~~================================================================================~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION ~~WASHINGTON,~~

Washington, D.C. 20549 ~~------------------------------ FORM~~

Form 10-K/A ~~(MARK ONE) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER~~

(Amendment No. 1)

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, ~~1998 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~ 2020

☐	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:~~ file number:

1-13445 ~~------------------------------ CAPITAL SENIOR LIVING CORPORATION (Exact~~

Capital Senior Living Corporation

(Exact name of registrant as specified in its charter) DELAWARE 75-2678809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14160 DALLAS PARKWAY, SUITE 300 DALLAS, TEXAS 75240 (Address of principal executive (Zip Code) offices) Registrant's


Delaware		75-2678809
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


14160 Dallas Parkway, Suite 300 Dallas, Texas		75254
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(972)

770-5600 ~~------------------------------~~

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	CSU	New York Stock Exchange

Securities registered pursuant to Section 12(g) of ~~each class: Name~~the Act: None

Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of ~~each exchange on which registered: COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE ------------------------------~~ the Securities Act. Yes ☐ No ☒

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 X☒ No ~~____~~ ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of

Regulation S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if ~~disclosure of delinquent filers~~the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to ~~Item 405~~Section 13(a) of ~~Regulation S-K~~the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by a check mark whether the registrant is ~~not contained herein, and will not be contained, to~~a shell company (as defined in

Rule 12b-2

of the ~~best of registrant's knowledge, in definitive proxy statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|~~ Exchange Act). Yes ☐ No ☒

The aggregate market value of ~~10,333,450~~the 2,090,169 shares, as adjusted for the

one-for-fifteen

reverse stock split, of the ~~Registrant's~~ Registrant’s common stock, par value $0.01 per share (“Common ~~Stock~~Stock”), held by ~~nonaffiliates,~~

non-affiliates

(defined to exclude all of the Registrant’s executive officers, directors, and certain significant stockholders) on June 30, 2020, the last day of the Registrant’s most recently completed second quarter, based upon the adjusted closing price of the ~~Registrant's~~Registrant’s Common Stock as reported by the New York Stock Exchange on ~~March 29, 1999~~such date was approximately ~~$72,313,150. For purposes~~$22.3 million. As of ~~this computation, all officers, directors and 10% beneficial owners of~~April 19, 2021, the Registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the Registrant. As of March 29, 1999, 19,717,347had 2,117,481 shares of Common Stock ~~$.01 par value, were~~ outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None. ~~================================================================================~~

Table of Contents

EXPLANATORY NOTE

This Amendment No. 1 ~~Capital Senior Living Corporation, a Delaware corporation (the "Company"~~on Form

10-K/A

(this “Amendment”)~~, hereby~~ amends ~~and restates in their entirety Parts I and II of~~ the ~~Company's~~ Annual Report on Form

10-K

for ~~the year ended December 31, 1998, filed with the Securities and Exchange Commission on March 31, 1999.~~

2 ~~PART I ITEM 1. BUSINESS GENERAL~~ Capital Senior Living Corporation (together with its subsidiaries, the ~~"Company"~~“Company”) for the fiscal year ended December 31, 2020, which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021 (the “Original Filing”).

We are filing this Amendment to include the information required by Part III and not included in the Original Filing, as we will not file our definitive proxy statement within 120 days of the end of our fiscal year ended December 31, 2020.

Except as set forth in Part III below and the updates to the List of Exhibits, no other changes are made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing. Unless expressly stated, this Amendment does not reflect events occurring after the filing of the Original Filing, nor does it modify or update in any way the disclosures contained in the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the SEC.

Information in this Amendment regarding the number and price of shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), reflects the

1-for-15

reverse stock split of the Common Stock that became effective on December 11, 2020.

Table of Contents

CAPITAL SENIOR LIVING CORPORATION

TABLE OF CONTENTS


		Page Number
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance		1
Item 11.	Executive Compensation		5
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		15
Item 13.	Certain Relationships and Related Transactions, and Director Independence		18
Item 14.	Principal Accountant Fees and Services		19
	PART IV
Item 15.	Exhibit and Financial Statement Schedules		20
Signatures			24

Table of Contents

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The names of our directors and executive officers, their ages as of the date of this Amendment, and certain other information about them are set forth below. There are no family relationships among any of our directors or executive officers.

Directors

Our Board of Directors (the “Board”) is currently divided into three classes and the number of directors: Class I (terms expire at 2022 annual meeting), Class II (terms expire at 2023 annual meeting) and Class III (terms expire at 2021 annual meeting). The Board currently consists of nine authorized directors with three directors in each of Classes I and II, and two directors and one vacancy in Class III.

Set forth below is information concerning the age, principal occupation and employment during the past five years, other directorships and positions with the Company for each of our directors, including the year in which he or she first became a director of the ~~largest~~Company and his or her term of office as a director.


Name	Age	Position(s)	Class	Director’s Term Expires
Jill M. Krueger	61	Director	III	2021
Michael W. Reid	67	Director	III	2021
Philip A. Brooks	62	Director	I	2022
Ed A. Grier	66	Director	I	2022
Steven T. Plochocki	69	Director	I	2022
Kimberly S. Lody	55	Chief Executive Officer, President and Director	II	2023
E. Rodney Hornbake	70	Director	II	2023
Ross B. Levin	37	Director	II	2023

Philip A. Brooks

has been a director since 2010. Mr. Brooks has more than 32 years of experience as a financier and investor, credit manager, and product/policy analyst. With extended focus on seniors housing and healthcare, he has provided $5 billion of operating and property capital for this sector. He is a principal investor and managing partner in Select Living, LLC, which acquires properties to develop to special market dynamics. He is a portfolio advisor to NRV, a venture capital firm funding early stage growth companies in Virginia. Previously, Mr. Brooks served as a Senior Vice President, Loan Production for Walker & Dunlop, LLC, a NYSE-listed provider of financial services for owners and developers ~~and operators~~ of ~~senior living communities in~~commercial real estate throughout the United ~~States~~States. Prior to Walker & Dunlop, LLC, from February 2011, Mr. Brooks served as Senior Vice President, Loan Production for CWCapital, LLC, a mortgage finance company, which was acquired by Walker & Dunlop, LLC in ~~terms~~September 2012. From 1996 to October 2010, Mr. Brooks served in various senior executive positions with Berkadia Commercial Mortgage, LLC, a national mortgage bank, which was previously known as Capmark Finance Inc. and GMAC Commercial Mortgage. He was a founding member of ~~resident capacity. As of December 31, 1998,~~ the ~~Company owned interests in and/or operated 34 communities in 17 states with~~American Seniors Housing Association, a capacity of approximately 5,700 residents, including 19 communities in which it owned interests and 15 communities that it managed for third parties pursuant to multi-year management contracts. As of December 31, 1998, the Company was developing 34 new communities which will have a capacity of approximately 5,000 residentsleading trade association promoting seniors housing, and was ~~expanding 10 existing communities to accommodate approximately 600 additional residents. As~~on the Board of ~~December 31, 1998, the Company also operated one home care agency. Approximately 93%~~Directors of the ~~total revenues and reimbursable expenses~~National Investment Center for the Seniors Housing & Care Industry, a leading trade association promoting the industry to the capital markets. Mr. Brooks also serves a director of the Virginia Council on Economic Education and the Virginia Community Development Corporation.

Ed A. Grier

has been a director since 2016. Mr. Grier has been the Dean of the Virginia Commonwealth University (“VCU”) School of Business since March 2010. Prior to joining VCU, Mr. Grier spent approximately 29 years with the Walt Disney Company (“Disney”) beginning in 1981. He served as the President of the Disneyland Resort from 2006 until 2010 and held various senior ~~living communities managed by~~financial and operational roles during his career with Disney. Mr. Grier served as a director of NVR, Inc., a NYSE-listed residential homebuilding company which operates in two business segments: homebuilding and mortgage banking (“NVR”), and as a member of the audit committee of NVR’s board of directors. Mr. Grier served as a director of the Middleburg Trust Company, asa provider of ~~December 31, 1998 are derived from private pay sources. During 1998,~~wealth management services and a division of Access National Corp. (NADAQ: ANCX), until the ~~communities which the Company operated and in which it owned interests had an average occupancy rate~~consummation of ~~approximately 95% and~~ its managed communities had an average occupancy rate of approximately 96%. The Company and its predecessors have provided senior living services since 1990. PENDING MERGERS On February 7, 1999, the Company entered into definitive Agreements and Plans of Merger with ILM Senior Living, Inc. and ILM II Senior Living, Inc. for a combined transaction value of approximately $174 million, which includes approximately $4 million of net liabilities. The primary assets of ILM Senior Living, Inc. and ILM II Senior Living, Inc. collectively are 13 senior living communities that have been managed by the Company under management agreements since 1996. Under the two merger ~~agreements, both ILM Senior Living, Inc. and ILM II Senior Living, Inc. would separately merge~~ with and into Union Bankshares Corporation in February 2019. He is also a ~~wholly owned direct subsidiary~~director of Witt/Kieffer, an executive search firm. In addition, Mr. Grier serves on the boards of the Greater Richmond Chamber of Commerce, The Colonial Williamsburg Foundation and ChildFund International and serves as a trustee for Brandman University. Mr. Grier is also a Certified Public Accountant.

E. Rodney Hornbake, M.D.

has been a director since 2011. Dr. Hornbake is currently serving as a part-time physician at a safety net clinic and as a consultant to various hospitals, medical groups and law firms across the country. Dr. Hornbake has served as the Medical Director of the Wheeler Clinic, a multisite provider of medical and other services in Connecticut. Dr. Hornbake formerly served as the Managing Partner of Essex Internal Medicine, a private practice of internal medicine and geriatrics, that he formed in 2002. Dr. Hornbake served as Senior Vice President and Chief Medical Officer of Gentiva from March 2000 to April 2002. Gentiva

Table of Contents

was

spun-off

from Olsten Corporation, a staffing services company, that Dr. Hornbake joined as part of its management team in 1999. Dr. Hornbake also served as Medical Director of Care Centrix, a home care benefits management company, from November 1999 until 2002, and he continued to serve in a consulting role to Care Centrix from 2002 to 2010. Dr. Hornbake previously served as Vice President and Medical Director of the North

Shore-LIJ

Health System in New York from 1996 to 1999, as Chief Medical Officer for Aetna Professional Management Corporation from 1994 to 1996, and as Chief of Medicine for the Park Medical Group/Park Ridge Health System in New York from 1993 to 1994. Dr. Hornbake served as Clinical Assistant Professor of Medicine at the University of Connecticut from August 2002 to 2010 and as an Associate Professor (Adjunct) of Hofstra University from 1998 to 2004. Dr. Hornbake served on the board of Equity Health Partners, a privately-held

start-up

technology company, from 2008 until 2012, and he served on the Commission on Office Laboratory Accreditation for ten years, including two years as its Chairman.

Jill M. Krueger

has been a director since 2004. She is the founding President and Chief Executive Officer of Symbria, Inc., and its affiliates, a leading national developer and provider of innovative, outcome-driven programs established in 1995 that enhance the lives of the geriatric population. Under Ms. Krueger’s leadership, Symbria has grown from $300,000 in revenue to more than $130 million with a workforce of nearly 2,000 employees. In 2015, she led Symbria’s transition to an Employee Stock Ownership Plan (ESOP) company. She also serves on the Board of Directors, Audit Committee and Compensation Committee of iMedia Brands, Inc., and is a member of the Board of Directors of the American Board of Post-Acute and Long-Term Care Medicine and the Board of Directors of the Senior Care Pharmacy Coalition. Before she joined Symbria, Ms. Krueger was a partner at KPMG LLP responsible for overseeing the firm’s national Long-Term Care and Retirement Housing Practice. She served as a public commissioner for the Continuing Care Accreditation Commission and as a member of its financial advisory board. Ms. Krueger is a Certified Public Accountant and a Certified Management Accountant.

Ross B. Levin

has been a director since March 2017. Mr. Levin, CFA, is the Director of Research for Arbiter Partners Capital Management LLC and a principal in the firm. Mr. Levin serves on the board of directors of Stereotaxis Inc. Mr. Levin is a former board member of Mood Media Corporation, American Community Properties Trust and Presidential Life Corporation. Mr. Levin is also chairman of the board of directors of Constructive Partnerships Unlimited, a nonprofit organization providing services and programs for people with developmental disabilities, and former vice chairman of the board of the Cerebral Palsy Associations of New York State. Mr. Levin is a member of the New York Society of Securities Analysts and a CFA charter holder. Mr. Levin holds a Bachelor of Science degree in Management with a concentration in Finance from the A.B. Freeman School of Business at Tulane University and has completed the Investment Decisions and Behavioral Finance program at the John F. Kennedy School of Government at Harvard University.

Kimberly S. Lody

has been a director since 2014. Prior to her employment on January 7, 2019 as Chief Executive Officer and President of the Company, ~~with~~Ms. Lody served as North America President and Senior Vice President of GN Hearing, a global manufacturer of hearing instruments and hearing protection devices, beginning in 2011. Ms. Lody led the ~~aggregate issued~~strategic direction and ~~outstanding shares~~daily execution of ~~ILM Senior Living, Inc. and ILM II Senior Living, Inc. common stock eligible to receive 65% of the merger consideration~~GN Hearing in ~~cash (approximately $110.5 million) and 35% in 8% convertible trust preferred securities (with~~North America while providing a liquidation value of approximately $59.5 million). Both mergers have been approved by the boards of directors of each company and each transaction requires the approval of the applicable shareholders of either ILM Senior Living, Inc. or ILM II Senior Living, Inc. The mergers also are subject to certain other customary conditions, including regulatory approvals, and are expected to be completed during the second half of 1999. FORMATION TRANSACTIONS The Company was incorporated in October 1996 in the state of Delaware. On November 5, 1997, the Company closed its initial public offering in which it sold 10,350,000 common shares pursuant to a final prospectus under the Securities Act of 1933, as amended, at $13.50 per share (the "Offering"). Simultaneously with the consummation of the Offering, the Company, the Company's founders Jeffrey L. Beck ("Beck") and James A. Stroud (and his affiliate) ("Stroud"), Lawrence A. Cohen, Vice Chairman and Chief Financial Officer of the Company ("Cohen"), and affiliates of Messrs. Beck and Stroud completed a series of transactions (collectively, the "Formation Transactions") that resulted in the reorganization of the Company (the "Formation"). In the Formation Transactions, 7,687,347 shares were issued to Beck, Stroud and Cohen in the transactions described below, bringing the total issued and outstanding shares of the Company to 19,717,347 shares. Since the Offering, all of the Company's operations are being conducted by the Company or its subsidiaries. As part of the Formation Transactions, Messrs. Beck and Stroud contributed all of the capital stock of Capital Senior Living, Inc., Capital Senior Management 1, Inc., Capital Senior Management 2, Inc., Capital Senior Development, Inc., and, with Mr. Cohen, of Quality Home Care, Inc. (the "Contributed Entities") to the Company in exchange for the issuance of 7,687,347 shares of common stock and the issuance of separate non-interest bearing notes to Messrs. Beck, Stroud and Cohen in the aggregate principal amount of $18,076,380 (collectively, the "Formation Note"). The number of 1 shares of common stock issued and the principal amount of the Formation Note were established by the Company in connection with the Formation based on an assessment of the value of the Contributed Entities and the value of the Acquired Assets (as defined below). The Formation Note was repaid from net proceeds of the Offering. The primary assets of the Contributed Entities consisted of third-party management contracts, development contracts and a home care agency. Also as part of the Formation Transactions, the Company purchased substantially all of the assets (the "Acquired Assets"), other than working capital items, of Capital Senior Living Communities, L.P., a Delaware limited partnership ("CSLC"), for the assumption of approximately $70.8 million of debt plus cash equal to $5.8 million (the "Asset Acquisition"). The Acquired Assets of CSLC were: (i) four senior living communities located in Cottonwood, Arizona, Indianapolis, Indiana, Merrillville, Indiana and Canton, Ohio; (ii) approximately 56% of the limited partner interests in HealthCare Properties, L.P., a Delaware limited partnership ("HCP"); and (iii) approximately 31% of the aggregate principal amount of certain notes (the "NHP Notes") issued by NHP Retirement Housing Partners I Limited Partnership, a Delaware limited partnership ("NHP") and approximately 3% of the outstanding limited partnership interests of NHP. The primary assets of HCP consisted of: (i) approximately $9.9 million in cash and cash equivalents as of the Offering; (ii) four physical rehabilitation facilities located in Orlando, Florida, Nashville, Tennessee, Lancaster, South Carolina, and Martin, Tennessee; and (iii) four skilled nursing facilities located in Evansville, Indiana, Cambridge, Massachusetts, Fort Worth, Texas, and Austin, Texas. The outstanding principal amount of all of the NHP Notes as of the Offering was $42.7 million. The NHP Notes accrue interest at a rate of 13% per annum, currently pay cash interest at a rate of 7% per annum, are secured by substantially all of the assets of NHP, and mature on December 31, 2001. The primary assets, as of the Offering, of NHP consisted of five senior living communities located in Buffalo, New York, Sacramento, California (two communities), Detroit, Michigan, and Boca Raton, Florida. Messrs. Beck and Stroud control approximately 66% of the limited partnership interests in CSLC. The purchase price paid for the Acquired Assets was determined as follows: (i) CSLC's communities, other than construction in process, were valued based on the appraised value of the communities; (ii) CSLC's investment in HCP was valued based on the appraised value of HCP's communities, adjusted for working capital items and other assets and liabilities that would be settled in cash, multiplied by the percentage of HCP owned by CSLC; (iii) CSLC's investment in the NHP Notes was valued based on discounting the amount of principal and interest payments to be made following the maturity date (December 31, 2001) of the NHP Notes (assuming a six month lag between maturity and full repayment); and (iv) CSLC's investment in the NHP limited partnership interests was valued at its historical cost basis which approximates fair value. The appraised values for the communities were determined by third-party appraisals. CSLC, HCP and NHP are limited partnerships required to file periodic reports under the Securities Exchange Act of 1934, as amended. The general partner of CSLC is Retirement Living Communities, an Indiana limited partnership, which is beneficially owned by Messrs. Beck and Stroud. The general partner of HCP and NHP is Capital Realty Group Senior Housing, Inc. ("Senior Housing"), an entity that was beneficially owned by Messrs. Beck and Stroud until June 10, 1998 when the general partner interest was sold to an unrelated third-party, Retirement Associates, Inc. The debt assumed by the Company in the Asset Acquisition consisted of an approximate $70.8 million mortgage loan pursuant to a $77.0 million commitment made on June 30, 1997 to CSLC by Lehman Brothers Holdings, Inc., an affiliate of Lehman Brothers (the "LBHI Loan"). Of the proceeds from the LBHI Loan, $5.5 million was used to repay outstanding amounts under the CSLC's prior credit facility, $0.8 million was used to fund construction in progress at CSLC's Cottonwood community, approximately $64.5 million was used by CSLC to purchase U.S. Treasury securities and the remaining $6.2 million was available to fund additional expenditures associated with the expansion of the Cottonwood community. The LBHI Loan was incurred by CSLC for the purpose of refinancing the outstanding debt due under CSLC's prior credit facility and to provide construction financing for the expansion of one of CSLC's communities. The U.S. Treasury securities were acquired with proceeds of the LBHI Loan to provide collateral for the borrowings thereunder. The U.S. Treasury securities were sold under a repurchase agreement with Lehman Brothers, with a term equal to their maturity. Upon consummation of the Offering and as a part of the Formation Transactions, the Acquired Assets were acquired by the Company through assumption of the LBHI Loan, the repurchase agreement was canceled and the LBHI Loan was reduced by the Company with net proceeds of the Offering. The U.S. Treasury securities reverted to CSLC for use or disposition as determined by CSLC, and the Company has no interest in such securities. 2 INDUSTRY BACKGROUND The senior living services industry encompasses a broad and diverse range of living accommodations and health care services that are provided primarily to persons 65 years of age or older. For the elderly who require limited services, care in independent living residences supplemented at times by home health care, offers a viable option. Most independent living communities typically offer community living together with a basic services package consisting of meals, housekeeping, laundry, security, transportation, social and recreational activities and health care monitoring. As a senior's need for assistance increases, care in an assisted living residence is often preferable and more cost-effective than home-based care or nursing home care. Typically, assisted living represents a combination of housing and 24-hour a day personal support services designed to aid elderly residents with activities of daily living ("ADLs"), such as ambulation, bathing, dressing, eating, grooming, personal hygiene, and monitoring or assistance with medications. Certain assisted living residences may also provide assistance to residents with low acuity medical needs, or may offer higher levels of personal assistance for incontinent residents or residents with Alzheimer's disease or other cognitive or physical frailties. Generally, assisted living residents require higher levels of care than residents of independent living residences and retirement living centers, but require lower levels of care than patients in skilled nursing facilities. For seniors who need the constant attention of a skilled nurse or medical practitioner, a skilled nursing facility may be required. The senior living services industry is highly fragmented and characterized by numerous small operators. Moreover, the scope of senior living services varies substantially from one operator to another. Many smaller senior living providers do not operate purpose-built residences, do not have professional training for staff and provide only limited assistance with ADLs. The Company believes that few senior living operators provide the required comprehensive range of senior living services designed to permit residents to "age in place" within the community as they develop further physical or cognitive frailties. The Company believes that the senior living services industry will require large capital infusions over the next 30 years to meet the growing demand for senior living facilities. The National Investment Conference has estimated that gross capital expenditures for the senior living marketplace will grow from $86 billion in 1996 to $126 billion in 2005 and to $490 billion in 2030, in order to accommodate increasing demand. As a result, the Company believes there will continue to be significant growth opportunities in the senior living market for providing services to the elderly. The Company believes that a number of demographic, regulatory, and other trends will contribute to the continued growth in the senior living market, the Company's targeted market for future development and expansion, including the following: Consumer Preference The Company believes that senior living communities are increasingly becoming the setting preferred by prospective residents and their families for the care of the elderly. Senior living offers residents greater independence and allows them to "age in place" in a residential setting, which the Company believes results in a higher quality of life than that experienced in more institutional or clinical settings. The likelihood of living alone increases with age. Most of this increase is due to an aging population in which women outlive men. In 1993, eight out of ten noninstitutionalized elderly who lived alone were women. According to the United States Bureau of Census, based on 1993 data, for women the likelihood of living alone increases from 32% for 65- to 74-year-olds to 57% for those women aged 85 and older. Men show similar trends with 13% of the 65- to 74-year-olds living alone rising to 29% of the men aged 85 and older living alone. Societal changes, such as increased divorce rates and the growing numbers of persons choosing not to marry, have further increased the number of Americans living alone. This growth in the number of elderly living alone has resulted in an increasing demand for services that historically have been provided by a spouse, other family members or live-in caregivers. 3 Demographics The primary market for the Company's senior living services is comprised of persons aged 75 and older. This age group is one of the fastest growing segments of the United States population and is expected to more than double by the year 2030. The population of seniors aged 85 and over is expected to increase from approximately 3.1 million in 1990 to over 4.3 million by 2000, an increase of 39%. As the number of persons aged 75 and over continues to grow, the Company believes that there will be corresponding increases in the number of persons who need assistance with ADLs. According to industry analyses, approximately 19% of persons aged 75-79, approximately 24% of persons aged 80-84 and approximately 45% of persons aged 85 and older need assistance with ADLs. According to the Alzheimer's Association the number of persons afflicted with Alzheimer's disease is expected to grow from the current 4.0 million to 14.0 million by the year 2050. Restricted Supply of Nursing Beds The majority of states in the United States have adopted Certificate of Need or similar statutes generally requiring that, prior to the addition of new skilled nursing beds, the addition of new services, or the making of certain capital expenditures, a state agency must determine that a need exists for the new beds or the proposed activities. The Company believes that this Certificate of Need process tends to restrict the supply and availability of licensed nursing facility beds. High construction costs, limitations on government reimbursement for the full costs of construction, and start-up expenses also act to constrain growth in the supply of such facilities. At the same time, nursing facility operators are continuing to focus on improving occupancy and expanding services to subacute patients generally of a younger age and requiring significantly higher levels of nursing care. As a result, the Company believes that there has been a decrease in the number of skilled nursing beds available to patients with lower acuity levels and that this trend should increase the demand for the Company's senior living communities, including particularly the Company's assisted living communities and skilled nursing facilities. Cost-Containment Pressures In response to rapidly rising health care costs, governmental and private pay sources have adopted cost containment measures that have reduced admissions and encouraged reduced lengths of stays in hospitals and other acute care settings. The federal government had previously acted to curtail increases in health care costs under Medicare by limiting acute care hospital reimbursement for specific services to pre-established fixed amounts. Private insurers have begun to limit reimbursement for medical services in general to predetermined charges, and managed care organizations (such as health maintenance organizations) are attempting to limit hospitalization costs by negotiating for discounted rates for hospital and acute care services and by monitoring and reducing hospital use. In response, hospitals are discharging patients earlier and referring elderly patients, who may be too sick or frail to manage their lives without assistance, to nursing homes and assisted living residences where the cost of providing care is typically lower than hospital care. In addition, third-party payors are increasingly becoming involved in determining the appropriate health care settings for their insureds or clients, based primarily on cost and quality of care. Based on industry data, the typical day-rate in an assisted living facility is two thirds of the cost for comparable care in a nursing home. Senior Affluence The average net worth of senior citizens is higher than non-senior citizens, partially as a result of accumulated equity through home ownership. The Company believes that a substantial portion of the senior population thus has significant resources available for their retirement and long-term care needs. The Company's target population is comprised of moderate- to upper-income seniors who have, either directly or indirectly through familial support, the financial resources to pay for senior living communities, including an assisted living alternative to traditional long-term care. 4 Reduced Reliance on Family Care Historically, the family has been the primary provider of care for seniors. The Company believes that the increase in the percentage of women in the work force, the reduction of average family size, and the increased mobility in society is reducing the role of the family as the traditional caregiver for aging parents. The Company believes that these factors will make it necessary for many seniors to look outside the family for assistance as they age. OPERATING STRATEGY The Company's operating strategy is to provide high quality senior living services at an affordable price to its residents, while achieving and sustaining a strong, competitive position within its chosen markets, as well as to continue to enhance the performance of its operations. The Company is implementing its operating strategy principally through the following methods: Continue to Provide Broad Range of High-Quality Personalized Care Central to the Company's operating strategy is its focus on providing high-quality care and services that are personalized and tailored to meet the individual needs of each community resident. The Company's residences and services are designed to provide a broad range of care that permits residents to "age in place" as their needs change and as they develop further physical or cognitive frailties. By creating an environment that maximizes resident autonomy and provides individualized service programs, the Company seeks to attract seniors at an earlier stage, before they need the higher level of care provided in a skilled nursing facility. The Company also maintains a comprehensive quality assurance program designed to ensure the satisfaction of its residents and their family members. The Company conducts annual resident satisfaction surveys, which allow the residents at each community to express whether they are "very satisfied," "satisfied" or "dissatisfied" with all major areas of a community - housekeeping, maintenance, activities and transportation, food service, security and management. In 1998 and 1997, the Company achieved a 95% and 96% overall approval rating (satisfied or very satisfied), respectively, from its residents in this polling of its residents' satisfaction. Offer Services Across a Range of Pricing Options The Company's rangeportfolio of products and services ~~is continually expanding~~ to meet the evolving needs of its residents. The Company has developed a menu of products and service programs which may be further customized to serve both the moderate and upper income markets of a particular targeted geographic area. By offering a range of pricing options that are customized for each target market, the Company believes that it can develop synergies, economies of scale, and operating efficiencies in its efforts to serve a larger percentage of the elderly population within a particular geographic market. Maintain and Improve Occupancy Rates The Company continually seeks to maintain and improve occupancy rates by: (i) retaining residents as they "age in place" by extending optional care and service programs; (ii) attracting new residents through the on-site marketing program focus on residents and family members; and (iii) aggressively seeking referrals from professional community outreach sources, including area religious organizations, senior social service programs, civic and business networks, as well as the medical community. Improve Operating Efficiencies The Company seeks to improve operating efficiencies at its communities by continuing to actively monitor and manage operating costs. By having an established national portfolio of communities with regional management in place, the Company believes it has established a platform to achieve operating efficiencies through economies of scale in the purchase of bulk items, such as food, and in the spreading of fixed costs, such as corporate overhead, over a larger 5 revenue base, and to provide more effective management supervision and financial controls. The Company's development strategy includes regional clustering of new communities to achieve further efficiencies. Emphasize Employee Training and Retention The Company devotes special attention to the hiring, screening, training, supervising, and retention of its employees and caregivers to ensure that quality standards are achieved. In addition to the normal on-site training, the Company conducts annual national management meetings and encourages sharing of expertise among managers. The Company's commitment to the total quality management concept is emphasized throughout its training program. This commitment to the total quality management concept means identification of the "best practices" in the senior living market and communication of those best practices to our executive directorshearing healthcare professionals and their ~~staff. The identification~~patients. Under Ms. Lody’s leadership, the North American business of ~~best practices is realized by a number~~GN Hearing experienced substantial growth in both revenue and profitability. Ms. Lody has over 26 years of means, including, emphasis on regional and executive directors keeping up with professional trade journals; interaction with other professionals and consultants in the senior living industry through seminars, conferences, and consultations; visits to other properties; leadership and participation at national and local trade organization events; as well as information derived from marketing studies and resident satisfaction surveys. This information is continually processed by regional managers and the executive directors and communicated to the Company's employees as part of their training. The Company believes its commitment to and emphasis on employee training and retention differentiates the Company from many of its competitors. Utilize Comprehensive Information Systems The Company employs comprehensive proprietary information systems to manage financial and operating data in connection with the management of its communities. Utilizing its computerized systems, the Company is able to collect and monitor on a regular basis key operating data for its communities. Reports are routinely prepared and distributed to on-site, district and regional managers for use in managing the profitability of the communities. The Company's management information systems provide senior management with the ability to identify emerging trends, monitor and control costs and develop current pricing strategies. The Company believes that its proprietary information systems are sufficient to support future growth and that the Company will have adequate resources to expand these systems to support the growth envisioned by the Company's business plan. CARE AND SERVICES PROGRAMS The Company provides a wide array of senior living services to the elderly at its communities, including independent living, assisted living (with special programs and living units at some of its communities for residents with Alzheimer's and other forms of dementia), skilled nursing, and home care services. By offeringexperience in a variety of ~~services~~clinical and ~~encouraging the active participation~~commercial health care settings, including health insurance, durable medical equipment, home healthcare, infusion therapy, respiratory therapy, specialty pharmaceuticals, and medical devices. Ms. Lody’s primary focus and expertise has been in developing and executing strategic growth initiatives, including business development, revenue cycle enhancement, sales performance management, M&A activities, and branding and communications. Ms. Lody received a Master of Business Administration degree from Wake Forest University and a Bachelor of Arts degree in business administration from Hiram College. She is Vice-Chairman of the ~~resident~~board of the Hearing Industries Association, and ~~the resident's family~~serves as an advisor to Salus University’s Osborne College of Audiology.

Steven T. Plochocki

has been a director since 2019. Mr. Plochocki previously served as Director and ~~medical consultants, the Company is able~~Chief Executive Officer of Quality Systems, Inc. (now NextGen Healthcare, Inc., NASDAQ: NXGN) from August 16, 2008, and also as its President from January 25, 2012, until his retirement in June 2015. From February 2007 to ~~customize its service plan to meet the specific needs~~May 2008, he served as Chairman and ~~desires~~Chief Executive Officer of ~~each resident. As~~Omniflight Helicopters, Inc., a result, the Company believes that it is able to maximize customer satisfaction and avoid the high cost of delivering unnecessary services to residents. Independent Living Services The Company provides independent living services to seniors who do not yet need assistance or support with ADLs, but who prefer the physical and psychological comfort of a residential community that offers health care and other services. As of December 31, 1998, the Company had ownership interests in 11 communities and managed an additional 14 communities which provide independent living services, with an aggregate capacity for 1,914 and 2,140 residents, respectively. Independent living services provided by the Company include daily meals, transportation, social and recreational activities, laundry, housekeeping, security and health care monitoring. The Company also fosters the wellness of its residents by offering health screenings (such as blood pressure checks), periodic special services (such as influenza inoculations), chronic disease management (such as diabetes with its attendant blood glucose monitoring), dietary and similar programs, as well as ongoing exercise and fitness classes. Classes are given by health care professionals to keep 6 ~~residents informed about health and disease management. Subject to applicable government regulation, personal care and~~Dallas-based air medical services ~~are available~~company. From October 2006 to ~~independent living residents~~February 2007, Mr. Plochocki was a private healthcare investor. He previously served as Chief Executive Officer and Director of Trinity Hospice, a national hospice provider, from October 2004 through ~~either the community staff or through the Company's or independent home care agencies. The Company's independent living residents pay~~October 2006. Prior to joining Trinity Hospice, Mr. Plochocki was Chief Executive Officer of InSight Health Services Corp., a ~~fee ranging~~national provider of diagnostic imaging services, from ~~$1,250~~November 1999 to ~~$2,400 per month, in general, depending on the specific community, program~~August 2004. Prior to joining InSight Health Services Corp., he was Chief Executive Officer of services, size of the unit, and amenities offered. The Company's contracts with its independent living residents are generally for a term of one year and are typically terminable by the resident upon 30 days' notice. Assisted Living and Memory Impaired Services The Company offers a wide range of assisted living care and services 24 hours per day, including personal care services, support services, and supplemental services. As of December 31, 1998, the Company had ownership interests in 10 communities, and managed an additional 10 communities which provide assisted living services, with an aggregate capacity for 383 and 412 residents, respectively. The residents of the Company's assisted living residences generally need help with some or all ADLs, but do not require the more acute medical care traditionally given in nursing homes. Upon admission to the Company's assisted living communities, and in consultation with the resident, the resident's family and medical consultants, each resident is assessed to determine his or her health status, including functional abilities, and need for personal care services, and completes a lifestyles assessment to determine the resident's preferences. From these assessments, a care plan is developed for each resident to ensure that all staff members who render care meet the specific needs and preferences of each resident where possible. Each resident's care plan is reviewed periodically to determine when a change in care is needed. The Company has adopted a philosophy of assisted living care that allows a resident to maintain a dignified independent lifestyle. Residents and their families are encouraged to be partners in their care and to take as much responsibility for their well being as possible. The basic types of assisted living services offered by the Company include the following: Personal Care Services. These services include assistance with ADLs such as ambulation, bathing, dressing, eating, grooming, personal hygiene, and monitoring or assistance with medications.Centratex Support Services. These services include meals, assistance with social and recreational activities, laundry services, general housekeeping, maintenance services, and transportation services. Supplemental Services. These services include extra transportation services, personal maintenance, extra laundry services, non-routine care services, and special care services, such as services for residents with Alzheimer's and other forms of dementia. Certain of these services require an extra charge in addition to the pricing levels described below. In pricing its services, the Company has developed the following three levels or tiers of assisted living care: o Level I typically provides for minimum levels of care and service, for which the Company generally charges a monthly fee per resident ranging from $1,750 to $1,900, depending upon unit size and the project design type. Typically, Level I residents need minimal assistance with ADLs. o Level II provides for relatively higher levels and increased frequency of care, for which the Company generally charges a monthly fee per resident ranging from $1,900 to $2,250, depending upon the unit size and the project design type. Typically, Level II residents require moderate assistance with ADLs and may need additional personal care, support, and supplemental services. 7 o Level III provides for the highest level of care and service, for which the Company generally charges a monthly fee per resident ranging from $2,250 to $2,400, depending upon the unit size and the project design type. Typically, Level III residents are either very frail or impaired and utilize many of the Company's services on a regular basis. The Company maintains programs and special units at some of its assisted living communities for residents with Alzheimer's and other forms of dementia, which provide the attention, care and services needed to help those residents maintain a higher quality of life. Specialized services include assistance with ADLs, behavior management and a lifeskills based activities program, the goal of which is to provide a normalized environment that supports residents' remaining functional abilities. Whenever possible, residents assist with meals, laundry and housekeeping. Special units for residents with Alzheimer's and other forms of dementia are located in a separate area of the community and have their own dining facilities, resident lounge areas, and specially trained staff. The special care areas are designed to allow residents the freedom to ambulate as they wish while keeping them safely contained within a secure area with a minimum of disruption to other residents. Special nutritional programs are used to help ensure caloric intake is maintained in residents. Resident fees for these special units are dependent on the size of the unit, the design type and the level of services provided. Skilled Nursing Services In its skilled nursing facilities, the Company provides traditional long-term care through 24-hour per day skilled nursing care by registered nurses, licensed practical nurses and certified nursing assistants. The Company also offers a comprehensive range of restorative nursing and rehabilitation services in its communities including, but not limited to, physical, occupational, speech and medical social services. As of December 31, 1998, the Company had ownership interests in seven facilities and managed an additional facility which provides nursing services, with an aggregate capacity for 746 and 60 residents, respectively. Home Care As of December 31, 1998, the Company provided private pay home care services to clients at one of its senior living communities through the Company's on-site home care agency and made private pay home care services available to clients at a majority of its senior living communities through third party providers. The Company believes that the provision of private pay home care services is an attractive adjunct to its independent living services because it allows the Company to provide more services to its residents as they age in place and increase the length of stay in the Company's communities. The services and products that the Company provides through its home care agency include: (i) general and specialty nursing services to clients with long-term chronic health conditions, permanent disabilities, terminal illnesses and post-procedural needs; (ii) rehabilitative therapy services including physical, occupational and speech therapy through outside contractors; (iii) personal care services and assistance with ADLs; (iv) enhanced hospice care for clients in the final phases of incurable disease; and (v) extensive monitoring and educational services relative to respiratory care, medication administration, medical equipment, and medical supplies. The Company intends to expand its home care service business to additional senior living communities and to develop, acquire or manage home care service businesses at other such communities. In addition, the Company will make available to residents certain customized physician, dentistry, podiatry and other health-related services that may be offered by third-party providers. The Company may elect to provide these services directly or through participation in managed care networks. OPERATING COMMUNITIES The table below sets forth certain information with respect to the independent, senior living, and continuum of care communities owned, leased, and managed by the Company as of December 31, 1998. The Company is expanding certain of these communities, primarily to add assisted living units. See "Growth Strategies - Expand Existing Communities." These expansions, along with the availability of private pay home care services, allow the Company to broaden its continuum of care services to allow residents to age in place. 8

9 THIRD-PARTY MANAGEMENT CONTRACTS The Company is a party to two separate property management agreements (the "ILM Management Agreements") with ILM I Lease Corporation and ILM II Lease Corporation, corporations formed by ILM Senior Living, Inc. and ILM II Senior Living, Inc. (collectively, "ILM") that operate 13 senior living communities. The ILM Management Agreements commenced on July 29, 1996 and will expire on December 31, 1999 and December 31, 2000, respectively, subject to extension under certain circumstances, but not beyond July 29, 2001. Under the terms of the ILM Management Agreements, the Company earns a base management fee equal to 4% of the gross operating revenues of the facilities under management (as defined), and is also eligible to receive an incentive management fee equal to 25% of the amount by which the average monthly net cash flow of the facilities (as defined) for the 12-month period ending on the last day of each calendar month exceeds a specified base amount. The ILM Management Agreements are terminable upon the sale of the related facilities, subject to the Company's rights to offer to purchase the facilities. In the event of a sale, the Company has the right to make the first and last offer with respect to the purchase of the facilities subject to the ILM Management Agreements. The Company earned a total of $980,159 and $969,068, respectively, under the two ILM Management Agreements for the year ended December 31, 1998, which includes the incentive management fee, and $854,948 and $734,755, respectively, for the year ended December 31, 1997. On February 7, 1999, the Company entered into separate agreements and plans of merger with ILM Senior Living, Inc. and ILM II Senior Living, Inc. Upon completion of such mergers, the Company will own the 13 communities currently managed under the ILM Management Agreements and will terminate the ILM Management Agreements. See "Pending Mergers" for a description of these transactions and the conditions which must be satisfied for their completion. The Company is also a party to two separate property management agreements (the "Buckner Agreements") with Buckner Retirement Services, Inc., a ~~not-for-profit corporation that operates two~~support services company for the healthcare industry, and Mr. Plochocki had previously held other senior ~~living communities. The Buckner Agreements commenced on April 1, 1996~~level positions with healthcare industry firms. Mr. Plochocki holds a B.A. in Journalism and ~~1997~~Public Relations from Wayne State University and ~~expire on March 31, 2001~~a Master’s degree in Business Management from Central Michigan University.

Michael W. Reid

has been a director since October 2009 and ~~2002, respectively, except that either party may terminate the agreements for cause under limited circumstances. Under the terms~~has served as Chairman of the ~~Buckner Agreement for Buckner Parkway Place, the Company earns~~Board since 2016. Mr. Reid serves as managing partner at Resolution Real Estate Partners, a ~~base~~real estate investment and management ~~fee of $25,300 per month. Under the terms~~company that manages and leases 2 million square feet in Midtown Manhattan. Mr. Reid was formally a member of the ~~Buckner Westminster Place Agreement,~~Board of Directors and the ~~Company earns a base management fee of $6,050 per month. In the case~~Chairman of the ~~Buckner Westminister Place Agreement, the Company was also entitled, through August 31, 1997,~~Audit

Table of Contents

Committee of Inland Residential Properties Trust, Inc., a real estate investment trust formed in December 2013 to ~~a marketing lease-up fee of $500 for each unit at the time it was initially occupied. Also,~~acquire multifamily properties located in the case of both of the Buckner Agreements, the Company is also eligible to receive a productivity reward equal to 5% of the Gross Revenues generated during the immediately preceding month that exceed $507,000 and $121,000, respectively. Both agreements have a productivity reward limit of 20% of the base management fee per month. The amounts that exceed the limit are deferred. The productivity reward took the place of the incentive fee during 1997. Pursuant to the terms of the Buckner Agreements, the Company has a right of first refusal with respect to purchasing the communities subject to these agreements. GROWTH STRATEGIES The Company believes that the fragmented nature of the senior living services industry and the limited capital resources available to many small, private operators provide an attractive opportunity for the Company to expand its existing base of senior living operations. The Company believes that its current operationsmetropolitan areas throughout the United States, ~~serve~~until 2019. Mr. Reid has nearly 36 years of investment banking and real estate experience, including heading Lehman Brothers REIT equity practice for nine years (from 1992 to 2001) as the foundation on which the Company can build senior living networks in targeted geographic markets and thereby provide a broad range of high quality care in a cost-efficient manner. The following are the principal elements of the Company's growth strategy: Develop New Senior Living Communities General. The Company intends to continue to expand its operations through the development, construction, marketing and management of new senior living communities in selected markets which provide a quality lifestyle that is 10 affordable to a large segment of seniors. The Company's national presence provides it with extensive research and experience in various markets which serve as the basis for the formulation of its development strategyManaging Director in the selection of new markets. The Company's development plan calls for the identification of multiple markets in which construction can occur within the Company's targeted time frame and budget. The Company has developed a list of target markets and submarkets based upon local market conditions, the availability of development sites and local construction capabilities, the existence of development barriers to entry, the overall health and growth trends of the local economies, and the presence of a significant elderly population. The Company's senior management has extensive experience in senior living development, having developed in excess of $400.0 million of senior living communities. The Company has an integrated internal development approach pursuant to which the Company's management and other personnel (including designers and architects, market analysts, and construction managers) locate sites for, develop, and open its communities. Personnel who are experienced in site selection conduct extensive market and site-specific feasibility studies prior to the Company's committing significant financial resources to new projects. The Company believes it can expand its operations into new markets and strengthen its presence within its existing markets utilizing its existing residence models, such as the Waterford model, discussed below. Development with Triad. Twenty-seven of the 34 senior living communities referred to in the table below will be Waterford Communities and will be developed pursuant to an arrangement with Triad Senior Living, Inc. and its affiliates, which are unrelated third parties. Triad Senior Living, Inc. and its affiliates have previously owned, developed, operated and sold senior living communities for their own account. The Waterford community model is designed to provide middle income residents with a senior living community having amenities typical of higher-priced communities, through more efficient space design, emphasizing common areas and providing more efficient layouts of the living areas. The Waterford design may be configured in a number of different ways thereby providing the Company with flexibility in adapting to a particular geographic market, neighborhood, site or care need.Global Real Estate Department. In addition, the Waterford design has been developed to facilitate the prompt, efficient, cost-effective delivery of senior care and personal services. Site requirements for the various designs range from 4.5 to 6.0 acres. The Waterford design may also provide for specially designed residential units, common areas and dining rooms for residents with Alzheimer's and other forms of dementia. The Company believes that its designs meet the desire of many of its residents to move into a new residence that approximates, as nearly as possible, the comfort of their prior home. The Company also believes that its designs achieve several other objectives, including: (i) lessening the trauma of change for residents and their families; (ii) facilitating resident mobility and caregiver access; (iii) enhancing operating efficiencies; (iv) enhancing the Company's ability to match its products to targeted markets; and (v) differentiating the Company from its competitors. The Company had previously entered into a development agreement to develop the Waterford communities with Tri Point Communities, L.P. ("Tri Point"), a limited partnership owned by the Company's founders (Messrs. Beck and Stroud) and their affiliates. Effective April 1, 1998, Tri Point was reorganized and the interests of Messrs. Beck and Stroud were sold at their cost to Triad Senior Living, Inc. and its affiliates. Tri Point was renamed Triad Senior Living I, L.P. ("Triad I"). The new general partner of Triad I, owning 1%, is Triad Senior Living, Inc. Five of the 34 senior living communities referred to in the table below will be Waterford communities developed pursuant to an arrangement with Triad I, a limited partnership owned 19% by the Company and 81% by unrelated third parties, under which Triad I will pay development and management fees to the Company for development and management services and the Company will have options to purchase the partnership interests in Triad I of the non-Company partners and to purchase the communities upon their completion and during the term of the management contracts. Triad I will be responsible for funding and obtaining financing for the construction and lease-up costs. The Company made available to Triad I an unsecured credit facility not to exceed $10 million. These communities will have an aggregate capacity, for approximately 756 residents at an aggregate estimated cost of completion and lease-up of approximately $40.0 million to $50.0 million. Three of the 34 senior living communities referred to in the table below will be Waterford communities developed pursuant to an arrangement with Triad Senior Living II, L.P. ("Triad II"), a limited partnership owned 19% by 11 the Company and 81% by unrelated third parties. Triad II will pay development and management fees to the Company for development and management services and the Company will have options to purchase the partnership interests in Triad II of the non-Company partners and to purchase the communities upon their completion during the term of the management contracts. Triad II will be responsible for funding and obtaining financing for the construction and lease-up costs. The Company has made available to Triad II an unsecured credit facility not to exceed $10 million. These communities will have an aggregate capacity for approximately 408 residents at an aggregate estimated cost of completion and lease-up of approximately $25 million to $30 million. Six of the 34 senior living communities referred to in the table below will be Waterford communities developed pursuant to an arrangement with Triad Senior Living III, L.P. ("Triad III"), a limited partnership owned 19% by the Company and 81% by unrelated third parties. Triad III will pay development and management fees to the Company for development and management services and the Company will have options to purchase the partnership interests in Triad III of the non-Company partners and to purchase the communities upon their completion during the term of the management contracts. Triad III will be responsible for funding and obtaining financing for the construction and lease-up costs. The Company has made available to Triad III, an unsecured credit facility not to exceed $10 million. These communities will have an aggregate capacity for approximately 816 residents at an aggregate estimated cost of completion and lease-up of approximately $50 million to $60 million. Up to six of the 34 senior living communities referred to in the table below will be Waterford communities developed pursuant to an arrangement with Triad Senior Living IV, L.P. ("Triad IV"), a limited partnership owned 19% by the Company and 81% by unrelated third parties. Triad IV will pay development and management fees to the Company for development and management services and the Company will have options to purchase the partnership interests in Triad IV of the non-Company partners and to purchase the communities upon their completion during the term of the management contracts. Triad IV will be responsible for funding and obtaining financing for the construction and lease-up costs. The Company has made available to Triad IV an unsecured credit facility not to exceed $10 million. These communities will have an aggregate capacity for approximately 816 residents at an aggregate estimated cost of completion and lease-up of approximately $50 million to $60 million. Up to seven of the 34 senior living communities referred to in the table below will be Waterford communities developed pursuant to an arrangement with another Triad limited partnership, which has not yet been formed. It is expected that the limited partnership will be owned 19% by a wholly owned subsidiary of the Company and 81% by unrelated third parties. The development agreements between each Triad entity and the Company provide for a development fee of 4%, plus reimbursements for expenses and overhead not to exceed 4%. The Triad entities also enter into management agreements with the Company providing for management fees to the Company in an amount equal to the greater of 5% of gross revenues or $5,000 per month per community, plus overhead reimbursements not to exceed 1% of gross revenues. Under each Triad partnership agreement, the Company has an option to purchase the partnership interests of the non- Company partners for an amount equal to the amount such party paid for its interest, plus noncompounded interest of 12% per annum. The property management agreements also provide the Company with an option to purchase the communities developed by the Triad entities upon their completion for an amount equal to the fair market value (based on a third-party appraisal but not less than hard and soft costs and lease-up costs). The Company has made no determination as to whether it will exercise its purchase options. The Company will evaluate the possible exercise of each purchase option based upon the business and financial factors which may exist at the time those options may be exercised. Development through Other Strategic Alliances. The Company has also formed strategic alliances with for-profit (LCOR Incorporated - "LCOR") and not-for-profit organizations (Buckner Retirement Services, Inc. and The Emmaus Calling, Inc.) to develop, market and manage additional communities while reducing the investment of, and associated risks to, the Company. The Company's alliances are with established development companies or not-for-profit owner/operators of senior living communities. Seven of the 34 senior living communities referred to in the table below will be developed through strategic alliances. The for-profit entities generally obtain construction financing and provide construction management experience, existing relationships with local contractors, suppliers, and municipal authorities, knowledge of local and state building codes and building laws, and assistance with site selection for new communities. The 12 not-for-profit organizations generally provide existing relationships with religious organizations, a community reputation of caring for seniors, a tax-exempt status that permits tax-exempt bond financing, and in certain instances, home care services. The Company contributes its operational and industry expertise, and has had, in most cases, leasing and management responsibilities for communities owned by these organizations, as well as has the right of first refusal to acquire the communities in most cases. The Company intends to continue to evaluate opportunities to form similar joint ventures and strategic alliances in the future. As of December 31, 1998, four sites have been purchased for the development and operation of independent and assisted living communities by LCOR. The sites are Trumbull, Connecticut; Libertyville, Illinois; Summit, New Jersey; and Naperville, Illinois. The Management Agreements between LCOR and the Company generally provide for a base management fee of the greater of $15,000 per month or 5% of gross revenues plus an incentive fee equal to 25% of the excess cash flow over budgeted amounts. The terms are for 10 years with a five year renewal at the Company's option. The Company is also entitled to a fee of $50,000 for development consulting services for each development and a monthly marketing fee of approximately $10,000 per month for each community, which generally covers the period prior to the expected opening of the communities, usually six to nine months. The Company has entered into a strategic alliance with Buckner Retirement Services, Inc. ("Buckner") to develop, market and manage senior living communities developed by Buckner. As of December 31, 1998, two sites have been purchased for the development and operation of independent, assisted living and skilled nursing communities. The sites are Beaumont, Texas and Georgetown, Texas. The Management Agreements between Buckner and the Company generally provide for a base management fee plus a productivity reward equal to 5% of the gross revenues generated during the immediately preceding month that exceed a base figure. The productivity reward has a limit of 20% of the base management fee per month. The amounts that exceed the limit are deferred. The terms are for five years. The Company has also entered into a strategic alliance with The Emmaus Calling, Inc. ("Emmaus") to develop, market and manage a senior living community developed by Emmaus. As of December 31, 1998, one site has been purchased for the development and operation of an assisted living community. The site is in Mesquite, Texas. The Management Agreement between Emmaus and the Company provides for a base management fee of $8,000 per month adjusted yearly by the difference between the Consumer Price Index for the year less the Consumer Price Index for the year of completion. The term is for 15 years. As of December 31, 1998, there were 34 communities under development. Seven of these communities (Beaumont, Texas; Mesquite, Texas; Libertyville, Illinois; Naperville, Illinois; Trumbull, Connecticut; Summit, New Jersey; and Georgetown, Texas) were being developed for third parties where the Company will manage these communities under management agreements and has no equity interest and 27 of these communities were being developed with the Triad entities where the Company will manage these communities under management agreements and where the Company has a 19% limited partner interest in each of the Triad entities. The table below summarizes information regarding those developments which the Company expects to be completed through 2000.

Expand Existing Communities The Company plans to expand certain of its existing communities to include additional independent living and assisted living residences (including special programs and living units for residents with Alzheimer's and other forms of dementia). As of December 31, 1998, the Company had three expansion projects under construction and seven expansion projects under development, representing an aggregate increase in capacity to accommodate an additional 564 residents. Of these ten expansion projects, four are at communities in which the Company owns an interest and manages under multi-year agreements, and six are at communities which the Company manages for third parties. The costs of the expansion of managed communities is borne by the community owner and not by the Company. However, with respect to the four expansion projects in which the Company has an ownership interest, the Company will manage the expansion and have rights to purchase the expansion facilities. The expansion of existing senior living communities allows the Company to create operating efficiencies and capitalize on its local presence, community familiarity and reputation in markets in which the Company operates. The table below summarizes information regarding the expansion of certain of the Company's existing senior living communities as of December 31, 1998. 14

Pursue Strategic Acquisitions The Company intends to continue to pursue single or portfolio acquisitions of senior living communities and, to a lesser extent, other assisted living and long-term care communities. Through strategic acquisitions, the Company plans to enter new markets or acquire communities in existing markets as a means to increase market share, augment existing clusters, strengthen its ability to provide a broad range of care, and create operating efficiencies. As the industry continues to consolidate, the Company believes that opportunities will arise to acquire other senior living companies. The Company believes that the current fragmented nature of the senior living industry, combined with the Company's financial resources, national presence, and extensive contacts within the industry, should provide it with the opportunity to evaluate a number of potential acquisition opportunities. In reviewing acquisition opportunities, the Company will consider, among other things, geographic location, competitive climate, reputation and quality of management and communities, and the need for renovation or improvement of the communities. Expand Home Care Services The Company intends to expand its home care services by developing, acquiring, or managing new home care agencies and expanding its range of existing home care services at its communities. The Company currently anticipates that its home care agencies will be based at some of the Company's communities, and revenues will be derived from private pay sources. The Company believes that the expansion of its home care services will enhance its ability to provide a broad range of services, increase its market visibility, and further increase Company profitability, as well as aid in the maintaining of current occupancy levels. As of December 31, 1998, the Company operated one home care agency, and intends to establish additional home care agencies at certain of its communities. Expand Referral Networks The Company intends to continue to develop relationships (which, in certain instances, may involve strategic alliances or joint ventures) with local and regional hospital systems, managed care organizations, and other referral sources to attract new residents to the Company's communities. The Company believes that such arrangements or alliances, which could range from joint marketing arrangements to priority transfer agreements, will enable it to be strategically positioned within the Company's markets if, as the Company believes, senior living programs become an integral part of the evolving health care delivery system. 15 OPERATIONS Centralized Management The Company centralizes its corporate and other administrative functions so that the community-based management and staff can focus their efforts on resident care. The Company maintains centralized accounting, finance, human resources, training, and other operational functions at its national corporate office in Dallas, Texas. The Company's corporate office is generally responsible for: (i) establishing Company-wide policies and procedures relating to, among other things, resident care and operations; (ii) performing accounting functions; (iii) developing employee training programs and materials; (iv) coordinating human resources; (v) coordinating marketing functions; and (vi) providing strategic direction. In addition, financing, development, construction and acquisition activities, including feasibility and market studies, and community design, development, and construction management, are conducted by the Company's corporate offices. The Company seeks to control operational expenses for each of its communities through standardized management reporting and centralized controls of capital expenditures, asset replacement tracking, and purchasing for larger and more frequently used supplies. Community expenditures are monitored by regional and district managers who are accountable for the resident satisfaction and financial performance of the communities in their region. Community-Based Management An executive director manages the day-to-day operations at each senior living community, including oversight of the quality of care, delivery of resident services, and monitoring of financial performance, and is responsible for all personnel, including food service, maintenance, activities, security, assisted living, housekeeping, and, where applicable, nursing. In most cases, each community also has department managers who direct the environmental services, nursing or care services, business management functions, dining services, activities, transportation, housekeeping, and marketing functions. The assisted living and skilled nursing components of the senior living communities are managed by licensed professionals, such as a nurse and/or a licensed administrator. These licensed professionals have many of the same operational responsibilities as the Company's executive directors, but their primary responsibility is to oversee resident care. Many of the Company's senior living communities and some of its skilled nursing facilities are part of a campus setting, which includes independent living. This campus arrangement allows for cross-utilization of certain support personnel and services, including administrative functions, which results in greater operational efficiencies and lower costs than free-standing facilities. The Company actively recruits personnel to maintain adequate staffing levels at its existing communities as well as new staff for new or acquired communities prior to opening. The Company has adopted comprehensive recruiting and screening programs for management positions that utilize corporate office team interviews and thorough background and reference checks. The Company offers system-wide training and orientation for all of its employees at the community level through a combination of Company-sponsored seminars and conferences. Quality Assurance Quality assurance programs are coordinated and implemented by the Company's corporate and regional staff. The Company's quality assurance is targeted to achieve maximum resident and resident family member satisfaction with the care and services delivered by the Company. The Company's primary focus in quality control monitoring includes routine in- service training and performance evaluations of care givers and other support employees. Additional quality assurance measures include: 16 Resident and Resident Family Input. On a routine basis the Company provides residents and family members the opportunity to provide valuable input regarding the day-to-day delivery of services. On-site management at each community has fostered and encouraged active resident councils and resident committees who meet independently. These resident bodies meet with on-site management on a monthly basis to offer input and suggestions to the quality and delivery of services. Additionally, at each community the Company conducts annual resident satisfaction surveys to further monitor the satisfaction levels of both residents and family members. These surveys are sent directly to the corporate headquarters for tabulation and distribution to on-site staff and residents. For 1998 and 1997, the Company achieved a 95% and 96% approval rating, respectively, from its residents. For any departmental area of service scoring below a 90%, a plan of correction is developed jointly by on-site, regional and corporate staff for immediate implementation. Regular Community Inspections. On a monthly basis a community inspection is conducted by regional and/or corporate staff. Included as part of this inspection is the monitoring of the overall appearance and maintenance of the community interiors and grounds. The inspection also includes monitoring staff professionalism and departmental reviews of maintenance, housekeeping, activities, transportation, marketing, administration and food service as well as health care, if applicable. The monthly inspection also includes the observation of residents in their daily activities and community compliance with government regulations. Independent Service Evaluations. The Company engages the services of outside professional independent consulting firms to evaluate various components of the community operations. These services include "mystery shops," competing community analysis, pricing recommendations and product positioning. This provides management with valuable unbiased product and service information. A plan of action regarding any areas requiring improvement or change is implemented based on information received. At communities where health care is delivered, these consulting service reviews include the on-site handling of medications, record-keeping, and general compliance with all governmental regulations. Marketing Each community is staffed by on-site marketing directors and additional marketing staff depending on the community size. The primary focus of the on-site marketing staff is to create awareness of the Company and its services among prospective residents and family members, professional referral sources and other key decision makers. The marketing efforts incorporate an aggressive marketing plan to include monthly and annual goals for leasing, new lead generation, prospect follow up, community outreach, and resident and family referrals. Additionally, the marketing plan includes a calendar of promotional events and a comprehensive media program. On-site marketing departments perform a competing community assessment twice annually. Corporate and regional marketing directors monitor the on-site marketing departments' effectiveness and productivity on a monthly basis. Routine detailed marketing department audits are performed on an annual basis or more frequently if deemed necessary. Corporate and regional personnel assist in the development of marketing strategies for each community and produce creative media, assist in direct mail programs and necessary marketing collateral materials. Ongoing sales training of on-site marketing staff is implemented by corporate and regional marketing directors. In the case of new development, the corporate and regional staff develop a comprehensive community outreach program that is implemented at the start of construction. A marketing pre-lease program is developed and on-site marketing staff are hired and trained to begin the program implementation six to nine months prior to the community opening. Extensive use of media to include radio, television, print, direct mail and telemarketing is implemented during this pre- lease phase. After the community is opened and sustaining occupancy levels are attained, the on-site marketing staff is more heavily focused on resident and resident family referrals, as well as professional referrals. A maintenance program of print media and direct mail is then implemented. 17 GOVERNMENT REGULATION Changes in existing laws and regulations, adoption of new laws and regulations and new interpretations of existing laws and regulations could have a material effect on the Company's operations. Failure by the Company to comply with applicable regulatory requirements could have a material adverse effect on the Company's business, financial condition, and results of operations. Accordingly, the Company monitors legal and regulatory developments on local and national levels. The health care industry is subject to extensive regulation and frequent regulatory change. At this time, no federal laws or regulations specifically regulate assisted or independent living residences. While a number of states have not yet enacted specific assisted living regulations, certain of the Company's assisted living communities are subject to regulation, licensing, Certificate of Need and permitting by state and local health and social service agencies and other regulatory authorities. While such requirements vary from state to state, they typically relate to staffing, physical design, required services, and resident characteristics. The Company believes that such regulation will increase in the future. In addition, health care providers are receiving increased scrutiny under anti-trust laws as integration and consolidation of health care delivery increases and affects competition. The Company's communities are also subject to various zoning restrictions, local building codes, and other ordinances, such as fire safety codes. Failure by the Company to comply with applicable regulatory requirements could have a material adverse effect on the Company's business, financial condition, and results of operations. Regulation of the assisted living industry is evolving. The Company is unable to predict the content of new regulations and their effect on its business. There can be no assurance that the Company's operations will not be adversely affected by regulatory developments. The Company believes that its communities are in substantial compliance with applicable regulatory requirements. However, in the ordinary course of business, one or more of the Company's communities could be cited for deficiencies. In such cases, the appropriate corrective action would be taken. To the Company's knowledge, no material regulatory actions are currently pending with respect to any of the Company's communities. Under the Americans with Disabilities Act of 1990, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. A number of additional federal, state, and local laws exist that also may require modifications to existing and planned properties to permit access to the properties by disabled persons. While the Company believes that its communities are substantially in compliance with present requirements or are exempt therefrom, if required changes involve a greater expenditure than anticipated or must be made on a more accelerated basis than anticipated, additional costs would be incurred by the Company. Further legislation may impose additional burdens or restrictions with respect to access by disabled persons, the costs of compliance with which could be substantial. In addition, the Company is subject to various federal, state and local environmental laws and regulations. Such laws and regulations often impose liability whether or not the owner or operator knew of, orhe was responsible for ~~the presence of hazardous or toxic substances. The costs of any required remediation or removal of these substances could be substantial~~developing and the liability of an owner or operator as to any property is generally not limited under such laws and regulations and could exceed the property's value and the aggregate assets of the owner or operator. The presence of these substances or failure to remediate such contamination properly may also adversely affect the owner's ability to sell or rent the property, or to borrow using the property as collateral. Under these laws and regulations, an owner, operator or an entity that arranges for the disposal of hazardous or toxic substances, such as asbestos-containing materials, at a disposal site may also be liable for the costs of any required remediation or removal of the hazardous or toxic substances at the disposal site. In connection with the ownership or operation of its properties, the Company could be liable for these costs, as well as certain other costs, including governmental fines and injuries to persons or properties. The Company has completed Phase I environmental audits of the communities in which the Company owns interests, and such surveys have not revealed any material environmental liabilities that exist with respect to these communities. The Company believes that the structure and composition of government, and specifically health care, regulations will continue to change and, as a result, regularly monitors developments in the law. The Company expects to modify its agreements and operations from time to time asimplementing the business ~~and regulatory environments change. While the Company 18~~ ~~believes it will be able to structure all~~strategy for its agreements and operations in accordance with applicable law, there can be no assurance that its arrangements will not be successfully challenged. COMPETITION The senior living services industry is highly competitive, and the Company expects that all segments of the industry will become increasingly competitive in the future. Although there are a number of substantial companies active in the senior living services industry and in the markets in which the Company operates, the industry continues to be very fragmented and characterized by numerous small operators. The Company competes with American Retirement Corporation and Holiday Retirement Corporation in Texas, Sunrise Assisted Living, Inc. in North Carolina and New York, Atria Senior Quarters in New York, and Marriott Senior Living Services in Florida. The Company believes that the primary competitive factors in the senior living services industry are: (i) reputation for and commitment to a high quality of service; (ii) quality of support services offered (suchREIT equity underwriting business. Mr. Reid also served as food services); (iii) price of services; (iv) physical appearance and amenities associated with the communities; and (v) location. The Company competes with other companies providing independent living, assisted living, skilled nursing, home health care, and other similar service and care alternatives,Chief Operating Officer at SL Green Realty Corp. from 2001-2004, where some of ~~whom may have greater financial resources than the Company. Because seniors tend to choose senior living communities near their homes, the Company's principal competitors are other senior living~~his responsibilities included strategic planning, finance and ~~long-term care communities~~reporting, capital markets, operations and budgeting for a $4 billion publicly-traded REIT. From 2004-2006, he served as President of Ophir Energy Corp., a company that invested in ~~the same geographic areas~~oil and gas production in Oklahoma. From 2006-2008, he served as ~~the Company's communities. The Company also competes with other health care businesses with respect to attracting~~Chief Operating Officer of Twining Properties, a real estate company specializing in high rise development in Cambridge, Massachusetts. Mr. Reid holds a Bachelor of Arts and ~~retaining nurses, technicians, aides, and other high quality professional and non-professional employees and managers. EMPLOYEES As~~Master of December 31, 1998, the Company employed approximately 1,800 persons, of which approximately 1,009 were full-time employees (approximately 39 of whom are located at the Company's corporate offices) and 791 are part-time employees. None of the Company's employees is currently represented by a labor union and the Company is not aware of any union organizing activity among its employees. The Company believes that its relationship with its employees is good. EXECUTIVE OFFICERS AND KEY EMPLOYEES Divinity, both from Yale University.

Executive Officers

The following table sets forth certain information concerning each of the ~~Company's~~Company’s executive officers, ~~and key employees as of December 31, 1998:~~ other than Ms. Lody. Information concerning Ms. Lody is set forth above under “—Directors.”

~~NAME AGE POSITION(S) WITH THE COMPANY - ---- --- ----------------------------~~ ~~Jeffrey L. Beck........................ 53 Co-Chairman~~

Name	Age	Position(s) with the Company
Brandon M. Ribar	40	Executive Vice President and Chief ~~Executive Officer James A. Stroud........................ 48 Co-Chairman, Chief~~ Operating Officer
David R. Brickman	62	Senior Vice President, Secretary and ~~Secretary Lawrence A. Cohen...................... 45~~General Counsel
Tiffany L. Dutton	41	Senior Vice ~~Chairman~~President – Finance and Accounting
Jeremy D. Falke	47	Senior Vice President – Human Resources
Michael C. Fryar	44	Senior Vice President and Chief ~~Financial~~Revenue Officer ~~Keith N. Johannessen................... 42 President Rob L. Goodpaster...................... 45~~
Carole J. Burnell	52	Vice President ~~-- National Marketing David W. Beathard, Sr.................. 51 Vice President --~~– Operations ~~David G. Suarez........................ 46 Vice President -- Development David R. Brickman...................... 40~~

Brandon M. Ribar

joined the Company in September 2019 and is currently the Executive Vice President and Chief Operating Officer. Prior to joining the Company, Mr. Ribar served as an executive healthcare consultant primarily focused on improving existing operations and expanding continuing care retirement communities for multiple investment platforms and operators since 2018. From 2014 through 2018, he served as the Senior Vice President, Operations of Golden Living, a post-acute healthcare provider. Prior to serving in such capacity, Mr. Ribar served Golden Living in various roles including Senior Vice President, Operational Finance and Strategy and Senior Vice President, Corporate Strategy and Business Development. Prior to Golden Living, Mr. Ribar served as Vice President of Fillmore Capital Partners from 2004 through 2009. Mr. Ribar received a BCS in Operations and Management Information Systems from Santa Clara University.

David R. Brickman

is currently the Senior Vice President, Secretary, and General Counsel of the Company. He served as Vice President and General Counsel ~~Kathleen L. Granzberg.................. 37 Controller -- Corporate Robert F. Hollister.................... 43 Controller -- Property~~ JEFFREY L. BECK has served as a director and Chief Executive Officer of the Company and its predecessors since January 1986. He currently serves as Co-Chairman of the Board. Mr. Beck also serves on the boards of various 19 educational, religious and charitable organizations and in varying capacities with several trade associations. Mr. Beck served as Vice Chairman of the American Seniors Housing Association from 1992 to 1994, and as Chairman from 1994 to 1996, and remains a member of its Executive Board, and is a council member of the Urban Land Institute. Mr. Beck is Chairman of the Board of Directors of United Texas Bank of Dallas. Mr. Beck has recently taken a leave of absence to attend to the needs of a seriously ill family member. JAMES A. STROUD has served as a director and Chief Operating Officer of the Company and its predecessors since January 1986. He currently serves as Co-Chairman of the Board and Chairman, Chief Operating Officer and Secretary of the Company. Mr. Stroud also serves on the boards of various educational and charitable organizations, and in varying capacities with several trade organizations, including as a member of the Founder's Council and Board of Directors of the Assisted Living Federation of America, and as President and as a member of the Board of Directors of the National Association For Senior Living Industry Executives. Mr. Stroud also serves as an Advisory Group member to the National Investment Conference. Mr. Stroud was a Founder of the Texas Assisted Living Association and serves as a member of its Board of Directors. Mr. Stroud has earned a Masters in Law, is a licensed attorney and is also a Certified Public Accountant. LAWRENCE A. COHEN has served as a director and Vice Chairman and Chief Financial Officer of the Company since November 1996. During Mr. Beck's leave of absence, Mr. Cohen is acting as Chief Executive Officer. From 1991 to 1996, Mr. Cohen served as President, and Chief Executive Officer of Paine Webber Properties Incorporated, which controlled a real estate portfolio having a cost basis of approximately $3.0 billion, including senior living facilities of approximately $110.0 million. Mr. Cohen serves as a member of the Corporate Finance Committee of the NASD Regulation, Inc., and was a founding member of the executive committee of the Board of the American Seniors Housing Association. Mr. Cohen has earned a Masters in Law, is a licensed attorney and is also a Certified Public Accountant. Mr. Cohen has had positions with businesses involved in senior living for 14 years. KEITH N. JOHANNESSEN has served as President of the Company and its predecessors since March 1994, and previously served as Executive Vice-President since May 1993. From 1992 to 1993, Mr. Johannessen served as Senior Manager in the health care practice of Ernst & Young. From 1987 to 1992, Mr. Johannessen was Executive Vice President of Oxford Retirement Services, Inc. Mr. Johannessen has served on the State of the Industry and Model Assisted Living Regulations Committees of the American Seniors Housing Association. Mr. Johannessen has been active in operational aspects of senior housing for 20 years. ROB L. GOODPASTER has served as Vice President - National Marketing of the Company and its predecessors since December 1992. From 1990 to 1992, Mr. Goodpaster was National Director for Marketing for Autumn America, an owner and operator of senior housing facilities. Mr. Goodpaster is a member of the Board of Directors of the National Association For Senior Living Industries. Mr. Goodpaster has been active in the operational, development and marketing aspects of senior housing for 22 years. DAVID W. BEATHARD, SR. has served as Vice President - Operations of the Company and its predecessors since August 1996. From 1992 to 1996, Mr. Beathard owned and operated a consulting firm which provided operational, marketing and feasibility consulting regarding senior housing facilities. Mr. Beathard has been active in the operational, sales and marketing, and construction oversight aspects of senior housing for 24 years. DAVID G. SUAREZ has recently joined the Company as Vice President - Development. From 1996 to 1998, Mr. Suarez served as Project Manager for the Western Group of Columbia/HCA. Prior to that, Mr. Suarez served as Vice President of Development for PDC Facilities, a healthcare design-build developer. Mr. Suarez has been in the healthcare industry in development for 20 years. His architectural and construction management degrees provide experience and expertise in the Company's site selection process, building design and budgeting, and construction methods and material procedures for the Company's senior living communities. DAVID R. BRICKMAN has served as Vice President of the Company and its predecessors since July 1992 and ~~General Counsel~~has served as Secretary of the Company since ~~October 1997.~~May 2007. From 1989 to 1992, Mr. Brickman served as

in-house

counsel with LifeCo Travel Management Company, a corporation ~~which~~that provided travel services to U.S. corporations. Mr. Brickman 20 ~~has~~ earned a Juris Doctor and Masters of Business Administration from the University of South Carolina and a Masters in Health ~~Administration.~~Administration from Duke University. He currently serves on the Board of Advisors for the Southern Methodist University Corporate Counsel Symposium. He is also a member of the National Center for Assisted Living

In-house

Counsel Roundtable Task Force, as well as the Long-Term Care Risk Legal Forum. Mr. Brickman has either practiced law or performed

in-house

counsel functions for 1233 years. ~~KATHLEEN~~

Tiffany L. ~~GRANZBERG,~~Dutton

, a Certified Public Accountant, has served as the ~~Corporate Controller for~~Company’s Senior Vice President – Finance and Accounting since December 2020. Ms. Dutton joined the Company in January 2020 as its Vice President – Accounting and ~~its predecessors~~Financial Reporting. Prior to joining the Company, Ms. Dutton served as an accounting consultant primarily focused on assisting healthcare and retail entities with improving financial reporting and accounting structures since ~~December 1991,~~2017. Prior to such time, Ms. Dutton served as the Director- Accounting Policy in 2017 and Assistant Controller- Operations from 2014 to 2017 for Adeptus Health, Inc, Senior Manager- Financial Reporting for RealPage, Inc. from 2013 to 2014, as Manager, Accounting, Reporting and Compliance for Pier 1 Imports from 2010 to 2013, and as ~~Property Controller since 1987.~~Senior Manager of Accounting Policy of Dollar Thrifty Automotive Group from 2008 to 2010. She began her career as a Manager in the assurance and advisory business services practice of Ernst & Young LLP. Ms. ~~Granzberg~~Dutton earned a BBA in Accounting and a BBA in Economics and Finance from the University of Oklahoma and is a member of the American Institute of Certified Public ~~Accountants~~Accountants.

Jeremy D. Falke

joined the Company as Senior Vice President – Human Resources in February 2018. Mr. Falke held various positions within Tenet Healthcare Corporation (“Tenet”) from November 2004 to February 2018, serving most recently as the Vice President, Talent, Culture and Performance Systems in Dallas. In this role, he was responsible for all talent planning, development, and cultural programming and transformation for an organization with over 75 acute-care hospitals and 450 outpatient facilities, employing more than 125,000 people. Prior to this role, Mr. Falke served as the Senior Director, Strategic Operations, Analytics and Reporting in Dallas and as the Chief Human Resources Officer for Creighton University Medical Center, which was then owned by Tenet in Omaha, Nebraska. Mr. Falke received a Bachelor of Science in Business Management from University of Phoenix in Scottsdale, and a Masters of Business Administration with a concentration in Healthcare Management from the University of Nebraska in Omaha.

Table of Contents

Michael C. Fryar

joined the Company as Chief Revenue Officer in February 2019. His 20 years of experience focusing on brands in complex, multi-channel environments includes leadership positions in medical device and marketing agency settings, with the majority of his career focused in senior healthcare. Prior to joining the Company, Mr. Fryar served as Vice President of GN Hearing North America, where he was part of a leadership team responsible for seven consecutive years of above-market growth and expansion across multiple channels and brands. Prior to GN Hearing, Mr. Fryar served as Senior Director, Marketing at Starkey Hearing Technologies from 2006 to 2012. From 1998 to 2006, he served as an account director at marketing agency Colle McVoy, specializing in digital and traditional marketing, advertising and public relations. Mr. Fryar received a BA in Communications Studies with a minor in Economics Management from Gustavus Adolphus College.

Carole J. Burnell

is ~~also a member~~currently the Vice President – Operations of the Texas Society of Certified Public Accountants. Ms. Granzberg has announced that she is leaving the Company sometime during the second quarter of 1999. ROBERT F. HOLLISTER, a Certified Public Accountant, hasCompany. She served as ~~Property Controller for~~ the Company and its predecessors since April 1992. From 1985 to 1992, Mr. Hollister was Chief Financial Officer and Controller of Kavanaugh Securities, Inc., a NASD broker dealer. Mr. Hollister is a Certified Financial Planner. Mr. Hollister is a member ofRegional Operations Manager in the American Institute of Certified Public Accountants and is also a member of the Texas Society of Certified Public Accountants. ITEM 2. PROPERTIES The executive and administrative officesDallas Region of the Company ~~are located at 14160 Dallas Parkway, Suite 300, Dallas, Texas 75240, and consist~~from January 2004 to March 2019. Ms. Burnell has over 22 years of approximately 14,000 square feet. The lease on the premises extends through August 31, 2002. The Company also leases an executive office space in New York, New York pursuant to a monthly lease agreement. The Company believes that its corporate office facilities are adequate to meet its requirements through at least fiscal 1999 and that suitable additional space will be available, as needed, to accommodate further physical expansion of corporate operations. As of December 31, 1998, the Company owned, leased and/or managed the senior living communities referred to in Item 1 above. Occupancy rate information as of December 31, 1998, is also presented for each community in Item 1 above. ITEM 3. LEGAL PROCEEDINGS On August 11, 1998, the Company executed a settlement agreement with Angeles Housing Concepts, Inc. ("AHC"), ILM I Lease Corporation and ILM II Lease Corporation (collectively, "ILM Lease") resolving all claims among the parties relating to a lawsuit filed by AHC against the Company alleging interference with AHC's management agreements with ILM Lease (the "Settlement Agreement") and calling for a dismissal with prejudice of this lawsuit. The Settlement Agreement did not involve any payment of damages to AHC or any other party by the Company. On or about October 23, 1998, Robert Lewis filed a putative class action complaint on behalf of certain holders of Assignee Interests in NHP in the Delaware Court of Chancery against NHP, the Company, Capital Senior Living Properties 2-NHPCT, Inc. and Capital Realty Group Senior Housing, Inc. (collectively, the "Defendants"). Mr. Lewis purchased 90 Assignee Interests in February 1993 for $180. The complaint alleges, among other things, that the Defendants breached, or aided and abetted a breach of, the express and implied terms of the NHP Partnership Agreement in connection with the sale of four properties by NHP to Capital Senior Living Properties 2 - NHPCT, Inc. The complaint seeks, among other relief, rescission of the sale of these properties and unspecified damages The Company believes the complaint is without merit and intends to vigorously defend itself in this action. On February 12, 1999 a competitor of the Company, Holiday Retirement Corporation ("Holiday"), as well as Colson & Colson Construction Company and their architects, Curry Brandaw Architects, filed suit against the Company in U.S. District Court in Dallas. The complaint alleges, among other claims, that the Company infringed the copyrighted architectural plans and trade dress of Holiday on at least three of the Company's communities. The communities using this Waterford prototype design are owned by Triad I, in which the Company is a 19% limited partner and provides development services under a third party development agreement. The plaintiffs are additionally seeking a preliminary and permanent injunction to bar further use of their allegedly copyrighted architectural plans and trade dress as well as damages, including punitive damages. The defense of this suit has been turned over to the Company's insurer for 21 ~~handling. The Company vigorously denies the allegations mentioned in the lawsuit~~industry experience and has filed an answer and counterclaim. The Company has pending claims incurred in the normal course of business which, in the opinion of management, based on the advice of legal counsel, will not have a material effect on the financial statements of the Company. The provision of personal and health care services entails an inherent risk of liability. In recent years, participants in the senior living and health care services industry have become subject to an increasing number of lawsuits alleging negligence or related legal theories, many of which involve large claims and result in the incurrence of significant defense costs. The Company currently maintains property, liability and professional medical malpractice insurance policies for the Company's owned and managed communities under a master insurance program in amounts and with such coverages and deductibles that the Company believes are within normal industry standards based upon the nature and risks of the Company's business, and the Company believes that such insurance coverage is adequate. The Company also has an umbrella excess liability protection policy in the amount of $15.0 million per location. There can be no assurance that a claim in excess of the Company's insurance will not arise. A claim against the Company not covered by, or in excess of, the Company's insurance could have a material adverse effect upon the Company. In addition, the Company's insurance policies must be renewed annually. There can be no assurance that the Company will be able to obtain liability insurance in the future or that, if such insurance is available, it will be available on acceptable terms. Under various federal, state, and local environmental laws, ordinances, and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property, and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean up costs. The Company is not aware of any environmental liability with respect to any of its owned, leased, or managed communities that it believes would have a material adverse effect on the Company's business, financial condition, or results of operations. The Company believes that its communities are in compliance in all material respects with all federal, state, and local laws, ordinances, and regulations regarding hazardous or toxic substances or petroleum products. The Company has not been notified by any governmental authority, and is not otherwise aware of any material non-compliance, liability, or claim relating to hazardous or toxic substances or petroleum products in connection with any of the communities it currently operates. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the fourth quarter ended December 31, 1998. 22 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The Company's shares of common stock are listed for trading on the New York Stock Exchange ("NYSE") under the symbol "CSU." The following table sets forth, for the periods indicated, the high and low sales prices for the Company's common stock, as reported on the NYSE. At December 31, 1998, there were approximately 3,900 shareholders of record of the Company's common stock. YEAR HIGH LOW - --------------------------------- -------- ------------ 1997 Fourth Quarter................ $ 171/2 $ 9 13/16 1998 First Quarter................. $ 14 $ 8 5/8 Second Quarter................ 15 1/2 11 1/2 Third Quarter................. 12 11/16 5 1/8 Fourth Quarter................ 14 3/4 9 1/2 It is the policy of the Company's Board of Directors to retain all future earnings to finance the operation and expansion of the Company's business. Accordingly, the Company has not and does not anticipate declaring or paying cash dividends on the common stock in the foreseeable future. The payment of cash dividends in the future will be at the sole discretion of the Company's Board of Directors and will depend on, among other things, the Company's earnings, operations, capital requirements, financial condition, restrictions in then existing financing agreements, and other factors deemed relevant by the Board of Directors. (b) Recent Sales of Unregistered Securities. Information with respect to this Item is set forth above under the caption "Item 1. Business--Formation Transactions." The issuance therein described of the Company's Common Stock to Messrs. Jeffrey L. Beck, James A. Stroud (including a trust) and Lawrence A. Cohen in the Formation Transactions in exchange for the Contributed Entities was carried out in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, pursuant to a binding written agreement entered into prior to the filing of the Registration Statement filed in connection with the Offering. In connection with the organization of the Company, during 1996, the Company issued 1,680,000 shares of its Common Stock to Messrs. Beck, Stroud (through a trust) and Cohen for $16,800. The shares were issued in equal amounts of 560,000 shares to each in consideration for a cash payment by each of $5,600. Such issuances were made in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended. (c) Use of Proceeds. As described above in "Business," the Company has completed the Offering. The following information relates to the use of proceeds of the Offering: (1) Effective Date of Registration Statement and Commission File Number: The Company's Registration Statement on Form S-1, File No. 333-33379, relating to the Offering, became effective on October 30, 1997. (2) Aggregate Gross Proceeds, Expenses and Aggregate Net Proceeds: The sale of the 10,350,000 shares of Common Stock generated aggregate gross proceeds of $139,725,000. The aggregate net proceeds to the Company from the sale of the 10,350,000 shares of Common Stock were approximately $128,407,000, after deducting underwriting discounts and commissions of approximately $9,742,000 and expenses of the Offering of approximately $1,576,000 paid by the Company. 23 (3) Use of Proceeds: Through December 31, 1998, the Company had used approximately $1.6 million of the net proceeds of the Offering for expenses associated with the Offering. In addition, the Company used a portion of such net proceeds as follows: (i) approximately $70.8 million of such net proceeds to repay the indebtedness incurred by the Company to acquire assets (including construction in progress) in the Formation Transactions; (ii) approximately $18.1 million to repay the Formation Note; (iii) approximately $5.8 million to pay the balance of the purchase price to an affiliate related to the purchase of assets on the Formation Transactions; (iv) approximately $1.2 million of such net proceeds to repay indebtedness to affiliates; (v) approximately $8,246,000 of such net proceeds to acquire the four senior living communities from NHP; (vi) approximately $505,000 of such net proceeds to purchase land in Carmichael, CA; and (vii) approximately $9,636,000, $932,000 and $1,160,000 advanced to Triad, Triad II and Triad IV, respectively. There has not been a material change in the use of proceeds described in the Company's prospectus. 24 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data of the Company. The selected financial data for the years ended December 31, 1998, 1997, 1996, 1995 and 1994 are derived from the audited consolidated financial statements of the Company.

26 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion and analysis addresses the Company's results of operations on a historical consolidated basis for the years ended December 31, 1998, 1997 and 1996. The following should be read in conjunction with the Company's historical consolidated financial statements and the selected financial data contained elsewhere in this report. On September 15, 1997, the Company increased its authorized common shares from 40,000,000 to 65,000,000 shares and authorized 15,000,000 shares of preferred stock. On November 5, 1997, the Company issued 18,037,347 additional shares of common stock (including 1,350,000 shares issued upon exercise of an option granted underwriters to purchase additional common shares in conjunction with the Offering) bringing its total issued and outstanding shares of common stock to 19,717,347 shares. Of the 18,037,347 shares issued, 7,687,347 shares were issued to Messrs. Beck, Stroud and Cohen in the Formation Transactions described herein and 10,350,000 shares were registered with the Securities and Exchange Commission for trading in public markets. On November 5, 1997, the Company also entered into Formation Transactions (herein so called) with Messrs. Beck and Stroud whereby they contributed all of their owned capital stock of Capital Senior Living, Inc., Capital Senior Management 1, Inc., Capital Senior Management 2, Inc., Capital Senior Development, Inc., and with Mr. Cohen, of Quality Home Care, Inc. (the "Contributed Entities") to the Company in exchange for the issuance of 7,687,347 shares of common stock of the Company and the issuance of separate notes in the aggregate amount of $18,076,380 to Messrs. Beck, Stroud and Cohen, which were subsequently repaid by the Company from the net proceeds received from the sale of the Company's common stock in the Offering. As part of the Formation Transactions, the Company simultaneously purchased substantially all of the operating assets of CSLC (including CSLC's investment in HCP and NHP and excluding CSLC's cash, U.S. Treasury securities purchased under the LBHI Loan agreement and working capital items) for an aggregate purchase price of approximately $76.6 million, comprised of the assumption by the Company of CSLC's outstanding LBHI Loan of approximately $70.8 million and payment of cash of approximately $5.8 million to CSLC. On November 7, 1997, the Company repaid the LBHI Loan from the proceeds received from the Offering. In October 1997, the combined Companies declared and paid dividends of $457,647 to Messrs. Beck, Stroud and Cohen in preparation for the Formation Transactions that transformed the combined companies from closely held corporations and S corporations to non-closely held C corporations for federal income tax purposes. Due to all of the entities involved in the Formation Transactions being under the common control of Messrs. Beck and Stroud, the Company's consolidated financial statements reflect the assets and liabilities at their historical values and the accompanying consolidated statements of income, equity, and cash flows reflect the combined results for the periods indicated through the date of the Offering even though they have historically operated as separate entities. The Formation Transactions have been accounted for at historical cost in a manner similar to a pooling of interests to the extent of the percentage ownership by Messrs. Beck and Stroud of the Company. Acquired assets and liabilities of CSLC have been recorded at fair value to the extent of minority interest. CSLC's assets include investments in HCP and NHP. On September 30, 1998, the Company entered into a mortgage loan agreement with Lehman Brothers Holdings, Inc. ("Lehman Loan"), under which the Company borrowed $47,700,000. The purpose of the Lehman Loan was to provide financing for the acquisition of four NHP senior living communities, as well as for the Tesson Heights Enterprises ("Tesson") senior living community, all of which have been pledged as collateral. Interest costs are based on 30-day LIBOR and were approximately 6.95% at December 31, 1998. The loan agreement matures October 1, 1999, and the Company expects to complete a refinancing of this mortgage loan with long term fixed rate mortgage loans during the second quarter of 1999. However, there can be no assurance that the Company will complete this refinancing as expected. 27 On September 30, 1998, the Company acquired four senior living communities from NHP for cash consideration of $40,650,000. The funds for the transaction were provided from working capital of the Company and from the proceeds of the Lehman Loan. The senior living communities acquired by the Company from NHP are The Atrium of Carmichael in Carmichael, California; Crosswoods Oaks in Citrus Heights, California; The Heatherwood in Southfield, Michigan; and The Veranda Club in Boca Raton, Florida. The Company had operated these communities under a long-term management contract since 1992. The purchase price for the properties was determined by independent appraisal. Personnel working at the property sites and certain home office personnel who performed services for NHP have been employees of the Company. NHP (prior to the acquisitions) reimbursed the Company for the salaries, related benefits, and overhead reimbursements of such personnel. Capital Realty Group Brokerage, Inc., a company wholly owned by Messrs. Beck and Stroud, received a brokerage fee of $1,219,500 related to this transaction, which was paid by NHP. The acquisitions were accounted for as a purchase business combination and the Company's operations have included the operations of NHP since September 30, 1998. On October 28, 1998, the Company acquired two senior living communities from Gramercy Hill Enterprises, a Texas limited partnership ("Gramercy"), and Tesson, for aggregate consideration of approximately $34,000,000. The funds for the Tesson transaction were provided from working capital of the Company and from $15,400,000 of proceeds from the Lehman Loan. The funds for the Gramercy transaction were provided from working capital of the Company, the assumption of the $6,334,660 Washington Mortgage Financial Group, Ltd. ("WMFG") promissory note (assigned to Fannie Mae) and from the proceeds of the $1,980,000 WMF Washington Mortgage Corp. ("WMFC") loan described below. On October 28, 1998, the Company entered into a $6,334,660 Assumption and Release Agreement with Fannie Mae and a $1,980,000 multifamily note in favor of WMFC. The purpose of the loans was to provide financing for the Gramercy acquisition. The senior living community acquired from Gramercy has been pledged as collateral under these loans. Interest costs are 7.69% and 7.08%, respectively. The Assumption and Release Agreement and WMFC note mature in January 2008 and January 2010, respectively. The senior living communities acquired by the Company from Gramercy and Tesson are Gramercy Hill in Lincoln, Nebraska and Tesson Heights, in St. Louis, Missouri. The acquisitions were accounted for as purchase business combinations, and the Company's operations have included the operations of Tesson Heights and Gramercy Hill since October 28, 1998. From 1990 through December 31, 1998, the Company acquired interests in 19 communities and entered into an operating lease with respect to one community, which was terminated effective January 31, 1998. Since 1996, the Company expanded its senior living management services by entering into the management service contracts on 15 communities for four independent third-party owners and commenced providing development and construction management services for new residence properties in addition to adding a home care service agency. The Company generates revenue from a variety of ~~sources. For the year ended December 31, 1998, the Company's revenue was derived~~leadership roles during that time. She started her career as ~~follows: 58.0% from the operation of 11 owned communities that were operated by the Company; 10.0% from lease rentals from triple net leases of three skilled nursing facilities~~an Executive Director with Assisted Living Concepts, and ~~four physical rehabilitation centers; 8.9% from management fees arising from management services provided for four affiliate owned~~has since served in both large publicly traded and small privately held senior living communities from January 1, 1998 through September 30, 1998 and one affiliate owned senior living community from January 1, 1998 through December 31, 1998 and 15 third-party owned senior living communities; and 20.4% from development feescompanies with multi-community oversight responsibilities. She earned ~~for managing the development and construction of new senior living communities for third parties. 28~~ The Company believes that the factors affecting the financial performance of communities managed under contracts with third parties do not vary substantially from the factors affecting the performance of owned and leased communities, although there are different business risks associated with these activities. The Company's third-party management fees are primarily based on a percentage of gross revenues. As a result, the cash flow and profitability of such contracts to the Company are more dependent on the revenues generated by such communities and less dependent on net cash flow than for owned communities. Further, the Company is not responsible for capital investments in managed communities. While the management contracts are generally terminable only for cause, in certain cases the contracts can be terminated upon the sale of a community, subject to the Company's rights to offer to purchase such community. The Company's triple net leases extend through the year 2000 for three of its owned communities and through the year 2001 for four of its owned communities. The payments under these leases are fixed and are not subject to change based upon the operating performance of these communities. Following termination of the lease agreements, the Company may either convert and operate the communities as assisted living and Alzheimer's care facilities, sell the facilities or evaluate other alternatives. The Company's current management contracts expire on various dates between December 1999 and September 2009 and provide for management fees based generally upon rates that vary by contract from 4% of net revenues to 7% of net revenues. In addition, certain of the contracts provide for supplemental incentive fees that vary by contract based upon the financial performance of the managed community. The Company's development fees are generally based upon a percentage of construction cost and are earned over the period commencing with the initial development activities and ending with the opening of the community. As of December 31, 1998, development fees have been earned for services performed for 39 communities under development or expansions for third parties. During 1998, 1997, 1996 and 1995, the Company made various purchases of limited partnership interests in HCP. HCP owns and operates a skilled nursing facility and owns and leases to third-party operators (under triple net leases) three skilled nursing facilities and four physical rehabilitation centers. During 1998, 1997, 1996 and 1995, the Company paid approximately $101,000, $5,605,000, $3,201,000 and $309,000, respectively, for partnership interests in HCP. The Company changed its method of accounting for its investment in HCP from the cost method in 1995 to the equity method in 1996. As a result of additional purchases, the Company's ownership interest in HCP exceeded 50% on June 26, 1997. Accordingly, this partial acquisition has been accounted for by the purchase method of accounting, and the assets, liabilities, minority interest, and the results of operations of HCP have been consolidated in the Company's financial statements since January 1, 1997. The Company acquired, on November 1, 1997, the NHP Notes owned by CSLC in the Formation Transactions for $18,664,128. The NHP Notes bear simple interest at 13% per annum and mature on December 31, 2001. Interest is currently paid quarterly at a rate of 7%, with the remaining 6% interest deferred. Beginning November 1, 1997 through September 30, 1998, the Company has been recording interest income at 10.5% of the purchase price paid, which was determined based on the discounted amount of principal and interest payments to be made following the maturity date (December 31, 2001) of the NHP Notes (using a six-month lag between maturity and full repayment), due to uncertainties regarding the ultimate realization of the accrued interest. On September 30, 1998, the Company purchased four properties from NHP. NHP is in turn redeeming $7,500,000 of the Company's investment in the NHP Notes and is distributing approximately $5,300,000 of deferred interest not previously paid on such notes. From October 1, 1998 through December 31, 1998, the Company reevaluated its investment in the NHP Notes, and is recording additional income, after giving consideration to current payment of interest, partial redemption of the NHP Notes with accrued interest and the estimated residual value in NHP. Also, during 1998 and 1996, the Company paid $344 and $1,364 for 4% and 3%, respectively, ownership of limited partnership interests in NHP. The Company accounts for its investment in NHP on the cost method with respect to the NHP limited partnership interests and as held-to-maturity securities and reported at amortized cost with respect to the NHP Notes. The Company will continue to develop and acquire senior living communities. The development of senior living communities typically involves a substantial commitment of capital over a 12 to 14-month construction period during 29 which time no revenues are generated, followed by a 12-month lease-up period. The Company anticipates that newly opened or expanded communities will operate at a loss during a substantial portion of the lease-up period. The Company's growth strategy may also include the acquisition of senior living communities, home care agencies, and other properties or businesses that are complementary to the Company's operations and growth strategy. 30 RESULTS OF OPERATIONS The following tables set forth, for the periods indicated, selected historical consolidated statements of income data in thousands of dollars and expressed as a percentage of total revenues.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997 Revenues. Total revenues were $42,768,000 in 1998 compared to $30,710,000 in 1997, representing an increase of $12,058,000, or 39.3%. Resident and health care revenue increased $3,584,000, of which $4,015,000 is a result of purchasing the four NHP properties, Gramercy Hill and Tesson Heights, alongBBA degree with a ~~decrease of $237,000 relating to the HCP properties. Unaffiliated management services revenue increased $545,000 due to a significant improvement~~concentration in the performance at the property level resulting in incentive payments and one additional third-party management contract added in the first quarter of 1998. Unaffiliated development fees increased $430,000, of which $894,000 is a result of two additional third party development contracts and the continuation of four projects that earned fees for seven months in 1998 as compared to two months for 1997 and a decrease of $464,000 resultingAccounting from one development project completed on December 31, 1997 and three development projects terminated by a third party. Affiliated development fees increased $7,300,000, resulting from fees earned on 29 projects in 1998 compared to one in 1997. Expenses. Total expenses were $26,395,000 in 1998 compared to $25,904,000 in 1997, representing an increase of $491,000, or 1.9%. Operating expenses increased $366,000 due to an increase of $1,954,000 as a result of acquiring six properties in the fourth quarter of 1998, along with a decrease of $1,361,000 related to the termination of Maryland Gardens lease and offset by an overall decrease in operating expenses. General and administrative expenses decreased $491,000 due to a decrease in officers' salaries of $2,670,000 offset by a $325,000 increase due to the acquisition of six properties in the fourth quarter of 1998, a $185,000 increase in development expenses due to the increase in development projects, a $200,000 increase in professional fees that relate to legal fees, a $100,000 increase in license and fee expense, a $320,000 increase in HCP general and administrative expenses, along with an overall increase in general and 31 administrative expenses. Depreciation and amortization increased $616,000 due to an increase of $424,000 as a result of the acquisition of the six properties in the fourth quarter of 1998, an $80,000 increase for the expansion of Cottonwood and an increase of $37,000 in the amortization of goodwill for twelve months in 1998 as opposed to two months in 1997. Other income and expenses. Interest and other income increased $1,835,000, primarily as a result of a $1,365,000 increase in income associated with investment of cash reserves, a $1,600,000 increase in NHP Notes interest due to a partial redemption of the notes and payment of accrued interest, a $308,000 increase in interest earned from the Triad, Triad II and Triad IV (as hereinafter defined) unsecured credit facilities, which is offset by a $1,400,000 decrease in interest due to the divestment of an investment from June 1997 through October 1997 by CSLC. Interest expense decreased $100,000 due to a decrease of $1,267,000 of interest related to the Lehman debt incurred in the Formation Transactions and a decrease of $44,000 in HCP interest expense due to refinancing. These decreases are offset by an increase of $1,201,000 in interest expense due to the acquisition of the six properties.West Texas A gain of $422,000 was recorded on the sale of two properties in the fourth quarter of 1998. In connection with the sale of its investment in HCP to the Company immediately following completion of the offering, CSLC incurred short swing profits, as defined by the Securities and Exchange Commission, and was, accordingly, required to remit such profits to HCP, which recorded the remittance of $440,000 as other income in 1997. Minority interest. Minority interest in limited partnerships decreased $1,557,000, primarily due to the CSLC minority interest being included in 1997 through October and not included in 1998. Provision for income taxes. Provision for income taxes was approximately $7,476,000 in 1998 compared to $793,000 in 1997. As a result of the Formation Transactions, the Company and its consolidated subsidiaries were converted from S corporations that are taxed at the shareholder level to C corporations that are subject to corporate income taxes. Accordingly, a provision for federal and state taxes was provided on the earnings for 12 months in 1998 compared to two months in 1997. Net Income. As a result of the foregoing factors, net income increased $8,276,000 to $11,957,000 for 1998 from $3,681,000 for 1997. YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996 Revenues. Total revenues were $30,710,000 in 1997 compared to $19,899,000 in 1996, representing an increase of $10,811,000, or 54.3%. The inclusion of HCP revenues in 1997 from January 1, 1997 contributed $8,978,000 of the increase, as HCP was not consolidated in 1996. Resident and health care revenue increased $7,515,000, of which $4,702,000 is a result of the HCP consolidation, $1,157,000 was improvement in CSLC's revenues due to realization of additional reimbursements previously limited under the Medicare program for 1994 and 1992 combined with improved CSLC rental rates and occupancies and $1,543,000 related to the Maryland Gardens facility leased on June 1, 1997. Rental and lease income increased $3,175,000, of which $4,276,000 was due to the HCP consolidation, offset by $1,101,000 due to the sale of CSLC's multi-family properties on November 1, 1996. Unaffiliated management services revenue increased $1,119,000 due to 15 third-party management contracts added in the third and fourth quarter of 1996 and one additional third-party management contract added in the second quarter of 1997. Affiliated management services revenue decreased by $1,330,000, of which $1,177,000 was due to the HCP consolidation. Development fees increased $304,000 and was due to new development contract management revenue for managing the development and construction of new third-party owned senior living communities. Expenses. Total expenses were $25,904,000 in 1997 compared to $17,772,000 in 1996, representing an increase of $8,132,000, or 45.8%. The inclusion of HCP expenses from January 1, 1997 contributed $6,538,000 of the increase. Operating expenses increased $6,045,000 of which $4,251,000 was a result of the HCP consolidation and $1,561,000 due to Maryland Gardens operating expenses. General and administrative expenses increased $1,450,000, which was due to the HCP consolidation of $1,078,000 offset by an overall decrease in general and administrative expenses. Depreciation and amortization increased $637,000, of which $1,209,000 was related to the HCP consolidation, offset by a $572,000 decrease in CSLC's depreciation which was primarily due to the sale of CSLC's multi-family rental properties in November 1996. 32 Other income and expenses. Interest income increased $2,754,000, primarily as a result of CSLC's increase in interest income of $1,116,754 associated with its investment in U.S. Treasury Bills, $1,230,000 as a result of the Company's increase in interest income associated with its increased investment in NHP Notes combined with the commencement of accruing a portion of the deferred income on these notes beginning in April 1997, as a result of NHP's improved financial position and performance and increased valuation of the underlying properties, $288,361 associated with income from temporary investment of net proceeds from the Offering for November and December 1997, and the consolidation of HCP of $359,000. Interest expense increased $1,801,000 as a result of higher debt balances including the LBHI Loan borrowings on July 1, 1997 and $679,000 as a result of the HCP consolidation. Income from equity in earnings on investments decreased $459,000 as a result of the HCP consolidation on January 1, 1997. In connection with the sale of its investment in HCP to the Company immediately following completion of the Offering, CSLC incurred short swing profits, as defined by the Securities and Exchange Commission, and was, accordingly, required to remit such profits to HCP which recorded the remittance as other income. A gain of $438,000 was recorded on November 1, 1996, as a result of the sale of multi-family properties with no corresponding gain being realized in 1997. Minority interest. Minority interest in limited partnerships increased $712,000 primarily as a result of the HCP consolidation. Provision for income taxes. Provision for income taxes was approximately $793,000 in 1997 compared to no provision in 1996. As a result of the Formation Transactions, the Company and its consolidated subsidiaries were converted from S corporations that are taxed at the shareholder level to C corporations that are subject to corporate income taxes. Accordingly, a provision for federal and state income taxes is provided on earnings after the Formation Transactions. Net income. As a result of the foregoing factors, net income increased $1,628,000 to $3,681,000 for 1997 from $2,053,000 for 1996. QUARTERLY RESULTS The following table presents certain quarterly financial information for the four quarters ended December 31, 1998 and 1997. This information has been prepared on the same basis as the audited Consolidated Financial Statements of the Company appearing elsewhere in this report and include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the quarterly results when read in conjunction with the audited Consolidated Financial Statements of the Company and the related notes thereto.

33 LIQUIDITY AND CAPITAL RESOURCES As described in the notes to the accompanying consolidated financial statements, the Company repaid all of its notes payable to affiliates and the mortgage loan payable to Lehman Brothers Holdings, Inc. with proceeds from the Offering in November 1997, leaving only the mortgage property loans of HCP outstanding thereafter. The Company also secured a three year revolving line of credit of $20 million which may be used for acquisition of additional interests in HCP and NHP, expansion of owned communities, acquisition of additional properties and general working capital purposes. In addition to approximately $36 million of cash balances on hand as of December 31, 1998, the Company's principal sources of liquidity are expected to be cash flows from operations and amounts available for borrowing under its $20 million revolving line of credit. Subsequent to December 31, 1998, the Company received a commitment to increase its line of credit to $34 million. The Company expects the funds available under its line of credit along with its net income and cash flow from operations to be sufficient to fund its short-term working capital requirements. The Company plans to refinance $47,700,000 of short-term variable rate debt to a long-term loan in 1999. The Company's long-term capital requirements, primarily for acquisitions, development and other corporate initiatives, will be dependent on the Company's ability to access additional funds through the debt and/or equity markets. There can be no assurance that the Company will continue to generate cash flows at or above current levels or that the Company will be able to obtain the capital necessary to meet its long-term capital requirements. The Company had net cash provided by operating activities of $6,689,000 in fiscal 1998 compared to $9,684,000 in the prior year. In fiscal 1998, cash from operating activities was primarily derived from net income of $11,957,000 along with non-cash charges of $3,055,000 and an increase in federal income taxes of $837,000 offset by increases in accounts receivable and other assets of $8,672,000 and $1,059,000, respectively. Net cash provided by operating activities in fiscal 1997 was primarily comprised of net income of $3,681,000 and net non-cash charges of $4,115,000 offset by an increase in accounts receivable of $1,648,000. The Company had cash used in investing activities of $86,502,000 and $81,507,000 in fiscal 1998 and 1997, respectively. In fiscal 1998, the cash used in investing activities was primarily the result of the acquisition of six properties for $77,408,000, advances to affiliates of $11,778,000 and capital expenditures of $6,027,000. In fiscal 1997 cash used in investing activities consisted primarily $64,203,000 invested in restricted cash equivalents, $8,244,000 in asset purchases and $15,608,000 invested in limited partnerships, offset by $8,995,000 in cash acquired upon the acquisition of HCP. The Company had net cash provided by financing activities in fiscal 1998, of $67,514,000, primarily from $67,039,000 of advances under the Company's line of credit and notes payable. In 1997 the Company had net cash provided by financing activities of $109,124,000 which was the result of the net cash provided by the Company's initial public offering. The Company derives the benefits and bears the risks attendant to the communities it owns. The cash flows and profitability of owned communities depends on the operating results of such communities and are subject to certain risks of ownership, including the need for capital expenditures, financing and other risks such as those relating to environmental matters. The cash flows and profitability of the Company's owned communities that are leased to third parties depend on the ability of the lessee to make timely lease payments. At December 31, 1998, HCP was operating one of its properties and had leased seven of its owned properties under triple net leases to third parties until year 2000 or 2001. Four of these properties are leased until year 2001 to HealthSouth Rehabilitation Corp. ("HealthSouth"), which provides acute spinal injury intermediate care at these properties. HealthSouth closed one of these facilities in 1994 and closed another facility in February of 1997 due to low occupancy. HealthSouth has continued to make lease payments on a timely basis for all four properties. Should the operators of the leased properties default on payment of their lease obligations prior to termination of the lease agreements, six of the seven lease contracts contain a continuing guarantee of payment and performance by the parent company of the operators, which the Company intends to pursue in the event of default. 34 Following termination of these leases, the Company will either convert and operate the facilities as assisted living and Alzheimer's care facilities, sell the facilities or evaluate other alternatives. HCP's facility lessees are all current in their lease obligations to HCP. The lessee for one property continues to fund a deficit between the required lease payment and operators' cash flow. The cash flows and profitability of the Company's third-party management fees are dependent upon the revenues and profitability of the communities managed. While the management contracts are generally terminable only for cause, in certain cases the contracts can be terminated upon the sale of a community, subject to the Company's rights to offer to purchase such community. The Company plans to continue to develop and acquire senior living communities. The development of senior living communities typically involves a substantial commitment of capital over a 12-month construction period during which time no revenues are generated, followed by a 12- to 14-month lease-up period. Effective April 1, 1998, Tri Point Communities, L.P. ("Tri Point"), a limited partnership owned by the Company's founders (Messrs. Beck and Stroud) and their affiliates was reorganized and the interests of Messrs. Beck and Stroud were sold at their cost to Triad Senior Living, Inc. and its affiliates, which are unrelated third-parties. Tri Point was renamed Triad I. The new general partner of Triad I, owning 1%, is Triad Senior Living, Inc. The limited partners are Blake N. Fail (principal owner of Triad Senior Living, Inc.), owning 80%, and the Company, owning 19%. The development agreements between Triad I and the Company provide for a development fee of 4% to the Company, as well as reimbursement of expenses and overhead not to exceed 4%. Triad I has also entered into management agreements with the Company providing for management fees in an amount equal to the greater of 5% of gross revenues or $5,000 per month per community, plus overhead reimbursement not to exceed 1% of gross revenues. The Company has an option to purchase the partnership interests of Triad Senior Living, Inc. and Blake N. Fail for an amount equal to the amount such party paid for its interest, plus noncompounded interest of 12% per annum. The management agreements also provide the Company with an option to purchase the communities developed by Triad I upon their completion for an amount equal to the fair market value (based on a third-party appraisal but not less than hard and soft costs and lease-up costs). The Company has made no determination as to whether it will exercise its purchase options. The Company will evaluate the possible exercise of each purchase option based upon the business and financial factors that may exist at the time those options may be exercised. Triad I has entered into construction loan facilities aggregating approximately $50,000,000 to fund its development activities and a take-out facility aggregating approximately $50,000,000. During 1998, the Company agreed to loan Triad I up to $10,000,000. The principal is due March 12, 2003. The first draw under this loan facility was made on March 12, 1998. Interest is due quarterly at 8% per annum. This loan may be prepaid without penalty. At December 31, 1998, approximately $9,636,000 has been advanced to Triad I under this loan facility. Effective September 24, 1998, the Company and Triad II, a limited partnership, entered into a Development and Turnkey Services Agreement in connection with the development and management of the Company's planned new Waterford communities where Triad II would own and finance the construction of the new communities. Triad II was organized on September 23, 1998. The general partner of Triad II, owning 1%, is Triad Partners II, Inc. The limited partners are Triad Partners II, Inc., owning 80%, and the Company, owning 19%. The Company has an option to purchase the partnership interests of Triad Partners II, Inc. in Triad II for an amount equal to the amount such party paid for its interests, plus noncompounded interest of 12% per annum. The management agreements with Triad II also provide the Company with an option to purchase the communities developed by Triad II upon their completion for an amount equal to the fair market value (based on a third-party appraisal but not less than hard and soft costs and lease-up costs). The Company has made no determination as to whether it will exercise its purchase options. The Company will evaluate the possible exercise of each purchase based upon the business and financial factors which may exist at the time those options may be exercised. 35 Triad II has entered into construction and mini-perm loan facilities aggregating approximately $26,000,000 to fund its development activities. During the third quarter, the Company agreed to loan Triad II up to $7,000,000. On January 15, 1999, the loan amount was amended to up to $10,000,000. The principal is due September 25, 2003. The first draw under this loan facility was made on September 25, 1998. Interest is due quarterly at 10.5% per annum. This loan may be prepaid without penalty. At December 31, 1998, approximately $932,000 has been advanced to Triad II under this loan facility. On September 30, 1998, the Company acquired four senior living communities from NHP for $40,683,281 by entering into the $32,300,000 Lehman Loan, a cash payment of $8,246,007 and assumption of net assets and liabilities of $137,274. The Company has mortgaged the four senior living communities as collateral. The acquisition was accounted for as a purchase. On October 28, 1998, the Company acquired a senior living community from Tesson for $23,051,786. The Company borrowed $15,400,000 pursuant to the existing mortgage loan agreement with Lehman and mortgaged the senior living community as collateral. The Company also acquired a senior living community from Gramercy for $11,036,655. The Company assumed a $6,334,660 note from Fannie Mae, and borrowed an additional $1,980,000 from WMFC on a second lien basis and mortgaged the senior living community as collateral for both loans. The Company paid the remaining purchase prices with a cash payment of $7,376,632 and $2,425,798, respectively, and assumption of liabilities of $275,154 and $296,197, respectively. Effective November 10, 1998, the Company and Triad III, a limited partnership, entered into a Development and Turnkey Services Agreement in connection with the development and management of the Company's planned new Waterford communities where Triad III would own and finance the construction of the new communities. Triad III was organized on November 10, 1998. The general partner of Triad III, owning 1%, is Triad Partners III, Inc. The limited partners are Triad Partners III, Inc., owning 80%, and the Company, owning 19%. The Company has an option to purchase the partnership interests of Triad Partners III, Inc. in Triad III for an amount equal to the amount such party paid for its interests, plus noncompounded interest of 12% per annum. The management agreements with Triad III also provide the Company with an option to purchase the communities developed by Triad III upon their completion for an amount equal to the fair market value (based on a third-party appraisal but not less than hard and soft costs and lease-up costs). The Company has made no determination as to whether it will exercise its purchase options. The Company will evaluate the possible exercise of each purchase based upon the business and financial factors which may exist at the time those options may be exercised. Triad III has entered into construction and mini-perm loan facilities aggregating approximately $51,000,000 to fund its development activities. During the fourth quarter, the Company agreed to loan Triad III up to $10,000,000. The principal is due February 8, 2004. Interest is due quarterly at 10.5% per annum. This loan may be prepaid without penalty. At December 31, 1998, no monies have been advanced to Triad III under this loan facility. Effective December 30, 1998, the Company and Triad IV, a limited partnership, entered into a Development and Turnkey Services Agreement in connection with the development and management of the Company's planned new Waterford communities where Triad IV would own and finance the construction of the new communities. Triad IV was organized on December 22, 1998. The general partner of Triad IV, owning 1%, is Triad Partners IV, Inc. The limited partners are Triad Partners IV, Inc., owning 80%, and the Company, owning 19%. The Company has an option to purchase the partnership interests of Triad Partners IV, Inc. in Triad IV for an amount equal to the amount such party paid for its interests, plus noncompounded interest of 12% per annum. The management agreements with Triad IV also provide the Company with an option to purchase the communities developed by Triad IV upon their completion for an amount equal to the fair market value (based on a third-party appraisal but not 36 less than hard and soft costs and lease-up costs). The Company has made no determination as to whether it will exercise its purchase options. The Company will evaluate the possible exercise of each purchase based upon the business and financial factors which may exist at the time those options may be exercised. Triad IV is negotiating commitments for loan facilities aggregating up to $50,000,000 to fund its development activities. During the fourth quarter, the Company agreed to loan Triad IV up to $10,000,000. The principal is due December 30, 2003. The first draw under this loan facility was made on December 30, 1998. Interest is due quarterly at 10.5% per annum. This loan may be prepaid without penalty. At December 31, 1998, approximately $1,160,000 has been advanced to Triad IV under this loan facility. Net cash provided by operating activities, of $6,689,000 for the year ended December 31, 1998, decreased $2,994,000, or 31%, over that of the comparable year ended December 31, 1997, which was composed of increased cash flow created by improved earnings of $7,215,000 (after noncash adjustments) combined with $10,209,000 of cash derived from working capital. Net cash used in investing activities of $25,094,000 for the year ended December 31, 1998 decreased $56,408,000 over that of the comparable year ended December 31, 1997. This decrease was composed of increased capital expenditures of $3,586,000 primarily related to the Cottonwood expansion, the lack of comparable proceeds from sale of properties in 1997 compared to 1998's proceeds of $676,000, a decrease in investments in 1998 in limited partnerships (CSLC, HCP and NHP Notes) of $13,915,000, the $64,203,000 investment by the Company in restricted cash securities from the proceeds obtained from the LBHI Loan and the difference in 1997 for cash paid for the September 1998 purchase of assets acquired from NHP, and the October 1998 purchase of assets acquired from Tesson and Gramercy, offset by the November 1997 purchase of assets from CSLC and offset by HCP's beginning cash balance of $8,995,000 as a result of the consolidation of HCP at January 1, 1997 in the amount of $9,805,000. Net cash provided by financing activities, of $6,106,000 for the year ended December 31, 1998, decreased $103,019,000 over that of the comparable year ended December 31, 1997. This decrease was due to $110,331,000 of net proceeds received by the Company in November 1997 from the Offering. YEAR 2000 ISSUE The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize the year 2000 as a date other than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. Based on ongoing assessments, the Company has developed a program to modify or replace significant portions of its software and certain hardware, which are generally PC-based systems, so that those systems will properly recognize and utilize dates beyond December 31, 1999. The Company expects to substantially complete software reprogramming and software and hardware replacement by March 31, 1999, with 100% completion targeted for December 31, 1999. The cost of the completed and future modifications and replacement of hardware and software is expected to result in expenditures of approximately $100,000. The general ledger program is Year 2000 compliant, however some of the reporting tools used in conjunction with the general ledger will not work properly with the current version of the Company's general ledger after December 31, 1999. As a result of this issue, the Company is currently in the process of upgrading its current general ledger and reporting software and expects this process to be completed by December 31, 1999. The Company presently believes that these modifications and replacement of existing software and certain hardware will mitigate the Year 2000 Issue. However, if such modifications and replacements are not completed timely, the Year 2000 Issue could&M University.

Audit Committee

We have a ~~material impact on the operations of the Company. 37~~ ~~The Company expects to complete a survey and required written responses from its critical service providers~~separately-designated standing Audit Committee established in ~~1999. The Company is not currently aware of any external critical service provider~~accordance with a Year 2000 Issue that would materially impact the Company's results of operations, liquidity or capital resources. However, the Company has no other means of determining whether or ensuring that its critical service providers are or will be Year 2000-ready. The inability of critical service providers to complete their Year 2000 resolution process in a timely fashion could materially impact the Company. The Company has assessed its exposure to operating equipment, and such exposure is not significant due to the nature of the Company's business. The Company operates in a relatively low technology dependent industry and does not anticipate any industry or Company specific Year 2000 risks beyond those discussed above. Significant Year 2000 problems could result in the Company not having timely the operating information necessary to efficiently manage and monitor its business activities. This could result in disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. The Company does not foresee Year 2000 issues effecting the day-to-day operation of its senior living communities due to their limited use of technology and the Company's evaluation of their operating equipment. The Company considers the possibility of significant Year 2000 problems based, on the evaluation of our internal systems and the response from our critical service providers, to be remote. Management of the Company believes it has an effective program in place to resolve the Year 2000 Issue in a timely manner. As noted above, the Company has completed most but not all necessary phases of its Year 2000 program. In the event that the Company does not complete the current program or any additional phases, the Company could incur disruptions to its operations. In addition, disruptions in the economy generally resulting from Year 2000 Issues could also materially adversely affect the Company. The Company could be subject to litigation or computer systems failure. The amount of potential liability and cost cannot be reasonably estimated at this time. The Company currently has no contingency plans in place in the event it does not complete all phases of its Year 2000 program. The Company plans to continue to monitor the status of completion of its Year 2000 initiatives to determine whether such a plan is necessary. IMPACT OF INFLATION To date, inflation has not had a significant impact on the Company. Inflation could, however, affect the Company's future revenues and results of operations because of, among other things, the Company's dependence on senior residents, many of whom rely primarily on fixed incomes to pay for the Company's services. As a result, during inflationary periods, the Company may not be able to increase resident service fees to account fully for increased operating expenses. In structuring its fees, the Company attempts to anticipate inflation levels, but there can be no assurance that the Company will be able to anticipate fully or otherwise respond to any future inflationary pressures. FORWARD LOOKING STATEMENTS Certain information contained in this report constitutes "Forward-Looking Statements" within the meaning of Section ~~27A of the Securities Act of 1933, as amended, and Section 21E~~3(a)(58)(A) of the Securities Exchange Act of 1934, as amended ~~which can be identified~~(the “Exchange Act”). The Audit Committee consists of Ms. Krueger (chair) and Messrs. Brooks, Grier and Levin, each of whom is “independent” as defined by the ~~use~~listing standards of ~~forward-looking terminology such~~the New York Stock Exchange in effect as ~~"may," "will," "expect," "anticipate," "estimate"~~of the date of this Amendment. The Board has determined that Ms. Krueger qualifies as an “audit committee financial expert” within the meaning of SEC regulations.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics governing all of our employees, including our Chief Executive Officer, Chief Financial Officer, our principal accounting officer and corporate controller. A copy of this Code of Business Conduct and Ethics is available in the “Corporate Governance Documents” section of the “Investor Relations” section of our website at

www.capitalsenior.com

. We intend to make all required disclosures concerning any amendments to, or ~~"continue" or the negative thereof or other variations thereon or comparable terminology.~~ waivers from, this Code of Business Conduct and Ethics on our website.

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ITEM 11.

EXECUTIVE COMPENSATION.

The Company ~~cautions readers~~is a “smaller reporting company” under Item 10 of Regulation

S-K

promulgated under the Exchange Act and has elected to comply with certain of the requirements applicable to smaller reporting companies in connection with this Amendment.

Summary Compensation Table

The following table summarizes the compensation earned by our named executive officers in 2020 and 2019, except that ~~forward looking statements, including, without limitation, those relating~~Mr. Ribar was not one of our named executive officers for 2019, and accordingly, information with respect to Mr. Ribar for such year is not provided. Carey P. Hendrickson resigned as the Company’s Executive Vice President and Chief Financial Officer effective November 6, 2020 to pursue other career opportunities. Mr. Hendrickson’s departure was not based on any disagreement with the Company on any matter.


Name and Principal Position	Year		Salary		Bonus			Stock Awards (1)		Option Awards (1)		Non-Equity Incentive Plan Compensation (2)		All Other Compensation (3)		Total

Kimberly S. Lody, President and Chief Executive Officer		2020	$	715,000	$	362,500	(4)		—		—	$	299,063	$	3,457	$	1,380,020
Kimberly S. Lody, President and Chief Executive Officer		2019	$	714,310	$	—		$	1,381,111	$	438,772	$	398,750	$	1,007,250	$	3,940,193

Brandon M. Ribar, Executive Vice President and Chief Operating Officer		2020	$	400,000	$	200,000	(4))		—		—	$	63,000		—	$	663,000

Carey P. Hendrickson, Former Executive Vice President and Chief Financial Officer		2020	$	381,616	$	510,908	(4)		—		—		—	$	47,585	$	940,109
		2019	$	438,746	$	142,881		$	388,355		—	$	61,107	$	5,888	$	1,036,977

David R. Brickman, Senior Vice President, General Counsel and Secretary		2020	$	341,161	$	394,676	(4)		—		—	$	57,591	$	5,170	$	798,598
		2019	$	341,161	$	110,375		$	212,707		—	$	35,253	$	4,951	$	704,447

(1)

Amounts for 2019 reflect the grant date fair value of the respective equity awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”), including, with respect to performance-based shares, the grant date fair value of the performance shares based on the probable outcome of the performance conditions as of the date of grant (rather than the maximum potential value of the award). Assumptions used in the calculation of these amounts are included in footnote 11 to our audited financial statements for the fiscal year ended December 31, 2020 included in the Original Filing.

In March 2020, in response to then-current economic conditions and to avoid the excessive share use, run rate and dilution that would occur by awarding equity-based long-term incentives at the Company’s then-current stock price, the Compensation Committee recommended that the Board approve, and the Board subsequently approved, a temporary suspension of equity awards to any officer of the Company. Accordingly, no equity awards were granted to the ~~Company's future business prospects, revenues, working capital, liquidity, capital needs, interest costs,~~Company’s named executive officers during the fiscal year ended December 31, 2020.

(2)	Amounts in this column for 2020 reflect the cash performance incentive received by Ms. Lody and Messrs. Ribar, Brickman and Hendrickson under our Management by Objective Incentive Plan for fiscal 2020. See “—Retention Bonuses and MBO Incentive Plan” below for additional information.

(3)

The amounts in this column for 2020 reflect annual contributions or other allocations by us to our 401(k) plan with respect to our named executive officers. In addition, with respect to Mr. Hendrickson, the amount in this column for 2020 also includes $45,860 paid to Mr. Hendrickson for his accrued vacation and sick time in connection with the termination of his employment with the Company.

(4)

The amounts in this column for 2020 reflect the retention awards earned by Ms. Lody and Messrs. Ribar, Brickman and Hendrickson for fiscal 2020. See “—Retention Bonuses and MBO Incentive Plan” below for additional information. In addition, the amounts for Messrs. Brickman and Hendrickson include the remaining portion of such named executive officer’s retention award granted in 2019, which equaled 67% of such named executive’s then current base salary and was subject to such named executive officer remaining continuously employed by the Company through March 13, 2020.

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Employment Agreements

Kimberly S. Lody

We entered into an employment agreement with Ms. Lody in January 2019. Pursuant to Ms. Lody’s employment agreement, Ms. Lody will serve as our President and ~~income, are subject~~Chief Executive Officer until December 31, 2021, unless terminated earlier pursuant to ~~certain risks and uncertainties that could cause actual results to differ materially from those indicated~~the termination provisions therein. The term of Ms. Lody’s employment will automatically renew for additional

one-year

periods in the ~~forward looking statements, due~~event that we do not, or Ms. Lody does not, provide written notice to ~~several important factors herein identified, among others,~~the other party of their intent not to renew such term at least 30 days prior to the expiration of the then-current term. Ms. Lody’s employment agreement provides that our Board of Directors will nominate Ms. Lody for reelection to the Board at the expiration of each term of office, and ~~other risks~~that Ms. Lody will serve as a member of our Board for each period for which she is so elected.

Pursuant to Ms. Lody’s employment agreement, she will receive an annual base salary of not less than $725,000 and ~~factors identified~~will be eligible to receive an annual performance bonus targeted at 110% of Ms. Lody’s base salary;

provided

, that (i) for the year ending December 31, 2019, Ms. Lody was entitled to receive an annual performance bonus equal to at least 50% of the full targeted performance bonus, and (ii) Ms. Lody’s targeted performance bonus may be increased from time to time by our Board or the Compensation Committee. Under her employment agreement, Ms. Lody also received a

sign-on

cash award of $1,000,000 and the following equity awards: (i) a

non-qualified

stock option to purchase 9,816 shares of our common stock with a

ten-year

term, which option is scheduled to vest in installments of 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively; (ii) 9,816 shares of performance-based restricted stock, the vesting of which is subject to the satisfaction of certain target performance conditions related to the trading price of our common stock during the three-year period following the grant date (with additional shares issuable upon the achievement of certain maximum target performance conditions related to the trading price of our common stock during the same period); and (iii) 4,908 shares of time-based restricted stock, which are scheduled to vest in installments of 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively. Beginning with fiscal year 2020, Ms. Lody became eligible to receive equity awards under our annual equity incentive award program in effect for our other senior executives, as determined by the Compensation Committee. Ms. Lody’s employment agreement also entitles her to certain severance payments and benefits in the ~~Company's reports~~ event she is terminated by us without “Cause” or by Ms. Lody for “Good Reason” (including in connection with a “Change in Control”), as described more fully in Ms. Lody’s employment agreement.

The foregoing description of Ms. Lody’s employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Ms. Lody’s employment agreement, which is included as Exhibit 10.1 to the Company’s Current Report on Form

8-K

filed with the ~~Securities~~SEC on January 8, 2019.

Brandon M. Ribar

We entered into an employment agreement with Mr. Ribar in September 2019. Pursuant to Mr. Ribar’s employment agreement, Mr. Ribar will serve as our Executive Vice President and ~~Exchange Commission. 38~~ ~~ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk~~Chief Operating Officer. Mr. Ribar’s employment agreement was for an initial term of one year and is ~~exposure~~subject to ~~changes in interest rates on debt instruments. As~~extension by the mutual written consent of ~~December 31, 1998,~~ the Company and Mr. Ribar.

Pursuant to Mr. Ribar’s employment agreement, he will receive an annual base salary of not less than $400,000 and will be eligible to receive a performance bonus as determined by the Compensation Committee. Under his employment agreement, Mr. Ribar also received the following equity awards: (i) 3,000 shares of performance-based restricted stock, the vesting of which is subject to the satisfaction of certain target performance conditions related to the trading price of our common stock during the three-year period following the grant date (with additional shares that are issuable upon the achievement of certain maximum target performance conditions related to the trading price of our common stock during the same period); and (ii) 1,667 shares of time-based restricted stock, which are scheduled to vest in installments of 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively. Mr. Ribar’s employment agreement also entitles him to certain severance payments and benefits in the event he is terminated by us without “Cause” or by Mr. Ribar for “Good Reason” (including in connection with a “Fundamental Change”), as described more fully in Mr. Ribar’s employment agreement.

The foregoing description of Mr. Ribar’s employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Mr. Ribar’s employment agreement, which is included as Exhibit 10.1 to the Company’s Current Report on Form

8-K

filed with the SEC on September 10, 2019.

David R. Brickman

On March 26, 2021, we entered into a new employment agreement with Mr. Brickman that terminated and replaced his then-existing employment agreement. Mr. Brickman’s employment agreement provides that we will continue to employ Mr. Brickman on an

at-will

basis as our Senior Vice President, General Counsel and Secretary. Mr. Brickman will receive an annual base salary of not

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less than $335,000 and will be eligible to receive an annual performance bonus targeted at not less than 50% of his base salary. Mr. Brickman’s employment agreement also entitles him to certain severance payments and benefits in the event he is terminated by us without “Cause” or by Mr. Brickman for “Good Reason” (including in connection with a “Change in Control”), as described more fully in Mr. Brickman’s employment agreement.

The foregoing description of Mr. Brickman’s employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Mr. Brickman’s employment agreement, which is included as Exhibit 10.28 to the Company’s Annual Report on Form

10-K

filed with the SEC on March 31, 2021.

Carey P. Hendrickson

We previously entered into an employment agreement with Mr. Hendrickson pursuant to which he served as our Executive Vice President and Chief Financial Officer until his resignation effective November 6, 2020 to pursue other career opportunities. Mr. Hendrickson’s departure was not based on any disagreement with the Company on any matter.

Mr. Hendrickson’s employment was terminated by Mr. Hendrickson without “Good Reason” (as such term is defined in Mr. Hendrickson’s employment agreement). Accordingly, pursuant to the terms of Mr. Hendrickson’s employment agreement, the only payments and benefits that he was entitled to receive from us were (i) payment for all accrued but unpaid base salary as of the date of termination, (ii) reimbursement for reasonable and necessary business expenses incurred through the date of termination, and (iii) any earned benefits under our employee benefit plans. All unvested awards were forfeited by Mr. Hendrickson effective upon termination of his employment.

The foregoing description of Mr. Hendrickson’s employment agreement does not purport to be complete and is qualified in its entirety by the reference to the full text of Mr. Hendrickson’s employment agreement, which is included as Exhibit 10.15 to the Company’s Annual Report on Form

10-K

filed with the SEC on March 31, 2020.

Retention Bonuses and MBO Incentive Plan

Retention Bonuses

On the recommendation of the Compensation Committee on March 24, 2020 in light of then-current economic conditions, the Board approved a temporary suspension of equity awards to any director or officer of the Company. The Compensation Committee also determined that it would not increase the annual base salaries of the Company’s executive officers for fiscal 2020.

In consideration of such matters and for retention purposes, on March 24, 2020 the Compensation Committee approved retention awards (the “Retention Awards”) to the Company’s named executive officers and certain other executive officers (each, a “Participant”) equal to 100% of the Participant’s then-current base salary. 50% of the Retention Award was subject to the Participant’s continued employment with the Company through September 15, 2020, and the remaining 50% of the Retention Award was subject to the Participant’s continued employment with the Company through March 15, 2021. If the Participant did not remain continuously employed with the Company through such dates, then the portion of the Retention Award subject to continuous employment as of such date would be forfeited, except that, if any Participant’s employment is terminated (i) by the Company without “Cause” (and other than due to the Participant’s death or “Disability”), or (ii) upon or following a “Change in Control” (each such term as defined in the Company’s equity incentive plan), in each case, prior to March 15, 2021, then the full amount of the Retention Award would be paid to such Participant.

MBO Incentive Plan

In addition, on March 24, 2020, the Compensation Committee approved a Management by Objective Incentive Plan for fiscal 2020 (the “MBO Incentive Plan”) pursuant to which each Participant had ~~$81,090,000~~the opportunity to earn a cash performance bonus equal to 30% of such Participant’s targeted performance bonus for fiscal 2020 (the “MBO Incentive”). Pursuant to the terms of their respective employment agreements, the “targeted performance bonus” for the Company’s President and CEO, former Executive Vice President and CFO, Executive Vice President and Chief Operating Officer and Senior Vice President, Secretary and General Counsel, who are the Company’s named executive officers, was equal to 110%, 70%, 70% and 50%, respectively, of their annual base salary for fiscal 2020. The payment of the MBO Incentive was based on the Participant’s achievement of certain individual goals for fiscal 2020 that were within such Participant’s sphere of influence, as determined in ~~outstanding debt comprised~~the discretion of ~~various fixed~~the Compensation Committee. Achievement of the threshold level of performance for each individual goal would result in 50% of the portion of MBO Incentive subject to such individual goal being earned by the Participant, and ~~variable rate debt instruments~~achievement of ~~$13,483,000~~the maximum level of performance for each individual goal would result in 150% of the portion of the MBO Incentive subject to such individual goal being earned by the Participant, in each case, subject to the discretion of the Compensation Committee.

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Performance Goals

The table below shows the individual performance goals for our named executive officers under our MBO Incentive Plan for 2020 and ~~$67,607,000, respectively. Changes~~the Compensation Committee’s determination as to whether such goals were achieved. Based upon each named executive officer’s achievement of his or her individual goals, the Compensation Committee had discretion to award between 0% and 150% of the target cash bonus to such named executive officer. As Mr. Hendrickson resigned as our Executive Vice President and Chief Financial Officer effective November 6, 2020 to pursue other career opportunities, he forfeited his MBO Incentive.


Executive	Individual Performance Goal	Weight			Achievement	Payout Factor
Kimberly S. Lody	Attain specific year-end cash balance (1)		16.5	%	Target		100	%
	Achieve certain capital structure initiatives (2)		16.5	%	Maximum		150	%

Brandon M. Ribar	Attain specific year-end cash balance (1)		5.25	%	Target		100	%
	Centralize accounts payable (3)		5.25	%	No		0	%
	Implementation of memory care program (4)		5.25	%	Threshold		50	%
	Establish and implement resident sales process (5)		5.25	%	Maximum		150	%

David R. Brickman	Attain specific year-end cash balance (1)		3.75	%	Target		100	%
	Achieve certain capital structure initiatives (2)		3.75	%	Maximum		150	%
	Develop risk management training materials and conduct training for all communities (6)		3.75	%	Target		100	%
	Update and standardize resident agreements and lease process (7)		3.75	%	Target		100	%

(1)

With respect to this individual performance goal, the threshold level of performance was subject to the Company having a cash balance of at least $8 million as of December 31, 2020, which would result in a payout equal to 50% of the targeted amount. In the event that the Company’s cash balance was at least $12 million as of December 31, 2020, then the targeted level of performance would be attained, which would result in a payout equal to 100% of the targeted amount. In the event that the Company’s cash balance was at least $25 million as of December 31, 2020, then the maximum level of performance would be attained, which would result in a payout equal to 150% of the targeted amount. As the Company’s cash balance as of December 31, 2020 was approximately $14 million, the targeted level of performance was achieved for this performance goal. As a result, the payout factor for this individual performance goal was 100%.

(2)

With respect to this individual performance goal, the threshold, target and maximum levels of performance was subject to the Company achieving certain capital structure initiatives during the year ended December 31, 2020 as determined by the Compensation Committee in its discretion. Achievement of the threshold level of performance would result in a payout equal to 50% of the targeted amount, achievement of the target level of performance would result in a payout equal to 100% of the targeted amount, and achievement of the maximum level of performance would result in a payout equal to 150% of the targeted amount. During fiscal 2020, as the Company exited all triple net leases and certain underperforming communities, removed approximately $470 million of debt from its balance sheet, improved cash flow by approximately $32 million compared to fiscal 2019, and completed certain other capital structure initiatives, the Compensation Committee exercised its discretion and determined that the maximum level of performance was achieved for this performance goal. As a result, the payout factor for this individual performance goal was 150%.

(3)

With respect to this individual performance goal, the threshold level of performance was subject to selecting and implementing a process for centralizing the Company’s accounts payable system by December 31, 2020, which would result in a payout equal to 50% of the targeted amount. In the event that such selection and implementation was completed by October 31, 2020, then the targeted level of performance would be attained, which would result in a payout equal to 100% of the targeted amount. In the event that such selection and implementation was completed by August 30, 2020, then the maximum level of performance would be attained, which would result in a payout equal to 150% of the targeted amount. As such selection and implementation was not completed during fiscal 2020 due to certain delays caused by process and system challenges, the threshold level of performance was not achieved for this performance goal. As a result, the payout factor for this individual performance goal was 0%.

(4)

With respect to this individual performance goal, the threshold level of performance was subject to preparing a detailed memory care program implementation plan, rolling out such plan to five communities and achieving certain monthly operating targets by December 31, 2020, which would result in a payout equal to 50% of the targeted amount. In the event that such plan was prepared and rolled out to 10 communities and such monthly operating targets were achieved by December 31, 2020, then the targeted level of performance would be attained, which would result in a payout equal to 100% of the targeted amount. In the event that such

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plan was prepared and rolled out to 20 communities and such monthly operating targets were achieved by December 31, 2020, then the maximum level of performance would be attained, which would result in a payout equal to 150% of the targeted amount. As such plan was prepared and rolled out to five communities and such monthly operating targets were achieved by December 31, 2020, the threshold level of performance was achieved for this performance goal. As a result, the payout factor for this individual performance goal was 50%.

(5)

With respect to this individual performance goal, the threshold level of performance was subject to establishing baseline lead, tour and conversion metrics for all communities, at least 30 communities receiving

hands-on

daily sales coaching and support, and improving conversion by 10% of A Place for Mom (“APFM”) leads by August 30, 2020, which would result in a payout equal to 50% of the targeted amount. In the event that at least 30 communities received

hands-on

daily sales coaching and support, the Company improved conversion by 15% of APFM leads by September 1, 2020, and speed to lead improved by at least 25% by August 30, 2020, then the targeted level of performance would be attained, which would result in a payout equal to 100% of the targeted amount. In the event that at least 30 communities received

hands-on

daily sales coaching and support, the Company improved conversion by 20% of APFM leads by December 31, 2020, speed to lead improved by at least 50% by December 31, 2020, and the Company’s new customer relationship management application was launched and utilized in at least 90% of communities by August 30, 2020, then the maximum level of performance would be attained, which would result in a payout equal to 150% of the targeted amount. As the maximum level of performance was achieved for this individual performance goal, the payout factor for this performance goal was 150%.

(6)

With respect to this individual performance goal, the threshold level of performance was subject to developing risk management training tools and conducting training for all of the Company’s communities by October 31, 2020, which would result in a payout equal to 50% of the targeted amount. In the event that such training tools were developed and such trainings were conducted for all of the Company’s communities by September 30, 2020, then the targeted level of performance would be attained, which would result in a payout equal to 100% of the targeted amount. In the event that such training tools were developed and such trainings were conducted for all of the Company’s communities by July 31, 2020, then the maximum level of performance would be attained, which would result in a payout equal to 150% of the targeted amount. As the target level of performance was achieved for this individual performance goal, the payout factor for this performance goal was 100%.

(7)

With respect to this individual performance goal, the threshold level of performance was subject to developing and finalizing standardized resident agreements and lease processes for customer relationship management testing and rollout by September 30, 2020, which would result in a payout equal to 50% of the targeted amount. In the event that such development and finalization were completed by July 31, 2020, then the targeted level of performance would be attained, which would result in a payout equal to 100% of the targeted amount. In the event that such development and training was completed by June 30, 2020, then the maximum level of performance would be attained, which would result in a payout equal to 150% of the targeted amount. As the target level of performance was achieved for this individual performance goal, the payout factor for this performance goal was 100%.

MBO Incentive Plan Payouts for 2020

Based upon the foregoing, the table below summarizes the payouts earned by each of our named executive officers under our MBO Incentive Plan for 2020.


Executive	Target		Plan Payout Factor			Plan Payout Amount (1)
Kimberly S. Lody	$	239,250		126.7	%	$	299,063
Brandon M. Ribar	$	84,000		75.0	%	$	63,000
David R. Brickman	$	51,176		110.6	%	$	57,591

(1)	Certain payout amounts differ slightly from the result of multiplying the targeted amounts by the plan payout factors in the table above due to rounding.

Equity Compensation Arrangements

In addition to the employment agreements described above, our named executive officers are entitled to receive payments under the terms of our equity compensation plans and equity award agreements upon a “change in ~~interest rates would affect~~control” and the ~~fair market~~termination of the named executive officer’s employment due to death or disability.

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2019 Omnibus Stock and Incentive Plan

In the event of a “change in control,” the 2019 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation (the “2019 Omnibus Stock and Incentive Plan”) provides for the following treatment of awards unless otherwise provided in an award agreement:

Unless converted, assumed, or replaced by a successor or survivor corporation, or a parent or subsidiary thereof, all awards will become fully exercisable, all forfeiture restrictions will lapse, and, following the consummation of such change in control, all such awards will terminate and cease to be outstanding.

The number or value of any performance-based award or other award that is based on performance criteria or performance goals that will become fully earned, vested, exercisable and free of forfeiture restrictions will not exceed the ~~Company's fixed rate debt instruments but~~greater of (i) such number or value determined by the actual performance attained during the applicable performance period to the time of the change in control or (ii) such number or value that would be fully earned, vested, exercisable and free of forfeiture restrictions had 100% of the target level of performance been attained for the entire applicable performance period without regard to the change in control.

If awards are assumed or continued after a change in control, the Compensation Committee may provide that all or a portion of such awards will become fully exercisable and all forfeiture restrictions will lapse immediately upon the involuntary termination of the participant’s employment or service within a designated period (not to exceed 24 months) following the effective date of such change in control.

Upon a change in control, the Compensation Committee may cause any and all awards outstanding to terminate at a specific time in the future, and will give each participant the right to exercise such awards during a period of time as the Compensation Committee, in its sole and absolute discretion, will determine.

The portion of any incentive stock option accelerated in connection with a change in control will remain exercisable as an incentive stock option only to the extent the applicable $100,000 limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option will be exercisable as a

non-qualified

stock option under the U.S. federal tax laws.

2007 Omnibus Stock and Incentive Plan

In the event of a “change in control,” the 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation, as amended, provides for the following treatment of awards unless otherwise provided under the terms of an award or by the Compensation Committee prior to such transaction:

all outstanding awards (except performance awards which will be governed by their express terms) will become fully exercisable, nonforfeitable, or the restricted period will terminate, as the case may be; and

the Compensation Committee will have ~~an impact~~the right to cash out some or all outstanding

non-qualified

stock options, stock appreciation rights and shares of restricted stock on the ~~Company's earnings or cash flows. Fluctuations~~basis of the highest price per share paid in ~~interest rates~~any transaction reported on the ~~Company variable rate debt instruments, which are tied to either the LIBOR~~NYSE or ~~the prime rate, would affect the Company's earnings and cash flows but would not affect the fair market value of the variable rate debt. For each percentage point change~~paid or offered in interest rates the Company's annual interest expense would increase by approximately $676,000 based on its current outstanding variable rate debt. In fiscal 1999 the Company expects to convert $47,700,000 of its variable rate debtany bona fide transaction related to a ~~fixed rate loan which~~“change in control” during the immediately preceding

60-day

period, in each case as determined by the Compensation Committee (except that the cash out for stock appreciation rights related to incentive stock options will be based on transaction reported for the 10date on which the holder exercises the stock appreciation rights or, if applicable, the date on which the cash out occurs).

Time-Based Restricted Stock Award Agreements

When our named executive officers are awarded shares of restricted stock with time-based vesting provisions, each of them enters into a restricted stock award agreement with us. These restricted stock award agreements generally provide that, if the holder’s employment with us is terminated for any reason before the vesting date for the restricted shares, the restricted shares that have not previously vested will, automatically and without notice, terminate and be permanently forfeited as of such date, except that all unvested shares will vest if the holder’s employment terminates on or after the first anniversary of the grant date due to the holder’s death or disability.

In the event of a change in control, shares of time-based restricted stock will not automatically vest; provided, however, that (i) if the Compensation Committee has made a provision for the substitution, assumption, exchange or other continuation of such award in connection with the change in control, then in the event that the holder’s employment is terminated (A) by us due to death, disability or retirement following the change in control, then the unvested portion of the award will immediately fully vest, or (B) by us other than for “Cause” or by the holder for “Good Reason,” in each case within one year ~~treasury rate~~following the change in control, the unvested portion of

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the award will immediately fully vest; or (ii) if the Compensation Committee has not made a provision for the substitution, assumption, exchange or other continuation of such award in connection with the change in control, the unvested portion of the award will fully vest immediately prior to the change in control.

Performance-Based Restricted Stock Award Agreements

When our named executive officers are awarded shares of performance-based restricted stock, each of them enters into a performance award agreement with us. These performance award agreements generally provide that, (1) if the holder’s employment with us is terminated for any reason before the vesting date for the performance shares, the performance shares that have not previously vested will, automatically and without notice, terminate and be permanently forfeited as of such date, and (2) the holder’s right to receive the specified percentage of performance shares that do not vest as a result of our failure to achieve the applicable performance measures will be automatically terminated and permanently forfeited; provided, that any performance shares that have not been forfeited pursuant to clause (2) above, will vest in connection with the holder’s death or disability.

In the event of a change in control, immediately prior to such change in control, the targeted number of performance shares will convert into time-based restricted shares and will vest on the scheduled vesting date (without regard to achievement of any of the ~~conversion plus an agreed~~applicable performance measures) if the holder remains employed with us on such scheduled vesting date; provided, however, that (i) if the Compensation Committee has made a provision for the substitution, assumption, exchange or other continuation of the such award in connection with the change in control, then in the event that the holder’s employment is terminated (A) by us due to ~~point spread.~~ death or disability following the change in control, the unvested portion of the award will immediately fully vest, or (B) by us other than for “Cause,” or by the holder for “Good Reason,” in each case within one year following the change in control, the unvested portion of the award will immediately fully vest; or (ii) if the Compensation Committee has not made a provision for the substitution, assumption, exchange or other continuation of such award in connection with the change in control, the unvested portion of the award will fully vest immediately prior to the change in control.

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2020 Outstanding Equity Awards at Fiscal

Year-End

The following table sets forth certain information with respect to our named executive officers’ outstanding stock options and restricted stock awards as of December 31, 2020.


	Option Awards											Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($) (1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1)
Kimberly S. Lody		3,240		6,576	(a)		—		111.90		1/7/2029		—			—		—			—
		—		—			—		—		—		3,288	(b)		40,574		—			—
		—		—			—		—		—		—			—		9,816	(c)		121,129
Brandon M. Ribar		—		—			—		—		—		1,117	(d)		13,784		—			—
		—		—			—		—		—							3,000	(e)		37,020
David R. Brickman		—		—			—		—		—		1,011	(f)		12,476		—			—
		—		—			—		—		—		599	(g)		7,392		—			—
		—		—			—		—		—		—			—		2,263	(h)		27,925
		—		—			—		—		—		—			—		2,645	(i)		32,639
Carey P. Hendrickson (2)		—		—			—		—		—		—			—		—			—

(1)	Calculated by reference to the closing price for shares of our common stock on the NYSE on December 31, 2020, which was $12.34 per share.

(2)	Mr. Hendrickson resigned as the Company’s Executive Vice President and Chief Financial Officer effective November 6, 2020 to pursue other career opportunities. Upon termination of his employment, Mr. Hendrickson forfeited all unvested awards.

(a)	Represents stock option to purchase 9,816 shares of common stock granted on January 7, 2019, which vests in installments of 33%, 33% and 34% on January 7, 2020, January 7, 2021 and January 7, 2022, respectively.

(b)	Represents the remaining shares of restricted stock (second and third tranches) granted on January 7, 2019, which vest in installments of 33%, 33% and 34% on January 7, 2020, January 7, 2021 and January 7, 2022, respectively.

(c)	Represents shares of restricted stock granted on January 7, 2019, which will vest upon the achievement of the target performance objective. Does not include additional shares that are issuable upon the achievement of the maximum performance objective.

(d)	Represents the remaining shares of restricted stock (second and third tranches) granted on September 10, 2019, which vest in installments of 33%, 33% and 34% on September 10, 2020, September 10, 2021 and September 10, 2022, respectively.

(e)	Represents shares of restricted stock granted on September 10, 2019, which will vest upon the achievement of the target performance objective. Does not include additional shares that are issuable upon the achievement of the maximum performance objective.

(f)	Represents the remaining shares of restricted stock (second and third tranches) granted on May 14, 2019, which vest in installments of 33%, 33% and 34% on May 14, 2020, May 14, 2021 and May 14, 2022, respectively.

(g)	Represents the remaining shares of restricted stock (third tranche) granted on March 27, 2018, which vest in installments of 33%, 33% and 34% on March 27, 2019, March 27, 2020 and March 27, 2021, respectively.

(h)	Represents shares of restricted stock granted on May 14, 2019, which vest subject to the satisfaction of certain performance conditions upon the third anniversary of the grant date (or such later date that the Compensation Committee certifies that such performance conditions have been satisfied).

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(i)

Represents shares of restricted stock granted on March 27, 2018, which vest subject to the satisfaction of certain performance conditions upon the third anniversary of the grant date (or such later date that the Compensation Committee certifies that such performance conditions have been satisfied). All of such shares were forfeited in February 2021 due to the failure to satisfy the applicable performance targets.

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2020 DIRECTOR COMPENSATION

The following table summarizes ~~information~~the compensation earned by our

non-employee

directors in 2020. Ms. Lody did not receive any compensation for her services as a director during 2020. Please refer to the Summary Compensation Table above for the compensation received by Ms. Lody for her services as an executive officer during 2020.


Name	Fees Earned or Paid in Cash ($) (1)		Stock Awards ($) (2)		Option Awards ($)		All Other Compensation ($)		Total ($)
Philip A. Brooks	$	125,000		—		—		—	$	125,000
Ed A. Grier	$	80,000		—		—		—	$	80,000
E. Rodney Hornbake	$	63,000		—		—		—	$	63,000
Paul J. Isaac(3)	$	31,250		—		—		—	$	31,250
Jill M. Krueger	$	82,500		—		—		—	$	82,500
Ross B. Levin	$	120,000		—		—		—	$	120,000
Steven T. Plochocki	$	67,500		—		—		—	$	67,500
Michael W. Reid	$	155,000		—		—		—	$	155,000

During 2020, we did not maintain any pension or deferred compensation arrangements for our directors.

(1)	Represents an annual retainer fee and compensation for attendance at Board and committee meetings during 2020. See “—Compensation of Directors During 2020” below for more information.

(2)

In March 2020, in response to then-current economic conditions and to avoid the excessive share use, run rate and dilution that would occur by awarding equity-based long-term incentives at the Company’s then-current stock price, the Compensation Committee recommended that the Board approve, and the Board subsequently approved, a temporary suspension of equity awards to any director of the Company. Accordingly, no equity awards were granted to the Company’s directors during the fiscal year ended December 31, 2020.

(3)	Mr. Paul J. Isaac resigned from the Board effective May 12, 2020, in order to focus his time and attention on other commitments. Mr. Isaac’s resignation did not result from any disagreements with management or the Board.

Compensation of Directors During 2020

For their services to us, our

non-employee

directors each received an annual retainer of $55,000 (in addition to the committee retainers and meeting fees discussed below). In addition, the independent Chairman of our Board (Mr. Reid), the Chairman of the Audit Committee (Ms. Krueger), the Chairman of the Nominating and Corporate Governance Committee (Mr. Brooks), the Vice Chairman of the Nominating and Corporate Governance Committee (Dr. Hornbake), and the Chairman of the Compensation Committee (Mr. Grier), each received an additional annual retainer of $50,000, $20,000, $10,000, $8,000 and $15,000, respectively, for serving as the Chairpersons or Vice Chairpersons, as applicable, of the Board or such committees in 2020. Our

non-employee

directors on the ~~Company's debt instruments outstanding~~Audit Committee, Nominating and Corporate Governance Committee, and Compensation Committee also each received an annual retainer of $10,000, $5,000 and $7,500, respectively, for serving on such committees in 2020. The Board and committee annual retainers are payable on a quarterly basis at the end of each quarter. Our

non-employee

directors were also reimbursed for their expenses in attending Board and committee meetings in 2020.

Additionally, during 2020, Messrs. Brooks, Reid and Levin each received retainer fees of $10,000 per month for their service on a Special Committee of the Board, which fees are payable at a later date. Ms. Lody also served on such Special Committee during 2020, but did not receive any compensation in respect of such service.

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ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents information relating to the Company’s equity compensation plans as of December 31, ~~1998.~~ 2020:


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights			Weighted-Average Exercise Price of the Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column)
Equity compensation plans approved by security holders		—		$	—		169,288
Equity compensation plans not approved by security holders		9,816	(1)		—		—

Total		9,816	(1)	$	—		169,288

(1)

Represents a

non-qualified

stock option granted as an employment inducement award outside of a plan to purchase 9,816 shares of our common stock with an exercise price of $111.90 per share and a

ten-year

term, which option is scheduled to vest in installments of 33%, 33% and 34% on the first, second, and third anniversaries of the grant date, respectively.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table ~~presents~~sets forth certain information with respect to the ~~principal due~~beneficial ownership of our common stock as of April 19 2021 by: (i) each person known by us to be the beneficial owner of more than five percent of our common stock; (ii) each of our directors and ~~weighted average interest rates~~director nominees; (iii) each of our “named executive officers” set forth in the Summary Compensation Table below; and (iv) all of our current executive officers and directors as a group. Except as otherwise indicated, the address of each person listed below is 14160 Dallas Parkway, Suite 300, Dallas, Texas 75254.


	Shares Beneficially Owned (1)(2)
Name of Beneficial Owner	Number		Percent of Class
5% or More Stockholder
Seymour Pluchenik (3)		307,728		14.5	%
Arbiter Partners Capital Management LLC (4)		289,155		13.7	%
Steven D. Lebowitz (5)		178,840		8.4	%
Pangea Ventures, L.P. (6)		118,807		5.6	%
Clayton Partners LLC (7)		118,500		5.6	%
Named Executive Officers and Directors
Kimberly S. Lody (8)		69,904		3.3	%
Brandon M. Ribar (9)		29,757		1.4	%
David R. Brickman (10)		26,552		1.3	%
Philip A. Brooks (11)		5,805		*
Jill M. Krueger		5,712		*
Steven T. Plochocki		4,663		*
Michael W. Reid		4,551		*
E. Rodney Hornbake		4,689		*
Ross B. Levin		3,129		*
Ed A. Grier		2,947		*
All directors and executive officers as a group (15 persons) (12)		192,543		9.1	%
Carey P. Hendrickson (13)		—		—

*	Less than one percent.

(1)

Pursuant to SEC rules, a person has beneficial ownership of any securities as to which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power and as to which such person has the right to acquire such voting and/or investment power within 60 days. Percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of shares as to which such person has the right to acquire voting and/or investment power within 60 days (rounded to the nearest tenth of a percent).

(2)	The percentages indicated are based on 2,117,481 shares of our common stock issued and outstanding on April 19, 2021.

(3)

The address of the reporting persons reported on this line is c/o GF Investments, 810 Seventh Avenue, 28th Floor, New York, NY 10019. Shares reported on this line represent shares that may be deemed to be beneficially owned by Seymour Pluchenik, Sam Levinson, Simon Glick, Silk Partners, LP (“Silk”); Siget, LLC (“Siget”); Siget NY Partners, L.P. (“Siget NY”); 1271 Associates, LLC (“1271 Associates”); and PF Investors, LLC (“PF Investors”). Mr. Levinson is the chief investment officer of Siget NY. Siget NY is the investment manager of and makes investment decisions for Silk. 1271 Associates is the General Partner of Siget NY. Messrs. Glick and Pluchenik are the managing members of 1271 Associates. Siget is the General Partner of Silk. Messrs. Glick and Pluchenik are the managing members of Siget. By virtue of these relationships, each of Siget NY, 1271 Associates, Siget and Messrs. Levinson, Glick and Pluchenik may be deemed to beneficially own the shares owned directly by Silk. Mr. Pluchenik is the manager of PF Investors, and by virtue of this relationship, Mr. Pluchenik may be deemed to beneficially own the shares of Common Stock owned directly by PF Investors. Based solely on a Schedule 13D/A filed on July 1, 2019, and accounting for the

1-for-15

reverse stock split of the Company’s common stock, (i) Seymour Pluchenik has the sole voting and dispositive power with respect to none of the shares and shared voting and dispositive power with respect to 307,728 shares, (ii) Sam Levinson, Simon Glick, Siget, Siget NY and 1271 Associates have the sole voting and dispositive power with respect to none of the shares and shared voting and dispositive power with respect to 290,809 shares, (iii) Silk has the sole voting and dispositive power with respect to 290,809 shares and shared voting and dispositive power with respect to none of the shares and (iv) PF Investors has the sole voting and dispositive power with respect to 16,918 shares and shared voting and dispositive power with respect to none of the shares.

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(4)

The address of Arbiter Partners Capital Management LLC (“Arbiter Partners”) is 530 Fifth Avenue, 20th Floor, New York, NY 10036. Arbiter Partners and Paul J. Isaac share voting power and share dispositive power with respect to all of the reported shares. Information relating to Arbiter Partners is based on a Schedule 13D filed with the SEC on March 10, 2017 and Form 4 filed with the SEC on August 29, 2017, as adjusted for the

1-for-15

reverse stock split of the Company’s common stock. Arbiter Partners is a registered investment adviser that manages and/or administers Arbiter Partners QP LP, an affiliated investment fund (“APQ”), and various accounts, including Isaac Brothers, LLC, Nana Associates LLC and 9 Interlaken Partners LLC (collectively, the “Family Accounts”). Mr. Isaac controls Arbiter Partners. By reason of its position as investment adviser to APQ and as manager and/or administrator of the Family Accounts, Arbiter Partners may be deemed to possess the power to vote and dispose of the shares held by APQ and the Family Accounts. By reason of his responsibility for the supervision and conduct of all investment activities of Arbiter Partners, Mr. Isaac may be deemed to possess the power to vote and dispose of the shares beneficially owned by Arbiter Partners. Mr. Isaac disclaims beneficial ownership of these securities for all purposes of Section 16 of the Securities Exchange Act of 1934, as amended, except to the extent of his pecuniary interest therein.

(5)

The address of the reporting persons reported on this line is 1333 Second Street, Suite 650, Santa Monica, CA 90401. Shares reported on this line represent shares that may be deemed to be beneficially owned by Steven D. Lebowitz, Deborah P. Lebowitz, David Lebowitz, Amanda Lebowitz, Lauren Lebowitz Salem, Robert Lebowitz, Kathryn Lebowitz Silverberg, The Lebowitz Family Stock, LLC (“LFS LLC”) and Leonard S. Pearlstein. Based solely on a Schedule 13G/A filed on January 29, 2021, (i) Steven D. Lebowitz has sole voting and dispositive power with respect to 11,666 shares, shared voting power with respect to 160,176 shares and shared dispositive power with respect to 167,174 shares, (ii) Deborah P. Lebowitz has sole voting and dispositive power with respect to none of the shares and shared voting and dispositive power with respect to 160,176 shares, (iii) David Lebowitz and Amanda Lebowitz have sole voting and dispositive power with respect to none of the shares and shared voting and dispositive power with respect to 1,166 shares, (iv) Lauren Lebowitz Salem has sole voting power with respect to 3,000 shares, sole dispositive power with respect to none of the shares, shared voting power with respect to none of the shares, and shared dispositive power with respect to 3,000 shares, (v) Robert Lebowitz has sole voting power with respect to 200 shares, sole dispositive power with respect to none of the shares, shared voting power with respect to none of the shares, and shared dispositive power with respect to 200 shares, (vi) Kathryn Lebowitz Silverberg has sole voting power with respect to 2,166 shares, sole dispositive power with respect to none of the shares, shared voting power with respect to none of the shares, and shared dispositive power with respect to 2,166 shares, (vii) LFS LLC has sole voting and dispositive power with respect to 11,666 shares and shared voting and dispositive power with respect to none of the shares, and (viii) Leonard S. Pearlstein has sole voting power with respect to 466 shares, sole dispositive power with respect to none of the shares, shared voting power with respect to none of the shares, and shared dispositive power with respect to 466 shares.

(6)

The address of the reporting persons reported on this line is 450 Park Avenue, Suite 2700, New York, NY 10022. Shares reported on this line represent shares that may be deemed to be beneficially owned by Pangea Ventures, L.P. (“Pangea”), Ortelius Advisors, L.P. (“Ortelius”) and Peter DeSorcy. Ortelius is the investment manager of Pangea. Peter DeSorcy is the Managing Member of the general partner of Ortelius, is a Managing Member of Ortelius and has a controlling interest in Ortelius, and, as a result, Peter DeSorcy may be deemed to beneficially own the shares beneficially owned by Pangea. Each of Pangea, Ortelius and Peter DeSorcy has sole voting and dispositive power with respect to none of the shares and shared voting and dispositive power with respect to 118,807 shares. The foregoing information regarding Pangea, Ortelius and Peter DeSorcy and their respective beneficial ownership of shares is based solely on a Schedule 13D filed on March 25, 2021.

(7)

The address of Clayton Partners LLC is 3160 College Avenue, Suite 203, Berkeley, CA 94705. Clayton Partners LLC has sole voting and dispositive power with respect to 118,500 shares and shared voting and dispositive power with respect to none of the shares. The foregoing information regarding Clayton Partners LLC and the shares that it beneficially owns is based solely on a Schedule 13G filed on January 22, 2021.

(8)

Consists of 6,636 shares held by Ms. Lody directly, 56,789 unvested shares of restricted stock (36,999 of which are subject to the Company’s achievement of certain performance targets), and 6,479 shares of common stock underlying the vested portion of an option to purchase shares of common stock at $111.90 per share. Does not include 3,338 shares underlying the unvested portion of such stock option and additional shares that are issuable upon the achievement of certain maximum performance targets.

(9)

Consists of 7,216 shares held by Mr. Ribar directly and 22,541 unvested shares of restricted stock (14,054 of which are subject to the Company’s achievement of certain performance targets). Does not include additional shares that are issuable upon the achievement of certain maximum performance targets.

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(10)

Consists of 13,009 shares held by Mr. Brickman directly and 13,543 unvested shares of restricted stock (8,424 of which are subject to the Company’s achievement of certain performance targets). Does not include additional shares that are issuable upon the achievement of certain maximum performance targets.

(11)	Consists of 5,387 shares held by Mr. Brooks directly and 418 shares held by the Philip A. Brooks Revocable Trust.

(12)

Includes 61,615 shares held directly or indirectly by the executive officers and directors of the Company, 124,449 unvested shares of restricted stock (78,455 of which are subject to the Company’s achievement of certain performance targets) and 6,479 shares of common stock underlying the vested portion of an option to purchase shares of common stock at $111.90 per share. Does not include 3,338 shares underlying the unvested portion of such stock option and additional shares that are issuable upon the achievement of certain maximum performance targets.

(13)	Mr. Hendrickson resigned as the Company’s Executive Vice President and Chief Financial Officer effective November 6, 2020 to pursue other career opportunities, and the Company has been unable to determine the number of shares of its common stock held by Mr. Hendrickson, if any.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Director Independence Policy

The Board has determined that Dr. E. Rodney Hornbake, Ross B. Levin, Jill M. Krueger, Michael W. Reid, Philip A. Brooks, Ed A. Grier and Steven T. Plochocki, each an existing director, are “independent” within the meaning of the corporate governance rules of the NYSE and no such individual has any relationship with us, except as a director stockholder and/or director nominee, as applicable. In addition, we have adopted a Director Independence Policy, as described in greater detail below, which establishes guidelines for the ~~Company's various debt instruments~~Board to follow in making the determination as to which of our directors is “independent.” Our Director Independence Policy is available on our website at

http://www.capitalsenior.com

in the Investor Relations section and is available in print to any stockholder who requests it. The Board has determined that Messrs. Hornbake, Levin, Reid, Brooks, Grier and Plochocki and Ms. Krueger, each an existing director, are “independent” in accordance with our Director Independence Policy.

The Board undertakes an annual review of the independence of all

non-management

directors. In advance of the meeting at which this review occurs, each

non-management

director is asked to provide the Board with full information regarding the director’s business and other relationships with us in order to enable the Board to evaluate the director’s independence. Directors have an affirmative obligation to inform the Board of any material changes in their circumstances or relationships that may impact their designation by ~~fiscal year. Weighted average variable interest rates are based~~the Board as “independent.” This obligation includes all business relationships between, on the ~~Company's floating rate~~one hand, directors or members of their immediate family, and, on the other hand, us, whether or not such business relationships are described above.

No director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with us. The following guidelines are considered in making this determination:

a director who is, or has been within the last three years, employed by us, or whose immediate family member is, or has been within the last three years, one of our executive officers, is not “independent”;

a director who received, or whose immediate family member received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from us, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not “independent”;

a director (a) who is or whose immediate family member is a current partner of a firm that is our internal or external auditor, (b) who is a current employee of such a firm, (c) whose immediately family member is a current employee of such a firm and participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice, or (d) who is, or whose immediate family member was within the last three years (but is no longer), a partner or employee of such a firm and personally worked on our audit within that time, is not “independent”;

a director who is, or whose immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that other company’s compensation committee, is not “independent”;

a director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues, is not “independent”;

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a director who serves as an executive officer, or whose immediate family member serves as an executive officer, of a tax exempt organization that, within the preceding three years, received contributions from us, in any single fiscal year, of an amount equal to the greater of $1 million or 2% of such organization’s consolidated gross revenue, is not “independent”; and

a director who has a beneficial ownership interest of 10% or more in a company which has received remuneration from us in any single fiscal year in an amount equal to the greater of $1 million or 2% of such company’s consolidated gross revenue is not “independent” until three years after falling below such threshold.

In addition, members of the Compensation Committee must not have any relationship or affiliation with us that would materially affect the director’s ability to be independent from management as a Compensation Committee member and must otherwise be “independent” under our Director Independence Policy. Members of the Audit Committee may not accept any consulting, advisory or other compensatory fee from us or any of our subsidiaries or affiliates other than directors’ compensation.

The terms “us,” “we” and “our” refer to Capital Senior Living Corporation and any direct or indirect subsidiary of Capital Senior Living Corporation, which is part of the consolidated group. An “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and

fathers-in-law,

sons and

daughters-in-law,

brothers and

sisters-in-law

and anyone (other than domestic employees) who shares such person’s home.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Fees Paid to Independent Auditors

In connection with the audit of the Company’s 2020 financial statements, the Company entered into an engagement agreement with Ernst & Young LLP, which sets forth the terms by which Ernst & Young LLP has performed audit services for the Company. The aggregate fees billed by Ernst & Young LLP for fiscal years 2020 and 2019 were as follows:


Services Rendered	2020		2019
Audit fees (1)	$	920,330	$	1,085,000
Audit-Related fees (2)		87,130		98,500
Tax fees (3)		—		—
All other fees		—		—

Total	$	1,007,460	$	1,183,500

(1)	Includes professional services for the audit of our annual financial statements, reviews of the financial statements included in our Form 10-Q filings, and services that are normally provided in connection with statutory and regulatory filings or engagements.

(2)	Includes fees associated with assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.

(3)	Includes fees associated with tax compliance, tax advice and tax planning.

The Audit Committee has considered whether the provision of the above services other than audit services is compatible with maintaining Ernst & Young LLP’s independence and has concluded that it is.

Audit Committee

Pre-Approval

of Services Performed by Independent Auditors

The Audit Committee has the sole authority to appoint or replace the independent auditor and is directly responsible for the compensation and oversight of the work of the independent auditor. The Audit Committee is responsible for the engagement of the independent auditor to provide permissible

non-audit

services, which require

pre-approval

by the Audit Committee (other than with respect to

de minimis

exceptions described in the rules of the NYSE or the SEC that are approved by the Audit Committee).

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PART IV

ITEM 15.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

(1)	The following documents required under this item were filed as part of the Original Filing:

Consolidated Financial Statements of Capital Senior Living Corporation

Report of Independent Registered Public Accounting Firm, Ernst & Young LLP

Consolidated Balance Sheets — December 31, ~~1998.~~ 2020 and 2019

Consolidated Statements of Operations and Comprehensive Loss — For the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Shareholders’ Equity — For the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows — For the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

Interest Rate Risk Principal Amount and Average Interest Rate by Expected Maturity Date (dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total Fair Value -------- ---------- ----------- ---------- ----------- ------------- ---------- ---------- Long-term debt: Fixed rate debt $ 304 $343 $378 $ 415 $455 $11,588 $13,483 $13,483 Average interest rate 8.7% 8.7% 8.7% 8.7% 8.7% 8.6% Variable rate debt $ 416 $333 $184 - - - $ 933 $ 933 Average interest rate 6.2% 6.2% 6.2% 0.0% 0.0% 0.0% Short-term debt: Variable rate debt $47,700 - - - - - $47,700 $47,700 Average interest rate 7.1% - - - - - Lines of credit: Variable rate debt - - - $18,974 - - $18,974 $18,974 Average interest rate - - - 7.3% - - ------- ------- Total Debt $81,090 $81,090
(2)	Exhibits:

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

The ~~financial statements~~following documents are included ~~under Item 14~~as a part of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company had no disagreements on accounting or financial disclosure matters with its independent accountants to report underAmendment. Those exhibits previously filed and incorporated herein by reference are identified below. Exhibits not required for this ~~Item 9. 39~~ Amendment have been omitted.


Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registration Statement No. 333-33379 on Form S-1/A filed by the Company with the Securities and Exchange Commission on September 8, 1997.)

3.1.1		Amendment to Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999, filed by the Company with the Securities and Exchange Commission.)

3.1.2		Second Amendment to Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on December 14, 2020.)

3.2		Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on March 8, 2013.)

4.1		2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation (Incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed by the Company with the Securities and Exchange Commission on May 31, 2007.)

4.2		First Amendment to 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation (Incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed by the Company with the Securities and Exchange Commission on May 31, 2007.)

4.3		Amended and Restated Second Amendment to the 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation, as amended (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on May 22, 2015.)

4.4		2019 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on May 15, 2019.)

4.5		Description of the Company’s securities#

10.1		Agreement of Limited Partnership of Triad Senior Living II, L.P., dated September 23, 1998 (Incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, filed by the Company with the Securities and Exchange Commission.)

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Exhibit Number		Description

10.2		Agreement of Limited Partnership of Triad Senior Living III, L.P., dated November 10, 1998 (Incorporated by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, filed by the Company with the Securities and Exchange Commission.)

10.3		Agreement of Limited Partnership of Triad Senior Living IV, L.P., dated December 22, 1998 (Incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, filed by the Company with the Securities and Exchange Commission.)

10.4		Second Amended and Restated Agreement of Limited Partnership of Triad Senior Living I, L.P. (Incorporated by reference to Exhibit 10.78 to the Company’s Annual Report on Form 10-K, dated March 30, 2000, filed by the Company with the Securities and Exchange Commission.)

10.4.1		Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Triad Senior Living I, LP. (Incorporated by reference to Exhibit 10.105 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, filed by the Company with the Securities and Exchange Commission.)

10.5		First Amendment to Triad II Partnership Agreement (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated August 15, 2000, filed by the Company with the Securities and Exchange Commission.)

10.6		Master Lease Agreement, dated June 30, 2005, between Ventas Amberleigh, LLC and Capital Senior Management 2, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, dated June 30, 2005, filed by the Company with the Securities and Exchange Commission on July 11, 2005.)

10.7		Schedule identifying substantially identical agreements to Exhibit 10.10 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A, dated June 30, 2005, filed by the Company with the Securities and Exchange Commission on July 11, 2005.)

10.8		Master Lease Agreement, dated October 18, 2005, between Ventas Georgetowne, LLC and Capital Senior Management 2, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 18, 2005, filed by the Company with the Securities and Exchange Commission.)

10.9		Master Lease Agreement, dated May 31, 2006, between subsidiaries of the Company and Healthpeak (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated May 31, 2006, filed by the Company with the Securities and Exchange Commission.)

10.10		Lease, dated May 31, 2006, between subsidiaries of the Company and Healthpeak regarding the Crosswood Oaks Facility in Citrus Heights, California (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated May 31, 2006, filed by the Company with the Securities and Exchange Commission.)

10.11		Schedule identifying substantially identical agreements to Exhibit 10.12 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, dated May 31, 2006, filed by the Company with the Securities and Exchange Commission.)

10.12		Master Lease Agreement, dated as of September 10, 2010, between Capital Texas S, LLC and the Landlord parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2010.)

10.13		Employment Agreement dated December 23, 2019, by and between Capital Senior Living Corporation and Carey P. Hendrickson (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on March 31, 2020.)

10.14		Form of Outside Director’s Restricted Share Unit Award Under the 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed by the Company with the Securities and Exchange Commission on August 5, 2015.)

10.15		Employment Agreement dated January 7, 2019, by and between Capital Senior Living Corporation and Kimberly S. Lody (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 8, 2019.)

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Exhibit Number		Description

10.16		Nonqualified Stock Option Agreement dated January 7, 2019, by and between Capital Senior Living Corporation and Kimberly S. Lody (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 8, 2019.)

10.17		Performance Award Agreement dated January 7, 2019, by and between Capital Senior Living Corporation and Kimberly S. Lody (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 8, 2019.)

10.18		Restricted Stock Award Agreement dated January 7, 2019, by and between Capital Senior Living Corporation and Kimberly S. Lody (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 8, 2019.)

10.19		Employment Agreement, dated February 20, 2019, by and between Capital Senior Living, Inc. and Michael C. Fryar (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, filed by the Company with the Securities and Exchange Commission.)

10.20		Employment Agreement, dated as of September 10, 2019, by and between Capital Senior Living Corporation and Brandon M. Ribar. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on September 10, 2019.)

10.21		Sign-On Performance Award Agreement, dated as of September 10, 2019, by and between Capital Senior Living Corporation and Brandon M. Ribar. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on September 10, 2019.)

10.22		Sign-On Restricted Stock Award Agreement, dated as of September 10, 2019, by and between Capital Senior Living Corporation and Brandon M. Ribar. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on September 10, 2019.)

10.23		Amended and Restated Forbearance Agreement, dated April 3, 2020 to be effective as of February 1, 2020, by and between Capital Senior Management 2, Inc. and Capital Senior Living Properties, Inc., each a wholly owned subsidiary of Capital Senior Living Corporation, and Ventas Realty, Limited Partnership and certain of its affiliated entities (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2020, filed by the Company with the Securities and Exchange Commission.)

10.24		Forbearance Agreement, dated March 15, 2020 to be effective as of February 1, 2020, by and between Capital Midwest, LLC, Capital Texas S, LLC, Capital Spring Meadows, LLC and Capital Senior Living Properties, Inc., each a wholly owned subsidiary of Capital Senior Living Corporation, and certain entities affiliated with Welltower Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2020, filed by the Company with the Securities and Exchange Commission.)

10.25		Form of MBO Incentive Plan and Executive Retention Award (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2020, filed by the Company with the Securities and Exchange Commission.)

10.26		Employment Agreement, dated as of March 26, 2021, by and between Capital Senior Living, Inc. and David R. Brickman#

10.27		Employment Agreement, dated as of December 9, 2020, by and between Capital Senior Living, Inc. and Tiffany L. Dutton#

10.28		Employment Agreement, dated as of February 18, 2020, by and between Capital Senior Living, Inc. and Jeremy D. Falke#

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Exhibit Number		Description

21.1		Subsidiaries of the Company#

23.1		Consent of Ernst & Young LLP#

31.1		Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)#

31.2		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)#

*31.3		Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).

*31.4		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).

32.1		Certification of Kimberly S. Lody pursuant to Section 906 of the Sarbanes-Oxley Act of 2002#

32.2		Certification of Tiffany L. Dutton pursuant to Section 906 of the Sarbanes-Oxley Act of 2002#

101.INS		XBRL Instance Document#

101.SCH		XBRL Taxonomy Extension Schema Document#

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document#

101.LAB		XBRL Taxonomy Extension Label Linkbase Document#

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document#

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document#

104		Cover page Interactive Data File (embedded as Inline XBRL)

*	Filed herewith.

#	Filed with Original Filing.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this ~~Form 10-K/A~~report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 4, 1999. CAPITAL SENIOR LIVING CORPORATION By: /s/ Lawrence A. Cohen -------------------------------------- Lawrence A. Cohen Vice Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K/A has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. authorized.

~~Signature Title Date --------- ----- ----~~ /s/ * Co-Chairman of the Board, November 4, 1999 - --------------------------------------- James A. Stroud Chairman and Secretary /s/ Lawrence A. Cohen Vice Chairman of the Board and November 4, 1999 - ---------------------------------------

CAPITAL SENIOR LIVING CORPORATION

By:		/s/ KIMBERLY S. LODY
		Kimberly S. Lody
		President, Chief Executive Officer (Principal Executive, Officer) /s/ * President, Chief Operating Officer November 4, 1999 - --------------------------------------- and Director Keith N. Johannessen /s/ * Director November 4, 1999 - --------------------------------------- Dr. Gordon I. Goldstein /s/ * Director November 4, 1999 - --------------------------------------- James A. Moore /s/ * Director November 4, 1999 - --------------------------------------- Dr. Victor W. Nee /s/ Ralph A. Beattie Executive Vice President and Chief November 4, 1999 - --------------------------------------- Financial Officer (Chief Financial and Ralph A. Beattie Accounting Officer) 40 ~~by */s/ Lawrence A. Cohen November 4, 1999 - ---------------------------------------- Lawrence A. Cohen attorney -in-fact~~

Date: April 30, 2021

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company