8-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

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

Date of Report (Date of earliest event reported): October 11, 2006

FIVE STAR QUALITY CARE, INC.
(Exact Name of Registrant as Specified in Its Charter)

Maryland
(State or other jurisdiction
of incorporation)

Commission File No. 1-16817	04-3516029 (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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01.    Other Events

On October 11, 2006, Five Star Quality Care, Inc. (the "Company" or "Five Star") announced that it intends to offer $80,000,000 aggregate principal amount of Convertible Senior Notes due 2026 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. A press release announcing the proposed offering is attached to this Current Report on Form 8-K as Exhibit 99.1.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS, INCLUDING WITH RESPECT TO THE COMPANY'S ISSUANCE OF THE NOTES AND ITS INTENDED USE OF THE PROCEEDS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON THE COMPANY'S PRESENT EXPECTATIONS, BUT THESE STATEMENTS AND THE IMPLICATIONS OF THESE STATEMENTS ARE NOT GUARANTEED.

Summary historical, pro forma and selected financial data of the Company; consolidating subsidiary financial information.

Summary historical and pro forma financial data

The following summary financial data related to our continuing operations has been derived from our historical financial statements for the six months ended June 30, 2006, and shows, for the period or date presented, our summary historical and our pro forma income statement and balance sheet data, giving effect to (1) our April 2006 equity offering; (2) the reduction in our management fees payable in respect of 10 SLS management agreements that we terminated in June 2006; and (3) this offering (assuming the initial purchasers over-allotment option is not exercised and not giving effect to conversion of the notes), as if these events had been completed as of the beginning of the period presented. The following data should be read in conjunction with, and is qualified in its entirety by reference to, our historical financial statements incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2005 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein, the information contained in this offering memorandum under "Risk Factors" and our unaudited pro forma financial statements contained in this offering memorandum. Our six month historical financial information contains normal recurring adjustments and is not necessarily indicative of results to be expected in a full year. Comparability of financial results from period to period is affected by acquisitions, closures and our termination of SLS management agreements. Pro forma financial information may not be reflective of what our financial results or financial position would have been had the April 2006 equity offering, the reduction in our management fees payable in respect of 10 SLS management agreements that we terminated in June 2006 and this offering been completed as of the dates indicated in our pro forma financial statements. Our pro forma financial information does not give pro forma effect to certain transactions, including, without limitation, the eight senior living communities we began to operate in

2

September and October 2006 and the two rehabilitation hospitals we began to operate in October 2006. You should not place undue reliance on our pro forma financial information.

		For the six months ended June 30, 2006
		Historical			Adjusted for April 2006 equity offering			Adjusted for April 2006 equity offering and 2006 Sunrise terminations			Adjusted for April 2006 equity offering, 2006 Sunrise terminations and convertible senior notes offering
		(amounts in thousands, except per share data)
Statement of Income Data
REVENUES:
	Net revenues from residents	$	365,398		$	365,398		$	365,398		$	365,398
	Pharmacy revenue		24,410			24,410			24,410			24,410
Total revenues			389,808			389,808			389,808			389,808
OPERATING EXPENSES:
Community level operating expenses			281,381			281,381			281,381			281,381
Termination payment to SLS			89,833			89,833			89,833			89,833
Pharmacy expenses			23,189			23,189			23,189			23,189
Management fee to SLS			6,392			6,392			3,059			3,059
Rent expense			52,563			52,563			52,563			52,563
General and administrative			14,635			14,635			14,635			14,635
Depreciation and amortization			4,561			4,561			4,561			4,561
Total operating expenses			472,554			472,554			469,221			469,221
Operating loss			(82,746	)		(82,746	)		(79,413	)		(79,413	)
	Interest and other income		1,140			1,140			1,140			1,140
	Interest expense		(1,633	)		(1,633	)		(1,633	)		(3,294	)(1)
Loss from continuing operations before income taxes			(83,239	)		(83,239	)		(79,906	)		(81,567	)
	Provision for income taxes		—			—			—			—
Loss from continuing operations		$	(83,239	)	$	(83,239	)	$	(79,906	)	$	(81,567	)
Weighted Average Shares Outstanding:
	Basic		25,551			31,581			31,581			31,581
	Fully Diluted		25,551			31,581			31,581			31,581
Basic and diluted income per share from continuing operations:
	Basic	$	(3.26	)	$	(2.64	)	$	(2.53	)	$	(2.58	)(2)
	Fully Diluted	$	(3.26	)	$	(2.64	)	$	(2.53	)	$	(2.58	)(2)
EBITDA
Loss from continuing operations		$	(83,239	)	$	(83,239	)	$	(79,906	)	$	(81,567	)
	Add: income taxes		—			—			—			—
	Add: depreciation and amortization		4,561			4,561			4,561			4,561
	Add: interest expense		1,633			1,633			1,633			3,294
	Less: interest and other income		(1,140	)		(1,140	)		(1,140	)		(1,140	)
EBITDA(3)		$	(78,185	)	$	(78,185	)	$	(74,852	)	$	(74,852	)

3

		As of June 30, 2006
		Actual		Adjusted for convertible senior notes offering
		(dollars in thousands)
Balance Sheet Data
	Cash and cash equivalents	$	23,576	$	101,126
	Total current assets		111,806		189,356
	Total assets		252,334		332,334
	Total current liabilities		83,889		83,889
	Total long term liabilities		71,472		151,472
	Total shareholders' equity	$	96,973	$	96,973

(1)

We have used an assumed interest rate of 4.0% per annum for the notes offered hereby.

(2)

The loss per share includes a loss of $(2.84) per share relating to the termination fees we incurred for the six months ended June 30, 2006 in connection with our termination of 10 SLS management agreements.

(3)

We consider earnings before interest, taxes, depreciation and amortization, or EBITDA, to be an indicative measure of our operating performance. We believe EBITDA is also useful in measuring our ability to service debt, fund capital expenditures and expand our business. Furthermore, we believe that EBITDA is a meaningful disclosure that may help shareholders to understand better our financial performance, including comparing our performance to other companies. However, EBITDA as presented may not be comparable to amounts calculated by other companies. This information should not be considered as an alternative to net income, income from continuing operations, operating profit, cash flow from operations, or any other operating or liquidity performance measure prescribed by accounting principles generally accepted in the United States. Other income excluded from EBITDA consists primarily of amortization of deferred gains.

4

Selected financial data

The following table presents selected financial data related to our continuing operations which has been derived from our historical financial statements for the years ended December 31, 2003, 2004 and 2005, and for the six months ended June 30, 2005 and 2006, all of which have been adjusted to remove the operations of two skilled nursing home communities in the state of Connecticut that we classified as discontinued operations in June 2006. The following information should be read in connection with, and is qualified in its entirety by reference to, our consolidated financial statements and the notes thereto incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2005 and from our Quarterly Reports on Form 10-Q for the three months ended March 31, 2006 and the six months ended June 30, 2006. The six month information contains normal recurring adjustments and is not necessarily indicative of the results that may be expected in a full year. Additionally, comparability of financial results from period to period is affected by acquisitions, closures and our termination of SLS management agreements. Accordingly, you should not place undue reliance on our historical financial information.

		Year ended December 31,									Six months ended June 30,
		2003			2004			2005			2005			2006
Revenues:
	Net revenues from residents	$	543,610		$	584,615		$	700,891		$	340,795		$	365,398
	Pharmacy revenue		1,770			13,209			33,476			12,356			24,410
Total revenues			545,380			597,824			734,367			353,151			389,808
Operating expenses:
	Community level operating expenses		434,530			455,755			537,062			260,061			281,381
	Pharmacy expenses		1,666			12,093			32,167			11,451			23,189
	Management fee to SLS		17,272			19,293			21,256			11,240			6,392
	Termination expense for certain SLS management agreements		—			—			86,286			—			89,833
	Rent expense		76,962			82,453			98,890			48,460			52,563
	General and administrative		15,892			18,473			26,559			12,702			14,635
	Depreciation and amortization		3,201			3,371			7,113			3,384			4,561
	Impairment of assets		—			—			2,333			—			—
Total operating expenses			549,523			591,438			811,666			347,298			472,554
Operating (loss) income			(4,143	)		6,386			(77,299	)		5,853			(82,746	)
	Interest and other income		503			1,666			1,543			566			1,140
	Interest expense		(1,439	)		(1,172	)		(3,741	)		(1,860	)		(1,633	)
(Loss) income from continuing operations before income taxes			(5,079	)		6,880			(79,497	)		4,559			(83,239	)
	Provision for income taxes		—			(120	)		—			(73	)		—
(Loss) income from continuing operations		$	(5,079	)	$	6,760		$	(79,497	)	$	4,486		$	(83,239	)
Weighted average shares outstanding			8,482			8,716			14,879			12,219			25,551
Basic and diluted (loss) income per share from:
	Continuing operations	$	(0.60	)	$	0.78		$	(5.34	)	$	0.37		$	(3.26	)
(Loss) income from continuing operations		$	(5,079	)	$	6,760		$	(79,497	)	$	4,486		$	(83,239	)
	Add: income taxes		—			120			—			73			—
	Add: depreciation and amortization		3,201			3,371			7,113			3,384			4,561
	Add: interest expense		1,439			1,172			3,741			1,860			1,633
	Less: interest and other income		(503	)		(1,666	)		(1,543	)		(566	)		(1,140	)
EBITDA		$	(942	)	$	9,757		$	(70,186	)	$	9,237		$	(78,185	)

5

CONSOLIDATING SUBSIDIARY FINANCIAL INFORMATION

Consolidating financial information related to the Company, its guarantor subsidiaries and non-guarantor subsidiaries as of June 30, 2006 and 2005 are reflected below.

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the six months ended June 30, 2006

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations		FVE consolidated
REVENUES:
	Net revenues from residents	$	—		$	163,152		$	202,246		$	—	$	365,398
	Pharmacy revenue		—			—			24,410			—		24,410
Total revenues			—			163,152			226,656			—		389,808
OPERATING EXPENSES:
	Wages and benefits		—			69,435			117,526			—		186,961
	Other operating expenses		—			47,035			47,385			—		94,420
	Termination payment to Sunrise Senior Living Services, Inc. ("SLS")		—			89,833			—			—		89,833
	Pharmacy expenses		—			—			23,189			—		23,189
	Management fee to SLS		—			6,392			—			—		6,392
	Rent expense		—			32,240			20,323			—		52,563
	General and administrative		—			4,241			10,394			—		14,635
	Depreciation and amortization		—			1,967			2,594			—		4,561
Total operating expenses			—			251,143			221,411			—		472,554
Operating (loss) income			—			(87,991	)		5,245			—		(82,746	)
	Interest and other income		—			65			1,075			—		1,140
	Interest expense		—			(3	)		(1,630	)		—		(1,633	)
	Equity in earnings of subsidiaries		(85,532	)		—			—			85,532		—
(Loss) income from continuing operations before income taxes			(85,532	)		(87,929	)		4,690			85,532		(83,239	)
	Provision for income taxes		—			—			—			—		—
(Loss) income from continuing operations			(85,532	)		(87,929	)		4,690			85,532		(83,239	)
Loss from discontinued operations			—			(94	)		(2,199	)		—		(2,293	)
Net (loss) income		$	(85,532	)	$	(88,023	)	$	2,491		$	85,532	$	(85,532	)

6

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the six months ended June 30, 2005

		Parent		Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
REVENUES:
	Net revenues from residents	$	—	$	156,638		$	184,157		$	—		$	340,795
	Pharmacy revenue		—		—			12,356			—			12,356
Total revenues			—		156,638			196,513			—			353,151
OPERATING EXPENSES:
	Wages and benefits		—		65,697			108,629			—			174,326
	Other operating expenses		—		43,229			42,506			—			85,735
	Termination payment to SLS		—		—			—			—			—
	Pharmacy expenses		—		—			11,451			—			11,451
	Management fee to SLS		—		11,148			92			—			11,240
	Rent expense		—		32,201			16,259			—			48,460
	General and administrative		—		—			12,702			—			12,702
	Depreciation and amortization		—		1,251			2,133			—			3,384
Total operating expenses			—		153,526			193,772			—			347,298
Operating income			—		3,112			2,741			—			5,853
	Interest and other income		—		59			507			—			566
	Interest expense		—		—			(1,860	)		—			(1,860	)
	Equity in earnings of subsidiaries		2,420		—			—			(2,420	)		—
Income (loss) from continuing operations before income taxes			2,420		3,171			1,388			(2,420	)		4,559
	Provision for income taxes		—		—			(73	)		—			(73	)
Income (loss) from continuing operations			2,420		3,171			1,315			(2,420	)		4,486
Loss from discontinued operations			—		(71	)		(1,995	)		—			(2,066	)
(Loss) net income		$	2,420	$	3,100		$	(680	)	$	(2,420	)	$	2,420

7

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
As of June 30, 2006

	Parent		Guarantor subsidiaries		Non-guarantor subsidiaries		Eliminations			FVE consolidated
ASSETS
Current Assets
Cash and cash equivalents	$	—	$	2,499	$	21,077	$	—		$	23,576
Accounts receivable, net		—		13,891		32,449		—			46,340
Prepaid expenses and other current assets		—		2,479		39,411		—			41,890
Total current assets		—		18,869		92,937		—			111,806
Property and equipment, net		—		19,820		82,230		—			102,050
Investment in subsidiary and long term recievable from (to) subsidiaries		200		—		200		(400	)		—
Restricted cash		—		3,673		10,024		—			13,697
Intercompany		227,808		—		—		(227,808	)		—
Mortgage notes receivable		—		—		3,725		—			3,725
Goodwill		—		—		16,901		—			16,901
Other long term assets		—		402		3,753		—			4,155
Total assets	$	228,008	$	42,764	$	209,770	$	(228,208	)	$	252,334
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	—	$	24,005	$	59,258	$	—		$	83,263
Current mortgage notes payable		—		—		626		—			626
Total current liabilities		—		24,005		59,884		—			83,889
Long term liabilities:
Mortgage notes payable		—		—		44,423		—			44,423
Notes payable to related parties		200		—		—		(200	)		—
Other long term liabilities		—		7,128		19,921		—			27,049
Total long term liabilities		200		7,128		64,344		(200	)		71,472
Total shareholders' equity		227,808		11,631		85,542		(228,008	)		96,973
Total liabilities and shareholders' equity	$	228,008	$	42,764	$	209,770	$	(228,208	)	$	252,334

8

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
As of June 30, 2005

	Parent		Guarantor subsidiaries		Non-guarantor subsidiaries		Eliminations			FVE consolidated
ASSETS
Current Assets
Cash and cash equivalents	$	—	$	11,744	$	6,960	$	—		$	18,704
Accounts receivable, net		—		12,937		26,315		—			39,252
Prepaid expenses and other current assets		—		10,807		15,897		—			26,704
Total current assets		—		35,488		49,172		—			84,660
Property and equipment, net		—		14,444		132,717		—			147,161
Investment in subsidiary and long term recievable from (to) subsidiaries		200		—		200		(400	)		—
Restricted cash		—		13,351		3,280		—			16,631
Intercompany		56,654		—		—		(56,654	)		—
Mortgage notes receivable		—		—		6,036		—			6,036
Goodwill		—		—		14,842		—			14,842
Other long term assets		—		402		1,502		—			1,904
Total assets	$	56,854	$	63,685	$	207,749	$	(57,054	)	$	271,234
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	—	$	27,396	$	46,022	$	—		$	73,418
Current mortgage notes payable		—		—		6,051		—			6,051
Total current liabilities		—		27,396		52,073		—			79,469
Long term liabilities:
Mortgage notes payable		—		—		69,056		—			69,056
Notes payable to related parties		200		—		—		(200	)		—
Other long term liabilities		—		6,825		17,290		—			24,115
Total long term liabilities		200		6,825		86,346		(200	)		93,171
Total shareholders' equity		56,654		29,464		69,330		(56,854	)		98,594
Total liabilities and shareholders' equity	$	56,854	$	63,685	$	207,749	$	(57,054	)	$	271,234

9

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT
For the six months ended June 30, 2006

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
Cash Flows from operating activities:
Net (loss) income		$	(85,532	)	$	(88,023	)	$	2,491		$	85,532		$	(85,532	)
Undistributed equity in earnings of subsidiaries			85,532			—			—			(85,532	)		—
Adjustments to reconcile net income (loss) to cash provided by (used in) operating acitivities, net			—			86,027			(92,220	)		—			(6,193	)
	Net cash used in operating activities		—			(1,996	)		(89,729	)		—			(91,725	)
Cash Flows from investing activities:
Capital expenditures			—			(8,323	)		(15,263	)		—			(23,586	)
Proceeds from the sale of property and equipment			—			5,746			5,331			—			11,077
Other, net			—			(4	)		(2,694	)		—			(2,698	)
	Net cash used in investing activities		—			(2,581	)		(12,626	)		—			(15,207	)
Cash Flows from financing activities:
Proceeds from issuance of common shares, net			—			—			114,059			—			114,059
Change in borrowings, net			—			—			(280	)		—			(280	)
Other, net			—			—			—			—			—
	Net cash provided by financing activities		—			—			113,779			—			113,779
Change in cash and cash equivalents			—			(4,577	)		11,424			—			6,847
Cash and cash equivalents at beginning of period			—			7,076			9,653			—			16,729
Cash and cash equivalents at end of period		$	—		$	2,499		$	21,077		$	—		$	23,576

10

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT
For the six months ended June 30, 2005

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
Cash Flows from operating activities:
Net income (loss)		$	2,420		$	3,100		$	(680	)	$	(2,420	)	$	2,420
Undistributed equity in earnings of subsidiaries			(2,420	)		—			—			2,420			—
Adjustments to reconcile net income (loss) to cash provided by operating acitivities, net			—			7,691			8,662			—			16,353
	Net cash provided by operating activities		—			10,791			7,982			—			18,773
Cash Flows from investing activities:
Capital expenditures			—			(6,987	)		(79,827	)		—			(86,814	)
Proceeds from the sale of property and equipment			—			3,988			25,574			—			29,562
Other, net			—			(3,698	)		(2,587	)		—			(6,285	)
	Net cash used in investing activities		—			(6,697	)		(56,840	)		—			(63,537	)
Cash Flows from financing activities:
Proceeds from issuance of common shares, net			—			—			—			—			—
Change in borrowings, net			—			—			32,526			—			32,526
Other, net			—			—			—			—			—
	Net cash provided by financing activities		—			—			32,526			—			32,526
Change in cash and cash equivalents			—			4,094			(16,332	)		—			(12,238	)
Cash and cash equivalents at beginning of period			—			7,650			23,292			—			30,942
Cash and cash equivalents at end of period		$	—		$	11,744		$	6,960		$	—		$	18,704

11

Consolidating financial information related to the Company, its guarantor subsidiaries and non-guarantor subsidiaries as of December 31, 2005, 2004 and 2003 are reflected below.

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the year ended December 31, 2005

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations		FVE consolidated
REVENUES:
	Net revenues from residents	$	—		$	314,990		$	385,901		$	—	$	700,891
	Pharmacy revenue		—			—			33,476			—		33,476
Total revenues			—			314,990			419,377			—		734,367
OPERATING EXPENSES:
	Wages and benefits		—			131,779			224,588			—		356,367
	Other operating expenses		—			90,368			90,327			—		180,695
	Termination payment to SLS		—			86,286			—			—		86,286
	Pharmacy expenses		—			—			32,167			—		32,167
	Management fee to SLS		—			21,256			—			—		21,256
	Rent expense		—			64,556			34,334			—		98,890
	General and administrative		—			—			26,559			—		26,559
	Depreciation and amortization		—			2,562			4,551			—		7,113
	Impairment of assets		—			—			2,333			—		2,333
Total operating expenses			—			396,807			414,859			—		811,666
Operating (loss) income			—			(81,817	)		4,518			—		(77,299	)
	Interest and other income		—			170			1,373			—		1,543
	Interest expense		—			—			(3,741	)		—		(3,741	)
	Equity in earnings of subsidiaries		(84,159	)		—			—			84,159		—
(Loss) income from continuing operations before income taxes			(84,159	)		(81,647	)		2,150			84,159		(79,497	)
	Provision for income taxes		—			—			—			—		—
(Loss) income from continuing operations			(84,159	)		(81,647	)		2,150			84,159		(79,497	)
Loss from discontinued operations			—			(272	)		(4,390	)		—		(4,662	)
Net (loss) income		$	(84,159	)	$	(81,919	)	$	(2,240	)	$	84,159	$	(84,159	)

12

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the year ended December 31, 2004

		Parent		Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
REVENUES:
	Net revenues from residents	$	—	$	302,760		$	281,855		$	—		$	584,615
	Pharmacy revenue		—		—			13,209			—			13,209
Total revenues			—		302,760			295,064			—			597,824
OPERATING EXPENSES:
	Wages and benefits		—		126,868			175,414			—			302,282
	Other operating expenses		—		88,287			65,186			—			153,473
	Termination payment to SLS		—		—			—			—			—
	Pharmacy expenses		—		—			12,093			—			12,093
	Management fee to SLS		—		19,293			—			—			19,293
	Rent expense		—		64,023			18,430			—			82,453
	General and administrative		—		—			18,473			—			18,473
	Depreciation and amortization		—		1,339			2,032			—			3,371
Total operating expenses			—		299,810			291,628			—			591,438
Operating income			—		2,950			3,436			—			6,386
	Interest and other income		—		66			1,600			—			1,666
	Interest expense		—		—			(1,172	)		—			(1,172	)
	Equity in earnings of subsidiaries		3,291		—			—			(3,291	)		—
Income (loss) from continuing operations before income taxes			3,291		3,016			3,864			(3,291	)		6,880
	Provision for income taxes		—		—			(120	)		—			(120	)
Income (loss) from continuing operations			3,291		3,016			3,744			(3,291	)		6,760
Loss from discontinued operations			—		(692	)		(2,777	)		—			(3,469	)
Net income (loss)		$	3,291	$	2,324		$	967		$	(3,291	)	$	3,291

13

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the year ended December 31, 2003

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations		FVE consolidated
REVENUES:
	Net revenues from residents	$	—		$	289,882		$	253,728		$	—	$	543,610
	Pharmacy revenue		—			—			1,770			—		1,770
Total revenues			—			289,882			255,498			—		545,380
OPERATING EXPENSES:
	Wages and benefits		—			125,605			166,029			—		291,634
	Other operating expenses		—			85,587			57,309			—		142,896
	Termination payment to SLS		—			—			—			—		—
	Pharmacy expenses		—			—			1,666			—		1,666
	Management fee to SLS		—			17,272			—			—		17,272
	Rent expense		—			63,728			13,234			—		76,962
	General and administrative		—			—			15,892			—		15,892
	Depreciation and amortization		—			419			2,782			—		3,201
Total operating expenses			—			292,611			256,912			—		549,523
Operating loss			—			(2,729	)		(1,414	)		—		(4,143	)
	Interest and other income		—			57			446			—		503
	Interest expense		—			—			(1,439	)		—		(1,439	)
	Equity in earnings of subsidiaries		(7,939	)		—			—			7,939		—
(Loss) income from continuing operations before income taxes			(7,939	)		(2,672	)		(2,407	)		7,939		(5,079	)
	Provision for income taxes		—			—			—			—		—
(Loss) income from continuing operations			(7,939	)		(2,672	)		(2,407	)		7,939		(5,079	)
Loss from discontinued operations			—			(803	)		(2,057	)		—		(2,860	)
Net (loss) income		$	(7,939	)	$	(3,475	)	$	(4,464	)	$	7,939	$	(7,939	)

14

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2005

	Parent		Guarantor subsidiaries		Non-guarantor subsidiaries		Eliminations			FVE consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	7,076	$	9,653	$	—		$	16,729
Accounts receivable, net		—		15,535		30,589		—			46,124
Prepaid expenses and other current assets		—		6,143		25,884		—			32,027
Total current assets		—		28,754		66,126		—			94,880
Property and equipment, net		—		19,200		77,543		—			96,743
Investment in subsidiary and long term recievable from (to) subsidiaries		200		—		200		(400	)		—
Restricted cash		—		3,798		9,159		—			12,957
Intercompany		113,749		—		—		(113,749	)		—
Mortgage notes receivable		—		—		5,971		—			5,971
Goodwill		—		—		14,059		—			14,059
Other long term assets		—		402		3,928		—			4,330
Total assets	$	113,949	$	52,154	$	176,986	$	(114,149	)	$	228,940
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and other current liabilities	$	—	$	25,262	$	64,080	$	—		$	89,342
Current mortgage notes payable		—		—		626		—			626
Total current liabilities		—		25,262		64,706		—			89,968
Long term liabilities:
Mortgage notes payable		—		—		44,703		—			44,703
Notes payable to related parties		200		—		—		(200	)		—
Other long term liabilities		—		6,179		19,286		—			25,465
Total long term liabilities		200		6,179		63,989		(200	)		70,168
Total shareholders' equity		113,749		20,713		48,291		(113,949	)		68,804
Total liabilities and shareholders' equity	$	113,949	$	52,154	$	176,986	$	(114,149	)	$	228,940

15

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2004

	Parent		Guarantor subsidiaries		Non-guarantor subsidiaries		Eliminations			FVE consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	7,650	$	23,292	$	—		$	30,942
Accounts receivable, net		—		11,676		25,066		—			36,742
Prepaid expenses and other current assets		—		12,498		15,476		—			27,974
Total current assets		—		31,824		63,834		—			95,658
Property and equipment, net		—		12,671		82,518		—			95,189
Investment in subsidiary and long term recievable from (to) subsidiaries		200		—		200		(400	)		—
Restricted cash		—		8,842		1,907		—			10,749
Intercompany		56,551		—		—		(56,551	)		—
Mortgage notes receivable		—		—		6,099		—			6,099
Goodwill		—		—		11,548		—			11,548
Other long term assets		—		402		3,340		—			3,742
Total assets	$	56,751	$	53,739	$	169,446	$	(56,951	)	$	222,985
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and other current liabilities	$	—	$	24,597	$	41,838	$	—		$	66,435
Current mortgage notes payable		—		—		463		—			463
Total current liabilities		—		24,597		42,301		—			66,898
Long term liabilities:
Mortgage notes payable		—		—		42,118		—			42,118
Notes payable to related parties		200		—		—		(200	)		—
Other long term liabilities		—		6,320		11,745		—			18,065
Total long term liabilities		200		6,320		53,863		(200	)		60,183
Total shareholders' equity		56,551		22,822		73,282		(56,751	)		95,904
Total liabilities and shareholders' equity	$	56,751	$	53,739	$	169,446	$	(56,951	)	$	222,985

16

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT
For the year ended December 31, 2005

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
Cash Flows from operating activities:
Net (loss) income		$	(84,159	)	$	(81,919	)	$	(2,240	)	$	84,159		$	(84,159	)
Undistributed equity in earnings of subsidiaries			84,159			—			—			(84,159	)		—
Adjustments to reconcile net (loss) income to cash provided by (used in) operating acitivities, net			—			80,502			(53,220	)		—			27,282
	Net cash used in operating activities		—			(1,417	)		(55,460	)		—			(56,877	)
Cash Flows from investing activities:
Capital expenditures			—			(19,722	)		(90,632	)		—			(110,354	)
Proceeds from the sale of property and equipment			—			7,769			88,379			—			96,148
Other, net			—			12,796			(15,287	)		—			(2,491	)
	Net cash provided by (used in) investing activities		—			843			(17,540	)		—			(16,697	)
Cash Flows from financing activities:
Proceeds from issuance of common shares, net			—			—			56,613			—			56,613
Change in borrowings, net			—			—			2,748			—			2,748
Other, net			—			—			—			—			—
	Net cash provided by financing activities		—			—			59,361			—			59,361
Change in cash and cash equivalents			—			(574	)		(13,639	)		—			(14,213	)
Cash and cash equivalents at beginning of period			—			7,650			23,292			—			30,942
Cash and cash equivalents at end of period		$	—		$	7,076		$	9,653		$	—		$	16,729

17

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT
For the year ended December 31, 2004

		Parent			Subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
Cash Flows from operating activities:
Net income (loss)		$	3,291		$	2,324		$	967		$	(3,291	)	$	3,291
Undistributed equity in earnings of subsidiaries			(3,291	)		—			—			3,291			—
Adjustments to reconcile net income (loss) to cash provided by (used in) operating acitivities, net			—			7,721			(11,370	)		—			(3,649	)
	Net cash provided by (used in) operating activities		—			10,045			(10,403	)		—			(358	)
Cash Flows from investing activities:
Capital expenditures			—			(18,813	)		(123,648	)		—			(142,461	)
Proceeds from the sale of property and equipment			—			5,746			126,393			—			132,139
Other, net			—			(2,484	)		4,262			—			1,778
	Net cash (used in) provided by investing activities		—			(15,551	)		7,007			—			(8,544	)
Cash Flows from financing activities:
Proceeds from issuance of common shares, net			—			—			27,685			—			27,685
Change in borrowings, net			—			—			(5,452	)		—			(5,452	)
Other, net			—			—			—			—			—
	Net cash provided by financing activities		—			—			22,233			—			22,233
Change in cash and cash equivalents			—			(5,506	)		18,837			—			13,331
Cash and cash equivalents at beginning of period			—			13,156			4,455			—			17,611
Cash and cash equivalents at end of period		$	—		$	7,650		$	23,292		$	—		$	30,942

18

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT
For the year ended December 31, 2003

		Parent			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			FVE consolidated
Cash Flows from operating activities:
Net (loss) income		$	(7,939	)	$	(3,475	)	$	(4,464	)	$	7,939		$	(7,939	)
Undistributed equity in earnings of subsidiaries			7,939			—			—			(7,939	)		—
Adjustments to reconcile net income (loss) to cash provided by operating acitivities, net			—			26,226			625			—			26,851
	Net cash provided by (used in) operating activities		—			22,731			(3,839	)		—			18,912
Cash Flows from investing activities:
Capital expenditures			—			(4,365	)		(14,522	)		—			(18,887	)
Proceeds from the sale of property and equipment			—			2,750			24,335			—			27,085
Other, net			—			(10,633	)		(3,449	)		—			(14,082	)
	Net cash (used in) provided by investing activities		—			(12,248	)		6,364			—			(5,884	)
Cash Flows from financing activities:
Proceeds from issuance of common shares, net			—			—			—			—			—
Change in borrowings, net			—			—			(5,687	)		—			(5,687	)
Other, net			—			—			—			—			—
	Net cash used in financing activities		—			—			(5,687	)		—			(5,687	)
Change in cash and cash equivalents			—			10,503			(3,162	)		—			7,341
Cash and cash equivalents at beginning of period			—			2,654			7,616			—			10,270
Cash and cash equivalents at end of period		$	—		$	13,157		$	4,454		$	—		$	17,611

19

Five Star Quality Care, Inc.


UNAUDITED PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2006
(dollars in thousands)

	Historical		Adjustments for convertible senior notes offering		Adjusted for convertible senior notes offering
ASSETS
Current assets
Cash and cash equivalents	$	23,576	$77,550	(A)	$101,126
Accounts receivable, net		46,340	—		46,340
Prepaid expenses and other current assets		41,890	—		41,890
Total current assets		111,806	77,550		189,356
Property and equipment, net		102,050	—		102,050
Restricted cash		13,697	—		13,697
Mortgage notes receivable		3,725	—		3,725
Goodwill		16,901	—		16,901
Other long term assets		4,155	2,450	(B)	6,605
Total assets	$	252,334	$80,000		$332,334
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities	$	83,889	$—		$83,889
Mortgage notes payable		44,423	—		44,423
% Convertible Senior Notes due 2026		—	80,000	(C)	80,000
Other long term liabilities		27,049	—		27,049
Total liabilities		155,361	80,000		235,361
Total shareholders' equity		96,973	—		96,973
Total liabilities and shareholders' equity	$	252,334	$80,000		$332,334

20

Five Star Quality Care, Inc.


UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the six months ended June 30, 2006
(dollars in thousands)

		Historical			Adjustments for April 2006 equity offering			Adjusted for April 2006 equity offering			Adjustments for 2006 Sunrise termination			Adjusted for April 2006 equity offering and 2006 Sunrise termination			Adjustments for convertible senior note offering			Adjusted for April 2006 equity offering, 2006 Sunrise termination and convertible senior note offering
REVENUES:
	Net revenues from residents	$	365,398		$	—		$	365,398		$	—		$	365,398		$	—		$	365,398
	Pharmacy revenue		24,410			—			24,410			—			24,410			—			24,410
Total revenues			389,808			—			389,808			—			389,808			—			389,808
OPERATING EXPENSES:
	Property level operating expenses		281,381			—			281,381			—			281,381			—			281,381
	Termination payment to Sunrise Senior Living Services, Inc.		89,833			—			89,833			—			89,833			—			89,833
	Pharmacy expenses		23,189			—			23,189			—			23,189			—			23,189
	Management fee to Sunrise Senior Living Services, Inc.		6,392			—			6,392			(3,333	)(E)		3,059			—			3,059
	Rent expense		52,563			—			52,563			—			52,563			—			52,563
	General and administrative		14,635			—			14,635			—			14,635			—			14,635
	Depreciation and amortization		4,561			—			4,561			—			4,561			—			4,561
Total operating expenses			472,554			—			472,554			(3,333	)		469,221			—			469,221
Operating loss			(82,746	)		—			(82,746	)		3,333			(79,413	)		—			(79,413	)
	Interest and other income		1,140			—			1,140			—			1,140			—			1,140
	Interest expense		(1,633	)		—			(1,633	)		—			(1,633	)		(1,661	)(F)		(3,294	)
(Loss) income from continuing operations before income taxes			(83,239	)		—			(83,239	)		3,333			(79,906	)		(1,661	)		(81,567	)
	Provision for income taxes		—			—			—			—			—			—			—
(Loss) income from continuing operations		$	(83,239	)	$	—		$	(83,239	)	$	3,333		$	(79,906	)	$	(1,661	)	$	(81,567	)
Weighted Average Shares Outstanding:
	Basic		25,551			6,030	(D)		31,581			—			31,581			—			31,581
	Fully Diluted		25,551			6,030			31,581			—			31,581			—			31,581
Basic and diluted loss per share from:
	Basic	$	(3.26	)				$	(2.64	)				$	(2.53	)				$	(2.58	)
	Fully Diluted	$	(3.26	)				$	(2.64	)				$	(2.53	)				$	(2.58	)

21

Five Star Quality Care, Inc.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share amounts)

INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated balance sheet as of June 30, 2006, presents the consolidated financial position of Five Star as if this convertible senior notes offering had been completed as of June 30, 2006, as described in the notes thereto. The unaudited pro forma consolidated statement of operations for the six months ended June 30, 2006, presents the consolidated results of operations of Five Star as if (1) our April 2006 equity offering; (2) the reduction in our management fees payable in respect of 10 Sunrise Senior Living Services, Inc., or SLS, management agreements that we terminated in June 2006; and (3) this convertible senior notes offering (assuming the initial purchasers' over-allotment option is not exercised and not giving effect to the conversion of the notes), had been completed as of January 1, 2006, as described in the notes thereto.

These unaudited pro forma consolidated financial statements do not represent our consolidated financial condition or results of operations for any future date or period. Actual future results may be materially different from pro forma results. Differences could arise from many factors, including, but not limited to, those set forth under "Risk factors" and "Warning concerning forward looking statements." These unaudited pro forma consolidated financial statements should be read in conjunction with our historical financial statements incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2005 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein and the information contained in this offering memorandum under "Risk Factors." These unaudited pro forma consolidated financial statements do not give pro forma effect to certain transactions, including, without limitation, the eight senior living communities we began to operate in September and October 2006 and the two rehabilitation hospitals we began to operate in October 2006.

Pro forma consolidated balance sheet as of June 30, 2006 adjustments

A.

Represents the proceeds we received from our issuance of our convertible senior notes offered hereby as follows:

Convertible senior notes issued	$	80,000
Initial purchasers discount and commissions and other offering costs, estimated		2,450
Net proceeds	$	77,550

B.

Represents deferred finance costs we expect to incur as a result of our issuance of the convertible senior notes offered hereby. Amounts represent estimated initial purchasers discount and commissions and other offering costs which will be amortized over the expected term of the convertible senior notes offered hereby.

C.

Represents the principal amount of the convertible senior notes offered hereby.

Pro forma consolidated statement of operations for the six months ended June 30, 2006 adjustments

D.

Represents our issuance of common shares in our April 2006 equity offering. The adjustment has been weighted to reflect shares actually outstanding as of June 30, 2006.

22

E.

Represents the elimination of the contractual management fee with SLS. In connection with the termination of 10 management agreements with SLS, we will no longer be required to make these payments.

F.

Represents the interest expense we will incur on the convertible senior notes offered hereby, as well as amortization of deferred finance fees. The adjustment is calculated as follows:

Interest expense for six months on the $80,000 of convertible senior notes offered hereby at an assumed rate of 4.0% per annum		(1,600	)
Amortization of deferred finance fees (see Note B) for six months. Deferred finance costs amortized over expected term of the convertible debt, or 20 years		(61	)
Total adjustment	$	(1,661	)

23

Item 9.01.    Financial Statements and Exhibits.

(d)

Exhibits.

10.1	Seventh Amendment to Second Amended and Restated Lease Agreement, dated as of October 1, 2006, by and among Ellicott City Land I LLC, Ellicott City Land II LLC, HRES2 Properties Trust, SNH CHS Properties Trust, SPTIHS Properties Trust, SPT-Michigan Trust, SPTMNR Properties Trust, SNH/LTA Properties Trust and SNH/LTA Properties GA LLC, as Landlord, and Five Star Quality Care Trust, as Tenant.
10.2	Fourth Amendment to Credit and Security Agreement, dated as of October 11, 2006, by and among Five Star Quality Care, Inc., each of the Guarantors party thereto and Wachovia Bank, National Association.
99.1	Press release of Five Star Quality Care, Inc., dated October 11, 2006.

24

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 hereunto duly authorized.

FIVE STAR QUALITY CARE, INC.
By:	/s/ Evrett W. Benton
Name:	Evrett W. Benton
Title:	President and Chief Executive Officer

Date: October 11, 2006

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THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS, INCLUDING WITH RESPECT TO THE COMPANY'S ISSUANCE OF THE NOTES AND ITS INTENDED USE OF THE PROCEEDS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON THE COMPANY'S PRESENT EXPECTATIONS, BUT THESE STATEMENTS AND THE IMPLICATIONS OF THESE STATEMENTS ARE NOT GUARANTEED.
Summary historical and pro forma financial data
Selected financial data

CONSOLIDATING SUBSIDIARY FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the six months ended June 30, 2006
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the six months ended June 30, 2005

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET As of June 30, 2006
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET As of June 30, 2005

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT For the six months ended June 30, 2006
UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT For the six months ended June 30, 2005

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the year ended December 31, 2005
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the year ended December 31, 2004

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET As of December 31, 2005

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET As of December 31, 2004
UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT For the year ended December 31, 2005

UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT For the year ended December 31, 2004
UNAUDITED CONDENSED CONSOLIDATING CASH FLOW STATEMENT For the year ended December 31, 2003

Five Star Quality Care, Inc. UNAUDITED PRO FORMA FINANCIAL INFORMATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET As of June 30, 2006 (dollars in thousands)
Five Star Quality Care, Inc. UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT For the six months ended June 30, 2006 (dollars in thousands)

INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

SIGNATURES

EX-10.1

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Exhibit 10.1

SEVENTH AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT

THIS SEVENTH AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT (this "Amendment") is made and entered into as of October 1, 2006 by and among each of the parties identified on the signature page hereof as landlord, as landlord (collectively, "Landlord"), and FIVE STAR QUALITY CARE TRUST, a Maryland business trust, as tenant ("Tenant").

WITNESSETH:

WHEREAS, pursuant to the terms of that certain Second Amended and Restated Lease Agreement, dated as of November 19, 2004, as amended by that certain First Amendment of Lease, dated as of May 17, 2005, that certain Second Amendment to Second Amended and Restated Lease Agreement, dated as of June 3, 2005, that certain Third Amendment to Second Amended and Restated Lease Agreement, dated as of October 31, 2005, that certain Third Amendment to Second Amended and Restated Lease Agreement, dated as of December 30, 2005, that certain Letter Agreement, dated as of March 13, 2006, that certain Fifth Amendment to Second Amended and Restated Lease Agreement, dated as of September 1, 2006 and that certain Sixth Amendment to Second Amended and Restated Lease Agreement, dated as of September 30, 2006 (as so amended, the "Consolidated Lease"), 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 such terms in the Consolidated Lease), all as more particularly described in the Consolidated Lease; and

WHEREAS, on or about the date hereof, SNH/LTA Properties Trust has acquired certain real property and related improvements known as Hermitage Gardens at Oxford and located at 1488 Belk Boulevard, Oxford, Mississippi, as more particularly described on Exhibit A-93 attached hereto (the "Oxford Property"); and

WHEREAS, on or about the date hereof, SNH/LTA Properties Trust has acquired certain real property and related improvements known as Hermitage Gardens at Southaven and located at 108 Clarington Drive, Southaven, Mississippi, as more particularly described on Exhibit A-94 attached hereto (the "Southaven Property", and together with the Oxford Property, collectively, the "Hermitage Properties"); and

WHEREAS, SNH/LTA Properties Trust, the other entities comprising Landlord and Tenant wish to amend the Consolidated Lease to include the Hermitage 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 as follows:

        1.     Definition of Base Year. The definition of the term "Base Year" set forth in Section 1.9 of the Consolidated Lease is hereby deleted in its entirety and replaced with the following:

"Base Year" shall mean (i) with respect to the Existing Properties, the 2005 calendar year, (ii) with respect to the Additional Properties, the 2006 calendar year, (iii) with respect to the Hermitage Properties and the Holiday Properties other than the Buena Vida Property, the 2007 calendar year, and (iv) with respect to the Buena Vida Property, the 2008 calendar year.

        2.     Definition of Disbursement Rate. The definition of the term "Disbursement Rate" set forth in Section 1.23 of the Consolidated Lease is hereby deleted in its entirety and replaced with the following:

"Disbursement Rate" shall mean (a) with respect to all of the Properties other than the Hermitage Properties and the Holiday Properties, an annual rate of interest, as of the date of determination, equal to the greater of (i) the Interest Rate, and (ii) the per annum rate for ten (10) year U.S. Treasury Obligations as published in The Wall Street Journal plus four hundred (400) basis points, and (b) with respect to the Hermitage Properties and the Holiday Properties, an annual rate of

interest, as of the date of determination, equal to the greater of (i) the Interest Rate, and (ii) the per annum rate for ten (10) year U.S. Treasury Obligations as published in The Wall Street Journal plus three hundred twenty-five (325) basis points; provided, however, that in no event shall the Disbursement Rate exceed eleven and one-half percent (11.5%).

        3.     Definition of Interest Rate. The definition of the term "Interest Rate" set forth in Section 1.54 of the Consolidated Lease is hereby deleted in its entirety and replaced with the following:

"Interest Rate" shall mean, (i) with respect to the Existing Properties, ten percent (10%) per annum, (ii) with respect to the Additional Properties, nine percent (9%) per annum, and (iii) with respect to the Hermitage Properties and the Holiday Properties, eight and one quarter percent (8.25%) per annum.

        4.     Definition of Minimum Rent. The definition of the term "Minimum Rent" set forth in Section 1.69 of the Consolidated Lease is hereby deleted in its entirety and replaced with the following:

"Minimum Rent" shall mean the sum of Thirty-Eight Million Nine Hundred Seventeen Thousand Seven Hundred Fifty and 00/100 Dollars ($38,917,750.00) per annum.

        5.     Definition of Hermitage Properties. The following new definition for the term "Hermitage Properties" is hereby added to the Consolidated Lease as a new Section 1.103:

"Hermitage Properties" shall mean the Properties located on the Land described in Exhibits A-93 and A-94 attached hereto.

        6.     Leased Property. Section 2.1 of the Consolidated Lease is hereby amended by deleting subsection (a) in its entirety and replacing it with the following:

(a)

those certain tracts, pieces and parcels of land as more particularly described in Exhibits A-1 through A-94 attached hereto and made a part hereof (the "Land").

        7.     Permitted Use. Section 4.1.1 of the Consolidated Lease is hereby amended by deleting subsection (b) in its entirety and replacing it with the following:

(b) In the event that, in the reasonable determination of Tenant, it shall no longer be economically practical to operate any Property as currently operated, Tenant shall give Landlord Notice thereof, which Notice shall set forth in reasonable detail the reasons therefor. Thereafter, Landlord and Tenant shall negotiate in good faith to agree on an alternative use for such Property, appropriate adjustments to the Additional Rent and other related matters; provided, however, in no event shall the Minimum Rent be reduced or abated as a result thereof. If Landlord and Tenant fail to agree on an alternative use for such Property within sixty (60) days after commencing negotiations as aforesaid, Tenant may market such Property for sale to a third party. If Tenant receives a bona fide offer (an "Offer") to purchase such Property from a Person having the financial capacity to implement the terms of such Offer, Tenant shall give Landlord Notice thereof, which Notice shall include a copy of the Offer executed by such third party. In the event that Landlord shall fail to accept or reject such Offer within thirty (30) days after receipt of such Notice, such Offer shall be deemed to be rejected by Landlord. If Landlord shall sell the Property pursuant to such Offer, then, effective as of the date of such sale, this Agreement shall terminate with respect to such Property, and the Minimum Rent shall be reduced by an amount equal to (x) ten percent (10%) of the net proceeds of sale received by Landlord in the case of an Existing Property, (y) nine percent (9%) of the net proceeds of sale received by Landlord in the case of an Additional Property, and (z) eight and one quarter percent (8.25%) of the net proceeds of sale received by Landlord in the case of a Hermitage Property or a Holiday Property. If Landlord shall reject (or be deemed to have rejected) such Offer, then, effective as of the proposed date of such sale, this Agreement shall terminate with respect to such Property, and the Minimum Rent shall be reduced by an amount equal (i) in the case of an Offer for an Existing Property, to ten percent (10%) of the

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projected net proceeds determined by reference to such Offer, (ii) in the case of an Additional Property, nine percent (9%) of the projected net proceeds determined by reference to such Offer, and (iii) in the case of a Hermitage Property or a Holiday Property, eight and one quarter percent (8.25%) of the net proceeds determined by reference to such Offer.

        8.     Exhibit A. Exhibit A to the Consolidated Lease is hereby amended by adding Exhibits A-93 and A-94 attached hereto following Exhibit A-92 to the Consolidated Lease.

        9.     Ratification. As amended hereby, the Consolidated Lease is hereby ratified and confirmed.

IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed, as a sealed instrument, as of the date first set forth above.

LANDLORD:
ELLICOTT CITY LAND I LLC, ELLICOTT CITY LAND II LLC, HRES2 PROPERTIES TRUST, SNH CHS PROPERTIES TRUST, SPTIHS PROPERTIES TRUST, SPT-MICHIGAN TRUST, SPTMNR PROPERTIES TRUST, SNH/LTA PROPERTIES TRUST and SNH/LTA PROPERTIES GA LLC
By:	/s/  JOHN R. HOADLEY John R. Hoadley Treasurer of each of the foregoing entities
TENANT:
FIVE STAR QUALITY CARE TRUST
By:	/s/  BRUCE J. MACKEY JR. Bruce J. Mackey Jr. Treasurer, Chief Financial Officer and Assistant Secretary

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        The following exhibits have been omitted and will be supplementally furnished to the Securities and Exchange Commission upon request:

EXHIBIT A-93—OXFORD PROPERTY

EXHIBIT A-94—SOUTHAVEN PROPERTY

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SEVENTH AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT
WITNESSETH

EX-10.2

Exhibit 10.2

FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

        This FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Amendment") dated as of October 11, 2006 by and among Five Star Quality Care, Inc. (the "Borrower"), each of the parties identified as "Guarantor" on the signature pages hereto (each a "Guarantor"), and Wachovia Bank, National Association, as Lender (the "Lender").

        WHEREAS, the Borrower and the Lender have entered into that certain Credit and Security Agreement dated as of May 9, 2005 (as amended and in effect immediately prior to the date hereof, the "Credit Agreement"); and

        WHEREAS, the Borrower and the Lender desire to amend certain provisions of the Credit Agreement on the terms and conditions contained herein.

        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows:

        Section 1.    Specific Amendments to Credit Agreement. The parties hereto agree that the Credit Agreement is amended as follows:

        (a)   The Credit Agreement is amended by inserting the following definitions in Section 1.1 in appropriate alphabetical order as follows:

        "Convertible Senior Notes" means those certain convertible senior notes issued by the Borrower pursuant to that certain Indenture to be dated on or about October 18, 2006 by and among the Borrower, the Convertible Senior Note Guarantors and U.S. Bank National Association, as trustee.

        "Convertible Senior Note Guarantors" means, initially, FS Lafayette Tenant Trust, FS Leisure Park Tenant Trust, FS Lexington Tenant Trust, FS Tenant Pool I Trust, FS Tenant Pool II Trust, FS Tenant Pool III Trust and FS Tenant Pool IV Trust, and any other Subsidiary of the Borrower that guaranties the Convertible Senior Notes and that is also a Guarantor.

        (b)   Section 10.1.(a) of the Credit Agreement is amended and restated in its entirety as follows:

        (a)   Maximum Leverage Ratio. The ratio of (i) Indebtedness (other than Permitted LC Debt) of the Borrower and its Subsidiaries to (ii) EBITDA for the four consecutive fiscal quarters most recently ended prior to the date of determination, to exceed 7.0 to 1.0 at any time.

        (c)   Section 10.3.(a) of the Credit Agreement is amended and restated in its entirety as follows:

        (a)   (i) Indebtedness of any Loan Party under the Loan Documents, (ii) Indebtedness of the Borrower in an aggregate principal amount not to exceed $200,000,000 in connection with those certain Convertible Senior Notes and (iii) the obligations of the Convertible Senior Note Guarantors to guaranty the Indebtedness outstanding in connection with the Convertible Senior Notes;

        Section 2.    Conditions Precedent. The effectiveness of this Amendment is subject to receipt by the Lender of each of the following, each in form and substance satisfactory to the Lender:

        (a)   A counterpart of this Amendment duly executed by the Borrower and each Guarantor; and

        (b)   Such other documents, instruments and agreements as the Lender may reasonably request.

        Section 3.    Effectiveness. Upon satisfaction of the conditions precedent contained in Section 4, this Amendment shall be deemed to be effective as of the date hereof.

        Section 4.    Representations. The Borrower represents and warrants to the Lender that:

        (a)   Authorization. The Borrower has the right and power, and has taken all necessary action to authorize it, to execute and deliver this Amendment and to perform its obligations hereunder and under the Credit Agreement, as amended by this Amendment, in accordance with its terms. This Amendment has been duly executed and delivered by a duly authorized officer of the Borrower and this Amendment and the Credit Agreement, as amended by this Amendment, is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors rights generally and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability.

        (b)   Compliance with Laws, etc. The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of this Amendment and the Credit Agreement, as amended by this Amendment, in accordance with their respective terms, do not and will not, by the passage of time, the giving of notice or otherwise: (i) require any Governmental Approval or violate any Applicable Law relating to any Loan Party; (ii) conflict with, result in a breach of or constitute a default under the organizational documents of any Loan Party, or any indenture, agreement or other instrument to which any Loan Party is a party or by which it or any of its respective properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by any Loan Party.

        (c)   No Default. No Default or Event of Default has occurred and is continuing as of the date hereof nor will exist immediately after giving effect to this Amendment.

        Section 5.    Reaffirmation of Representations by Borrower. The Borrower hereby repeats and reaffirms all representations and warranties made by the Borrower to the Lender in the Credit Agreement and the other Loan Documents to which it is a party on and as of the date hereof and after giving effect to this Amendment with the same force and effect as if such representations and warranties were set forth in this Amendment in full.

        Section 6.    Reaffirmation of Guaranty by Guarantors. Each Guarantor hereby reaffirms its continuing obligations to the Lender under Article XII of the Credit Agreement and agrees that the transactions contemplated by this Amendment shall not in any way affect the validity and enforceability of its obligations under Article XII of the Credit Agreement, or reduce, impair or discharge the obligations of such Guarantor thereunder.

        Section 7.    Certain References. Each reference to the Credit Agreement in any of the Loan Documents shall be deemed to be a reference to the Credit Agreement, as amended by this Amendment.

        Section 8.    Expenses. The Borrower shall reimburse the Lender upon demand for all costs and expenses (including attorneys' fees) incurred by the Lender in connection with the preparation, negotiation and execution of this Amendment and the other agreements and documents executed and delivered in connection herewith.

        Section 9.    Benefits. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

        Section 10.    GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

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        Section 11.    Effect. Except as expressly herein amended, the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein.

        Section 12.    Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns.

        Section 13.    Definitions. All capitalized terms not otherwise defined herein are used herein with the respective definitions given them in the Credit Agreement.

[Signatures on Next Page]

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        IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Credit and Security Agreement to be executed as of the date first above written.

THE BORROWER:
FIVE STAR QUALITY CARE, INC.
By:	/s/ Evrett W. Benton
Name:	Evrett W. Benton
Title:	President
THE LENDER:
WACHOVIA BANK, NATIONAL ASSOCIATION
By:	/s/ David M. Blackman
Name:	David M. Blackman
Title:	Managing Director

[Signatures Continued on Next Page]

[Signature Page to Fourth Amendment to Credit and Security Agreement
with Five Star Quality Care, Inc.]

THE GUARANTORS:
ALLIANCE PHARMACY SERVICES, LLC FIVE STAR QUALITY CARE-CA, INC. FIVE STAR QUALITY CARE-IA, INC. FIVE STAR QUALITY CARE-NE, INC. THE HEARTLANDS RETIREMENT COMMUNITY—     ELLICOTT CITY I, INC. FIVE STAR QUALITY CARE-AZ, LLC FIVE STAR QUALITY CARE-CA, LLC FIVE STAR QUALITY CARE-COLORADO, LLC FIVE STAR QUALITY CARE-CT, LLC FIVE STAR QUALITY CARE-GA, LLC FIVE STAR QUALITY CARE-IA, LLC FIVE STAR QUALITY CARE-MO, LLC FIVE STAR QUALITY CARE-NE, LLC FIVE STAR QUALITY CARE-WI, LLC FIVE STAR QUALITY CARE-WY, LLC FIVE STAR QUALITY CARE-FL, LLC FIVE STAR QUALITY CARE-KS, LLC FIVE STAR QUALITY CARE-MD, LLC FIVE STAR QUALITY CARE-NC, LLC FIVE STAR QUALITY CARE-VA, LLC FS LAFAYETTE TENANT TRUST FS LEISURE PARK TENANT TRUST FS LEXINGTON TENANT TRUST FS TENANT POOL I TRUST FS TENANT POOL II TRUST FS TENANT POOL III TRUST FS TENANT POOL IV TRUST MORNINGSIDE OF BELMONT, LLC MORNINGSIDE OF GALLATIN, LLC MORNINGSIDE OF SPRINGFIELD, LLC FSQC FUNDING CO., LLC FIVE STAR QUALITY CARE-CA II, LLC FIVE STAR QUALITY CARE TRUST FS TENANT HOLDING COMPANY TRUST
By:	/s/ Evrett W. Benton
Name:	Evrett W. Benton
Title:	President

[Signatures Continued on Next Page]

[Signature Page to Fourth Amendment to Credit and Security Agreement
with Five Star Quality Care, Inc.]

THE GUARANTORS (cont.):
MORNINGSIDE OF BELLGRADE, RICHMOND, LLC MORNINGSIDE OF CHARLOTTESVILLE, LLC MORNINGSIDE OF NEWPORT NEWS, LLC MORNINGSIDE OF SKIPWITH-RICHMOND, LLC
By:	LIFETRUST AMERICA, INC., its Member
By:	/s/ Evrett W. Benton
Name:	Evrett W. Benton
Title:	President
MORNINGSIDE OF ALABAMA, L.P. MORNINGSIDE OF ANDERSON, L.P. MORNINGSIDE OF ATHENS, LIMITED PARTNERSHIP MORNINGSIDE OF COLUMBUS, L.P. MORNINGSIDE OF DALTON, LIMITED PARTNERSHIP MORNINGSIDE OF DECATUR, L.P. MORNINGSIDE OF EVANS, LIMITED PARTNERSHIP MORNINGSIDE OF GREENWOOD, L.P. MORNINGSIDE OF KENTUCKY, LIMITED PARTNERSHIP
By:	LIFETRUST AMERICA, INC., its General Partner
By:	/s/ Evrett W. Benton
Name:	Evrett W. Benton
Title:	President

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:
Timothy A. Bonang
Manager of Investor Relations
(617) 796-8149
www.fivestarqualitycare.com

Five Star Quality Care, Inc. to Offer $80 Million Convertible Senior Notes

Newton, MA (October 11, 2006). Five Star Quality Care, Inc. (AMEX: FVE) today announced that it intends, subject to market and other conditions, to offer $80 million aggregate principal amount of Convertible Senior Notes due 2026 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The notes will be convertible into Five Star common stock. Five Star intends to grant the initial purchasers a 30-day option to purchase up to an additional $12 million of the Convertible Senior Notes to cover over allotments, if any.

        Five Star expects to use the net proceeds from the offering of the notes for general business purposes, including possible future acquisitions.

        The securities to be offered have not been registered under the Securities Act of 1933, as amended, or applicable securities laws, and until so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws.

        This press release is not an offer to sell, nor a solicitation of an offer to buy, securities, nor shall there be any sale of these securities in any state or jurisdiction in which the offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction. Any offers of the securities will be made only by means of a private offering memorandum.

WARNINGS REGARDING FORWARD LOOKING STATEMENTS

        THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS REPRESENT FIVE STAR'S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR. FOR EXAMPLE, ALTHOUGH THIS PRESS RELEASE REFERS TO AN OFFERING OF $80 MILLION OF CONVERTIBLE SENIOR NOTES, MORE OR LESS THAN $80 MILLION OF CONVERTIBLE SENIOR NOTES MAY BE SOLD, OR THIS OFFERING MAY BE TERMINATED. IN ADDITION, FIVE STAR MAY USE THE NET PROCEEDS FROM THIS OFFERING FOR PURPOSES THAT ARE DIFFERENT THAN THOSE CURRENTLY CONTEMPLATED. INVESTORS SHOULD NOT PLACE UNDUE RELIANCE UPON ANY FORWARD LOOKING STATEMENTS.

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