8-K

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):  August 23, 2005 (August 23, 2005)

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 5.03.  Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On August 23, 2005, Five Star Quality Care, Inc. (“Five Star”), filed with the office of the State Department of Assessments and Taxation of Maryland Articles of Amendment to Five Star’s Articles of Amendment and Restatement to increase the number of shares of stock which Five Star has the authority to issue from 21,000,000 to 31,000,000 shares, consisting of 30,000,000 shares of common stock, $0.01 par value per share, and 1,000,000 shares of preferred stock, $0.01 par value per share.  The Articles of Amendment were effective upon filing.

Item 7.01. Regulation FD Disclosure.

On August 24, 2005, Five Star filed a prospectus supplement (the “Prospectus Supplement”) to its prospectus dated January 28, 2005 under its Registration Statement on Form S-3, File No. 333-121910, with the Securities and Exchange Commission in connection with a public offering and sale (the “Offering”) of 7,500,000 shares of its common stock, par value $.01 per share (plus additional shares to cover an over-allotment option).

The Prospectus Supplement contains certain information that was previously nonpublic. Among other things, the Prospectus Supplement discusses: (i) Five Star’s intention to terminate twelve management agreements with Sunrise Senior Living Services, Inc. (“Sunrise”) following the Offering and to pay termination fees to Sunrise currently expected to total approximately $79.5 million in connection therewith, which amount may change if Five Star terminates different management agreements than those Five Star is currently contemplating.  These termination fees will be recorded as expenses in Five Star’s income statement in the quarter in which Five Star gives the termination notices, which Five Star expects to be the current quarter ending September 30, 2005; (ii) Five Star’s expectation to fund these termination fees with the proceeds of a sale leaseback transaction with Senior Housing Properties Trust (“Senior Housing”) for the six communities Five Star recently acquired from Gordon Health Ventures, LLC (“Gordon”) and with a portion of the proceeds of the Offering and cash on hand; (iii) Five Star’s expectation of incurring a significant loss in the quarterly period ending September 30, 2005 and for all of 2005, as a result of the termination of the twelve Sunrise management agreements; and (iv) unaudited consolidated pro forma financial statements that present Five Star’s financial position at and as of June 30, 2005 as if the following had occurred: (1) Five Star’s acquisition of Gordon, including the related sale leaseback and line of credit financing entered to fund the Gordon acquisition, (2) the Offering and the use of a portion of the proceeds to repay Five Star’s mortgage line of credit financing and repay amounts outstanding under Five Star’s revolving credit facility, and (3) Five Star’s payment of termination fees for twelve Sunrise management agreements, including the related planned sale leaseback with Senior Housing to fund a portion of these fees, and the reduction in management fees payable to Sunrise.

Item 8.01. Other Events.

On August 24, 2005, Five Star agreed to sell 7,500,000 shares of common stock in an underwritten public offering.  The public offering price was $7.77 per share.  Five Star expects to issue and deliver these shares on or about August 29, 2005.  Five Star has granted the underwriters a 30-day option to purchase up to an additional 1,125,000 shares to cover over-allotments, if any.  Five Star expects to use the approximately $55.0 million of net proceeds of

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the offering (after estimated expenses and underwriters’ commissions) to repay $24.0 million of its first mortgage line of credit with Senior Housing Properties Trust, to reduce amounts outstanding under its revolving credit facility, to fund a portion of certain termination payments which Five Star expects will be payable to Sunrise and for general business purposes.

This Current Report on Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any of these shares. The offering of these shares will be made only by means of a prospectus supplement and accompanying prospectus.  In addition, this Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these shares in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS CURRENT REPORT ON FORM 8-K CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS.  THESE STATEMENTS REFLECT FIVE STAR’S INTENT, BELIEF OR EXPECTATION, OR THE INTENT, BELIEFS OR EXPECTATIONS OF FIVE STAR’S DIRECTORS AND OFFICERS, BUT THEY ARE NOT GUARANTEED TO OCCUR.  FOR EXAMPLE, THE TERMINATION OF FIVE STAR’S MANAGEMENT AGREEMENTS WITH SUNRISE MAY NOT IMPROVE FIVE STAR’S FINANCIAL RESULTS OR MAY CAUSE IT TO EXPERIENCE OPERATING LOSSES.  SUNRISE MAY DISPUTE FIVE STAR’S RIGHTS TO TERMINATE THESE CONTRACTS OR FIVE STAR’S CALCULATION OF THE TERMINATION FEES.  THE OPERATING AND FINANCIAL PERFORMANCE OF THE COMMUNITIES WHICH ARE THE SUBJECT OF THE 12 MANAGEMENT AGREEMENTS MAY DETERIORATE IN THE PERIOD AFTER FIVE STAR NOTIFIES SUNRISE OF ITS INTENTION TO TERMINATE THE AGREEMENTS AND BEFORE FIVE STAR IS ALLOWED TO ASSUME THEIR OPERATIONS PURSUANT TO THE AGREEMENT TERMS.  ALTHOUGH FIVE STAR’S EXPECTATION IS OTHERWISE, IT MAY BE UNABLE TO OPERATE THESE COMMUNITIES FOR ITS OWN ACCOUNT IN A MANNER WHICH IS AS PROFITABLE AS THEY HAVE BEEN OPERATED BY SUNRISE.  IN ADDITION, THE FINANCIAL BENEFITS FROM THE GORDON ACQUISITION, INCLUDING FIVE STAR’S EXPECTATION OF THE ACCRETION TO FIVE STAR’S EARNINGS DURING 2006, MAY NOT BE REALIZED; FIVE STAR MAY EXPERIENCE LOSSES BECAUSE IT IS UNABLE TO INCREASE OCCUPANCIES AT THE GORDON COMMUNITIES OR REALIZE COST SAVINGS FROM THE COMBINATION OF THE GORDON OPERATIONS WITH FIVE STAR’S EXISTING OPERATIONS.  FURTHER, THE FACT THAT THE OFFERING HAS PRICED MAY IMPLY THAT THE OFFERING WILL CLOSE.  THE CLOSING IS SUBJECT TO CONDITIONS CUSTOMARY TO TRANSACTIONS OF THIS TYPE AND MAY BE DELAYED OR MAY NOT OCCUR AT ALL.  THE FACT THAT THE UNDERWRITERS HAVE AN OVER-ALLOTMENT OPTION MAY IMPLY THAT THIS OPTION WILL BE EXERCISED. THE UNDERWRITERS ARE NOT UNDER ANY OBLIGATION TO EXERCISE THIS OPTION, OR ANY PORTION OF IT, AND MAY NOT DO SO.  IN ADDITION, THE AMOUNT OF AND THE INTENDED USE OF PROCEEDS FROM THE OFFERING MAY CHANGE.  THESE FORWARD LOOKING STATEMENTS ARE BASED

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UPON  FIVE STAR’S PRESENT EXPECTATIONS, BUT THESE STATEMENTS AND THE IMPLICATIONS OF THESE STATEMENTS ARE NOT GUARANTEED.  INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.

Item 9.01.  Financial Statements and Exhibits.

(c)Exhibits.

1.1Underwriting Agreement, dated August 24, 2005, between Five Star and the underwriters named therein relating to the sale of up to 8,625,000 shares of common stock.

3.1Composite copy of Articles of Amendment and Restatement of Five Star.

5.1Opinion of Venable LLP.

10.1First Amendment to Credit and Security Agreement, dated as of July 22, 2005, by and among Five Star, each of the Guarantors party thereto and Wachovia Bank, National Association.

10.2Second Amendment to Credit and Security Agreement, dated as of August 15, 2005, by and among Five Star, each of the Guarantors party thereto and Wachovia Bank, National Association.

23.1Consent of Venable LLP (contained in Exhibit 5.1).

[Remainder of this Page Intentionally Left Blank.]

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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 hereunto duly authorized.

FIVE STAR QUALITY CARE, INC.
By:	/s/ Bruce J. Mackey Jr.
Name:		Bruce J. Mackey Jr.
Title:		Treasurer and Chief Financial Officer

Date:  August 24, 2005

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EX-1.1

Exhibit 1.1

Five Star Quality Care, Inc.

7,500,000 Shares

Common Stock

UNDERWRITING AGREEMENT

August 24, 2005

UNDERWRITING AGREEMENT

August 24, 2005

UBS Securities LLC

RBC Capital Markets Corporation

Legg Mason Wood Walker, Incorporated

Ferris, Baker Watts, Incorporated

Stifel, Nicolaus & Company, Incorporated

As Representatives of the several Underwriters

c/o UBS Securities LLC

299 Park Avenue

New York, New York 10171-0026

Ladies and Gentlemen:

Five Star Quality Care, Inc., a Maryland corporation (the “Company”), proposes to issue and sell to the underwriters named in Schedule A annexed hereto (the “Underwriters”) an aggregate of 7,500,000 shares of Common Stock, $0.01 par value per share (the “Common Stock”), of the Company (the “Firm Shares”).  In addition, solely for the purpose of covering over-allotments, the Company proposes to grant to the Underwriters the option to purchase from the Company up to an additional 1,125,000 shares of Common Stock (the “Additional Shares”).  The Firm Shares and the Additional Shares are hereinafter collectively sometimes referred to as the “Shares.” The Shares are described in the Prospectus which is referred to below.

The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Act”), a registration statement (file number 333-121910) on Form S-3 under the Act (the “universal shelf registration statement”), including a prospectus relating to, among other things, debt securities, shares of common and preferred stock, depositary shares, warrants and stock purchase contracts and equity units of the Company, and such amendments to such registration statement, as may have been required prior to the date hereof, have been similarly prepared and have been filed with the Commission.  Such universal shelf registration statement, as so amended, and any post-effective amendments thereto, have been declared by the Commission to be effective under the Act.  Such universal shelf registration statement, as amended at the date of this Agreement, meets the requirements set forth in Rule 415(a)(1)(x) under the Act and complies in all other material respects with said Rule.

The Company will next file with the Commission pursuant to Rule 424(b) under the Act a final prospectus supplement to the base prospectus included in the universal shelf registration statement, as so amended, describing the Shares and the offering thereof, in such form as has been provided to or discussed with, and approved, by the Underwriters.

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The term “Registration Statement” as used in this Agreement means the universal shelf registration statement, as amended at the time it became effective, as supplemented or amended prior to the execution of this Agreement, including (i) all financial schedules and exhibits thereto and (ii) all documents incorporated by reference or deemed to be incorporated by reference therein.  If it is contemplated, at the time this Agreement is executed, that post-effective amendment(s) to the Registration Statement will be filed and must be declared effective before the offering of the Shares may commence, the term “Registration Statement” as used in this Agreement means the Registration Statement as amended by said post-effective amendment(s).  If an abbreviated registration statement is prepared and filed with the Commission in accordance with Rule 462(b) under the Act (an “Abbreviated Registration Statement”), the term “Registration Statement” includes the Abbreviated Registration Statement.  The term “Base Prospectus” as used in this Agreement means the prospectus dated January 28, 2005, as filed with the Commission and included in the universal shelf registration statement.  The term “Prepricing Prospectus” as used in this Agreement means the preliminary form of the Prospectus (as defined herein) subject to completion, if any, used in connection with the offering of the Shares.  The term “Prospectus Supplement” as used in this Agreement means any final prospectus supplement specifically relating to the Shares, in the form filed with, or transmitted for filing to, the Commission pursuant to Rule 424 under the Act.  The term “Prospectus” as used in this Agreement means the Base Prospectus together with the Prospectus Supplement, except that if such Base Prospectus is amended or supplemented on or prior to the date on which the Prospectus Supplement was first filed pursuant to Rule 424, the term “Prospectus” shall refer to the Base Prospectus as so amended or supplemented and as supplemented by the Prospectus Supplement.  Any reference in this Agreement to the universal shelf registration statement, the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of the universal shelf registration statement, the Registration Statement, the Base Prospectus, such Prepricing Prospectus, such Prospectus Supplement or the Prospectus, as the case may be, and any reference to any amendment or supplement to the universal shelf registration statement, the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which, upon filing, are incorporated by reference therein, as required by paragraph (b) of Item 12 of Form S-3.  As used herein, the term “Incorporated Documents” means the documents which are incorporated by reference in the universal shelf registration statement, the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement, the Prospectus, or any amendment or supplement thereto.

The Company and the Underwriters agree as follows:

1.Sale and Purchase.  On the basis of the representations and warranties herein and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each Underwriter and, upon the basis of the representations,

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warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $7.36 per Share (the “purchase price per share”), the number of Firm Shares set forth opposite the name of such Underwriter in Schedule A annexed hereto (or such number of Firm Shares increased as set forth in Section 8 hereof).

The Company is advised by you that the Underwriters intend (i) to make a public offering of their respective portions of the Firm Shares as soon after the effective date of the Registration Statement as in your judgment is advisable and (ii) initially to offer the Firm Shares upon the terms set forth in the Prospectus.  You may from time to time increase or decrease the public offering price after the initial public offering to such extent as you may determine.

In addition, the Company hereby grants to the several Underwriters the option to purchase, and upon the basis of the representations, warranties and agreements of the Company and subject to the terms and conditions herein set forth, the Underwriters shall have the right to purchase, severally and not jointly, from the Company all or a portion of the Additional Shares as may be necessary to cover over-allotments made in connection with the offering of the Firm Shares, at the same purchase price per share to be paid by the Underwriters to the Company for the Firm Shares.  This option may be exercised by you on behalf of the several Underwriters at any time on or before the 30th day following the date hereof by written notice to the Company.  Such notice shall set forth the aggregate number of Additional Shares as to which the option is being exercised and the date and time when the Additional Shares are to be delivered (such date and time being herein referred to as the “additional time of purchase”); provided, however, that the additional time of purchase shall not be earlier than the time of purchase (as defined below) nor earlier than the second business day(1) after the date on which the option shall have been exercised nor later than the tenth business day after the date on which the option shall have been exercised.  The number of Additional Shares to be sold to each Underwriter shall be the number which bears the same proportion to the aggregate number of Additional Shares being purchased as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule A hereto bears to the total number of Firm Shares (subject, in each case, to such adjustment as you may determine solely to eliminate fractional shares).

2.Payment and Delivery.  Payment of the purchase price for the Firm Shares shall be made to the Company by Federal Funds wire transfer, against delivery of the certificates for the Firm Shares to you through the facilities of the Depository Trust Company (“DTC”) for the respective accounts of the Underwriters.  Such payment and delivery shall be made at 10:00 A.M., New York City time, on August 29, 2005 (unless

(1)As used herein “business day” shall mean a day on which the New York Stock Exchange is open for trading.

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another time shall be agreed to by you and the Company or unless postponed in accordance with the provisions of Section 8 hereof).  The time at which such payment and delivery are actually made is hereinafter called the “time of purchase.” Electronic transfer of the Firm Shares shall be made to you at the time of purchase in such names and in such denominations as you shall specify, such specification to be made by you no later than the second business day preceding the time of purchase.

Payment of the purchase price for the Additional Shares shall be made at the additional time of purchase in the same manner and at the same office as the payment for the Firm Shares.  Electronic transfer of the Additional Shares shall be made to you at the additional time of purchase in such names and in such denominations as you shall specify, such specification to be made by you no later than the second business day preceding the time of purchase.

Deliveries of the documents described in Section 6 below with respect to the purchase of the Shares shall be made at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York at 10:00 A.M., New York City time, on the date of the closing of the purchase of the Firm Shares or the Additional Shares, as the case may be.

3.Representations and Warranties of the Company.  The Company represents and warrants to each of the Underwriters that:

(a)the Company has not received nor has notice of any order of the Commission preventing or suspending the use of the Base Prospectus, any Prepricing Prospectus, the Prospectus Supplement or the Prospectus, or instituting proceedings for that purpose, and each Base Prospectus, any Prepricing Prospectus, the Prospectus Supplement or the Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act.  The Registration Statement has become effective under the Act; to the knowledge of the Company after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission or the securities authority of any state or other jurisdiction;

(b)(i) the Company is eligible to use Form S-3 and the offering of the Shares complies and will comply with the requirements of Rule 415 under the Act, (ii) each part of the Registration Statement, when such part became effective, and also any Abbreviated Registration Statement when it shall become effective, complied in all material respects with the applicable provisions of the Act and the Exchange Act, (iii) each part of the Registration Statement, when such part became effective, did not contain and each such part, as may be amended or supplemented, if applicable, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) the Registration Statement, any Abbreviated Registration Statement, the Base Prospectus, any Prepricing Prospectus, the Prospectus Supplement and the Prospectus comply

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and, as may be amended or supplemented, if applicable, will comply in all material respects with the applicable provisions of the Act and the Exchange Act and (v) the Prospectus does not contain and, as may be amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided, however, that the Company makes no representation or warranty with respect to any statement contained in the Registration Statement, any Abbreviated Registration Statement, the Base Prospectus, any Prepricing Prospectus, the Prospectus Supplement or the Prospectus relating to information concerning the Underwriters and furnished in writing by or on behalf of any Underwriter through you to the Company expressly for use therein; and neither the Company nor any of its affiliates has distributed any offering materials in connection with the offer or sale of the Shares other than any Prepricing Prospectus, the Prospectus or any other materials, if any, permitted by the Act;

(c)the Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act, and none of such documents, when they were filed with the Commission, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further Incorporated Documents so filed will not, when they are filed, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading;

(d)as of the date of this Agreement, the Company’s authorized and outstanding capitalization is as set forth in the section of the Registration Statement and the Prospectus entitled “Capitalization” and, as of the time of purchase and the additional time of purchase, as the case may be, the Company’s authorized and outstanding capitalization shall be as set forth in the section of the Registration Statement and the Prospectus entitled “Capitalization” (subject to the issuance of Additional Shares at any additional time of purchase); all of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable, have been issued in compliance with all federal and state securities laws and were not issued in violation of any preemptive or similar right;

(e)the Company has been duly incorporated and is existing as a corporation in good standing under the laws of the State of Maryland, with the requisite corporate power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement and the Prospectus;

(f)the Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or

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leasing of its properties or the conduct of its business requires such qualification, except where the failure to so qualify in any such jurisdiction would not, (i) individually or in the aggregate, have a material adverse effect on the business, prospects, properties, management, financial condition or results of operations of the Company and the Subsidiaries (as hereinafter defined) taken as a whole or (ii) prevent the consummation of the transactions contemplated hereby (the occurrence of (i) or (ii), a “Material Adverse Effect”);

(g)the Company has no subsidiaries (as defined in the Act) other than as listed in Schedule B annexed hereto (the “Subsidiaries”); except for Senior Living of Boynton Beach Limited Partnership, in which the Company through its subsidiaries has a 3.03% interest as general partner, and except as described in the Registration Statement and the Prospectus, the Company owns 100% of the outstanding capital stock or other equity interests of the Subsidiaries; except for the Subsidiaries or as described in the Registration Statement and the Prospectus, the Company does not own, directly or indirectly, any long-term debt or any equity interest in any firm, corporation, partnership, joint venture, limited liability company, association or other entity; complete and correct copies of the charter and bylaws or other organizational documents of the Company and each of the Subsidiaries and all amendments thereto have been made available to you; each of the Subsidiaries has been duly incorporated or formed and is validly existing as a corporation or other entity, as the case may be, in good standing under the laws of the jurisdiction of its incorporation or organization with the requisite corporate, trust, partnership or other power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus; each Subsidiary is duly qualified and in good standing to do business as a foreign corporation in each jurisdiction listed on Schedule B hereto, such jurisdictions being the only jurisdictions where the ownership or leasing of the properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect; all of the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all applicable securities laws and were not issued in violation of any preemptive or similar right; the Company has no “significant subsidiary,” as that term is defined in Rule 1-02(w) of Regulation S-X under the Act, substituting 5% for 10%, other than as indicated in Schedule B annexed hereto;

(h)this Agreement has been duly authorized, executed and delivered by the Company;

(i)the capital stock of the Company, including the Shares, conforms in all material respects to the description thereof contained in the Registration Statement and the Prospectus; the certificates, if any, evidencing the Shares are in due and proper form and conform in all material respects to the requirements of the Maryland General Corporation Law (the “MGCL”);

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(j)the Shares have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and non-assessable and free of any preemptive or similar rights;

(k)neither the Company nor any of the Subsidiaries is in breach or violation of, or in default under (and no event has occurred which with notice, lapse of time, or both would result in any breach or violation of, or constitute a default under) (each such breach, violation or default, a “Default Event”), (i) its charter, bylaws or other organizational documents, (ii) any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, bank loan or credit agreement, or any lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their properties is bound or affected or (iii) any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries or any of their respective properties, other than, in the case of clauses (ii) and (iii), such Default Events as would not, individually or in the aggregate, have a Material Adverse Effect; and the execution, delivery and performance of this Agreement, including the issuance and sale of the Shares and the consummation of any other transactions contemplated hereby, does not constitute and will not result in a Default Event under (w) any provisions of the charter, bylaws or other organizational documents of the Company or any of the Subsidiaries, (x) under any provision of any indenture, mortgage, deed of trust, bank loan or credit agreement, or any lease, contract or other agreement or instrument to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries is bound or to which any of their respective properties is subject, (y) under any applicable law, regulation or rule or (z) under any decree, judgment or order of any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries’ properties, except, in the case of clauses (x), (y) and (z) for such Default Events as would not, individually or in the aggregate, have a Material Adverse Effect;

(l)no approval, authorization, consent or order of or filing with any federal, state or local or foreign governmental or regulatory commission, board, body, authority or agency is required in connection with the issuance and sale of the Shares or the consummation by the Company of any other transactions contemplated hereby, other than registration of the offer and sale of the Shares under the Act, which has been or will be effected, and any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters;

(m)except as set forth in the Registration Statement and the Prospectus (i) no person has the right, contractual or otherwise, to cause the Company to issue or sell to it any shares of Common Stock or shares of any other capital stock or other equity interests of the Company, (ii) no person has any preemptive rights, resale rights, rights of first refusal or other rights to purchase any shares of

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Common Stock or shares of any other capital stock or other equity interests of the Company and (iii) no person has the right to act as an underwriter, or as a financial advisor to the Company, in connection with the offer and sale of the Shares, in the case of each of the foregoing clauses (i), (ii) and (iii), whether as a result of the filing or effectiveness of the Registration Statement or the sale of the Shares as contemplated thereby or otherwise; no person has the right, contractual or otherwise, to cause the Company to register under the Act any shares of Common Stock or shares of any other capital stock or other equity interests of the Company, or to include any such shares or interests in the Registration Statement or the offering contemplated thereby whether as a result of the filing or effectiveness of the Registration Statement or the sale of the Shares as contemplated thereby or otherwise, except for such rights as have been complied with or waived;

(n)Ernst & Young LLP, whose report on (i) the consolidated financial statements of the Company is filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, (ii) the consolidated financial statements of LTA Holdings, Inc. and its subsidiaries was filed with the Company’s Current Report on Form 8-K/A on January 7, 2005 and (iii) the consolidated financial statements of Gordon Health Ventures, LLC was filed with the Company’s Current Report on Form 8-K/A on July 28, 2005, is an independent registered public accounting firm with respect to the Company and each other such entity as required by the Act;

(o)all legal or governmental proceedings, affiliate or other related party transaction, off-balance sheet transactions (including, without limitation, transactions related to, and the existence of, “variable interest entities” within the meaning of Financial Accounting Standards Board Interpretation No. 46), contracts, leases or documents of a character required to be described in the Registration Statement or the Prospectus or any Incorporated Document, and all documents required to be filed as an exhibit to the Registration Statement or any Incorporated Document, have been so described or filed as required;

(p)except as disclosed in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or, to the Company’s knowledge, threatened to which the Company or any of the Subsidiaries is a party or of which any of their respective properties is subject which, if adversely decided, would result in a judgment, decree or order having, individually or in the aggregate, a Material Adverse Effect; without limiting the foregoing, the Company and the Subsidiaries are in compliance with applicable provisions of federal or state laws governing Medicare or any state Medicaid programs, including, without limitation, Sections 1320a-7a and 1320a-7b of Title 42 of the United States Code, except for such provisions the violation of which would not, individually or in the aggregate, have a Material Adverse Effect; no individual with an ownership or control interest, as defined in 42 U.S.C. § 1320a-3(a)(3), in the Company or any of the Subsidiaries, or who is an officer, director or managing employee as defined in 42 U.S.C. § 1320a-5(b), of the Company or

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any of the Subsidiaries is a person described in 42 U.S.C. § 1320a-7(b)(8)(B), except as would not, individually or in the aggregate, have a Material Adverse Effect; and the Company’s and each of the Subsidiaries’ business practices are in compliance with federal or state laws regarding physician ownership of (or financial relationship with) and referral to entities providing healthcare related goods or services, or laws requiring disclosure of financial interests held by physicians in entities to which they may refer patients for the provisions of health care related goods or services, except for those laws, the violation of which would not, individually or in the aggregate, have a Material Adverse Effect; except as disclosed in the Prospectus, there are no Medicare, Medicaid or any other recoupment or recoupments of any governmental or private health care payor being sought, requested or claimed or, to the Company’s knowledge, threatened against the Company or any of the Subsidiaries, which, individually or in the aggregate, would result in a Material Adverse Effect; and

(q)to the Company’s knowledge and except as disclosed in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or threatened to which any lessor or manager of any property operated by the Company is subject at law or in equity, or before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency which, if adversely decided, would result in a judgment, decree or order having, individually or in the aggregate, a Material Adverse Effect;

(r)except as disclosed in the Registration Statement and Prospectus, (i) neither the Company nor any of the Subsidiaries has received from any governmental authority written notice of any violation of any local, state or federal law, rule or regulation including without limitation any such law, rule or regulation applicable to the health care industry (“Health Care Laws”) or relating to human health or safety or the environment or any hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) and (ii) to the Company’s knowledge, there is no such violation or any occurrence or circumstance that would give rise to a claim under or pursuant to any local, state or federal law, rule or regulation (including, without limitation, any Health Care Laws or Environmental Laws), which, in the case of clauses (i) and (ii), would, individually or in the aggregate, have a Material Adverse Effect;

(s)to the Company’s knowledge and except as disclosed in the Registration Statement and Prospectus, (i) there is no violation of any local, state or federal law, rule or regulation (including, without limitation, Health Care Laws and Environmental Laws) by any person from whom the Company or any of the Subsidiaries acquired or leased any of its properties (a “seller”), or any sublessee or manager of any of their respective properties or any part thereof and (ii) there is no such violation or any occurrence or circumstance that would give rise to a claim under or pursuant to any local, state or federal law, rule or regulation (including, without limitation, any Health Care Laws or Environmental Laws),

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which, in the case of clauses (i) and (ii) would, individually or in the aggregate, have a Material Adverse Effect;

(t)no written notice of any condemnation of or zoning change affecting the properties or any part thereof of the Company or any of the Subsidiaries has been received, or, to the Company’s knowledge, threatened, that if consummated would, individually or in the aggregate, have a Material Adverse Effect; to the Company’s knowledge, no lessor, seller, sublessee or manager of any property, or portion thereof, of the Company or any of the Subsidiaries has received from any governmental authority any written notice of any condemnation of or zoning change affecting the Properties or any part thereof of the Company or any of the Subsidiaries that would, individually or in the aggregate, have a Material Adverse Effect;

(u)the Company and each of the Subsidiaries have good and marketable title to all real and personal property owned by them as described in the Registration Statement and the Prospectus, free and clear of all liens, encumbrances and defects except such as are described in the Registration Statement and the Prospectus or such as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; except as described in the Registration Statement and the Prospectus, any real property and buildings held under lease by the Company or any of the Subsidiaries are held by it under valid, subsisting and enforceable leases, except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance, or other similar laws, affecting the enforcement of creditor’s rights generally and by general equitable principles, with such exceptions as would not, individually or in the aggregate, have a material adverse effect on use made and proposed to be made of such property and buildings by the Company or any of the Subsidiaries, as the case may be;

(v)the Company and each of the Subsidiaries and, to the Company’s knowledge, each of the managers, lessors or sublessees of any property or portion thereof of the Company or any of the Subsidiaries have such permits, licenses, approvals, certificates, franchises and authorizations of governmental or regulatory authorities (“permits”), including, without limitation, under any Health Care Laws or Environmental Laws, as are necessary in the case of each such party to acquire and own, lease or operate its properties and to conduct its business, all as described in the Prospectus, except where the failure to obtain such permits would not, individually or in the aggregate, have a Material Adverse Effect; except as described in the Prospectus, the Company and each of the Subsidiaries and, to the Company’s knowledge, each of the lessees, sublessees or managers of any property or portion thereof of the Company or any of the Subsidiaries have fulfilled and performed all of their obligations with respect to such permits and, except as disclosed in the Prospectus, no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or result in any other impairment of the rights of the holder of any such permit, except where

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the failure to fulfill or perform, or the resulting termination or impairment, would not, individually or in the aggregate, have a Material Adverse Effect;

(w)the financial statements of the Company, together with the related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and the Subsidiaries for the periods specified and have been prepared in compliance with the requirements of the Act and in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved; the financial statements of LTA Holdings, Inc. and its subsidiaries, together with the related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and the Subsidiaries for the periods specified and have been prepared in compliance with the requirements of the Act and in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved; the financial statements of Gordon Health Ventures, LLC, together with the related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and the Subsidiaries for the periods specified and have been prepared in compliance with the requirements of the Act and in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved; all pro forma financial statements and other pro forma financial data included or incorporated by reference in the Registration Statement and the Prospectus comply as to form in all material respects with the applicable accounting requirements of Regulation S-X of the Act, to the extent that such statements and data are required to be so included, and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements; the other financial and statistical data set forth in the Registration Statement and the Prospectus are accurately presented and prepared on a basis consistent with such financial statements and books and records of the Company; all disclosures contained in the Registration Statement, the Prospectus or any Incorporated Document regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”) and Item 10 of Regulation S-K under the Act, to the extent applicable; the Company and the Subsidiaries do not have any  material liabilities or obligations, direct or contingent (including any off-balance sheet obligations or any “variable interest entities” within the meaning of Financial Accounting Standards Board Interpretation No. 46), not disclosed in the Registration Statement and the Prospectus; and there are no financial statements (historical or pro forma) that are

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required to be included in the Registration Statement and the Prospectus that are not included as required;

(x)subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been (i) any material adverse change, or any prospective material adverse change, in the business, properties, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries taken as a whole, (ii) any transaction which is material to the Company or the Subsidiaries taken as a whole, (iii) any obligation, direct or contingent, which is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or the Subsidiaries, (iv) any change in the outstanding capital stock (other than issuances of Common Stock upon the exercise of options described as outstanding in the Registration Statement and Prospectus), or at any additional time of purchase, any material change in outstanding capital stock, (v) any increase in outstanding indebtedness of the Company or the Subsidiaries, or at any additional time of purchase, any material increase in outstanding indebtedness or (vi) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company; neither the Company nor any of the Subsidiaries has any material contingent obligation which is not disclosed in the Registration Statement and the Prospectus;

(y)each of the Company and the Subsidiaries are insured by insurers of recognized financial responsibility or are self-insured against such losses and risks and in such amounts as are customary in the business in which they are engaged, except as described in the Prospectus; except as would not, individually or in the aggregate, have a Material Adverse Effect, all policies of insurance insuring the Company and the Subsidiaries or any of their businesses, assets, employees, officers, directors and trustees are in full force and effect, and the Company and the Subsidiaries are in compliance with the terms of such policies in all material respects; except as would not, individually or in the aggregate, have a Material Adverse Effect, there are no claims by the Company or any of the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause;

(z)except as disclosed in the Registration Statement, neither the Company nor any of the Subsidiaries has either sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements referred to or described in, or filed as an exhibit to, the Registration Statement or any Incorporated Document, and no such termination or non-renewal has been threatened by the Company or any of the Subsidiaries or any other party to any such contract or agreement;

(aa)Affiliates Insurers Limited and Senior Living Insurance Company Ltd. (the “Insurance Subsidiaries”) hold such insurance licenses, certificates and permits from governmental authorities (including, without limitation, from the insurance regulatory agencies of the various jurisdictions where they conduct business (the “Insurance Licenses”)) as are necessary to the conduct of its

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business as described in the Registration Statement and the Prospectus, except where the failure to hold such licenses, certificates or permits would not, individually or in the aggregate, have a Material Adverse Effect; the Company and the Insurance Subsidiaries have fulfilled and performed all obligations necessary to maintain the Insurance Licenses; except as disclosed in the Prospectus, there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or investigation that could reasonably be expected to result in the revocation, termination or suspension of any Insurance License which would, individually or in the aggregate, have a Material Adverse Effect;

(bb)neither the Company nor any of the Subsidiaries nor any of their respective affiliates has taken, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act, or otherwise, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares;

(cc)neither the Company nor any of the Subsidiaries has sustained since the date of the latest financial statements included in the Prospectus any losses or interferences with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Registration Statement and the Prospectus or other than any losses or interferences which would not, individually or in the aggregate, have a Material Adverse Effect;

(dd)the Company has obtained for the benefit of the Underwriters an agreement (a “Lock-Up Agreement”), in the form set forth as Exhibit A hereto, of Barry M. Portnoy, Gerald M. Martin and the executive officers of the Company; the Company will not release or purport to release any person from any Lock-Up Agreement without the prior written consent of UBS Securities LLC;

(ee)the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds as described in the Prospectus, will not be an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”);

(ff)any statistical and market-related data included in the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate, and the Company has obtained the written consent to the use of such data from such sources to the extent required;

(gg)the Company and each of the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles

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and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences;

(hh)the Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act) and such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Company’s Chief Executive Officer and its Chief Financial Officer by others within those entities, and such disclosure controls and procedures are effective to perform the functions for which they were established; the Company’s auditors and the Audit Committee of the Board of Directors have been advised by the Company’s Chief Executive Officer and Chief Financial Officer of (i) any significant deficiencies in the design or operation of the Company’s internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting; any material weaknesses in the Company’s internal control over financial reporting have been identified for the Company’s auditors; and since the date of the most recent evaluation of such disclosure controls and procedures, there has been no change in the Company’s internal control over financial reporting or in other factors that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;

(ii)the Company has provided you true, correct, and complete copies of all documentation pertaining to any extension of credit in the form of a personal loan made, directly or indirectly, by the Company to any director or executive officer of the Company, or to any family member or affiliate of any director or executive officer of the Company; and since July 30, 2002, the Company has not, directly or indirectly, including through any Subsidiary (i) extended credit, arranged to extend credit, or renewed any extension of credit, in the form of a personal loan, to or for any director or executive officer of the Company, or to or for any family member or affiliate of any director or executive officer of the Company or (ii) made any material modification, including any renewal thereof, to any term of any personal loan to any director or executive officer of the Company, or any family member or affiliate of any director or executive officer, which loan was outstanding on July 30, 2002;

(jj)the Company has taken all necessary actions to ensure that, upon and at all times after the effectiveness of the Registration Statement, the Company and the Subsidiaries and, to the Company’s knowledge, any of the officers and directors of the Company and any of the Subsidiaries, in their capacities as such, will be in compliance in all material respects with the applicable provisions of the

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Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder;

(kk)the Company and the Subsidiaries have filed all federal, state, local and foreign tax returns and tax forms required to be filed; such returns and forms are complete and correct in all material respects, and all taxes shown by such returns or otherwise assessed that are due or payable have been paid, except such taxes as are being contested in good faith and as to which adequate reserves have been provided; all payroll withholdings required to be made by the Company and the Subsidiaries with respect to employees have been made except where the failure to fulfill or perform, would not, individually or in the aggregate, have a Material Adverse Effect; the charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of any tax liability for any year not finally determined are adequate to meet any assessments or reassessments for additional taxes; there have been no tax deficiencies asserted and, to the Company’s knowledge, no tax deficiency might be reasonably asserted or threatened against the Company and/or the Subsidiaries that would, individually or in the aggregate, have a Material Adverse Effect;

(ll)the outstanding Common Stock is, and the Shares will be, subject to satisfactory distribution information, listed on the American Stock Exchange (the “AMEX”); and

(mm)other than as set forth in the Registration Statement and the Prospectus, or as would not, individually or in the aggregate, have a Material Adverse Effect, the Company and the Subsidiaries own, possess, license or have other rights to use, all patents, trademarks, servicemarks, trade names, copyrights, trade secrets, information, proprietary rights and processes necessary for their business as described in the Registration Statement and the Prospectus.

In addition, any certificate signed by any officer of the Company and delivered to the Underwriters or counsel for the Underwriters in connection with the offering of the Shares shall be deemed to be a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.

4.Certain Covenants of the Company.  The Company hereby agrees:

(a)to furnish such information as may be required and otherwise to cooperate in qualifying the Shares for offering and sale under the securities or blue sky laws of such states as you may designate and to maintain such qualifications in effect so long as required for the distribution of the Shares; provided that the Company shall not be required to qualify as a foreign corporation or to consent to the service of process under the laws of any such state (except service of process with respect to the offering and sale of the Shares); and to promptly advise you of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threat of any proceeding for such purpose;

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(b)to make available to the Underwriters in New York City as many copies of the Prospectus (or of the Prospectus as amended or supplemented if the Company shall have made any amendments or supplements thereto) as the Underwriters may reasonably request for the purposes contemplated by the Act; in case any Underwriter is required to deliver a prospectus beyond the nine-month period referred to in Section 10(a)(3) of the Act in connection with the sale of the Shares, the Company will prepare promptly upon request, but at its expense, such amendment or amendments to the Registration Statement and such prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Act;

(c)to advise you promptly, confirming such advice in writing, of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information with respect thereto, or of notice of institution of proceedings for, or the entry of a stop order suspending the effectiveness of the Registration Statement and, if the Commission should enter a stop order suspending the effectiveness of the Registration Statement, to make every reasonable effort to obtain the lifting or removal of such order as soon as possible; to advise you promptly of any proposal to amend or supplement the Registration Statement or Prospectus, including by filing any documents that would be incorporated therein by reference, and to file no such amendment or supplement to which you shall object in writing;

(d)if, at the time this Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement or for any Abbreviated Registration Statement to be declared effective before the offering of the Shares may commence, the Company will endeavor to cause such post-effective amendment to become effective as soon as possible and will advise you promptly and, if requested by you, will confirm such advice in writing, when such post-effective amendment has become effective;

(e)to furnish to you and, upon request, to each of the other Underwriters for a period of two years from the date of this Agreement (i) copies of any reports or other communications which the Company shall send to its stockholders or shall from time to time publish or publicly disseminate, (ii) copies of all annual, quarterly and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, (iii) upon request, copies of documents or reports filed with any national securities exchange on which any class of securities of the Company is listed and (iv) such other information as you may reasonably request regarding the Company or any of the Subsidiaries, in each case as soon as such communications, documents or information become available; provided, however, that in no case shall the Company be required to furnish materials pursuant to this paragraph which are filed and publicly accessible through EDGAR;

(f)to advise the Underwriters promptly of the happening of any event known to the Company within the time during which a Prospectus relating to the

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Shares is required to be delivered under the Act which, in the judgment of the Company, would require the making of any change in the Prospectus then being used, or in the information incorporated therein by reference, so that the Prospectus would not include an untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading, and, during such time, to prepare and furnish, at the Company’s expense, to the Underwriters promptly such amendments or supplements to such Prospectus as may be necessary to reflect any such change and to furnish you a copy of such proposed amendment or supplement before filing any such amendment or supplement with the Commission;

(g)to make generally available to its security holders, and to deliver to you, as soon as reasonably practicable, but not later than 16 months after the date of this Agreement, an earnings statement of the Company satisfying the provisions of Section 11(a) of the Act and Rule 158 thereunder;

(h)to furnish to you two conformed copies of the Registration Statement, as initially filed with the Commission, and of all amendments thereto (including all exhibits thereto and documents incorporated by reference therein) and sufficient additional conformed copies of the foregoing (other than exhibits) for distribution of a copy to each of the other Underwriters;

(i)to furnish to you as early as practicable prior to the time of purchase and the additional time of purchase, as the case may be, but not later than two business days prior thereto, a copy of the latest available unaudited interim consolidated financial statements, if any, of the Company and the Subsidiaries which have been read by the Company’s independent certified public accountants, as stated in their letter to be furnished pursuant to Section 6(d) hereof;

(j)to apply the net proceeds from the sale of the Shares in the manner set forth under the caption “Use of proceeds” in the Prospectus;

(k)to pay all expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, the Base Prospectus, each Prepricing Prospectus, each Prospectus Supplement, the Prospectus, and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment), (ii) the issuance, sale and delivery of the Shares by the Company, (iii) the word processing and/or printing of this Agreement, any Agreement Among Underwriters and any dealer agreements and the reproduction and/or printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment), each relating to the offer and sale of the Shares, (iv) the qualification of the Shares for offering and sale under state laws and the determination of their eligibility for investment under state law as aforesaid (including the legal fees and filing fees and other disbursements of counsel to the

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Underwriters) and the printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers, (v) the filing for review of the public offering of the Shares by NASD Regulation, Inc. (including the legal fees and filing fees and other disbursements of counsel to the Underwriters with respect thereto), (vi) any listing of the Shares on any securities exchange and any registration thereof under the Exchange Act and (vii) the performance of the Company’s other obligations under this Agreement;

(l)for so long as the delivery of the Prospectus is required in connection with the offer or sale of the Shares and before filing with the Commission subsequent to the effective date of the Registration Statement, to furnish to you a copy of any document proposed to be filed pursuant to Section 13, 14 or 15(d) of the Exchange Act;

(m)to not take, directly or indirectly, any action designed to or which may constitute or which might cause or result, under the Exchange Act or otherwise, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares;

(n)not to (i) sell, offer to sell, contract to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any Common Stock of the Company or any securities convertible into or exercisable or exchangeable for Common Stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, whether any such transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii), or (iv) file or cause to be declared effective a registration statement under the Act relating to the offer and sale of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or other rights to purchase Common Stock or any other securities of the Company that are substantially similar to Common Stock, for a period of 90 days after the date hereof (the “Lock-up Period”), without the prior written consent of UBS Securities LLC, except for (A) the registration of the Shares and the sales to the Underwriters pursuant to this Agreement, (B) issuances of Common Stock upon the exercise of options or warrants disclosed as outstanding in the Registration Statement and the Prospectus, (C) the issuance of employee stock options not exercisable during the Lock-up Period pursuant to stock option plans described in the Registration Statement and the Prospectus, and (D) issuances of Common Stock as partial or full payment for businesses directly or indirectly acquired or to be acquired by the Company or its Subsidiaries, provided that the Company shall have conditioned such issuances of Common Stock upon agreement of the recipients to the restrictions of this paragraph, provided, however, that if (x) during the period that begins on the date that is 15 calendar days plus 3 business

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days before the last day of the Lock-up Period and ends on the last day of the Lock-up Period, the Company issues a earnings release or material news or a material event relating to the Company occurs, or (y) prior to the expiration of the Lock-up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-up Period, the restrictions set forth in this Section 4(n) shall continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the issuance of the earnings release or the material news or material event occurs; and

(o)subject to Section 4(l) hereof, to file promptly all reports and any definitive proxy or information statement required to be filed by the Company with the Commission in order to comply with the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares, and to promptly notify you of such filing;

5.Reimbursement of Underwriters’ Expenses.  If the Shares are not delivered for any reason other than the termination of this Agreement pursuant to clause (y)(i), (y)(iii), (y)(iv) or (y)(v) of the second paragraph of Section 7 hereof or pursuant to the last paragraph of Section 8 hereof or the default by one or more of the Underwriters in its or their respective obligations hereunder, the Company agrees, in addition to paying the amounts described in Section 4(k) hereof, to reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of their counsel.

6.Conditions to Underwriters’ Obligations.  The several obligations of the Underwriters hereunder are subject to the accuracy of the representations and warranties on the part of the Company on the date hereof and at the time of purchase (and the several obligations of the Underwriters at the additional time of purchase are subject to the accuracy of the representations and warranties on the part of the Company on the date hereof and at the time of purchase (unless previously waived) and at the additional time of purchase, as the case may be), the performance by the Company of its obligations hereunder and to the following additional conditions precedent:

(a)The Company shall furnish to you at the time of purchase and at the additional time of purchase, as the case may be, an opinion of Sullivan & Worcester LLP, counsel for the Company, addressed to the Underwriters, and dated the time of purchase or the additional time of purchase, as the case may be, with reproduced copies for each of the other Underwriters and in a form satisfactory to Dewey Ballantine LLP, counsel for the Underwriters, stating that:

(i)(A) the Company is duly qualified to transact business and is in good standing in each of the jurisdictions set forth on Schedule B hereto; (B) each Delaware Material Subsidiary and Massachusetts Material Subsidiary is a corporation or other legal entity duly formed, existing and in good standing under the laws of its jurisdiction of

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organization; and (C) each Material Subsidiary listed on Schedule B is duly qualified as a foreign corporation or other legal entity and in good standing in each of the jurisdictions set forth on Schedule B hereto (“Material Subsidiary” being defined herein as any subsidiary that constitutes a “significant subsidiary” within the meaning of clause (w) of Section 1-02 of Regulation S-X, substituting 5% for 10%);

(ii)this Agreement has been duly authorized, executed and delivered by the Company (in rendering the opinion expressed in this paragraph (ii), such counsel may rely upon the opinion of Venable LLP as to matters governed by the laws of the State of Maryland);

(iii)the Registration Statement and the Prospectus (except as to the financial statements and schedules and other financial or accounting data contained or incorporated by reference therein, or statistical data derived therefrom, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act;

(iv)the Registration Statement has become effective under the Act and, to such counsel’s knowledge, no stop order proceedings with respect thereto are pending or threatened under the Act and any required filing of the Prospectus, and any supplement thereto, pursuant to Rule 424 under the Act, has been made in the manner and within the time period required by such Rule 424;

(v)each Delaware Material Subsidiary and Massachusetts Material Subsidiary has the corporate, trust, partnership or other power to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact to the extent described in the Registration Statement and Prospectus.  All of the issued and outstanding shares of beneficial ownership or shares of capital stock of, or other ownership interests in, each Delaware Material Subsidiary and Massachusetts Material Subsidiary have been duly authorized and validly issued, are fully paid and, except as to such Subsidiaries that are limited liability companies or partnerships, non-assessable; and, to such counsel’s knowledge, all issued and outstanding shares of beneficial ownership or shares of capital stock of, or other ownership interests in, each Subsidiary are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien or encumbrance, except as disclosed in the Registration Statement and Prospectus;

(vi)the execution, delivery and performance of this Agreement by the Company and the transactions contemplated hereby do not and will not result in a Default Event under (nor constitute any event which with notice, lapse of time, or both, would result in any breach of, or constitute a

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Default Event under) (A) any provisions of the charter or by-laws or other organizational documents of any Delaware Material Subsidiary or Massachusetts Material Subsidiary, (B) any provision of any agreement or other instrument to which the Company or any of the Material Subsidiaries is a party or by which their respective properties may be bound or affected, that is described in the Prospectus or filed as an exhibit to the Registration Statement or any Incorporated Document or is otherwise known to such counsel, (C) any United States federal or State of Delaware, Commonwealth of Massachusetts or State of New York law, regulation or rule, or any decree, to which the Company or the Material Subsidiaries may be subject, other than, in the case of clauses (B) and (C), such Default Events as would not, individually or in the aggregate, have a Material Adverse Effect;

(vii)to such counsel’s knowledge, there are no contracts, licenses, agreements, leases or documents of a character which are required to be filed as exhibits to the Registration Statement or any Incorporated Document or to be described in the Prospectus which have not been so filed or described;

(viii)to such counsel’s knowledge, except as described in the Prospectus or as would not, individually or in the aggregate, have a Material Adverse Effect, there are no private or governmental actions, suits, claims, investigations or proceedings pending, threatened or contemplated to which the Company or any of the Material Subsidiaries or any of their officers is subject or of which any of their properties is subject, whether at law, in equity or before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency;

(ix)to such counsel’s knowledge, no person has the right, pursuant to the terms of any contract, agreement or other instrument described in or filed as an exhibit to the Registration Statement or any Incorporated Document, to cause the Company to register under the Act any shares of beneficial interest or other equity interests as a result of the filing or effectiveness of the Registration Statement or the sale of the Shares as contemplated hereby, except for such rights as have been complied with or waived; and to the knowledge of such counsel, except as described in the Registration Statement and Prospectus, no person is entitled to registration rights with respect to shares of capital stock or other securities of the Company;

(x)the Company is not, and after the offering and sale of the Shares and the application of the proceeds as described in the Prospectus, will not be, an “investment company,” or an entity controlled by an “investment company,” as such terms are defined in the Investment Company Act;

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(xi)to such counsel’s knowledge, the statements in (i) the Registration Statement and the Prospectus under the captions “Prospectus Summary - Recent Developments - New Credit Facility”; (ii) the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 under the captions “Business - Government Regulation and Reimbursement,” “Business - - Environmental Matters,” “Properties -  Communities we Operate and Lease from Senior Housing,” “Properties - -  Communities we Operate and Lease from Senior Housing and SLS Manages,” “Properties - Our Senior Housing Leases,” “Properties - - Sunrise Senior Living Services, Inc. Management Agreements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Related Party Transactions” and (iii) in the Company’s Schedule 14A relating to its Annual Meeting of Stockholders held on May 11, 2005 under the caption “Certain Relationships and Related Transactions” and in each case insofar as such statements purport to summarize matters arising under Delaware or Massachusetts or New York law or the federal law of the United States, or provisions of documents as to which the Company is a party specifically referred to therein, are accurate in all material respects; and

(xii)no approval, authorization, consent or order of or filing with any United States federal or State of Delaware, State of Massachusetts, State of New York governmental or regulatory commission, board, body, authority or agency having jurisdiction over the Company or its Material Subsidiaries is required in connection with the execution, delivery and performance of this Agreement, the issuance and sale of the Shares being delivered at the time of purchase and at the additional time of purchase, as the case may be, and the consummation of such issuance and sale, other than the registration of the Shares under the Act, which registration has been effected (in rendering the opinion expressed in this paragraph (xii), such counsel need express no opinion concerning the securities laws of the State of Delaware, the Commonwealth of Massachusetts or State of New York).

Also, such counsel shall state that it has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants of the Company and representatives of the Underwriters at which the contents of the Registration Statement and Prospectus were discussed and, although such counsel is not passing upon and does not assume responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or Prospectus (except as and to the extent stated in subparagraph (xi) above), on the basis of the foregoing nothing has come to the attention of such counsel that causes them to believe that the Registration Statement or any amendment thereto at the time such Registration Statement or amendment became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus or any supplement thereto at the date of the Prospectus Supplement or such other supplement, and at all

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times up to and including the time of purchase or additional time of purchase, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial or accounting data contained or incorporated by reference therein, or statistical data derived therefrom, or exhibits included or incorporated by reference in the Registration Statement or Prospectus).

(b)The Company shall furnish to you at the time of purchase and at the additional time of purchase, as the case may be, an opinion of Venable LLP, special Maryland counsel of the Company, addressed to the Underwriters, and dated the time of purchase or the additional time of purchase, as the case may be, with reproduced copies for each of the other Underwriters and in form satisfactory to Dewey Ballantine LLP, counsel for the Underwriters, stating that:

(i)the Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessment and Taxation of Maryland, with corporate power to own, lease and operate its properties and conduct its business in all material respects as described in the Registration Statement and the Prospectus, to execute and deliver this Agreement and to issue, sell and deliver the Shares as herein contemplated;

(ii)each Material Maryland Subsidiary is a corporation duly incorporated or other legal entity duly formed, existing under and by virtue of the laws of the State of Maryland and in good standing with the State Department of Assessments and Taxation of Maryland (“Material Subsidiary” being defined herein as any subsidiary that constitutes a “significant subsidiary” within the meaning of clause (w) of Section 1-02 of Regulation S-X, substituting 5% for 10%).  Each Material Maryland Subsidiary has the corporate or other power to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact to the extent described in the Registration Statement and Prospectus.  All of the issued and outstanding shares of stock or other ownership interest of each Material Maryland Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly or through subsidiaries;

(iii)this Agreement has been duly authorized, executed and delivered by the Company;

(iv)the execution, delivery and performance of this Agreement by the Company and the transactions contemplated hereby and by the Registration Statement do not and will not conflict with, or result in any

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breach of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both, would result in any breach of, or constitute a default under) (A) any provisions of the charter or bylaws or other organizational documents of the Company or any of the Material Maryland Subsidiaries or (B) any Maryland statute or administrative regulation applicable to the Company or any of the Material Maryland Subsidiaries;

(v)the Company has authorized and outstanding shares of stock as set forth in the Registration Statement and the Prospectus under the caption “Capitalization”; the outstanding shares of capital stock of the Company have been duly authorized and validly issued by all necessary corporate action and are fully paid, nonassessable and free of any preemptive or similar rights under the MGCL; the Shares, when issued, will be duly authorized and validly issued by all necessary corporate action, fully paid, nonassessable and free of any preemptive rights or similar rights under the MGCL; and the certificates for the Shares are in due and proper form and conform in all material respects to the requirements of the MGCL;

(vi)no approval, authorization, consent or order of or filing with any Maryland governmental or regulatory commission, board, body, authority or agency having jurisdiction over the Company is required in connection with the execution, delivery and performance of this Agreement, the issuance and sale of the Shares being delivered at the time of purchase and at the additional time of purchase, as the case may be, and the consummation of the transactions contemplated hereby and by the Prospectus (in rendering the opinion expressed in this paragraph (v), such counsel need express no opinion concerning the securities laws of the State of Maryland); and

(vii)so far as is known to such counsel, the statements in the Registration Statement and the Prospectus under the captions “Description of Common Shares,” “Description of Preferred Shares” and “Description of Certain Provisions of Maryland Law and of our Charter and Bylaws,” in each case insofar as such statements purport to summarize matters arising under Maryland law, are accurate in all material respects.

(c)You shall have received at the time of purchase and at the additional time of purchase, as the case may be, the opinion of Dewey Ballantine LLP, counsel for the Underwriters, dated the time of purchase or the additional time of purchase, as the case may be, with respect to the issuance and sale of the Shares by the Company, the Registration Statement, the Prospectus (together with any supplement thereto) and other related matters as the Underwriters may require.  In addition, Dewey Ballantine LLP may rely on the opinion of Venable LLP as to all matters of Maryland law.

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(d)You shall have received from Ernst & Young LLP letters dated, respectively, the date of this Agreement and the time of purchase and additional time of purchase, as the case may be, and addressed to the Underwriters (with reproduced copies for each of the Underwriters) in the forms heretofore approved by Dewey Ballantine LLP, counsel for the Underwriters.

(e)No amendment or supplement to the Registration Statement or Prospectus or any Incorporated Document, and no document which upon filing with the Commission would become an Incorporated Document, shall at any time have been filed to which you have objected in writing.

(f)The Registration Statement shall have become effective, and the Prospectus Supplement shall have been filed with the Commission pursuant to Rule 424(b) under the Act at or before 5:30 PM New York City time on the second full business day after the date of this Agreement, and any registration statement pursuant to Rule 462(b) under the Act required in connection with the offering and sale of the Shares shall have been filed and become effective no later than 10:00 PM New York City time, on the date of this Agreement.

(g)Prior to the time of purchase or the additional time of purchase, as the case may be, (i) no stop order with respect to the effectiveness of the Registration Statement shall have been issued under the Act or proceedings initiated under Section 8(d) or 8(e) of the Act; (ii) the Registration Statement and all amendments thereto, or modifications thereof, if any, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) the Prospectus and all amendments or supplements thereto, or modifications thereof, if any, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading.

(h)Between the time of execution of this Agreement and the time of purchase or the additional time of purchase, as the case may be, (i) no material and adverse change or any development involving a prospective material adverse change in the business, properties, management, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries, taken as a whole, shall occur or become known and (ii) no transaction which is material and adverse to the Company and the Subsidiaries, taken as a whole, shall have been entered into by the Company or any of the Subsidiaries.

(i)You shall have received the letters referred to in Section 3(cc) hereof.

(j)The Company will, at the time of purchase or additional time of purchase, as the case may be, deliver to you a certificate signed by two of the Company’s executive officers to the effect that the representations and warranties

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of the Company as set forth in this Agreement are true and correct as of each such date, that the Company has performed such of its obligations under this Agreement as are to be performed at or before the time of purchase and at or before the additional time of purchase, as the case may be, and the conditions set forth in paragraphs (f), (g) and (h) of this Section 6 have been met.

(k)The Shares shall have been approved for listing for quotation on the AMEX, subject only to notice of issuance at or prior to the time of purchase or the additional time of purchase, as the case may be.

(l)The Company shall have furnished to you such other documents and certificates as to the accuracy and completeness of any statement in the Registration Statement and the Prospectus as of the time of purchase and the additional time of purchase, as the case may be, as you may reasonably request.

7.Effective Date of Agreement; Termination.  This Agreement shall become effective: (i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement or an Abbreviated Registration Statement to be declared or become effective before the offering of the Shares may commence, when notification of the effectiveness of such post-effective amendment has been released by the Commission or such Abbreviated Registration Statement has, pursuant to the provisions of Rule 462 under the Act, become effective.  Until such time as this Agreement shall have become effective, it may be terminated by the Company by notifying you, or by you, as representatives of the Underwriters, by notifying the Company.

The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of UBS Securities LLC, or of any group of Underwriters (which may include UBS Securities LLC) which has agreed to purchase in the aggregate at least 50% of the Firm Shares, if (x) since the time of execution of this Agreement or the earlier respective dates as of which information is given in the Registration Statement and the Prospectus, there has been any material adverse change in the business, prospects, properties, management, financial condition or results of operations of the Company and the Subsidiaries taken as a whole, which would, in UBS Securities LLC’s judgment or in the judgment of such group of Underwriters, make it impracticable to proceed with the public offering or the delivery of the Shares on the terms and in the manner contemplated in the Registration Statement and the Prospectus, or (y) since the time of execution of this Agreement, there shall have occurred: (i) a suspension or material limitation in trading in securities generally on the NYSE, the American Stock Exchange or the NASDAQ; (ii) a suspension or material limitation in trading in the Company’s securities on the American Stock Exchange; (iii) a general moratorium on commercial banking activities declared by either federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) an outbreak or escalation of hostilities or acts of terrorism involving the United States or a declaration by the United States of a national emergency or war; or (v) any other calamity or crisis or any change in financial,

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political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in UBS’s judgment or in the judgment of such group of Underwriters makes it impracticable to proceed with the public offering or the delivery of the Shares on the terms and in the manner contemplated in the Registration Statement and the Prospectus.

If you or any group of Underwriters elects to terminate this Agreement as provided in this Section 7, the Company and each other Underwriter shall be notified promptly by letter, telegram or telecopy.

If the sale to the Underwriters of the Shares, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted under this Agreement or if such sale is not carried out because the Company shall be unable to comply with any of the terms of this Agreement, the Company shall not be under any obligation or liability under this Agreement (except to the extent provided in Sections 4(k), 5 and 9 hereof), and the Underwriters shall be under no obligation or liability to the Company under this Agreement (except to the extent provided in Section 9 hereof) or to one another hereunder.

8.Increase in Underwriters’ Commitments.  Subject to Sections 6 and 7, if any Underwriter shall default in its obligation to purchase and pay for the Firm Shares to be purchased by it hereunder (otherwise than for a reason sufficient to justify the termination of this Agreement under the provisions of Section 7 hereof) and if the number of Firm Shares which all Underwriters so defaulting shall have agreed but failed to purchase and pay for does not exceed 10% of the total number of Firm Shares, the non-defaulting Underwriters shall purchase and pay for (in addition to the aggregate number of Firm Shares they are obligated to purchase pursuant to Section 1 hereof) the number of Firm Shares agreed to be purchased by all such defaulting Underwriters, as hereinafter provided.  Such Firm Shares shall be purchased and paid for by such non-defaulting Underwriter or Underwriters in such amount or amounts as you may designate with the consent of each Underwriter so designated or, in the event no such designation is made, such Firm Shares shall be purchased and paid for by all non-defaulting Underwriters pro rata in proportion to the aggregate number of Firm Shares set opposite the names of such non-defaulting Underwriters in Schedule A.

Without relieving any defaulting Underwriter from its obligations hereunder, the Company agrees with the non-defaulting Underwriters that it will not sell any Firm Shares hereunder unless all of the Firm Shares are purchased by the Underwriters (or by substituted Underwriters selected by you with the approval of the Company or selected by the Company with your approval).

If a new Underwriter or Underwriters are substituted by the Underwriters or by the Company for a defaulting Underwriter or Underwriters in accordance with the foregoing provision, the Company or you shall have the right to postpone the time of purchase or the additional time of purchase, as the case may be, for a period not exceeding five business days in order that any necessary changes in the Registration Statement and Prospectus and other documents may be effected.

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The term Underwriter as used in this Agreement shall refer to and include any Underwriter substituted under this Section 8 with like effect as if such substituted Underwriter had originally been named in Schedule A.

If the aggregate number of Shares which the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the total number of Shares which all Underwriters agreed to purchase hereunder, and if neither the non-defaulting Underwriters nor the Company shall make arrangements within the five business day period stated above for the purchase of all the Shares which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall terminate without further act or deed and without any liability on the part of the Company to any non-defaulting Underwriter and without any liability on the part of any non-defaulting Underwriter to the Company.  Nothing in this paragraph, and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

9.Indemnity and Contribution.

(a)The Company agrees to indemnify, defend and hold harmless each Underwriter, its partners, directors, officers, employees and agents and any person who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, any such Underwriter or any such person may incur under the Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented), or arises out of or is based upon any omission or alleged omission to state a material fact required to be stated in either the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented) or necessary to make the statements made therein not misleading, except insofar as any such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and in conformity with information furnished by or on behalf of any Underwriter through any one of you to the Company expressly for use with reference to such Underwriter in the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented) or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement, the Base Prospectus, any Prepricing Prospectus, any Prospectus Supplement or the Prospectus (or in any of the foregoing as the same may at any time be amended or supplemented) or necessary to make such information not misleading, (ii) any untrue statement or alleged untrue statement made by the Company in Section 3 of this Agreement or the failure by the Company to perform when and as required any

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agreement or covenant contained herein or (iii) any untrue statement or alleged untrue statement of any material fact contained in any audio or visual materials provided by the Company or based upon written information furnished by or, with the approval of the Company, on behalf of the Company including, without limitation, slides, videos, films or tape recordings, used in connection with the marketing of the Shares; provided, however, that the indemnity agreement contained in this subsection (a) as it may relate to any untrue statement in or omission from any Base Prospectus or Prepricing Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any partner, director or officer of any Underwriter or person controlling such Underwriter) from whom the person asserting such losses, claims, damages or liabilities purchased Shares, if sufficient copies of the Prospectus were timely delivered to such Underwriter pursuant to Section 4 hereof and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not given or sent to such person, if required by law to have been delivered, at or prior to the written confirmation of the sale of the Shares to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities.

If any action, suit or proceeding (together, a “Proceeding”) is brought against an Underwriter or any such person in respect of which indemnity may be sought against the Company pursuant to the foregoing paragraph, such Underwriter or such person shall promptly notify the Company in writing of the institution of such Proceeding and the Company shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses related thereto; provided, however, that the omission to so notify the Company shall not relieve the Company from any liability which the Company may have to any Underwriter or any such person or otherwise.  Such Underwriter or such person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or of such person unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such Proceeding or the Company shall not have, within a reasonable period of time in light of the circumstances, employed counsel to have charge of the defense of such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from, additional to or in conflict with those available to the Company (in which case the Company shall not have the right to direct the defense of such Proceeding on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the Company and paid as incurred (it being understood, however, that the Company shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the indemnified parties who are parties to such Proceeding).  The Company shall not be liable for any settlement of any Proceeding effected without its prior written consent, but if settled with the written consent of the Company, the Company agrees to indemnify and hold harmless any Underwriter and any such person from and against any loss or liability by reason of such settlement.  Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees

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and expenses of counsel as contemplated by the second sentence of this paragraph, then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without the Company’s written consent if (i) such settlement is entered into more than 60 business days after receipt by the indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days’ prior notice of its intention to settle.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding and does not include an admission of fault, culpability or a failure to act, by or on behalf of such indemnified party.

(b)Each Underwriter severally agrees to indemnify, defend and hold harmless the Company, its directors, officers, employees and agents and any person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and the successors and assigns of all of the foregoing persons from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, the Company or any such person may incur under the Act, the Exchange Act, the common law or otherwise, insofar as such loss, damage, expense, liability or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and in conformity with information furnished by or on behalf of such Underwriter through any one of you to the Company expressly for use with reference to such Underwriter in the Registration Statement, the Base Prospectus, any Prepricing Prospectus, the Prospectus Supplement or in the Prospectus (or in any of the foregoing as such document may at any time be amended or supplemented), or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated in the Registration Statement, the Base Prospectus, any Prepricing Prospectus, the Prospectus Supplement or in the Prospectus (or in any of the foregoing as such document may at any time be amended or supplemented) or necessary to make such information not misleading.

If any Proceeding is brought against the Company or any such person in respect of which indemnity may be sought against any Underwriter pursuant to the foregoing paragraph, the Company or such person shall promptly notify such Underwriter in writing of the institution of such Proceeding and such Underwriter shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all fees and expenses; provided, however, that the omission to so notify such Underwriter shall not relieve such Underwriter from any liability which such Underwriter may have to the Company or any such person or otherwise.  The Company or such person shall have the right to employ their or its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Company or such person unless the employment of such counsel shall have been authorized in writing by such Underwriter in connection with the defense of

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such Proceeding or such Underwriter shall not have employed counsel to defend such Proceeding or such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to or in conflict with those available to such Underwriter (in which case such Underwriter shall not have the right to direct the defense of such Proceeding on behalf of the indemnified party or parties, but such Underwriter may employ counsel and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Underwriter), in any of which events such fees and expenses shall be borne by such Underwriter and paid as incurred (it being understood, however, that such Underwriter shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) in any one Proceeding or series of related Proceedings in the same jurisdiction representing the indemnified parties who are parties to such Proceeding).  No Underwriter shall be liable for any settlement of any such Proceeding effected without the written consent of such Underwriter but if settled with the written consent of such Underwriter, such Underwriter agrees to indemnify and hold harmless the Company and any such person from and against any loss or liability by reason of such settlement.  Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, then the indemnifying party agrees that it shall be liable for any settlement of any Proceeding effected without the Underwriters’ written consent if (i) such settlement is entered into more than 60 business days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement and (iii) such indemnified party shall have given the indemnifying party at least 30 days’ prior notice of its intention to settle.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding.

(c)If the indemnification provided for in this Section 9 is unavailable to an indemnified party under subsections (a) and (b) of this Section 9 in respect of any losses, damages, expenses, liabilities or claims referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, damages, expenses, liabilities or claims (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, damages, expenses, liabilities or claims, as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total proceeds from the offering

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(net of underwriting discounts and commissions but before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, bear to the aggregate public offering price of the Shares.  The relative fault of the Company on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid or payable by a party as a result of the losses, damages, expenses, liabilities and claims referred to in this subsection shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating, preparing to defend or defending any Proceeding.

(d)The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in subsection (c) above.  Notwithstanding the provisions of this Section 9, in no case shall any Underwriter be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by such Underwriter and distributed to the public were offered to the public exceeds the amount of any damage which such Underwriter has otherwise been required to pay by reason of such untrue statement or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Underwriters’ obligations to contribute pursuant to this Section 9 are several in proportion to their respective underwriting commitments and not joint.

(e)The indemnity and contribution agreements contained in this Section 9 and the covenants, warranties and representations of the Company contained in this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter, its partners, directors, officers, employees or agents or any person (including each partner, officer, director, employee or agent of such person) who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, or by or on behalf of the Company, its directors, officers, employees or agents or any person who controls any of the foregoing within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and shall survive any termination of this Agreement or the issuance and delivery of the Shares.  The Company and each Underwriter agree promptly to notify each other of the commencement of any Proceeding against it and against any of the officers, directors, employees or agents of the Company in connection with the issuance and sale of the Shares, or in connection with the Registration Statement or Prospectus.

10.Notices.  Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram and, if to the Underwriters, shall be sufficient in all respects if delivered or sent to UBS Securities LLC, 299 Park Avenue, New York, NY 10171-0026, Attention: Syndicate Department;

33

and if to the Company, shall be sufficient in all respects if delivered or sent to the Company at the offices of the Company at 400 Centre Street, Newton, Massachusetts 02458, Attention: Evrett W. Benton, Chief Executive Officer and President.

11.Information Furnished by the Underwriters.  The statements set forth in the last sentence on the cover page of the Prospectus, the Underwriters listed on the cover page of the Prospectus, the list of Underwriters and their respective participation in the sale of the Shares set forth under the caption “Underwriting” in the Prospectus, the statements set forth in the two sentences immediately preceding the caption “Underwriting - - Over-allotment Option” in the Prospectus, the statements set forth in the first paragraph under the caption “Underwriting - Commissions and Discounts” in the Prospectus and the statements set forth under the caption “Underwriting - Price Stabilization and Short Positions” in the Prospectus constitute the only information furnished by or on behalf of the Underwriters as such information is referred to in Sections 3 and 9 hereof.

12.Governing Law; Construction.  This Agreement and any claim, counterclaim or dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement (“Claim”), directly or indirectly, shall be governed by, and construed in accordance with, the laws of the State of New York.  The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement.

13.Submission to Jurisdiction.  Except as set forth below, no Claim may be commenced, prosecuted or continued in any court other than the courts of the State of New York located in the City and County of New York or in the United States District Court for the Southern District of New York, which courts shall have jurisdiction over the adjudication of such matters, and you and the Company consent to the jurisdiction of such courts and personal service with respect thereto.  The Company hereby consents to personal jurisdiction, service and venue in any court in which any Claim arising out of or in any way relating to this Agreement is brought by any third party against an Underwriter or any indemnified party.  Each Underwriter and the Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement.  The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding thereupon, and may be enforced in any other courts in the jurisdiction to which the Company is or may be subject, by suit upon such judgment.

14.Parties at Interest.  The Agreement herein set forth has been and is made solely for the benefit of the Underwriters, the Company and, to the extent provided in Section 9 hereof, the controlling persons, partners, directors, officers, employees and agents referred to in such section, and their respective successors, assigns, heirs, personal representatives and executors and administrators.  No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement.

34

15.No Fiduciary Relationship.  The Company hereby acknowledges that the Underwriters are acting solely as an underwriter in connection with the purchase and sale of the Company’s securities.  The Company further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the purchase and sale of the Company’s securities, either before or after the date hereof.  The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect.  The Company and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including, but not limited to, any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company.  The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

16.Counterparts.  This Agreement may be signed by the parties in one or more counterparts which together shall constitute one and the same agreement among the parties.

17.Successors and Assigns.  This Agreement shall be binding upon the Underwriters and the Company and their successors and assigns and any successor or assign of any substantial portion of the Company’s and any of the Underwriters’ respective businesses and/or assets.

18.Miscellaneous.  UBS Securities LLC, an indirect, wholly owned subsidiary of UBS AG, is not a bank and is separate from any affiliated bank, including any U.S. branch or agency of UBS Securities LLC.  Because UBS Securities LLC is a separately organized entity, it is solely responsible for its own contractual obligations and commitments, including obligations with respect to sales and purchases of securities.  Securities sold, offered or recommended by UBS Securities LLC are not deposits, are not insured by the Federal Deposit Insurance Corporation, are not guaranteed by a branch or agency, and are not otherwise an obligation or responsibility of a branch or agency.

A lending affiliate of UBS Securities LLC may have lending relationships with issuers of securities underwritten or privately placed by UBS Securities LLC.  To the extent required under the securities laws, prospectuses and other disclosure documents for securities underwritten or privately placed by UBS Securities LLC will disclose the existence of any such lending relationships and whether the proceeds of the issue will be used to repay debts owed to affiliates of UBS Securities LLC.

35

[Remainder of Page Intentionally Left Blank; Signature Page Follows.]

36

If the foregoing correctly sets forth the understanding between the Company and the Underwriters, please so indicate in the space provided below for the purpose, whereupon this letter and your acceptance shall constitute a binding agreement between the Company and the several Underwriters.

			Very truly yours.
			FIVE STAR QUALITY CARE , INC.
			By:	/s/ Bruce J. Mackey Jr.
				Name:	Bruce J. Mackey Jr.
				Title:	Treasurer, Chief Financial Officer and Assistant Secretary
Accepted and agreed to as of the date
first above written:
UBS SECURITIES LLC
RBC CAPITAL MARKETS CORPORATION
LEGG MASON WOOD WALKER, INCORPORATED
FERRIS, BAKER WATTS, INCORPORATED
STIFEL, NICOLAUS & COMPANY, INCORPORATED
As Representatives of the several Underwriters
By: UBS SECURITIES LLC
By:	/s/ Sage Kelly
	Name:	Sage Kelly
	Title:	Managing Director
By:	/s/ Kristin Kusmierz
	Name:	Kristin Kusmierz
	Title:	Associate Director

37

SCHEDULE A

Underwriter	Number of Firm Shares
UBS Securities LLC	3,750,000
RBC Capital Markets Corporation	1,500,000
Legg Mason Wood Walker, Incorporated	750,000
Ferris, Baker Watts, Incorporated	750,000
Stifel, Nicolaus & Company, Incorporated	750,000
Total	7,500,000

38

SCHEDULE B

Company and jurisdiction of incorporation	Jurisdiction of Foreign Qualifications
Five Star Quality Care, Inc (Maryland)	Massachusetts
Subsidiaries	Jurisdiction of Foreign Qualifications
* Alliance Pharmacy Services, LLC (Delaware)	Massachusetts Nebraska Wisconsin
Affiliates Insurers, Limited (Bermuda)	None
CCC Boynton Beach, Inc. (Delaware)	Florida
Five Star Advertising, Inc. (Delaware)	Massachusetts
Five Star Insurance, Inc. (Maryland)	None
Five Star MD Homes LLC (Delaware)	Maryland
Five Star Procurement Group Trust (Maryland)	Massachusetts
Five Star Quality Care Trust (Maryland)	California Georgia Kansas Massachusetts Michigan Tennessee Wisconsin Wyoming
Five Star Quality Care-AZ, LLC (Delaware)	Arizona
Five Star Quality Care-CA, Inc. (Delaware)	California
Five Star Quality Care-CA II, Inc. (Maryland)	None
Five Star Quality Care-CA, LLC (Delaware)	California
Five Star Quality Care-CA II, LLC (Delaware)	California
Five Star Quality Care-CO, Inc. (Maryland)	None
Five Star Quality Care-Colorado, LLC (Delaware)	Colorado
Five Star Quality Care-CT, LLC (Delaware)	Connecticut
* Five Star Quality Care-FL, LLC (Delaware)	Florida
* Five Star Quality Care-GA, LLC (Delaware)	Georgia
Five Star Quality Care-GA, Inc. (Maryland)	None
Five Star Quality Care-IA, Inc. (Delaware)	Iowa
Five Star Quality Care-IA, LLC (Delaware)	Iowa
Five Star Quality Care-KS, LLC (Delaware)	Kansas

* Entity is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Act, substituting 5% for 10%.

39

Five Star Quality Care-MD, LLC (Delaware)	Maryland
Five Star Quality Care-MI, Inc. (Delaware)	Michigan
* Five Star Quality Care-MI, LLC (Delaware)	Michigan
Five Star Quality Care-MO, LLC (Delaware)	Missouri
Five Star Quality Care-NC, LLC (Delaware)	North Carolina
Five Star Quality Care-NE, Inc. (Delaware)	Nebraska
Five Star Quality Care-NE, LLC (Delaware)	Nebraska
* Five Star Quality Care-VA, LLC (Delaware)	Virginia
* Five Star Quality Care-WI, LLC (Delaware)	Wisconsin
Five Star Quality Care-WI, Inc. (Maryland)	None
Five Star Quality Care-WY, LLC (Delaware)	Wyoming
Five Star Quality Care-Ainsworth, LLC (Delaware)	Nebraska
Five Star Quality Care-Ashland, LLC (Delaware)	Nebraska
Five Star Quality Care-Blue Hill, LLC (Delaware)	Nebraska
Five Star Quality Care-Central City, LLC (Delaware)	Nebraska
Five Star Quality Care-Columbus, LLC (Delaware)	Nebraska
Five Star Quality Care-Edgar, LLC (Delaware)	Nebraska
Five Star Quality Care-Exeter, LLC (Delaware)	Nebraska
Five Star Quality Care-Farmington, LLC (Delaware)	Michigan
Five Star Quality Care-GHV, LLC (Maryland)	Pennsylvania
Five Star Quality Care-Grand Island, LLC (Delaware)	Nebraska
Five Star Quality Care-Gretna, LLC (Delaware)	Nebraska
Five Star Quality Care-Howell, LLC (Delaware)	Michigan
Five Star Quality Care-Lyons, LLC (Delaware)	Nebraska
Five Star Quality Care-Milford, LLC (Delaware)	Nebraska
Five Star Quality Care - MVSP, LLC (Maryland)	Pennsylvania
Five Star Quality Care-Sutherland, LLC (Delaware)	Nebraska
Five Star Quality Care-Utica, LLC (Delaware)	Nebraska
Five Star Quality Care-Waverly, LLC (Delaware)	Nebraska
Five Star Seabury, LLC (Delaware)	Connecticut
FS Lafayette Tenant Trust (Maryland)	Kentucky Massachusetts
FS Leisure Park Tenant Trust (Maryland)	Massachusetts

* Entity is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Act, substituting 5% for 10%.

40

* FS Lexington Tenant Trust (Maryland)	Kentucky Massachusetts
* FS Tenant Holding Company Trust (Maryland)	Arizona California Delaware Florida Indiana Kansas Kentucky Massachusetts New Mexico Ohio South Carolina
* FS Tenant Pool I Trust (Maryland)	Delaware Florida Massachusetts New Mexico South Carolina
* FS Tenant Pool II Trust (Maryland)	Arizona California Delaware Florida Indiana Massachusetts
* FS Tenant Pool III Trust (Maryland)	Arizona Florida Kansas Kentucky Massachusetts Ohio
FS Tenant Pool IV Trust (Maryland)	Delaware Florida Massachusetts
FSQ Crown Villa Business Trust (Maryland)	Massachusetts
FSQ Overland Park Place Business Trust (Maryland)	Kansas Massachusetts
FSQ Pharmacy Holdings, LLC (Delaware)	Massachusetts Nebraska
FSQ Rio Las Palmas Business Trust (Maryland)	California Massachusetts
FSQ The Palms at Fort Myers Business Trust (Maryland)	Florida Massachusetts
FSQ Villa at Riverwood Business Trust (Maryland)	Massachusetts

* Entity is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Act, substituting 5% for 10%.

41

FSQ, Inc. (Delaware)	Arizona California Colorado Connecticut Florida Georgia Indiana Iowa Kansas Kentucky Maryland Massachusetts Michigan Missouri Nebraska North Carolina New Jersey New Mexico Ohio South Carolina Texas Wisconsin Wyoming
FSQ/LTA Holdings, Inc. (Delaware).	None
FVEST.JOE, Inc. (Delaware)	Missouri
Heartland Pharmacy Cares, Inc. (Nebraska)	None
Heartland Promotions, Inc. (Nebraska)	Iowa
* LifeTrust America, Inc. (Tennessee)	None
* LifeTrust Properties, LLC (Delaware)	None
LTA Management Services, LLC (Delaware)	None
LTA Management Services of Florida, LLC (Delaware)	None
Morningside Holdings of Concord, LLC (Delaware)	North Carolina
Morningside Holdings of Gastonia, LLC (Delaware)	North Carolina
Morningside Holdings of Greensboro, LLC (Delaware)	North Carolina
Morningside Holdings of Raleigh, LLC (Delaware)	North Carolina
Morningside Holdings of Williamsburg, LLC (Delaware)	Virginia
Morningside of Alabama, L.P. (Delaware)	Alabama
Morningside of Anderson, L.P. (Delaware)	South Carolina
Morningside of Athens, L.P. (Delaware)	Georgia

* Entity is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Act, substituting 5% for 10%.

42

Morningside of Beaufort, LLC (Delaware)	South Carolina
Morningside of Bellgrade, Richmond, LLC (Delaware)	Virginia
Morningside of Belmont, LLC (Delaware)	Tennessee
Morningside of Bowling Green, LLC (Delaware)	Kentucky
Morningside of Camden, LLC (Delaware)	South Carolina
Morningside of Charlottesville, LLC (Delaware)	Virginia
Morningside of Cleveland, LLC (Delaware)	Tennessee
Morningside of Columbus, L.P. (Delaware)	Georgia
Morningside of Concord, LLC (Delaware)	North Carolina
Morningside of Conyers, LLC (Delaware)	Georgia
Morningside of Cookeville, LLC (Delaware)	Tennessee
Morningside of Cullman, LLC (Delaware)	Alabama
Morningside of Dalton, Limited Partnership (Delaware)	Georgia
Morningside of Decatur, L.P. (Delaware)	Alabama
Morningside of Evans, Limited Partnership (Delaware)	Georgia
Morningside of Fayette, L.P. (Delaware)	Alabama
Morningside of Franklin, LLC (Delaware)	Tennessee
Morningside of Gainesville, LLC (Delaware)	Georgia
Morningside of Gallatin, LLC (Delaware)	Tennessee
Morningside of Gastonia, LLC (Delaware)	North Carolina
Morningside of Georgia, L.P. (Delaware)	None
Morningside of Greensboro, LLC (Delaware)	North Carolina
Morningside of Greenwood, L.P. (Delaware)	South Carolina
Morningside of Hartsville, LLC (Delaware)	South Carolina
Morningside of Hopkinsville, Limited Partnership (Delaware)	Kentucky
Morningside of Jackson, LLC	Tennessee
Morningside of Kentucky, Limited Partnership (Delaware)	Kentucky
Morningside of Knoxville, LLC (Delaware)	Tennessee
Morningside of Lexington, LLC (Delaware)	South Carolina
Morningside of Macon, LLC (Delaware)	Georgia
Morningside of Madison, LLC (Delaware)	Alabama
Morningside of Newport News, LLC (Delaware)	Virginia
Morningside of Orangeburg, LLC (Delaware)	South Carolina
Morningside of Paducah, LLC (Delaware)	Kentucky
* Morningside of Paris, L.P. (Delaware)	Tennessee

43

Morningside of Raleigh, LLC (Delaware)	North Carolina
Morningside of Seneca, L.P. (Delaware)	South Carolina
Morningside of Sheffield, LLC (Delaware)	Alabama
Morningside of Skipwith-Richmond, LLC (Delaware)	Virginia
Morningside of South Carolina, L.P. (Delaware)	South Carolina
Morningside of Springfield, LLC (Delaware)	Tennessee
Morningside of Tennessee, LLC (Delaware)	None
* Morningside of Williamsburg, LLC (Delaware)	Virginia
National LTC Pharmacy Services LLC (Delaware)	Massachusetts Nebraska
Senior Living Insurance Company, Ltd. (Cayman)	None
Senior Living of Boynton Beach Limited Partnership (Delaware)	Florida
The Heartlands Retirement Community - Ellicott City I, Inc. (Maryland)	None
The Heartlands Retirement Community - Ellicott City II, Inc. (Maryland)	None

* Entity is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Act, substituting 5% for 10%.

44

SCHEDULE C

Delaware Subsidiaries

Alliance Pharmacy Services, LLC

CCC Boynton Beach, Inc.

Five Star Advertising, Inc.

Five Star MD Homes LLC

Five Star Quality Care - AZ, LLC

Five Star Quality Care - CA, Inc.

Five Star Quality Care - CA, LLC

Five Star Quality Care - CA II, LLC

Five Star Quality Care - Colorado, LLC

Five Star Quality Care - CT, LLC

Five Star Quality Care - FL, LLC

Five Star Quality Care - GA, Inc.

Five Star Quality Care - GA, LLC

Five Star Quality Care - IA, Inc.

Five Star Quality Care - IA, LLC

Five Star Quality Care - KS, LLC

Five Star Quality Care - MD, LLC

Five Star Quality Care - MI, Inc.

Five Star Quality Care - MI, LLC

Five Star Quality Care - MO, LLC

Five Star Quality Care - NC, LLC

Five Star Quality Care - NE, Inc.

Five Star Quality Care - NE, LLC

Five Star Quality Care - VA, LLC

Five Star Quality Care - WI, Inc.

Five Star Quality Care - WI, LLC

Five Star Quality Care - WY, LLC

Five Star Quality Care - Ainsworth, LLC

Five Star Quality Care - Ashland, LLC

Five Star Quality Care - Blue Hill, LLC

Five Star Quality Care - Central City, LLC

Five Star Quality Care - Columbus, LLC

Five Star Quality Care - Edgar, LLC

Five Star Quality Care - Exeter, LLC

Five Star Quality Care - Farmington, LLC

Five Star Quality Care - Grand Island, LLC

Five Star Quality Care - Gretna, LLC

Five Star Quality Care - Howell, LLC

Five Star Quality Care - Lyons, LLC

Five Star Quality Care - Milford, LLC

Five Star Quality Care - Sutherland, LLC

Five Star Quality Care - Utica, LLC

45

Five Star Quality Care - Waverly, LLC

Five Star Quality Care Holding Co., Inc.

Five Star Seabury LLC

FSQ/LTA Holdings, Inc.

FSQ, Inc.

FSQ Pharmacy Holdings, LLC

FSQC Funding Co., LLC

FVEST.JOE, Inc.

LifeTrust Properties, LLC

LTA Management Services, LLC

LTA Management Services of Florida, LLC

Morningside Holdings of Concord, LLC

Morningside Holdings of Gastonia, LLC

Morningside Holdings of Greensboro, LLC

Morningside Holdings of Raleigh, LLC

Morningside Holdings of Williamsburg, LLC

Morningside of Alabama, L.P.

Morningside of Anderson, L.P.

Morningside of Athens, Limited Partnership

Morningside of Beaufort, LLC

Morningside of Bellgrade, Richmond, LLC

Morningside of Belmont, LLC

Morningside of Bowling Green, LLC

Morningside of Camden, LLC

Morningside of Charlottesville, LLC

Morningside of Cleveland, LLC

Morningside of Columbus, L.P.

Morningside of Concord, LLC

Morningside of Conyers, LLC

Morningside of Cookeville, LLC

Morningside of Cullman, LLC

Morningside of Dalton, Limited Partnership

Morningside of Decatur, L.P.

Morningside of Evans, Limited Partnership

Morningside of Fayette, L.P.

Morningside of Franklin, LLC

Morningside of Gainesville, LLC

Morningside of Gallatin, LLC

Morningside of Gastonia, LLC

Morningside of Georgia, L.P.

Morningside of Greensboro, LLC

Morningside of Greenwood, L.P.

Morningside of Hartsville, LLC

Morningside of Hopkinsville, Limited Partnership

Morningside of Jackson, LLC

Morningside of Kentucky, Limited Partnership

46

Morningside of Knoxville, LLC

Morningside of Lexington, LLC

Morningside of Macon, LLC

Morningside of Madison, LLC

Morningside of Newport News, LLC

Morningside of Orangeburg, LLC

Morningside of Paducah, LLC

Morningside of Paris, L.P.

Morningside of Raleigh, LLC

Morningside of Seneca, L.P.

Morningside of Sheffield, LLC

Morningside of Skipwith-Richmond, LLC

Morningside of South Carolina, L.P.

Morningside of Springfield, LLC

Morningside of Tennessee, LLC

Morningside of Williamsburg, LLC

National LTC Pharmacy Services LLC

Senior Living of Boynton Beach Limited Partnership

47

SCHEDULE D

Maryland Subsidiaries

Five Star Insurance, Inc.

Five Star Procurement Group Trust

Five Star Quality Care Trust

Five Star Quality Care - CA II, Inc.

Five Star Quality Care - CO, Inc.

Five Star Quality Care - GA, Inc.

Five Star Quality Care - GHV, LLC

Five Star Quality Care - MVSP, LLC

Five Star Quality Care - WI, Inc.

FS Lafayette Tenant Trust

FS Leisure Park Tenant Trust

FS Lexington Tenant Trust

FS Tenant Holding Company Trust

FS Tenant Pool I Trust

FS Tenant Pool II Trust

FS Tenant Pool III Trust

FS Tenant Pool IV Trust

FSQ Crown Villa Business Trust

FSQ Overland Park Place Business Trust

FSQ Rio Las Palmas Business Trust

FSQ The Palms at Fort Myers Business Trust

FSQ Villa at Riverwood Business Trust

The Heartlands Retirement Community - Ellicott City I, Inc.

The Heartlands Retirement Community - Ellicott City II, Inc.

48

Exhibit A

Five Star Quality Care, Inc.

Shares of Common Stock ($0.01 Par Value)

[Date]

UBS Securities LLC

Together with the other Underwriters

named in Schedule A to the Underwriting Agreement

referred to herein

c/o UBS Securities LLC

299 Park Avenue

New York, New York 10171-0026

Ladies and Gentlemen:

This Lock-up Letter Agreement is being delivered to you in connection with the proposed Underwriting Agreement (the “Underwriting Agreement”) to be entered into between Five Star Quality Care, Inc. (the “Company”) and you, as Underwriters, with respect to the public offering (the “Offering”) of 7,500,000 shares of common stock, $0.01 par value, of the Company (the “Common Shares”).

In order to induce you to enter into the Underwriting Agreement, the undersigned agrees that, for a period from the date hereof until the end of 90 days after the date of the final prospectus supplement relating to the Offering, the undersigned will not, without the prior written consent of UBS Securities LLC, (i) sell, offer to sell, contract to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder (the “Exchange Act”), with respect to, any Common Shares of the Company or any securities convertible into or exercisable or exchangeable for Common Shares, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, whether any such transaction is to be settled by delivery of Common Shares or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii).

If (a) during the period that begins on the date that is 15 calendar days plus 3 business days before the last day of the 90-day restricted period described in the foregoing paragraph (the “Lock-up Period”) and ends on the last day of the Lock-up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs or (b) prior to the expiration of the Lock-up Period, the Company announces that it will release earnings results during the 16-day period

A-1

beginning on the last day of the Lock-up Period, the restrictions imposed by this letter shall continue to apply until the expiration of the date that is 15 calendar days plus 3 business days after the date on which the issuance of the earnings release or the material news or material event occurs; provided, however, this paragraph will not apply if, within 3 days of the termination of the Lock-up Period, the Company delivers to UBS Securities LLC a certificate signed by the Chief Financial Officer or Chief Executive Officer of the Company certifying on behalf of the Company that the Common Shares are, as of the date of delivery of such certificate, “actively traded securities,” as defined in Regulation M under the Exchange Act.  Such notice shall be delivered in accordance with Section 10 of the Underwriting Agreement.

The foregoing restrictions shall not apply to (a) bona fide gifts, provided the recipient or recipients thereof agree in writing to be bound by the terms of this Lock-Up Letter Agreement, or (b) if the undersigned is an individual, dispositions to any entity for the direct or indirect benefit of the undersigned and/or the immediate family of the undersigned, provided that such entity agrees in writing to be bound by the terms of this Lock-Up Letter Agreement.

In addition, the undersigned hereby waives any rights the undersigned may have to require registration of Common Shares in connection with the Registration Statement.  The undersigned further agrees that, for a period from the date hereof until the end of 90 days after the date of the final prospectus supplement relating to the Offering, the undersigned will not, without the prior written consent of UBS Securities LLC, make any demand for, or exercise any right with respect to, the registration of Common Shares of the Company or any securities convertible into or exercisable or exchangeable for Common Shares.

If (i) the Company notifies you in writing that it does not intend to proceed with the Offering, (ii) the registration statement filed with the Securities and Exchange Commission with respect to the Offering is withdrawn or (iii) for any reason the Underwriting Agreement shall be terminated prior to the time of purchase (as defined in the Underwriting Agreement), this Lock-Up Letter Agreement shall be terminated and the undersigned shall be released from his obligations hereunder.

Yours very truly,

[Name of Signatory]

A-2

EX-3.1

Exhibit 3.1

FIVE STAR QUALITY CARE, INC.

ARTICLES OF AMENDMENT AND RESTATEMENT

December 5, 2001

As amended on November 9, 200 4

And August 23, 2005

ARTICLE I

NAME

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

Five Star Quality Care, Inc.

ARTICLE II

PURPOSE

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. The name 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. The resident 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 shall be 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.

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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 of Preferred 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 not constitute 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 be classified 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 a term 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 term ending 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 meeting of the stockholders, the successors to the class of directors whose term expires at such mee ting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year 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 by the 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 or approved 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 hereafter authorized, 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 in the 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.

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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 may issue or sell.

Section 4.5 INDEMNIFICATION. The Corporation sh all 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 reasonable expenses 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 of the 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 against any 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, with the 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 a ny of the capacities described in (a) or (b) above and to any employee 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 of actual 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 of its 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 stoc k or the payment of other distributions on its stock; the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or 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 liability for 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 the Corporation; 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 be removed 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 bad faith or active and deliberate dishonesty.

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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 stockholders entitled to vote on the matter which sets forth the action.

ARTICLE V

STOCK

Section 5.1 AUTHORIZED SHARES.  The Corporation has authority to issue 31,000,000 shares of stock, consisting of 30,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and 1,000,000 shares of Preferred Stock, $.01 par value per share (“Preferred Stock”).  The aggregate par value of all authorized shares of stock having par value is $310,000.  If shares of one class of stock are classified or reclassified into shares of another 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 by the number of shares so classified or reclassified, so that the aggregate number of shares of stock of all classes that the Corporation has author ity to issue shall not be more than the total number of shares of stock set forth in the first 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 the number 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 Common Stock 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 from all other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the cla ss or series; (c) set or change, subject to the provisions of Article VI and subject to the express terms of any class or 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 of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of 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 (including determinations 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 upon the terms of

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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 of stockholders 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 or by 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 necessary for 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 s ecurities 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 State of 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 S tock 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 in Sections 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 2522 of 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.

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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 the Charitable 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 on such day, the average of the closing bid and asked prices, regular w ay, for such shares of Capital Stock, in either case as reported on the principal consolidated transaction reporting system with respect to securities listed or admitted 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 on the 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 last quoted 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 automated quotation 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 furn ished by a professional market maker making a market in 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 Board of 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 a nominee), 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,” “Constructively Owns” 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 Common Stock 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 HO LDER 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 Directors pursuant to Section 6.2.7, and subject to

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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 t erm Excluded Holder shall include 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 immediately following 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 such decreased amount shall become the Excluded Holder Lim it, 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 thereafter apply 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 r espect to shares of Common Stock, 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding Common Stock of the Corporation; 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 Preferred Stock 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 be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation with in the meaning of Section 509(a) of the Code, joint stock company, limited liability company, or other entity and also 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 for purposes 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” for purposes 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

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appropriate in the context, shall also mean any 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.

RESTRIC TION 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 in the 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 longer required 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 (as determined 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) of the 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) that causes 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 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 the Corporation, (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) the grant 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 to acquire shares of Capital Stock, (e) any disposi tion 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 or exchange 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 or Constructively 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 shall Constructively 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 Excluded Holder 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 securities exchange 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), as applicable; (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 the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Benefici ary, as described in Section 6.3, effective as of the close of business on the Business Day prior to the date 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 the transfer 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 of that 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 no rights 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 a violation 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), the Board 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 shares of 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 other event 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 as provided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof.

Section 6.2.3 NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or attempts or intends to acquire Constructive Ownership of shares of Capital Stock

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that will or may violate Section 6.2.1(a), or any Person 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 in the 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 the Corporation 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 holds outstanding shares of Capital Stock as n ominee 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 the Corporation 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 of record 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 to ensure compliance with the Ownership Limit and the Corporation’s compliance of its covenants with SNH with respect thereto.

(b) Each Person who is a Const ructive 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 to the 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 to protect 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 the power 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 the charter 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 of Sections 6.1, 6.2 or 6.3.

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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 elements thereof) 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 and absolute discretion, that the Requesting Pe rson’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 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 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 or reasonably 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 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 Capital Stock by all other Persons as permitted under 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) such Requesting 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 absolute discretion 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 of shares 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 the remedies 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 (determined without regard to the exception granted such Requesting Pers on 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.

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(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 substance satisfactory 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 Directors shall 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) may Constructively 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 offering or 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 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.

(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 of the agreements and undertakings entered into with such Excepted 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.  Ea ch 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 Maryland real 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 the Corporation’s charter, (i) no Person may Constructively Own shares of Common Stock of the Corporation in excess of

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9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding shares 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 Holder Limit 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 of shares, 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”), unless such Person is an Excepted Holder (in whi ch case the Excepted Holder Limit shall be applicable) or an Excluded Holder (in which case the Excluded Holder Limit shall be applicable). Notwithstanding the foregoing, 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 whom an 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 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 the Transfer of Common Stock 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 immediately following 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 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, such Excluded 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 Capital Stock 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 on Transfer 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 of the 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 Person who attempts to Constructively Own shares of Capital

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Stock in violation of the Transfer restrictions described above shall have no claim, cause of action or any recourse whatsoever against a transferor of such shares 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 on Transfer, 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 s tate that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge.

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 the restrictions 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 Capital Stock 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 in Section 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 to the 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 the Corporation 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 Prohibited Owner 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 extent otherwise 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 no claim, 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).

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Any dividend or other distribution paid prior to the discovery by the Corporation that 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 other distribution 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 Prohibited Owner 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 Charitable Trustee, the Charitable Tru stee 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 Stock have 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 Corporation has 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 received notification 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 stockholders entitled 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 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 the Corporation 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 the total number of shares of Capital Stock of such class or series of shares of Capital Stock then outstanding). The Charitable T rustee shall distribute any such assets received in respect of the shares of Capital Stock held in the Charitable 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 of Capital Stoc k 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 Charitable Trustee 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 in Section 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 Prohibited Owner and to the Charitable Beneficiary as provided in this Section 6.3.5.

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(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 in connection 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 of the 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 Stock held 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 that shares 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 of the 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 this Section 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 Truste e shall be deemed to have been offered for sale to the Corporation, or its designee, at a price 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 Capital Stock 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 right to 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 the shares 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.

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 Charitable Beneficiary 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), 2055 and 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 the provisions and limitations set forth in this Article VI.

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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 the Prohibited 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 writte n 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 i n the charter, 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 as otherwise 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 all the 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 such lesser proportion permitted under Maryland law.

ARTICLE& nbsp;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 Corporation or 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 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 su ch amendment, repeal or adoption.

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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 corporation under the general laws of the State of Maryland.

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EX-5.1

Exhibit 5.1

[LETTERHEAD OF VENABLE LLP]

August 24, 2005

Five Star Quality Care, Inc.

400 Centre Street

Newton, Massachusetts 02458

Re:Registration Statement on Form S-3 (Registration No. 333-121910)

Ladies and Gentlemen:

We have served as Maryland counsel to Five Star Quality Care, Inc., a Maryland corporation (the “Company”), in connection with certain matters of Maryland law arising out of the registration of up to 8,625,000 shares (the “Shares”) of common stock, $.01 par value per share (the “Common Stock”), of the Company (including up to 1,125,000 Shares which the underwriters in the Offering (as defined herein) have the option to purchase solely to cover over-allotments), covered by the above-referenced Registration Statement, and all amendments thereto (the “Registration Statement”), filed by the Company with the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”).  The Shares are to be issued in an underwritten public offering (the “Offering”) pursuant to a Prospectus Supplement, dated August 24, 2005 (the “Prospectus Supplement”).

In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (hereinafter collectively referred to as the “Documents”):

1.The Registration Statement and the related form of prospectus included therein in the form in which it was transmitted to the Commission under the 1933 Act;

2.The Prospectus Supplement, substantially in the form to be filed with the Commission;

3.The charter of the Company (the “Charter”), certified as of a recent date by the State Department of Assessments and Taxation of Maryland (the “SDAT”);

4.The Amended and Restated Bylaws of the Company, certified as of the date hereof by an officer of the Company;

5.A certificate of the SDAT as to the good standing of the Company, dated as of a recent date;

6.Resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof relating to, among other matters, the authorization of the sale, issuance and registration of the Shares (the “Resolutions”), certified as of the date hereof by an officer of the Company;

7.A certificate executed by an officer of the Company, dated as of the date hereof; and

8.Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth below, subject to the assumptions, limitations and qualifications stated herein.

In expressing the opinion set forth below, we have assumed the following:

1.Each individual executing any of the Documents, whether on behalf of such individual or any other person, is legally competent to do so.

2.Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.

3.Each of the parties (other than the Company) executing any of the Documents has duly and validly executed and delivered each of the Documents to which such party is a signatory, and such party’s obligations set forth therein are legal, valid and binding and are enforceable in accordance with all stated terms.

4.All Documents submitted to us as originals are authentic.  The form and content of all Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such Documents as executed and delivered. All Documents submitted to us as certified or photostatic copies conform to the original documents.  All signatures on all such Documents are genuine.  All public records reviewed or relied upon by us or on our behalf are true and complete.  All representations, warranties, statements and information contained in the Documents are true and complete.  There has been no oral or written modification of or amendment to any of the Documents, and there has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise.

5.The Shares will not be issued in violation of any restriction or limitation contained in Article VI (Restriction on Transfer and Ownership of Shares) of the Charter.

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Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that:

1.The Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT.

2.The issuance of the Shares has been duly authorized and, when and to the extent issued in accordance with the Registration Statement and the Resolutions, the Shares will be validly issued, fully paid and nonassessable.

The foregoing opinion is limited to the laws of the State of Maryland and we do not express any opinion herein concerning any other law.  We express no opinion as to compliance with any federal or state securities laws, including the securities laws of the State of Maryland, or as to federal or state laws regarding fraudulent transfers.  To the extent that any matter as to which our opinion is expressed herein would be governed by any jurisdiction other than the State of Maryland, we do not express any opinion on such matter.  The opinion expressed herein is subject to the effect of judicial decisions which may permit the introduction of parol evidence to modify the terms or the interpretation of agreements.

The opinion expressed herein is limited to the matters specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated.  We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof.

This opinion is being furnished to you for submission to the Commission as an exhibit to the Company’s Current Report on Form 8-K, dated August 23, 2005 (the “Current Report”), which is incorporated by reference in the Registration Statement.  We hereby consent to the filing of this opinion as an exhibit to the Current Report and the said incorporation by reference and to the use of the name of our firm therein.  In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act.

Very truly yours,

/s/ Venable LLP

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EX-10.1

EXHIBIT 10.1

FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) dated as of July 22, 2005 by and among FIVE STAR QUALITY CARE, INC. (the “Borrower”), 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 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 Amendment to Credit Agreement.  The parties hereto agree that the Credit Agreement is amended by adding the following to the end of the definition “EBITDA” contained in Section 1.1:

If the Borrower or any Subsidiary has acquired or disposed of (whether by purchase, merger, or otherwise), any of the assets of, or a majority of the Equity Interests in, a Person or a division, line of business or other business unit of a Person during the relevant period for determining compliance with the financial covenant set forth in Section 10.1.(a) [Maximum Leverage Ratio], EBITDA for the relevant period shall be calculated for such purposes after giving pro forma effect to such acquisition or disposition, as if such acquisition or disposition (and, in each case, any related incurrence, repayment or assumption of Indebtedness) had occurred on the first day of the relevant period for determining EBITDA.  Any such pro forma calculations may include operating and other expense reductions and other adjustments for such period resulting from any acquisition that is being given pro forma effect to the extent that such operating and other expense reductions and other adjustments (a) are of the type that would be permitted pursuant to Article XI of Regulation S-X under the Securities Act of 1933 or (b) are reasonably consistent with the purposes of such Regulation S-X as determined in good faith by the Borrower and agreed to by the Lender.

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

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

Section 3.  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 their respective terms.  This Amendment has been duly executed and delivered by a duly authorized officer of the Borrower and each of 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 4.  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 with the same force and effect as if such representations and warranties were set forth in this Amendment in full.

Section 5.  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 6.  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.

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Section 7.  Benefits.  This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

Section 8.  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.

Section 9.  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 10.  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 11.  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 First 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/ Bruce J. Mackey Jr.
	Name:			Bruce J. Mackey Jr.
	Title:		Treasurer, Chief Financial Officer and Assistant Secretary
THE LENDER:
WACHOVIA BANK, NATIONAL ASSOCIATION
By:	/s/ David Blackman
	Name:			David Blackman
	Title:	Managing Director

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EX-10.2

EXHIBIT 10.2

SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) dated as of August 15, 2005 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 by that First Amendment dated July 22, 2005 (as amended, 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 definition of “EBITDA” found in Section 1.1 of the Credit Agreement, is amended and restated in its entirety as follows:

“‘EBITDA’ means, with respect to the Borrower and its consolidated Subsidiaries for any period (without duplication): net income (loss) of such Persons for such period determined on a consolidated basis, exclusive of the following (but only to the extent included in determination of such net income (loss)): (i) depreciation and amortization, including amortization of intangibles pursuant to Statement of Financial Accounting Standards number 141 and the like; (ii) Interest Expense; (iii) income tax expense; (iv) extraordinary or non-recurring gains and losses; and (v) expenses incurred by the Borrower during the fiscal quarters ended September 30, 2005 and December 31, 2005  directly arising from the purchase and termination of one or more Sunrise Operating Agreements.  If the Borrower or any Subsidiary has acquired or disposed of (whether by purchase, merger, or otherwise), any of the assets of, or a majority of the Equity Interests in, a Person or a division, line of business or other business unit of a Person during the relevant period for determining compliance with the financial covenants set forth in Section 10.1., EBITDA for the relevant period shall be calculated for such purposes after giving pro forma effect to such acquisition or disposition, as if such acquisition or disposition (and, in each case, any related incurrence, repayment or assumption of Indebtedness) had occurred on the first day of the relevant period for determining EBITDA.  Any such pro forma calculations may include operating and other expense

reductions and other adjustments for such period resulting from any acquisition that is being given pro forma effect to the extent that such operating and other expense reductions and other adjustments (a) are of the type that would be permitted pursuant to Article XI of Regulation S-X under the Securities Act of 1933 or (b) are reasonably consistent with the purposes of such Regulation S-X as determined in good faith by the Borrower and agreed to by the Lender.”

(b)Section 1.1 of the Credit Agreement is amended by adding the following definitions to such section in appropriate alphabetical order:

“‘Second Amendment’ means that certain Second Amendment to Credit and Security Agreement dated as of August 15, 2005 by and among the Borrower, the Guarantors and the Lender.”

“‘Second Amendment Date’ means the date upon which the Lender receives evidence in form and substance reasonably satisfactory to the Lender that all conditions precedent to the effectiveness of the Second Amendment have been satisfied.”

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

“(c)Minimum Net Worth.  Tangible Net Worth at any time to be less than (i) $50,000,000 (ii) plus 75% of the Net Proceeds of all Equity Issuances effected by the Borrower or any Subsidiary (other than Equity Issuances to the Borrower or any of its Subsidiaries) after the Second Amendment Date.”

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;

(b)Evidence that Borrower has consummated an Equity Issuance and evidence of receipt by the Borrower of cash Net Proceeds therefrom in an amount not less than $25,000,000;

(c)Evidence that SNH and/or its Subsidiaries and one or more of the Subsidiaries of the Borrower have agreed that SNH and/or its Subsidiaries will (i) purchase the six so-called “Gordon” properties from Subsidiaries of the Borrower for an aggregate consideration of not less than $58,000,000 and (ii) lease such properties back to one or more Subsidiaries of the Borrower upon fair and reasonable terms which are no less favorable to such Subsidiaries than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate; and

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

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Section 3.  Effectiveness. Upon satisfaction of the conditions precedent contained in Section 2, this Amendment shall be deemed to be effective as of the date hereof.  The amendments contained herein shall be deemed to have prospective application only from date hereof, unless otherwise specifically stated herein.

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 their respective terms.  This Amendment has been duly executed and delivered by a duly authorized officer of the Borrower and each of 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 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 to Guarantor.  The Guarantor hereby reaffirms its continuing obligations to the Lender under its obligations 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 the Guarantor thereunder.

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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.

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 First 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/ Bruce J. Mackey Jr.
	Name: Bruce J. Mackey Jr.
	Title: Treasurer, Chief Financial Officer and Assistant Secretary
THE LENDER:
WACHOVIA BANK, NATIONAL ASSOCIATION
By:		/s/ Rex E. Rudy
	Name: Rex E. Rudy
	Title: Managing Director

[Signatures Continued on Next Page]

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[Signature Page to Second Amendment to Credit and Security Agreement dated as of
August 15, 2005 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/ Bruce J. Mackey Jr.
	Name:		Bruce J. Mackey Jr.
	Title:	Treasurer, Chief Financial Officer and Assistant Secretary

[Signatures Continued on Next Page]

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[Signature Page to Second Amendment to Credit and Security Agreement dated as of
August 15, 2005 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/ Bruce J. Mackey Jr.
		Name:		Bruce J. Mackey Jr.
		Title:	Treasurer, Chief Financial Officer and Assistant Secretary
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/ Bruce J. Mackey Jr.
		Name:		Bruce J. Mackey Jr.
		Title:	Treasurer, Chief Financial Officer and Secretary

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