targeted level of performance (or above) would result in the vesting of 100% of the shares in the tranche. Any shares which do not vest in the tranche would be forfeited. The table below shows the percentage of such shares that would vest based on our actual CFFO per share in 2017. Vesting percentages were to be interpolated between the steps shown below.

We failed to achieve the threshold level of CFFO per share for 2017, and, as a result, all of the shares eligible to vest on February 27, 2018 were forfeited based on our actual results . The number of shares that were eligible to vest on February 27, 2018, but were forfeited, was as follows:

The performance targets for the shares eligible to vest on February 27, 2019 are based on our 2018 ROI on all Program Max projects approved in 2015 and completed prior to the end of 2016. Achievement of the threshold level of performance will result in the vesting of 20% of the shares eligible to vest in 2019, and achievement of the targeted level of performance (or above) will result in the vesting of 100% of such shares. Any shares which do not vest in the tranche will be forfeited. Pursuant to the terms of each of Messrs. Smith's and Richardson's restricted share agreement, as a result of his termination without cause effective on February 28, 2018 and March 9, 2018, respectively, 17,176 shares and 2,893 shares, respectively, eligible to vest on February 27, 2019 remain outstanding and eligible to vest based on (and subject to) our performance relative to the performance targets.

Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation that a company may deduct in any one year with respect to "covered employees". Effective for taxable years beginning after December 31, 2017, the tax reform legislation enacted in December 2017 eliminated a Company’s ability to deduct “qualified performance-based compensation” in excess of $1 million paid to named executive officers under Section 162(m). Under the new legislation, the definition of covered employees has been expanded to include a company's chief financial officer, in addition to the chief executive officer and three other most highly paid executive officers, plus any individual who has been a covered employee in any taxable year beginning after December 31, 2016. The Committee will continue to consider tax implications in making compensation decisions and, when believed to be in the best interests of our stockholders, we may provide compensation that is not fully deductible under Section 162(m) to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals. In making decisions about executive compensation, the Committee also considers the impact of other tax laws, including Section 409A of the Internal Revenue Code regarding non-qualified deferred compensation and Section 280G of the Internal Revenue Code regarding compensation in connection with a change in control.

Since 2007, we have maintained stock ownership and retention guidelines applicable to certain of our officers, including our named executive officers, to further align the interests of our executives with the interests of our stockholders. Our named executive officers are expected to hold a number of shares with a minimum market value expressed as a multiple of the named executive officer’s base salary. The expected levels of ownership of our named executive officers under our guidelines are as follows:

The expected level of ownership may be met through stock purchased by the officer or his or her spouse in the market and/or through stock received upon vesting of equity awards. Unvested equity awards do not count toward the expected level of ownership, except that under the guidelines the estimated number of after-tax time-based restricted shares that are scheduled to vest within 90 days will count towards the expected level of ownership.

The expected level of ownership must be achieved by the fifth anniversary of such officer’s becoming subject to the guidelines. Until the expected ownership level is achieved, each officer is expected to retain at least 50% of after-tax shares obtained through our equity compensation plans. This holding requirement also applies in situations where an officer has achieved the expected stock ownership level but changes in the market price of our stock or the officer’s base salary result in such officer’s failure to maintain the expected stock ownership level.

As of April 19, 2018, each of our current named executive officers was in compliance with our stock ownership and retention guidelines. Ms. Baier and Mr. Coco, who joined the Company in 2015 and 2016, respectively, and Ms. Patchett, who was promoted to the Executive Vice President position in 2015, are expected to retain at least 50% of their after-tax shares obtained through our equity compensation plans until they meet such applicable multiple of base salary.

Our insider trading policy provides that no one subject to the policy may engage in short sales, puts, calls or other derivative transactions involving our securities. It further provides that none of our directors or executive officers

may engage in hedging or monetization transactions involving our securities, pledge our securities as collateral for a loan, or hold our securities in a margin account.

We have not adopted a separate executive compensation clawback policy. However, our 2014 Omnibus Incentive Plan provides that any award thereunder that is subject to recovery under any law, government regulation or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement or as may be required pursuant to any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement.

We are party to an employment agreement dated March 1, 2018 with Ms. Baier, which we entered into in connection with her appointment as President and Chief Executive Officer effective February 28, 2018. The employment agreement has a three year term, subject to automatic extensions for additional one year periods, unless either we or Ms. Baier gives written notice to the other no less than 90 days prior to the expiration of the term that the term will not be so extended. Ms. Baier's initial base salary is $825,000 per year, which may not be reduced without Ms. Baier's approval. In addition, Ms. Baier is eligible to receive an annual cash incentive opportunity targeted at 125% of base salary paid during the calendar year, subject to the terms of our incentive compensation plan for senior executive officers. Ms. Baier was entitled to receive an initial award of shares of time- and performance-based restricted stock with an aggregate grant date value of $3,000,000 under our 2014 Omnibus Incentive Plan. The terms of such awards, which were granted on March 5, 2018, are described under "2018 Compensation Decisions" below. Ms. Baier is eligible to participate in various benefit plans that we make available to our senior executive officers (other than our severance policies). In addition, we will provide Ms. Baier with basic term life insurance benefits of at least 100% of her base salary, at no cost to Ms. Baier. Under her employment agreement, Ms. Baier is entitled to severance payments if her employment is terminated by us without cause or if she terminates for good reason. Severance payments in connection with a change in control are “double trigger,” which requires the occurrence of a change in control followed by termination of employment within 18 months of the change in control by us without cause or by Ms. Baier for good reason. Under Ms. Baier's employment agreement, any payments that are not deductible by us under Section 280G of the Internal Revenue Code will be cut back only to the extent that the cutback results in a better after tax position for Ms. Baier. The employment agreement contains non-competition, non-solicitation, confidentiality and mutual non-disparagement covenants. The non-competition restrictions will continue in effect during Ms. Baier’s employment and for one year following termination of employment. The non-solicitation restrictions will continue in effect during her employment and for two years following her termination of employment. The confidentiality and mutual non-disparagement obligations will apply during her employment and thereafter.

Prior to his termination without cause effective February 28, 2018, we were party to an employment agreement dated as of February 11, 2013 and amended April 23, 2015 with Mr. Smith, which we entered into in connection with his appointment as Chief Executive Officer in February 2013 and superseded and replaced the severance pay policy letter agreement, dated as of August 6, 2010, between us and Mr. Smith. The employment agreement had a three year term, subject to automatic extensions for additional one year periods, unless either we or Mr. Smith had given written notice to the other no less than 90 days prior to the expiration of the term that the term will not be so extended. Mr. Smith’s initial base salary was $480,000 per year, which was increased to $825,000 per year as of the date that his service as Chief Executive Officer began. In addition, Mr. Smith was eligible to receive an annual cash incentive opportunity targeted at 125% of base salary, subject to the terms of our incentive compensation plan for senior executive officers. Mr. Smith was eligible to participate in various benefit plans that we make available to our senior executive officers. In addition, we provided Mr. Smith with basic term life insurance benefits of at least 100% of his base salary, at no cost to Mr. Smith. Under his employment agreement, Mr. Smith is entitled to severance payments as a result of our terminating his employment without cause effective February 28, 2018, and he would have been entitled to severance payments if he had terminated employment for good reason. Severance payments in connection with a change in control were “double trigger,” which would have required the occurrence of

a change in control followed by termination of employment within 12 months of the change in control by us without cause or by Mr. Smith for good reason. Under Mr. Smith’s employment agreement, any payments that were not deductible by us under Section 280G of the Internal Revenue Code would have been cut back only to the extent that the cutback resulted in a better after tax position for Mr. Smith. The employment agreement contained non-competition, non-solicitation, confidentiality and mutual non-disparagement covenants. The non-competition restrictions were effective during Mr. Smith's employment and will continue in effect for one year following termination of his employment. The non-solicitation restrictions were effective during Mr. Smith's employment and will continue in effect for two years following termination of employment. The confidentiality and mutual non-disparagement obligations applied during his employment and will apply thereafter.

Our other named executive officers do not have employment agreements, but are eligible to participate in the Brookdale Senior Living Inc. Severance Pay Policy, Tier I, adopted by the Committee on August 6, 2010 and amended on April 23, 2015, August 3, 2015, and January 19, 2017 (the "Severance Policy"). On March 1, 2018, the Committee approved certain further amendments to the Severance Policy, which amendments were set forth in an amendment and restatement of the Severance Policy effective April 15, 2018. The Severance Policy provides for severance payments and benefits to certain of our officers for terminations of employment. During 2017, each of our named executive officers (other than Mr. Smith) participated in the Severance Policy. Effective March 1, 2018, Ms. Baier no longer participates in the Severance Policy. Additionally, each of Mr. Richardson and Ms. Patchett was a party to a letter agreement with us that would have provided for additional severance benefits in certain circumstances. The severance payments under the Severance Policy (and the former letter agreements) applicable in connection with a change in control are “double trigger,” which require the occurrence of a change in control followed by termination of employment by us without cause or by the named executive officer for good reason. If payments pursuant to the Severance Policy and other arrangements are not deductible by us under Section 280G of the Internal Revenue Code, such payments shall be reduced (or repaid) in order to ensure our deduction of payments in connection with a change in control.

In January 2017, after consultation with F.W. Cook, the Committee amended the Severance Policy to extend the time period during which a named executive officer would be eligible to receive payments resulting from a termination by us without cause or by the named executive officer for good reason following the occurrence of a change in control from 12 months to 18 months, and to provide that in the event of such a termination by an “Other Eligible Employee” (which included Ms. Patchett during 2017) in such circumstance, the Other Eligible Employee will receive an annual bonus for the year of separation from service (to the extent earned under the terms of the bonus plan), pro-rated based on the number of days such Other Eligible Employee was employed and payable when such bonus would otherwise be due. The Severance Policy had been amended in 2015 to provide such pro-rata bonus to “Designated Officers” (which included the other named executive officers). In December 2017, the Committee determined that Ms. Patchett will participate in the Severance Policy as a "Designated Officer" effective beginning January 1, 2018.

As a result of the amendments to the Severance Policy approved by the Committee on March 1, 2018, among other things, effective for terminations of employment on or after December 13, 2018, the amount payable to a Designated Officer (which includes Mr. Coco and Ms. Patchett) for termination of employment without cause will be reduced from 250% of the sum of such executive's annual base salary and target annual bonus to 150% of the sum of such executive's annual base salary and target annual bonus, in each case payable over 18 months. Further, effective for terminations of employment occurring on or after December 13, 2018, the amount payable to a Designated Officer for termination of employment without cause or by the executive for good reason within 18 months after a change in control will be reduced from 300% of annual base salary payable over 18 months and 300% of target annual bonus payable 60 days after such termination to 200% of annual base salary payable over 18 months and 200% of target annual bonus payable 60 days after such termination.

A detailed description of severance payments pursuant to the foregoing employment agreements and the Severance Policy, as well as the effect of certain terminations and/or change in control pursuant to our restricted share agreements, is set forth under “Potential Payments Upon Termination or Change in Control” below.

Ms. Baier's Compensation Arrangements

Pursuant to Ms. Baier's employment agreement dated March 1, 2018 entered into in connection with her appointment as President and Chief Executive Officer, her base salary was increased to $825,000 effective March 1, 2018, her target 2018 annual cash incentive opportunity was increased to 125% of her base salary paid in 2018, and she was awarded shares of time- and performance-based restricted stock with an aggregate grant date value of $3,000,000. Additional terms under the employment agreement are described above under "Employment Agreements and Severance Policies Applicable to Named Executive Officers". In setting Ms. Baier's compensation arrangements, the Committee reviewed Mr. Smith's former compensation arrangements and a market analysis of CEO compensation of a peer group prepared by F.W. Cook.

With respect to the $3,000,000 restricted stock award, one half of the award, or 207,469 shares of time-based restricted stock, will vest ratably in four annual installments beginning on February 27, 2019, subject to continued employment. The other one half of such award, or 207,469 shares of performance-based restricted stock, will be eligible to vest on February 27, 2021, subject to continued employment and the achievement of total shareholder return (TSR) performance targets. The restricted share agreements also contain non-competition, non-solicitation, confidentiality and mutual non-disparagement covenants. Ms. Baier will be entitled to receive dividends on any unvested shares of restricted stock, to the extent that any such dividends are declared in the future. The treatment of such awards in connection with termination of Ms. Baier's employment and/or a change in control are described under “Potential Payments Upon Termination or Change in Control” below.

Other Compensation Decisions

The base salaries of Mr. Coco and Ms. Patchett were increased by 3% for 2018 compared to 2017. The base salaries of Messrs. Smith and Richardson were not increased. Ms. Baier also received a base salary increase of 3% for her service prior to becoming President and Chief Executive Officer.

2018 Annual Cash Incentive Plan

The 2018 annual cash incentive opportunity will continue to be based on company and individual performance objectives, and the target amount of the 2018 annual cash incentive opportunity is the same for our named executive officers as a percentage of base salary as 2017 (other than Ms. Baier, whose opportunity increased to 125% of her base salary paid in 2018). The annual cash incentive opportunity will be weighted 40% on Facility Operating Income, 20% on Combined Adjusted Free Cash Flow, 10% on resident fee revenue, and 30% on individual objectives.

Long-Term Incentive Awards

Each of Ms. Baier, Mr. Coco and Ms. Patchett received long-term incentive awards on January 5, 2018 with grant date fair values consistent with the awards made in 2017. One-half of the long-term incentive awards are shares of time-based restricted stock that will vest ratably in four annual installments beginning on February 27, 2018, subject to continued employment. The other one-half of such awards are shares of time-based restricted stock, 75% of which will vest on February 27, 2021 and 25% of which will vest on February 27, 2022, in each case subject to continued employment.

Retention Bonus Awards

On March 1, 2018, the Committee approved a retention bonus to Mr. Coco and Ms. Patchett in an amount of $350,000 and $450,000, respectively, payment of which will occur upon his or her continued employment through December 13, 2018. If his or her employment is terminated due to death or permanent disability before such date, a prorated amount will be paid to the executive or his or her estate. The retention bonus opportunity was awarded to Mr. Coco and Ms. Patchett for retention purposes and in recognition of the reduced severance pay that would be available to them from and after December 13, 2018, as described above under "Employment Agreements and Severance Policies Applicable to Named Executive Officers".

Compensation Committee Report

The Compensation Committee has reviewed and discussed the disclosure set forth above under the heading “Compensation Discussion and Analysis” with management and, based on the review and discussions, it has recommended to the Board that the “Compensation Discussion and Analysis” be included herein.

Respectfully submitted by the Compensation Committee of the Board,

COMPENSATION COMMITTEE

Frank M. Bumstead, Chairman 

Jackie M. Clegg 

Jeffrey R. Leeds 

Lee S. Wielansky