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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019 or

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

Commission File Number 1-16817

FIVE STAR SENIOR LIVING INC.(Exact Name of Registrant as Specified in Its Charter)

Maryland 04-3516029

(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts 02458(Address of Principal Executive Offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code): 617-796-8387

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

Title of Each Class Trading Symbol(s) Name of Each Exchange on Which RegisteredShares of Common Stock FVE The Nasdaq Stock Market LLC

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 suchreports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit 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,” “smallerreporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

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

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

Number of registrant’s shares of common stock, $.01 par value, outstanding as of November 5, 2019: 5,082,334.

FIVE STAR SENIOR LIVING INC.FORM 10-Q

September 30, 2019INDEX

PART I Financial Information PageItem 1. Condensed Consolidated Financial Statements (unaudited) 1 Condensed Consolidated Balance Sheets – September 30, 2019 and December 31, 2018 1 Condensed Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2019 and 2018 2 Condensed Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September 30, 2019 and 2018 3 Condensed Consolidated Statements of Stockholders' Equity – Three and Nine Months Ended September 30, 2019 and 2018 4 Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2019 and 2018 6 Notes to Condensed Consolidated Financial Statements 7Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24Item 3. Quantitative and Qualitative Disclosures About Market Risk 37Item 4. Controls and Procedures 37 Warning Concerning Forward-Looking Statements 38PART II Other Information 42Item 1. Legal Proceedings 42Item 1A. Risk Factors 42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42Item 6. Exhibits 42 Signatures 44

References in this Quarterly Report on Form 10-Q to the Company, Five Star, we, us or our include Five Star Senior Living Inc. and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

PART I. Financial InformationItem 1. Condensed Consolidated Financial Statements

FIVE STAR SENIOR LIVING INC.CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)(unaudited)

September 30, 2019 December 31, 2018

ASSETS

Cash and cash equivalents $ 39,423 $ 29,512

Accounts receivable, net of allowance of $4,727 and $3,422 at September 30, 2019 and December 31, 2018, respectively 36,084 37,758

Due from related persons 6,406 7,855

Investments, of which $11,984 and $11,285 are restricted at September 30, 2019 and December 31, 2018, respectively 21,360 20,179

Restricted cash 23,047 19,720

Prepaid expenses and other current assets 25,050 23,029

Assets held for sale 13,416 —

Total current assets 164,786 138,053

Property and equipment, net 164,736 243,873

Equity investment of an investee 9,340 8,633

Restricted cash 1,478 923

Restricted investments 6,556 8,073

Right of use assets 878,673 —

Other long term assets 6,196 6,069

Total assets $ 1,231,765 $ 405,624

LIABILITIES AND SHAREHOLDERS’ EQUITY

Revolving credit facility $ — $ 51,484

Accounts payable and accrued expenses 76,816 69,667

Current portion of lease liabilities 94,432 —

Accrued compensation and benefits 44,626 35,421

Due to related persons 19,344 18,883

Mortgage notes payable 356 339

Accrued real estate taxes 2,271 12,959

Security deposits and current portion of continuing care contracts 691 3,468

Other current liabilities 33,842 37,472

Liabilities held for sale 16,053 —

Total current liabilities 288,431 229,693

Long term liabilities:

Mortgage notes payable 7,263 7,533

Long term portion of lease liabilities 798,826 —

Accrued self-insurance obligations 31,929 33,030

Deferred gain on sale and leaseback transaction — 59,478

Other long term liabilities 1,518 4,721

Total long term liabilities 839,536 104,762

Commitments and contingencies Shareholders’ equity:

Common stock, par value $.01: 75,000,000 shares authorized, 5,082,334 and 5,085,345 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively 51 51

Additional paid in capital 362,314 362,012

Accumulated deficit (261,263) (292,636)

Accumulated other comprehensive income 2,696 1,742

Total shareholders’ equity 103,798 71,169

$ 1,231,765 $ 405,624

The accompanying notes are an integral part of these unaudited condensed financial statements.

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FIVE STAR SENIOR LIVING INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2019 2018 2019 2018

Revenues:

Senior living revenue $ 270,047 $ 272,701 $ 821,478 $ 818,108

Management fee revenue 4,053 4,009 12,060 11,408

Reimbursed costs incurred on behalf of managed communities 80,909 72,200 232,733 208,009

Total revenues 355,009 348,910 1,066,271 1,037,525

Operating expenses:

Senior living wages and benefits 147,048 142,035 435,927 418,917

Other senior living operating expenses 78,209 76,761 227,553 226,302

Costs incurred on behalf of managed communities 80,909 72,200 232,733 208,009

Rent expense 33,169 52,282 120,973 156,640

General and administrative expenses 20,094 18,965 67,144 57,405

Depreciation and amortization expense 2,818 9,137 13,924 26,974

Loss (gain) on sale of senior living communities 749 62 850 (7,131)

Long lived asset impairment 18 — 3,278 365

Total operating expenses 363,014 371,442 1,102,382 1,087,481

Operating loss (8,005) (22,532) (36,111) (49,956)

Interest, dividend and other income 414 192 985 577

Interest and other expense (384) (466) (2,196) (1,773)

Unrealized gain on equity investments 148 133 476 127

Realized (loss) gain on sale of debt and equity investments, net of tax (9) 2 227 (8)

Loss before income taxes and equity in earnings of an investee (7,836) (22,671) (36,619) (51,033)

Benefit (provision) for income taxes 687 263 (98) (274)

Equity in earnings of an investee, net of tax 83 826 617 882

Net loss $ (7,066) $ (21,582) $ (36,100) $ (50,425)

Weighted average shares outstanding—basic and diluted 5,012 4,968 5,007 4,964

Net loss per share—basic and diluted $ (1.41) $ (4.34) $ (7.21) $ (10.16)


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FIVE STAR SENIOR LIVING INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)(unaudited)


2019 2018 2019 2018

Net loss $ (7,066) $ (21,582) $ (36,100) $ (50,425)

Other comprehensive income (loss):

Unrealized gain (loss) on investments, net of tax 1,085 3 864 (437)

Equity in unrealized (loss) gain of an investee, net of tax (46) 173 90 90

Realized (gain) loss on investments reclassified and included in net loss, net of tax (1) 25 — 92

Other comprehensive income (loss) 1,038 201 954 (255)

Comprehensive loss $ (6,028) $ (21,381) $ (35,146) $ (50,680)


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FIVE STAR SENIOR LIVING INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)(unaudited)

Three and Nine Months Ended September 30, 2019

Number of

Shares Common

Stock

Additional Paid in Capital

Accumulated Deficit

Accumulated Other

Comprehensive Income Total

Balance at December 31, 2018 5,085,345 $ 51 $ 362,012 $ (292,636) $ 1,742 $ 71,169

Comprehensive loss:

Net loss — — — (33,215) — (33,215)

Unrealized loss on investments, net of tax — — — — (205) (205)

Realized loss on investments reclassified and included in net loss, net of tax — — — — 4 4

Equity in unrealized gain of an investee, net of tax — — — — 65 65

Total comprehensive loss — — — (33,215) (136) (33,351)

Cumulative effect adjustment to beginning retained earnings in connection with the adoption of FASB ASU No. 2016-02 — — — 67,473 — 67,473

Grants under share award plan and share based compensation — — 97 — — 97

Repurchases and forfeitures under share award plan (1,042) — — — — —

Balance at March 31, 2019 5,084,303 $ 51 $ 362,109 $ (258,378) $ 1,606 $ 105,388

Comprehensive income:

Net income — — — 4,181 — $ 4,181


Realized gain on investments reclassified and included in net income, net of tax — — — — (3) (3)


Total comprehensive income — — — 4,181 52 4,233

Grants under share award plan and share based compensation 6,250 — 123 — — 123

Repurchases and forfeitures under share award plan (3,964) — 2 — — 2

Balance at June 30, 2019 5,086,589 $ 51 $ 362,234 $ (254,197) $ 1,658 $ 109,746

Comprehensive loss:

Net loss — — — (7,066) — $ (7,066)

Unrealized gain on investments, net of tax — — — — 1,085 1,085

Realized gain on investments reclassified and included in net loss, net of tax — — — — (1) (1)

Equity in unrealized loss of an investee, net of tax — — — — (46) (46)

Total comprehensive loss — — — (7,066) 1,038 (6,028)

Repurchase of fractional shares (515) — — — — —

Grants under share award plan and share based compensation — — 82 — — 82

Repurchases and forfeitures under share award plan (3,740) — (2) — — (2)

Balance at September 30, 2019 5,082,334 $ 51 $ 362,314 $ (261,263) $ 2,696 $ 103,798

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FIVE STAR SENIOR LIVING INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)(unaudited)

Three and Nine Months Ended September 30, 2018

Number of

Shares Common

Stock

AdditionalPaid inCapital

AccumulatedDeficit

AccumulatedOther

ComprehensiveIncome Total

Balance at December 31, 2017 5,052,442 $ 51 $ 361,396 $ (220,489) $ 4,036 $ 144,994

Comprehensive loss:

Cumulative effect of reclassification of unrealized gain on equity investments in connection with the adoption of FASB ASU No. 2016-01 — — — 1,947 (1,947) —

Net loss — — — (7,949) — (7,949)


Realized gain on investments reclassified and included in net loss, net of tax — — — — (3) (3)

Equity in unrealized gain of an investee, net of tax — — — — (93) (93)

Total comprehensive loss — — — (6,002) (2,440) (8,442)


Balance at March 31, 2018 5,053,692 $ 51 $ 361,607 $ (226,491) $ 1,596 $ 136,763

Comprehensive loss:

Net loss — — — (20,894) — (20,894)




Total comprehensive loss — — — (20,894) 37 (20,857)


Repurchases and forfeitures under share award plan (1,134) — 207 — — 207

Balance at June 30, 2018 5,058,808 $ 51 $ 361,887 $ (247,385) $ 1,633 $ 116,186

Comprehensive loss:

Net loss — — — (21,582) — (21,582)

Unrealized gain on investments, net of tax — — — — 3 3



Total comprehensive loss — — — (21,582) 201 (21,381)

Grants under share award plan and share based compensation — — — — — —

Repurchases and forfeitures under share award plan (834) — 163 — — 163

Balance at September 30, 2018 5,057,974 $ 51 $ 362,050 $ (268,967) $ 1,834 $ 94,968


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FIVE STAR SENIOR LIVING INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)(unaudited)

Nine Months Ended September 30,

2019 2018

Cash flows from operating activities: Net loss $ (36,100) $ (50,425)

Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization expense 13,924 26,974

Loss (gain) on sale of senior living communities 850 (7,131)

Unrealized gain on equity securities (476) (127)

Realized (gain) loss on sale of debt and equity investments (227) 8

Loss on disposal of property and equipment 86 263

Long lived asset impairment 3,278 365

Equity in earnings of an investee, net of tax (617) (882)

Stock based compensation 302 654

Provision for losses on receivables 3,232 3,694

Amortization of non-cash rent adjustments (944) (4,957)

Other noncash expense adjustments, net 120 279

Changes in assets and liabilities: Accounts receivable (1,558) (1,881)

Prepaid expenses and other assets (4,939) (1,715)

Accounts payable and accrued expenses 5,365 (2,491)

Accrued compensation and benefits 9,205 7,164

Due from (to) related persons, net 15,976 (1,670)

Other current and long term liabilities 4,600 5,879

Cash provided by (used in) operating activities 12,077 (25,999)

Cash flows from investing activities:

Acquisition of property and equipment (37,433) (36,941)

Purchases of investments (2,897) (3,239)

Proceeds from sale of property and equipment 90,822 14,749

(Settlement of liabilities) proceeds from sale of communities (749) 31,819

Proceeds from sale of investments 5,042 6,349

Cash provided by investing activities 54,785 12,737

Cash flows from financing activities:

Proceeds from borrowings on revolving credit facility 5,000 25,000

Repayments of borrowings on revolving credit facility (56,484) (25,000)

Repayments of mortgage notes payable (272) (427)

Payment of deferred financing fees (1,271) —

Cash used in financing activities (53,027) (427)

Change in cash, cash equivalents and restricted cash 13,835 (13,689)

Cash, cash equivalents and restricted cash at beginning of period 50,155 48,478

Cash, cash equivalents and restricted cash at end of period $ 63,990 $ 34,789

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 39,423 $ 13,128

Restricted cash 24,525 21,661

Restricted cash presented in assets held for sale 42 —

Cash, cash equivalents and restricted cash at end of period $ 63,990 $ 34,789

Supplemental cash flow information:

Cash paid for interest $ 1,691 $ 1,195

Cash (received) paid for income taxes, net $ (1,366) $ 338 Non-cash activities:

Initial recognition of right of use assets $ 1,478,958 $ —

Initial recognition of lease liabilities $ 1,478,958 $ —

Real estate sale $ — $ 33,364

Mortgage notes assumed by purchaser in real estate sale $ — $ 33,364


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FIVE STAR SENIOR LIVING INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollar amounts in thousands, except per share amounts)(unaudited)

Note 1. Basis of Presentation and Organization

General

The accompanying condensed consolidated financial statements of Five Star Senior Living Inc. and its subsidiaries, or we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, forcomplete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying financial statements should be read in conjunction with the financialstatements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018, or our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments, considered necessary for afair presentation have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for thefull year. Certain reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year’s presentation.

We operate senior living communities, including independent living communities, assisted living communities and skilled nursing facilities, or SNFs. As of September 30, 2019, we operated 267 senior living communities located in 32 states with 31,116 livingunits, including 256 primarily independent and assisted living communities with 29,852 living units and 11 SNFs with 1,264 living units. As of September 30, 2019, we owned and operated 20 of these senior living communities (2,108 living units), we leasedand operated 170 of these senior living communities (18,840 living units) and we managed 77 of these senior living communities (10,168 living units). Our 267 senior living communities, as of September 30, 2019, included 11,195 independent living apartments,16,470 assisted living suites and 3,451 SNF units. The foregoing numbers exclude living units categorized as out of service.

During the third quarter of 2019, we and Senior Housing Properties Trust, or, together with its subsidiaries, SNH, sold 15 SNFs to a third party for an aggregate sales price of $8,000, excluding closing costs. We determined that this transaction did not meet thecriteria for discontinued operations, as it does not represent a strategic shift that has, or will have, a material impact on our operations and financial results. We classified the property and equipment related to these 15 SNFs, as well as all of the communities thatwe currently lease from SNH, as held for sale in our interim condensed consolidated balance sheet as of June 30, 2019. See Note 9 for more information regarding our communities classified as held for sale and our leases and other arrangements with SNH.

Reverse Stock Split

On September 30, 2019, we completed a one-for-ten reverse stock split of our outstanding common shares, or the Reverse Stock Split, pursuant to which every ten of our outstanding common shares were converted into one of our common shares. As a result ofthe Reverse Stock Split, we regained compliance with the minimum bid price listing standards of The Nasdaq Market LLC, or Nasdaq, for continued listing on Nasdaq.

All impacted amounts and share information included in this Quarterly Report on Form 10-Q have been retroactively adjusted for the Reverse Stock Split, as if it occurred on the first day of the first period presented. Certain adjusted amounts may not agree withpreviously reported amounts due to the rounding of fractional shares. No fractional shares were issued in connection with the Reverse Stock Split. Instead, each of our stockholders who would have been entitled to receive a fractional share as a result of theReverse Stock Split received cash in lieu of such fractional share, in an amount equal to their fractional interest multiplied by the closing price of our common shares on Nasdaq on September 27, 2019, the trading day immediately preceding September 30, 2019,adjusted to give effect to the Reverse Stock Split, without interest.

Segment Information

As of September 30, 2019, we have two operating segments: senior living and rehabilitation and wellness. In the senior living segment, we operate for our own account or manage for the account of others independent living communities, assisted livingcommunities and SNFs that are subject to centralized oversight and provide housing and services to elderly residents. In the rehabilitation and wellness operating segment, we provide therapy services, including physical, occupational, speech and otherspecialized therapy services, in the inpatient setting and in outpatient clinics. We have determined that our two operating segments meet the aggregation criteria as prescribed under Financial Accounting Standards Board, or FASB, Accounting

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Standards Codification™, or ASC, Topic 280, Segment Reporting, and we have therefore determined that our business is comprised of one reportable segment, senior living. All of our operations and assets are located in the United States, except for theoperations of our Cayman Islands organized captive insurance company subsidiary, which participates in our workers’ compensation, professional and general liability and certain automobile insurance programs.

Note 2. Summary of Significant Accounting Policies

Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financialstatements relate to revenue, reserves for bad debt allowance, intangible assets and goodwill, impairment of long-lived assets, general and professional liability, workers' compensation and healthcare claims included in accrued self-insurance liabilities andincome taxes.

Leases

On January 1, 2019, we adopted FASB ASC Topic 842, Leases, or ASC Topic 842, utilizing the modified retrospective transition method with no adjustments to comparative periods presented. Additionally, we elected the practical expedients within FASBAccounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842), or ASU No. 2016-02, that allow an entity to not reassess as of January 1, 2019 its prior conclusions on whether an existing contract contains a lease, lease classification for existing leases,and whether costs incurred for existing leases qualify as initial direct costs.

In accordance with ASC Topic 842, at inception of a contract, we, as lessee, evaluate and determine whether such contract is or contains a lease based on whether such contract conveys the right to control the use of the identified asset. We apply a dual approach,classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. We have elected to apply the portfolio approach where possible in assessing our leases andperformed an assessment of all our leases. In addition, we have elected the practical expedient, by class of underlying asset, not to separate non-lease components from the associated lease component if certain conditions are met. As lessee, we lease senior livingcommunities and our headquarters, and enter into contracts for the use and maintenance of various pieces of equipment that contain a lease. We have determined that none of these leases have met any of the criteria to be classified as a finance lease and,therefore, we have accounted for all of these leases as operating leases.

We have determined that our leases for the use and maintenance of equipment are short term leases. In accordance with ASC Topic 842, we have made an accounting policy election for our leases, which are determined to be short term leases, whereby werecognize the lease payments on a straight line basis over the lease term and variable lease payments in the period in which the obligations for those payments are incurred. Expenses related to these leases are recognized in the statement of operations in othersenior living operating expenses and is not material to our condensed consolidated financial statements.

We have determined that our leases for senior living communities and our headquarters are long term leases. In accordance with ASC Topic 842, a lessee is required to record a right of use asset and a lease liability for all leases with a term greater than 12months regardless of their classification. Accordingly, we have recorded a right of use asset and lease liability for all of our leased communities and our headquarters. We determined that the discount rate implicit in the leases was not readily available, andtherefore, in accordance with ASC Topic 842, we determined our incremental borrowing rate, or IBR, to calculate the right of use assets and lease liabilities. For purposes of determining the lease term, we concluded that it is not reasonably certain that our leaseextensions will be exercised and, therefore, we included payments required to be made under the committed lease term in calculating the right of use assets and lease liabilities. Expenses related to these leases are recognized in the statement of operations in rentexpense, except for the expense related to our headquarters, which is recorded in general and administrative expenses. We recognize variable lease payments primarily relating to percentage rent paid under our leases with SNH and operating costs such asinsurance and real estate taxes, in the statement of operations in the period in which the obligations for those payments are incurred.

We have not capitalized any initial direct costs related to our leases as these costs are not material to our condensed consolidated financial statements.

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ASC Topic 842 provides lessors with a practical expedient, by class of underlying asset, not to separate non-lease components from the associated lease component if certain conditions are met. In addition, ASC Topic 842 clarifies which ASC Topic (Topic 842or FASB ASC Topic 606, Revenue from Contracts with Customers, or ASC Topic 606) applies for the combined component. Specifically, if the non-lease components associated with the lease component are the predominant component of the combinedcomponents, the lessor should account for the combined component in accordance with ASC Topic 606. Otherwise, the lessor should account for the combined component as an operating lease in accordance with ASC Topic 842. We have elected this practicalexpedient and recognized revenue under our resident agreements at our independent living and assisted living communities based upon the predominant component rather than allocating the consideration and separately accounting for it under ASC Topic 842and ASC Topic 606. We have concluded that the non-lease components of the agreements with respect to our independent and assisted living communities are the predominant component of the leases and, therefore, we recognize revenue for these agreementsunder ASC Topic 606.

Revenue Recognition

We recognize revenue from contracts with customers in accordance with ASC Topic 606 using the practical expedient in paragraph 606-10-10-4 that allows for the use of a portfolio approach, because we have determined that the effect of applying the guidanceto our portfolios of contracts within the scope of ASC Topic 606 on our condensed consolidated financial statements would not differ materially from applying the guidance to each individual contract within the respective portfolio or our performanceobligations within that portfolio. The five step model defined by ASC Topic 606 requires us to: (1) identify our contracts with customers; (2) identify our performance obligations under those contracts; (3) determine the transaction prices of those contracts; (4)allocate the transaction prices to our performance obligations in those contracts; and (5) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to thecustomer in an amount that reflects the consideration expected in exchange for those goods or services.

A substantial portion of our revenue at our independent living and assisted living communities relates to contracts with residents for housing services that are generally short term in nature and initially is subject to ASC Topic 842. As previously discussed, wehave concluded that the non-lease components of these agreements are the predominant components of the contracts; therefore, we recognize revenue for these agreements under ASC Topic 606. Our contracts with residents and other customers that are withinthe scope of ASC Topic 606 are generally short term in nature. We have determined that services performed under those contracts are considered one performance obligation in accordance with ASC Topic 606 as such services are regarded as a series of distinctevents with the same timing and pattern of transfer to the resident or customer. Revenue is recognized for those contracts when our performance obligation is satisfied by transferring control of the service provided to the resident or customer, which is generallywhen the services are provided over time.

Senior Living Revenue. Resident fees at our independent living and assisted living communities consist of regular monthly charges for basic housing and support services and fees for additional requested services, such as assisted living services, personalizedhealth services and ancillary services. Fees are specified in our agreements with residents, which are generally short term (30 days to one year), with regular monthly charges billed in advance. Funds received from residents in advance of services being providedare not material to our condensed consolidated financial statements. Some of our senior living communities require payment of an entrance fee in advance of a resident moving into the community; substantially all of these community fees are non-refundable andare initially recorded as deferred revenue and included in other current liabilities in our consolidated balance sheets. These deferred amounts are then amortized on a straight line basis into revenue over the term of the resident's agreement. Revenue recorded anddeferred in connection with community fees is not material to our condensed consolidated financial statements. Revenue for basic housing and support services and additional requested services is recognized in accordance with ASC Topic 606 and measuredbased on the consideration specified in the resident agreement and is recorded when the services are provided.

In our SNFs and certain of our independent and assisted living communities where we provide SNF services, we are paid fixed daily rates from governmental and contracted third party payers, and we charge a predetermined fixed daily rate for private payresidents. These fixed daily rates and certain other fees are billed monthly in arrears. Although there are complex regulatory compliance rules governing fixed daily rates, we have no episodic payments or capitation arrangements. We currently use the “mostlikely amount” technique to estimate revenue in accordance with ASC Topic 606, although rates are generally known and considered fixed prior to services being performed, whether included in the resident agreement or contracted with governmental or thirdparty payers. Rate adjustments from Medicare or Medicaid are recorded when known (without regard to when the assessment is paid or withheld), and subsequent adjustments to these amounts are recorded in revenues when known. Billings under certain ofthese programs are subject to audit and possible retroactive adjustment, and related revenue is recorded at the

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amount we ultimately expect to receive, which is inclusive of the estimated retroactive adjustments or refunds, if any, under reimbursement programs. Retroactive adjustments are recorded on an estimated basis in the period the related services are rendered andadjusted in future periods or as final settlements are determined. Revenue is recognized when performance obligations are satisfied by transferring control of the service provided to the resident, which is generally when services are provided over the duration ofcare. We derived approximately 21.7% and 23.1% of our senior living revenues for the three months ended September 30, 2019 and 2018, respectively, and 22.6% and 23.2% for the nine months ended September 30, 2019 and 2018, respectively, from paymentsunder Medicare and Medicaid programs.

Management Fee Revenue and Reimbursed Costs Incurred on Behalf of Managed Communities. We manage senior living communities for the account of SNH pursuant to long term management agreements which provide for periodic management fee paymentsto us and reimbursement for our direct costs and expenses related to such communities. Management fees are determined by an agreed upon percentage of gross revenues (as defined) and recognized in accordance with ASC Topic 606 in the same period that weprovide the management services to SNH, generally monthly. FASB ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), clarifies how an entity should identifythe unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions. Where we are the primary obligor and therefore control the transfer of the goods andservices with respect to any such operating expenses incurred in connection with the management of these communities, we recognize revenue when the goods have been delivered or the service has been rendered and we are due to be reimbursed from SNH.Such revenue is included in reimbursed costs incurred on behalf of managed communities in our consolidated statements of operations. The related costs are included in costs incurred on behalf of managed communities in our consolidated statements ofoperations. Amounts due from SNH related to management fees and reimbursed costs incurred on behalf of managed communities are included in due from related persons in our consolidated balance sheets.

The following table presents revenue disaggregated by type of contract and payer:


2019 2018 2019 2018

Revenue from contracts with customers: Basic housing and support services (1) $ 162,853 $ 162,397 $ 489,244 $ 486,279

Medicare and Medicaid programs (1) 58,546 62,982 185,310 190,138

Additional requested services, and private pay and other third party payer SNF services (1) 48,648 47,322 146,924 141,691

Management fee revenue 4,053 4,009 12,060 11,408

Reimbursed costs incurred on behalf of managed communities 80,909 72,200 232,733 208,009

Total revenues $ 355,009 $ 348,910 $ 1,066,271 $ 1,037,525

(1) Included in senior living revenue in our consolidated statements of operations.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). This ASU also changes the accounting for sale andleaseback transactions, such as our sale and leaseback transaction with SNH in June 2016, and any associated deferred gain. In accordance with ASC Topic 842, if a previous sale and leaseback transaction was accounted for as a sale and operating leaseback inaccordance with FASB ASC Topic 840, Leases, or ASC Topic 840, any deferred gain or loss not resulting from off-market terms shall be recognized as a cumulative-effect adjustment to equity. This ASU is effective for reporting periods beginning afterDecember 15, 2018. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, or ASU No. 2018-11, which works to improve on certain aspects of ASU No. 2016-02 identified by stakeholders as problematic or difficult to implement,including the adoption method. ASU No. 2018-11 provides for a transition method option, allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, rather than restating comparativeperiods being presented. ASU No. 2018-11 also provides lessors with a practical expedient, by class of underlying asset, not to separate non-lease components from the associated lease component if certain conditions are met. We adopted these ASUs as requiredeffective January 1, 2019 utilizing the modified retrospective transition method with no adjustments to comparative periods presented in accordance with ASU No. 2018-11.

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The adoption of ASC Topic 842 resulted in the recognition of lease liabilities and right of use assets of approximately $1.5 billion as of January 1, 2019. Such amount of right of use assets was recognized based upon the amount of the recognized lease liabilities,adjusted for accrued lease payments, which are not material to our condensed consolidated financial statements as of January 1, 2019. We have also concluded that any previously unrecognized right of use assets needed to be reviewed for impairment effectiveJanuary 1, 2019, which could have resulted in a reduction to the initially recognized right of use assets with a cumulative effect adjustment to beginning retained earnings as of January 1, 2019. We have completed the process of evaluating the initial right of useassets for impairment and have determined there were no indicators of impairment. Due to changes in how we account for the deferred gain on our sale and leaseback transaction described above effective with the adoption of these ASUs, on January 1, 2019, werecorded through retained earnings our total deferred gain of $67,473 on our consolidated balance sheets as of December 31, 2018, $55 of which was in accounts payable and accrued expenses, $6,723 of which was in other current liabilities, $1,217 of which wasin other long term liabilities and the remaining $59,478 was separately stated on our consolidated balance sheets.

For the year ended December 31, 2018, a substantial portion of our senior living revenue at our independent living and assisted living communities related to housing services and was subject to ASC Topic 840, and revenue for additional requested services wasrecognized in accordance with ASC Topic 606. Upon adoption of Topic 842, we elected the lessor practical expedient within ASU No. 2018-11 and recognized revenue under our resident agreements at our independent living and assisted living communitiesbased upon the predominant component, either the lease or non-lease component, of the contracts rather than allocating the consideration and separately accounting for it under ASC Topic 842 and ASC Topic 606. We have concluded that the non-leasecomponents of the agreements with respect to our independent and assisted living communities are the predominant component of the lease and, therefore, we recognize revenue for these agreements under ASC Topic 606. After the adoption of ASC Topic 842,the timing and pattern of revenue recognition are substantially the same as those prior to the adoption.

See also the discussion above under “Leases” and Note 9 for more information regarding the impact of these ASUs on our condensed consolidated financial statements.

On January 1, 2019, we adopted FASB ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), which shortens the amortization period for certain callable debt securities held at a premium. Specifically, this ASU requires thepremium to be amortized to the earliest call date. This ASU does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The adoption of this ASU did not have a material impact on our condensedconsolidated financial statements.

On January 1, 2019, we adopted FASB ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220), which permits an entity to reclassify the tax effects that remain recorded within other comprehensive income to retained earnings as aresult of tax reform legislation that became effective in December 2017. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

On January 1, 2019, we adopted FASB ASU No. 2018-07, Compensation—Stock Compensation (Topic 718), which expands the scope of Topic 718 to include share based payment transactions for acquiring goods and services from non-employees. The adoptionof this ASU did not have a material impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which requires a financial asset or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. ThisASU eliminates the probable initial recognition threshold and instead requires reflection of an entity’s current estimate of all expected credit losses. In addition, this ASU amends the current available for sale security other-than-temporary impairment model fordebt securities. The length of time that the fair value of an available for sale debt security has been below the amortized cost will no longer impact the determination of whether a credit loss exists and credit losses will now be limited to the difference between asecurity’s amortized cost basis and its fair value. This ASU is effective for reporting periods beginning after December 15, 2019. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Reliefwhich provides for an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. We are assessing the potential impact that the adoption of this ASU will have on our condensed consolidated financialstatements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies certain disclosure requirements in Topic 820, such as the removal of the need to disclose the amount of and reason for transfers between Level 1

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and Level 2 of the fair value hierarchy, and several changes related to Level 3 fair value measurements. This ASU is effective for reporting periods beginning after December 15, 2019. We are assessing the potential impact that the adoption of this ASU will haveon our condensed consolidated financial statements.

In August 2018, the FASB also issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing hosting arrangement thatis a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. This ASU is effective for reporting periods beginning after December 15, 2019. We are assessing the potential impact that theadoption of this ASU will have on our condensed consolidated financial statements.

Note 3. Property and Equipment

Property and equipment consist of the following:

September 30, 2019 December 31, 2018

Land $ 12,155 $ 16,383

Buildings and improvements 200,739 208,375

Furniture, fixtures and equipment 54,639 239,240

Property and equipment, at cost 267,533 463,998

Less: accumulated depreciation (102,797) (220,125)

Property and equipment, net $ 164,736 $ 243,873

We recorded depreciation expense relating to our property and equipment of $2,818 and $9,117 for the three months ended September 30, 2019 and 2018, respectively, and $13,924 and $26,915 for the nine months ended September 30, 2019 and 2018,respectively. We review the carrying value of long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an indication that the carrying value of an asset is not recoverable, wedetermine the amount of impairment loss, if any, by comparing the historical carrying value of the asset to its estimated fair value. We determine estimated fair value based on input from market participants, our experience selling similar assets, marketconditions and internally developed cash flow models that our assets or asset groups are expected to generate, and we consider these estimates to be a Level 3 fair value measurement. As a result of our long lived assets impairment review, we recorded $18 and$3,278 of impairment charges to certain of our long lived assets for the three and nine months ended September 30, 2019, respectively, and $0 and $365 for the three and nine months ended September 30, 2018, respectively.

As of September 30, 2019, we had $9,767 of net property and equipment classified as held for sale and presented separately in our consolidated balance sheets primarily as a result of the transaction agreement we entered into with SNH on April 1, 2019, or theTransaction Agreement. SNH has agreed to purchase $2,243 of these assets classified as held for sale as of September 30, 2019. See Note 9 for more information regarding our communities classified as held for sale and our leases and other arrangements withSNH.

On April 1, 2019, pursuant to the Transaction Agreement, SNH purchased from us approximately $50,000 of unencumbered fixed assets and improvements related to SNH’s senior living communities leased to and operated by us, which amount wassubsequently reduced to $49,155 due to the exclusion of certain fixed assets in accordance with the Transaction Agreement. See Note 9 for more information regarding the Transaction Agreement and the transactions contemplated thereby.

Note 4. Accumulated Other Comprehensive Income

The following table details the changes in accumulated other comprehensive income, net of tax, for the nine months ended September 30, 2019:

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EquityInvestment of an

Investee Investments

AccumulatedOther

ComprehensiveIncome

Balance at January 1, 2019 $ (266) $ 2,008 $ 1,742

Unrealized gain on investments, net of tax — 864 864

Equity in unrealized gain of an investee, net of tax 90 — 90

Balance at September 30, 2019 $ (176) $ 2,872 $ 2,696

Accumulated other comprehensive income represents the unrealized gains and losses of our debt investments, net of tax, and our share of other comprehensive income of Affiliates Insurance Company, or AIC. See Note 11 for more information regarding ourarrangements with AIC.

Note 5. Income Taxes

We recognized a benefit for income taxes of $687 and a provision for income taxes of $98 for the three and nine months ended September 30, 2019, respectively. We recognized a benefit for income taxes of $263 and a provision for income taxes of $274 for thethree and nine months ended September 30, 2018, respectively. The benefit for income taxes for the three months ended September 30, 2019 is related to a decrease to our cumulative federal and state income taxes through September 30, 2019 compared to June30, 2019, and the provision for income taxes for the nine months ended September 30, 2019 is related to federal and state income taxes. The benefit for income taxes for the three months ended September 30, 2018 and the provision for income taxes for the ninemonths ended September 30, 2018 are each related to state income taxes.

We previously determined it was more likely than not that a majority of our net deferred tax assets would not be realized and concluded that a valuation allowance was required, which eliminated the majority of our net deferred tax assets recorded in ourconsolidated balance sheets. In the future, if we believe that we will more likely than not realize a benefit of these deferred tax assets, we will adjust our valuation allowance and recognize an income tax benefit, which may affect our results of operations.

Note 6. Earnings Per Share

We calculated basic earnings per common share, or EPS, for the three and nine months ended September 30, 2019 and 2018 using the weighted average number of shares of our common shares, outstanding during the periods. When applicable, diluted EPSreflects the more dilutive earnings per common share amount calculated using the two class method or the treasury stock method. The three months ended September 30, 2019 and 2018 had 122,412 and 120,792, respectively, and the nine months endedSeptember 30, 2019 and 2018 had 122,054 and 123,962, respectively, of potentially dilutive restricted unvested common shares. These shares were not included in the calculation of diluted EPS for the three and nine months ended September 30, 2019 and thethree and nine months ended September 30, 2018 because to do so would have been antidilutive.

Note 7. Fair Values of Assets and Liabilities

Our assets recorded at fair value have been categorized based on a fair value hierarchy in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures. We apply the following fair value hierarchy, which prioritizes the inputs used tomeasure fair value into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and quoted prices in inactivemarkets. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

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Recurring Fair Value Measures

The tables below present the assets measured at fair value at September 30, 2019 and December 31, 2018 categorized by the level of inputs used in the valuation of each asset.

As of September 30, 2019

Quoted Prices inActive Markets

for Identical Assets

Significant Other

Observable Inputs

SignificantUnobservable

Inputs

Description Total (Level 1) (Level 2) (Level 3)

Cash equivalents(1) $ 27,639 $ 27,639 $ — $ —

Investments: Equity investments(2)

Financial services industry 1,175 1,175 — —

Healthcare 282 282 — —

Technology 258 258 — —

Other 4,394 4,394 — —

Total equity investments 6,109 6,109 — —

Debt investments:(3) International bond fund(4) 2,676 — 2,676 —

High yield fund(5) 2,913 — 2,913 —

Industrial bonds 1,182 — 1,182 —

Technology bonds 2,193 — 2,193 —

Government bonds 9,591 9,591 — —

Energy bonds 626 — 626 —

Financial bonds 1,852 — 1,852 —

Other 774 — 774 —

Total debt investments 21,807 9,591 12,216 —

Total investments 27,916 15,700 12,216 —

Total $ 55,555 $ 43,339 $ 12,216 $ —

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As of December 31, 2018

Quoted Prices inActive Markets

for IdenticalAssets

Significant Other

ObservableInputs

Significant Unobservable

Inputs

Description Total (Level 1) (Level 2) (Level 3)

Cash equivalents(1) $ 23,390 $ 23,390 $ — $ —

Investments:

Equity investments(2) Financial services industry 1,074 1,074 — —

Healthcare 291 291 — —

Technology 174 174 — —

Other 3,927 3,927 — —

Total equity investments 5,466 5,466 — —

Debt investments(3) International bond fund(4) 2,537 — 2,537 —

High yield fund(5) 2,669 — 2,669 —

Industrial bonds 1,692 — 1,692 —

Technology bonds 2,375 — 2,375 —

Government bonds 9,791 9,791 — —

Energy bonds 595 — 595 —

Financial bonds 1,858 — 1,858 —

Other 1,268 — 1,268 —

Total debt investments 22,785 9,791 12,994 —

Total investments 28,251 15,257 12,994 —

Total $ 51,641 $ 38,647 $ 12,994 $ —

(1) Cash equivalents consist of short term, highly liquid investments and money market funds held principally for obligations arising from our self insurance programs. Cash equivalents are reported in our condensed consolidated balance sheets as cash and cash equivalents and current and long term

restricted cash. Cash equivalents include $23,310 and $19,529 of balances that are restricted at September 30, 2019 and December 31, 2018, respectively.

(2) The fair value of our equity investments is readily determinable. During the nine months ended September 30, 2019 and 2018, we received gross proceeds of $1,861 and $697, respectively, in connection with the sales of equity investments and recorded gross realized gains totaling $282 and $92,respectively, and gross realized losses totaling $55 and $5, respectively.

(3) As of September 30, 2019, our debt investments, which are classified as available for sale, had a fair value of $21,807 with an amortized cost of $19,714; the difference between the fair value and amortized cost amounts resulted from unrealized gains of $2,098, net of unrealized losses of $5. As of

December 31, 2018, our debt investments had a fair value of $22,785 with an amortized cost of $21,806; the difference between the fair value and amortized cost amounts resulted from unrealized gains of $1,276, net of unrealized losses of $297. Debt investments include $12,527 and $13,943 ofbalances that are restricted as of September 30, 2019 and December 31, 2018, respectively. At September 30, 2019, one of the investments we hold, with a fair value of $298, has been in a loss position for less than 12 months and four of the investments we hold, with a fair value of $1,148, have been in aloss position for greater than 12 months. We do not believe these investments are impaired primarily because they have not been in a loss position for an extended period of time, the financial conditions of the issuers of these investments remain strong with solid fundamentals, or we intend to hold theseinvestments until recovery, and other factors that support our conclusion that the loss is temporary. During the nine months ended September 30, 2019 and 2018, we received gross proceeds of $3,181 and $5,652, respectively, in connection with the sales of debt investments and recorded gross realizedgains totaling $7 and $9, respectively, and gross realized losses totaling $7 and $104, respectively. We record gains and losses on the sales of these investments using the specific identification method.

(4) The investment strategy of this fund is to invest principally in fixed income securities issued by non-U.S. issuers. The fund invests in such securities or investment vehicles as it considers appropriate to achieve the fund’s investment objective, which is to provide an above average rate of total return whileattempting to limit investment risk by investing in a diversified portfolio of U.S. dollar investment grade fixed income securities. There are no unfunded commitments and the investment can be redeemed weekly.

(5) The investment strategy of this fund is to invest principally in fixed income securities. The fund invests in such securities or investment vehicles as it considers appropriate to achieve the fund’s investment objective, which is to provide an above average rate of total return while attempting to limit

investment risk by investing in a diversified portfolio of primarily fixed income securities issued by companies with below investment grade ratings. There are no unfunded commitments and the investment can be redeemed weekly.

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During the nine months ended September 30, 2019, we did not change the type of inputs used to determine the fair value of any of our assets and liabilities that we measure at fair value. Accordingly, there were no transfers of assets or liabilities between levels ofthe fair value hierarchy during the nine months ended September 30, 2019. The carrying value of accounts receivable and accounts payable approximates fair value as of September 30, 2019 and December 31, 2018. The carrying value and fair value of our mortgage notes payable were $7,619 and $9,173, respectively, as ofSeptember 30, 2019 and $7,872 and $8,986, respectively, as of December 31, 2018, and are categorized in Level 3 of the fair value hierarchy in their entirety. We estimate the fair values of our mortgage notes payable by using discounted cash flow analyses andcurrently prevailing market terms as of the measurement date.

Non-Recurring Fair Value Measures We review the carrying value of our long lived assets, including our right of use assets, property and equipment and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset groupmay not be recoverable. See Note 3 for more information regarding fair value measurements related to impairments of our long lived assets we recorded. Note 8. Indebtedness

Our prior credit facility, which provided for borrowings of up to $54,000, subject to conditions, was scheduled to mature on June 28, 2019. In June 2019, we replaced our prior credit facility with our $65,000 secured revolving credit facility. Our credit facility isscheduled to mature on June 12, 2021, and, subject to the payment of an extension fee and meeting other conditions, we have an option to extend the stated maturity date of our credit facility for a one year period. Other terms of our credit facility are substantiallysimilar to those of our prior credit facility. We paid fees of $1,271 in 2019 in connection with the closing of our credit facility, which fees were deferred and are being amortized over the initial term of our credit facility. Our credit facility is available for generalbusiness purposes, including acquisitions, and provides for the issuance of letters of credit. We are required to pay interest at a rate of LIBOR plus a premium of 250 basis points per annum, or at a base rate, as defined in our credit agreement, plus 150 basispoints per annum, on borrowings under our credit facility; the effective annual interest rates as of September 30, 2019 were 4.59% and 6.75%, respectively. We are also required to pay a quarterly commitment fee of 0.35% per annum on the unused part of theavailable borrowings under our credit facility. The weighted average annual interest rate for borrowings under our credit facility was 4.69% for the nine months ended September 30, 2019. The weighted average annual interest rate for borrowings under our priorcredit facility was 4.99% and 6.51% for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, we had no borrowings under our credit facility, letters of credit issued in an aggregate amount of $3,238 and $61,762available for borrowing under our credit facility. We incurred aggregate interest expense and other associated costs related to our credit facilities of $253 and $329 for the three months ended September 30, 2019 and 2018, respectively, and $1,801 and $864 forthe nine months ended September 30, 2019 and 2018 respectively.

Our credit facility is secured by real estate mortgages on 11 senior living communities with a combined 1,245 living units owned by certain of our subsidiaries that guarantee our obligations under our credit facility. Our credit facility is also secured by thesesubsidiaries’ accounts receivable and related collateral. The amount of available borrowings under our credit facility is subject to our having qualified collateral, which is primarily based on the value of the communities securing our obligations under our creditfacility. Our credit facility provides for acceleration of payment of all amounts outstanding under our credit facility upon the occurrence and continuation of certain events of default, including a change of control of us, as defined in our credit agreement. Ourcredit agreement contains financial and other covenants, including those that restrict our ability to pay dividends or make other distributions to our stockholders in certain circumstances.

At September 30, 2019, we had seven irrevocable standby letters of credit outstanding, totaling $28,088. In September 2019, we increased, from $23,237 to $24,850, one of these letters of credit which secures our workers' compensation insurance program, andthis letter of credit is currently collateralized by approximately $21,595 of cash equivalents and $6,013 of debt and equity investments. This letter of credit currently expires in June 2020 and is automatically extended for one year terms unless notice ofnonrenewal is provided by the issuing bank prior to the end of the applicable term. We expect that our workers' compensation insurance program will require an increase in the value of this letter of credit in June 2020. At September 30, 2019, the cashequivalents collateralizing this letter of credit, including accumulated interest, were classified as short term restricted cash in our condensed consolidated balance sheets, and the debt and equity investments collateralizing this letter of credit were classified asshort term investments in our condensed consolidated balance sheets. The remaining six irrevocable

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standby letters of credit outstanding at September 30, 2019, totaling $3,238, secure certain of our other obligations. As of September 30, 2019, these letters of credit are scheduled to mature between October 2019 and September 2020 and are required to berenewed annually. The letter of credit scheduled to mature in October 2019 was renewed for the same amount for a one year term prior to its scheduled maturity. As of September 30, 2019, our obligations under these six letters of credit, totaling $3,238, remainissued and outstanding under our credit facility.

At September 30, 2019, one of our senior living communities was encumbered by a mortgage. This mortgage contains standard mortgage covenants. We recorded a mortgage discount in connection with the assumption of this mortgage note as part of ouracquisition of the community secured by this mortgage note in order to record this mortgage at its estimated fair value. We amortize this mortgage discount as an increase in interest expense until the maturity of this mortgage. This mortgage note requirespayments of principal and interest monthly until maturity. The following table is a summary of this mortgage note as of September 30, 2019:

Balance as of Contractual Stated Effective Monthly

September 30, 2019 Interest Rate Interest Rate Maturity Date Payment Lender Type

$ 7,879 (1) 6.20% 6.70% September 2032 $ 72 Federal Home Loan Mortgage Corporation

(1) Contractual principal payment excluding unamortized discount and debt issuance costs of $260.

We incurred mortgage interest expense, net of discount amortization, of $131 and $137 for the three months ended September 30, 2019 and 2018, respectively, and $395 and $909 for the nine months ended September 30, 2019 and 2018, respectively. Ourmortgage debt requires monthly payments into escrows for taxes, insurance and property replacement funds; certain withdrawals from escrows require Federal Home Loan Mortgage Corporation approval.

In February 2018, in connection with the sale of one of our senior living communities to SNH, SNH assumed a Federal National Mortgage Association mortgage note that had a principal balance of $16,776 and required interest at the contracted rate of 6.64% perannum. In connection with SNH's assumption of this debt, we recorded a gain of $543, which amount is included in gain on sale of senior living communities in our condensed consolidated statements of operations.

In June 2018, in connection with the sale of two of our senior living communities to SNH, SNH assumed a commercial lender mortgage that had a principal balance of $16,588 and required interest at the contracted rate of 5.75% per annum. In connection withSNH's assumption of this debt, we recorded a gain of $638, which amount is included in gain on sale of senior living communities in our condensed consolidated statements of operations.

As of September 30, 2019, we believe we were in compliance with all applicable covenants under our credit facility and mortgage debts.

See Note 9 for information regarding the $25,000 credit facility we obtained from SNH on April 1, 2019. As of November 5, 2019, we have not made any borrowings under this credit facility. Note 9. Leases with SNH and HCP and Management Agreements with SNH

We are SNH’s largest tenant and SNH is our largest landlord. As of September 30, 2019 and 2018, we leased 166 and 184 senior living communities from SNH, respectively. We lease senior living communities from SNH pursuant to five master leases. We alsomanage senior living communities for the account of SNH pursuant to management and pooling agreements under which we earn management fees. As of September 30, 2019 and 2018, we managed 77 and 75 senior living communities, respectively, for theaccount of SNH, pursuant to these management and pooling agreements.

The April 2019 Transaction Agreement with SNH. Among other things, the Transaction Agreement provides that, subject to certain conditions, effective as of January 1, 2020 (or January 1, 2021 if extended under the Transaction Agreement), or the ConversionTime:

• our five existing master leases with SNH for all of SNH's senior living communities that are leased by us, as well as our existing management agreements and pooling agreements with SNH for SNH's senior living communities that are

17



operated by us, will be terminated and replaced, or the Conversion, with new management agreements for all of these senior living communities, or collectively, the New Management Agreements;

• we will issue to SNH such number of our common shares as is necessary to cause SNH to own, when considered together with our common shares then owned by SNH, approximately 34% of our then outstanding common shares, and enable SNH todeclare a pro rata distribution to holders of its common shares of beneficial interest of the right to receive, and we will issue on a pro rata basis to such holders, a number of our common shares which equals approximately 51% of our then outstandingcommon shares, or, together, the Share Issuances; the noted percentage ownership amounts are post-issuance, giving effect to the Share Issuances; and

• as consideration for the Share Issuances, SNH will provide to us $75,000 of additional consideration, or, collectively with the Conversion and the Share Issuances, the Restructuring Transactions.

In accordance with ASC Topic 360, Property, Plant and Equipment, or ASC 360, the senior living communities under the five existing master leases with SNH that will terminate, as described above, meet the conditions to be classified as held for sale inreporting periods subsequent to our entry into the Transaction Agreement. As a result, as of September 30, 2019, we have classified these senior living communities as held for sale. The carrying value of these senior living communities was $(2,637), andconsisted of restricted cash of $42, prepaid and other current assets of $3,416, net property and equipment of $9,767, other intangible assets of $191, accrued real estate taxes of $14,010 and security deposits and current portion of continuing care contracts of$2,043, all of which were presented on our condensed consolidated balance sheets as assets and liabilities held for sale. These communities, while leased by us, generated income (loss) from operations before income taxes of $8,430 and $(8,246) for the threemonths ended September 30, 2019 and 2018, respectively, and $17,436 and $(19,534) for the nine months ended September 30, 2019 and 2018, respectively.

Also pursuant to the Transaction Agreement: (1) commencing February 1, 2019, the aggregate amount of monthly minimum rent payable to SNH by us under our master leases with SNH was reduced to $11,000, subject to adjustment, and no additional rent ispayable to SNH by us from such date to the Conversion Time; and (2) on April 1, 2019, SNH purchased from us $49,115 of unencumbered Qualifying PP&E (as defined in the Transaction Agreement) related to SNH's senior living communities leased andoperated by us, which amount remains subject to adjustment but will not exceed $60,000. In accordance with the Transaction Agreement, the aggregate amount of monthly minimum rent payable to SNH was reduced to $10,815 as of September 30, 2019, as aresult of dispositions, and remains subject to further adjustment.

At our annual meeting of stockholders held on June 11, 2019, our stockholders approved the Share Issuances. The Restructuring Transactions remain subject to conditions, including, among others: (1) the receipt of all Required Licenses (as defined in theTransaction Agreement) and any other third party consent or approval required for the consummation of the Restructuring Transactions; (2) the effectiveness of the registration statement on Form S-1 filed by us on September 27, 2019 with the Securities andExchange Commission, or SEC, to register our common shares to be issued pursuant to the Transaction Agreement; and (3) approval by Nasdaq of the listing of our common shares to be issued pursuant to the Transaction Agreement subject to official notice ofissuance.

If any required approval is not obtained by December 31, 2019, and the failure to obtain such approval is not the result of a breach or default by us under the Transaction Agreement, we and SNH have agreed to work in good faith to determine an alternative toallow the Restructuring Transactions to occur on January 1, 2020; provided SNH is not required to agree to any alternative that would adversely affect SNH's qualification for taxation as a REIT under the Internal Revenue Code of 1986, as amended. If we andSNH do not agree to any such alternative, and, as of January 1, 2020, the failure to obtain a required approval is the only remaining condition under the Transaction Agreement, the Conversion Time will be automatically extended to January 1, 2021. Pursuant tothe Transaction Agreement, since our stockholders approved the Share Issuances, the aggregate amount of monthly minimum rent payable to SNH under our existing master leases with SNH remains at $11,000, subject to adjustment, regardless of whether theTransaction Agreement is extended and/or is terminated. In accordance with the Transaction Agreement, this amount was reduced to approximately $10,800 as of September 30, 2019 as a result of dispositions, and remains subject to further adjustment.

In accordance with ASC Topic 842, the reduction in the monthly minimum rent payable to SNH under our existing master leases with SNH pursuant to the Transaction Agreement was determined to be a modification of these master leases, and we havereassessed the classification of these master leases based on the modified terms and determined that these master leases

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continue to be classified as long term operating leases. Accordingly, we have remeasured the lease liability and right of use asset recorded in the condensed consolidated balance sheets.

Pursuant to the Transaction Agreement, we have agreed to expand our Board of Directors within six months following the Conversion Time to add an Independent Director (as defined in our Bylaws) reasonably satisfactory to SNH.

Pursuant to the New Management Agreements, we will receive a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for our direct costs and expenses related to such communities, as well asan annual incentive fee equal to 15% of the amount by which the annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of all communities on a combined basis exceeds the target EBITDA for all communities on a combined basis forsuch calendar year, provided that in no event shall the incentive fee be greater than 1.5% of the gross revenues realized at all communities on a combined basis for such calendar year.

The New Management Agreements provide for 15 year terms, subject to our right to extend for two consecutive five year terms if we achieve certain performance targets for the combined managed communities portfolio. The New Management Agreements alsoprovide SNH with the right to terminate the New Management Agreement for any community that does not earn 90% of the target EBITDA for such community for two consecutive calendar years or in any two of three consecutive calendar years, with themeasurement period commencing January 1, 2021 (and the first termination not possible until the beginning of calendar year 2023); provided SNH may not in any calendar year terminate communities representing more than 20% of the combined revenues forall communities for the calendar year prior to such termination.

In connection with the Transaction Agreement, we entered into a credit agreement with SNH pursuant to which SNH extended to us a $25,000 line of credit, or the SNH credit facility. The SNH credit facility matures on January 1, 2020, or January 1, 2021 if theConversion Time is extended pursuant to the Transaction Agreement. The SNH credit facility provides for interest to be paid on borrowed amounts at a rate of 6% per year and is secured by real estate mortgages on six senior living communities owned bycertain of our subsidiaries that guarantee our obligations under the SNH credit facility, and certain personal property owned by those and certain other of our subsidiaries. The SNH credit facility provides for acceleration of payment of all amounts outstandingunder the SNH credit facility upon the occurrence and continuation of certain events of default, including a default by us under the Transaction Agreement and certain other agreements. The agreement governing the SNH credit facility contains covenants,including those that restrict our ability to incur debt or to pay dividends or make other distributions to our stockholders in certain circumstances. As of November 5, 2019, we have not made any borrowings under the SNH credit facility.

We incurred transaction costs of $1,330 and $10,138 related to the Transaction Agreement for the three and nine months ended September 30, 2019, respectively.

Senior Living Communities Leased from SNH. Under our master leases with SNH, we pay SNH annual rent plus percentage rent equal to 4.0% of the increase in gross revenues at the applicable senior living communities over base year gross revenues asspecified in the applicable lease. Our obligation to pay percentage rent under Lease No. 5 commenced in 2018. Different base years apply to those communities that pay percentage rent. The base year for a particular leased community is usually the first fullcalendar year after that community has become subject to that lease. As noted above, pursuant to the Transaction Agreement, no additional rent is payable to SNH by us from February 1, 2019 to the Conversion Time.

Our total annual rent payable to SNH as of September 30, 2019 and 2018 was $129,785 and $207,504, respectively, excluding percentage rent. As noted above, pursuant to the Transaction Agreement, since our stockholders approved the Share Issuances, theaggregate amount of monthly minimum rent payable to SNH under our existing master leases with SNH remains at $11,000, subject to adjustment, regardless of whether the Transaction Agreement is extended and/or is terminated. In accordance with theTransaction Agreement, this amount was reduced to approximately $10,800 as of September 30, 2019 as a result of dispositions, and remains subject to further adjustment. Our total rent expense under all of our leases with SNH was $32,375 and $51,541 for thethree months ended September 30, 2019 and 2018, respectively, and $118,647 and $154,425 for the nine months ended September 30, 2019 and 2018, respectively, which amounts included estimated percentage rent of $0 and $1,387 for the three months endedSeptember 30, 2019 and 2018, respectively, and $1,547 and $4,068 for the nine months ended September 30, 2019 and 2018, respectively. Rent expense for the three and nine months ended September 30, 2018 was net of lease inducement amortization and theamortization of the deferred gain associated with the sale and leaseback transaction with SNH in June 2016 of $1,652 and $4,956, respectively. Rent expense for the three and nine months ended September 30, 2019 was net of lease inducement amortization of$472 and $944, respectively. Pursuant to the Transaction

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Agreement, our rent payable to SNH was reduced by a total of $13,840 in aggregate for February and March 2019 and we did not pay such amount to SNH. However, as the Transaction Agreement was not entered into until April 1, 2019, our rent expense for thethree months ended March 31, 2019 was not adjusted for the rent reduction for February and March 2019. Instead, the rent reduction for February and March 2019 was determined to be a lease inducement, for which a liability for the $13,840 has been recordedas a reduction of the right of use asset on our condensed consolidated balance sheets and will be amortized as a reduction of rent expense over the remaining terms of our master leases.

As of September 30, 2019 and December 31, 2018, we had outstanding rent due and payable to SNH of $10,877 and $18,781, respectively, which amounts are included in due to related persons in our condensed consolidated balance sheets.

Under our leases with SNH, we are required to operate continuously and maintain, at our expense, the leased communities in good order and repair, including structural and non-structural components. We may request that SNH purchase certain improvements tothe leased communities in return for increases in annual rent in accordance with a formula specified in the applicable lease; however, SNH is not obligated to purchase such improvements and we are not obligated to sell them to SNH. We sold to SNH $14,749 ofimprovements to communities leased from SNH for the nine months ended September 30, 2018. As a result, the annual rent payable by us to SNH increased by approximately $1,177. Pursuant to the Transaction Agreement, the improvements we sold to SNH forthe communities we leased from SNH during the nine months ended September 30, 2019 did not result in increased rent payable by us to SNH. As of September 30, 2019, our assets held for sale included $2,243 for similar improvements to communities leasedfrom SNH that SNH has agreed to purchase from us.

In accordance with FASB ASC Topic 840, Leases, the sale and leaseback transaction we completed in June 2016 with SNH qualified for sale-leaseback accounting and we classified the related lease as an operating lease. Accordingly, the gain generated from thesale of $82,644 was deferred and was being amortized as a reduction of rent expense over the initial term of the related lease. In accordance with our adoption of Topic 842 effective January 1, 2019, we recorded through retained earnings our total deferred gainas of that date.

Since January 1, 2019, we and SNH have sold to third parties 18 SNFs located in California, Kansas, Iowa and Nebraska that SNH owned and that we leased from SNH for an aggregate sales price of approximately $29,500, excluding closing costs. As a result ofthese sales, the annual minimum rent payable to SNH by us under our master leases with SNH was reduced in accordance with the Transaction Agreement. We recorded a loss of $749 for the nine months ended September 30, 2019, as a result of settling certainliabilities associated with the sale of 15 of these 18 SNFs, which amount is included in loss (gain) on sale of senior living communities in our condensed consolidated statements of operations. We did not receive any proceeds from these sales.

In April 2019, we and SNH entered into an agreement to sell to a third party two SNFs located in Wisconsin that SNH owns and leases to us for an aggregate sales price of approximately $11,000, excluding closing costs. This sale agreement was terminated inAugust 2019. Previously, in accordance with ASC 360, these two SNFs met the conditions to be classified as held for sale. Despite the termination of this sale agreement, these SNFs remain classified as held for sale as of September 30, 2019 as a result of ourand SNH's agreement to terminate our five master leases with SNH pursuant to the Transaction Agreement and are included in the amounts disclosed above regarding our assets held for sale.

In June 2018, we and SNH sold one SNF to a third party, which had been previously leased to us, located in California for a sales price of approximately $6,500, excluding closing costs. Pursuant to the terms of our lease with SNH, as a result of this sale, ourannual rent payable to SNH decreased by 10.0% of the net proceeds that SNH received from this sale, in accordance with the terms of the applicable lease. We did not receive any proceeds from this sale.

Also in June 2018, SNH acquired an additional living unit at a senior living community we lease from SNH located in Florida which was added to the lease for that senior living community, and, as a result of this acquisition, our annual rent payable to SNHincreased by $14 in accordance with the terms of such lease.

Senior Living Communities Leased from HCP. As of September 30, 2019, we leased four senior living communities under one lease with HCP, Inc., or HCP. This lease is also a “triple net” lease which requires that we pay all costs incurred in the operation of thecommunities, including the cost of insurance and real estate taxes, maintaining the communities, and indemnifying the landlord for any liability which may arise from the operations during the lease term. Our lease with HCP contains a minimum annual escalatorof 2.0%, but not greater than 4.0%, depending on increases in certain cost of living indexes and expires on April 30, 2028 and includes one 10 year renewal option. Rent expense is recognized for actual rent paid plus or minus a straight

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line adjustment for the minimum lease escalators, which amount is not material to our condensed consolidated financial statements. The right of use asset balance has been decreased for the amount of accrued lease payments, which amounts are not material toour condensed consolidated financial statements.

The following table is a summary of our leases with SNH and with HCP as of September 30, 2019:

Future Minimum Rents for the Twelve Months Ending September 30,

Number of Properties Current Expiration Date Remaining Renewal OptionsAnnual Minimum Rent as of September

30, 2019 2020 2021 2022 2023 2024 Thereafter Total IBR Lease Liability (1)

1. Lease No. 1 for SNFs and independent and assisted livingcommunities 73 December 31, 2024 Two 15-year renewal options. $ 31,226 $ 31,226 $ 31,226 $ 31,226 $ 31,226 $ 7,806 $ — $ 163,936 4.53% $ 145,6752. Lease No. 2 for SNFs and independent and assisted livingcommunities 39 June 30, 2026 Two 10-year renewal options. 39,318 39,318 39,318 39,318 39,318 39,318 29,491 265,399 4.64% 227,483

3. Lease No. 3 for independent and assisted living communities 17 December 31, 2028 Two 15-year renewal options. 26,679 26,679 26,679 26,679 26,679 26,679 86,706 246,780 4.6% 200,6874. Lease No. 4 for SNFs and independent and assisted livingcommunities 28 April 30, 2032 Two 15-year renewal options. 25,642 25,642 25,642 25,642 25,642 25,642 168,804 322,656 4.64% 244,125

5. Lease No. 5 for independent and assisted living communities 9 December 31, 2028 Two 15-year renewal options. 6,921 6,921 6,921 6,921 6,921 6,921 22,489 64,015 4.6% 52,059

6. One HCP lease 4 April 30, 2028 One 10-year renewal option. 2,839 2,896 2,948 3,005 3,073 3,134 8,382 26,277 4.6% 21,555

Totals 170 $ 132,625 $ 132,682 $ 132,734 $ 132,791 $ 132,859 $ 109,500 $ 315,872 $ 1,089,063 $ 891,584

(1) Total lease liability does not include the lease liability related to our headquarters of $1,675.

Senior Living Communities Managed for the Account of SNH and its Related Entities. As of September 30, 2019 and 2018, we managed 77 and 75 senior living communities, respectively, for the account of SNH. We earned base management fees of $3,763 and$3,597 from the senior living communities we managed for the account of SNH for the three months ended September 30, 2019 and 2018, respectively, and $11,284 and $10,486 for the nine months ended September 30, 2019 and 2018, respectively. In addition,we earned fees for our management of capital expenditure projects at the communities we managed for the account of SNH of $221 and $344 for the three months ended September 30, 2019 and 2018, respectively, and $568 and $714 for the nine months endedSeptember 30, 2019 and 2018, respectively. These amounts are included in management fee revenue in our condensed consolidated statements of operations. Pursuant to the Transaction Agreement, we and SNH have agreed to replace our long term managementand pooling agreements with the New Management Agreements, subject to certain conditions and the receipt of various approvals.

During the first quarter of 2018, we sold two senior living communities pursuant to a transaction agreement we entered with SNH in November 2017, or the 2017 transaction agreement, for an aggregate sales price of $41,917. These two senior livingcommunities had an aggregate carrying value of $19,425, net of mortgage debt and premiums of $17,356, of which the principal amount of $16,776 was assumed by SNH. These transactions are accounted for in accordance with ASU No. 2014-09, in particularASC Topic 610 and related ASUs, effective with the adoption of these new ASUs on January 1, 2018. Under these new ASUs, the income recognition for real estate sales is largely based on the transfer of control rather than continuing involvement in theownership of the real estate. We recorded a gain of $0 and $5,684 for the three and nine months ended September 30, 2018, respectively, as a result of the sale of these two senior living communities, which gain is included in loss (gain) on sale of senior livingcommunities in our condensed consolidated statements of operations.

In June 2018, we sold to SNH the remaining two senior living communities pursuant to the 2017 transaction agreement for an aggregate sales price of $23,300. These two senior living communities had an aggregate carrying value of $5,163, net of mortgage debtand premiums of $17,226, of which the principal amount of $16,588 was assumed by SNH. These transactions are accounted for in accordance with ASU No. 2014-09, in particular ASC Topic 610 and related ASUs, effective with our adoption of these newASUs on January 1, 2018. We recorded a gain of $0 and $1,549 for the three and nine months ended September 30, 2018, respectively, as a result of the sale of these two senior living communities, which gain is included in loss (gain) on sale of senior livingcommunities in our condensed consolidated statements of operations.

We now manage for SNH’s account, pursuant to management and pooling agreements, the senior living communities that we sold to SNH pursuant to the 2017 transaction agreement.

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We also provide certain other services to residents at some of the senior living communities we manage for the account of SNH, such as rehabilitation services. At senior living communities we manage for the account of SNH where we provide rehabilitationservices on an outpatient basis, the residents, third party payers or government programs pay us for those rehabilitation services. At senior living communities we manage for the account of SNH where we provide both inpatient and outpatient rehabilitationservices, SNH generally pays us for these services and charges for such services are included in amounts charged to residents, third party payers or government programs. We earned revenues of $1,478 and $1,584 for the three months ended September 30, 2019and 2018, respectively, and $4,667 and $4,944 for the nine months ended September 30, 2019 and 2018, respectively, for rehabilitation services we provided at senior living communities we manage for the account of SNH and that are payable by SNH. Theseamounts are included in senior living revenue in our condensed consolidated statements of operations.

In order to accommodate certain requirements of New York healthcare licensing laws, a part of the senior living community SNH owns, and we manage, located in Yonkers, New York is subleased by a subsidiary of SNH to D&R Yonkers LLC. As ofSeptember 30, 2019, SNH’s president and chief operating officer and its chief financial officer and treasurer were the members of D&R Yonkers LLC; until they became the members in September 2019, the members previously were SNH’s former president andchief operating officer and our former Executive Vice President, Chief Financial Officer and Treasurer during the remainder of the periods presented. We treat the part of this senior living community that we manage for D&R Yonkers LLC and the part of thissenior living community that we manage for the account of SNH as one senior living community. We earned management fees of $69 and $68 for the three months ended September 30, 2019 and 2018, respectively, and $208 for each of the nine months endedSeptember 30, 2019 and 2018, respectively, under this management arrangement with D&R Yonkers LLC, which amounts are included in management fee revenue in our condensed consolidated statements of operations.

Note 10. Business Management Agreement with RMR LLC

The RMR Group LLC, or RMR LLC, provides us certain services pursuant to a business management agreement that we require to operate our business and which relate to various aspects of our business. Pursuant to our business management agreement withRMR LLC, we incurred aggregate fees and costs payable to RMR LLC of $2,349 and $2,319 for the three months ended September 30, 2019 and 2018, respectively, and $7,122 and $6,955 for the nine months ended September 30, 2019 and 2018, respectively,for these services, which include reimbursements for our share of RMR LLC’s costs for providing our internal audit function. These amounts are included in general and administrative expenses in our condensed consolidated statements of operations.

For further information about our relationship with RMR LLC, see our Annual Report.

Note 11. Related Person Transactions

We have relationships and historical and continuing transactions with SNH, RMR LLC, ABP Trust, AIC and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and which have trustees,directors and officers who are also our Directors or officers.

SNH. SNH is currently one of our largest stockholders, owning, as of September 30, 2019, 423,500 of our common shares, or approximately 8.3% of our outstanding common shares. We lease from, and manage for the account of, SNH a majority of the seniorliving communities we operate. RMR LLC provides management services to both us and SNH and Adam D. Portnoy, the Chair of our Board of Directors and one of our Managing Directors, also serves as a managing trustee of SNH. SNH’s executive officersare officers of RMR LLC. Our Secretary also serves as a managing trustee and the secretary of SNH. On April 1, 2019, we entered into the Transaction Agreement with SNH, pursuant to which we agreed to modify our existing business arrangements with SNH,subject to certain conditions and the receipt of various approvals. See Notes 1 and 9 for more information regarding our relationships, agreements and transactions with SNH and certain parties related to it and us.

RMR LLC. We have an agreement with RMR LLC to provide management services to us. See Note 10 for more information regarding our management agreement with RMR LLC. Adam Portnoy is a managing director, president and chief executive officer ofThe RMR Group Inc., or RMR Inc., and is an executive officer and employee of RMR LLC; RMR Inc. is the managing member of RMR LLC. Our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurerare officers and employees of RMR LLC. Our Secretary is a managing director, executive vice president, general counsel and secretary of RMR Inc. and is an officer and employee of RMR LLC.

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ABP Trust. ABP Acquisition LLC, a subsidiary of ABP Trust is our largest stockholder, owning, as of September 30, 2019, 1,799,999 of our common shares, or approximately 35.4% of our outstanding common shares. Adam Portnoy is the sole trustee, anofficer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc. Our Secretary is also an officer of ABP Trust.

We lease our headquarters from another subsidiary of ABP Trust. Our rent expense for our headquarters, including utilities and real estate taxes that we pay as additional rent, was $467 and $420 for the three months ended September 30, 2019 and 2018,respectively, and $1,438 and $1,299 for the nine months ended September 30, 2019 and 2018, respectively. The adoption of ASC Topic 842 resulted in the recognition of a lease liability and right of use asset, which amount was $1,675 for each of the leaseliability and the right of use asset as of September 30, 2019, with respect to our headquarters lease, using an IBR of 4.4%. The right of use asset balance has been reduced by the amount of accrued lease payments, which have been deemed not material to ourcondensed consolidated financial statements.

AIC. We, ABP Trust, SNH and four other companies to which RMR LLC provides management services currently own AIC, an Indiana insurance company, in equal amounts. We and the other AIC shareholders historically participated in a combined propertyinsurance program arranged and reinsured in part by AIC. The policies under that program expired on June 30, 2019, and we and the other AIC shareholders elected not to renew the AIC property insurance program; we have instead purchased standaloneproperty insurance coverage from unrelated third party insurance providers.

As of September 30, 2019 and December 31, 2018, our investment in AIC had a carrying value of $9,340 and $8,633, respectively. These amounts are presented as equity investment of an investee in our condensed consolidated balance sheets. We recognizedincome related to our investment in AIC, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of operations. Our other comprehensive income includes our proportionate part of unrealized gains (losses) onfixed income securities that are owned by AIC related to our investment in AIC.

AIC is in the process of dissolving. In connection with its dissolution, we expect to receive a capital distribution in the fourth quarter of 2019.

Retirement and Separation Arrangements. In connection with their respective retirement or separation, we entered into retirement and separation agreements with our former officers, Bruce J. Mackey Jr., R. Scott Herzig and Richard A. Doyle. Pursuant to theseagreements, we made cash payments of $600 and $510 to Mr. Mackey and Mr. Herzig, respectively, in January 2019 and made a cash payment of $325 to Mr. Doyle in June 2019. Additionally, we and RMR LLC made combined quarterly release payments toMr. Mackey, in cash, totaling $138 and $414 for the three and nine months ended September 30, 2019, respectively, and made combined monthly transition payments to Mr. Mackey and Mr. Doyle, in cash, totaling $60 and $130 for the three and nine monthsended September 30, 2019, respectively. We paid 80% and RMR LLC paid 20% of these combined release and transition payments. Our arrangements with Mr. Mackey and Mr. Doyle meet the criteria in FASB ASC Topic 420, Exit or Disposal CostObligations, or ASC Topic 420, and, as a result, we recorded the full severance cost for Mr. Mackey of $1,160 during the fourth quarter of 2018 and we recorded the full severance cost for Mr. Doyle of $568 during the second quarter of 2019. The terms of theseretirement and separation agreements are further described in our Annual Report and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, respectively.

For further information about these and other such relationships and certain other related person transactions, see our Annual Report.

Note 12. Legal Proceedings and Claims

We have been, are currently, and expect in the future to be involved in claims, lawsuits, and regulatory and other government audits, investigations and proceedings arising in the ordinary course of our business, some of which may involve material amounts.Also, the defense and resolution of these claims, lawsuits, and regulatory and other government audits, investigations and proceedings may require us to incur significant expense. We account for claims and litigation losses in accordance with FASB ASC Topic450, Contingencies. Under FASB ASC Topic 450, loss contingency provisions are recorded for probable and estimable losses at our best estimate of a loss or, when a best estimate cannot be made, at our estimate of the minimum loss. These estimates are oftendeveloped prior to knowing the amount of the ultimate loss, require the application of considerable judgment and are refined as additional information becomes known. Accordingly, we are often initially unable to develop a best estimate of loss and therefore theestimated minimum loss amount, which could be zero, is recorded; then, as information

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becomes known, the minimum loss amount is updated, as appropriate. A minimum or best estimate amount may be increased or decreased when events result in a changed expectation.

As previously disclosed, in July 2017, as a result of our compliance program to review records related to our Medicare billing practices, we became aware of certain potential inadequate documentation and other issues at one of our leased SNFs. This compliancereview was not initiated in response to any specific complaint or allegation, but was a review of the type that we periodically undertake to test our compliance with applicable Medicare billing rules. As a result of these discoveries, we made a voluntary disclosureof deficiencies to the U.S. Department of Health and Human Services Office of the Inspector General, or the OIG, pursuant to the OIG's Provider Self-Disclosure Protocol. We submitted supplemental disclosures related to this matter to the OIG in December2017 and March 2018. In June 2019, we settled this matter with the OIG without admitting any liability and paid $1,139 to the OIG in exchange for a customary release.

We previously accrued a liability of $1,139 related to this matter, all of which was paid at September 30, 2019. At December 31, 2017, we accrued an estimated revenue reserve of $888 for historical Medicare payments we received and expected to repay as aresult of this matter, which amount we reduced to $759 in March 2018. In addition, at December 31, 2017, we recorded an aggregate $658 expense for additional costs we incurred as a result of this matter, including estimated OIG imposed penalties of $444,which amount we reduced to $594 in March 2018, including a reduction in estimated OIG imposed penalties to $380, and recorded additional expenses of $55, $20 and $13 for further costs related to this matter for the three months ended March 31, 2018, June30, 2018 and September 30, 2018, respectively. We did not recognize any expenses related to this matter in 2019.

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

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report.

GENERAL INDUSTRY TRENDS

We believe that the primary market for senior living services is individuals age 80 and older, and, according to U.S. Census data, that group is projected to be among the fastest growing age cohort in the United States over the next 20 years. Also, as a result ofmedical advances, seniors are living longer and more active lifestyles. Due to these demographic trends, we expect the demand for senior living services to increase in future years.

Despite this trend, future economic downturns, softness in the U.S. housing market, higher levels of unemployment among our residents' and potential residents' family members, lower levels of consumer confidence, stock market volatility and/or changes indemographics could adversely affect the ability of seniors to afford our resident charges. Prospective residents who plan to use the proceeds from the sale of their homes to cover the cost of senior living services seem to be especially affected by cyclical factorsaffecting the housing market. However, any appreciation in U.S. housing values may not result in increased demand for our services. Although many of the services that we provide to residents are needs driven, economic circumstances and seniors’ preferencesfor housing and healthcare services and delivery methods, among other reasons, are key factors when making decisions as to whether to relocate to a senior living community.

For the past few years, increased access to capital and continued low interest rates appear to have encouraged increased senior living development, particularly in areas where existing senior living communities have historically experienced high occupancies.This has resulted in a significant increase in new senior living community inventory entering the market in recent years. The new senior living community inventory has increased competitive pressures on us, particularly in certain of our geographic markets, andwe expect these challenges to continue for at least the next few years. We expect to have continuing challenges to maintain or increase occupancies and charges at our senior living communities. These challenges are currently negatively impacting our revenues,cash flows and results from operations and we expect these challenges to continue at least through the end of 2020.

Another factor which appears to have a negative impact on us and our industry is that healthcare services that are extending lives and periods of occupancy at senior living communities are also allowing some potential residents to defer the time when theyrequire certain services available at our communities or forgo moving to senior living communities altogether. We do not currently believe that the increased stays that may result from medical advances and healthcare services will be completely offset bydeferred entry, but we think this is a contributing factor to the challenges in growing occupancy.

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In addition, low unemployment in the United States combined with a competitive labor market and, in certain jurisdictions, legislation and regulations that increase the minimum wage, are increasing our employment costs, including salaries, wages and benefits,such as health care benefit coverage, for our employees, which will increase our operating expenses and may negatively impact our financial results. We have incurred increased labor costs as a result of these labor market conditions. In response, we haveincreased our investments in our workforce and we are continuing to focus on reducing our employee turnover level by enhancing our competitiveness in the marketplace with respect to cash compensation and other benefits.

The senior living and healthcare industries are subject to extensive and frequently changing federal, state and local laws and regulations. These laws and regulations vary by jurisdiction but may address, among other things, licensure, personnel training, staffingratios, types and quality of medical care, physical facility requirements, government healthcare program participation, the definition of "fraud and abuse", payment rates for resident services and confidentiality of patient records. We incur significant costs tocomply with these laws and regulations and these laws and regulations may result in our having to repay payments we received for services we provided and to pay penalties, fines and interest, which amounts can be significant. See Note 12 to our condensedconsolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. For further information regarding government regulations and reimbursements, including possible changes and related legislative and other reform efforts, see "—Our Revenues" in Part I, Item 2 of this Quarterly Report on Form 10-Q.

TRANSACTION AGREEMENTS WITH SNH AND REFINANCED CREDIT FACILITY

On April 1, 2019, we entered into the Transaction Agreement pursuant to which we and SNH agreed to modify our existing business arrangements. Pursuant to the Transaction Agreement, effective as of the Conversion Time, our existing leases, managementagreements and pooling agreements with SNH will be terminated and replaced with the New Management Agreements, we will issue our common shares to SNH and SNH’s shareholders, which, after giving effect to those issuances, will result in SNH owningapproximately 34% and SNH’s shareholders owning approximately 51% of our then outstanding common shares and at that time, SNH will also pay us $75 million as consideration for the Share Issuances. At our 2019 annual meeting of stockholders on June 11,2019, our stockholders approved the Share Issuances which satisfied one of the conditions to the restructuring of our business arrangements with SNH. On September 27, 2019, we filed a registration statement on Form S-1 with the SEC to register the commonshares to be issued pursuant to the Transaction Agreement. We expect this registration statement to be declared effective by the SEC prior to December 31, 2019. Also pursuant to the Transaction Agreement, in addition to other transactions: (1) commencingFebruary 1, 2019, the aggregate amount of monthly minimum rent payable to SNH by us under our master leases was reduced $11.0 million, subject to adjustment, and no additional rent is payable to SNH by us from such date to the Conversion Time; (2) onApril 1, 2019, SNH purchased from us approximately $49.1 million of unencumbered fixed assets and improvements related to SNH's senior living communities leased and operated by us; and (3) on April 1, 2019 we entered into the SNH credit facility, subjectto a one year extension. These transactions are subject to conditions including, among others, the receipt of certain regulatory approvals. See Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form10-Q for further information about these transactions and the conditions to these transactions. We cannot be sure that any or all such conditions will be satisfied or that these pending transactions will be completed.

On June 12, 2019, we entered into a second amended and restated credit agreement with Citibank, N.A., as administrative agent and lender, and a syndicate of other lenders, pursuant to which we obtained a $65.0 million secured revolving credit facility that isavailable for general business purposes. Our credit facility replaced our prior credit facility, which was scheduled to expire on June 28, 2019. On June 24, 2019 and June 28, 2019, we repaid, in aggregate, approximately $51.5 million of outstanding borrowingsunder our credit facility. As of September 30, 2019 and November 5, 2019, we have no borrowings outstanding under our credit facility. For more information regarding our credit agreement, our credit facility and our prior credit facility, see Note 8 to ourcondensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information about our credit facility.

In November 2017, we entered into a transaction agreement with SNH pursuant to which we agreed to sell six senior living communities to SNH for $104.4 million, including SNH’s assumption of approximately $33.5 million of mortgage debt principal securedby certain of these senior living communities, excluding closing costs. In December 2017, January 2018, February 2018 and June 2018, we sold to, and began managing for the account of, SNH, these senior living communities, and concurrently with those sales,we and SNH entered management agreements for each of these senior living communities and two new pooling arrangements with SNH.

For more information regarding our leases and management agreements and other transactions with SNH, see Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS

As of September 30, 2019, we have two operating segments: senior living and rehabilitation and wellness. In the senior living segment, we operate for our own account or manage for the account of others independent living communities, assisted livingcommunities and SNFs and provide housing and services to the residents at those communities and SNFs. In the rehabilitation and wellness operating segment we provide therapy services, including physical, occupational, speech and other specialized therapyservices, in the inpatient setting and in outpatient clinics. We have determined that our two operating segments meet the aggregation criteria as prescribed under FASB ASC Topic 280, Segment Reporting, and we have therefore determined that our business iscomprised of one reportable segment, senior living. All of our operations and assets are located in the United States, except for the operations of our Cayman Islands organized captive insurance company subsidiary, which participates in our workers’compensation, professional and general liability and certain automobile insurance programs.

Key Statistical Data For the Three Months Ended September 30, 2019 and 2018:

The following tables present a summary of our operations for the three months ended September 30, 2019 and 2018:

Three Months Ended September 30,

(dollars in thousands, except average monthly rate) 2019 2018 Change %/bps

Change

Senior living revenue $ 270,047 $ 272,701 $ (2,654) (1.0)%

Management fee revenue 4,053 4,009 44 1.1 %

Reimbursed costs incurred on behalf of managed communities 80,909 72,200 8,709 12.1 %

Total revenues 355,009 348,910 6,099 1.7 %

Senior living wages and benefits (147,048) (142,035) 5,013 3.5 %

Other senior living operating expenses (78,209) (76,761) 1,448 1.9 %

Costs incurred on behalf of managed communities (80,909) (72,200) 8,709 12.1 %

Rent expense (33,169) (52,282) (19,113) (36.6)%

General and administrative expenses (20,094) (18,965) 1,129 6.0 %

Depreciation and amortization expense (2,818) (9,137) (6,319) (69.2)%

Loss on sale of senior living communities (749) (62) 687 1,108.1 %

Long lived asset impairment (18) — 18 100.0 %

Interest, dividend and other income 414 192 222 115.6 %

Interest and other expense (384) (466) (82) (17.6)%

Unrealized gain on equity investments 148 133 15 11.3 %

Realized (loss) gain on sale of debt and equity investment, net of tax (9) 2 (11) (550.0)%

Benefit for income taxes 687 263 424 161.2 %

Equity in earnings of an investee, net of tax 83 826 (743) (90.0)%

Net loss $ (7,066) $ (21,582) $ 14,516 67.3 %

Total number of communities (end of period):

Owned and leased communities 190 208 (18) (8.7)%

Managed communities 77 75 2 2.7 %

Number of total communities 267 283 (16) (5.7)%

Total number of living units (end of period):

Owned and leased living units (1) 20,948 22,290 (1,342) (6.0)%

Managed living units (1) 10,168 9,515 653 6.9 %

Number of total living units (1) 31,116 31,805 (689) (2.2)%

Owned and leased communities:

Occupancy % (1)(2) 82.9% 82.0% n/a 90 bps

Average monthly rate (2)(3) $ 4,654 $ 4,701 $ (47) (1.0)%

Percent of senior living revenue from Medicaid 11.7% 12.6% n/a (90) bps

Percent of senior living revenue from Medicare 10.0% 10.5% n/a (50) bps

Percent of senior living revenue from private and other sources 78.3% 76.9% n/a 140 bps

(1) Includes only living units categorized as in service. As a result, the number of living units may change from period to period for reasons other than the acquisition or disposition of senior living communities.(2) Occupancy and average monthly rate for the three months ended September 30, 2018 include data for the senior living communities that were sold to SNH during such period as owned until the time of sale and as managed from the time of sale through the end of such period.(3) Average monthly rate is calculated by taking the average daily rate, which is defined as total operating revenues for senior living services, divided by occupied units during the period, and multiplying it by 30 days.

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Comparable communities (senior living communities that we have operated continuously since July 1, 2018):

Three Months Ended September 30,

(dollars in thousands, except average monthly rate) 2019 2018 Change %/bpsChange

Senior living revenue $ 257,493 $ 253,620 $ 3,873 1.5 %

Management fee revenue 3,627 3,666 (39) (1.1)%

Senior living wages and benefits 137,816 128,946 8,870 6.9 %

Other senior living operating expenses 74,025 71,057 2,968 4.2 %


Owned and leased communities 190 190 — — %

Managed communities 75 75 — — %

Number of total communities 265 265 — — %


Owned and leased living units (1) 20,948 21,048 (100) (0.5)%


Number of total living units (1) 30,559 30,563 (4) — %

Owned and leased communities (1):

Occupancy % (1) 83.2% 82.2% n/a 100 bps

Average monthly rate (2) $ 4,601 $ 4,606 $ (5) (0.1)%

Percent of senior living revenue from Medicaid 9.4% 9.1% n/a 30 bps


Percent of senior living revenue from private and other sources 81.2% 81.2% n/a — bps

(1) Includes only living units categorized as in service. As a result, the number of living units may change from period to period for reasons other than the acquisition or disposition of senior living communities.(2) Average monthly rate is calculated by taking the average daily rate, which is defined as total operating revenues for senior living services, divided by occupied units during the period, and multiplying it by 30 days.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The following is a discussion of our operating results for the three months ended September 30, 2019 compared to the three months ended September 30, 2018.

Senior living revenue. Senior living revenue decreased approximately 1.0% due to the sales of 18 SNFs to third parties during the second and third quarters of 2019, partially offset by increases in occupancy and in revenues from ancillary services, such asrehabilitation and wellness services. The 1.5% increase in senior living revenue at the communities that we have operated continuously since July 1, 2018 was primarily due to an increase in occupancy. Management fee revenue. Management fee revenue increased by 1.1% primarily due to an increase in the number of managed communities to 77 from 75, partially offset by decreases in occupancy and average monthly rates for rooms to residents who payprivately for services at the communities that we have operated continuously since July 1, 2018.

Reimbursed costs incurred on behalf of managed communities. Reimbursed costs incurred on behalf of managed communities increased by 12.1% primarily due to an increase in the number of managed communities to 77 from 75, as well as an increase insalaries and wages at managed communities attributable to the competitive labor market.

Senior living wages and benefits. Senior living wages and benefits increased by 3.5% primarily due to an increase in our salaries and wages of $5.8 million at the communities that we have operated continuously since July 1, 2018 attributable to the competitivelabor market and, in certain jurisdictions, legislation and regulations that increased the minimum wage. In addition, outside labor costs increased $1.7 million at the communities that we have operated continuously since July 1, 2018 primarily due to thetransition of the SNFs owned by SNH and leased to us, which we and SNH have agreed to sell. These increases were partially offset by the sales of 18 SNFs to third parties during the second and third quarters of 2019. The 6.9% increase in senior living wagesand benefits at the communities that we have operated continuously since July 1, 2018 is primarily due to an increase in our salaries and wages attributable to our continued investment in our employees, including our focus on reducing our employee turnoverlevel through market competitive cash compensation and other benefits, in conjunction with increased outside labor costs due to the transition of the SNFs that SNH owns and leases to us, which we and SNH have agreed to sell.

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Other senior living operating expenses. Other senior living operating expenses, which include utilities, housekeeping, dietary, repairs and maintenance, insurance and community level administrative costs, increased by 1.9% due to an increase in certaininsurance costs and certain consulting and other purchase services expenses, partially offset by the sales of 18 SNFs to third parties during the second and third quarters of 2019. The 4.2% increase in other senior living operating expenses at the communities thatwe have operated continuously since July 1, 2018 was primarily due to an increase of $0.6 million in certain insurance costs as a result of increased rates attributable to the property and casualty insurance market and certain consulting and other purchasedservices expenses incurred in connection with non-recurring costs associated with our strategic investments to enhance efficiencies in and benefits from our purchasing of services.

Rent expense. Rent expense decreased by 36.6% due to the reduction in our aggregate minimum monthly rent payable to SNH commencing February 1, 2019 pursuant to the Transaction Agreement.

General and administrative expenses. General and administrative expenses increased by 6.0% primarily due to $1.3 million of transaction costs incurred in connection with the Transaction Agreement. Depreciation and amortization expense. Depreciation and amortization expense decreased by 69.2% due to the sale of approximately $90.8 million of fixed assets and improvements to SNH during the nine months ended September 30, 2019 and the sales of 18SNFs to third parties during the second and third quarters of 2019.

Loss on sale of senior living communities. A loss on sale of senior living communities of $0.7 million was recorded during the three months ended September 30, 2019 in connection with the sale of 15 SNFs to a third party during the third quarter of 2019. A losson sale of senior living communities of $0.1 million was recorded primarily in connection with the sale of one senior living community to a third party in June 2018.

Long lived asset impairment. For the three months ended September 30, 2019, we recorded non-cash charges related to long lived asset impairments of $0.02 million to reduce the carrying value of certain of our long lived assets to their estimated fair values. Interest, dividend and other income. Interest, dividend and other income increased by 115.6% due to the combination of higher stated interest rates and increased cash balances invested during the period. Interest and other expense. Interest and other expense decreased by 17.6% for the three months ended September 30, 2019 compared to the same period in 2018 primarily due to decreased borrowings under our credit facility compared to our prior credit facility.

Unrealized gain on equity investments. Unrealized gain on equity investments represents adjustments made to our investments in equity securities to record amounts to fair value.

Realized (loss) gain on sale of debt and equity investments, net of tax. Realized (loss) gain on sale of debt and equity investments represents our realized gain (loss) on investments, net of applicable taxes.

Benefit for income taxes. For the three months ended September 30, 2019 and 2018, we recognized a benefit for income taxes of $0.7 million and $0.3 million, respectively. The benefit for income taxes for the three months ended September 30, 2019 is related toa decrease in our cumulative federal and state income taxes through September 30, 2019 compared to June 30, 2019. The benefit for income taxes for the three months ended September 30, 2018 is due to our state income taxes. Equity in earnings of an investee, net of tax. Equity in earnings of an investee represents our proportionate share of earnings from our investment in AIC.

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Key Statistical Data For the Nine Months Ended September 30, 2019 and 2018:

The following tables present a summary of our operations for the nine months ended September 30, 2019 and 2018:


(dollars in thousands, except average monthly rate) 2019 2018 Change %/bps

Change



Reimbursed costs incurred on behalf of managed communities 232,733 208,009 24,724 11.9 %

Total revenues 1,066,271 1,037,525 28,746 2.8 %

Senior living wages and benefits (435,927) (418,917) 17,010 4.1 %

Other senior living operating expenses (227,553) (226,302) 1,251 0.6 %

Costs incurred on behalf of managed communities (232,733) (208,009) 24,724 11.9 %

Rent expense (120,973) (156,640) (35,667) (22.8)%

General and administrative expenses (67,144) (57,405) 9,739 17.0 %

Depreciation and amortization expense (13,924) (26,974) (13,050) (48.4)%

(Loss) gain on sale of senior living communities (850) 7,131 (7,981) (111.9)%

Long lived asset impairment (3,278) (365) 2,913 798.1 %

Interest, dividend and other income 985 577 408 70.7 %

Interest and other expense (2,196) (1,773) 423 23.9 %

Unrealized gain on equity investments 476 127 349 (274.8)%

Realized gain (loss) on sale of debt and equity investment, net of tax 227 (8) 235 2,937.5 %

Provision for income taxes (98) (274) (176) (64.2)%

Equity in earnings of an investee, net of tax 617 882 (265) (30.0)%

Net loss $ (36,100) $ (50,425) $ 14,325 (28.4)%


Owned and leased communities 190 208 (18) (8.7)%

Managed communities 77 75 2 2.7 %

Number of total communities 267 283 (16) (5.7)%


Owned and leased living units (1) 20,948 22,290 (1,342) (6.0)%



Owned and leased communities:

Occupancy % (1) (2) 83.0% 81.7% n/a 130 bps

Average monthly rate (2) (3) $ 4,739 $ 4,735 $ 4

Percent of senior living revenue from Medicaid 12.0% 12.3% n/a (30) bps


Percent of senior living revenue from private and other sources 77.4% 76.8% n/a 60 bps

(1) Includes only living units categorized as in service. As a result, the number of living units may change from period to period for reasons other than the acquisition or disposition of senior living communities.(2) Occupancy and average monthly rate for the nine months ended September 30, 2018 include data for the senior living communities that were sold to SNH during such period as owned until the time of sale and as managed from the time of sale through the end of such period.(3) Average monthly rate is calculated by taking the average daily rate, which is defined as total operating revenues for senior living services, divided by occupied units during the period, and multiplying it by 30 days.

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Comparable communities (senior living communities that we have operated continuously since January 1, 2018):


(dollars in thousands, except average monthly rate) 2019 2018 Change %/bpsChange



Senior living wages and benefits 399,404 376,648 22,756 6.0 %

Other senior living operating expenses 212,089 207,442 4,647 2.2 %


Owned and leased communities 190 190 — — %

Managed communities 70 70 — — %

Number of total communities 260 260 — — %


Owned and leased living units (1) 20,948 21,048 (100) (0.5)%



Owned and leased communities (1):

Occupancy % (1) 83.3% 81.9% n/a 140 bps

Average monthly rate (2) $ 4,661 $ 4,644 $ 17 0.4 %

Percent of senior living revenue from Medicaid 9.2% 8.8% n/a 40 bps


Percent of senior living revenue from private and other sources 81.3% 81.3% n/a — bps

(1) Includes only living units categorized as in service. As a result, the number of living units may change from period to period for reasons other than the acquisition or disposition of senior living communities.(2) Average monthly rate is calculated by taking the average daily rate, which is defined as total operating revenues for senior living services, divided by occupied units during the period, and multiplying it by 30 days.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The following is a discussion of our operating results for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.

Senior living revenue. Senior living revenue increased approximately 0.4% due to increases in occupancy and in revenues from ancillary services, such as rehabilitation and wellness services, partially offset by the sales during the first half of 2018 of four seniorliving communities to SNH, which communities we now manage for SNH's account, as well as the sales of 18 SNFs to third parties during the second and third quarters of 2019. The 1.9% increase in senior living revenue at the communities that we haveoperated continuously since January 1, 2018 was primarily due to an increase in occupancy. Management fee revenue. Management fee revenue increased by 5.7% due to an increase in the number of managed communities to 77 from 75, partially offset by decreases in occupancy and average monthly rates for rooms to residents who pay privately forservices at the communities that we have operated continuously since January 1, 2018.

Reimbursed costs incurred on behalf of managed communities. Reimbursed costs incurred on behalf of managed communities increased by 11.9% due to an increase in the number of managed communities to 77 from 75, as well as an increase in our salaries andwages at managed communities at the communities we have operated continuously since January 1, 2018 attributable to the competitive labor market. Senior living wages and benefits. Senior living wages and benefits increased by 4.1% primarily due to an increase in our salaries and wages of $15.8 million at the communities that we have operated continuously since January 1, 2018 attributable to thecompetitive labor market and, in certain jurisdictions, legislation and regulations that increased the minimum wage. In addition, outside labor costs have increased $6.0 million at the communities that we have operated continuously since January 1, 2018primarily due to the transition of the SNFs that SNH owns and leases to us, which we and SNH have agreed to sell. These increases were partially offset by a decrease in employee health insurance expense, sales during the first half of 2018 of four senior livingcommunities to SNH, which communities we now manage for SNH's account, as well as one SNF to a third party, and the sales of 18 SNFs to third parties during the second and third quarters of 2019. The 6.0% increase in senior living wages and benefits at thecommunities that we have operated continuously since January 1, 2018 is due an increase in our

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salaries and wages attributable to our continued investment in our employees, including our focus on reducing our employee turnover level through market competitive cash compensation and other benefits, in conjunction with increased outside labor costs dueto the transition of the SNFs that SNH owns and leases to us, which we and SNH have agreed to sell, partially offset by a decrease in employee health insurance expense. Other senior living operating expenses. Other senior living operating expenses, which include utilities, housekeeping, dietary, repairs and maintenance, insurance and community level administrative costs, increased by 0.6% primarily due to increases in repairsand maintenance and certain insurance costs and certain consulting and other purchased services expenses, partially offset by the sales during the first half of 2018 of four senior living communities to SNH, which communities we now manage for SNH'saccount, as well as one SNF to a third party, and the sales of 18 SNFs to third parties during the second and third quarters of 2019. The 2.2% increase in other senior living operating expenses at the communities that we have operated continuously since January1, 2018 was primarily due to increases in repairs and maintenance and certain insurance costs as a result of increased rates attributable to the property and casualty insurance market and certain consulting and other purchased services expenses incurred inconnection with non-recurring costs associated with our strategic investments to enhance efficiencies in and benefits from our purchasing of services.

Rent expense. Rent expense decreased by 22.8% due to the reduction in our aggregate minimum monthly rent payable to SNH commencing February 1, 2019 pursuant to the Transaction Agreement.

General and administrative expenses. General and administrative expenses increased by 17.0% primarily due to $10.1 million of transaction costs incurred in connection with the Transaction Agreement. Depreciation and amortization expense. Depreciation and amortization expense decreased by 48.4% due to the sale of approximately $90.8 million of fixed assets and improvements to SNH during the nine months ended September 30, 2019, the sales during thefirst half of 2018 of four senior living communities to SNH, which communities we now manage for SNH's account, as well as one SNF to a third party and the sales of 18 SNFs to third parties during the second and third quarters of 2019.

Loss (gain) on sale of senior living communities. A loss on sale of senior living communities of $0.9 million was recorded during the nine months ended September 30, 2019, primarily in connection with the sales of 18 SNFs to third parties during the second andthird quarters of 2019. A gain on sale of senior living communities of $7.1 million was recorded during the nine months ended September 30, 2018, primarily in connection with our sale of four senior living communities to SNH during the first half of 2018.

Long lived asset impairment. For the nine months ended September 30, 2019, and 2018, we recorded non-cash charges for long lived asset impairment of $3.3 million and $0.4 million, respectively, to reduce the carrying value of certain of our long lived assetsto their estimated fair values.

Interest, dividend and other income. Interest, dividend and other income increased by 70.7% due to the combination of higher stated interest rates and increased cash balances invested during the period. Interest and other expense. Interest and other expense increased by 23.9% primarily due to increased borrowings under our prior credit facility, partially offset by SNH's assumption of two mortgage notes in connection with our sale of three senior livingcommunities during the first half of 2018.

Unrealized gain on equity investments. Unrealized gain on equity investments represents adjustments made to our investments in equity securities to record amounts to fair value.

Realized gain (loss) on sale of debt and equity investments, net of tax. Realized gain (loss) on sale of debt and equity investments represents our realized gain (loss) on investments, net of applicable taxes.

Provision for income taxes. For the nine months ended September 30, 2019 and 2018, we recognized a provision for income taxes of $0.1 million and $0.3 million, respectively. The provision for income taxes for the nine months ended September 30, 2019 isrelated to our federal and state income tax obligations. The provision for income taxes for the nine months ended September 30, 2018 is due to our state income taxes. Equity in earnings of an investee, net of tax. Equity in earnings of an investee represents our proportionate share of earnings from our investment in AIC.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2019, we had $39.4 million of unrestricted cash and cash equivalents, $61.8 million available for borrowing under our credit facility and $25.0 million available for borrowing under the SNH credit facility. The amount of availableborrowings under our credit facility is subject to our having qualified collateral, which is primarily based on the value of the assets securing our obligations under our credit facility. Accordingly, the availability of borrowings under our credit facility at any timemay be less than $65.0 million. Our principal sources of funds to meet operating and capital expenses and debt service obligations are cash flows from operating activities, unrestricted cash balances, sales to, or other funding by, SNH of capital improvements at senior living communities SNHowns and we operate, and borrowings under our credit facilities. We believe that these sources will be sufficient to meet our operating and capital expenses and debt service obligations for the next 12 months.

Our future cash flows from operating activities will depend primarily upon our ability to maintain or increase the occupancy of, and the rental rates at, our senior living communities and our ability to control operating expenses at our senior living communities. Ifoccupancy at our senior living communities declines, the rates we receive from residents who pay for our services with private resources decline, government reimbursement rates are reduced, our operating expenses increase or if we are unable to generatepositive cash flows for an extended period for these or other reasons, we expect that we would explore various alternatives to fund our operations. Such alternatives may include seeking to reduce our costs, incurring debt under or in addition to our credit facility,engaging in sale and manageback transactions, mortgage financing our owned senior living communities and issuing other debt or equity securities. Although we believe these alternatives will be available to us, we cannot be sure that they will be. See Note 9 toour condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding our leases and management agreements and the modification of our business arrangements with SNH pursuant to theTransaction Agreement.

Assets and Liabilities

At September 30, 2019, we had $39.4 million of unrestricted cash and cash equivalents compared to $29.5 million at December 31, 2018. Our total current and long term assets were $164.8 million and $1.1 billion, respectively, at September 30, 2019 comparedto $138.1 million and $267.6 million, respectively, at December 31, 2018. Our total current and long term liabilities were $288.4 million and $839.5 million, respectively, at September 30, 2019 compared to $229.7 million and $104.8 million, respectively, atDecember 31, 2018. The increase in total current assets primarily relates to an increase in assets held for sale, which consists of net property and equipment previously classified as long term, primarily as a result of our entering into the Transaction Agreementwith SNH, an increase in prepaid and other current assets attributed to the timing of when real estate tax payments are made and the receipt of cash in the current period related to the monetization of alternative minimum tax credits in the prior year and anincrease in cash and cash equivalents. These increases were partially offset by a decrease in due from related persons related to timing differences in when payments were received. The increase in long term assets is the result of recording right of use assets inconnection with the adoption of ASU No. 2016-02, partially offset by the sale of $90.8 million of fixed assets and improvements to SNH. The increase in total current liabilities primarily relates to recording lease liabilities in connection with the adoption ofASU No. 2016-02, an increase in accrued compensation and benefits due to timing differences in when the pay dates prior to the end of each period occurred and in when the payment of other payroll items occurred and an increase in accounts payable andaccrued expenses due to timing differences in when payments were made, partially offset by repayment of the outstanding borrowings under our credit facility in the current period and a decrease in other current liabilities due to the short term portion of ourdeferred gain related to our sale and leaseback transaction with SNH in 2017 being recorded through retained earnings on January 1, 2019 in connection with the adoption of ASU No. 2016-02. The increase in long term liabilities is primarily due to the result ofrecording lease liabilities, partially offset by our deferred gain on sale and leaseback transaction being recorded through retained earnings on January 1, 2019, both of which were in connection with the adoption of ASU No. 2016-02.

We had cash flows provided by operating activities of $12.1 million for the nine months ended September 30, 2019 compared to cash flows used in operating activities of $26.0 million for the same period in 2018. The increase in cash flows provided byoperating activities for the nine months ended September 30, 2019 compared to the same period in 2018 is primarily the result of the reduction in the aggregate amount of our monthly minimum rent payable to SNH commencing February 1, 2019 pursuant to theTransaction Agreement. In accordance with the Transaction Agreement, this amount was reduced to approximately $10.8 million as of September 30, 2019, as a result of dispositions, and remains subject to further adjustment. This positive impact was partiallyoffset by transaction fees paid in connection with the Transaction Agreement.

We had cash flows provided by investing activities of $54.8 million for the nine months ended September 30, 2019 compared to $12.7 million for the same period in 2018. The increase in cash flows provided by investing activities was primarily due to

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the sale of approximately $90.8 million of fixed assets and improvements to SNH in 2019, partially offset by $31.9 million of net proceeds received from the sale of four senior living communities to SNH during the first half of 2018, and $14.7 million of fixedassets and improvements to SNH in 2018. Acquisitions of property and equipment, net of sales of qualified improvements we made to SNH pursuant to our leases with SNH, were $(53.4) million and $22.2 million for the nine months ended September 30, 2019and 2018, respectively.

We had cash flows used in financing activities of $53.0 million and $0.4 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in cash flows used in financing activities for the nine months ended September 30, 2019 wasprimarily due to our repayment of outstanding borrowings under our credit facility in June 2019.

We previously determined it was more likely than not that a majority of our net deferred tax assets would not be realized and concluded that a valuation allowance was required, which eliminated the majority of our net deferred tax assets recorded in ourconsolidated balance sheets. In the future, if we believe that we will more likely than not realize the benefit of these deferred tax assets, we will adjust our valuation allowance and recognize an income tax benefit, which may affect our results of operations. If wecomplete the Share Issuances, our net operating loss and tax credit carryforwards may be subject to limitations on usage or elimination.

Our Leases and Management Agreements with SNH As of September 30, 2019, we leased 166 senior living communities from SNH under five leases. Our total annual rent payable to SNH as of September 30, 2019 was $129.8 million, excluding percentage rent based on increases in gross revenues at certaincommunities. Our total rent expense under all our leases with SNH, which for 2018 was net of lease inducement amortization and the amortization of the deferred gain associated with the June 2016 sale and leaseback transaction, was $32.4 million and $51.5million for the three months ended September 30, 2019 and 2018, respectively, for which 2018 included approximately $1.4 million in estimated percentage rent due to SNH. For the three months ended September 30, 2019 no percentage rent payments weredue. Pursuant to the Transaction Agreement, the aggregate amount of monthly minimum rent payable to SNH was reduced to $11.0 million commencing February 1, 2019, subject to adjustment. In accordance with the Transaction Agreement, this amount wasreduced to approximately $10.8 million as of September 30, 2019 as a result of dispositions, and remains subject to further adjustment. As the Transaction Agreement was not entered into until April 1, 2019, our rent expense for the three months ended March31, 2019 was not adjusted for the rent reduction for February and March 2019 even though we did not pay, and are not obligated to pay, the prior rent amounts that were in excess of the modified amount. Instead, that amount is being amortized over theremaining lives of the applicable master leases in accordance with GAAP. The transactions contemplated by the Transaction Agreement are subject to conditions, including among others, the receipt of certain regulatory approvals. For more informationregarding our Transaction Agreement and the modifications to our existing business arrangements with SNH, see Notes 1 and 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “—2019Transaction Agreement with SNH and Refinanced Credit Facility” in Part I, Item 2 of this Quarterly Report on Form 10-Q.

Under our existing leases with SNH, upon our request, SNH may purchase or fund capital improvements made at the communities we lease from SNH. During the nine months ended September 30, 2019, we sold to SNH $41.6 million of improvements made atthe communities we lease from SNH. In addition, pursuant to the Transaction Agreement, we sold approximately $50.0 million of unencumbered fixed assets and improvements related to SNH's senior living communities leased and operated by us, whichamount was subsequently adjusted to $49.2 million due to the exclusion of certain fixed assets in accordance with the Transaction Agreement. Also pursuant to the Transaction Agreement, the aggregate amount of monthly minimum rent payable to SNH was setat $11.0 million commencing February 1, 2019, subject to adjustment; as a result, capital improvements that SNH purchases from us during that period will not result in an increase in the aggregate monthly minimum rent. The sales of capital improvements thatwe made to SNH for the three months ended March 31, 2019 occurred after February 1, 2019.

As of September 30, 2019, we managed 77 senior living communities for the account of SNH and its related entities pursuant to long term management agreements and pooling agreements that combine various calculations of revenues and expenses from theoperations of the communities covered by the applicable pooling agreements. We earned management fees attributable to senior living communities we manage for SNH's account of $4.1 million and $4.0 million for the three months ended September 30, 2019and 2018, respectively and $12.1 million and $11.4 million for the nine months ended September 30, 2019 and 2018, respectively. Included in these amounts were fees we earned for our management of capital expenditure projects of $0.2 million and $0.3million for the three months ended September 30, 2019 and 2018, respectively, and $0.6 million and $0.7 million for the nine months ended September 30, 2019 and 2018, respectively.

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In November 2017, we entered a transaction agreement with SNH pursuant to which we agreed to sell six senior living communities to SNH and, as we sold these communities, enter into new management agreements with SNH for us to manage the soldcommunities for SNH's account, with the new management agreements being combined pursuant to two new pooling agreements between us and SNH. In December 2017, January 2018, February 2018 and June 2018, we sold to, and began managing for theaccount of, SNH, these six senior living communities, and, concurrently with those sales, we and SNH entered management agreements for each of these senior living communities and two new pooling agreements.

In April 2019, we began managing for SNH’s account a senior living community that SNH owns located in Oregon with 318 living units, pursuant to a management agreement with SNH on terms substantially similar to those of existing management agreementsbetween us and SNH.

For more information regarding our leases and management agreements and other transactions with SNH, see Notes 9 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and Notes 9, 11,13 and 16 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.

Our Revenues We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Our adoption of ASC Topic 606 did not result in an adjustment to our beginning retained earnings and did not have amaterial impact on the amount and timing of our revenue recognition for the nine months ended September 30, 2019 or 2018.

Our revenues from services to residents at our senior living communities are our primary source of cash to fund our operating expenses, including rent, capital expenditures (net of capital improvements that we sell to SNH for increased rent, if any, pursuant toour leases with SNH) and principal and interest payments on our debt.

The general trends impacting our industry are affecting our business and revenues. For further information about those trends, see "—General Industry Trends" in Part I, Item 2 of this Quarterly Report on Form 10-Q.

At some of our senior living communities (principally our SNFs) and our rehabilitation and wellness clinics, Medicare and Medicaid programs provide operating revenues for skilled nursing and rehabilitation and wellness services. We derived approximately22.6% and 23.2% of our consolidated revenues from these government funded programs during the nine months ended September 30, 2019 and 2018, respectively. Our net Medicare revenues totaled $86.7 million and $89.5 million during the nine months endedSeptember 30, 2019 and 2018, respectively. Our net Medicaid revenues totaled $98.6 million and $100.7 million during the nine months ended September 30, 2019 and 2018, respectively.

On August 2, 2019, the U.S. Congress passed the Bipartisan Budget Act of 2019 (P.L. 116-37), which extended Medicare sequestration cuts for an additional two years. Medicare sequestration cuts have been in place since 2013 and have been extendedperiodically. Most recently, this law extends the 2% reduction in payments through fiscal year 2029.

On August 15, 2019, the Centers for Medicare & Medicaid Services, or CMS, published a proposed rule that presents potential updates to the Medicare physician fee schedule rule for the calendar year 2020 and changes to other Medicare Part B policies. Inparticular, the rule proposes to implement a statutory requirement that claim modifiers be used to identify certain therapy services that are furnished in whole or in part by physical therapy assistants, or PTAs, and occupational therapy assistants, or OTAs,beginning January 1, 2020. CMS has adopted a standard that, when more than 10% of the service is furnished by a PTA or OTA, then the service is considered to be furnished “in whole or in part” by a PTA or OTA. CMS proposes to base the 10% calculation onthe therapeutic minutes of time spent by the therapist versus a PTA or OTA. Beginning January 1, 2022, claims that contain a therapy assistant modifier will be paid at 85% of the otherwise applicable payment amount.

On September 10, 2019, CMS issued a final rule that implements statutory provisions that require Medicare, Medicaid and the Children’s Health Insurance Program, or CHIP, providers and suppliers to disclose certain current and previous "affiliations" (which isdefined to include ownership interests, partnership interests, or operational or managerial control) that it, or any of its owning or managing employees or organizations, has or had with other providers and suppliers that have experienced certain disposable eventswithin the previous five years. Specifically, such providers and suppliers must, beginning November 4, 2019, upon initially enrolling in Medicare, Medicaid, or CHIP, or revalidating such enrollment, disclose any current or previous direct or indirect affiliationwith a provider or supplier that (1) has uncollected debt related to Medicare, Medicaid or CHIP overpayments for which CMS or the state has sent notice of the debt, civil monetary penalties, or similar assessments imposed by the government; (2) has been or issubject to a payment suspension under a federal health care program; (3) has been or is excluded from participation in Medicare, Medicaid or CHIP; or (4) has had its Medicare, Medicaid

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or CHIP billing privileges denied, revoked or terminated. The final rule also provides CMS with additional authority to deny or revoke a provider's or supplier’s Medicare enrollment in certain specified circumstances.

On October 9, 2019, CMS and the OIG issued coordinated proposed rules which seek to update the regulations interpreting the Physician Self-Referral Law, the Federal Anti-Kickback Statute, and the civil monetary penalties rules prohibiting beneficiaryinducement. The proposed rules include new exceptions and safe harbors for value-based payment arrangements, modifications to the existing electronic health record exception and safe harbor and a new exception and safe harbor for the provision ofcybersecurity technology and services. CMS is also seeking comment on whether the agency should require the provision of cost-of-care information at the point of a referral for an item or service as part of the agency’s broader agenda related to pricetransparency.

Because of shifting policy priorities, the current and projected federal budget deficit, other federal spending priorities and challenging fiscal conditions in some states, there have been numerous recent legislative and regulatory actions or proposed actions withrespect to federal Medicare rates, state Medicaid rates and federal payments to states for Medicaid programs. We cannot currently predict the type and magnitude of the potential Medicare and Medicaid policy changes, rate changes or other changes that may beimplemented, but we believe that some of these changes will cause these government funded healthcare programs to fail to provide rates that match our increasing expenses, and that such changes may be material and adverse to our operations and to our futurefinancial results of operations.

For further information regarding government healthcare funding and regulation and the possible impact on us and our business, revenues and operations, see the sections captioned “Business—Government Regulation and Reimbursement” in Part I, Item I and“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Revenues” in Part II, Item 7 of our Annual Report and the section captioned "—Our Revenues" in Part I, Item 2 of our Quarterly Report on Form 10-Q for thequarters ended March 31, 2019 and June 30, 2019.

Insurance

Increases over time in the costs of insurance, especially professional and general liability insurance, workers’ compensation and employee health insurance, have had an adverse impact upon our results of operations. Although we self-insure a large portion ofthese costs, our costs have increased as a result of the higher costs that we incur to settle claims and to purchase insurance for claims in excess of the self-insurance amounts. These increased costs may continue in the future. Further, we may realize increasedpremiums for other forms of insurance we obtain from third parties, such as for property, casualty and business interruption coverage. For more information about our existing insurance see “Business—Insurance” in Part I, Item I of our Annual Report.

Debt Financings and Covenants

We maintain a $65.0 million secured revolving credit facility, which is available for general business purposes. Our credit facility matures in June 2021. Subject to our payment of extension fees and meeting other conditions, we have the option to extend thestated maturity date of our credit facility for a one year period. We are required to pay interest at a rate of LIBOR plus a premium of 250 basis points per annum, or at a base rate as defined in our credit agreement, plus 150 basis points per annum, on borrowingsunder our credit facility; the effective annual rates as of September 30, 2019 were 4.59% and 6.75%, respectively. We are also required to pay a quarterly commitment fee of 0.35% per annum on the unused part of the available borrowings under our creditfacility. No principal repayment is due until maturity.

Our credit facility is secured by real estate mortgages on 11 senior living communities with a combined 1,245 living units owned by certain of our subsidiaries that guarantee our obligations under our credit facility. Our credit facility is also secured by thesesubsidiaries’ accounts receivable and related collateral. The amount of available borrowings under our credit facility is subject to our having qualified collateral, which is primarily based on the value of the communities securing our obligations under our creditfacility. Our credit facility provides for acceleration of payment of all amounts outstanding under our credit facility upon the occurrence and continuation of certain events of default, including a change of control of us, as defined in our credit agreement. Ourcredit agreement contains financial and other covenants, including those that restrict our ability to pay dividends or make other distributions to our stockholders in certain circumstances.

As of September 30, 2019 and November 5, 2019, we had no outstanding borrowings under our credit facility, $3.2 million in letters of credit issued under our credit facility and approximately $7.6 million of outstanding mortgage debt. As of September 30,2019, we believe we were in compliance with all applicable covenants under our debt agreements.

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Pursuant to the Transaction Agreement, on April 1, 2019, we obtained a $25.0 million line of credit from SNH. As of September 30, 2019 and November 5, 2019, we had no outstanding borrowings under this line of credit. For further information regarding thisline of credit, see Note 9 to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For more information regarding our debt financings and covenants, see Note 8 to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Related Person Transactions

We have relationships and historical and continuing transactions with SNH, RMR LLC, ABP Trust and others related to them. For example: SNH is our former parent company, our largest landlord, the owner of the senior living communities that we manage anda significant stockholder of us, owning as of September 30, 2019, 8.3% of our outstanding common shares, and with which we have entered the Transaction Agreement, which provides for modifications for our existing business arrangements with SNH, andAdam Portnoy, the Chair of our Board of Directors and one of our Managing Directors, and our Secretary, are managing trustees of SNH; various services we require to operate our business are provided to us by RMR LLC pursuant to our business managementagreement with RMR LLC and RMR LLC also provides management services to SNH; RMR LLC employs our President and Chief Executive Officer, our Executive Vice President, Chief Financial Officer and Treasurer, our Secretary and Adam Portnoy; AdamPortnoy, directly and indirectly through ABP Trust and its subsidiaries, is our largest stockholder, beneficially owning approximately 35.4% of our outstanding common shares as of September 30, 2019; a subsidiary of ABP Trust is also the landlord for ourheadquarters; and Adam Portnoy, through ABP Trust, is also the controlling shareholder of RMR Inc., which is the managing member of RMR LLC. We have relationships and historical and continuing transactions with other companies to which RMR LLC orits subsidiaries provide management services and some of which have directors, trustees or officers who are also directors, trustees or officers of us, SNH, RMR LLC or RMR Inc.

For further information about these and other such relationships and related person transactions, see Notes 9, 10 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our Annual Report, ourdefinitive Proxy Statement for our 2019 Annual Meeting of Stockholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our Annual Report for a description of risks that may arise as a result of these and other relatedperson transactions and relationships. Our filings with the SEC and copies of certain of our agreements with these related persons, including our business management agreement with RMR LLC, our various agreements with SNH and our lease and otheragreements with subsidiaries of ABP Trust, are available as exhibits to our filings with the SEC and accessible at the SEC’s website, www.sec.gov. We may engage in additional transactions with related persons, including businesses to which RMR LLC or itssubsidiaries provide management services.

Nasdaq Listing

We previously received a letter from Nasdaq informing us that, for a period of 30 consecutive business days, the closing bid price of our common shares was below $1.00 per common share, which was not in compliance with the Nasdaq listing standards forcontinued listing on Nasdaq. On September 30, 2019, we completed the Reverse Stock Split, which resulted in the closing bid price of our common shares exceeding the $1.00 per share minimum bid price for the applicable period to regain compliance with theNasdaq listing standards. On October 15, 2019, we received a letter from Nasdaq informing us that we had regained compliance with the minimum bid price listing standards of Nasdaq for continued listing on Nasdaq.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Executive Vice President, ChiefFinancial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our management, including our Presidentand Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, concluded that our disclosure controls and procedures are effective. There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Warning Concerning Forward-Looking Statements This Quarterly Report on Form 10-Q contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we use words such as “believe”, “expect”,“anticipate”, “intend”, “plan”, “estimate”, "will", "may" and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, butforward-looking statements are not guaranteed to occur and may not occur. Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:

• Our ability to complete the transactions contemplated by the Transaction Agreement we entered into with SNH in April 2019,

• Our ability to operate our senior living communities profitably,

• Our ability to meet our rent and debt obligations or obtain relief from those obligations,

• Our ability to access or raise debt or equity capital,

• Our expectation to focus our expansion activities on internal growth from our existing senior living communities and the healthcare services that we may provide,

• Our ability to increase the number of senior living communities we operate and residents we serve and to grow our other sources of revenues, including rehabilitation and wellness services and other services we may provide,

• Whether the aging U.S. population and increasing life spans of seniors will increase the demand for senior living communities, wellness centers and other medical and healthcare related properties and healthcare services,

• Our ability to comply and to remain in compliance with applicable Medicare, Medicaid and other federal and state regulatory, rule making and rate setting requirements,

• Our ability to sell communities we offer for sale, and

• Other matters. Our actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Risks,uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, cash flows, liquidity and prospects include, but are not limited to:

• The impact of conditions in the economy and the capital markets on us and our residents and other customers,

• Competition within the senior living and other healthcare related services businesses,

• Our operating leverage,

• Seniors' delaying or forgoing moving to senior living communities or purchasing healthcare services from us,

• Increases in tort and insurance liability costs,

• Increases in our labor costs or in costs we pay for goods and services,

• Actual and potential conflicts of interest with our related parties, including our Managing Directors, SNH, RMR LLC, ABP Trust and others affiliated with them,

• Changes in Medicare or Medicaid policies and regulations or the possible future repeal, replacement or modification of these or other existing or proposed legislation or regulations, which could result in reduced Medicare or Medicaid rates, a failure ofsuch rates to cover our costs or limit the scope or funding of either or both programs, or reductions in private insurance utilization and coverage,

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• Delays or nonpayment of government payments to us that could result from government shutdowns or other circumstances,

• Compliance with, and changes to, federal, state and local laws and regulations that could affect our services or impose requirements, costs and administrative burdens that may reduce our ability to profitably operate our business,

• Continued efforts by third party payers to reduce healthcare costs, and

• Acts of terrorism, outbreaks of so called pandemics or other manmade or natural disasters beyond our control.

For example:

• Even though challenging conditions in the senior living industry continue to exist, there no longer exists a substantial doubt about our ability to continue as a going concern. However, our business and operations remain subject to substantial risks,including the risk that the transactions contemplated by the Transaction Agreement will not be completed, and many of these risks are beyond our control. As a result, our operations may not be profitable in the future and we may realize losses, whichcould negatively affect our ability to continue as a going concern,

• We expect to close certain of the transactions contemplated by the Transaction Agreement, as described herein, on January 1, 2020. These transactions are subject to conditions, including, among others, the receipt of certain licensing and otherregulatory approvals. We cannot be sure that any or all of such conditions will be satisfied. Accordingly, these transactions may not become effective as of January 1, 2020 or at all, or the terms of such transactions may change,

• The Share Issuances are subject to the SEC declaring effective the registration statement on Form S-1 that we previously filed with the SEC to register our common shares to be issued pursuant to the Transaction Agreement. When and whether the SECdeclares the registration statement effective is beyond our control. Accordingly, we cannot be sure that the SEC will declare the registration statement on Form S-1 effective prior to December 31, 2019 or at all,

• Our ability to operate senior living communities profitably depends upon many factors, including our ability to integrate new communities into our existing operations, as well as some factors which are beyond our control, such as the demand for ourservices arising from economic conditions generally and competition from other providers of senior living services. We may not be able to successfully integrate, operate, compete and profitably manage our senior living communities,

• We expect to enter additional operating arrangements with SNH for additional senior living communities that SNH owns or may acquire in the future. However, we cannot be sure that we will enter any additional operating arrangements with SNH,

• Our belief that the aging of the U.S. population and increasing life spans of seniors will increase demand for senior living communities and services may not be realized or may not result in increased demand for our services,

• Our investments in our workforce and continued focus on reducing our employee turnover level by enhancing our competitiveness in the marketplace with respect to cash compensation and other benefits may not be successful and may not result in thebenefits we expect to achieve through such investments,

• Our marketing initiatives may not succeed in increasing our occupancy and revenues, and they may cost more than any increased revenues they may generate,

• Our strategic investments to enhance efficiencies in and benefits from our purchasing of services may not be successful or generate the returns we expect,

• At September 30, 2019, we had $39.4 million of unrestricted cash and cash equivalents. As of September 30, 2019, we had no borrowings under our $65.0 million credit facility or $25.0 million SNH credit facility, letters of credit issued in an aggregateamount of $3.2 million and $61.8 million available for borrowing under our credit facility. These statements may imply that we may have sufficient cash liquidity. However, we have been incurring operating losses and have a large accumulated deficit.Moreover, our operations and business require significant amounts of working cash and require us to make significant capital expenditures to maintain our competitiveness. Accordingly, we may not have sufficient cash liquidity,

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• Circumstances that adversely affect the ability of seniors or their families to pay for our services, such as economic downturns, weakening housing market conditions, higher levels of unemployment among our residents' or potential residents' familymembers, lower levels of consumer confidence, stock market volatility and/or changes in demographics generally could affect the profitability of our senior living communities,

• Residents who pay for our services with their private resources may become unable to afford our services, resulting in decreased occupancy and decreased revenues at our senior living communities and our increased reliance on lower rates fromgovernment agencies and other payers,

• The various federal and state government agencies which pay us for the services we provide to some of our residents are currently experiencing budgetary constraints and may lower the Medicare, Medicaid and other rates they pay us,

• We may be unable to repay our debt obligations when they become due,

• Actual costs under our credit facility will be higher than LIBOR plus a premium because of other fees and expenses associated with our credit facility,

• The amount of available borrowings under our credit facility is subject to our having qualified collateral, which is primarily based on the value of the assets securing our obligations under our credit facility. Accordingly, the availability of borrowingsunder our credit facility at any time may be less than $65.0 million. Also, the availability of borrowings under our credit facility is subject to our satisfying certain financial covenants and other conditions that we may be unable to satisfy,

• The amount of available borrowings under our SNH credit facility is subject to conditions. Further, the SNH credit facility is scheduled to mature at the Conversion Time. As such, it is not a long term source of financing for us,

• Our actions and approach to managing our insurance costs, including our operating an offshore captive insurance company and self-insuring with respect to certain liability matters, may not be successful and could result in our incurring significant costsand liabilities that we will be responsible for funding,

• Contingencies in our and SNH’s applicable acquisition and sale agreements may not be satisfied and our and SNH’s applicable pending acquisitions and sales and any related leases, management or pooling arrangements we may expect to enter may notoccur, may be delayed or the terms of such transactions or arrangements may change,

• We may be unable to meet collateral requirements related to our workers’ compensation insurance program for future policy years, which may result in increased costs for such insurance program,

• We may not be able to sell communities that we may seek to sell on terms acceptable to us or otherwise,

• The fact that we have regained compliance with Nasdaq’s minimum $1.00 bid price per share requirement may imply that we will continue to satisfy that Nasdaq standard. The number of our common shares included in our nonaffiliated public float iscurrently at a reduced level, which may result in decreased liquidity and increased trading price volatility for our common shares. If we fail to maintain compliance with Nasdaq’s minimum $1.00 bid price or other standards, Nasdaq may initiateproceedings to delist our common shares,

• We believe that our relationships with our related parties, including SNH, RMR LLC, ABP Trust and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, theadvantages we believe we may realize from these relationships may not materialize,

• We expect to receive a capital distribution in the fourth quarter of 2019 in connection with the dissolution of AIC. We cannot be sure that such distribution will occur when expected or at all or what the amount of any such distribution will be, and

• Our senior living communities are subject to extensive government regulation, licensure and oversight. We sometimes experience deficiencies in the operation of our senior living communities, and some of our communities may be prohibited fromadmitting new residents, or our license to continue operations at a community may be revoked. Also, operating deficiencies or a license revocation at one or more of our senior living communities may have an adverse impact on our ability to operate,obtain licenses for, or attract residents to, our other communities.

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Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as acts of terrorism, natural disasters, changed Medicare or Medicaid rates, new legislation, regulations or rule making affecting ourbusiness, or changes in capital markets or the economy generally.

The information contained elsewhere in this Quarterly Report on 10-Q or in our other filings with the SEC, including under the caption “Risk Factors”, or incorporated herein or therein, identifies other important factors that could cause differences from ourforward-looking statements. Our filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon our forward-looking statements.

Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

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PART II. Other Information

Item 1. Legal Proceedings

There have been no material developments in our legal proceedings from those disclosed in our Annual Report.

Item 1A. Risk Factors

There have been no material changes to the risk factors from those we previously disclosed in our Annual Report.

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

Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended September 30, 2019:

Calendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly

Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be

Purchased Under the Plans or Programs

July 2019 119 $ 4.80 — $ — Total 119 $ 4.80 — $ —

(1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of a former officer of RMR LLC in connection with the vesting of awards of our common shares. We withheld and purchased these shares at their fair market value based upon the tradingprice of our common shares at the close of trading on Nasdaq on the purchase date.

Item 6. Exhibits

ExhibitNumber Description

3.1 Composite Copy of Articles of Amendment and Restatement, dated December 5, 2001, as amended to date. (Filed herewith.)3.2 Articles Supplementary, as corrected by Certificate of Correction, dated March 10, 2004. (Incorporated by reference to the Company’s registration statement on Form 8-A dated March 19, 2004

and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, respectively.)3.3 Articles Supplementary, dated April 16, 2014. (Incorporated by reference to the Company’s Current Report on Form 8-K dated April 16, 2014.)3.4 Amended and Restated Bylaws of the Company, adopted March 3, 2017. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.)4.1 Form of Common Stock Certificate. (Filed herewith.)4.2 Consent, Standstill, Registration Rights and Lock-Up Agreement, dated October 2, 2016, among the Company, ABP Trust, ABP Acquisition LLC, Barry M. Portnoy and Adam D. Portnoy.

(Incorporated by reference to the Company’s Current Report on Form 8-K dated October 2, 2016.)10.1 Form of Indemnification Agreement.(+) (Filed herewith.)10.2 Eighteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of May 22, 2019, effective as of April 1, 2019, among certain subsidiaries of Senior Housing

Properties Trust, as Landlord, and certain subsidiaries of the Company, as Tenant. (Filed herewith.)10.3 Partial Termination of and Nineteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of September 17, 2019, among certain subsidiaries of Senior

Housing Properties Trust, as Landlord, and certain subsidiaries of the Company, as Tenant. (Filed herewith.)10.4 Thirteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of May 22, 2019, effective as of April 1, 2019, among certain subsidiaries of Senior Housing

Properties Trust, as Landlord, and certain subsidiaries of the Company, as Tenant. (Filed herewith.)

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10.5 Partial Termination of and Fourteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of September 17, 2019, among certain subsidiaries of Senior HousingProperties Trust, as Landlord, and certain subsidiaries of the Company, as Tenant. (Filed herewith.)

10.6 Partial Termination of and Seventh Amendment to Amended and Restated Master Lease Agreement (Lease No. 4), dated as of September 17, 2019, among certain subsidiaries of Senior HousingProperties Trust, as Landlord, and certain subsidiaries of the Company, as Tenant. (Filed herewith.)

31.1 Rule 13a-14(a) Certification of Chief Executive Officer. (Filed herewith.)31.2 Rule 13a-14(a) Certification of Chief Financial Officer. (Filed herewith.)32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer. (Furnished herewith.)101.1 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the

Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the CondensedConsolidated Statements of Cash Flows and (v) related notes to these financial statements, tagged as blocks of text and in detail. (Filed herewith.)

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SIGNATURES

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

FIVE STAR SENIOR LIVING INC.

/s/ Katherine E. Potter

Katherine E. Potter President and Chief Executive Officer Dated: November 6, 2019 /s/ Jeffrey C. Leer Jeffrey C. Leer Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Dated: November 6, 2019

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Exhibit 3.1


ARTICLES OF AMENDMENT AND RESTATEMENT

December 5, 2001 As amended on November 9, 2004, August 23, 2005, March 28, 2006,

June 10, 2011, March 3, 2017, September 30, 2019 (effective at 4:01 p.m.)and September 30, 2019 (effective at 4:15 p.m.)


ARTICLES OF AMENDMENT AND RESTATEMENT

ARTICLE I NAME

The name of the corporation (the “Corporation”) is:

Five Star Senior Living Inc.

ARTICLE IIPURPOSE

The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force.

ARTICLE III PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

The address of the principal office of the Corporation in the State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. Thename of the resident agent of the Corporation in the State of Maryland is James J. Hanks, Jr., whose post address is c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202. Theresident agent is a citizen of and resides in the State of Maryland.

ARTICLE IV PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF

THE CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

Section 4.1 Number and Classification of Directors. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation initially shallbe two, which number may be increased or decreased only by the Board of Directors pursuant to the Bylaws, but shall never be less than the minimum number required by the Maryland General Corporation Law (the “MGCL”)or more than seven.

The Corporation elects, at such time as such election becomes available under Section 3-802(b) of the MGCL, that, except as may be provided by the Board of Directors in setting the terms of any class or series ofPreferred Stock (as hereinafter defined), any and all vacancies on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do notconstitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred.

On the first date on which the Corporation shall have more than one stockholder of record, the directors (other than any director elected solely by holders of one or more classes or series of Preferred Stock) shall beclassified into three groups, Group I, Group II and Group III. The number of directors in each class shall be as nearly equal in number as possible, as determined by the Board of Directors. Directors in Group I shall serve for aterm ending at the annual meeting of stockholders to be held in 2002; directors in Group II shall serve for a term ending at the annual meeting of stockholders to be held in 2003, and directors in Group III shall serve for a termending at the annual meeting of stockholders to be held in 2004 and, in each such case, until their successors are duly elected and qualify. At each annual

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meeting of the stockholders, the successors to the class of directors whose term expires at such meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following theyear of their election and until their successors are duly elected and qualify.

The names of the initial directors are:

Gerard M. Martin Barry M. Portnoy

Section 4.2 Extraordinary Actions. Except as specifically provided in Section 4.7 (relating to removal of directors), notwithstanding any provision of law permitting or requiring any action to be taken or approved bythe affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if (a) such action is first declared advisable by the Board of Directors and (b) then taken orapproved by (i) the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter, or (ii) if Maryland law hereafter permits the effectiveness of a vote described in this clause (ii),the affirmative vote a majority of the votes cast on the matter or any such lesser proportion permitted under Maryland law.

Section 4.3 Authorization by Board of Stock Issuance. The Board of Directors may authorize the issuance from time to time of shares of stock of the Corporation of any class or series, whether now or hereafterauthorized, or securities or rights convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable (or without consideration inthe case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the charter or the Bylaws.

Section 4.4 Preemptive Rights. Except as may be provided by the Board of Directors in setting the terms of classified or reclassified shares of stock pursuant to Section 5.4 or as may otherwise be provided by contract,no holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of stock of the Corporation or any other security of the Corporation which it mayissue or sell.

Section 4.5 Indemnification. The Corporation shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonableexpenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former director or officer of the Corporation or (b) any individual who, while a director of the Corporation and at the request ofthe Corporation, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise from and againstany claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former director or officer of the Corporation. The Corporation shall have the power, withthe approval of the Board of Directors, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to anyemployee or agent of the Corporation or a predecessor of the Corporation.

Section 4.6 Determinations by Board. The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with the charter and in the absence ofactual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares ofits stock: the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions on itsstock; the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or

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excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liabilityfor which such reserves or charges shall have been created shall have been paid or discharged); the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by theCorporation; any matter relating to the acquisition, holding and disposition of any assets by the Corporation; or any other matter relating to the business and affairs of the Corporation.

Section 4.7 Removal of Directors. Subject to the rights of holders of one or more classes or series of Preferred Stock to elect or remove one or more directors, any director, or the entire Board of Directors, may beremoved from office at any time, but only for cause and then only by the affirmative vote of at least three-fourths of the votes entitled to be cast generally in the election of directors. For the purpose of this paragraph, “cause”shall mean, with respect to any particular director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Corporation through badfaith or active and deliberate dishonesty.

Section 4.8 Informal Actions by Stockholders. Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting only by a unanimous written consent of the stockholdersentitled to vote on the matter which sets forth the action.

ARTICLE V STOCK

Section 5.1 Authorized Shares. The Corporation has authority to issue 76,000,000 shares of stock, consisting of 75,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and 1,000,000 sharesof Preferred Stock, $.01 par value per share (“Preferred Stock”). The aggregate par value of all authorized shares of stock having par value is $760,000. If shares of one class of stock are classified or reclassified into shares ofanother class of stock pursuant to this Article V, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case bythe number of shares so classified or reclassified, so that the aggregate number of shares of stock of all classes that the Corporation has authority to issue shall not be more than the total number of shares of stock set forth in thefirst sentence of this paragraph. The Board of Directors, without any action by the stockholders of the Corporation, may amend the charter at any time to increase or decrease the aggregate number of shares of stock or thenumber of shares of stock of any class or series that the Corporation has authority to issue.

Section 5.2 Common Stock. Subject to the provisions of Article VI, each share of Common Stock shall entitle the holder thereof to one vote. The Board of Directors may reclassify any unissued shares of CommonStock from time to time in one or more classes or series of stock.

Section 5.3 Preferred Stock. The Board of Directors may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time,in one or more classes or series of stock.

Section 5.4 Classified or Reclassified Shares. Prior to issuance of classified or reclassified shares of any class or series, the Board of Directors by resolution shall: (a) designate that class or series to distinguish it fromall other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the provisions of Article VI and subject to the express terms of any classor series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions ofredemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of

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Maryland (“SDAT”). Any of the terms of any class or series of stock set or changed pursuant to clause (c) of this Section 5.4 may be made dependent upon facts or events ascertainable outside the charter (includingdeterminations by the Board of Directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate uponthe terms of such class or series of stock is clearly and expressly set forth in the articles supplementary filed with the SDAT.

Section 5.5 Charter and Bylaws. All persons who shall acquire stock in the Corporation shall acquire the same subject to the provisions of the charter and the Bylaws.

Section 5.6 Quorum. At an annual meeting of stockholders or a special meeting of stockholders called by the Board of Directors or any authorized officer of the Corporation, the presence in person or by proxy ofstockholders entitled to cast one third of all the votes entitled to be cast at such meeting shall constitute a quorum. At any special meeting of stockholders called upon the written request of stockholders, the presence in person orby proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum. This section shall not affect any requirement under any statute or the charter for the vote necessaryfor the adoption of any measure, and shall not affect any provisions of the Bylaws with respect to the quorum at meetings of stockholders to the extent not inconsistent with this Section.

ARTICLE VI RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

Section 6.1 Definitions. For the purpose of this Article VI, the following terms shall have the following meanings:

AMEX. The term “AMEX” shall mean the American Stock Exchange, LLC, or any other national securities exchange on which the Common Stock may be subsequently listed.

Business Day. The term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in the Commonwealth of Massachusetts or in the Stateof New York are authorized or required by law, regulation or executive order to close.

Capital Stock. The term “Capital Stock” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

Charitable Beneficiary. The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 6.3.7, provided that each such organization must be described inSections 501(c)(3), 170(b)(1)(A) (other than clause (vii) or (viii) thereof) and 170(c)(2) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522of the Code.

Charitable Trust. The term “Charitable Trust” shall mean any trust provided for in Section 6.2.1(b)(i) and Section 6.3.1.

Charitable Trustee. The term “Charitable Trustee” shall mean the Person, unaffiliated with the Corporation and a Prohibited Owner, that is appointed by the Corporation from time to time to serve as trustee of theCharitable Trust.

Closing Price. The “Closing Price” with respect to shares of Capital Stock on any date shall mean the last sale price for such shares of Capital Stock, regular way, or, in case no such sale takes place

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on such day, the average of the closing bid and asked prices, regular way, for such shares of Capital Stock, in either case as reported on the principal consolidated transaction reporting system with respect to securities listed oradmitted to trading on the AMEX or, if such shares of Capital Stock are not listed or admitted to trading on the AMEX, as reported on the principal consolidated transaction reporting system with respect to securities listed onthe principal national securities exchange on which such shares of Capital Stock are listed or admitted to trading or, if such shares of Capital Stock are not listed or admitted to trading on any national securities exchange, the lastquoted price, or, if not so quoted, the average of the high bid and low asked prices, in the over-the-counter market, as reported by the Nasdaq Stock Market or, if such system is no longer in use, the principal other automatedquotation system that may then be in use or, if such shares of Capital Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a marketin such shares of Capital Stock selected by the Board of Directors or, in the event that no trading price is available for such shares of Capital Stock, the fair market value of such shares, as determined in good faith by the Boardof Directors.

Code. The term “Code” means the Internal Revenue Code of 1986, as amended.

Constructive Ownership. The term “Constructive Ownership” shall mean ownership of shares of Capital Stock by a Person, whether the interest in shares of Capital Stock is held directly or indirectly (including by anominee), and shall include any interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “ConstructivelyOwns” and “Constructively Owned” shall have the correlative meanings.

Distribution. The term “Distribution” shall mean the distribution by SNH to the holders of its common shares of shares of Common Stock of the Corporation and the immediate distribution of the Corporation’s CommonStock received by HRPT Properties Trust, a Maryland real estate investment trust, to holders of its common shares.

Effective Date. The term “Effective Date” shall mean the date on which the Distribution occurs.

Excepted Holder. The term “Excepted Holder” shall mean a stockholder of the Corporation for whom an Excepted Holder Limit is created by the Board of Directors pursuant to Section 6.2.7.

Excepted Holder Limit. The term “Excepted Holder Limit” shall mean, provided that (and only so long as) the affected Excepted Holder complies with all of the requirements established by the Board of Directorspursuant to Section 6.2.7, and subject to adjustment pursuant to Section 6.2.8, the percentage limit established by the Board of Directors pursuant to Section 6.2.7.

Excluded Holder. The term “Excluded Holder” shall mean any Person who acquires Constructive Ownership of shares of Common Stock solely by reason of the Transfer of Common Stock in the Distribution and who,immediately following the Distribution, Constructively Owns shares of Common Stock in excess of the Ownership Limit solely by reason of such Transfer of Common Stock in the Distribution. The term Excluded Holder shallinclude HRPT Properties Trust.

Excluded Holder Limit. The term “Excluded Holder Limit” shall mean, with respect to any Excluded Holder, the shares of Capital Stock that such Excluded Holder was considered to Constructively Own immediatelyfollowing the Distribution solely by reason of the Distribution (taking into account only such shares of Capital Stock and no other shares as to which such Person may thereafter become, for any reason, the Constructive Owner);provided, however, that (i) if the amount of shares of Capital Stock such Excluded Holder is considered to constructively own decreases by disposition or otherwise, but remains higher than the Ownership Limit, then suchdecreased amount shall become the Excluded Holder

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Limit, and (ii) if at any time the Excluded Holder Limit for any Excluded Holder would be less than the Ownership Limit, such Excluded Holder shall cease to be an Excluded Holder and the Ownership Limit shall thereafterapply to such Person.

Market Price. The term “Market Price” on any date shall mean, with respect to any class or series of outstanding shares of Capital Stock, the Closing Price for such shares of Capital Stock on such date.

Ownership Limit. The term “Ownership Limit” shall mean (i) with respect to shares of Common Stock, 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding Common Stock of theCorporation; and (ii) with respect to any class or series of shares of Preferred Stock or other stock, 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding shares of such class or series of PreferredStock or other stock of the Corporation.

Person. The term “Person” shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), portion of a trust permanently set aside for or to beused exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company, limited liability company, or other entity andalso includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that the term “Person” shall not include any “group” as that term is used forpurposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, if such “group” would be an Excluded Holder (but any Person that is a member of such “group” shall still be considered to be a “Person” forpurposes hereof).

Prohibited Owner. The term “Prohibited Owner” shall mean any Person who, but for the provisions of Section 6.2.1, would Constructively Own shares of Capital Stock, and if appropriate in the context, shall also meanany Person who would have been the record owner of shares of Capital Stock that the Prohibited Owner would have so owned.

REIT. The term “REIT” shall mean a real estate investment trust within the meaning of Section 856 of the Code.

Restriction Termination Date. The term “Restriction Termination Date” shall mean the first day after the Effective Date on which any of the following are applicable: (i) there shall have been a “final determination”within the meaning of Section 1313 of the Code, or SNH has publicly announced, that SNH no longer qualifies as a REIT; (ii) SNH notifies the Corporation that SNH’s Board of Trustees has determined that it is no longer inthe best interests of SNH to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Constructive Ownership and Transfers of shares of Capital Stock set forth herein is no longerrequired in order for SNH to qualify as a REIT; or (iii) the Corporation determines (and SNH concurs, in writing), that SNH derives and is expected to continue to derive less than one percent (1%) of its gross income (asdetermined for purposes of Section 856(c)(2) of the Code) pursuant to leases, mortgages or other arrangements with the Corporation and other Persons in which the Corporation owns (as determined under Section 856(d)(5) ofthe Code) an interest described in Section 856(d)(2)(B) of the Code.

SNH. The term “SNH” shall mean Senior Housing Properties Trust, a Maryland real estate investment trust, and its successors.

Transfer. The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event (or any agreement to take any such actions or cause any such events) thatcauses any Person to acquire Constructive Ownership of shares of Capital Stock or the right to vote or receive dividends on shares of Capital Stock, including without limitation, (a) the transfer of

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shares of Capital Stock to holders of common shares of SNH or HRPT in the Distribution, (b) any change in the capital structure of the Corporation which has the effect of increasing the total equity interest of any Person in theCorporation, (c) a change in the relationship between two or more Persons which causes a change in ownership of shares of Capital Stock by application of Section 318(a) of the Code, as modified by Section 856(d)(5), (d) thegrant or exercise of any option or warrant (or any disposition of any option or warrant, or any event that causes any option or warrant not theretofore exercisable to become exercisable), pledge, security interest or similar right toacquire shares of Capital Stock, (e) any disposition of any securities or rights convertible into or exchangeable for shares of Capital Stock or any interest in shares of Capital Stock or any exercise of any such conversion orexchange right, and (f) transfers of interests in other entities that result in changes in Constructive Ownership of shares of Capital Stock, in each case, whether voluntary or involuntary, whether owned of record orConstructively Owned, and whether by operation of law or otherwise. The terms “Transferring” and “Transferred” shall have the correlative meanings.

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Section 6.2 Restrictions on Ownership and Transfer of Shares.

Section 6.2.1 Ownership Limitations. During the period commencing on the Effective Date and ending at the close of business on the Restriction Termination Date:

(a) Basic Restrictions. (i) No Person, other than an Excepted Holder or an Excluded Holder, shall Constructively Own shares of Capital Stock in excess of the Ownership Limit, (ii) no Excepted Holder shallConstructively Own shares of Capital Stock in excess of the Excepted Holder Limit for such Excepted Holder, and (iii) no Excluded Holder shall Constructively Own shares of Capital Stock in excess of the ExcludedHolder Limit for such Excluded Holder.

(b) Transfer in Trust. If any Transfer of shares of Capital Stock occurs (whether or not such Transfer is the result of a transaction entered into through the facilities of the AMEX or any other national securitiesexchange or automated inter-dealer quotation system) which, if effective, would result in any Person Constructively Owning shares of Capital Stock in violation of Section 6.2.1(a)(i), 6.2.1(a)(ii) or 6.2.1(a)(iii), asapplicable; (i) then that number of shares of Capital Stock the Constructive Ownership of which otherwise would cause such Person to violate Section 6.2.1(a)(i), 6.2.1(a)(ii) or 6.2.1(a)(iii) (rounded upward to thenearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 6.3, effective as of the close of business on the Business Day prior to thedate of such Transfer (or as of the close of business on the Effective Date as to any such Transfer that occurs on the Effective Date), and such Person shall acquire no rights in such shares of Capital Stock; or (ii) if thetransfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 6.2.1(a)(i), 6.2.1(a)(ii) or 6.2.1(a)(iii), as applicable, then the Transfer ofthat number of shares of Capital Stock that otherwise would cause any Person to violate Section 6.2.1(a)(i) or 6.2.1(a)(ii) or 6.2.1(a)(iii), as applicable, shall be void ab initio, and the intended transferee shall acquire norights in such shares of Capital Stock.

Section 6.2.2 Remedies for Breach. If the Board of Directors or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in aviolation of Section 6.2.1(a) or that a Person intends to acquire or has attempted to acquire Constructive Ownership of any shares of Capital Stock in violation of Section 6.2.1(a) (whether or not such violation is intended), theBoard of Directors or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem sharesof Capital Stock, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfer or attempted Transfer or otherevent in violation of Section 6.2.1(a) shall automatically result in the transfer to the Charitable Trust described above, and, where applicable under Section 6.2.1(b)(ii), such Transfer (or other event) shall be void ab initio asprovided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof.

Section 6.2.3 Notice of Restricted Transfers. Any Person who acquires or attempts or intends to acquire Constructive Ownership of shares of Capital Stock that will or may violate Section 6.2.1(a), or anyPerson who would have owned shares of Capital Stock that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 6.2.1(b), shall immediately give written notice to the Corporation of such event, or inthe case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any,of such acquisition or ownership on SNH’s status as a REIT and the Corporation’s compliance with its covenants with SNH with respect thereto.

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Section 6.2.4 Owners Required to Provide Information. During the period commencing at the Effective Time and ending at the close of business on the Restriction Termination Date:

(a) Every stockholder of record of more than five percent of the outstanding shares of any series or class of Capital Stock, within 30 days after the end of each taxable year, shall give written notice to theCorporation stating the name and address of such owner, the number of shares owned, and a description of the manner in which such shares of Capital Stock are held; provided that a stockholder of record who holdsoutstanding shares of Capital Stock as nominee for another Person, which other Person is required to include in gross income the dividends received on such shares (an “Actual Owner”), shall give written notice to theCorporation stating the name and address of such Actual Owner and the number of shares of Capital Stock of such Actual Owner with respect to which the stockholder of record is nominee. Each such stockholder ofrecord and each Actual Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such ownership on SNH’s status as a REIT and toensure compliance with the Ownership Limit and the Corporation’s compliance of its covenants with SNH with respect thereto.

(b) Each Person who is a Constructive Owner of shares of Capital Stock and each Person (including the stockholder of record) who is holding shares of Capital Stock for a Constructive Owner shall provide tothe Corporation such information as the Corporation may request, in good faith, in order to help determine SNH’s status as a REIT and the Corporation’s compliance of its covenants with SNH with respect thereto.

Section 6.2.5 Remedies Not Limited. Subject to Section 6.4, nothing contained in this Section 6.2 shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable toprotect the Corporation and the interests of its stockholders in preserving SNH’s status as a REIT.

Section 6.2.6 Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Section 6.2, Section 6.3 or any definition contained in Section 6.1, the Board of Directors shall have thepower to determine the application of the provisions of this Section 6.2 or Section 6.3 with respect to any situation based upon the facts known to it. If Section 6.2 or 6.3 requires an action by the Board of Directors and thecharter of the Corporation fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions ofSections 6.1, 6.2 or 6.3.

Section 6.2.7 Exceptions.

(a) The Board of Directors, in its sole and absolute discretion, may grant to any Person who makes a request therefor (a “Requesting Person”) an exception to the Ownership Limit (or one or more elementsthereof) with respect to the ownership of any series or class of Capital Stock of the Corporation, subject to the following conditions and limitations: (i) (A) the Board of Directors shall have determined, in its sole andabsolute discretion, that the Requesting Person’s ownership of shares of Capital Stock in excess of the Ownership Limit pursuant to the exception requested hereunder (together with the ownership of shares of CapitalStock by all other Persons as permitted under this Article VI, taking into account any previously granted exceptions pursuant hereto) would not cause the Corporation or any Person in which the Corporation owns,directly or indirectly, any equity interest and which is a tenant of SNH or any entity in which SNH owns any equity interest, to be considered a “related party tenant” with respect to SNH for purposes of Section 856(d)(2)(B) of the Code, (B) the Board of Directors shall have determined, in its sole and absolute discretion, that the Requesting Person’s ownership of

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shares of Capital Stock in excess of the Ownership Limit pursuant to the exception requested hereunder (together with the ownership of shares of Capital Stock by all other Persons as permitted under this Article VI,taking into account any previously granted exceptions pursuant hereto) would not cause a default under the terms of any lease relating to real or personal property pursuant to which the Corporation is a party orreasonably expects to become a party, (C) the Board of Directors shall have determined, in its sole and absolute discretion, and in the case of each individual director, in his or her business judgment, that the RequestingPerson’s ownership of shares of Capital Stock in excess of the Ownership Limit pursuant to the exception requested hereunder (together with the ownership of shares of Capital Stock by all other Persons as permittedunder this Article VI, taking into account any previously granted exceptions pursuant hereto) is in the best interests of the Corporation, and (D) SNH shall have consented, in writing, to such exception; and (ii) suchRequesting Person provides to the Board of Directors, for the benefit of both the Corporation and SNH, such representations and undertakings, if any, as the Board of Directors or SNH may, in their sole and absolutediscretion of each of them, determine to be necessary in order for it to make the determination that the conditions set forth in clause (A) above of this Section 6.2.7(a) have been and/or will continue to be satisfied(including, without limitation, an agreement as to a reduced Ownership Limit or Excepted Holder Limit for such Requesting Person with respect to the Constructive Ownership of one or more other classes or series ofshares of Capital Stock not subject to the exception), and such Requesting Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of theremedies set forth in Section 6.2 with respect to shares of Capital Stock held in excess of the Ownership Limit or the Excepted Holder Limit (as may be applicable) with respect to such Requesting Person (determinedwithout regard to the exception granted such Requesting Person under this subparagraph (a)). If a member of the Board of Directors requests that the Board of Directors grant an exception pursuant to this subparagraph(a) with respect to such member, or with respect to any other Person if such member of the Board of Directors would be considered to be the Constructive Owner of shares of Capital Stock owned by such other Person,such member of the Board of Directors shall not participate in the decision of the Board of Directors as to whether to grant any such exception.

(b) Prior to granting any exception or exemption pursuant to subparagraph (a), the Board of Directors may require a ruling from the IRS and/or an opinion of counsel, in either case in form and substancesatisfactory to the Board of Directors, in its sole and absolute discretion as it may deem necessary or advisable in order to determine or ensure SNH’s status as a REIT; provided, however, that the Board of Directorsshall not be obligated to require obtaining a favorable ruling or opinion in order to grant an exception hereunder.

(c) An underwriter or initial purchaser that participates in a public offering or a private placement of shares of Capital Stock (or securities convertible into or exchangeable for shares of Capital Stock) mayConstructively Own shares of Capital Stock (or securities convertible into or exchangeable for shares of Capital Stock) in excess of the Ownership Limit, but only to the extent necessary to facilitate such public offeringor private placement; and provided, that the ownership of shares of Capital Stock by such underwriter or initial purchaser would not result in the Corporation or any Person in which the Corporation owns, directly orindirectly, any equity interest and which is a tenant of SNH or any entity in which SNH owns any equity interest, to be considered a “related party tenant” with respect to SNH for purposes of Section 856(d)(2)(B) of theCode.

(d) The Board of Directors may reduce the Excepted Holder Limit for an Excepted Holder only (1) with the written consent of such Excepted Holder at any time or (2) pursuant to the terms and conditions ofthe agreements and undertakings entered into with such Excepted

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Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder.

Section 6.2.8 Increase or Decrease in Ownership Limit. The Board of Directors may from time to time increase or decrease the Ownership Limit, subject to the limitations provided in this Section 6.2.8.

(a) Any decrease may be made only prospectively as to subsequent holders (other than a decrease as a result of a retroactive change in existing law, in which case such change shall be effective immediately).

(b) The Ownership Limit may not be increased without the written consent of SNH.

Section 6.2.9 Legend. Each certificate for shares of Capital Stock (or securities exercisable for or convertible into shares of Capital Stock) shall bear substantially the following legend:

The shares of Capital Stock represented by this certificate are subject to restrictions on Constructive Ownership and Transfer primarily for the purpose of assisting Senior Housing Properties Trust, a Marylandreal estate investment trust, in maintaining its status as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Except as expressly provided in theCorporation’s charter, (i) no Person may Constructively Own shares of Common Stock of the Corporation in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstandingshares of Common Stock of the Corporation unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable) or an Excluded Holder (in which case the Excluded HolderLimit shall be applicable); and (ii) with respect to any class or series of shares of Capital Stock other than Common Stock, no Person may Constructively Own more than 9.8 percent (in value or number ofshares, whichever is more restrictive) of the outstanding shares of such class or series of such Capital Stock of the Corporation (collectively, (i) and (ii) are referred to herein as the “Ownership Limit”), unlesssuch Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable) or an Excluded Holder (in which case the Excluded Holder Limit shall be applicable). Notwithstanding theforegoing, commencing at the time at which the distribution by Senior Housing Properties Trust, a Maryland real estate investment trust, of the Capital Stock of the Corporation (the “Distribution”) is effective,no Excluded Holder shall Constructively Own shares of Capital Stock in excess of the Excluded Holder Limit for such Excluded Holder. An “Excepted Holder” means a stockholder of the Corporation for whoman Excepted Holder Limit is created by the Board of Directors. An “Excluded Holder” means any Person who acquires Constructive Ownership of shares of Common Stock solely by reason of the Transfer ofCommon Stock in the Distribution and who, immediately following the Distribution, Constructively Owns shares of Common Stock in excess of the Ownership Limit solely by reason of the Transfer of CommonStock in the Distribution. The “Excluded Holder Limit” means, with respect to any Excluded Holder, the shares of Capital Stock that such Excluded Holder was considered to Constructively Own immediatelyfollowing the Distribution solely by reason of the Distribution (taking into account only such shares of Capital Stock and no other shares as to which such Person may thereafter become, for any reason, theConstructive

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Owner), provided, however, that (i) if the amount of shares of Capital Stock such Excluded Holder is considered to constructively own decreases by disposition or otherwise, but remains higher than theOwnership Limit, then such decreased amount shall become the Excluded Holder Limit, and (ii) if at any time the Excluded Holder Limit for any Excluded Holder would be less than the Ownership Limit, suchExcluded Holder shall cease to be an Excluded Holder and the Ownership Limit shall thereafter apply to such Person. Any Person who Constructively Owns or attempts to Constructively Own shares of CapitalStock which cause or will cause a Person to Constructively Own shares of Capital Stock in excess or in violation of the above limitations must immediately notify the Corporation. If any of the restrictions onTransfer are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Charitable Trustee of a Charitable Trust for the benefit (except as otherwise provided in the charter ofthe Corporation) of one or more Charitable Beneficiaries. In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio. A Personwho attempts to Constructively Own shares of Capital Stock in violation of the Transfer restrictions described above shall have no claim, cause of action or any recourse whatsoever against a transferor of suchshares of Capital Stock. All capitalized terms in this legend have the meanings defined in the Corporation’s charter, as the same may be amended from time to time, a copy of which, including the restrictions onTransfer, will be furnished to each holder of shares of Capital Stock of the Corporation on request and without charge.

Instead of the foregoing legend, the certificate may state that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge.

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Section 6.2.10 No Recourse. A Prohibited Owner shall have no claim, cause of action or other recourse whatsoever against the purported transferor of shares of Capital Stock causing the violation of therestrictions set forth in Section 6.2.1(a).

Section 6.3 Transfer of Shares of Capital Stock in the Corporation.

Section 6.3.1 Ownership in Trust. Upon any purported Transfer or other event described in Section 6.2.1(b) that would result in a transfer of shares of Capital Stock to a Charitable Trust, such shares of CapitalStock shall be deemed to have been transferred to the Charitable Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries (except to the extent otherwise provided inSection 6.3.5). Such transfer to the Charitable Trustee shall be deemed to be effective as of the close of business on the Business Day prior to any other purported Transfer or other event that otherwise results in the transfer tothe Charitable Trust pursuant to Section 6.2.1(b) (or as of the close of business on the Effective Date if such other purported Transfer or other event occurs on that date). The Charitable Trustee shall be appointed by theCorporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 6.3.7.

Section 6.3.2 Status of Shares Held by the Charitable Trustee. Shares of Capital Stock held by the Charitable Trustee shall be issued and outstanding shares of Capital Stock of the Corporation. The ProhibitedOwner shall (i) have no rights in the shares of Capital Stock held by the Charitable Trustee; (ii) not benefit economically from ownership of any shares of Capital Stock held in trust by the Charitable Trustee (except to the extentotherwise provided in Section 6.3.5); (iii) have no rights to dividends or other distributions; (iv) not possess any rights to vote or other rights attributable to the shares of Capital Stock held in the Charitable Trust; and (v) have noclaim, cause of action or other recourse whatsoever against the purported transferor of such shares of Capital Stock.

Section 6.3.3 Dividend and Voting Rights. The Charitable Trustee shall have all voting rights and rights to dividends or other distributions with respect to shares of Capital Stock held in the Charitable Trust,which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary (except to the extent otherwise provided in Section 6.3.5). Any dividend or other distribution paid prior to the discovery by the Corporationthat shares of Capital Stock have been transferred to the Charitable Trustee shall be paid with respect to such shares of Capital Stock to the Charitable Trustee by the Prohibited Owner upon demand and any dividend or otherdistribution authorized but unpaid shall be paid when due to the Charitable Trustee. Any dividends or distributions so paid over to the Charitable Trustee shall be held in trust for the Charitable Beneficiary. The ProhibitedOwner shall have no voting rights with respect to shares of Capital Stock held in the Charitable Trust and, subject to Maryland law, effective as of the date that shares of Capital Stock have been transferred to the CharitableTrustee, the Charitable Trustee shall have the authority (at the Charitable Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that shares of Capital Stockhave been transferred to the Charitable Trustee and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Corporationhas already taken irreversible corporate action, then the Charitable Trustee shall not have the power to rescind and recast such vote. Notwithstanding the provisions of this Article VI, until the Corporation has receivednotification that shares of Capital Stock have been transferred into a Charitable Trust, the Corporation shall be entitled to rely on its stock transfer and other stockholder records for purposes of preparing lists of stockholdersentitled to vote at meetings, determining the validity and authority of proxies, and otherwise conducting votes of stockholders.

Section 6.3.4 Rights Upon Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of or any distribution of the assets of the Corporation, the

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Charitable Trustee shall be entitled to receive, ratably with each other holder of shares of Capital Stock of the class or series of shares of Capital Stock that is held in the Charitable Trust, that portion of the assets of theCorporation available for distribution to the holders of such class or series (determined based upon the ratio that the number of shares of such class or series of shares of Capital Stock held by the Charitable Trustee bears to thetotal number of shares of Capital Stock of such class or series of shares of Capital Stock then outstanding). The Charitable Trustee shall distribute any such assets received in respect of the shares of Capital Stock held in theCharitable Trust in any liquidation, dissolution or winding up or distribution of the assets of the Corporation, in accordance with Section 6.3.5.

Section 6.3.5 Sale of Shares by Charitable Trustee.

(a) Within 20 days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Charitable Trust, the Charitable Trustee of the Charitable Trust shall sell the shares ofCapital Stock held in the Charitable Trust (together with the right to receive dividends or other distributions with respect to such shares of Capital Stock as to any shares of Capital Stock transferred to the CharitableTrustee as a result of the operation of Section 6.2.1(b)) to a person, designated by the Charitable Trustee, whose ownership of the shares of Capital Stock will not violate the ownership limitations set forth inSection 6.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in the shares of Capital Stock sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the ProhibitedOwner and to the Charitable Beneficiary as provided in this Section 6.3.5.

(b) A Prohibited Owner shall receive the lesser of (1) the net price paid by the Prohibited Owner for the shares of Capital Stock or, if the Prohibited Owner did not give value for the shares of Capital Stock inconnection with the event causing the shares of Capital Stock to be held in the Charitable Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares of Capital Stock on the day ofthe event causing the shares of Capital Stock to be held in the Charitable Trust, and (2) the net sales proceeds per share received by the Charitable Trustee from the sale or other disposition of the shares of Capital Stockheld in the Charitable Trust. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation thatshares of Capital Stock have been transferred to the Charitable Trustee, such shares of Capital Stock are sold by a Prohibited Owner, then (i) such shares of Capital Stock shall be deemed to have been sold on behalf ofthe Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares of Capital Stock that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to thisSection 6.3.5, such excess shall be paid to the Charitable Trustee upon demand.

Section 6.3.6 Purchase Right in Stock Transferred to Trustee. Shares of Capital Stock transferred to the Charitable Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at aprice per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise, gift or other such transaction, the Market Price of the shares of CapitalStock on the day of the event causing the shares of Capital Stock to be held in the Charitable Trust) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the rightto accept such offer until the Charitable Trustee has sold the shares of Capital Stock held in the Charitable Trust pursuant to Section 6.3.5. Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in theshares of Capital Stock sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and the Charitable Beneficiary as provided in Section 6.3.5.

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Section 6.3.7 Designation of Charitable Beneficiaries. By written notice to the Charitable Trustee, the Corporation shall designate from time to time one or more nonprofit organizations to be the CharitableBeneficiary of the interest in the Charitable Trust such that (i) shares of Capital Stock held in the Charitable Trust would not violate the restrictions set forth in Section 6.2.1(a) in the hands of such Charitable Beneficiary and(ii) each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055and 2522 of the Code.

Section 6.4 AMEX Transactions. Nothing in this Article VI shall preclude the settlement of any transaction entered into through the facilities of the AMEX or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction takes place shall not negate the effect of any other provision of this Article VI and any transferee in such a transaction shall be subject to all of theprovisions and limitations set forth in this Article VI.

Section 6.5 Enforcement. The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VI.

Section 6.6 Non-Waiver. No delay or failure on the part of the Corporation or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the Board of Directors,as the case may be, except to the extent specifically waived in writing.

Section 6.7 Enforceability. If any of the restrictions on transfer of shares of Capital Stock contained in this Article VI are determined to be void, invalid or unenforceable by any court of competent jurisdiction, then theProhibited Owner may be deemed, at the option of the Corporation, to have acted as an agent of the Corporation in acquiring such shares and to hold such shares on behalf of the Corporation.

Section 6.8 Amendments. Notwithstanding any other provisions of the charter or Bylaws of the Corporation, prior to the Restriction Termination Date, the written consent of SNH shall be required to amend, alter,change, repeal, or adopt any provisions inconsistent with, the provisions of this Article VI.

ARTICLE VII AMENDMENTS

The Corporation reserves the right from time to time to make any amendment to its charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in thecharter, of any shares of outstanding stock. All rights and powers conferred by the charter on stockholders, directors and officers are granted subject to this reservation. Subject to Section 2-605 of the MGCL and except asotherwise provided in the charter, any amendment to the charter shall be valid only if (a) such amendment is first declared advisable by the Board of Directors, and (b) then approved by (i) the affirmative vote of a majority of allthe votes entitled to be cast on the matter, or (ii) if Maryland law hereafter permits the effectiveness or validity of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter or any suchlesser proportion permitted under Maryland law.

ARTICLE VIII LIMITATION OF LIABILITY

To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no director or officer of the Corporation shall be liable to the Corporationor its stockholders for money damages. Neither the amendment nor repeal of this Article VIII, nor the adoption or amendment of any other provision of the charter or Bylaws inconsistent

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with this Article VIII, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

ARTICLE IX INCORPORATOR

The undersigned, Michael A. Mingolelli, Jr., Esq., whose address is c/o Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts 02109, being at least 18 years of age, does hereby form a corporationunder the general laws of the State of Maryland.

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Exhibit 4.1 SEE REVERSE FOR IMPORTANT NOTICE ON TRANSFER RESTRICTIONS AND OTHER INFORMATION CUSIP 33832D 20 5 A CORPORATION FORMED UNDER THE LAWS OF THE STATE OF MARYLAND THIS CERTIFIES THAT BY COUNTERSIGNED AND REGISTERED: EQUINITI TRUST COMPANY is the owner of FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF FIVE STAR SENIOR LIVING INC. (the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Charter and BylawsCOMMON of the Corporation and any amendments thereto. The holder of this Certificate and every transferee or assignee hereof by accepting or holding the same agrees to be bound by all of the provisions of the Charter and Bylaws of the Corporation, as amended from time to time. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. AUTHORIZED SIGNATURE IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed on its behalf by its duly authorized officers. TRANSFER AGENT Dated: AND REGISTRAR PRESIDENT AND CHIEF EXECUTIVE OFFICER EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER AMERICAN FINANCIAL PRINTING INCORPORATED – MINNEAPOLIS

FIVE STAR SENIOR LIVING INC. IMPORTANT NOTICE PURSUANT AND SUBJECT TO THE TERMS OF THE CHARTER OF THE CORPORATION (TOGETHER WITH ALL AMENDMENTS THERETO, THE “CHARTER”), THE CORPORATION HAS THE AUTHORITY TO CREATE ONE OR MORE ADDITIONAL CLASSES OR SERIES OF SHARES AND ISSUE ADDITIONAL SHARES OF ANY EXISTING CLASS OR SERIES OF SHARES. THE CORPORATION WILL FURNISH A FULL STATEMENT OF (i) THE AUTHORITY OF THE CORPORATION TO CREATE ADDITIONAL CLASSES OR SERIES OF SHARES AND ISSUE ADDITIONAL SHARES OF ANY EXISTING CLASS OR SERIES OF SHARES, (ii) THE TERMS OF ANY EXISTING CLASS OR SERIES OF SHARES, AND (iii) SUCH OTHER INFORMATION AS IS REQUIRED BY APPLICABLE LAW, WITHOUT CHARGE TO ANY SHAREHOLDER UPON REQUEST TO THE SECRETARY OF THE CORPORATION. THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON OWNERSHIP AND TRANSFER WHICH ARE OR MAY HEREAFTER BE CONTAINED IN THE CHARTER OR IN THE BYLAWS OF THE CORPORATION, AS AMENDED FROM TIME TO TIME (THE “BYLAWS”), INCLUDING PROVISIONS OF THE CHARTER WHICH PROHIBIT THE OWNERSHIP OF MORE THAN 9.8% OF ANY CLASS OR SERIES OF THE CORPORATION’S SECURITIES BY ANY PERSON OR GROUP AND PROVISIONS OF THE BYLAWS PROHIBITING, FOR PURPOSES OF PRESERVING CERTAIN TAX BENEFITS OF THE CORPORATION, TRANSFERS OF THE CORPORATION’S SHARES TO THE EXTENT THAT, AS A RESULT OF SUCH TRANSFER, EITHER A PERSON, ENTITY OR GROUP WOULD OWN 5% OR MORE OF THE CORPORATION’S OUTSTANDING SHARES OR THE PERCENTAGE OWNERSHIP OF ANY PERSON, ENTITY OR GROUP THEN OWNING 5% OR MORE OF THE CORPORATION’S OUTSTANDING SHARES WOULD INCREASE AS A RESULT. THIS DESCRIPTION OF THE RESTRICTIONS UPON OWNERSHIP OR TRANSFER OF THE CORPORATION’S SECURITIES IS NOT COMPLETE. A MORE COMPLETE DESCRIPTION OF THESE RESTRICTIONS AND OF VARIOUS RIGHTS AND OBLIGATIONS OF SHAREHOLDERS APPEARS IN THE CHARTER OR BYLAWS, AS APPLICABLE, AND IN CERTAIN OTHER AGREEMENTS WHICH MAY FROM TIME TO TIME BE ENTERED INTO BY THE CORPORATION AFFECTING THE RIGHTS AND OBLIGATIONS OF SHAREHOLDERS. COPIES OF THE CHARTER, BYLAWS AND AGREEMENTS AFFECTING THE RIGHTS AND OBLIGATIONS OF SHAREHOLDERS AS IN EFFECT FROM TIME TO TIME WILL BE SENT WITHOUT CHARGE TO ANY SHAREHOLDER UPON REQUEST TO THE SECRETARY OF THE CORPORATION. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: UTMA – ____________ Custodian ____________ TEN COM – as tenants incommon (Cust) (Minor) TEN ENT – as tenants by entireties under Uniform Transfers to Minors JT TEN – as joint tenants with right of survivorship Act ________________________________ and not as tenants in common (State) Additional abbreviations may also be used though not in above list. For value received ________________________________________________ hereby sell, assign, and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE) Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated ________________ X X NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE GUARANTEED ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH AS A BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM (“STAMP”), THE NEW YORK STOCK EXCHANGE, INC. MEDALLION SIGNATURE PROGRAM (“MSP”), OR THE STOCK EXCHANGES MEDALLION PROGRAM (“SEMP”) AND MUST NOT BE DATED. GUARANTEES BY A NOTARY PUBLIC ARE NOT ACCEPTABLE.

Exhibit 10.1


FORM OF [AMENDED AND RESTATED] INDEMNIFICATION AGREEMENT

THIS [AMENDED AND RESTATED] INDEMNIFICATION AGREEMENT (this “Agreement”), effective as of [DATE] (the “Effective Date”), by and between Five Star Senior Living Inc., a Maryland corporation (the “Company”), and[DIRECTOR/OFFICER] (“Indemnitee”).

WHEREAS, Indemnitee currently serves as a director and/or officer of the Company and may, in connection therewith, be subjected to claims, suits or proceedings arising from such service; and

WHEREAS, as an inducement to Indemnitee to continue to serve as such, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximumextent permitted by law as hereinafter provided; and

WHEREAS, the parties [are currently parties to an Indemnification Agreement dated as of [DATE] (the “Prior Indemnification Agreement”) and] desire to [amend and restate the Prior Indemnification Agreement and] set forth their agreementregarding indemnification and advancement of expenses [as reflected herein];

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions. For purposes of this Agreement:

(a) “Board” means the board of directors of the Company.

(b) “Bylaws” means the bylaws of the Company, as they may be amended from time to time.

(c) “Change in Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response toany similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such aChange in Control shall be deemed to have occurred if after the Effective Date:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Companyrepresenting 10% or more of the combined voting power of all the Company’s then outstanding securities entitled to vote generally in the election of directors without the prior approval of at least two-thirds of the members of the Board in officeimmediately prior to such person attaining such percentage interest;

(ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board then in

office, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter; or

(iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 1, individuals who at the beginning of such period constituted the Board (including for thispurpose any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reasonto constitute at least a majority of the Board.

(d) “Charter” means the charter (as defined in the MGCL), of the Company, as it may be in effect from time to time.

(e) “Company Status” means the status of a Person who is or was a director, trustee, manager, officer, partner, employee, agent or fiduciary of the Company or any predecessor of the Company or any of their majority ownedsubsidiaries and the status of a Person who, while a director, trustee, manager, officer, partner, employee, agent or fiduciary of the Company or any predecessor of the Company or any of their majority owned subsidiaries, is or was serving at the request of theCompany or any predecessor of the Company or any of their majority owned subsidiaries as a director, trustee, manager, officer, partner, employee, agent or fiduciary of another corporation, real estate investment trust, partnership, limited liability company, jointventure, trust, employee benefit plan or any other Enterprise.

(f) “control” of an entity, shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities, by contract orotherwise.

(g) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification or advance of Expenses is sought by Indemnitee.

(h) “Enterprise” shall mean the Company and any other corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving atthe express written request of the Company as a director, trustee, manager, officer, partner, employee, agent or fiduciary.

(i) “Expenses” means all expenses, including, but not limited to, all attorneys’ fees and costs, retainers, court or arbitration costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and bindingcosts, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to bea witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium,security for, and other costs relating to any cost bond or other appeal bond or its equivalent.

(j) “Independent Counsel” means a law firm, or a member of a law firm, selected by the Company and acceptable to Indemnitee, that is experienced in matters of business law. If, within twenty (20) days after submission byIndemnitee of a written demand for indemnification pursuant to Section 7(a) hereof, no Independent Counsel shall have been selected and agreed to by Indemnitee, either the Company or Indemnitee may petition a Chosen Court (as defined in Section 18) for theappointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person so appointed shall act as Independent Counsel hereunder.

(k) “MGCL” means the Maryland General Corporation Law.

(l) “Person” means an individual, a corporation, a general or limited partnership, an association, a limited liability company, a governmental entity, a trust, a joint venture, a joint stock company or another entity or organization.

(m) “Proceeding” means any threatened, pending or completed claim, demand, action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other proceeding, whether civil,criminal, administrative or investigative (including on appeal), whether or not by or in the right of the Company, except one initiated by an Indemnitee pursuant to Section 9.

Section 2. Indemnification - General. The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the Effective Date and asamended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the Effective Date. The rights of Indemnitee provided in thisSection 2 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the MGCL, the Charter or the Bylaws.

Section 3. Proceedings Other Than Derivative Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of Indemnitee’s Company Status, Indemnitee is, or is

threatened to be, made a party to any Proceeding, other than a derivative Proceeding by or in the right of the Company (or, if applicable, such other Enterprise at which Indemnitee is or was serving at the request of the Company or a predecessor of the Companyor any of their majority owned subsidiaries). Pursuant to this Section 3, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection witha Proceeding by reason of Indemnitee’s Company Status unless it is finally determined that such indemnification is not permitted by the MGCL, the Charter or the Bylaws.

Section 4. Derivative Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of Indemnitee’s Company Status, Indemnitee is, or is threatened to be, made a

party to any derivative Proceeding brought by or in the right of the Company (or, if applicable, such other Enterprise at which Indemnitee is or was serving at the request of the Company or a predecessor of the Company or any of their majority ownedsubsidiaries). Pursuant to this Section 4, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding unless it isfinally determined that such indemnification is not permitted by the MGCL, the Charter or the Bylaws.

Section 5. Indemnification for Expenses of a Party Who is Partly Successful. Without limitation on Section 3 or Section 4, if Indemnitee is not wholly successful in any Proceeding covered by this Agreement, but is successful, on the merits orotherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 5 for all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfullyresolved claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed tobe a successful result as to such claim, issue or matter.

Section 6. Advancement of Expenses. The Company, without requiring a preliminary determination of Indemnitee’s ultimate entitlement to indemnification hereunder, shall advance all Expenses incurred by or on behalf of Indemnitee in connectionwith any Proceeding in which Indemnitee may be involved, or is threatened to be involved, including as a party, a witness or otherwise, by reason of Indemnitee’s Company Status, within ten (10) days after the receipt by the Company of a statement orstatements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall bepreceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by the MGCL, the Charter and the Bylaws has been met and a writtenundertaking by or on behalf of Indemnitee, in substantially the form of Exhibit A hereto or in such other form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced toIndemnitee relating to any claims, issues or matters in the Proceeding as to which it shall be finally determined that the standard of conduct has not been met and which have not been successfully resolved as described in Section 5. For the avoidance of doubt,the Company shall advance Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with such a Proceeding pursuant to this Section 6 until it is finally determined that Indemnitee is not entitled to indemnification under the MGCL, the Charteror the Bylaws in respect of such Proceeding. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertakingrequired by this Section 6 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor. AtIndemnitee’s request, advancement of any such Expense shall be made by the Company’s direct payment of such Expense instead of reimbursement of Indemnitee’s payment of such Expense.

Section 7. Procedure for Determination of Entitlement to Indemnification.

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written demand therefor. The Secretary of the Company shall, promptly upon receipt of such a demand for indemnification, providecopies of the demand to the Board.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in thespecific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred or if, after a Change in Control,Indemnitee shall so request, (A) by the Board (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Directors, or (B) if a quorum of the Board consisting of Disinterested Directors is not obtainable or, even ifobtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (C) if so directed by a majority of the members of the Board, by the stockholders of theCompany; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall actreasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under this Agreement.

(c) The Company shall pay the fees and expenses of Independent Counsel, if one is appointed, and shall agree to fully indemnify such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of

or relating to this Agreement or the Independent Counsel’s engagement as such pursuant hereto.

Section 8. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the Person or Persons making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyoneseeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(b) It shall be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumptionshall have the burden of proof and the burden of persuasion by clear and convincing evidence. Without limitation of the foregoing, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of theEnterprise, including financial statements, or on information supplied to Indemnitee by officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterpriseby an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge or actions, or failure to act, of any director, trustee, manager, officer, partner, employee, agent orfiduciary of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

(c) Neither the failure to make a determination pursuant to Section 7(b) as to whether indemnification is proper in the circumstances because Indemnitee has met any particular standard of conduct, nor an actual determination by theCompany (including by the Board or Independent Counsel) pursuant to Section 7(b) that Indemnitee has not met such standard of conduct, shall be a defense to Indemnitee’s claim that indemnification is proper in the circumstances or create a presumption thatIndemnitee has not met any particular standard of conduct.

(d) The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, shall not in and of itself adversely affect the right ofIndemnitee to indemnification or create a presumption that Indemnitee did not meet the standard of conduct required for indemnification. The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits aparty to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of suchaction, claim or proceeding with or without payment of money or other consideration), it shall be presumed that Indemnitee has been successful on the merits or otherwise in such Proceeding. Anyone seeking to overcome this presumption shall have the burdenof proof and the burden of persuasion by clear and convincing evidence.

Section 9. Remedies of Indemnitee.

(a) If (i) a determination is made pursuant to Section 7(b) that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 6, (iii) no determination of entitlementto indemnification shall have been made pursuant to Section 7(b) within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 within ten (10) days after receipt by theCompany of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall (A) unless the Company demands arbitration asprovided by Section 17, be entitled to an adjudication in a Chosen Court or (B) be entitled to seek an award in arbitration as provided by Section 17, in each case of Indemnitee’s entitlement to such indemnification or advance of Expenses.

(b) In any judicial proceeding or arbitration commenced pursuant to this Section 9, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be. In theevent that a determination shall have been made pursuant to Section 7(b) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 9 shall be conducted in all respects as a de novo trial on themerits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 7(b).

(c) If a determination shall have been made pursuant to Section 7(b) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant tothis Section 9, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the demand for indemnification.

(d) In the event that Indemnitee, pursuant to this Section 9, seeks a judicial adjudication of or an award in arbitration as provided by Section 17 to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreementby the Company, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall indemnify Indemnitee against any and all Expenses incurred by Indemnitee in such judicial adjudication or arbitrationand, if requested by Indemnitee, the Company shall (within ten (10) days after receipt by the Company of a written demand therefor) advance, to the extent not prohibited by law, the Charter or the Bylaws, any and all such Expenses.

(e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 9 that the procedures and presumptions of this Agreement are not valid, binding and enforceable andshall stipulate in any such judicial proceeding or arbitration that the Company is bound by all the provisions of this Agreement.

(f) To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line ofcredit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of Indemnitee.

(g) Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which theCompany pays or is obligated to pay for the period (i) commencing with either the tenth (10th) day after the date on which the Company was requested to advance Expenses in accordance with Section 6 of this Agreement or the thirtieth (30th) day after the dateon which the Company was requested to make the determination of entitlement to indemnification under Section 7(b) of this Agreement, as applicable, and (ii) ending on the date such payment is made to Indemnitee by the Company.

Section 10. Defense of the Underlying Proceeding.

(a) Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to any Proceeding which mayresult in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification orthe advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is therebyactually so prejudiced.

(b) Subject to the provisions of the last sentence of this Section 10(b) and of Section 10(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided,however, that the Company shall notify Indemnitee of any such decision to defend within fifteen (15) days following receipt of notice of any such Proceeding under Section 10(a) above, and the counsel selected by the Company shall be reasonably satisfactory toIndemnitee. The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, (ii) does notinclude, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee or (iii) has the actual or purported effect of extinguishing,limiting or impairing Indemnitee’s rights hereunder. This Section 10(b) shall not apply to a Proceeding brought by Indemnitee under Section 9 above or Section 15.

(c) Notwithstanding the provisions of Section 10(b), if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Company Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by theCompany, which approval shall not be unreasonably withheld, that Indemnitee may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonablyconcludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) theCompany fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject to the prior approval of the Company, which shall not be unreasonably withheld,at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other Person takes any action to declare this Agreement void or unenforceable, or institutes anyProceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company (subject to Section 9(d)), to representIndemnitee in connection with any such matter.

Section 11. Liability Insurance.

(a) To the extent the Company maintains an insurance policy or policies providing liability insurance for any of its directors or officers, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, tothe maximum extent of the coverage available for any Company director or officer during Indemnitee’s tenure as a director or officer and, following a termination of Indemnitee’s service in connection with a Change in Control, for a period of six (6) yearsthereafter.

(b) If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such proceedingto the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding inaccordance with the terms of such policies.

(c) In the event of any payment by the Company under this Agreement the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with respect to any insurance policy. Indemniteeshall take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights in accordance with the terms of such insurance policy. The Company shall pay or reimburseall expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

Section 12. Non-Exclusivity; Survival of Rights.

(a) The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter or theBylaws, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right ofIndemnitee under this Agreement in respect of any action taken or omitted by Indemnitee in Indemnitee’s Company Status prior to such amendment, alteration or repeal. To the extent that a change in the MGCL permits greater indemnification to Indemniteethan would be afforded currently under the MGCL, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change if permitted by the MGCL. No right or remedy herein conferred is intended tobe exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of anyright or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actuallyreceived such payment under any insurance policy, contract, agreement or otherwise.

Section 13. Binding Effect.

(a) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct orindirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, trustee, manager, officer, partner, employee, agent orfiduciary of the Company or a director, trustee, manager, officer, partner, employee, agent or fiduciary of another Enterprise which such Person is or was serving at the request of the Company or a predecessor of the Company or any of their majority ownedsubsidiaries, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

(b) Any successor of the Company (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part of, the business or assets of the Company shall be automatically deemed tohave assumed and agreed to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place, provided that no such assumption shall relieve the Company of its obligationshereunder. To the extent required by applicable law to give effect to the foregoing sentence and to the extent requested by Indemnitee, the Company shall require and cause any such successor to expressly assume and agree to perform this Agreement by writtenagreement in form and substance satisfactory to Indemnitee.

Section 14. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement

(including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b)to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal orunenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 15. Limitation and Exception to Right of Indemnification or Advance of Expenses. Notwithstanding any other provision of this Agreement, (a) any indemnification or advance of Expenses to which Indemnitee is otherwise entitled under theterms of this Agreement shall be made only to the extent such indemnification or advance of Expenses does not conflict with applicable Maryland law and (b) Indemnitee shall not be entitled to indemnification or advance of Expenses under this Agreement withrespect to any Proceeding brought by Indemnitee, unless (i) the Proceeding is brought to enforce rights under this Agreement, the Charter, the Bylaws, liability insurance policy or policies, if any, or otherwise or (ii) the Charter, the Bylaws, a resolution of thestockholders entitled to vote generally in the election of directors or of the Board or an agreement approved by the Board to which the Company is a party expressly provides otherwise. Notwithstanding any other provision of this Agreement, a court ofappropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances: (a) if such court determines that Indemnitee is entitled toreimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or (b) if such court determines that Indemnitee is fairly andreasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standard of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefitunder Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper without regard to any limitation on such court-ordered indemnification contemplated by Section 2-418(d)(2)(ii) of the MGCL.

Section 16. Specific Performance, Etc. The parties hereto recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation,Indemnitee shall be entitled, if Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee mayelect to pursue.

Section 17. Arbitration.

(a) Any disputes, claims or controversies regarding Indemnitee’s entitlement to indemnification or advancement of Expenses hereunder or otherwise arising out of or relating to this Agreement, including any disputes, claims orcontroversies brought by or on behalf of a party hereto or any holder of equity interests (which, for purposes of this Section 17, shall mean any holder of record or any beneficial owner of equity interests or any former holder of record or beneficial owner ofequity interests) of a party, either on his, her or its own behalf, on behalf of a party or on behalf of any series or class of equity interests of a party or holders of equity interests of a party against a party or any of their respective trustees, directors, members,officers, managers, agents or employees, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Agreement, including this Section 17 or the governing documents of a party (allof which are referred to as “Disputes”), or relating in any way to such a Dispute or Disputes, shall, on the demand of any party to such Dispute or Disputes, be resolved through binding and final arbitration in accordance with the Commercial Arbitration Rules(the “Rules”) of the American Arbitration Association (“AAA”) then in effect, except as those Rules may be modified in this Section 17. For the avoidance of doubt, and not as a limitation, Disputes are intended to include derivative actions against the trustees,directors, officers or managers of a party and class actions by a holder of equity interests against those individuals or entities and a party. For the avoidance of doubt, a Dispute shall include a Dispute made derivatively on behalf of one party against anotherparty. For purposes of this Section 17, the term “equity interest” shall mean (i) in respect of the Company, shares of beneficial interest of the Company, (ii) shares of “membership interests” in an entity that is a limited liability company, (iii) general partnershipinterests in an entity that is a partnership, (iv) shares of capital stock of an entity that is a corporation and (v) similar equity ownership interests in other entities.

(b) There shall be three (3) arbitrators. If there are only two (2) parties to the Dispute, each party shall select one (1) arbitrator within fifteen (15) days after receipt by respondent of a copy of the demand for arbitration. The arbitratorsmay be affiliated or interested persons of the parties. If there are more than two (2) parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand, shall select, by the vote of a majority of the claimants or the respondents, as the casemay be, one (1) arbitrator within fifteen (15) days after receipt of the demand for arbitration. The arbitrators may be affiliated or interested persons of the claimants or the respondents, as the case may be. If either a claimant (or all claimants) or a respondent (orall respondents) fail(s) to timely select an arbitrator then the party (or parties) who has selected an arbitrator may request AAA to provide a list of three (3) proposed arbitrators in accordance with the Rules (each of whom shall be neutral, impartial andunaffiliated with any party) and the party (or parties) that failed to timely appoint an arbitrator shall have ten (10) days from the date AAA provides the list to select one (1) of the three (3) arbitrators proposed by AAA. If the party (or parties) fail(s) to select thesecond (2nd) arbitrator by that time, the party (or parties) who have appointed the first (1st) arbitrator shall then have ten (10) days to select one (1) of the three (3) arbitrators proposed by AAA to be the second (2nd) arbitrator; and, if he/they should fail to selectthe second (2nd) arbitrator by such time, AAA shall select, within fifteen (15) days thereafter, one (1) of the three (3) arbitrators it had proposed as the second (2nd) arbitrator. The two (2) arbitrators so appointed shall jointly appoint the third (3rd) and presidingarbitrator (who shall be neutral, impartial and unaffiliated with any party) within fifteen (15) days of the appointment of the second (2nd) arbitrator. If the third (3rd) arbitrator has not been appointed within the time limit specified herein, then AAA shall providea list of proposed arbitrators in accordance with the Rules, and the arbitrator shall be appointed by AAA in accordance with a listing, striking and ranking procedure, with each party having a limited number of strikes, excluding strikes for cause.

(c) The place of arbitration shall be Boston, Massachusetts unless otherwise agreed by the parties.

(d) There shall be only limited documentary discovery of documents directly related to the issues in dispute, as may be ordered by the arbitrators. For the avoidance of doubt, it is intended that there shall be no depositions and no otherdiscovery other than limited documentary discovery as described in the preceding sentence.

(e) In rendering an award or decision (an “Award”), the arbitrators shall be required to follow the laws of the State of Maryland without regard to principles of conflicts of law. Any arbitration proceedings or award rendered hereunderand the validity, effect and interpretation of this arbitration agreement shall be governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq. An Award shall be in writing and shall state the findings of fact and conclusions of law on which it is based. Anymonetary Award shall be made and payable in U.S. dollars free of any tax, deduction or offset. Subject to Section 17(g), each party against which an Award assesses a monetary obligation shall pay that obligation on or before the thirtieth (30th) day followingthe date of such Award or such other date as the Award may provide.

(f) Except to the extent expressly provided by this Agreement or as otherwise agreed by the parties hereto, each party and each Person acting or seeking to act in a representative capacity (such Person, a “Named Representative”)involved in a Dispute shall bear its own costs and expenses (including attorneys’ fees), and the arbitrators shall not render an Award that would include shifting of any such costs or expenses (including attorneys’ fees) or, in a derivative case or class action,award any portion of a party’s award to its attorneys, a Named Representative or any attorney of a Named Representative. Each party (or, if there are more than two (2) parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand,respectively) shall bear the costs and expenses of its (or their) selected arbitrator and the parties (or, if there are more than two (2) parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand) shall equally bear the costs andexpenses of the third (3rd) appointed arbitrator.

(g) Notwithstanding any language to the contrary in this Agreement, an Award, including but not limited to any interim Award, may be appealed pursuant to the AAA’s Optional Appellate Arbitration Rules (the “Appellate Rules”). An Award shall not be considered final until after the time for filing the notice of appeal pursuant to the Appellate Rules has expired. Appeals must be initiated within thirty (30) days of receipt of an Award by filing a notice of appeal with any AAA office.Following the appeal process, the decision rendered by the appeal tribunal may be entered in any court having jurisdiction thereof. For the avoidance of doubt, and despite any contrary provision of the Appellate Rules, Section 17(f) shall apply to any appealpursuant to this Section 17 and the appeal tribunal shall not render an Award that would include shifting of any costs or expenses (including attorneys’ fees) of any party or Named Representative or the payment of such costs and expenses, and all costs andexpenses of a party or Named Representative shall be its sole responsibility.

(h) Following the expiration of the time for filing the notice of appeal, or the conclusion of the appeal process set forth in Section 17(g), an Award shall be final and binding upon the parties thereto and shall be the sole and exclusiveremedy between those parties relating to the Dispute, including any claims, counterclaims, issues or accounting presented to the arbitrators. Judgment upon an Award may be entered in any court having jurisdiction. To the fullest extent permitted by law, noapplication or appeal to any court of competent jurisdiction may be made in connection with any question of law arising in the course of arbitration or with respect to any award made except for actions relating to enforcement of this agreement to arbitrate or anyarbitral award issued hereunder and except for actions seeking interim or other provisional relief in aid of arbitration proceedings in any court of competent jurisdiction.

(i) This Section 17 is intended to benefit and be enforceable by the parties hereto and their respective holders of equity interests, trustees, directors, officers, managers, agents or employees, and their respective successors and assigns,and shall be binding upon all such parties and their respective holders of equity interests, and be in addition to, and not in substitution for, any other rights to indemnification or contribution that such individuals or entities may have by contract or otherwise.

Section 18. Venue. Each party hereto agrees that it shall bring any Proceeding in respect of any claim arising out of or related to this Agreement exclusively in the courts of the State of Maryland and the Federal courts of the United States, in each case,located in the City of Baltimore (the “Chosen Courts”). Solely in connection with claims arising under this Agreement, each party irrevocably and unconditionally (i) submits to the exclusive jurisdiction of the Chosen Courts, (ii) agrees not to commence anysuch Proceeding except in such courts, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such Proceeding in the Chosen Courts, (iv) waives, to the fullest extentpermitted by law, the defense of an inconvenient forum to the maintenance of such Proceeding, (v) agrees that service of process upon such party in any such Proceeding shall be effective if notice is given in accordance with Section 24 and (vi) agrees to requestand/or consent to the assignment of any dispute arising out of this Agreement or the transactions contemplated by this Agreement to the Chosen Courts’ Business and Technology Case Management Program, or similar program. Nothing in this Agreement willaffect the right of any party hereto to serve process in any other manner permitted by law. A final judgment in any such Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS. Notwithstanding anythingherein to the contrary, if a demand for arbitration of a Dispute is made pursuant to Section 17, this Section 18 shall not preempt resolution of the Dispute pursuant to Section 17.

Section 19. Adverse Settlement. The Company shall not seek, nor shall it agree to or support, or agree not to contest any settlement or other resolution of any matter that has the actual or purported effect of extinguishing, limiting or impairingIndemnitee’s rights hereunder, including without limitation the entry of any bar order or other order, decree or stipulation, pursuant to 15 U.S.C. § 78u-4 (the Private Securities Litigation Reform Act), or any similar foreign, federal or state statute, regulation, ruleor law.

Section 20. Period of Limitations. To the fullest extent permitted by law, no legal action shall be brought, and no cause of action shall be asserted, by or on behalf of the Company or any controlled affiliate of the Company against Indemnitee,Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its controlled affiliate shall be extinguished anddeemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

Section 21. Counterparts. This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties hereto anddelivered to the other party (including via facsimile or other electronic transmission), it being understood that each party hereto need not sign the same counterpart.

Section 22. Delivery by Electronic Transmission. This Agreement and any signed agreement or instrument entered into in connection with this Agreement or contemplated hereby, and any amendments hereto or thereto, to the extent signed anddelivered by means of an electronic transmission, including by a facsimile machine or via email, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were theoriginal signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to the other parties. No party hereto or toany such agreement or instrument shall raise the use of electronic transmission by a facsimile machine or via email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through electronic transmissionas a defense to the formation of a contract and each such party forever waives any such defense.

Section 23. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to, orshall, constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 24. Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is accepted by the party to whom it is given,and shall be given by being delivered at the following addresses to the parties hereto:

(a) If to Indemnitee, to: The address set forth on the signature page hereto.

(b) If to the Company to:

Five Star Senior Living Inc.400 Centre StreetNewton, Massachusetts 02458-2094Attn: Secretary

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

Section 25. Governing Law. The provisions of this Agreement and any Dispute, whether in contract, tort or otherwise, shall be governed by and construed in accordance with the laws of the State of Maryland without regard to its conflicts of laws rules.

Section 26. Interpretation.

(a) Generally. Unless the context otherwise requires, as used in this Agreement: (a) words defined in the singular have the parallel meaning in the plural and vice versa; (b) “Articles,” “Sections,” and “Exhibits” refer to Articles,

Sections and Exhibits of this Agreement unless otherwise specified; and (c) “hereto” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

(b) Additional Interpretive Provisions. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. Any capitalized term used in any Exhibit to thisAgreement, but not otherwise defined therein, shall have the meaning as defined in this Agreement. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder and anysuccessor statute or statutory provision. References to any agreement are to that agreement as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors andpermitted assigns of that Person. Reference to any agreement, document or instrument means the agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof.

(c) [Expansion of Indemnification. This amendment and restatement of the Prior Indemnification Agreement is intended to expand, and not to limit, the scope of indemnification provided to Indemnitee under the PriorIndemnification Agreement, and this Agreement shall be interpreted consistent with such intent.]

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Agreement as of the date first written above.

Inf


By: Name: Title:

[INDEMNITEE]

Indemnitee’s Address:

[ ]

[Signature Page to [Amended and Restated] Indemnification Agreement]

EXHIBIT A

FORM OF AFFIRMATION AND

UNDERTAKING TO REPAY EXPENSES ADVANCED To the Board of Directors of Five Star Senior Living Inc.:

This affirmation and undertaking is being provided pursuant to that certain [Amended and Restated] Indemnification Agreement dated , 20 (the “Indemnification Agreement”), by and between Five Star Senior Living Inc.,a Maryland corporation (the “Company”), and the undersigned Indemnitee, pursuant to which Indemnitee is entitled to advancement of expenses in connection with [Description of Claims/Proceeding] (together, the “Claims”). Terms used, and not otherwisedefined, herein shall have the meanings specified in the Indemnification Agreement.

Indemnitee is subject to the Claims by reason of Indemnitee’s Company Status or by reason of alleged actions or omissions by Indemnitee in such capacity.

Indemnitee hereby affirms Indemnitee’s good faith belief that the standard of conduct necessary for Indemnitee’s indemnification has been met.

In consideration of the advancement of Expenses by the Company for attorneys’ fees and related expenses incurred by Indemnitee in connection with the Claims (the “Advanced Expenses”), Indemnitee hereby agrees that if, in connection witha proceeding regarding the Claim, it is ultimately determined that Indemnitee is not entitled to indemnification under law, the Charter, the Bylaws or the Indemnification Agreement with respect to an act or omission by Indemnitee, then Indemnitee shallpromptly reimburse the portion of the Advanced Expenses relating to the Claim(s) as to which the foregoing findings have been established and which have not been successfully resolved as described in Section 5 of the Indemnification Agreement. To theextent that Advanced Expenses do not relate to specific Claims, Indemnitee agrees that such Advanced Expenses may be allocated on a reasonable and proportionate basis.

IN WITNESS WHEREOF, the undersigned Indemnitee has executed this Affirmation and Undertaking to Repay Expenses Advanced on , .

WITNESS:

Print name of witness Print name of Indemnitee

Schedule to Exhibit 10.1

The following directors and executive officers of Five Star Senior Living Inc., or FVE, are parties to Indemnification Agreements with FVE which are substantially identical in all material respects to the representative Indemnification Agreement filed herewithand are dated as of the respective dates listed below. The other Indemnification Agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.

Name of Signatory DateDonna D. Fraiche May 17, 2018Bruce M. Gans May 17, 2018Barbara D. Gilmore May 17, 2018Gerard M. Martin May 17, 2018Adam D. Portnoy May 17, 2018Katherine E. Potter May 17, 2018Jeffrey C. Leer June 1, 2019Margaret S. Wigglesworth August 12, 2019

1

Exhibit 10.2

EIGHTEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 1)

THIS EIGHTEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 1) (this “Amendment”) is made and entered into as of May 22, 2019, byand among each of the parties identified on the signature pages hereof as a landlord (collectively, “Landlord”) and each of the parties identified on the signature pages hereof as a tenant (jointly and severally,“Tenant”).

W I T N E S S E T H:

WHEREAS, pursuant to the terms of that certain Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 4, 2009, as amended by that certain Partial Termination of and FirstAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of October 1, 2009, that certain Second Amendment to Amended and Restated Master Lease Agreement (Lease No. 1),dated as of November 17, 2009, that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of December 10, 2009, that certain Partial Termination of and FourthAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 1, 2010, that certain Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), datedas of May 1, 2011, that certain Partial Termination of and Sixth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 1, 2011, that certain Seventh Amendment toAmended and Restated Master Lease Agreement (Lease No. 1), dated as of June 20, 2011, that certain Eighth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 31,2012, that certain Partial Termination of and Ninth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 1, 2013, that certain Partial Termination of and TenthAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of January 22, 2014, that certain Partial Termination of and Eleventh Amendment to Amended and Restated Master LeaseAgreement (Lease No. 1), dated as of October 1, 2014, that certain Partial Termination of and Twelfth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of October 31, 2014,that certain Partial Termination of and Thirteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of February 17, 2015, that certain Partial Termination of and FourteenthAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 1, 2015, that certain Partial Termination of and Fifteenth Amendment to Amended and Restated Master LeaseAgreement (Lease No. 1), dated as of December 29, 2015, that certain Partial Termination of and Sixteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 1, 2018,and that certain Partial Termination of and Seventeenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of May 1, 2019 (as so amended, “Amended Lease No. 1”), Landlordleases to Tenant, and Tenant leases from Landlord, the Leased Property (this and other capitalized terms used but not otherwise defined herein having the meanings given such terms in Amended Lease No. 1), allas more particularly described in Amended Lease No. 1; and

WHEREAS, Amended Lease No. 1 was further modified by that certain Transaction Agreement, dated as of April 1, 2019, between Five Star Senior Living Inc., on behalf of itself and certain of itssubsidiaries, and Senior Housing Properties Trust, on behalf of itself and certain of its subsidiaries (the “Transaction Agreement”); and

WHEREAS, pursuant to the Transaction Agreement, as of April 1, 2019, SNH/LTA Properties GA LLC acquired from Five Star Quality Care-OBX Owner, LLC, an affiliate of Tenant, certain vacant land(the “Adjacent Property”) adjacent to the Property known as Crimson Pointe and located at 7130 Crimson Ridge Drive, Rockford, Illinois (the “Crimson Pointe Property”) and the Adjacent Property became a partof the Crimson Pointe Property; and

WHEREAS, Landlord and Tenant wish to amend Amended Lease No. 1 to reflect the acquisition of the Adjacent Property;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged,Landlord and Tenant hereby agree that, effective as of April 1, 2019, Amended Lease No. 1 is hereby amended as follows:

1. Exhibit A. Exhibit A to Amended Lease No. 1 is amended by deleting Exhibit A-61 therefrom in its entirety and replacing it with Exhibit A-61 attached hereto.

2. Ratification. As amended hereby, Amended Lease No. 1 is hereby ratified and confirmed.

[Remainder of page intentionally left blank; signature pages follow]

IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument as of the date above first written.

LANDLORD:

SNH SOMERFORD PROPERTIES TRUST SPTMNR PROPERTIES TRUST SNH/LTA PROPERTIES TRUST SPTIHS PROPERTIES TRUST SNH CHS PROPERTIES TRUST SNH/LTA PROPERTIES GA LLCSNH/LTA SE WILSON LLCMSD POOL 1 LLCMSD POOL 2 LLCSNH RMI FOX RIDGE MANOR PROPERTIES LLCSNH RMI JEFFERSON MANOR PROPERTIES LLCSNH RMI MCKAY MANOR PROPERTIES LLCSNH RMI NORTHWOOD MANOR PROPERTIES LLCSNH RMI OAK WOODS MANOR PROPERTIES LLCSNH RMI PARK SQUARE MANOR PROPERTIES LLCSNH RMI SMITH FARMS MANOR PROPERTIES LLC andSNH RMI SYCAMORE MANOR PROPERTIES LLC

By: /s/ Jennifer F. Francis Jennifer F. FrancisPresident and Chief Operating Officer of each of the foregoing entities

[Signature Page: Eighteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1)]

TENANT:

FIVE STAR QUALITY CARE TRUST MORNINGSIDE OF KNOXVILLE, LLC MORNINGSIDE OF FRANKLIN, LLCFVE SE WILSON LLCFIVE STAR QUALITY CARE-RMI, LLC By: /s/ Katherine E. Potter

Katherine E. PotterPresident and Chief Executive Officer of each of the foregoing entities

MORNINGSIDE OF MACON, LLCMORNINGSIDE OF SENECA, L.P.MORNINGSIDE OF HOPKINSVILLE, LIMITED PARTNERSHIP

By:LIFETRUST AMERICA, INC., a Tennessee corporation, its General Partner/Member (as applicable)

By: /s/ Katherine E. Potter Katherine E. PotterPresident and Chief Executive Officer

MORNINGSIDE OF BEAUFORT, LLC MORNINGSIDE OF CAMDEN, LLCMORNINGSIDE OF HARTSVILLE, LLCMORNINGSIDE OF LEXINGTON, LLCMORNINGSIDE OF ORANGEBURG, LLC

By:MORNINGSIDE OF SOUTH CAROLINA, L.P., a Delaware limited partnership, its Sole Member

By:LIFETRUST AMERICA, INC., a Tennessee corporation, its General Partner



MORNINGSIDE OF CULLMAN, LLC MORNINGSIDE OF MADISON, LLCMORNINGSIDE OF SHEFFIELD, LLC

By: MORNINGSIDE OF ALABAMA, L.P., a Delaware limited partnership, its Sole Member



MORNINGSIDE OF BOWLING GREEN, LLC MORNINGSIDE OF PADUCAH, LLC

By:MORNINGSIDE OF KENTUCKY, LIMITED PARTNERSHIP, a Delaware limited partnership, its Sole Member




MORNINGSIDE OF CONYERS, LLC MORNINGSIDE OF GAINESVILLE, LLC

By:MORNINGSIDE OF GEORGIA, L.P., a Delaware limited partnership, its Sole Member



MORNINGSIDE OF CLEVELAND, LLC MORNINGSIDE OF COOKEVILLE, LLCMORNINGSIDE OF JACKSON, LLC

By:MORNINGSIDE OF TENNESSEE, LLC, a Delaware limited liability company, its Sole Member



EXHIBIT A-61

Crimson Pointe7130 Crimson Ridge Drive

Fox Chase LaneRockford, Illinois

LEGAL DESCRIPTION

Exhibit 10.3

PARTIAL TERMINATION OF AND NINETEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 1)

THIS PARTIAL TERMINATION OF AND NINETEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 1) (this “Amendment”) is madeand entered into as of September 17, 2019, by and among each of the parties identified on the signature pages hereof as a landlord (collectively, “Landlord”) and each of the parties identified on the signature pageshereof as a tenant (jointly and severally, “Tenant”).


WHEREAS, pursuant to the terms of that certain Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 4, 2009, as amended by that certain Partial Termination of and FirstAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of October 1, 2009, that certain Second Amendment to Amended and Restated Master Lease Agreement (Lease No. 1),dated as of November 17, 2009, that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of December 10, 2009, that certain Partial Termination of and FourthAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 1, 2010, that certain Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), datedas of May 1, 2011, that certain Partial Termination of and Sixth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 1, 2011, that certain Seventh Amendment toAmended and Restated Master Lease Agreement (Lease No. 1), dated as of June 20, 2011, that certain Eighth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 31,2012, that certain Partial Termination of and Ninth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 1, 2013, that certain Partial Termination of and TenthAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of January 22, 2014, that certain Partial Termination of and Eleventh Amendment to Amended and Restated Master LeaseAgreement (Lease No. 1), dated as of October 1, 2014, that certain Partial Termination of and Twelfth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of October 31, 2014,that certain Partial Termination of and Thirteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of February 17, 2015, that certain Partial Termination of and FourteenthAmendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of August 1, 2015, that certain Partial Termination of and Fifteenth Amendment to Amended and Restated Master LeaseAgreement (Lease No. 1), dated as of December 29, 2015, that certain Partial Termination of and Sixteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 1, 2018,that certain Partial Termination of and Seventeenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of May 1, 2019, and that certain Eighteenth Amendment to Amendedand Restated Master Lease Agreement (Lease No. 1), dated as of May, 2019 (as so amended, “Amended Lease No. 1”), Landlord leases to Tenant, and Tenant leases from Landlord, the Leased Property (this andother capitalized terms used but not otherwise defined herein having the meanings given such terms in Amended Lease No. 1), all as more particularly described in Amended Lease No. 1; and

1

WHEREAS, Amended Lease No. 1 was further modified by that certain Transaction Agreement, dated as of April 1, 2019, between Five Star Senior Living Inc., on behalf of itself and certain of itssubsidiaries, and Senior Housing Properties Trust, on behalf of itself and certain of its subsidiaries (the “Transaction Agreement”); and

WHEREAS, simultaneously herewith, SPTIHS Properties Trust is selling the real property and related improvements known as (i) Prairie Ridge Care & Rehabilitation located at 608 Prairie Street,Mediapolis, Iowa, as more particularly described on Exhibit A-22 to Amended Lease No. 1, (ii) Union Park Health Services located at 2401 E. 8 th Street, Des Moines, Iowa, as more particularly described onExhibit A-20 to Amended Lease No. 1, (iii) Ashland Care Center located at 1700 Furnace Street, Ashland, Nebraska, as more particularly described on Exhibit A-32 to Amended Lease No. 1, (iv) Blue Hill CareCenter located at 414 North Wilson Street, P.O. Box 156, Blue Hill, Nebraska, as more particularly described on Exhibit A-33 to Amended Lease No. 1, (v) Central City Care Center located at 2720 South 17th

Avenue, Central City, Nebraska, as more particularly described on Exhibit A-34 to Amended Lease No. 1, (vi) Gretna Community Living Center located at 700 South Highway 6, Gretna, Nebraska, as moreparticularly described on Exhibit A-36 to Amended Lease No. 1, (vii) Sutherland Care Center located at 333 Maple Street, P.O. Box 307, Sutherland, Nebraska, as more particularly described on Exhibit A-37 toAmended Lease No. 1 and (viii) Waverly Care Center located at 11041 North 137th Street, Waverly, Nebraska, as more particularly described on Exhibit A-38 to Amended Lease No. 1 (collectively, the “MidwestProperties”); and

WHEREAS, in connection with the foregoing, SPTIHS Properties Trust and the other entities comprising Landlord and Five Star Quality Care Trust and the other entities comprising Tenant wish to amendAmended Lease No. 1 to terminate Amended Lease No. 1 with respect to the Midwest Properties;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged,Landlord and Tenant hereby agree that, effective as of the date hereof, Amended Lease No. 1 is hereby amended as follows:

1. Partial Termination of Amended Lease No. 1. Amended Lease No. 1 is terminated with respect to the Midwest Properties and neither Landlord nor Tenant shall have any further rights or liabilitiesthereunder with respect to the Midwest Properties from and after the date hereof, except for those rights and liabilities which by their terms survive the termination of Amended Lease No. 1.

2. Minimum Rent. The defined term "Minimum Rent" set forth in Section 1.68 of Amended Lease No. 1 is hereby reduced as of the date hereof by the sum of Fifty Thousand Forty-Six and 84/100 Dollars($50,046.84) per month in accordance with Section 2.1(1)(b) to the Transaction Agreement.

3. Schedule 1. Schedule 1 to Amended Lease No. 1 is deleted in its entirety and replaced with Schedule 1 attached hereto.

2

4. Exhibit A. Exhibit A to Amended Lease No. 1 is amended by deleting the text of Exhibits A-20, A-22, A-32, A-33, A-34, A-36, A-37 and A-38 attached thereto in their entirety and replacing each with“Intentionally Deleted”.

5. Ratification. As amended hereby, Amended Lease No. 1 is hereby ratified and confirmed.


3

IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument as of the date above first written.

LANDLORD:

SNH SOMERFORD PROPERTIES TRUST SPTMNR PROPERTIES TRUST SNH/LTA PROPERTIES TRUST SPTIHS PROPERTIES TRUST SNH CHS PROPERTIES TRUST SNH/LTA PROPERTIES GA LLCSNH/LTA SE WILSON LLCMSD POOL 1 LLCMSD POOL 2 LLCSNH RMI FOX RIDGE MANOR PROPERTIES LLCSNH RMI JEFFERSON MANOR PROPERTIES LLCSNH RMI MCKAY MANOR PROPERTIES LLCSNH RMI NORTHWOOD MANOR PROPERTIES LLCSNH RMI OAK WOODS MANOR PROPERTIES LLCSNH RMI PARK SQUARE MANOR PROPERTIES LLCSNH RMI SMITH FARMS MANOR PROPERTIES LLC andSNH RMI SYCAMORE MANOR PROPERTIES LLC

By: /s/ Jennifer F. Francis Jennifer F. FrancisPresident of each of the foregoing entities

[Signature Page: Partial Amendment and Nineteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1)]

TENANT:

FIVE STAR QUALITY CARE TRUST MORNINGSIDE OF KNOXVILLE, LLC MORNINGSIDE OF FRANKLIN, LLCFVE SE WILSON LLCFIVE STAR QUALITY CARE-RMI, LLC By: /s/ Katherine E. Potter

Katherine E. PotterPresident of each of the foregoing entities

MORNINGSIDE OF MACON, LLCMORNINGSIDE OF SENECA, L.P.MORNINGSIDE OF HOPKINSVILLE, LIMITED PARTNERSHIP

By:LIFETRUST AMERICA, INC., a Tennessee corporation, its General Partner/Member (as applicable)

By: /s/ Katherine E. Potter Katherine E. PotterPresident

MORNINGSIDE OF BEAUFORT, LLC MORNINGSIDE OF CAMDEN, LLCMORNINGSIDE OF HARTSVILLE, LLCMORNINGSIDE OF LEXINGTON, LLCMORNINGSIDE OF ORANGEBURG, LLC

By:MORNINGSIDE OF SOUTH CAROLINA, L.P., a Delaware limited partnership, its Sole Member



[Signature Page: Partial Termination of and Nineteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1)]

MORNINGSIDE OF CULLMAN, LLC MORNINGSIDE OF MADISON, LLCMORNINGSIDE OF SHEFFIELD, LLC

By: MORNINGSIDE OF ALABAMA, L.P., a Delaware limited partnership, its Sole Member



MORNINGSIDE OF BOWLING GREEN, LLC MORNINGSIDE OF PADUCAH, LLC

By:MORNINGSIDE OF KENTUCKY, LIMITED PARTNERSHIP, a Delaware limited partnership, its Sole Member




MORNINGSIDE OF CONYERS, LLC MORNINGSIDE OF GAINESVILLE, LLC

By:MORNINGSIDE OF GEORGIA, L.P., a Delaware limited partnership, its Sole Member



MORNINGSIDE OF CLEVELAND, LLC MORNINGSIDE OF COOKEVILLE, LLCMORNINGSIDE OF JACKSON, LLC

By:MORNINGSIDE OF TENNESSEE, LLC, a Delaware limited liability company, its Sole Member



SCHEDULE 1

PROPERTY-SPECIFIC INFORMATION

ExhibitProperty Address Base Gross Revenues

(Calendar Year)Base Gross Revenues

(Dollar Amount)Commencement

DateInterest Rate

A-1 Intentionally Deleted. N/A N/A N/A N/A


A-3 Somerford Place - Encinitas1350 South El Camino RealEncinitas, CA 92024

2009 $3,092,467 03/31/2008 8%

A-4 Somerford Place - Fresno6075 North Marks AvenueFresno, CA 93711

2009 $3,424,896 03/31/2008 8%


A-6 Somerford Place – Redlands1319 Brookside AvenueRedlands, CA 92373

2009 $3,065,084 03/31/2008 8%

A-7 Somerford Place - Roseville110 Sterling CourtRoseville, CA 95661

2009 $2,802,082 03/31/2008 8%

A-8 Leisure Pointe1371 Parkside DriveSan Bernardino, CA 92404

2007 $1,936,220 09/01/2006 8.25%


A-10 Mantey Heights Rehabilitation & Care Center2825 Patterson RoadGrand Junction, CO 81506

2005 $5,564,949 12/31/2001 10%

A-11 Cherrelyn Healthcare Center5555 South Elati StreetLittleton, CO 80120

2005 $12,574,200 12/31/2001 10%

A-12 Somerford House and Somerford Place – Newark I & II501 South Harmony Road and4175 Ogletown RoadNewark, DE 19713

2009 $6,341,636 03/31/2008 8%

A-13 Tuscany Villa Of Naples (aka Buena Vida)8901 Tamiami Trail EastNaples, FL 34113

2008 $2,157,675 09/01/2006 8.25%


A-15 Morningside of Columbus7100 South Stadium DriveColumbus, GA 31909

2006 $1,381,462 11/19/2004 9%

A-16 Morningside of Dalton2470 Dug Gap RoadDalton, GA 30720

2006 $1,196,357 11/19/2004 9%




DateInterest Rate

A-17 Morningside of Evans353 North Belair RoadEvans, GA 30809

2006 $1,433,421 11/19/2004 9%

A-18 Vacant Land Adjacent to Morningside of Macon6191 Peake RoadMacon, GA 31220

2006 N/A 11/19/2004 9%





A-23 Ashwood Place102 LeonardwoodFrankfort, KY 40601

2007 $1,769,726 09/01/2006 8.25%

A-24 Somerford Place - Annapolis2717 Riva RoadAnnapolis, MD 21401

2009 $3,917,902 03/31/2008 8%

A-25 Somerford Place - Columbia8220 Snowden River ParkwayColumbia, MD 21045

2009 $3,221,426 03/31/2008 8%

A-26 Somerford Place - Frederick2100 Whittier DriveFrederick, MD 21702

2009 $5,088,592 03/31/2008 8%

A-27 Somerford Place - Hagerstown10114 & 10116 Sharpsburg PikeHagerstown, MD 21740

2009 $4,066,761 03/31/2008 8%

A-28 The Wellstead of Rogers20500 and 20600 South Diamond Lake RoadRogers, MN 55374

2009 $12,646,616 03/01/2008 8%


A-30 Hermitage Gardens of Oxford1488 Belk BoulevardOxford, MS 38655

2007 $1,816,315 10/01/2006 8.25%

A-31 Hermitage Gardens of Southaven108 Clarington DriveSouthaven, MS 38671

2007 $1,527,068 10/01/2006 8.25%








DateInterest Rate






A-41 Mount Vernon of South Park1400 Riggs RoadSouth Park, PA 15129

2006 $2,718,057 10/31/2005 9%

A-42 Morningside of Gallatin1085 Hartsville PikeGallatin, TN 37066

2006 $1,343,801 11/19/2004 9%

A-43 Walking Horse Meadows207 Uffelman DriveClarksville, TN 37043

2007 $1,471,410 01/01/2007 8.25%

A-44 Morningside of Belmont1710 Magnolia BoulevardNashville, TN 37212

2006 $3,131,648 06/03/2005 9%

A-45 Dominion Village at Chesapeake2856 Forehand DriveChesapeake, VA 23323

2005 $1,416,951 05/30/2003 10%

A-46 Dominion Village at Williamsburg4132 Longhill RoadWilliamsburg, VA 23188

2005 $1,692,753 05/30/2003 10%


A-48 Brookfield Rehabilitation and Specialty Care (aka Woodland HealthcareCenter)18741 West Bluemound RoadBrookfield, WI 53045

2005 $13,028,846 12/31/2001 10%

A-49 Meadowmere - Southport Assisted Living8350 and 8351 Sheridan RoadKenosha, WI 53143

2009 $2,170,645 01/04/2008 8%

A-50 Meadowmere - Madison Assisted Living5601 Burke RoadMadison, WI 53718

2009 $2,136,654 01/04/2008 8%


A-52 Mitchell Manor Senior Living5301 West Lincoln AvenueWest Allis, WI 53219

2009 $12,348,104 01/04/2008 8%

A-53 Laramie Care Center503 South 18th StreetLaramie, WY 82070

2005 $4,473,949 12/31/2001 10%




DateInterest Rate

A-54 Haven in Highland Creek5920 McChesney DriveCharlotte, NC 28269

Laurels in Highland Creek 6101 Clark Creek ParkwayCharlotte, NC 28269

2010 $6,454,157 11/17/2009 8.75%

A-55 Haven in the Village at Carolina Place13150 Dorman RoadPineville, NC 28134

Laurels in the Village at Carolina Place13180 Dorman RoadPineville, NC 28134

2010 $7,052,425 11/17/2009 8.75%

A-56 Haven in the Summit3 Summit TerraceColumbia, SC 29229

2010 $2,308,737 11/17/2009 8.75%

A-57 Haven in the Village at Chanticleer 355 Berkmans LaneGreenville, SC 29605

2010 $2,197,919 11/17/2009 8.75%

A-58 Intentionally Deleted N/A N/A N/A N/A

A-59 Haven in Stone Oak 511 Knights Cross DriveSan Antonio, TX 78258

Laurels in Stone Oak575 Knights Cross Drive San Antonio, TX 78258

2010 $6,584,027 11/17/2009 8.75%

A-60 Eastside Gardens 2078 Scenic Highway North Snellville, GA 30078

2010 $1,766,628 12/10/2009 8.75%

A-61 Crimson Pointe7130 Crimson Ridge DriveRockford, IL 61107

2012 $2,568,827 05/01/2011 8%

A-62 Talbot Park6311 Granby StreetNorfolk, VA 23305

2012 $3,866,871 06/20/2011 7.5%

A-63 The Landing at Parkwood Village1720 Parkwood BoulevardWilson, NC 27893

2012 $4,318,990 06/20/2011 7.5%

A-64 Aspenwood14400 Homecrest Road Silver Spring, MD 20906

2005 $4,470,354 10/25/2002 10%

A-65 HeartFields at Easton 700 Port StreetEaston, MD 21601

2005 $2,545,887 10/25/2002 10%




DateInterest Rate

A-66 Morningside of Macon6191 Peake RoadMacon, GA 31220

2006 $1,298,541 11/19/2004 9%

A-67 Morningside of Beaufort109 Old Salem RoadBeaufort, SC 29902

2006 $1,337,453 11/19/2004 9%

A-68 Morningside of Camden719 Kershaw HighwayCamden, SC 29020

2006 $1,595,035 11/19/2004 9%

A-69 Morningside of Hartsville1901 West Carolina AvenueHartsville, SC 29550

2006 $1,507,131 11/19/2004 9%

A-70 Morningside of Lexington218 Old Chapin RoadLexington, SC 29072

2006 $1,638,422 11/19/2004 9%

A-71 Morningside of Orangeburg2306 Riverbank DriveOrangeburg, SC 29118

2006 $1,129,764 11/19/2004 9%

A-72 Morningside of Seneca15855 Wells HighwaySeneca, SC 29678

2006 $1,684,477 11/19/2004 9%

A-73 Morningside of Cullman2021 Dahlke Dr. NECullman, AL 32058

2006 $1,413,633 11/19/2004 9%

A-74 Morningside of Madison49 Hughes RoadMadison, AL 35758

2006 $1,531,206 11/19/2004 9%

A-75 Morningside of Sheffield413 D. D. Cox BoulevardSheffield, AL 35660

2006 $1,495,038 11/19/2004 9%

A-76 Morningside of Bowling Green981 Campbell LaneBowling Green, KY 42104

2006 $1,458,781 11/19/2004 9%

A-77 Morningside of Paducah1700 Elmdale RoadPaducah, KY 42003

2006 $2,012,245 11/19/2004 9%

A-78 Morningside of Conyers1352 Wellbrook CircleConyers, GA 30012

2006 $1,646,910 11/19/2004 9%

A-79 Morningside of Gainesville2435 Limestone ParkwayGainesville, GA 30501

2006 $1,453,250 11/19/2004 9%

A-80 Morningside of Cleveland2900 Westside Drive, N.W.Cleveland, TN 37312

2006 $1,212,846 11/19/2004 9%




DateInterest Rate

A-81 Morningside of Cookeville1010 East Spring StreetCookeville, TN 38501

2006 $1,513,932 11/19/2004 9%

A-82 Morningside of Jackson1200 North ParkwayJackson, TN 38305

2006 $1,787,155 11/19/2004 9%

A-83 Williamsburg VillasA Morningside Community3020 Heatherton WayKnoxville, TN 37920

2006 $2,728,841 11/19/2004 9%

A-84 Morningside of Franklin105 Sunrise CircleFranklin, TN 37067

2006 $1,582,509 11/19/2004 9%

A-85 Morningside of Hopkinsville4190 Lafayette RoadHopkinsville, KY 42240

2006 $1,444,246 11/19/2004 9%

A-86 Parkwood Village1730 Parkwood BoulevardWilson, NC 27893

2012 $4,318,990 06/23/2011 7.5%

A-87 Fox Ridge Manor150 Fox Ridge DriveVincennes, Indiana 47591

2009 N/A 09/01/2008 8%

A-88 Jefferson Manor601 St. Joseph DriveKokomo, Indiana 46901

2009 N/A 09/01/2008 8%

A-89 McKay Manor1473 East McKay RoadShelbyville, Indiana 46176

2009 N/A 09/01/2008 8%

A-90 Northwood Manor1590 West Timberview DriveMarion, Indiana 46952

2009 N/A 09/01/2008 8%

A-91 Oak Woods Manor1211 Longwood DriveLaPorte, Indiana 46350

2009 N/A 09/01/2008 8%

A-92 Park Square Manor6990 East County Road 100 NorthAvon, Indiana 46123

2009 N/A 09/01/2008 8%

A-93 Smith Farm Manor406 Smith DriveAuburn, Indiana 46706

2009 N/A 09/01/2008 8%

A-94 Sycamore Manor222 South 25th StreetTerre Haute, Indiana 47803

2009 N/A 09/01/2008 8%

Exhibit 10.4

THIRTEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 2)

THIS THIRTEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 2) (this “Amendment”) is made and entered into as of May 22, 2019, byand among each of the parties identified on the signature pages hereof as a landlord (collectively, “Landlord”) and each of the parties identified on the signature pages hereof as a tenant (jointly and severally,“Tenant”).


WHEREAS, pursuant to the terms of that certain Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 4, 2009, as amended by that certain Partial Termination of and FirstAmendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of November 1, 2009, that certain Partial Termination of and Second Amendment to Amended and Restated Master LeaseAgreement (Lease No. 2), dated as of August 1, 2010, that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 20, 2011, that certain Fourth Amendmentto Amended and Restated Master Lease Agreement (Lease No. 2), dated as of July 22, 2011, that certain Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 31,2012, that certain Partial Termination of and Sixth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of September 19, 2013, that certain Partial Termination of and SeventhAmendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 1, 2014, that certain Partial Termination of and Eighth Amendment to Amended and Restated Master LeaseAgreement (Lease No. 2), dated as of July 20, 2015, that certain Partial Termination of and Ninth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of September 30, 2016,that certain Tenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 1, 2017, that certain Eleventh Amendment to Amended and Restated Master Lease Agreement(Lease No. 2), dated as of July 31, 2018 and that certain Partial Termination of and Twelfth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of May 1, 2019 (as so amended,“Master Lease No. 2”), Landlord leases to Tenant, and Tenant leases from Landlord, the Leased Property (this and other capitalized terms used but not otherwise defined herein having the meanings given suchterms in Master Lease No. 2), all as more particularly described in Master Lease No. 2;

WHEREAS, Master Lease No. 2 was further modified by that certain Transaction Agreement, dated as of April 1, 2019, between Five Star Senior Living Inc., on behalf of itself and certain of itssubsidiaries, and Senior Housing Properties Trust, on behalf of itself and certain of its subsidiaries (the “Transaction Agreement”); and

WHEREAS, pursuant to the Transaction Agreement, as of April 1, 2019, certain entities comprising Landlord acquired from certain affiliates of Tenant land and improvements (each, an

- 1 -

“Adjacent Property” and collectively, the “Adjacent Properties”) adjacent to certain of the Properties and each such Adjacent Property became a part of the applicable adjacent Property; and

WHEREAS, Landlord and Tenant wish to amend Master Lease No. 2 to reflect the acquisition of the Adjacent Properties;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged,Landlord and Tenant hereby agree, effective as of April 1, 2019, as follows:

1. Exhibit A. Exhibit A to Master Lease No. 2 is amended by deleting Exhibit A-2, Exhibit A-21 and Exhibit A-50 therefrom in their entirety and replacing them with Exhibit A-2, Exhibit A-21, ExhibitA-50 and Exhibit A-52 attached hereto.

2. Ratification. As amended hereby, Master Lease No. 2 is ratified and confirmed.


- 2 -

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as a sealed instrument as of the date first above written.

LANDLORD:

CCC FINANCING I TRUST,CCC INVESTMENTS I, L.L.C.,CCC OF KENTUCKY TRUST,CCC PUEBLO NORTE TRUST,CCDE SENIOR LIVING LLC,CCOP SENIOR LIVING LLC,O.F.C. CORPORATION,SNH CHS PROPERTIES TRUST,SNH/LTA PROPERTIES GA LLC,SNH/LTA PROPERTIES TRUST,SNH SOMERFORD PROPERTIES TRUST,SPTIHS PROPERTIES TRUST, andSPTMNR PROPERTIES TRUST


CCC FINANCING LIMITED, L.P.

By: CCC Retirement Trust,its General Partner

By: /s/ Jennifer F. Francis Jennifer F. FrancisPresident

CCC RETIREMENT COMMUNITIES II, L.P.

By: Crestline Ventures LLC,its General Partner


[Signature Page to Thirteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2)]

LEISURE PARK VENTURE LIMITED PARTNERSHIP

By: CCC Leisure Park Corporation,its General Partner



TENANT:

FIVE STAR QUALITY CARE TRUST


FS TENANT HOLDING COMPANY TRUST



EXHIBIT A-2

Lakeview Estates2630 & 2634 Valleydale Road

Birmingham, Alabama

LEGAL DESCRIPTION

Page 1 of 2

EXHIBIT A-21

Meadowood Retirement Community2455 E. Tamarack Trail

2500 N. Dunn Street 2510 N. Dunn Street 2620 N. Dunn Street

787 E. Tamarack Trail791 E. Tamarack TrailBloomington, Indiana

LEGAL DESCRIPTION

Page 1 of 6

EXHIBIT A-50

The Virginia Health & Rehabilitation Center1451 & 1457 Cleveland Avenue

Waukesha, Wisconsin

LEGAL DESCRIPTION

Lots 10 and 11, Block 2, Elevated Home Addition to Waukesha, a Subdivision of part of the South ½ of Section 35, Town 7 North, Range 19 East, City of Waukesha, County of Waukesha, State of Wisconsin.

WAKC 1004.078 (Lot 10)WAKC 1004.079 (Lot 11)

EXHIBIT A-52

Palms at St Lucie West501 N.W. Cashmere Boulevard

Port St. Lucie, Florida

LEGAL DESCRIPTION

Assisted Living:Lot 1, of ST. LUCIE WEST PLAT NO. 137, according to the Plat thereof, recorded in Plat Book 39, pages 26 and 26A, of the Public Records of St. Lucie County, Florida

and

Villas and Independent Living:All of Lot 2, ST. LUCIE WEST PLAT NO. 149, according to the Plat thereof, as recorded in Plat Book 40, at Pages 17 and 17A, of the Public Records of St. Lucie County Florida.

and

Vacant Land:Lot 1, ST. LUCIE WEST PLAT NO. 149, a Subdivision according to the plat thereof recorded at Plat Book 40, Pages 17, 17A in the public records of St. Lucie County, Florida.

Exhibit 10.5

PARTIAL TERMINATION OF AND FOURTEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 2)

THIS PARTIAL TERMINATION OF AND FOURTEENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 2) (this “Amendment”) is madeand entered into as of September 17, 2019, by and among each of the parties identified on the signature pages hereof as a landlord (collectively, “Landlord”) and each of the parties identified on the signature pageshereof as a tenant (jointly and severally, “Tenant”).


WHEREAS, pursuant to the terms of that certain Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 4, 2009, as amended by that certain Partial Termination of and FirstAmendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of November 1, 2009, that certain Partial Termination of and Second Amendment to Amended and Restated Master LeaseAgreement (Lease No. 2), dated as of August 1, 2010, that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 20, 2011, that certain Fourth Amendmentto Amended and Restated Master Lease Agreement (Lease No. 2), dated as of July 22, 2011, that certain Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 31,2012, that certain Partial Termination of and Sixth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of September 19, 2013, that certain Partial Termination of and SeventhAmendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 1, 2014, that certain Partial Termination of and Eighth Amendment to Amended and Restated Master LeaseAgreement (Lease No. 2), dated as of July 20, 2015, that certain Partial Termination of and Ninth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of September 30, 2016,that certain Tenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 1, 2017, that certain Eleventh Amendment to Amended and Restated Master Lease Agreement(Lease No. 2), dated as of July 31, 2018, that certain Partial Termination and Twelfth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of May 1, 2019 and that certainThirteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of May, 2019 (as so amended, “Amended Lease No. 2”), Landlord leases to Tenant, and Tenant leases fromLandlord, the Leased Property (this and other capitalized terms used but not otherwise defined herein having the meanings given such terms in Amended Lease No. 2), all as more particularly described inAmended Lease No. 2;

WHEREAS, Amended Lease No. 2 was further modified by that certain Transaction Agreement, dated as of April 1, 2019, between Five Star Senior Living Inc., on behalf of itself and certain of itssubsidiaries, and Senior Housing Properties Trust, on behalf of itself and certain of its subsidiaries (the “Transaction Agreement”);

- 1 -

WHEREAS, simultaneously herewith, SPTIHS Properties Trust is selling the real property and related improvements known as (i) West Bridge Care & Rehabilitation located at 1015 West Summit Street,Winterset, Iowa, as more particularly described on Exhibit A-20 to Amended Lease No. 2, (ii) Woodhaven Care Center located at 510 W. 7th Street, Ellinwood, Kansas, as more particularly described on ExhibitA-22 to Amended Lease No. 2, (iii) Crestview Health Care Center located at 1100 West First Street, P.O. Box D, Milford, Nebraska, as more particularly described on Exhibit A-35 to Amended Lease No. 2, (iv)Morys Haven located at 1112 15th Street, Columbus, Nebraska, as more particularly described on Exhibit A-31 to Amended Lease No. 2, (v) Utica Community Care Center located at 1350 Centennial Avenue,Utica, Nebraska, as more particularly described on Exhibit A-36 to Amended Lease No. 2 and (vi) Wedgewood Care Center located at 800 Stoeger Drive, Grand Island, Nebraska, as more particularly described onExhibit A-33 to Amended Lease No. 2 (collectively, the “Midwest Properties”); and

WHEREAS, in connection with the foregoing, SPTIHS Properties Trust and the other entities comprising Landlord and Five Star Quality Care Trust and the other entities comprising Tenant wish to amendAmended Lease No. 2 to terminate Amended Lease No. 2 with respect to the Midwest Properties;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged,Landlord and Tenant hereby agree, effective as of the date hereof, as follows:

1. Partial Termination of Lease. Amended Lease No. 2 is terminated with respect to the Midwest Properties and neither Landlord nor Tenant shall have any further rights or liabilities thereunder withrespect to the Midwest Properties from and after the date hereof, except for those rights and liabilities which by their terms survive the termination of Amended Lease No. 2.

2. Minimum Rent. The defined term “Minimum Rent” set forth in Section 1.67 of Amended Lease No. 2 is hereby reduced by the sum of Fifty-Three Thousand One Hundred Thirty-Three and 49/100Dollars ($53,133.49) per month in accordance with Section 2.1(1)(b) of the Transaction Agreement.

3. Schedule 1. Schedule 1 to Amended Lease No. 2 is deleted in its entirety and replaced with Schedule 1 attached hereto.

4. Exhibit A. Exhibit A to Amended Lease No. 2 is amended by deleting Exhibits A-20, A-22, A-31, A-33, A-35 and A-36 attached thereto in their entirety and replacing each with “IntentionallyDeleted.”

5. Ratification. As amended hereby, Amended Lease No. 2 is ratified and confirmed.


- 2 -

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as a sealed instrument as of the date first above written.

LANDLORD:

CCC FINANCING I TRUST,CCC INVESTMENTS I, L.L.C.,CCC OF KENTUCKY TRUST,CCC PUEBLO NORTE TRUST,CCDE SENIOR LIVING LLC,CCOP SENIOR LIVING LLC,O.F.C. CORPORATION,SNH CHS PROPERTIES TRUST,SNH/LTA PROPERTIES GA LLC,SNH/LTA PROPERTIES TRUST,SNH SOMERFORD PROPERTIES TRUST,SPTIHS PROPERTIES TRUST, andSPTMNR PROPERTIES TRUST


CCC FINANCING LIMITED, L.P.

By: CCC Retirement Trust,its General Partner


CCC RETIREMENT COMMUNITIES II, L.P.

By: Crestline Ventures LLC,its General Partner


[Signature Page to Partial Termination of and Fourteenth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2)]

LEISURE PARK VENTURE LIMITED PARTNERSHIP

By: CCC Leisure Park Corporation,its General Partner



TENANT:

FIVE STAR QUALITY CARE TRUST


FS TENANT HOLDING COMPANY TRUST



SCHEDULE 1





DateInterest

Rate

A-1 Ashton Gables in Riverchase 2184 Parkway Lake DriveBirmingham, AL 35244

2009 $2,121,622 08/01/2008 8%

A-2 Lakeview Estates2634 Valleydale RoadBirmingham, AL 35244

2009 $2,692,868 08/01/2008 8%

A-3 Forum at Pueblo Norte7090 East Mescal StreetScottsdale, AZ 85254

2005 $11,470,312 01/11/2002 10%

A-4 Intentionally deleted. N/A N/A N/A N/A


A-6 Skyline Ridge Nursing &Rehabilitation Center515 Fairview AvenueCanon City, CO 81212

2005 $4,104,100 12/31/2001 10%

A-7 Springs Village Care Center110 West Van Buren StreetColorado Springs, CO 80907

2005 $4,799,252 12/31/2001 10%

A-8 Willow Tree Care Center2050 South Main StreetDelta, CO 81416

2005 $4,310,982 12/31/2001 10%

A-9 Cedars Healthcare Center1599 Ingalls StreetLakewood, CO 80214

2005 $6,964,007 12/31/2001 10%

A-10 Millcroft255 Possum Park RoadNewark, DE 19711

2005 $11,410,121 01/11/2002 10%

A-11 Forwood Manor1912 Marsh RoadWilmington, DE 19810

2005 $13,446,434 01/11/2002 10%

A-12 Foulk Manor South407 Foulk RoadWilmington, DE 19803

2005 $4,430,251 01/11/2002 10%

A-13 Shipley Manor2723 Shipley RoadWilmington, DE 19810

2005 $9,333,057 01/11/2002 10%

A-14 Forum at Deer Creek3001 Deer CreekCountry Club Blvd.Deerfield Beach, FL 33442

2005 $12,323,581 01/11/2002 10%

A-15 Springwood Court12780 Kenwood LaneFort Myers, FL 33907

2005 $2,577,612 01/11/2002 10%

A-16 Fountainview111 Executive Center DriveWest Palm Beach, FL 33401

2005 $7,920,202 01/11/2002 10%

A-17 Morningside of Athens1291 Cedar Shoals DriveAthens, GA 30605

2006 $1,560,026 11/19/2004 9%

A-18 Marsh View Senior Living7410 Skidaway RoadSavannah, GA 31406

2007 $2,108,378 11/01/2006 8.25%





DateInterest

Rate


A-21 Meadowood Retirement Community2455 Tamarack TrailBloomington, IN 47408

2009 $12,061,814 11/01/2008 8%


A-23 Lafayette at Country Place690 Mason Headley RoadLexington, KY 40504

2005 $4,928,052 01/11/2002 10%

A-24 Lexington Country Place700 Mason Headley RoadLexington, KY 40504

2005 $8,893,947 01/11/2002 10%



A-27 HeartFields at Bowie7600 Laurel Bowie RoadBowie, MD 20715

2005 $2,436,102 10/25/2002 10%

A-28 HeartFields at Frederick1820 Latham DriveFrederick, MD 21701

2005 $2,173,971 10/25/2002 10%









A-37 Leisure Park1400 Route 70Lakewood, NJ 08701

2005 $14,273,446 01/07/2002 10%

A-38 Franciscan Manor71 Darlington RoadPatterson TownshipBeaver Falls, PA 15010

2006 $4,151,818 10/31/2005 9%

A-39 Mount Vernon of Elizabeth145 Broadlawn DriveElizabeth, PA 15037

2006 $2,332,574 10/31/2005 9%

A-40 Overlook Green5250 Meadowgreen DriveWhitehall, PA 15236

2006 $3,878,300 10/31/2005 9%

A-41 Myrtle Beach Manor9547 Highway 17 NorthMyrtle Beach, SC 29572

2005 $6,138,714 01/11/2002 10%

A-42 Morningside of Anderson1304 McLees RoadAnderson, SC 29621

2006 $1,381,775 11/19/2004 9%

A-43 Heritage Place at Boerne120 Crosspoint DriveBoerne, TX 78006

2009 $1,469,683 02/07/2008 8%




DateInterest

Rate

A-44 Forum at Park Lane7831 Park LaneDallas, TX 75225

2005 $13,620,931 01/11/2002 10%

A-45 Heritage Place at Fredericksburg96 Frederick RoadFredericksburg, TX 78624

2009 $1,386,771 02/07/2008 8%



A-48 ManorPointe - Oak Creek Independent Senior Apartments and Meadowmere -Mitchell Manor - Oak Creek700 East Stonegate Drive and701 East Puetz RoadOak Creek, WI 53154

2009 $4,189,440 01/04/2008 8%


A-50 The Virginia Health & Rehabilitation Center1451 Cleveland AvenueWaukesha, WI 53186

2005 $6,128,045 12/31/2001 10%

A-51 Reserve at Greenbriar1005 Elysian PlaceChesapeake, Virginia

2012 $2,508,269 06/20/2011 7.5%

A-52 Palms at St. Lucie West501 N.W. Cashmere BoulevardPort St. Lucie, Florida

2012 $2,903,642 07/22/2011 7.5%

A-53 Forum at Desert Harbor13840 North Desert Harbor DrivePeoria, AZ 85381

2005 $9,830,918 01/11/2002 10.0%

A-54 Forum at Tucson 2500 North Rosemont Blvd.Tucson, AZ 85712

2005 $13,258,998 01/11/2002 10.0%

A-55 Park Summit at Coral Springs 8500 Royal Palm Blvd.Coral Springs, FL 33065

2005 $11,229,677 01/11/2002 10.0%

A-56 Gables at Winchester 299 Cambridge StreetWinchester, MA 01890

2005 $6,937,852 01/11/2002 10.0%

A-57 Forum at Memorial Woods 777 North Post Oak RoadHouston, TX 77024

2005 $19,734,400 01/11/2002 10.0%

Exhibit 10.6

PARTIAL TERMINATION OF AND SEVENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 4)

THIS PARTIAL TERMINATION OF AND SEVENTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 4) (this “Amendment”) is made andentered into as of September 17, 2019, by and among each of the parties identified on the signature page hereof as a landlord (collectively, “Landlord”) and each of the parties identified on the signature pagehereof as a tenant (jointly and severally, “Tenant”).


WHEREAS, pursuant to that certain Amended and Restated Master Lease Agreement (Lease No. 4), dated as of August 4, 2009, as amended by that certain First Amendment to Amended and RestatedMaster Lease Agreement (Lease No. 4), dated as of October 1, 2009, that certain Partial Termination of and Second Amendment to Amended and Restated Master Lease Agreement (Lease No. 4), dated as of May1, 2011, that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 4), dated as of June 20, 2011, that certain Fourth Amendment to Amended and Restated Master LeaseAgreement (Lease No. 4), dated as of August 31, 2012, that certain Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 4), dated as of July 10, 2014 and that certain Sixth Amendmentto Amended and Restated Master Lease Agreement (Lease No. 4), dated as of January 1, 2018 (as so amended, the “Lease”), Landlord leases to Tenant, and Tenant leases from Landlord, the Leased Property (thisand other capitalized terms used but not otherwise defined herein having the meanings given such terms in the Lease), all as more particularly described in the Lease; and

WHEREAS, the Lease was further modified by that certain Transaction Agreement, dated as of April 1, 2019, between Five Star Senior Living Inc., on behalf of itself and certain of its subsidiaries, andSenior Housing Properties Trust, on behalf of itself and certain of its subsidiaries (the “Transaction Agreement”); and

WHEREAS, simultaneously herewith, SPTIHS Properties Trust is selling the real property and related improvements known as the WestRidge Quality Care & Rehabilitation located at 600 Manor Drive,Clarinda, Iowa, as more particularly described on Exhibit A-7 to the Lease (the “WestRidge Property”);

WHEREAS, in connection with the foregoing, SPTIHS Properties Trust and the other entities comprising Landlord and Five Star Quality Care Trust and the other entities comprising Tenant wish to amendthe Lease to terminate the Lease with respect to the WestRidge Property;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged,Landlord and Tenant hereby agree, effective as of the date hereof, as follows:

1. Partial Termination of Lease. The Lease is terminated with respect to the WestRidge Property and neither Landlord nor Tenant shall have any further rights or liabilities thereunder with respect to theWestRidge Property from and after the date hereof, except for those rights and liabilities which by their terms survive the termination of the Lease.

2. Minimum Rent. The defined term “Minimum Rent” set forth in Section 1.68 of the Lease is hereby reduced by the sum of Twelve Thousand One Hundred Sixty-Three and 91/100 Dollars ($12,163.91)per month in accordance with Section 2.1(1)(b) of the Transaction Agreement.

8. Schedule 1. Schedule 1 to the Lease is deleted in its entirety and replaced with Schedule 1 attached hereto.

9. Exhibit A. Exhibit A to the Lease is amended by deleting Exhibit A-7 attached thereto in its entirety and replacing it with “Intentionally Deleted”.

10. Ratification. As amended hereby, the Lease is hereby ratified and confirmed.

[Remainder of page intentionally left blank; Signature page follows]

- 2 -

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a sealed instrument as of the date above first written.

LANDLORD:

CCOP SENIOR LIVING LLCSNH CHS PROPERTIES TRUSTSNH NS PROPERTIES TRUSTSNH SOMERFORD PROPERTIES TRUST SNH/LTA PROPERTIES GA LLC SNH/LTA PROPERTIES TRUST SNH/LTA SE HOME PLACE NEW BERN LLCSNH/LTA SE MCCARTHY NEW BERN LLC SPTIHS PROPERTIES TRUST


TENANT:

FIVE STAR QUALITY CARE - NS TENANT, LLCFIVE STAR QUALITY CARE TRUSTFS TENANT HOLDING COMPANY TRUST FVE SE HOME PLACE NEW BERN LLC FVE SE MCCARTHY NEW BERN LLC

By: /s/ Katherine E. Potter Katherine E. PotterPresident of each of the foregoing entities

[Signature Page to Partial Termination of and Seventh Amendment to Amended and Restated Master Lease Agreement (Lease No. 4)]

SCHEDULE 1





DateInterest Rate

A-1 Somerford Place - Stockton3530 Deer Park DriveStockton, CA 95219

2009 $3,515,630 03/31/2008 8%

A-2 La Villa Grande Care Center2501 Little Bookcliff DriveGrand Junction, CO 81501

2005 $5,205,189 12/31/2001 10%

A-3 Court at Palm-Aire2701 North Course DrivePompano Beach, FL 33069

2007 $12,992,201 09/01/2006 8.25%

A-4 Home Place of New Bern 1309 McCarthy Boulevard New Bern, NC 28562

2012 $2,742,228 06/20/2011 7.50%

A-5 McCarthy Court I1321 McCarthy Blvd New Bern, NC 28562

2012 $3,050,293* 6/20/2011 7.50%

A-6 Northlake Gardens1300 Montreal RoadTucker, GA 30084

2006 $2,240,421 06/03/2005 9%


A-8 Brenden Gardens900 Southwind RoadSpringfield, IL 62703

2007 $1,802,414 09/01/2006 8.25%

A-9 Overland Park Place6555 West 75th StreetOverland Park, KS 66204

2005 $2,539,735 10/25/2002 10%

A-10 Morningside of Mayfield1517 West BroadwayMayfield, KY 42066

2006 $1,197,256 11/19/2004 9%

A-11 The Neighborhood of Somerset100 Neighborly DriveSomerset, KY 42503

2007 $1,893,629 11/05/2006 8.25%

A-12 Centennial Park Retirement Village510 Centennial CircleNorth Platte, NE 69101

2009 $6,624,481 02/17/2008 8%

A-13 Westgate Assisted Living3030 South 80th StreetOmaha, NE 68124

2006 $2,210,173 06/03/2005 9%

A-14 NewSeasons at Cherry Hill490 Cooper Landing RoadCherry Hill, NJ 08002

2018 TBD 12/29/2003 10%

A-15 NewSeasons at Mount Arlington2 Hillside DriveMount Arlington, NJ 07856

2018 TBD 12/29/2003 10%

A-16 NewSeasons at New Britain800 Manor DriveChalfont, PA 18914

2018 TBD 12/29/2003 10%

A-17 NewSeasons at Clarks Summit950 Morgan HighwayClarks Summit, PA 18411

2018 TBD 12/29/2003 10%

A-18 NewSeasons at Exton600 North Pottstown PikeExton, PA 19341

2018 TBD 12/29/2003 10%




DateInterest Rate

A-19 NewSeasons at Glen Mills (Concordville)242 Baltimore PikeGlen Mills, PA 19342

2018 TBD 12/29/2003 10%

A-20 NewSeasons at Tiffany Court700 Northampton StreetKingston, PA 18704

2018 TBD 12/29/2003 10%

A-21 Morningside of Greenwood116 Enterprise CourtGreenwood, SC 29649

2006 $1,322,836 06/03/2005 9%

A-22 Montevista at Coronado1575 Belvidere StreetEl Paso, TX 79912

2005 $8,149,609 01/11/2002 10%

A-23 Dominion Village at Poquoson531 Wythe Creek RoadPoquoson, VA 23662

2005 $1,359,832 5/30/2003 10%

A-24 Morningside in the West End3000 Skipwith RoadRichmond, VA 23294

2006 $3,792,363 11/19/2004 9%

A-25 Worland Healthcare &Rehabilitation Center1901 Howell AvenueWorland, WY 82401

2005 $3,756,035 12/31/2001 10%

A-26 Brandon Woods at Alvamar1501 Inverness DriveLawrence, KS 66047

2010 $14,988,426 10/01/2009 8.75%

A-27 McCarthy Court II1325 McCarthy BoulevardNew Bern, North Carolina

2012 $3,050,293* 06/20/2011 7.5%

A-28 Remington Club I & II16925 and 16916 Hierba DriveSan Diego, CA 92128

2005 $20,853,252 01/11/2002 10.0%

A-29 Savannah SquareOne Savannah Square DriveSavannah, GA 31406

2007 $6,931,887 10/01/2006 9.0%

A-30 Morningside of Bellgrade2800 Polo ParkwayMidlothian, VA 23113

2006 $4,992,156 11/19/2004 9.0%

* Base Gross Revenues (and Gross Revenues) for McCarthy Court I and McCarthy Court II are combined.

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Katherine E. Potter, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 6, 2019 /s/ Katherine E. Potter Katherine E. Potter President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Jeffrey C. Leer, certify that:

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

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

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

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

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles;c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this

report based on such evaluation; andd. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has

materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: November 6, 2019 /s/ Jeffrey C. Leer Jeffrey C. Leer Executive Vice President, Chief Financial Officer and Treasurer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SEC. 1350

In connection with the filing by Five Star Senior Living Inc. (the “Company”) of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (the “Report”), each of the undersigned hereby certifies, to the best of her or his knowledge:

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

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

/s/ Katherine E. Potter Katherine E. Potter President and Chief Executive Officer

/s/ Jeffrey C. Leer Jeffrey C. Leer Executive Vice President, Chief Financial Officer and Treasurer

Date: November 6, 2019

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