Exhibit 10.3


 


REGISTRATION RIGHTS AGREEMENT


 


This Registration Rights Agreement  (this “Agreement”) made August 4, 2009, between Five Star Quality Care, Inc.
(the “Company”)
and Senior Housing Properties Trust (the “Shareholder”).


 


RECITAL


 


Pursuant to the terms of that certain Lease
Realignment Agreement, dated August 4, 2009 (the “Realignment Agreement”),
among the Company, the Shareholder and certain of their respective
subsidiaries, the Company has sold and the Shareholder has acquired and holds
as of the date hereof 3,200,000 shares of the Company’s common shares, $0.01
par value (the “Shares”).


 


The Company has agreed to enter into this Agreement to
provide the Shareholder with certain rights relating to the registration of the
Shares.


 


Now, therefore, the parties agree as follows:


 


1.                                       DEFINITIONS.  Except as otherwise noted, for all purposes
of this Agreement, the following terms shall have the respective meanings set
forth in this Agreement, which meanings shall apply equally to the singular and
plural forms of the terms so defined and the words “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole.  The following capitalized terms used herein
have the following meanings:


 


“AAA”  is defined in Section 6.10(a).


 


“Agreement” means this Agreement, as
amended, restated, supplemented, or otherwise modified from time to time.


 


“Award”
is defined in Section 6.10(e).


 


“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks in the City of Boston are required, permitted or authorized, by
applicable law or executive order, to be closed for regular banking business.


 


“Commission”
means the United States Securities and Exchange Commission, or such successor
federal agency or agencies as may be established in lieu thereof.


 


“Company” is defined
in the preamble to this Agreement.


 


“Company
Indemnified Party” is defined in Section 4.2.


 


“Demand Registration”
is defined in Section 2.1.1.


 


“Disputes”
is defined in Section 6.10(a).


 

















 


“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder.


 


“Maximum Number of Shares”
is defined in Section 2.1.3.


 


“Notices” is defined
in Section 6.2.


 


“Piggy-Back Registration”
is defined in Section 2.2.1.


 


“Prospectus” means a
prospectus relating to a Registration Statement, as amended or supplemented,
including all materials incorporated by reference in such Prospectus.


 


“register,” “registered”  and “registration”
refer to a registration effected by preparing and filing a registration
statement or similar document under the Securities Act and such registration
statement becoming effective.


 


“Registration Statement”
means any registration statement filed by the Company with the Commission in
compliance with the Securities Act for a public offering and sale of Shares
(other than a registration statement on Form S-4 or Form S-8, or
their successors, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another entity),
as amended or supplemented, including all materials incorporated by reference
in such Registration Statement.


 


“Restricted Shares”
mean all of the Shares held of record by the Shareholder or held of record by its
permitted transferees from time to time in accordance with Section 6.1
(together with any shares issued in respect thereof as a result of any stock
split, stock dividend, share exchange, merger, consolidation or similar
recapitalization); provided, that
such Shares shall cease to be Restricted Shares hereunder, as of any date,
when:  (a) a Registration Statement
with respect to the sale of such Restricted Shares shall have become effective
under the Securities Act (as defined below) and such Restricted Shares shall
have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement as of such date; (b) such Restricted Shares shall
have been otherwise transferred pursuant to Rule 144 under the Securities
Act (or any similar provisions thereunder, but not Rule 144A), and new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration under the Securities Act, in each case, as of
such date; (c) such Restricted Shares are saleable immediately in their
entirety without condition or limitation pursuant to Rule 144 under the
Securities Act; or (d) such Restricted Shares shall have ceased to be
outstanding as of such date.


 


“Rules”
is defined in Section 6.10(a).


 


“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations of
the Commission promulgated thereunder.


 


“Shareholder” is
defined in the preamble to this Agreement.


 


“Shareholder
Indemnified Party” is defined in Section 4.1.


 


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“Shares” is defined in
the recitals of this Agreement.


 


“Underwriter” means a
securities dealer who purchases any Restricted Shares as principal in an
underwritten offering and not as part of such dealer’s market-making
activities.


 


2.                                       REGISTRATION
RIGHTS.


 


2.1                               Demand Registration.


 


2.1.1                      General Request for
Registration.  At any time
from and after the date of this Agreement, the Shareholder may make a written
demand for registration under the Securities Act of all or part of the
Restricted Shares (a “Demand Registration”).  Any such written demand for a Demand
Registration shall specify the number of Restricted Shares proposed to be sold
and the intended method(s) of distribution thereof and, unless otherwise
agreed by the Shareholder, shall be for the Shareholder’s exclusive benefit.


 


2.1.2                      Underwritten Offering.  If the Shareholder so elects and so advises
the Company as part of its written demand for a Demand Registration, the
offering of such Restricted Shares pursuant to such Demand Registration shall
be in the form of an underwritten offering. 
In such case, the Shareholder shall enter into an underwriting agreement
in customary form with the Underwriter or Underwriters selected for such
underwriting by the Shareholder (which Underwriter or Underwriters shall be
reasonably acceptable to the Company), complete and execute any questionnaires,
powers of attorney, indemnities, lock-up agreements, securities escrow
agreements and other documents reasonably required or which are otherwise
customary under the terms of such underwriting agreement, and furnish to the
Company such information as the Company may reasonably request in writing for
inclusion in the Registration Statement.


 


2.1.3                      Reduction of Offering.  If the managing Underwriter or Underwriters
for a Demand Registration that is to be an underwritten offering advises the
Company and the Shareholder that the dollar amount or number of Restricted
Shares which the Shareholder desires to sell taken together with all other
shares or other securities which the Shareholder has agreed may be included in
such offering, exceeds the maximum dollar amount or maximum number of shares
that can be sold in such offering without adversely affecting the proposed
offering price, the timing, the distribution method or the probability of
success of such offering (such maximum dollar amount or maximum number of
shares or other securities, as applicable, the “Maximum Number of Shares”), then the Company shall include in such registration:  (i) first, the Restricted Shares which
the Shareholder has requested be included in the Demand Registration; (ii) second,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the Shares or other securities that the Company desires
to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the Shares or other securities for the
account of other security holders of the Company that can be sold without
exceeding the Maximum Number of Shares.


 


2.1.4                      Withdrawal.  In the case of a Demand Registration, if the
Shareholder disapproves of the terms of any underwriting or is not entitled to
include all of its Restricted Shares in any offering, the Shareholder may elect
to withdraw such offering by giving 


 


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written notice to the Company and the Underwriter or Underwriters of
its request to withdraw prior to the effectiveness of the Registration
Statement filed with the Commission with respect to such Demand
Registration.  In such event, the Company
need not seek effectiveness of such Registration Statement.  If the Shareholder’s withdrawal is based on (i) a
material adverse change in circumstances with respect to the Company and not
known to the Shareholder at the time the Shareholder makes its written demand
for such Demand Registration, (ii) the Company’s failure to comply with
its obligations under this Agreement or (iii) a reduction pursuant to Section 2.1.3
of 10% or more of the number of Restricted Shares which the Shareholder has
requested be included in the Demand Registration, such registration shall not
count as a Demand Registration for purposes of Section 3.1.1(b) or
(e). If the Shareholder’s withdrawal is based on the Company’s failure to
comply with its obligations under this Agreement, the Company shall pay or
reimburse all expenses otherwise payable or reimbursable by the Shareholder in
connection with such Demand Registration pursuant to Section 3.2 and such
registration shall not count as a Demand Registration for purposes of Section 3.1.1(b) or
(e).


 


2.2                                 Piggy-Back Registration.


 


2.2.1                      Piggy-Back Rights.  If, at any time on or after the date of this
Agreement, the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering of common shares of the Company, or
securities or other obligations exercisable or exchangeable for, or convertible
into, common shares of the Company, by the Company for its own account or for
any other shareholder of the Company for such shareholder’s account, other than
a Registration Statement (i) filed in connection with any employee benefit
plan, (ii) for an exchange offer or offering of securities solely to the
Company’s existing shareholders, (iii) for an offering of debt securities
convertible into equity securities of the Company, (iv) for a dividend
reinvestment plan or (v) filed on Form S-4 (or successor form), then
the Company shall (x) give written notice of such proposed filing to the
Shareholder as soon as practicable but in no event less than ten (10) Business
Days before the anticipated filing date, which notice shall describe the amount
and type of securities to be included in such offering, the intended method(s) of
distribution, and the name of the proposed managing Underwriter or
Underwriters, if any, of the offering and (y) offer to the Shareholder in
such notice the opportunity to register the sale of such number of Restricted
Shares as the Shareholder may request in writing within five (5) Business
Days following receipt of such notice (a “Piggy-Back Registration”).  The Company shall cause such
Restricted Shares to be included in such registration and shall use
commercially reasonable efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Restricted
Shares requested to be included in the Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company and
to permit the sale or other disposition of such Restricted Shares in accordance
with the intended method(s) of distribution thereof.  If the Piggy-Back Registration involves an
Underwriter or Underwriters, the Shareholder shall enter into an underwriting
agreement in customary form with the Underwriter or Underwriters selected for
such Piggy-Back Registration by the Company and complete and execute any
questionnaires, powers of attorney, indemnities, lock-up agreements, securities
escrow agreements and other documents reasonably required or which are
otherwise customary under the terms of such underwriting agreement, and furnish
to the Company such information as the Company may reasonably request in
writing for inclusion in the Registration Statement or such information that is
otherwise customary.


 


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2.2.2                        Reduction of Offering.  If the managing Underwriter or Underwriters
for a Piggy-Back Registration that is to be an underwritten offering advises
the Company and the holders of Restricted Shares that the dollar amount or
number of Shares or other securities which the Company desire to sell, taken
together with Shares or other securities, if any, as to which registration has
been demanded pursuant to written contractual arrangements with persons other
than the Shareholder, the Restricted Shares as to which registration has been
requested under this Section 2.2, and the Shares or other securities, if
any, as to which registration has been requested pursuant to the written
contractual piggy-back registration rights of other shareholders of the
Company, exceeds the Maximum Number of Shares, then the Company shall include
in any such registration:


 


(a)                                  If the registration is undertaken for the
Company’s account: (i) first, the shares or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number
of Shares; (ii) second, to the extent that the Maximum Number of Shares
has not been reached under the foregoing clause (i), the shares or other
securities, if any, including the Restricted Shares, as to which registration
has been requested pursuant to written contractual piggy-back registration
rights of security holders (pro rata
in accordance with the number of Shares or other securities which each such
person has actually requested to be included in such registration, regardless
of the number of shares or other securities with respect to which such persons
have the right to request such inclusion) that can be sold without exceeding
the Maximum Number of Shares; and


 


(b)                                 If the registration is a “demand”
registration undertaken at the demand of persons, other than the Shareholder,
pursuant to written contractual arrangements with such persons, (i) first,
the Shares or other securities for the account of the demanding persons that
can be sold without exceeding the Maximum Number of Shares; (ii) second,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the Shares or other securities that the Company desires
to sell that can be sold without exceeding the Maximum Number of Shares; and (iii) third,
to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the shares or other securities, if any,
including the Restricted Shares, as to which registration has been requested
pursuant to written contractual piggy-back registration rights which other
security holders desire to sell (pro rata
in accordance with the number of Shares or other securities which each such
person has actually requested to be included in such registration, regardless
of the number of shares or other securities with respect to which such persons
have the right to request such inclusion) that can be sold without exceeding
the Maximum Number of Shares.


 


2.2.3                        Withdrawal.  The Shareholder may elect to withdraw its
request for inclusion of Restricted Shares in any Piggy-Back Registration by
giving written notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. 
The Company may also elect to withdraw a registration at any time prior
to the effectiveness of the Registration Statement.  If the Shareholder’s withdrawal is based on (i) the
Company’s failure to comply with its obligations under this Agreement or (ii) a
reduction pursuant to Section 2.2.2 of 20% or more of the number of
Restricted Shares which the Shareholder has requested be included in the
Piggy-Back Registration, the Company shall pay or reimburse all expenses 


 


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otherwise payable or reimbursable by the Shareholder in connection with
such Piggy-Back Registration pursuant to Section 3.2.


 


3.                                       REGISTRATION
PROCEDURES.


 


3.1                                 Filings; Information.  Whenever the Company is required to effect
the registration of any Restricted Shares pursuant to Section 2, the
Company shall use commercially reasonable efforts to effect the registration
and sale of such Restricted Shares in accordance with the intended method(s) of
distribution thereof as expeditiously as practicable, and in connection with
any such request.


 


3.1.1                        Filing Registration Statement.  The Company shall, as expeditiously as
possible and in any event within thirty (30) days after receipt of a request
for a Demand Registration pursuant to Section 2.1, prepare and file with
the Commission a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of all Restricted Shares to be registered
thereunder in accordance with Section 2.1.2 and the intended method(s) of
distribution thereof, and shall use commercially reasonable efforts to cause
such Registration Statement to become and remain effective for the period
required by Section 3.1.3; provided,
however, that:


 


(a)                                  the Company shall have the right to defer
any Demand Registration for periods of up to thirty (30) days, and any
Piggy-Back Registration for such period(s) as may be applicable to
deferment of any demand registration to which such Peggy-Back Registration
relates, in each case if the Company shall furnish to the holders a certificate
signed by the Chief Executive Officer of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company and its Shareholder for such Registration Statement
to be effected at such time (including without limitation because the Company
is then engaged in a material transaction or has an undisclosed material
corporate development, in either case, which would be required to be disclosed
in the Registration Statement); provided,
further, however, that
the Company shall not have the right to exercise the right set forth in this
clause (a) for more than one hundred and twenty (120) days in any 365-day
period in respect of a Demand Registration (including in such 120 days, any
deferral under subsection (d) of this Section 3.1.1 if the
Registration Statement was not timely filed thereunder);


 


(b)                                 the Company shall not be obligated to
effect any registration of Restricted Shares upon receipt of a written demand
for a Demand Registration if the Company has already completed four (4) Demand
Registrations;


 


(c)                                  the Company shall not be obligated to
effect any registration of Restricted Shares upon receipt of a written demand
for a Demand Registration in the event that the number of Restricted Shares
proposed to be included in the Demand Registration represents less than
one-quarter (1/4) of the Shares issued to the Shareholder pursuant to the
Realignment Agreement or if less, all the Shares then held by the Shareholder;


 


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(d)                                 the Company shall not then be obligated
to effect any registration of Restricted Shares upon receipt of a written
demand for a Demand Registration if the Company shall furnish to the
Shareholder a certificate signed by the Chief Executive Officer of the Company
stating that within ninety (90) days of receipt of the written demand for a
Demand Registration, the Company shall file a Registration Statement and offer
to the Shareholder the opportunity to register Restricted Shares thereunder in
accordance with Section 2.2;


 


(e)                                  the Company shall not be obligated to
effect any registration of Restricted Shares upon receipt of a written demand
for a Demand Registration if the Company has, within the six (6) month
period preceding the date of the written demand for a Demand Registration
already effected one Demand Registration for the Shareholder pursuant to Section 2.1;
and


 


(f)                                    the Company shall not be obligated to
effect any registration of Restricted Shares to the extent the Company’s
disposition of Restricted Shares pursuant to such registration would constitute
a breach of or default under the Realignment Agreement.


 


3.1.2                        Copies.  If the Shareholder has included Restricted
Shares in a registration, the Company shall, prior to filing a Registration
Statement or Prospectus, or any amendment or supplement thereto, furnish to the
Shareholder and its counsel, copies of such Registration Statement as proposed
to be filed, each amendment and supplement to such Registration Statement (in
each case including all exhibits thereto and documents incorporated by
reference therein), the Prospectus included in such Registration Statement
(including each preliminary Prospectus), and such other documents as the
Shareholder or counsel for any the Shareholder may reasonably request in order
to facilitate the disposition of the Restricted Shares included in such
registration.


 


3.1.3                        Amendments and Supplements.  The Company shall prepare and file with the
Commission such amendments, including post-effective amendments, and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective and in compliance with the provisions of the Securities Act until all
Restricted Shares, and all other securities covered by such Registration
Statement, have been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement (which period shall not
exceed the sum of one hundred eighty (180) days, plus any period during which
any such disposition is interfered with by any stop order or injunction of the
Commission or any governmental agency or court ) or such securities have been
withdrawn.


 


3.1.4                        Notification.  If the Shareholder has included Restricted
Shares in a registration, after the filing of the Registration Statement, the
Company shall promptly, and in no event more than two (2) Business Days
after such filing, notify the Shareholder of such filing, and shall further
notify the Shareholder promptly and confirm such notification in writing in all
events within two (2) Business Days of the occurrence of any of the
following:  (i) when such
Registration Statement becomes effective; (ii) when any post-effective
amendment to such Registration Statement becomes effective; (iii) the
issuance or threatened issuance by the Commission of any stop order (and the
Company shall use reasonable best efforts to prevent the 


 


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entry of such stop order or to remove it if entered); and (iv) any
request by the Commission for any amendment or supplement to such Registration
Statement or any Prospectus relating thereto or for additional information or
of the occurrence of an event requiring the preparation of a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of the securities covered by such Registration Statement, such Prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly make available to the Shareholder any such
supplement or amendment; except that before filing with the Commission a Registration
Statement or Prospectus or any amendment or supplement thereto, including
documents incorporated by reference, the Company shall furnish to the
Shareholder and to its counsel, copies of all such documents proposed to be
filed sufficiently in advance of filing to provide the Shareholder and its
counsel with a reasonable opportunity to review such documents and comment
thereon, and the Company shall not file any Registration Statement or
Prospectus or amendment or supplement thereto, including documents incorporated
by reference, to which the Shareholder or its counsel shall reasonably object.


 


3.1.5                        State Securities Laws
Compliance.  If the
Shareholder has included Restricted Shares in a registration the Company shall
use commercially reasonable efforts to (i) register or qualify the
Restricted Shares covered by the Registration Statement under such securities
or “blue sky” laws of such jurisdictions in the United States as the
Shareholder (in light of the intended plan of distribution) may request and (ii) take
such action necessary to cause such Restricted Shares covered by the
Registration Statement to be registered with or approved by such other federal
or state authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
necessary or advisable to enable the Shareholder to consummate the disposition
of such Restricted Shares in such jurisdictions; provided, however,
that the Company shall not be required to qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3.1.5 or subject itself to taxation in any such jurisdiction.


 


3.1.6                        Agreements for Disposition.  The Company shall enter into customary agreements
(including, if applicable, an underwriting agreement in customary form) and use
commercially reasonable efforts to take such other actions as are required in
order to expedite or facilitate the disposition of Restricted Shares.  The representations, warranties and covenants
of the Company in any underwriting agreement which are made to or for the
benefit of any Underwriters, to the extent applicable, shall also be made to
and for the benefit of the Shareholder. 
For the avoidance of doubt, the Shareholder may not require the Company
to accept terms, conditions or provisions in any such agreement which the
Company determines are not reasonably acceptable to the Company,
notwithstanding any agreement to the contrary herein.  The Shareholder shall not be required to make
any representations or warranties in the underwriting agreement except as
reasonably requested by the Company and, if applicable, with respect to the
Shareholder’s organization, good standing, authority, title to Restricted
Shares, lack of conflict of such sale with such holder’s material agreements
and organizational documents, and with respect to written information relating
to the Shareholder that the Shareholder has furnished in writing expressly for
inclusion in such Registration Statement. 
The Shareholder, however, shall agree to such covenants and
indemnification and contribution obligations for selling stockholders as are
reasonable and customarily contained in agreements of that type.


 


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3.1.7                        Cooperation.  The Company and all officers and members of
the management of the Company, shall reasonably cooperate in any offering of
Restricted Shares under this Agreement, which cooperation shall include,
without limitation, the preparation of the Registration Statement with respect
to such offering and all other offering materials and related documents, and
participation in meetings with Underwriters, attorneys, accountants and
potential investors.  The Shareholder
shall reasonably cooperate in the preparation of the registration statement and
other documents relating to any offering in which it includes securities
pursuant to this Section 3.  The
Shareholder shall also furnish to the Company such information regarding
itself, the Restricted Shares held by it, and the intended method(s) of
disposition of such securities as shall be reasonably required to effect the
registration of the Restricted Shares.


 


3.1.8                        Records.  Upon reasonable notice and during normal
business hours, subject to the Company receiving any customary confidentiality
undertakings or agreements, the Company shall make available for inspection by
the Shareholder, any Underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other professional
retained by the Shareholder or any Underwriter, all relevant financial and
other records, pertinent corporate documents and properties of the Company as
shall be necessary to enable them to exercise their due diligence responsibility,
and shall cause the Company’s officers, directors and employees to supply all
information reasonably requested by the Shareholder in connection with such
Registration Statement.


 


3.1.9                        Opinions and Comfort Letters.  The Company shall use commercially reasonable
efforts to furnish to the Shareholder signed counterparts, addressed to the
Shareholder, of (i) any opinion of counsel to the Company delivered to any
Underwriter and (ii) any comfort letter from the Company’ independent
public accountants delivered to any Underwriter; provided,  however, that counsel to the Underwriter shall have
exclusive authority to negotiate the terms thereof.  In the event no legal opinion is delivered to
any Underwriter, the Company shall furnish to the Shareholder, at any time that
the Shareholder elects to use a Prospectus, an opinion of counsel to the
Company to the effect that the Registration Statement containing such
Prospectus has been declared effective, that no stop order is in effect, and
such other matters as the Shareholder may reasonably request as would
customarily have been addressed in an opinion of counsel to the Company
delivered to an Underwriter.


 


3.1.10                  Earnings Statement.  The Company shall comply with all applicable rules and
regulations of the Commission and the Securities Act, and make generally
available to its shareholders, as soon as practicable, an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act,
provided that the Company will be deemed to have complied with this Section 3.1.10
if the earnings statement satisfies the provisions of Rule 158 under the
Securities Act.


 


3.1.11                  Listing.  The Company shall use commercially reasonable
efforts to cause all Restricted Shares included in any registration to be
listed on such exchanges or otherwise designated for trading in the same manner
as similar shares of the Company are then listed or designated or, if no such
similar securities are then listed or designated, in a manner satisfactory to
the Shareholder.


 


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3.2                                 Registration Expenses.  Except to the extent expressly provided by Section 2.1.4
or 2.2.3 or in connection with a Piggy-Back Registration relating to a
registration by the Company on its own initiative (and not as a result of any
other person’s or entity’s right to cause the Company to file, cause and effect
a registration of Company securities) and for the Company’s own account (in which case the
Company will pay all customary costs and expenses of registration), the
Shareholder shall pay or promptly reimburse the Company for (a) all
customary costs and expenses incurred in connection with any Demand
Registration effected pursuant to Section 2.1 and (b) if a Piggy-Back
Registration , and to the extent other shareholders participating in such
offering are required to pay costs and expenses in such Piggy-Back
Registration, a pro rata share
(in proportion to the amount of shares the Shareholder is selling, after giving
effect to any reduction pursuant to Section 2.1.3, in such Piggy-Back
Registration relative to all other shares included therein) of all customary
costs and expenses incurred in connection with any Piggy-Back Registration
effected pursuant to Section 2.2, in each case whether or not the
Registration Statement becomes effective, including, without limitation: (i) all
registration and filing fees; (ii) fees and expenses of compliance with
securities or “blue sky” laws (including fees and disbursements of counsel in
connection with blue sky qualifications of the Restricted Shares); (iii) printing
expenses; (iv) fees imposed by the Financial Industry Regulatory Authority, Inc.;
(v) fees and disbursements of counsel for the Company and fees and
expenses for independent registered public accountants retained by the Company
(including the expenses or costs associated with the delivery of any opinions
or comfort letters requested pursuant to Section 3.1.9); and (vi) the
fees and expenses of counsel selected by the Shareholder in a Demand
Registration or if it participates in a Piggy-Back Registration, counsel
selected by and solely representing the Shareholder unless the Shareholder and
any other shareholder agree that such counsel shall represent them jointly, in
which case the Company shall have no obligation to pay for any such fees or
expenses of such counsel.  The Company
shall have no obligation to pay any underwriting discounts or selling
commissions attributable to the Restricted Shares being sold by the
Shareholder, which underwriting discounts or selling commissions shall be borne
solely by the Shareholder.  Additionally,
in an underwritten offering, the Shareholder and the Company shall bear the
expenses of the Underwriter or Underwriters pro
rata in proportion to the respective amount of shares each is
selling in such offering.  For the
avoidance of doubt, the Shareholder shall have no obligation to pay, and the
Company shall bear, all internal expenses of the Company (including, without
limitation, all fees, salaries and expenses of its officers, employees and
management) incurred in connection with performing or complying with the
Company’s obligations under this Agreement.


 


3.3                                 Information.  The Shareholder shall provide such
information as may reasonably be requested by the Company, or the managing
Underwriter, if any, in connection with the preparation of any Registration
Statement, including amendments and supplements thereto, in order to effect the
registration of any Restricted Shares under the Securities Act pursuant to Section 2
and in connection with the Company’s obligation to comply with federal and
applicable state securities laws.


 


3.4                                 Shareholder Obligations.  The Shareholder may not participate in any
underwritten offering pursuant to Section 2 unless such holder (i) agrees
to only sell Restricted Shares on the basis reasonably provided in any
underwriting agreement, and (ii) completes, executes and delivers any and
all questionnaires, lock-up agreements, powers of attorney,


 


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custody agreements, indemnities, underwriting agreements and other
documents reasonably or customarily required by or under the terms of any
underwriting agreement or as reasonably requested by the Company.


 


4.                                       INDEMNIFICATION
AND CONTRIBUTION.


 


4.1                                 Indemnification by the
Company.  The Company agrees to indemnify
and hold harmless the Shareholder and its officers, employees, affiliates,
directors, partners, members, attorneys and agents, and each person, if any,
who controls the Shareholder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) (each, a “Shareholder
Indemnified Party”) from and against any expenses, losses, judgments, claims,
damages or liabilities, whether joint or several, arising out of or based upon
any untrue statement (or allegedly untrue statement) of a material fact
contained in any Registration Statement under which the sale of Restricted
Shares was registered under the Securities Act, any preliminary Prospectus,
final Prospectus or summary Prospectus contained in such Registration
Statement, or arising out of or based upon any omission (or alleged omission)
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expense, loss,
judgment, claim, damage or liability arises out of or is based upon (a) any
untrue statement or allegedly untrue statement or omission or alleged omission
made in such Registration Statement, preliminary Prospectus, final Prospectus
or summary Prospectus in reliance upon and in conformity with information
furnished in writing to the Company by the Shareholder expressly for use
therein, or (b) the use of any Registration Statement, any preliminary
Prospectus, final Prospectus or summary Prospectus during a period when the
Shareholder has been notified that a stop order has been issued in respect
thereof or any proceeding for that purpose has been initiated, or the use of
any Registration Statement, any preliminary Prospectus, final Prospectus or
summary Prospectus has been suspended by the Company pursuant to the terms of
this Agreement.  The foregoing indemnity
shall not inure to the benefit of any Shareholder Indemnified Party from whom
the person asserting losses, claims, damages or liabilities purchased Restricted
Shares, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Shareholder Indemnified Party to such
person, if required by law so to have been delivered at or prior to the written
confirmation of the sale of Restricted 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, unless such failure is the
result of noncompliance by the Company with Section 3.1.3.


 


4.2                                 Indemnification by the
Shareholder.  The
Shareholder will, with respect to any Registration Statement where Restricted
Shares were registered under the Securities Act, indemnify and hold harmless the
Company, each of the Company’s directors and officers, and each other person,
if any, who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) (each, a “Company
Indemnified Party”), against any expenses, losses, claims, judgments, damages
or liabilities, whether joint or several, insofar as such expenses, losses,
claims, judgments, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or allegedly untrue statement of
a material fact contained in any Registration Statement under which the sale of
such Restricted  Shares was registered
under the Securities Act, any preliminary Prospectus, final Prospectus or
summary Prospectus contained in such Registration Statement, or any amendment
or


 


11

















 


supplement to the Registration Statement, or arise out of or are based
upon any omission or the alleged omission to state a material fact required to
be stated therein or necessary to make the statement therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by the Shareholder expressly
for use therein.  The Shareholder’s indemnification
obligations hereunder shall be limited to the amount of any net proceeds
actually received by the Shareholder.


 


4.3                                 Notification of
Indemnification.  Promptly
after receipt by an indemnified party under this Section 4 of notice of
the commencement of any action (including any action by a governmental
authority), such indemnified party shall, if a claim in respect thereof is to
be made against any indemnifying party under this Section 4, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided,
however, that an
indemnified party shall have the right to retain its own counsel, with the
reasonable fees and expenses of one such counsel to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. 
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 4, but the omission
so to deliver written notice to the indemnifying party shall not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 4.


 


5.                                       UNDERWRITING
AND DISTRIBUTION.


 


5.1                                 Rule 144.  The Company covenants that it shall file all
reports required to be filed by it under the Securities Act and the Exchange
Act and shall take such further action as the Shareholder may reasonably
request, all to the extent required from time to time to enable the Shareholder
to sell Restricted Shares without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 under the Securities
Act, or any similar provision thereto, but not Rule 144A.


 


6.                                       MISCELLANEOUS.


 


6.1                                 Assignment; No Third Party
Beneficiaries.  This
Agreement and the rights, duties and obligations of the Company hereunder may
not be assigned or delegated by the Company in whole or in part and shall be
binding on its successors.  Subject to
the Realignment Agreement, this Agreement and the rights, duties and
obligations of the Shareholder hereunder may be assigned, transferred or
delegated by the Shareholder, in whole or in part, in conjunction with and to
the extent of any permitted transfer of Restricted Shares to an affiliate of
the Shareholder in accordance with applicable law , which affiliate agrees in
writing to be subject to and bound by all duties and obligations set forth in
this Agreement, whereupon any such assignee, transferee or delegatee would have
all rights, duties and obligations hereunder in addition to the Shareholder to
the extent that the Shareholder continues to own Restricted Shares.  Subject to the Realignment Agreement, this
Agreement and the


 


12

















 


rights, duties and obligations of the Shareholder hereunder may be
assigned, transferred or delegated by the Shareholder, in whole or in part, in
conjunction with and to the extent of any permitted transfer of one-quarter
(1/4) or more of the Shares issued to the Shareholder under the Realignment
Agreement or if less, all the Restricted Shares then held by the Shareholder to
a person or entity that is not an affiliate of the Shareholder in accordance
with applicable law and which person or entity agrees in writing to be subject
to and bound by all duties and obligations set forth in this Agreement,
whereupon any such assignee, transferee or delegatee would have all rights,
duties and obligations hereunder; provided,
however, that the rights,
duties and obligations hereunder assigned, transferred or delegated to a person
that is not an affiliate of the Shareholder may not be further assigned,
transferred or delegated by such person. 
This Agreement is not intended to confer any rights or benefits on any
persons that are not party hereto other than as expressly set forth in Section 4
and this Section 6.1.


 


6.2                                 Notices. All notices,
demands, requests, consents, approvals or other communications (collectively, “Notices”)
required or permitted to be given hereunder or which are given with respect to
this Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, or facsimile, addressed as set forth below, or to such other address
as such party shall have specified most recently by written notice provided in
accordance with this Section 6.2. 
Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by facsimile; provided, that if such service or transmission is not on
a Business Day or is after normal business hours, then such notice shall be
deemed given on the next Business Day. 
Notice otherwise sent as provided herein shall be deemed given on the
next Business Day following timely delivery of such notice to a reputable air
courier service with an order for next-day delivery.


 


	
  To
  the Company:

  	
   

  
	
   

  	
   

  
	
   

  	
  Five
  Star Quality Care, Inc.

  
	
   

  	
  400
  Centre Street

  
	
   

  	
  Newton,
  Massachusetts 02458

  
	
   

  	
  Attn:
  Bruce Mackey, President

  
	
   

  	
  Facsimile:
  (617) 658-1751

  
	
   

  	
   

  
	
  with a copy (which shall not constitute notice)
  to:

  
	
   

  	
   

  
	
   

  	
  Skadden, Arps, Slate Meagher & Flom LLP

  
	
   

  	
  One Beacon Street

  
	
   

  	
  Boston, Massachusetts 02108

  
	
   

  	
  Attn.: Louis Goodman

  
	
   

  	
  Facsimile: (617) 573-4822

  
	
   

  	
   

  
	
  To
  the Shareholder:

  
	
   

  	
   

  
	
   

  	
  Senior Housing Properties Trust

  
	
   

  	
  400 Centre Street

  



 


13

















 


	
   

  	
  Newton, Massachusetts 02458

  
	
   

  	
  Attn: David Hegarty, President

  
	
   

  	
  Facsimile: (617) 796-8349

  
	
   

  	
   

  
	
  with
  a copy (which shall not constitute
  notice) to:

  
	
   

  	
   

  
	
   

  	
  Sullivan & Worcester LLP

  
	
   

  	
  One Post Office Square

  
	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
  Attn: Richard Teller

  
	
   

  	
  Facsimile: (617) 338-2880

  



 


6.3                                 Severability.  This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof.  Furthermore, if any
term or provision hereof shall be deemed to be invalid or unenforceable, the
parties hereto shall mutually agree upon an amendment to this Agreement to
include a term or provision as similar in purpose to such invalid or
unenforceable term or provision as may be reasonably possible and which term or
provision is valid and enforceable.


 


6.4                                 Counterparts.  This Agreement may be executed in  separate counterparts, each of which shall be
deemed an original, and both of which taken together shall constitute one and
the same instrument.


 


6.5                                 Entire Agreement.  This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written.


 


6.6                                 Modifications and Amendments.  No amendment, modification or termination of
this Agreement shall be binding upon any party unless executed in writing by
such party.


 


6.7                                 Titles and Headings.  Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.


 


6.8                                 Waivers and Extensions.  Any party entitled to benefits under this
Agreement may waive any right, breach or default which such party has the right
to waive;  provided, that such waiver will not be effective against
the waiving party unless it is in writing, is signed by such party, and
specifically refers to this Agreement. 
Waivers may be made in advance or after the right waived has arisen or
the breach or default waived has occurred. 
Any waiver may be conditional.  No
waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. 
No waiver or extension of time for performance of any obligations or
acts shall be deemed a waiver or extension of the time for performance of


 


14

















 


any other obligations or acts.


 


6.9                                 Remedies Cumulative.  If the Company fails to observe or perform
any covenant or agreement to be observed or performed under this Agreement, the
Shareholder may proceed to protect and enforce its rights by suit in equity or
action at law, whether for specific performance of any term contained in this
Agreement or for an injunction against the breach of any such term or in aid of
the exercise of any power granted in this Agreement or to enforce any other
legal or equitable right, or to take any one or more of such actions, without
being required to post a bond.  None of
the rights, powers or remedies conferred under this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.


 


6.10                           Arbitration.


 


(a)                                  Any disputes, claims or
controversies between the Shareholder and the Company (i) arising out of
or relating to this Agreement or the transactions contemplated hereby, or (ii) brought
by or on behalf of any shareholder of either the Shareholder or the Company
(which, for purposes of this Section 6.10, shall mean any shareholder of
record or any beneficial owner of shares of either the Shareholder or the
Company, or any former shareholder of record or beneficial owner of shares of
either the Shareholder or the Company), either on its own behalf, on behalf of
either the Shareholder or the Company or on behalf of any series or class of
shares of either the Shareholder or the Company or shareholders of either the
Shareholder or the Company against either the Shareholder or the Company or any
trustee, director, officer, manager (including Reit Management &
Research LLC or its successor), agent or employee of either the Shareholder or
the Company, including disputes, claims or controversies relating to the
meaning, interpretation, effect, validity, performance or enforcement of this
Agreement, the declaration of trust or the bylaws of the Shareholder or the
charter or bylaws of the Company (all of which are referred to as “Disputes”)
or relating in any way to such a Dispute or Disputes, shall on the demand of
any party to such Dispute be resolved through binding and final arbitration in
accordance with the Commercial Arbitration Rules (the “Rules”) of the
American Arbitration Association (“AAA”) then in effect, except as modified
herein.  For the avoidance of doubt, and
not as a limitation, Disputes are intended to include derivative actions
against trustees, directors, managers or officers of either the Shareholder or
the Company and class actions by a shareholder of either the Shareholder or the
Company against those individuals or entities and either the Shareholder and
the Company.


 


(b)                                 There shall be three
arbitrators.  If there are (i) only
two parties to the Dispute, each party shall select one arbitrator within 15
days after receipt by respondent of a copy of the demand for arbitration and (ii) more
than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand, shall each select, by the vote of a majority of
the claimants or the respondents, as the case may be, one arbitrator.  The two party-nominated arbitrators shall
jointly nominate the third and presiding arbitrator within 15 days of the
nomination of the second arbitrator.  If
any arbitrator has not been nominated within the time limit specified herein,
then the AAA


 


15

















 


shall
provide a list of proposed arbitrators in accordance with the Rules, and the
arbitrator shall be appointed by the AAA in accordance with a listing, striking
and ranking procedure, with each party having a limited number of strikes,
excluding strikes for cause.  For the
avoidance of doubt, the arbitrators appointed by the parties to such Dispute
may be affiliates or interested persons of such parties but the third
arbitrator elected by the party arbitrators or by the AAA shall be unaffiliated
with either party.


 


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


 


(d)                                 There shall be only limited
documentary discovery of documents directly related to the issues in dispute,
as may be ordered by the arbitrators.


 


(e)                                  In rendering an award or
decision (the “Award”), the arbitrators shall be required to follow the laws of
The Commonwealth of Massachusetts.  Any
arbitration proceedings or Award rendered hereunder and the validity, effect
and interpretation of this arbitration agreement shall be governed by the
Federal Arbitration Act, 9 U.S.C. §1 et seq. 
The Award shall be in writing and may, but shall not be required to,
briefly state the findings of fact and conclusions of law on which it is based.


 


(f)                                    Except to the extent
expressly provided by this Agreement or as otherwise agreed between the
parties, each party involved in a Dispute shall bear its own costs and expenses
(including attorneys’ fees), and the arbitrators shall not render an award that
would include shifting of any such costs or expenses (including attorneys’
fees) or, in a derivative case or class action by a shareholder of either the
Shareholder or the Company, award any portion of the Shareholder’s or the
Company’s award to the claimant or the claimant’s attorneys.  Each party (or, if there are more than two
parties to the Dispute, all claimants, on the one hand, and all respondents, on
the other hand, respectively) shall bear the costs and expenses of its (or their)
selected arbitrator and the parties (or, if there are more than two parties to
the Dispute, all claimants, on the one hand, and all respondents, on the other
hand) shall equally bear the costs and expenses of the third appointed
arbitrator.


 


(g)                                 The Award shall be final and
binding upon the parties thereto and shall be the sole and exclusive remedy
between such parties relating to the Dispute, including any claims,
counterclaims, issues or accounting presented to the arbitrators.  Judgment upon the Award may be entered in any
court having jurisdiction.  To the
fullest extent permitted by law, no application or appeal to any court of
competent jurisdiction may be made in connection with any question of law
arising in the course of arbitration or with respect to any award made except
for actions relating to enforcement of this agreement to arbitrate or any
arbitral award issued hereunder and except for actions seeking interim or other
provisional relief in aid of arbitration proceedings in any court of competent
jurisdiction.


 


(h)                                 Any monetary award shall be
made and payable in U.S. dollars free of any tax, deduction or offset.  The party against which the Award assesses a
monetary


 


16

















 


obligation
shall pay that obligation on or before the 30th day following the date of the
Award or such other date as the Award may provide.


 


6.11                           Governing Law.  Except as to matters regarding the internal
affairs of the Company or the Shareholder and issues of or limitations on any
personal liability of the shareholders, trustees and directors of the Company
or the Shareholder, as to which the laws of such party’s jurisdiction of
formation or organization shall govern, this Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of The Commonwealth
of Massachusetts without giving effect to the principles of conflicts of laws
thereof that would require the application of any law of another jurisdiction.


 


6.12                           Non-liability of Trustees.


 


6.12.1                  THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING
PROPERTIES TRUST DATED SEPTEMBER 20, 1999, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED IN THE OFFICE OF THE
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND PROVIDE THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES
TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST.  ALL PERSONS DEALING WITH SENIOR HOUSING
PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING
PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.


 


6.12.2                  A COPY OF THE
ARTICLES OF INCORPORATION, AS IN EFFECT ON THE DATE HEREOF, OF FIVE STAR
QUALITY CARE, INC., TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS
DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
MARYLAND.  NO DIRECTOR, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF FIVE STAR QUALITY CARE, INC. SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, FIVE STAR QUALITY CARE, INC. 
ALL PERSONS DEALING WITH FIVE STAR QUALITY CARE, INC., IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF FIVE STAR QUALITY CARE, INC. FOR THE PAYMENT OF ANY
SUM OR THE PERFORMANCE OF ANY OBLIGATION.


 


Signatures
appear on the next  page


 


17

















 


Executed under seal  as of the date first above written.


 


	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Name:
  Bruce J. Mackey Jr.

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SENIOR HOUSING PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
   

  	
  Name: David J. Hegarty

  
	
   

  	
   

  	
  Title:    President

  



 


18