FVEVV Five Star Senior Living Inc

PROXY STATEMENT

Our Board of Directors (our "Board") of Five Star Senior Living Inc., a Maryland corporation (the "Company," "we," "us" or "our") is furnishing this proxy statement (the "Proxy Statement") and accompanying proxy card (or voting instruction form) to you in connection with the solicitation of proxies by our Board for our 2020 annual meeting of stockholders. Our annual meeting will be held at Two Newton Place, 255 Washington Street, Suite 100, Newton, Massachusetts 02458^* on Tuesday, June 9, 2020, at 9:30 a.m., Eastern time, subject to any postponements or adjournments thereof (the "2020 Annual Meeting"). We are first making these proxy materials available to stockholders on or about April 15, 2020.

Only owners of record of shares of common stock of the Company ("Common Shares") as of the close of business on March 16, 2020, the record date for the 2020 Annual Meeting, are entitled to notice of, and to vote at, the meeting and at any postponements or adjournments of the meeting. Holders of Common Shares are entitled to one vote for each Common Share held on the record date. On March 16, 2020, there were 31,543,711 Common Shares issued and outstanding.

The mailing address of our principal executive office is 400 Centre Street, Newton, Massachusetts 02458.

* As part of our precautions regarding the coronavirus or COVID-19, we are planning for the possibility that the annual meeting may be held virtually solely by means of remote communication or via a live webcast. If we take this step, we will announce the decision to do so in advance, and we will provide details on how to participate in a press release and on our website at www.fivestarseniorliving.com.

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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

We are currently governed by a seven member Board of Directors. Ensuring our Board is comprised of Directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, professional experience and backgrounds and effectively represent the long term interests of stockholders is a top priority of our Board and our Nominating and Governance Committee.

In addition, our Board has determined that our Board, as a whole, should strive to have the right mix of characteristics and skills necessary to effectively perform its oversight responsibilities. Our Board believes that Directors with one or more of the following professional skills or experiences can assist in meeting this goal:

Our Nominating and Governance Committee and our Board consider the qualifications, characteristics and skills of Directors and Director candidates individually and in the broader context of our Board's overall composition when evaluating potential nominees for election as Director.

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Our Board is elected by stockholders to oversee our business and long term strategy. As part of fulfilling its responsibilities, our Board oversees the safeguarding of our assets, the maintenance of appropriate financial and other internal controls and our compliance with applicable laws and regulations. Inherent in these responsibilities is our Board's understanding and oversight of the various risks we face. Our Board considers that risks should not be viewed in isolation and should be considered in virtually every business decision and as part of our business strategy.

Our Board oversees risk as part of its general oversight of our Company. Oversight of risk is addressed as part of various Board and Board committee activities and through regular and special Board and Board committee meetings. Our day to day business is conducted by management, and management is responsible for incorporating risk management in its activities. Our Director of Internal Audit reports to our Audit Committee and provides us advice and assistance with our risk management function.

In discharging their oversight responsibilities, our Board and Board committees review regularly a wide range of reports provided to them by management, internal audit and service providers, including:

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reports on market and industry conditions;



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operating and regulatory compliance reports;



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reports on clinical operations;



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financial reports;



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reports on risk management activities;



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regulatory and legislative updates that may impact us;



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reports on the security of our information technology processes and our data; and



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legal proceedings updates and reports on other business related matters.

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Our Board and Board committees discuss these matters among themselves and with our management, our Director of Internal Audit, legal counsel, our independent auditors and other professionals, as appropriate.

Our Audit Committee takes a leading role in helping our Board fulfill its responsibilities for oversight of our financial reporting, internal audit function, risk management and our compliance with legal and regulatory requirements. Our Board and Audit Committee review periodic reports from our independent auditors regarding potential risks, including risks related to our internal control over financial reporting. Our Audit Committee also reviews, approves and oversees an internal audit plan developed by our Director of Internal Audit with the goal of helping us systematically evaluate the effectiveness of its risk management, control and governance processes on an annual basis. Our Audit Committee considers risks related to cybersecurity and receives regular reports from management regarding cybersecurity risks and countermeasures being undertaken or considered by us, including updates on the internal and external cybersecurity landscape and relevant technical developments. Our Audit Committee meets at least quarterly and reports its findings to our Board. Our Audit Committee also meets periodically with our Director of Internal Audit to review the results of our internal audits, and directs or recommends to our Board actions or changes it determines appropriate to enhance or improve the effectiveness of our risk management.

Our Quality of Care Committee reviews management reports on our clinical operations and directs or recommends to management and our Board actions or changes it determines appropriate to improve our clinical operations and to reduce risks arising from those operations.

Our Compensation Committee whose duties are detailed in its charter, among other duties, evaluates the performance of our Director of Internal Audit and the performance of The RMR Group LLC ("RMR LLC") under our business management agreements. Also, our Compensation Committee and our Board consider that we have a share award program that requires share awards to executive officers to vest over a period of years. We believe that the use of share awards vesting over time rather than stock options mitigates the incentives for our management to undertake undue risks and encourages management to make longer term and appropriately risk balanced decisions.

It is not possible to identify all of the risks that may affect us or to develop processes and controls to eliminate all risks and their possible effects, and processes and controls employed to address risks may be limited in their effectiveness. Moreover, it is necessary for us to bear certain risks to achieve our objectives. As a result of the foregoing and other factors, our ability to manage risk is subject to substantial limitations.

To learn more about the risks we face, you can review the matters discussed in Part I, "Item 1A. Risk Factors" and "Warning Concerning Forward Looking Statements" in our Annual Report for the year ended December 31, 2019 (the "Annual Report"). The risks described in the Annual Report are not the only risks we face. Additional risks and uncertainties not currently known or that may currently be deemed to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

Under the corporate governance listing standards of the Nasdaq, to be considered independent:

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a director must not have a disqualifying relationship, as defined in the corporate governance section of the Nasdaq rules; and



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our Board must affirmatively determine that the director otherwise has no relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To facilitate the director independence assessment process, our Board has adopted written Governance Guidelines as described below.

Our Board is comprised of seven Directors, including five Independent Directors and two Managing Directors. Under our Bylaws, so long as the number of directors is less than five, at least one director

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must meet the qualifications of a Managing Director and, so long as the number of directors is five or greater, at least two directors must meet the qualifications of a Managing Director. Our Bylaws require that a majority of our Board be Independent Directors. Under our Bylaws, Independent Directors are Directors who are not employees of the Company or RMR LLC, are not involved in the Company's day to day activities and are persons who qualify as independent under the applicable rules of the Nasdaq and the SEC. As set forth in our Bylaws, Managing Directors are Directors who are not Independent Directors and who have been employees of the Company or RMR LLC or any of its subsidiaries or involved in the day to day activities of the Company, any of its subsidiaries or any of their predecessors for at least one year prior to such Director's election.

Our Board affirmatively determines whether Directors have a direct or indirect material relationship with the Company, including the Company's subsidiaries, other than serving as our Directors or trustees or directors of our subsidiaries. In making independence determinations, our Board observes the Nasdaq and SEC criteria, as well as the criteria set forth in our governing documents. When assessing a Director's relationship with us, our Board considers all relevant facts and circumstances, not merely from the Director's standpoint, but also from that of the persons or organizations with which the Director has an affiliation. Based on this review, our Board has determined that Barbara D. Gilmore, Donna D. Fraiche, Bruce M. Gans, M.D., Gerard M. Martin and Michael E. Wagner, M.D. currently qualify as independent directors under applicable Nasdaq and SEC criteria and as Independent Directors under our Bylaws. In making these independence determinations, our Board reviewed and discussed additional information provided by us and our Directors with regard to each of the Directors' relationships with us, RMR LLC or The RMR Group Inc. ("RMR Inc."), the managing member of RMR LLC, and the other companies to which RMR LLC or its subsidiaries provide management services. Our Board has concluded that none of these five Directors possessed or currently possesses any relationship that could impair his or her judgment in connection with his or her duties and responsibilities as a Director or that could otherwise be a direct or indirect material relationship under applicable Nasdaq and SEC standards.

Pursuant to our Governance Guidelines, our Independent Directors are expected to meet in regularly scheduled meetings at which only Independent Directors are present. It is expected that these executive sessions may occur at least twice per year. Our Independent Directors also meet separately with our officers, with our Director of Internal Audit and with our independent auditors. The presiding Director for purposes of leading Independent Director sessions will be the Lead Independent Director, unless the Independent Directors determine otherwise.

All Directors play an active role in overseeing our business both at the Board and committee levels. As set forth in our Governance Guidelines, the core responsibility of our Directors is to exercise sound, informed and independent business judgment in overseeing the Company and its strategic direction. Our Directors are skilled and experienced leaders and currently serve or have served as members of senior management in public and private for profit and nonprofit organizations, and also have served in academia. Our Directors may be called upon to provide solutions to various complex issues and are expected to, and do, ask hard questions of our officers and advisers. Our Board is small, which facilitates informal discussions and communication from management to our Board and among Directors.

Adam D. Portnoy has served as Chair of our Board since 2019. One or more of our executive officers and our Director of Internal Audit are not members of our Board and regularly attend Board and Board committee meetings. Special meetings of our Board may be called at any time by the President, any Managing Director or any two Directors. Our Managing Directors, in consultation with our management and our Director of Internal Audit, set the agenda for Board meetings. Other Directors may suggest agenda items as well. Discussions at Board meetings are led by the Managing Director or Independent Director who is most knowledgeable on a subject.

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Five of our Directors, including one of our nominees for election at the 2020 Annual Meeting, are independent under the applicable Nasdaq and SEC criteria and our governing documents. All of the members of our Audit Committee, Nominating and Governance Committee and Compensation Committee are independent under the applicable listing requirements and rules of the Nasdaq and other applicable laws, rules and regulations, including those of the SEC. As set forth in our governing documents, two of our Directors are Managing Directors, persons who have been employees, officers or directors of RMR LLC or who have been involved in the Company's day to day activities for at least one year prior to such Director's election.

We have a Lead Independent Director who is selected annually by the vote of a majority of our Independent Directors. Currently, Ms. Fraiche serves as our Lead Independent Director. Our Lead Independent Director has well-defined, substantive responsibilities that include:

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presiding at all meetings of our Board at which the Chair or a Managing Director is not present;



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presiding at all meetings and executive sessions of the Independent Directors;



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having the authority to call meetings of the Independent Directors or executive sessions of the Independent Directors;



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serving as the principal liaison between the Independent Directors and the senior management team;



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arranging, together with the Chair of our Board, for appropriate information (including quality and quantity) to be timely provided to our Board and the Independent Directors;



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assisting our Compensation Committee in its annual evaluation of the performance of our management and of our manager, RMR LLC;



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assisting with setting Board meeting agendas and arranging meeting schedules, including to ensure that there is sufficient time for discussion of all agenda items;



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considering suggestions for meeting agenda items from other Independent Directors;



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authorizing the retention of advisors and consultants who report directly to the Independent Directors when appropriate; and



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if requested, and in coordination with the Chair of our Board and the Company's management, being reasonably available for consultation and direct communication with stockholders.

Our Board is committed to corporate governance that promotes the long term interests of our stockholders. Our Board has established Governance Guidelines that provide a framework for effective governance. Our Board regularly reviews developments in corporate governance and updates our Governance Guidelines and other governance materials as it deems necessary and appropriate.

We have also adopted a Code of Business Conduct and Ethics (the "Code") to, among other things, provide guidance to our and our subsidiaries' directors, officers and employees and RMR LLC, its officers and employees and its parent's and subsidiaries' directors, officers and employees to ensure compliance with applicable laws and regulations.

Our Board has an Audit Committee, Compensation Committee, Nominating and Governance Committee and Quality of Care Committee. Our Audit Committee, Compensation Committee, Nominating and Governance Committee and Quality of Care Committee each have adopted a written charter, and reviews its written charter on an annual basis to consider whether any changes are required.

Our Audit Committee, Compensation Committee, Nominating and Governance Committee and Quality of Care Committee are comprised entirely of Independent Directors under applicable Nasdaq rules who also meet the independence criteria applicable to audit committees under the Sarbanes Oxley Act and the SEC's implementing rules under that law.

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Our corporate governance materials are available for review in the governance section of our website, including our Governance Guidelines, the charter for each Board committee, the Code and information on how to report concerns or complaints about accounting, internal accounting controls or auditing matters and any violations or possible violations of the Code and how to communicate with our Directors, individually or as a group. To access these documents on our website, visit www.fivestarseniorliving.com.

Our Insider Trading Policies and Procedures expressly prohibits members of our Board and our officers from engaging in hedging transactions involving our securities and those of RMR Inc. or any other public company to which RMR LLC or its affiliates provide management services.

Our Nominating and Governance Committee is responsible for identifying and evaluating nominees for Director and for recommending to our Board nominees for election at each annual meeting of stockholders. Our Nominating and Governance Committee may consider candidates suggested by our Directors, officers or stockholders or by others. Stockholders who would like to recommend a nominee for the position of Director should submit their recommendations in writing by mail to the Chair of our Nominating and Governance Committee, c/o Five Star Senior Living Inc., Secretary, at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458 or by email to secretary@fivestarseniorliving.com. Any such recommendation should include a description of the candidate's qualifications for Board service, the candidate's written consent to be considered for nomination and to serve if nominated and elected, as well as the addresses and telephone numbers for contacting the stockholder and the candidate for more information. Our Nominating and Governance Committee may request additional information about the stockholder recommended nominee or about the stockholder recommending the nominee. Recommendations by stockholders will be considered by our Nominating and Governance Committee in its discretion using the same criteria as other candidates it considers.

Our Board has established a process to facilitate communication by stockholders and other interested parties with Directors. Communications should be addressed to Directors in care of the Secretary, Five Star Senior Living Inc., Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458 or by email to secretary@fivestarseniorliving.com.

We understand the importance of leading a sustainable business and regularly consider ways to improve our internal culture and the communities in which we operate. Our environmental sustainability and community engagement strategies focus on a complementary set of objectives, including the following:

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Embrace Our Communities:  We recognize the importance of aligning ourselves with the communities where we operate our senior living communities. We seek to be a responsible corporate citizen and to strengthen the communities in which we own or operate our senior living communities. We regularly encourage our employees to engage in a variety of charitable and community programs.



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Environmental Stewardship:  Preserving our natural resources has a special meaning to us and to RMR LLC and its stakeholders. We support environmental practices that reduce the impact we have on our planet. We believe this is important to all our stakeholders, including investors, regulatory agencies, local communities, residents and employees. We seek to improve the environmental footprint of our properties, including by reducing energy consumption and water

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usage at our properties, especially when doing so may reduce operating costs and improve the properties' competitive positions. Through our Green Stars Program—we strive to achieve results by using resources more efficiently, minimizing waste, and increasing awareness among employees and residents.

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Diversity:  We value a diversity of backgrounds, experience and perspectives. Our Chief Executive Officer is a woman and our Board is comprised of more than 40% women. We are an equal opportunity employer.

To learn more about our sustainability initiatives, visit www.fivestarseniorliving.com/the-five-star-difference/green-stars-program.