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EXHIBIT 10.39
AMENDMENT TO STERLING - MEDITRUST LEASES
This AMENDMENT is made as of the 23rd of December, 1999 by and among
(i) ASSISTED LIVING PROPERTIES, INC., a Kansas corporation having its principal
place of business c/o Sterling House Corporation, 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53005 ("ALP"); (ii) STERLING HOUSE CORPORATION,
a Kansas corporation having its principal place of business at 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 ("Sterling"); (iii)
ALTERRA HEALTHCARE CORPORATION, a Delaware corporation formerly known as
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation having its principal
place of business at 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin
53005 ("Alterra"); (iv) ALS LEASING, INC., a Delaware corporation, having its
principal place of business at 450 North Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005 ("ALS Leasing"); (v) MEDITRUST OF KANSAS, INC., a Delaware
corporation, having a principal place of business c/o MEDITRUST CORPORATION, 197
First Avenue, Needham Heights, Massachusetts 02494 ("MOK"); (vi) NEW MEDITRUST
COMPANY LLC, a Delaware limited liability company and successor by merger to
MEDITRUST COMPANY LLC (the successor by merger to MEDITRUST OF FLORIDA, INC., a
New York corporation, MEDITRUST OF TEXAS, INC., a Delaware corporation, and
MEDITRUST OF OHIO, INC., a Delaware corporation), having a principal place of
business c/o MEDITRUST CORPORATION, 197 First Avenue, Needham Heights,
Massachusetts 02494 (collectively, "Meditrust"); (vii) T AND F PROPERTIES, LP, a
Delaware limited partnership (successor in title to certain Meditrust/ALS
Facilities (as such term is defined in the Meditrust Agreements) located in
Texas), having a principal place of business c/o MEDITRUST CORPORATION, 197
First Avenue, Needham, Massachusetts 02494 ("T and F"); and (viii) MEDITRUST
ACQUISITION COMPANY LLC, a Delaware limited liability company (the successor by
merger to MEDITRUST ACQUISITION CORPORATION III, a Delaware corporation), having
its principal place of business c/o MEDITRUST CORPORATION, 197 First Avenue,
Needham Heights, Massachusetts 02494 ("MAC").
W I T N E S S E T H:
WHEREAS, ALP, Meditrust and MOK are parties to that certain Amended and
Restated Agreement Regarding Related Transactions ($35,000,000 Combined
Sale/Leaseback) dated as of March 31, 1997, as amended (the "$35,000,000
Meditrust Agreement"); and
WHEREAS, ALS Leasing, Alterra and MAC are parties to that certain
Amended and Restated Agreement Regarding Related Lease Transactions
($100,000,000 Meditrust Investment) dated as of April 30, 1997, as amended (the
"$100,000,000 Meditrust Agreement"); and
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WHEREAS, ALP, Meditrust and MOK are parties to that certain Agreement
Regarding Related Transactions ($50,000,000 Combined Sales/Lease Back) dated as
of September 30, 1997, as amended (the "$50,000,000 Meditrust Agreement"); and
WHEREAS, ALS Leasing, Alterra and MAC are parties to that certain
Agreement Regarding Related Lease Transactions ($150,000,000 Meditrust
Investment) dated as of November 21, 1997, as amended (the "$150,000,000
Meditrust Agreement"). The $35,000,000 Meditrust Agreement, the $100,000,000
Meditrust Agreement, the $50,000,000 Meditrust Agreement and the $150,000,000
Meditrust Agreement may be referred to herein collectively as the "Meditrust
Agreements"; and
WHEREAS, Alterra and Sterling (as the sole shareholder of ALP)
consummated on or about October 23, 1997 an Agreement and Plan of Merger dated
as of July 30, 1997, as amended, pursuant to which Sterling became a
wholly-owned subsidiary of Alterra and a sister corporation to ALS Leasing; and
WHEREAS, Meditrust consented to the aforesaid merger on certain terms
and conditions, including, without limitation, that Alterra guaranty the Lease
Obligations, as such term is defined in those certain Facility Lease Agreements
by and among Meditrust and ALP (the "Sterling Leases");
WHEREAS, in conjunction with the aforesaid merger of Sterling and upon
receipt of the aforesaid Alterra guaranty, Meditrust agreed to amend the
Sterling Leases to make certain provisions thereof consistent with certain
provisions of the Facility Lease Agreements by and between MAC and ALS Leasing
(the "ALS Leases"); and
WHEREAS, Alterra and Sterling now desire to merge Sterling with
Alterra, with Alterra to become the surviving entity, and MOK, Meditrust, MAC
and T and F agree to consent to such merger, contingent upon the execution of
this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. Initial capitalized terms used herein and not
otherwise defined shall have the meanings respectively ascribed to such terms in
the ALS Leases.
2. CONSENT TO MERGER. MOK, Meditrust, MAC and T and F hereby (i)
consent to the merger of Sterling with Alterra, with Alterra to be the surviving
corporation following such merger, (ii) accept Alterra as the guarantor under
the Sterling Leases immediately following the merger and (iii) agree that such
merger and the failure of Sterling to be the surviving corporation shall not be
or constitute a Default or Event of Default under the Sterling Leases, the ALS
Leases, the Meditrust Agreements or any documents or instruments executed or
delivered in connection therewith. MOK, Meditrust, MAC and T and F further
represent and warrant that they collectively are the owners of all of the
Facilities subject to the Sterling Leases and the ALS
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Leases and no other persons or entities claiming by, through or under MOK,
Meditrust, MAC or T and F are required to consent to the merger or the other
matters set forth in this Amendment. As partial consideration to the
aforementioned consent to merger, ALP, Sterling (if prior to the date said
merger is consummated), Alterra and ALS Leasing shall, within ten (10) business
days of the request of any of MOK, Meditrust, T and F or MAC, execute any
amendments to the Meditrust Agreements reasonably requested by any such party to
reflect the facts as they currently exist and/or to make modifications
consistent with this Amendment. Alterra shall notify MAC as soon as the
aforementioned merger is consummated.
3. ALTERRA AS GUARANTOR OF STERLING LEASES. Simultaneously with the
consummation of the merger of Sterling with Alterra, resulting in Alterra as the
surviving corporation, all references in the Sterling Leases to the Guarantor
shall mean and refer to only Alterra. Effective upon the consummation of such
merger, ALP shall be a wholly-owned subsidiary of Alterra.
4. CHANGES IN EXECUTIVE OFFICERS. The following language (or any
substantially similar language) appearing in each Sterling Lease shall be
deleted in its entirety:
"CHANGES IN EXECUTIVE OFFICERS. Lessee shall not suffer of permit to
exist any circumstance in which any of the executive officers listed on
EXHIBIT J hereto ceases for any reason to serve as an executive officer
of Lessee, unless succeeded in such position within thirty (30) days by
another individual reasonably satisfactory to Lessor, and this
provision will, in turn become effective as to each such successive
executive officer."
5. DEFAULT: CHANGE IN CONTROL. The following language (or any
substantially similar language) appearing in the Article entitled "Default"
under each Sterling Lease shall be deleted in its entirety:
"(h) in the event that, without the prior written consent of
Lessor, in each instance, which consent may be withheld by Lessor in
its sole and absolute discretion: (i) there shall be a change in the
Person or Persons presently holding management or ownership control of
any member of the Leasing Group (other than changes in stock ownership
of, or the individuals managing, Guarantor), whether by operation of
law or otherwise; (ii) all or any portion of the interest of any
partner or member of any member of the Leasing Group (other than
changes in the stock ownership of Guarantor) shall be, on any one or
more occasions, directly or indirectly, sold, assigned, hypothecated or
otherwise transferred (whether by operation of law or otherwise), if
such member of the Leasing Group shall be a partnership, joint venture,
syndicate or other group; (iii) more than twenty-five (25%), in the
aggregate, of the shares of the issued and outstanding capital stock of
any member of the Leasing Group (other than changes of stock ownership
of Guarantor) shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such member of the
Leasing Group shall be a corporation; or (iv) all or any
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portion of the beneficial interest in any member of the Leasing Group
shall be, directly or indirectly, sold or otherwise transferred
(whether by operation of law or otherwise), if such member of the
Leasing Group shall be a trust;
(i) the death, incapacity, liquidation, dissolution or
termination of existence of any member of the Leasing Group with any
other Person;"
Said language shall be replaced by the following:
"(h) in the event that, without the prior written consent of
the Lessor, in each instance, which consent may be withheld by the
Lessor in its sole and absolute discretion, and except as specifically
permitted in subsection (h)(vi) or subsection (i) below:
i. there shall be a change in the Person or Persons
presently in control of any member of the Leasing
Group (other than changes in stock ownership of the
Guarantor or changes in the officers or directors of
either the Lessee or the Guarantor) (whether by
operation of law or otherwise);
ii. any member of the Leasing Group (other than
changes in the stock ownership of the Guarantor), all
or any portion of the interest of any partner or
member of any member of the Leasing Group shall be,
on any one or more occasions, directly or indirectly,
sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such
member of the Leasing Group shall be a partnership,
joint venture, syndicate or other group;
iii. any of the shares of the issued and outstanding
capital stock of any member of the Leasing Group
(other than changes of stock ownership of the
Guarantor) shall be, on any one or more occasions,
directly or indirectly, sold, assigned, hypothecated
or otherwise transferred (whether by operation of law
or otherwise), if such member of the Leasing Group
shall be a corporation;
iv. all or any portion of the beneficial interest in
any member of the Leasing Group shall be, directly or
indirectly, sold or otherwise transferred (whether by
operation of law or otherwise), if such member of the
Leasing Group shall be a trust;
v. except as otherwise expressly permitted herein, if
any Person other than the Lessee is the licensed
operator of the Facility; or
vi. more than fifty percent (50%), in the aggregate,
of the shares of the issued and outstanding capital
stock of the Guarantor are held by a single Person or
two (2) or more Affiliates (collectively, an
"Acquiror"),
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except in a Permitted Transaction (defined below). If
immediately after the date on which the Acquiror
acquire(s) more than fifty percent (50%) of such
stock, the "Net Worth" (defined as an amount
determined in accordance with GAAP) of the Guarantor
is equal to or greater than FIFTY-FIVE MILLION
DOLLARS ($55,000,000.00), then such acquisition shall
be deemed to be a "Permitted Transaction." However,
in the event that a Permitted Transaction occurs,
then the higher ratios and the Net Worth covenant
pertaining to the Guarantor specified in the
financial covenants of this Lease shall both become
operative and effective;
(i) the death, incapacity, merger, liquidation, dissolution or
termination of existence of any member of the Leasing Group (except (a)
in the case of a merger or consolidation of some other Person with the
Guarantor, which shall be a "Permitted Merger" or (b) in the case of a
Permitted Transaction); provided however, if the Persons who were the
shareholders of the Guarantor immediately prior to the Permitted Merger
hold in the aggregate less than 50% of the outstanding voting stock of
the surviving corporation which results from the Permitted Merger, then
(i) the higher ratios specified in Section 11.3.5 and the Net Worth
requirement for the Guarantor specified above shall both become
operative and effective, and (ii) if Alterra Healthcare Corporation is
not the surviving corporation which results from such Permitted Merger,
the new surviving corporation will affirm in writing its obligations
under the Guaranty;"
6. RENT COVERAGE RATIO. The financial covenant entitled "Rent Coverage
Ratio of Lessee" or "Debt Coverage Ratio of Lessee" contained in any of the
Sterling Leases shall be deleted in its entirety, and the Rent Coverage Ratio
provisions of the $35,000,000 Meditrust Agreement or the $50,000,000 Meditrust
Agreement, as applicable, shall control.
7. GUARANTOR. Notwithstanding any provisions of the Sterling Leases to
the contrary, the definition of "Guarantor" shall mean and be Alterra Healthcare
Corporation and its successors and assigns.
8. CURRENT RATIO - GUARANTOR. Notwithstanding any provisions of the
Sterling Leases to the contrary, the text of the financial covenant entitled
"Current Ratio - Guarantor" shall be deleted in its entirety, and the following
text shall be substituted therefor:
"CURRENT RATIO - GUARANTOR. The Guarantor shall achieve, as of
December 31, 1997, a ratio of Consolidated Current Assets to
Consolidated Current Liabilities equal to or greater than 0.5 to 1 and,
as of December 31 of each year thereafter during the Term, a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal
to or greater than 1.0 to 1; provided however that if a Permitted
Transaction (as defined in Section 16.1(h)(vi)) occurs, or if increased
ratios are triggered by a Permitted Merger pursuant to
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Section 16.1(i), then such ratios shall increase to 1.0 to 1.0 and 1.2
to 1.0, respectively."
9. NET WORTH OF GUARANTOR AFTER A PERMITTED TRANSACTION OR PERMITTED
MERGER. The following financial covenant shall be inserted in the Financial
Covenants section of each Sterling Lease:
"NET WORTH OF GUARANTOR AFTER A PERMITTED TRANSACTION OR
PERMITTED MERGER. From and after the occurrence of a Permitted
Transaction or if triggered by a Permitted Merger pursuant to Section
16.1(i), the Guarantor shall maintain a "Net Worth" (determined in
accordance with GAAP) of not less than FIFTY-FIVE MILLION DOLLARS
($55,000,000.00)."
10. TANGIBLE NET WORTH - GUARANTOR. Notwithstanding any provisions of
the Sterling Leases to the contrary, the text of the financial covenant entitled
"Tangible Net Worth - Guarantor" shall be deleted in its entirety, and the
following text shall be substituted therefor:
"TANGIBLE NET WORTH - GUARANTOR. The Guarantor shall maintain,
at all times, a Tangible Net Worth of not less than FORTY MILLION AND
NO/100 DOLLARS ($40,000,000.00)."
11. RESTRICTIONS RELATING TO THE GUARANTOR. Notwithstanding any
provisions of the Sterling Leases to the contrary, the text of the negative
covenant entitled "Restrictions Relating to the Guarantor" contained in the
Sterling Leases shall be deleted in its entirety, and the following text shall
be substituted therefor:
"RESTRICTIONS RELATING TO THE GUARANTOR. If, at any time
during the Term, the Tangible Net Worth of the Guarantor is less than
FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00), the Guarantor shall
not, without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the sole and absolute discretion of
the Lessor, convey, assign, donate, sell, mortgage or pledge any real
or personal property or take any other action which would have a
materially adverse effect upon the Tangible Net Worth or general
financial condition of Guarantor."
12. ACCEPTABLE LICENSED OPERATOR.
(a) DEFINITION. The following definition shall be added to the
definition section of each Sterling Lease:
"ACCEPTABLE LICENSED OPERATOR: Any of (a) the Current Manager,
(b) the Lessee, (c) the Guarantor, (d) any Manager of the Facility
(pursuant to a Management Agreement approved by the Lessor) that is
wholly-owned by Alterra Healthcare Corporation and, during the Term, is
engaged in no business or
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venture other than the ownership and/or operation of any health care
facility owned or financed by any Meditrust Entity, or (e) any
Sublessee of the Facility (pursuant to a Sublease approved by the
Lessor) that is wholly-owned or is controlled by Alterra Healthcare
Corporation and, during the Term, is engaged in no business or venture
other than the ownership and/or operation of any health care facility
owned or financed by any Meditrust Entity."
(b) AFFIRMATIVE COVENANT. The following covenant shall be added to the
Affirmative Covenant section of each Sterling Lease:
"ACCEPTABLE LICENSED OPERATOR. In the event that the Lessee
proposes that any other Acceptable Licensed Operator become the
licensed operator of the Facility, the Lessee shall so advise the
Lessor and, subject to the Lessor's review and approval of any
applicable Sublease or Management Agreement (pursuant to which the
proposed Acceptable Licensed Operator shall operate the Facility), the
Lessor shall consent to such operation of the Facility by the proposed
Acceptable Licensed Operator, as long as, prior to or contemporaneously
with the commencement of the operation of the Facility by such proposed
Acceptable Licensed Operator and without limiting any other terms and
conditions of the Lease Documents, the Lessor receives (a) such
evidence as the Lessor may request evidencing that the proposed
Acceptable Licensed Operator has received all Permits necessary for the
operation of the Facility in accordance with its Primary Intended Use,
(b) such documents executed by the proposed Acceptable Licensed
Operator as the Lessor may request to maintain and protect the Lessor's
security for the Lease Obligations (including, without limitation,
documents in form and substance substantially similar to the Permits
Assignment and Security Agreement), (c) a copy of the proposed
Acceptable Licensed Operator's articles of incorporation as certified
by the Secretary of State of the state of its incorporation, (d) a
certificate of the Secretary of State of the state of incorporation of
the proposed Acceptable Licensed Operator to the effect that the
proposed Acceptable Licensed Operator is in legal existence and good
standing on the records of such Secretary of State as of the date of
such Certificate, (e) a copy of the by-laws of the proposed Acceptable
Licensed Operator as certified by the Secretary of the proposed
Acceptable Licensed Operator, (f) resolutions certified by the
Secretary of the proposed Acceptable Licensed Operator evidencing the
execution and delivery of the documents required under this Section by
the Lessor and (g) if requested by the Lessor, a due authorization and
enforceability opinion, addressed to the Lessor, in form and substance
reasonably acceptable to the Lessor, rendered by counsel to the Lessee
and the proposed Acceptable Licensed Operator, opining as to the due
authorization, execution, delivery and enforceability of the documents
required under this Section by the Lessor."
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13. MISCELLANEOUS. Except as expressly modified above, the Sterling
Leases are hereby ratified and confirmed and shall remain in full force and
effect.
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IN WITNESS WHEREOF the parties hereto have executed this Amendment
under seal as of the date first above written.
WITNESS: ASSISTED LIVING PROPERTIES,
INC., a Kansas corporation
By: /s/ Thomas E. Komula
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Name: Name: Thomas E. Komula
Title: Vice President
WITNESS STERLING HOUSE CORPORATION,
a Kansas corporation
By: /s/ Thomas E. Komula
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Name: Name: Thomas E. Komula
Title: Vice President:
WITNESS: ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation
By: /s/ Thomas E. Komula
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Name: Name: Thomas E. Komula
Title: Senior Vice President
WITNESS: ALS LEASING, INC, a Delaware
corporation
By: /s/ Thomas E. Komula
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Name: Name: Thomas E. Komula
Title: Vice President
WITNESS: MEDITRUST OF KANSAS, INC.,
a Delaware corporation
By: /s/ Michael S. Benjamin
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Name: Name: Michael S. Benjamin
Title: Senior Vice President
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WITNESS: NEW MEDITRUST COMPANY LLC, a
Delaware limited liability company
By: /s/ Michael S. Benjamin
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Name: Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: MEDITRUST ACQUISITION
COMPANY LLC, a Delaware limited
liability company
By: /s/ Michael S. Benjamin
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Name: Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: T AND F PROPERTIES, LP, a Delaware
limited partnership
By: /s/ Michael S. Benjamin
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Name: Name: Michael S. Benjamin
Title: Senior Vice President
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