Exhibit 10.1

 

FIVE STAR SENIOR LIVING INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

 

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FIVE STAR SENIOR LIVING INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

 

Table of Contents

 

Article

 

Title

 

Page

 

 

 

 

 

ARTICLE I

 

Definitions

 

1

 

 

 

 

 

(a)

 

“Account” or “Accounts”

 

1

(b)

 

“Affiliate”

 

1

(c)

 

“Beneficiary”

 

1

(d)

 

“Board”

 

1

(e)

 

“Change in Control”

 

1

(f)

 

“Claimant”

 

3

(g)

 

“Code”

 

3

(h)

 

“Company”

 

3

(i)

 

“Effective Date”

 

3

(j)

 

“ERISA”

 

3

(k)

 

“Matching Contribution”

 

3

(l)

 

“Participating Affiliate”

 

3

(m)

 

“Participant”

 

3

(n)

 

“Plan”

 

3

(o)

 

“Plan Administrator”

 

4

(p)

 

“Plan Year”

 

4

(q)

 

“Separation from Service”

 

4

(r)

 

“Specified Employee”

 

4

(s)

 

“Unforeseeable Emergency”

 

4

 

 

 

 

 

ARTICLE II

 

Administration

 

5

 

 

 

 

 

(a)

 

Plan Administrator

 

5

(b)

 

Plan Administrator’s Authority

 

5

(c)

 

Claims Procedure for Denial of Benefits

 

5

(d)

 

Appeals Procedure for Denial of Benefits

 

6

(e)

 

Plan Administrator Authority with respect to Claims

 

7

 

 

 

 

 

ARTICLE III

 

Eligibility and Participation

 

7

 

 

 

 

 

(a)

 

Eligibility

 

7

(b)

 

Participation

 

7

 

 

 

 

 

ARTICLE IV

 

Deferral Elections; Discretionary Contributions

 

7

 

 

 

 

 

(a)

 

Deferral Procedures

 

7

(b)

 

Matching Contributions

 

8

(c)

 

Irrevocability of Elections

 

8

 

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ARTICLE V

 

Participant Accounts and Investment of Deferred Amounts

 

8

 

 

 

 

 

(a)

 

In General

 

8

(b)

 

Subject to Claims

 

9

(c)

 

Crediting of Earnings

 

9

(d)

 

Valuation; Annual Statement

 

9

(e)

 

Establishment of Trust

 

9

 

 

 

 

 

ARTICLE VI

 

Vesting

 

10

 

 

 

 

 

ARTICLE VII

 

Distributions

 

10

 

 

 

 

 

(a)

 

Plan Benefits

 

10

(b)

 

Payment on Separation from Service (other than Death)

 

10

(c)

 

Payment on account of Death

 

11

(d)

 

In-Service Distribution (other than Unforeseeable Emergency)

 

11

(e)

 

In-Service Distribution for Unforeseeable Emergency

 

11

(f)

 

Form of Benefit Payment

 

12

(g)

 

Payment on Change in Control

 

12

(h)

 

Small Balance Cash-outs

 

12

(i)

 

Redeferral Election

 

13

(j)

 

Status of Participant or Beneficiary

 

13

(k)

 

Release and Setoff

 

13

(l)

 

Delay in Payment

 

14

(m)

 

Delayed Payment to Specified Employees

 

14

(n)

 

Accounting Procedures

 

14

 

 

 

 

 

ARTICLE VIII

 

Amendment

 

14

 

 

 

 

 

(a)

 

In General

 

14

(b)

 

Effect of Amendment

 

14

(c)

 

Plan Termination

 

14

(d)

 

Plan Termination due to a Change in Control

 

15

 

 

 

 

 

ARTICLE IX

 

Miscellaneous

 

15

 

 

 

 

 

(a)

 

Payments to Minors and Incompetents

 

15

(b)

 

Plan Not a Contract of Employment

 

15

(c)

 

No Interest in Assets

 

16

(d)

 

Recordkeeping

 

16

(e)

 

Non-Alienation of Benefits

 

16

(f)

 

State Law

 

16

(g)

 

Tax Withholding

 

16

(h)

 

Compliance with Code § 409A

 

17

(i)

 

No Acceleration

 

17

(j)

 

Liability Limited

 

17

(k)

 

Number and Gender

 

17

(l)

 

Headings

 

18

(m)

 

Protective Provisions

 

18

 

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FIVE STAR SENIOR LIVING INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

 

PURPOSE

 

Five Star Senior Living Inc. (the “Company”) hereby establishes as of the
Effective Date the Five Star Senior Living Inc. Nonqualified Deferred
Compensation Plan (the “Plan”) to retain and reward a select group of management
or highly compensated employees of the Company and its Participating
Affiliates.  The Plan is an unfunded plan established and maintained for the
primary purpose of providing certain key employees who contribute or who are
expected to contribute substantially to the success of the Company and its
Affiliates with the opportunity to defer the receipt of compensation.  The Plan
is intended to comply in all respects with Code § 409A and those provisions of
ERISA applicable to an unfunded plan maintained primarily to provide deferred
compensation benefits for a select group of “management or highly compensated
employees.”

 

ARTICLE I
Definitions

 

Wherever the following terms are used in this Plan, they shall have the meaning
specified below.

 

(a)                                 “Account” or “Accounts” shall mean a
Participant’s Deferred Compensation Account and his or her Matching Contribution
Account, as applicable (collectively, the “Account”).  The Account consists of
one or more bookkeeping accounts that represent a Participant’s hypothetical
interest with respect to the amounts credited on his or her behalf in accordance
with Article V, adjusted for earnings gain or loss in accordance with
Article V.  The Plan Administrator may maintain additional subaccounts as
necessary to ensure that each time and form of payment election (if not the same
for the entire Account) is properly administered.

 

(b)                                 “Affiliate” shall mean a member of the
Company’s controlled group within the meaning of Code § 414(b) and (c), as
modified by Treas. Reg. § 1.409A-1.

 

(c)                                  “Beneficiary” shall mean the person or
entity determined to be a Participant’s beneficiary pursuant to Article VII.

 

(d)                                 “Board” shall mean the Board of Directors of
the Company.

 

(e)                                  “Change in Control” shall be deemed to have
occurred with respect to the Company if any of the events set forth in any one
of the following paragraphs shall have occurred:

 

(1)                                 Any Person or Persons acting as a group,
within a 12-month period, is or becomes the Beneficial Owner, directly or
indirectly, of stock of the

 

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Company representing more than 50 percent of either the then outstanding stock
of the Company or the combined voting power of the Company’s then outstanding
stock, excluding any Person or Persons acting as a group who becomes such a
Beneficial Owner in connection with a transaction described in (3)(B) below;

 

(2)                                 The following individuals cease, within a
12-month period, for any reason to constitute a majority of the number of
directors then serving:  individuals who, immediately following the most recent
annual meeting of the Company’s shareholders, constitute the Board and any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors) whose
appointment or election by the Board or nomination for election by the Company’s
shareholders was approved or recommended by a vote of at least two-thirds
(2/3rd) of the directors then in office who either were directors immediately
following the most recent annual meeting of the Company’s shareholders or whose
appointment, election or nomination for election was previously so approved or
recommended;

 

(3)                                 There is consummated a merger or
consolidation of the Company with any other entity that is not a Related Party,
other than (A) a merger or consolidation which would result in the stock of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into stock
of the surviving entity or any parent thereof) at least 50 percent of the stock
or combined voting power of stock of the Company outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of stock of
the Company (not including stock beneficially owned by such Person any stock
acquired directly from the Company or its Affiliates) representing 50 percent or
more of the combined voting power of the Company’s then outstanding stock; or

 

(4)                                 There is the sale or disposition by the
Company of all or substantially all of the Company’s assets within a 12-month
period, other than a sale or disposition by the Company of all or substantially
all of the Company’s assets to a Related Party.

 

For purposes of this Change in Control definition:  the term “Beneficial Owner”
shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”); the word “Person” shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include
(i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding

 

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securities pursuant to an offering of such securities and (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of shares of the Company;
and the term “Related Party” shall mean with respect to the Company and as
determined immediately following the relevant transaction, (I) a shareholder of
the Company that receives assets in exchange for stock of the Company, (II) an
entity 50 percent or more of the combined value or voting power of which is
owned by the Company, (III) a Person or Persons acting as a group that own(s),
directly or indirectly, 50 percent or more of the combined value or voting power
of the stock of the Company; or (IV) an entity at least 50 percent of the
combined value or voting power of stock of which is owned by Person or Persons
described in the preceding clause III.

 

In no event will there be a Change in Control for purposes of this Plan unless
the transaction constitutes a change in the ownership of a corporation, a change
in the effective control of a corporation or a change in the ownership of a
substantial portion of a corporation’s assets, each within the meaning of Code §
409A and Treas. Reg. § 1.409A-3(i)(5)(v), (vi) and (vii) respectively.

 

(f)                                   “Claimant” shall have the meaning set
forth in Article II(c).

 

(g)                                  “Code” shall mean the Internal Revenue Code
of 1986, as it may be amended from time to time, or any successor statute. 
Reference to a specific section of the Code shall include a reference to any
successor provision.

 

(h)                                 “Company” shall have the meaning set forth
in the Preamble.

 

(i)                                     “Effective Date” shall mean July 1,
2018, or such later date as the Plan Administrator shall establish.

 

(j)                                    “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended from time to time, or any
successor statute.  Reference to a specific section of ERISA shall include a
reference to any successor provision.

 

(k)                                 “Matching Contribution” shall be a
contribution by the Company and/or a Participating Affiliate pursuant to
Article IV(b).

 

(l)                                     “Participating Affiliate” shall mean
each Affiliate of the Company that, with the consent of the Compensation
Committee of the Board has elected to participate in the Plan.  As of the
Effective Date, FSQ, Inc., FVE Managers, Inc. and FVE IL Managers, Inc. are
Participating Affiliates.

 

(m)                             “Participant” shall mean any employee of the
Company or a Participating Affiliate who is covered by this Plan as provided in
Article III.

 

(n)                                 “Plan” shall mean the Five Star Senior
Living Inc. Nonqualified Deferred Compensation Plan, as hereby created and as it
may be amended and in effect from time to time.

 

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(o)                                 “Plan Administrator” shall mean the
401(k) Investment Committee.

 

(p)                                 “Plan Year” shall mean the 12-month period
ending on each December 31; provided, however, that the first Plan Year, which
shall end on December 31, may be a period of less than 12-months.

 

(q)                                 “Separation from Service” shall mean a
termination of employment (as provided in Treas. Reg. § 1.409A-1(h) and
interpreted consistently therewith) as a result of which the Participant
voluntarily or involuntarily terminates employment with the Company and all of
its Affiliates, for any reason other than death.  A Separation from Service
occurs if the facts and circumstances indicate that the Plan Administrator and
the Participant reasonably anticipate that no further services will be performed
after a certain date or that the level of bona fide services the Participant
will perform after such date (whether as an employee or an independent
contractor) will decrease to no more than 20 percent of the average level of
bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding 36-month period (or the full period
of services if the Participant has been providing services for less than 36
months).

 

Notwithstanding the foregoing, the employment relationship is treated as
continuing while the Participant is on military leave, sick leave or other bona
fide leave of absence if the period of leave does not exceed six months, or if
longer, so long as the Participant retains the right to reemployment with the
Company or an Affiliate under an applicable statute or contract.  When a leave
of absence is due to any medically determinable physical or mental impairment
that can be expected to result in death or to last for a period of at least six
months and such impairment causes the Participant to be unable to perform the
duties of his or her position or any substantially similar position, a 29-month
period of absence may be substituted for the six month period.

 

(r)                                    “Specified Employee” shall mean any
Participant treated as a Specified Employee within the meaning of Treas. Reg.
§ 1.409A-1(i) as of the date of his or her Separation from Service.  A
Participant is treated as a Specified Employee during the period April 1 through
the following March 31 if he or she was a key employee meeting the requirements
of Code § 416(i)(1)(A)(i), (ii) or (iii) (applied in accordance with the
regulations thereunder and disregarding Code § 416(i)(5))) of the Company or its
Affiliates, any stock of which is publicly traded on an established securities
market or otherwise, at any time during the 12-month period ending as of the
December 31 immediately preceding the beginning of the April 1 through March 31
period.  Whether any stock of the Company or its Affiliates is publicly traded
on an established securities market or otherwise must be determined as of the
date of the Participant’s Separation from Service.

 

(s)                                   “Unforeseeable Emergency” shall have the
meaning set forth in Treas. Reg. § 1.409A-3(i)(3), which, as of the Effective
Date, is a severe financial hardship resulting from an illness or accident of
the Participant, the Participant’s spouse or Beneficiary or a dependent (as
defined in Code § 152 without regard to Code § 152(b)(1), (b)(2) or (d)(1)(B))
of the Participant, loss of the Participant’s property due to casualty or other

 

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similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.

 

ARTICLE II
Administration

 

(a)                                 Plan Administrator.  The Plan Administrator
shall have complete control and discretion to manage the operation and
administration of the Plan.  Not in limitation, but in amplification of the
foregoing, the Plan Administrator shall have the following powers:

 

(1)                                 To determine all questions relating to the
eligibility of employees to participate or continue to participate;

 

(2)                                 To maintain all books and records necessary
for the administration of the Plan;

 

(3)                                 To interpret the provisions of the Plan and
to make and to publish such interpretive or procedural rules as are not
inconsistent with the Plan and applicable law;

 

(4)                                 To compute, certify and arrange for the
payment of benefits to which any Participant or Beneficiary is entitled;

 

(5)                                 To process claims for benefits under the
Plan by Participants or Beneficiaries;

 

(6)                                 To engage consultants and professionals to
assist the Plan Administrator in carrying out its duties under this Plan; and

 

(7)                                 To develop and maintain such instruments as
may be deemed necessary from time to time by the Plan Administrator to
facilitate payment of benefits under the Plan.

 

(b)                                 Plan Administrator’s Authority.  The Plan
Administrator may consult with officers, employees and directors of, and legal
and financial advisers to, the Company and its Affiliates, but nevertheless the
Plan Administrator shall have the full authority and discretion to act, and the
Plan Administrator’s actions shall be final and conclusive on all parties.

 

(c)                                  Claims Procedure for Denial of Benefits.  A
Participant or a Beneficiary (a “Claimant”) may file with the Plan Administrator
a written claim for benefits. The Plan Administrator must render a decision on
the claim within a reasonable period of time of the Claimant’s written claim for
benefits, which shall be within 90 days of the Plan Administrator’s receipt of
the initial claim.  The Plan Administrator must provide adequate notice in
writing to the Claimant whose claim for benefits under the Plan the Plan
Administrator has denied.  The Plan Administrator’s notice to the Claimant must
set forth:

 

(1)                                 The specific reason for the denial;

 

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(2)                                 Specific references to pertinent Plan
provisions on which the Plan Administrator based its denial;

 

(3)                                 A description of any additional material and
information needed for the Claimant to perfect his or her claim and an
explanation of why the material or information is needed; and

 

(4)                                 A statement of the Claimant’s right to bring
a civil action under Section 502(a) of ERISA following an adverse benefit
determination on review.

 

(d)                                 Appeals Procedure for Denial of Benefits.  A
Claimant whose application for benefits is denied, or who has received neither
an affirmative reply nor a notice of denial within 90 days after filing his or
her claim, may request a full and fair review of the decision denying the
claim.  The request must be made in writing to the Plan Administrator within 60
days after receipt of the notice of denial or, if no notice of denial is issued,
within 60 days after the expiration of 90 days from the filing of the claim.  In
connection with the review, the Claimant:

 

(1)                                 Shall be provided, upon request and free of
charge, with reasonable access to, and copies of, all documents, records and
other information relevant to the Claimant’s claim; and

 

(2)                                 May submit issues, comments, documents,
records and other information in writing to the Plan Administrator for review.

 

A decision on review by the Plan Administrator shall take into account all
comments, documents, records and other information submitted by the Claimant
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination.  The decision of the Plan
Administrator shall be made promptly and not later than 60 days after the
receipt by the Plan Administrator of a request for review, unless special
circumstances (such as the need to hold a hearing) require an extension of time
for processing, in which case the Claimant will be so notified of the extension
prior to the expiration of the initial 60 day period and the extension notice
shall contain the reason(s) for the extension.  A decision shall be rendered as
soon as possible, and not later than 120 days after the receipt of the request
for review.  If an extension is required due to a failure by the Claimant to
submit information necessary to decide a claim, the time period for completing
the review shall be tolled from the date on which notification of the extension
is sent until the date on which the Claimant responds to the request for
additional information.

 

The decision shall be in writing and shall include specific reasons for the
decision written in a manner calculated to be understood by the Claimant and
specific reference to the pertinent provisions of the Plan on which the decision
is based.  The decision shall also include a statement that the Claimant is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records and other information relevant to the
Claimant’s claim, along with a statement of the Claimant’s

 

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right to bring a civil action under Section 502(a) of ERISA following an adverse
benefit determination on review.

 

Notwithstanding any provision of the Plan to the contrary, a Claimant wishing to
seek judicial review of an adverse benefit determination under the Plan, whether
in whole or in part, must file any suit or legal action, including, without
limitation, a civil action under Section 502(a) of ERISA, within 365 days of the
date the final decision on the adverse benefit determination on review is issued
or lose any rights to bring such an action.

 

(e)                                  Plan Administrator Authority with respect
to Claims.  The Plan Administrator shall have discretionary authority to
interpret and apply the provisions of the Plan with respect to, and to make any
factual determination in connection with, any benefit claim or appeal of a
benefit claim.

 

ARTICLE III
Eligibility and Participation

 

(a)                                 Eligibility.  The Plan Administrator, in its
sole discretion, shall determine those employees of the Company or a
Participating Affiliate eligible to participate in the Plan; provided, however,
that in no event shall any employee be permitted to participate in the Plan
unless he or she is anticipated to have total compensation for the year of at
least $140,000 and holds the position of either “administrator” or the position
of “director” or higher.

 

(b)                                 Participation.  An eligible employee shall
not become a Participant until the first pay period commencing on or after the
Effective Date, January 1 or July 1 next following an offer of participation in
the Plan by the Plan Administrator.  The Participant shall file prior to that
Effective Date, January 1 or July 1 any required elections pursuant to Articles
IV, V and VII.

 

ARTICLE IV
Deferral Elections; Discretionary Contributions

 

(a)                                 Deferral Procedures.

 

(1)                                 Except as otherwise provided in this
Article IV(a), any Participant may irrevocably elect to defer for any calendar
year by December 31 of the preceding year a minimum of two percent and a maximum
of 50 percent of his or her base salary and/or a minimum of two percent and a
maximum of 100 percent of any bonus earned during such calendar year.  Deferral
elections shall be in whole percentages or a stated dollar amount, not to exceed
the minimum or maximum percentages as stated in this Article IV(a)(1).

 

At the time of the Participant’s deferral election, he or she shall also elect a
time and form of payment in accordance with the provisions of Article VII with
respect to the Plan Year’s deferral.

 

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(2)                                 In the case of a deferral election following
a Participant’s initial eligibility to participate in the Plan on a date other
than January 1, an election to defer and an election with respect to the time
and form of payment shall be delivered to the Plan Administrator not later than
June 30 of the year of initial eligibility.  The election will become
irrevocable as of July 1 of the year of initial eligibility and will be
effective only with respect to base salary and bonus earned beginning with the
first pay period commencing on or after that July 1.

 

(3)                                 In the case of the first deferral elections
available under the Plan, the initial eligibility date shall be the Effective
Date and elections to defer and elections with respect to the time and form of
payment shall be delivered to the Plan Administrator not later than the day
preceding the Effective Date.  Elections will become irrevocable as of the
Effective Date and will be effective only with respect to base salary and bonus
earned beginning with the first pay period commencing on or after the Effective
Date.

 

(4)                                 A Participant must submit a new deferral
election (including an election with respect to the time and form of payment)
for each Plan Year.  If a Participant fails to submit the appropriate elections
for any Plan Year, the Participant will be deemed to have elected not to defer
under the Plan for the Plan Year to which such elections would apply.

 

(5)                                 Contributions pursuant to this
Article IV(a) shall be credited to a Participant’s Deferred Compensation
Account.

 

(6)                                 Any election by a Participant under this
Article IV(a) shall be made in a manner prescribed by the Plan Administrator,
and shall specify the amount of compensation to be deferred.  The Plan
Administrator may establish an alternative deadline for making an election, may
permit elections to be expressed as percentages of compensation or in whole
dollar amounts and may modify any minimum or maximum limitations.

 

(b)                                 Matching Contributions.  The Company and
each Participating Affiliate may, in its sole discretion, credit a Participant’s
Matching Contribution Account with a discretionary Matching Contribution.

 

(c)                                  Irrevocability of Elections. 
Notwithstanding the foregoing, an election described in this Article IV may be
cancelled if the Plan Administrator determines that such cancellation should be
permitted due to an Unforeseeable Emergency or due to a hardship distribution
pursuant to Treas. Reg. § 1.401(k)-1(d)(3), all to the extent permitted under
Treas. Reg. § 1.409A-3(j)(4)(viii).

 

ARTICLE V
Participant Accounts and Investment of Deferred Amounts

 

(a)                                 In General.  Any compensation deferred or
Matching Contributions credited to a Participant’s Account (if any) pursuant to
Article IV, and any distributions from the

 

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Participant’s Account pursuant to Article VII, shall be recorded by the Plan
Administrator in a bookkeeping account maintained in the name of the
Participant.

 

A Participant shall not have any interest in or right to such Account at any
time.

 

(b)                                 Subject to Claims.  The Plan constitutes an
unsecured promise by the Company and Participating Affiliates (with respect to
each of their employees) to pay benefits in the future.  Participants shall have
the status of general unsecured creditors of the Company and the Affiliates. 
The Plan is unfunded for Federal tax purposes and for purposes of Title I of
ERISA.  All amounts credited to a Participant’s Account will remain the general
assets of the Company and its Affiliates, as applicable, and shall remain
subject to the claims of the creditors of the Company and its Affiliates, as
applicable, until such amounts are distributed to the Participants.

 

(c)                                  Crediting of Earnings.

 

(1)                                 The Plan Administrator shall allow a
Participant to make a hypothetical allocation of the amounts credited to his or
her Account among investment options that the Plan Administrator shall make
available from time to time.  The Plan Administrator shall establish and
communicate to Participants procedures regarding investment allocations as are
necessary.

 

(2)                                 A Participant’s Accounts shall reflect his
or her investment elections and shall be further credited at least annually with
all interest, dividends, capital gains or other distributions based on the
investment options selected by the Participant, less expenses.

 

(d)                                 Valuation; Annual Statement.  The value of a
Participant’s Account shall be determined by the Plan Administrator and the Plan
Administrator may establish such accounting procedures as are necessary to
account for the Participant’s interest in the Plan.  Each Account shall be
valued as of the last day of each Plan Year or more frequently as determined by
the Plan Administrator.  The Plan Administrator shall furnish each Participant
with an annual statement of his or her Account.

 

(e)                                  Establishment of Trust.  The Company may,
in its discretion, establish one or more trusts substantially in conformance
with the terms of the model trust described in Revenue Procedure 92-64 or any
successor guidance thereto to assist in meeting its obligations to Participants
under this Plan.  Any such trust or trusts shall be established in a manner that
permits the use of assets transferred to the trust and the earnings thereon to
be used by the trustee to satisfy the liability of the Company and the
Participating Affiliates in accordance with the Plan.

 

In all events, it is the intent of the Company and its Participating Affiliates
that the Plan be treated as unfunded for tax purposes and for purposes of Title
I of ERISA.

 

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ARTICLE VI
Vesting

 

(a)                                 A Participant shall be at all times fully
vested in his or her Deferred Compensation Account.  A Participant’s Matching
Contribution Account shall be subject to a rolling three-year cliff vesting
schedule with respect to the Matching Contributions for a Plan Year, with
vesting occurring only if the Participant is employed on the last day of the
third year.  The rolling three-year period shall begin on January 1 of the Plan
Year for which the Matching Contribution is made (even if credited following the
close of that Plan Year) and shall end on December 31 of the third such year. 
Thus, and solely for purposes of illustration, a Matching Contribution, together
with earnings thereon, made on March 1, 2020 for the 2019 Plan Year will become
fully vested on December 31, 2021 provided the Participant has not experienced a
Separation from Service or died prior to that date.

 

(b)                                 Notwithstanding Article VI(a), solely for
Participants who make an initial deferral election with respect to the 2018 Plan
Year prior to the Effective Date, any Matching Contribution for that year will
be subject to a two-year cliff vesting schedule.

 

(c)                                  Notwithstanding Article VI(a) and (b), in
the event a Participant dies while actively employed by the Company or its
Affiliates, all Matching Contributions, together with earnings thereon, shall
become immediately vested in full.

 

(d)                                 The Plan Administrator may establish such
accounting procedures as are necessary to accurately reflect each Participant’s
vested interest in contributions and earnings thereon that are credited to his
or her Account.

 

ARTICLE VII
Distributions

 

(a)                                 Plan Benefits.  A Participant will be
entitled to his or her vested Account as determined in accordance with this
Article VII.  Distributions will be based on the value of the Account (or
portion thereof subject to distribution) immediately prior to the distribution.

 

(b)                                 Payment on Separation from Service (other
than Death).  In the event that a Participant experiences a Separation from
Service other than as a result of death, all vested amounts that the Participant
has elected to have distributed on a Separation from Service will be distributed
(or distributions will commence) in the form provided pursuant to
Article VII(f) below, as elected by the Participant.  Such distribution will be
made (or commence) as soon as practicable following the Participant’s Separation
from Service but no later than 60 days following the separation date; provided,
however, that if the 60-day period begins in one taxable year and ends in
another, payment will be made in the latter year.  If installment distributions
are made, payment of each subsequent year’s installment may occur any time
during the year, but generally will be made on the anniversary date of the first
installment.

 

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For purposes of this Article VII(b), a Participant’s vesting shall be determined
as of the date of Separation from Service and any unvested amounts shall be
irrevocably forfeited as of that date.

 

(c)                                  Payment on account of Death.

 

(1)                                 In the event that a Participant dies prior
to the distribution of his or her Account, the entire remaining vested Account
will be paid in a lump sum (even if the Participant had been receiving
distributions in the form of installments) to the Participant’s Beneficiary as
soon as practicable following the Participant’s death but in no event later than
December 31 of the calendar year following the calendar year in which death
occurs.

 

For purposes of this Article VII(c), a Participant’s vesting shall be determined
as of the date of death and any unvested amounts shall be irrevocably forfeited
as of that date.

 

(2)                                 A designation of beneficiary shall be made
in a manner prescribed by and filed with the Plan Administrator, and may be
changed at any time by filing a new form with the Plan Administrator.  If the
Participant has designated no Beneficiary, or if no Beneficiary that he or she
has designated survives, then the unpaid amount shall be paid to the
Participant’s estate.  In the event of any dispute as to the entitlement of any
Beneficiary, the Plan Administrator’s determination shall be final, and the Plan
Administrator may withhold any payment until the dispute has been resolved.

 

(d)                                 In-Service Distribution (other than
Unforeseeable Emergency).  A Participant can elect to receive an in-service
distribution of amounts credited to his or her Account for a particular Plan
Year by designating a year following the Plan Year for which any related
Matching Contribution becomes fully vested.  (An election to receive an
in-service distribution earlier than the Plan Year specified in the preceding
sentence shall be treated as invalid.)  Thus, and solely for purposes of
illustration, a Participant may elect to receive an in-service distribution of
amounts credited to his or her Account for the 2019 Plan Year in 2022 (or any
later year).  Distribution will be made in the form provided pursuant to
Article VII(f) below, as elected by the Participant and any such distribution
will be paid (or begin to be paid) as soon as practicable on or after January 1
(but on or prior to December 31) of the chosen year.  In the event that a
Participant experiences a Separation from Service prior to the in-service
distribution (or the commencement of the in-service distribution), distribution
will instead be made in accordance with Article VII(b).

 

(e)                                  In-Service Distribution for Unforeseeable
Emergency.  In the event of an Unforeseeable Emergency, the Plan Administrator
may permit an early distribution in a lump sum of part or all of a Participant’s
Deferred Compensation Account and up to 50% of his or her vested (determined as
of the date of the request for distribution under this provision) Matching
Contribution Account; provided, however, that such distribution shall be made
only if the Plan Administrator, in its sole discretion, determines that the

 

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Participant has experienced an Unforeseeable Emergency; and provided, further,
that if such a distribution is made (and notwithstanding the provisions of
Article IV), any deferral election for the Plan Year shall also be cancelled
prospectively.  If an Unforeseeable Emergency is determined to exist, a
distribution may not exceed the amount necessary to satisfy the emergency plus
an amount necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which the hardship is or
may be relieved through reimbursement or compensation by insurance or otherwise
or by liquidation of the Participant’s assets (to the extent the liquidation of
such assets would not itself cause severe financial hardship) or by cessation of
deferrals under the Plan.

 

(f)                                   Form of Benefit Payment.

 

(1)                                 The following forms of benefit are permitted
under the Plan:

 

(A)                               Lump sum;

 

(B)                               Five annual installments; or

 

(C)                               10 annual installments.

 

Such election shall be made in accordance with a manner prescribed by the Plan
Administrator.

 

(2)                                 In the event a Participant elects to receive
all or a portion of his or her vested Account balance in installment payments,
each such payment shall be equal to the balance to be distributed divided by the
number of payment years remaining.

 

(3)                                 If the Participant fails to timely make an
election as to the timing or form of benefit payment for any particular Plan
Year, the Participant’s vested benefit for that year shall be paid in the form
of a lump sum at Separation from Service.

 

(g)                                  Payment on Change in Control.  Upon a
Participant’s initial eligibility for the Plan, a Participant may submit an
irrevocable distribution election to receive his or her entire vested Account in
one single lump sum upon a Change in Control, regardless of whether the
Participant has incurred a Separation from Service or commenced in-service
distributions.  In the event of a distribution pursuant to this Article VII(g),
a Participant’s vesting shall be determined as of the date of the Change in
Control and any unvested amounts shall be irrevocably forfeited as of that date.

 

If no election is made, a Change in Control will not, by itself, trigger a
distribution.

 

(h)                                 Small Balance Cash-outs.

 

(1)                                 The Plan Administrator may, in its sole
discretion, elect pursuant to Treas. Reg. § 1.409A-3(j)(4)(v) to cash out the
Participant’s entire vested

 

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Account balance so long as the amounts distributed are no greater than the
applicable dollar amount under Code § 402(g)(1)(B).  Such limited cash out under
this rule shall constitute the termination and liquidation of the entirety of
the Participant’s interest under the Plan, including all agreements, methods,
programs or other arrangements with respect to which deferrals of compensation
are treated as having been deferred under a single nonqualified deferred
compensation plan under Treas. Reg. § 1.409A-1(c)(2).

 

(2)                                 Notwithstanding the foregoing or any
installment election made, if a Participant’s vested Account balance is less
than $5,000.00 at the time of distribution, including at the time of any
particular installment distribution, payment will be made in the form of a lump
sum.

 

(i)                                     Redeferral Election.  A Participant will
be permitted to elect to change the form or timing of the distribution of the
balance of his or her Account to the extent permitted and in accordance with the
requirements of Code § 409A, including the requirement that (1) a redeferral
election may not take effect until at least 12 months after the election is
filed with the Plan Administrator, (2) an election to change the form or further
defer a distribution (other than a distribution upon death or an Unforeseeable
Emergency) must result in the first distribution subject to the election being
made at least five years after the previously elected date of distribution and
(3) any redeferral election affecting a distribution at a fixed date must be
filed with the Plan Administrator at least 12 months before the first scheduled
payment under the previous fixed date distribution election.  Once an Account
begins distribution, no such changes to distributions shall be permitted to the
extent prohibited by Code § 409A and related regulations thereunder.

 

(j)                                    Status of Participant or Beneficiary. 
Once a Participant’s entire interest has been liquidated and distributed to the
Participant or his or her Beneficiary(ies), the Participant or Beneficiary(ies)
shall have no further interest in and be entitled to no further amounts under
the Plan.

 

(k)                                 Release and Setoff.  As a condition to
receiving any payment of all or a portion of a Participant’s Matching
Contribution Account, or the earnings portion of a Participant’s Deferral
Contribution Account, under this Plan, the Participant must have executed, if
requested by the Company, a release satisfactory to the Company and prior to the
date payment commences of all claims in connection with his or her employment by
the Company and any Affiliate through the date of execution.  If a release is
requested and not executed and irrevocable prior to the date payment is
scheduled to commence, the Participant shall forfeit his or right to the
payment.

 

All payments under this Plan are subject to setoff and recoupment by the Company
or an Affiliate for any amounts that a Participant may owe to the Company or an
Affiliate, provided that the setoff and recoupment may not change the timing of
any payment under this Plan.

 

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(l)                                     Delay in Payment.  Payment hereunder may
be delayed if the Company or a Participating Affiliate informs the Plan
Administrator:  (1) that the Company or Participating Affiliate reasonably
anticipates that the payment would not be deductible as a result of the
application of Code § 162(m); (2) that the Company or the Participating
Affiliate reasonably anticipates that the making of the payment will jeopardize
its ability to continue in business as a going concern; or (3) that the Company
or the Participating Affiliate reasonably anticipates that the payment will
violate federal securities or other applicable laws.  Any payment that is
delayed pursuant to this Article VII(l) shall be made as soon as possible on the
date required under regulations issued under Code § 409A, including, without
limitation, Treas. Reg. § 1.409A-2(b)(7) and Treas. Reg. § 1.409A-3(d).

 

(m)                             Delayed Payment to Specified Employees.  Any
payment on account of a Participant’s Separation from Service (other than by
reason of death) to a Participant who is a Specified Employee shall be delayed
through the six-month anniversary following his or her Separation from Service. 
Any amount delayed shall be paid immediately following the sixth month
anniversary of the Participant’s Separation from Service.  This
Article VII(m) shall be applied in accordance with Treas. Reg. § 1.409A-3(i)(2),
including the last sentence of Treas. Reg. § 1.409A-3(i)(2)(i).

 

(n)                                 Accounting Procedures.  The Plan
Administrator shall establish such accounting procedures as are necessary to
implement the provisions of this Article.

 

ARTICLE VIII
Amendment

 

(a)                                 In General.  The Plan may be amended at any
time, or from time to time, by the Compensation Committee of the Board on behalf
of the Company and all Participating Affiliates.

 

(b)                                 Effect of Amendment.  No amendment shall
affect the rights of any Participant with respect to any amounts credited to his
or her Account prior to the amendment.

 

(c)                                  Plan Termination.  The Company reserves the
right, on its behalf and on behalf of the Participating Affiliates, to terminate
the Plan in whole or in part, in either of the following manners, except that no
termination shall have any retroactive effect to reduce any amounts allocated to
a Participant’s Account, and provided that the Plan’s termination complies with
Code § 409A and related regulations thereunder:

 

(1)                                 The Company, in its sole discretion, may
terminate the Plan and distribute all vested Accounts no earlier than 12
calendar months from the date of the Plan termination and no later than 24
calendar months from the date of the Plan termination; provided, however, that
all other similar arrangements that are required to be aggregated with the Plan
under Treas. Reg. § 1.409A-1(c)(2) (determined as if there were one service
provider that had deferrals of compensation under every such arrangement) are
also terminated by the Company and its Affiliates, no

 

14

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other such similar arrangements are adopted by the Company and its Affiliates
within a three year period from the date of termination, and the termination and
liquidation does not occur proximate to the downturn in the financial health of
the Company and its Affiliates; or

 

(2)                                 The Company may decide, in its sole
discretion, to terminate the Plan in the event of a corporate dissolution taxed
under Code § 331, or with the approval of a bankruptcy court; provided, however,
that vested Accounts are distributed to Participants and are included in
Participants’ gross income in the latest of the following years (or, if earlier,
the taxable year in which the amount is actually or constructively received): 
(A) the calendar year in which the termination occurs; (B) the calendar year in
which the amounts deferred are no longer subject to a substantial risk of
forfeiture; or (C) the first calendar year in which payment is administratively
practicable.

 

(d)                                 Plan Termination due to a Change in
Control.  The Company may decide, in its discretion and on its behalf and on
behalf of all Participating Affiliates, to terminate the Plan in the event of a
Change in Control in accordance with Treas. Reg. § 1.409A-3(j)(4)(ix)(B) and
distribute all vested Accounts no earlier than 30 days prior to, and no later
than 12 months after, the effective date of the Change in Control; provided,
however, that the Company and its Affiliates terminate all other similar
arrangements that are required to be aggregated with the Plan under Treas. Reg.
§ 1.409A-1(c)(2) with respect to each Participant who experiences the Change in
Control.  Any corporation or other business organization that is a successor to
the Company by reason of a Change in Control shall have the right to become a
party to the Plan by appropriate entity action.

 

ARTICLE IX
Miscellaneous

 

(a)                                 Payments to Minors and Incompetents.  If the
Plan Administrator receives satisfactory evidence that a person who is entitled
to receive any benefit under the Plan, at the time such benefit becomes
available, is a minor or is physically unable or mentally incompetent to receive
such benefit, and that another person or an institution is then maintaining or
has custody of such person, and that no guardian or other representative of the
estate of such person shall have been duly appointed, the Plan Administrator may
authorize payment of the benefit otherwise payable to such person to such other
person or institution.  In connection with such a payment, the Plan
Administrator may request that a release be executed by the recipient to the
effect that payment to the recipient shall be a valid and complete discharge for
the payment of the benefit on behalf of the individual.

 

(b)                                 Plan Not a Contract of Employment.  The Plan
shall not be deemed to constitute a contract between the Company or a
Participating Affiliate and any Participant, or to be consideration for the
employment of any Participant.  Nothing in the Plan shall give a Participant the
right to be retained in the employ of the Company or

 

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any Affiliate and all Participants remain subject to discharge or discipline as
employees to the same extent as if the Plan had not been adopted.

 

(c)                                  No Interest in Assets.  Nothing contained
in the Plan shall be deemed to give any Participant any equity or other interest
in the assets, business or affairs of the Company or any of its Affiliates.  No
Participant in the Plan shall have a security interest in any assets of the
Company or its Affiliates used to make contributions or pay benefits.

 

(d)                                 Recordkeeping.  Appropriate records shall be
maintained for the Plan, subject to the supervision and control of the Plan
Administrator.

 

(e)                                  Non-Alienation of Benefits.  No benefit
under the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to do so
shall be void.  No benefit under the Plan shall in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or torts of any
person.  If any person entitled to benefits under the Plan shall become bankrupt
or shall attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any benefit under the Plan, or if any attempt shall be made
to subject any such benefit to the debts, contracts, liabilities, engagements or
torts of the person entitled to any such benefit, except as specifically
provided in the Plan, then such benefits shall cease and terminate at the
discretion of the Plan Administrator.  The Plan Administrator may then hold or
apply the same or any part thereof to or for the benefit of such person or any
dependent or Beneficiary of such person in such manner and proportions as it
shall deem proper.

 

(f)                                   State Law.  To the extent not preempted by
ERISA, the laws of The Commonwealth of Massachusetts shall govern, control and
determine all questions arising with respect to the Plan and the interpretation
and validity of its provisions.  Wherever possible, each provision of this Plan
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Plan shall be held unenforceable or
invalid, the provision shall be ineffective only to the extent of such
unenforceability or invalidity and the remainder of the provision and the
remaining provisions of this Plan shall in that event continue to be binding and
in full force and effect, unless the Company elects to completely invalidate
this Plan and render this Plan unenforceable.

 

(g)                                  Tax Withholding.  The Participant or the
Participant’s Beneficiary, as the case may be, shall be responsible for any
federal, state, local, employment or other taxes imposed on any amount paid or
the value of any benefit accrued pursuant to this Plan.  The Company and its
Affiliates shall comply with the obligations imposed under the applicable
withholdings laws with respect to any payment or benefit accrued under this Plan
and shall be entitled to do any act or thing to effect compliance by the
Participant or the Participant’s Beneficiary and the Company or an Affiliate
with said laws, including withholding any amounts payable by the Company or an
Affiliate to the Participant or the Participant’s Beneficiary, whether or not
such amounts are payable pursuant to this Plan, and making demand upon the
Participant or the Participant’s Beneficiary for such

 

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amounts as the Company or an Affiliate may reasonably estimate to be required by
applicable withholding laws.

 

(h)                                 Compliance with Code § 409A. 
Notwithstanding any provision of the Plan to the contrary, all provisions of the
Plan will be interpreted and applied to comply with the requirements of Code §
409A and any regulations and applicable binding guidance so as to avoid adverse
tax consequences. The provisions of this Plan shall be interpreted in a manner
consistent with such intent.  In furtherance thereof, to the extent that any
provision hereof would otherwise result in the Participant being subject to
payment of tax, interest and tax penalty under Code § 409A, the Company and
Participant agree to amend this Plan in a manner that brings this Plan into
compliance with Code § 409A and preserves to the maximum extent possible the
economic value of the relevant payment or benefit under this Plan to the
Participant.  No provision of the Plan, however, is intended or shall be
interpreted to create any right with respect to the tax treatment of the amounts
paid or payable hereunder, and neither the Company nor its successors shall
under any circumstances have any liability to a Participant or Beneficiary for
any taxes, penalties or interest due on amounts paid or payable under the Plan,
including taxes, penalties or interest imposed under Code § 409A.

 

If an amount is to be paid under the Plan in two or more installments, each
installment shall be treated as a separate payment for purposes of Code § 409A.

 

Reference in this Plan to any particular provision in Code § 409A or the
regulations thereunder shall refer to any successor thereto.

 

(i)                                     No Acceleration.  No payment under this
Plan shall be accelerated except as otherwise provided pursuant to the terms of
the Plan; provided, however, that a payment may be accelerated in the discretion
of the Plan Administrator in accordance with Treas. Reg. § 1.409A-3(j)(4).

 

(j)                                    Liability Limited.  In administering the
Plan, the Plan Administrator (or any member of a committee designated as Plan
Administrator) shall be indemnified against all liability occasioned by any act
or omission to act, provided that the Plan Administrator (or any member of a
committee designated as Plan Administrator) acted (or omitted to act) in good
faith.

 

The Plan Administrator, and the officers, directors and employees of the Company
and its Affiliates, shall be entitled to rely conclusively on all tables,
valuations, certificates, opinions and reports that shall be furnished by any
actuary, accountant, trustee, insurance company, consultant, counsel or other
expert who shall be employed or engaged by the Plan Administrator or the Company
in good faith.

 

(k)                                 Number and Gender.  The singular shall
include the plural, and the plural the singular, wherever the context so
requires, and the masculine, the feminine and the neuter shall be mutually
inclusive.

 

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(l)                                     Headings.  All headings in this Plan are
intended merely for convenience and shall in no way be deemed to modify or
supplement the actual terms and provisions set forth hereunder.

 

(m)                             Protective Provisions.  Each Participant shall
cooperate with the Plan Administrator by furnishing any and all information
requested by the Plan Administrator in order to facilitate the payment of
benefits hereunder.  If a Participant refuses so to cooperate or makes any
material misstatement of information, then no benefit will be payable hereunder
to the Participant or his or her Beneficiary.  Furthermore, in the Plan
Administrator’s sole discretion, benefits paid to a Participant or his or her
Beneficiary may be subject to setoff and recoupment by the Company or an
Affiliate in an amount reasonably necessary, as determined by the Plan
Administrator in its sole discretion, to compensate the Company or an Affiliate
for any loss, cost, damage or expense suffered or incurred by the Company or an
Affiliate as a result in any way of such action, misstatement or nondisclosure.

 

*   *   *   *   *

 

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly
authorized officer on this 18th day of May, 2018.

 

 

FIVE STAR SENIOR LIVING INC., on its behalf and on behalf of the Participating
Affiliates

 

 

 

By:

/s/ Bruce J. Mackey Jr.

 

Title:

President and Chief Executive Officer

 

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