EXHIBIT 10-2
EXECUTION
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (this "First Amendment")
is entered into as of March 28, 2003 by and among MARRIOTT INTERNATIONAL, INC.,
a Delaware corporation ("Parent"), MARRIOTT SENIOR HOLDING CO., a Delaware
corporation and wholly owned subsidiary of Parent ("MSHC"), MARRIOTT MAGENTA
HOLDING COMPANY, INC., a Delaware corporation and wholly owned subsidiary of
Parent and MSHC ("Holdco"; and, together with Parent and MSHC, "Sellers"), and
SUNRISE ASSISTED LIVING, INC., a Delaware corporation ("Buyer" and, together
with Sellers, the "Parties").
WHEREAS, the Parties have entered into a Stock Purchase Agreement dated as
of December 30, 2002 (the "Purchase Agreement"), pursuant to which Buyer has
agreed to purchase from Sellers, and Sellers have agreed to sell to Buyer, all
of the issued and outstanding capital stock of Marriott Senior Living Services,
Inc., a Delaware corporation; and
WHEREAS, the Parties desire to amend certain provisions of the Purchase
Agreement on the terms set forth in this First Amendment.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein and other consideration, the value, receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
1. Amendments to Purchase Agreement.
A. Section 1.1 of the Purchase Agreement is hereby amended by
inserting the following definitions in proper alphabetical order:
"`First Amendment' means the First Amendment to Stock Purchase
Agreement dated as of March 28, 2003 by and among the Parties."
"`Reaffirmation of Agreements' means the Reaffirmation of Agreements
dated as of March 28, 2003 executed by MCC and MSLS."
"`Section 2.6 Cash Flow Adjustment Amount' has the meaning set forth
in Section 2.6(a)."
"`Section 2.6 Measurement Period' has the meaning set forth in Section
2.6(b)."
"`Section 2.6 Valuation Date Adjustment Amount' has the meaning set
forth in Section 2.6(a).
"`Section 2.6 Valuation Date' has the meaning set forth in Section
2.6(b)."
"`Surety Bonds' has the meaning set forth in Section 5.7(g)."
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"`Trademark License Agreement' means the Trademark License Agreement
dated as of March 28, 2003 by and between Parent, the Company and the
Company Subsidiaries party thereto."
B. The definition of "Related Agreements" contained in Section 1.1
of the Purchase Agreement is hereby amended by inserting ", the Trademark
License Agreement, the Reaffirmation of Agreements" after the phrase "the
Sublease" appearing therein.
C. The definitions of "Owner 1 Continuing Agreement" and "Owner 1
New Management Agreement" contained in Section 1.1 of the Purchase Agreement are
hereby deleted in their entirety.
D. The reference to "2.6(b)" in the definition of "Section 2.6
Adjustment Amount" contained in Section 1.1 of the Purchase Agreement is hereby
deleted and replaced with a reference to "2.6(a)".
E. Section 2.3(b) of the Purchase Agreement is hereby amended by
deleting the second and third sentences thereof in their entirety and replacing
them with the following:
"If the Estimated Adjusted Working Capital (i) is greater (i.e. less
negative) than the Target Adjusted Working Capital, Buyer will pay to
Parent the absolute difference between Estimated Adjusted Working Capital
and the Target Adjusted Working Capital, or (ii) is less (i.e., more
negative) than the Target Adjusted Working Capital, Parent will pay to
Buyer the absolute difference between the Estimated Adjusted Working
Capital and the Target Adjusted Working Capital. Any payments under this
Section 2.3(b) shall be paid at the times and in the amounts set forth on
Schedule 2.3(b) by wire transfer of immediately available funds to a bank
account designated in advance in writing by the Party entitled to receive
the payment."
F. Section 2.5(c) of the Purchase Agreement is hereby amended by
inserting the following before the period at the end of the first sentence
thereof:
"provided that, for purposes of this Section 2.5(c), in computing the
aggregate management fees payable to Buyer or its Affiliates under the
Management Agreements for the Facilities listed on Schedule 2.5(c)(i) any
amendments to any such Management Agreements that change the management
fees therein after the Closing Date shall not be given effect in
calculating such aggregate management fees payable, unless otherwise
consented to by Parent (on behalf of Parent and the other Sellers) in
writing; it being understood that any such post-Closing amendment entered
into by Buyer to settle or resolve any claim or dispute with the "owner"
(or "tenant" or "lessee", as applicable) of an Owner 2 Facility or an Other
Managed Facility, which claim or dispute would establish a basis under
Section 2.5(a)(A), (B) or (C) for a Purchase Price reduction under this
Section 2.5 if such Management Agreement were terminated, shall be given
effect in calculating such aggregate management fees payable and shall not
require the prior written consent of Parent."
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G. Section 2.5(j) of the Purchase Agreement is hereby amended by (i)
inserting "except as otherwise provided in the proviso at the end of this
sentence," after " in this Section 2.5," appearing on the first line thereof and
(ii) inserting the following words before the period at the end of Section
2.5(j):
"; provided that, with respect to the Management Agreement for the
Rosewood-Estate Maplewood Facility, there shall be no reduction in the
Purchase Price payable by Buyer at Closing under this Section 2.5(j) and
such termination shall be treated for all purposes under this Section 2.5
as if such Management Agreement were terminated after the Closing.
Consistent with the foregoing, the Parties acknowledge and agree that, with
respect to the Management Agreement for the Rosewood-Estate Maplewood
Facility, (i) Buyer is hereby deemed to have satisfied the requirements
under Sections 2.5(a) and (b) with respect to the establishment of a basis
for a Purchase Price reduction under Section 2.5, (ii) Sellers hereby waive
the requirement under Section 2.5(d) to include in the Section 2.5 Payment
Notice a summary of the basis for termination of such Management Agreement,
(iii) Sellers hereby acknowledge that the aggregate amount of management
fees payable to Buyer or its Affiliates under such Management Agreement is
zero for purposes of this Section 2.5 (including the Section 2.5 Payment
Notice) and (iv) Buyer shall be entitled to a Purchase Price reduction
under this Section 2.5 to the extent provided in Section 2.5(c)."
H. Section 2.6 of the Purchase Agreement is hereby amended by deleting
subsection (a) and (b) in their entirety and replacing them with the following:
"(a) Sellers shall be entitled to a post-Closing adjustment to the
Purchase Price relating to the Owner 1 Facilities in accordance with this
Section 2.6.
(1) On the Section 2.6 Valuation Date (as defined below), the
amount of the adjustment under this Section 2.6 (the "Section 2.6
Valuation Date Adjustment Amount") with respect to any Owner 1
Facility shall be equal to the product of (x) the difference between
(A) the average base fee percentage (i.e., the base fee calculated as
a percentage of gross property revenues) received during (or
forecasted to be received during) the Section 2.6 Measurement Period
(as defined below) minus (B) 3.5%, multiplied by (y) the gross
property revenues derived from the operation of the Owner 1 Facility
during the 12-month period immediately preceding the Section 2.6
Valuation Date. For example, if the base fee percentage is 5.0%, gross
revenues derived from the operation of the Owner 1 Facility during the
12-month period immediately preceding the Section 2.6 Valuation Date
is $10,000,000, and the remaining term of the management agreement is
eight years, the Section 2.6 Adjustment Amount with respect to such
management agreement would be $750,000 ($10,000,000 x (5.0%-3.5%) x
5).
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(2) In addition, from time to time during the period commencing
on the Closing Date and terminating on the eighth anniversary of the
Section 2.6 Valuation Date, Buyer shall pay to Parent 50% of any of
the following amounts within 10 Business Days following receipt
thereof (any such amount, a "Section 2.6 Cash Flow Adjustment Amount"
and, together with the "Section 2.6 Valuation Date Adjustment Amount",
the "Section 2.6 Adjustment Amount"): (x) payments which the operator
or manager receives during the Section 2.6 Measurement Period relating
to the Owner 1 Facility based on or arising from (i) proceeds from the
sale of the Owner 1 Facility, (ii) proceeds from the refinancing of
indebtedness related to the Owner 1 Facility, (iii) incentive payments
(excluding normal and customary incentive fees related to improvement
of the performance of the Owner 1 Facility), or (y) other amounts that
the operator or manager receives from the cash flow generated by the
Owner 1 Facility during or related to the Section 2.6 Measurement
Period (excluding base fees or normal and customary incentive fees
related to improvement of the performance of the Owner 1 Facility);
provided that notwithstanding anything to the contrary in this Section 2.6, the
aggregate amount of all adjustments under this Section 2.6 shall not exceed $7.2
million.
(b) For purposes of this Section 2.6:
(1) `Section 2.6 Measurement Period' with respect to any Owner 1
Facility shall mean the period from the Closing Date until the
expiration of the term of the Owner 1 Management Agreement and, if a
new management agreement is entered into by Buyer or any Affiliate of
Buyer, including the Company or any Company Subsidiary, on or prior to
the Section 2.6 Valuation Date, the period from the effectiveness of
such management agreement until the expiration of the term of such
management agreement, including, in either case, any possible
extensions of the term thereof (not subject to any conditions, other
than the delivery of notice of such extension, that have not been
satisfied as of the Section 2.6 Valuation Date or are within the
reasonable control of the operator or manager) at the operator's or
manager's option without the consent of the "owner" (or "tenant" or
"lessee," as applicable); provided that if the remaining term of a
management agreement is cancelable by the "owner" (or "tenant" or
"lessee," as applicable) without cause or a default by the operator or
manager during such period, the number of days prior notice required
to be given by the "owner" (or "tenant" or "lessee," as applicable)
prior to termination of the management agreement shall be the term of
such management agreement for purposes of this definition; provided
that the Section 2.6 Measurement Period shall not exceed 5 years in
length.
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(2) `Section 2.6 Valuation Date' shall mean, with respect to any
Owner 1 Facility, the earliest to occur of (i) the eighth anniversary
of the Closing Date, (ii) the date on which Buyer or any Affiliate of
Buyer, including the Company or any Company Subsidiary, enters into a
new management agreement with respect to an Owner 1 Facility with a
term (including any possible extensions of the term thereof (not
subject to any conditions, other than the delivery of notice of such
extension, that have not been satisfied as of the effective date of
the management agreement or are within the reasonable control of the
operator or manager) at the operator's or manager's option without the
consent of the "owner" (or "tenant" or "lessee," as applicable)) of
five years or greater or (iii) the first anniversary of the date on
which Buyer or any Affiliate of Buyer, including the Company or any
Company Subsidiary, no longer manages the Owner 1 Facility.'"
I. Section 2.6(c) of the Purchase Agreement is hereby amended by
deleting the first and second sentence thereof in their entirety and replacing
them with the following:
"Within 90 days following the occurrence of the Section 2.6 Valuation
Date with respect to any Owner 1 Facility or within 5 Business Days
following the receipt of any amounts requiring the payment of a Section 2.6
Cash Flow Adjustment Amount, Buyer shall prepare and submit to Parent (on
behalf of Parent and the other Sellers) a statement (the "Section 2.6
Adjustment Statement") setting forth, in reasonable detail, the calculation
of the Section 2.6 Adjustment Amount with respect thereto."
J. Section 2.8(b) of the Purchase Agreement is hereby amended by
deleting the last sentence of such section in its entirety and replacing it with
the following:
"The Closing shall be effective at 11:59 p.m. on March 28, 2003. To
the extent that new Permits are required to be issued in connection with
the consummation of the Closing, the Parties shall request that the
applicable Governmental Entity issue such Permits effective at 12:00 a.m.
on March 29, 2003."
K. Article IV of the Purchase Agreement is hereby amended by
inserting the following new Section 4.15 after Section 4.14.
"4.15 Terminations of Certain Management Agreements.
"Buyer consents to the termination of the Management Agreements
for Brighton Gardens of Cincinnati, Brighton Gardens of Memphis and
Rosewood Estate - Maplewood prior to the Closing. With respect to the
termination of any of such Management Agreements, the Parties
acknowledge and agree that the Disclosure Schedules need not be
updated to reflect the fact that such Management Agreements have been
terminated or to list the termination agreements entered into in
connection
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with such terminations to the extent that final copies of such
termination agreements have been provided to Buyer at or prior to the
Closing (it being acknowledged that the Disclosure Schedules shall be
deemed to have been so modified without any action by Sellers)."
L. Section 5.7 of the Purchase Agreement is hereby amended by
inserting the following new subsections (f) and (g) at the end of such Section:
"(f) Until Buyer causes the Company and MCC to change their names as
provided in Section 5.5(c), Buyer agrees with respect to any lifecare bonds
and continuing care agreements that are signed by the Company or MCC after
the Closing, following receipt of any necessary Approvals from any
Governmental Entities, which it shall use its Commercially Reasonable
Efforts to obtain, to:
(i) include the following language prominently in such lifecare
bonds and continuing care agreements (utilizing the appropriate
alternative for the Company or MCC depending on the signatory
thereto):
'[Marriott Senior Living Services, Inc./Marriott Continuing
Care LLC] is not affiliated in any way with Marriott
International, Inc. and is in the process of changing its name to
Sunrise [Senior Living Services, Inc./Continuing Care LLC].
Marriott International, Inc. and its affiliates have no
responsibility for the operation or management of the [Community]
and have no obligation under or in respect of this [Lifecare
Bond/Continuing Care Agreement].'
(ii) identify the Company or MCC, as the case may be, in both the
opening paragraph of and in the signature block as any such lifecare
bonds and continuing care agreements as "a Delaware
[corporation/limited liability company] to be renamed Sunrise [Senior
Living Services, Inc./Continuing Care LLC].
(g) Attached hereto as Schedule 5.7(g) is a list of all surety bonds
outstanding in connection with the Business (the "Surety Bonds") as of the
date immediately preceding the Closing Date. Promptly following the
Closing, Buyer shall take or cause to be taken all steps necessary to
ensure that, no later than 20 Business Days following the Closing, Sellers
and their Affiliates shall be unconditionally released, in a manner
reasonably satisfactory to Sellers, from all obligations in respect of the
Surety Bonds."
M. Section 5.9(k) of the Purchase Agreement is hereby amended by
inserting the following at the end of such Section:
"To give effect to the foregoing in connection with the termination of
any Management Agreement after the Closing, (i) Buyer shall give Sellers
notice as soon as reasonably practicable of its intent to effect any such
termination, (ii) as soon as reasonably practicable after receipt of such
notice, Sellers shall notify
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Buyer in writing of the aggregate amount of Additional Cost Amounts
projected by Sellers to accrue in respect of the applicable Facility, and
(iii) Buyer shall, to the extent permitted under the applicable Management
Agreement, use Commercially Reasonable Efforts to cause the owner or lessee
of such Facility to deposit an amount equal to the projected Additional
Cost Amounts into an escrow account for the benefit of Sellers."
N. Section 10.1(b) of the Purchase Agreement is hereby amended by
inserting ", the Trademark License Agreement" after the phrase "provisions of
this Agreement".
O. Section 10.1(l) of the Purchase Agreement is hereby amended by
inserting the following at the end of the first sentence thereof:
"; and provided further that this Section 10.1(l) shall not apply with
respect to a Facility that is subject to the Trademark License Agreement in
the event the Trademark License Agreement is terminated by Licensee
pursuant to Section 9.2(b) of the Trademark License Agreement or terminated
by Licensor pursuant to Section 9.2(a) of the Trademark License Agreement".
P. Section 10.2(b) of the Purchase Agreement is hereby amended by
inserting "(other than the Trademark License Agreement)" after the phrase "or
the Related Agreements".
2. Amendments to Schedules to the Purchase Agreement.
A. The Schedules are hereby amended to create a new Schedule 2.3(b)
in the form attached to this First Amendment as Exhibit I.
B. The Schedules are hereby amended to create a new Schedule 5.7(g)
in the form attached to this First Amendment as Exhibit II.
C. The second bulleted section of Note 2 of Schedule 2.3(c) entitled
"Exclusion of certain reserves and liabilities" is hereby amended by (i)
inserting the words "Estimated Adjusted Working Capital or" before the reference
to "Final Adjusted Working Capital" appearing on the second line thereof, (ii)
deleting the word "or" at the end of clause (v) thereof and (iii) inserting the
following at the end of clause (vi) before the period:
"or (vii) will be paid by Sellers".
D. Schedule 2.5(c)(i) is hereby amended to (i) delete the reference
to "$348,616"in the column entitled "Adjustment Amount" corresponding to
"ROSEWOOD ESTATE-MAPLEWOOD" and replace it with a reference to "$174,308" and
(ii) delete the reference to "$43,577.00" in the column entitled "Annual
Adjustment Amount Decrease" corresponding to "ROSEWOOD ESTATE-MAPLEWOOD" and
replace it with a reference to "$21,788.50"
E. Schedule 3.1(f)(1) is hereby amended to insert the following
language at the end of the list of properties contained thereon:
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"For purposes of the definitions of `Patient Injury Claims' and
`Medical Services' only, the term `Facilities' shall refer to the list of
properties contained on this Schedule 3.1(f)(1) as of the date of the
Agreement (without giving effect to any amendment or modifications to such
Schedule (whether deemed to occur by operation of a provision in this
Agreement or by virtue of an actual amendment or modification) prior to the
Closing), but excluding ▇▇▇▇▇ ▇▇▇▇ Guest Homes."
F. Schedule 4.9 of the Purchase Agreement is hereby amended by
deleting the first sentence thereon in its entirety and replacing it with the
following:
"Parent and MSHC will contribute all of the Stock to Holdco as a
contribution to capital of Holdco."
G. Schedule 10.1(l) of the Purchase Agreement is hereby amended to
delete any information in the table on such Schedule in the row referencing
"Edgehill Retirement Community" in the column entitled "Management Agreement"
and replacing it with "[Intentionally Omitted]."
3. Amendment to Exhibit to the Purchase Agreement.
A. The third sentence of the second paragraph of Exhibit G attached
to the Purchase Agreement is hereby deleted in its entirety and replaced with
the following:
"MSLS will receive a percentage of the subordinated base fee equal to
the percentage equal to Net House Profit (calculated on a hypothetical
basis deducting the full 7.0% base fee) in excess of the $14M owner's
priority divided by $5M."
4. Miscellaneous.
A. On and after the date of this First Amendment, each reference in
the Purchase Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Purchase Agreement, and each reference in the
Related Agreements and documents delivered at the Closing to "the Purchase
Agreement", "thereunder", "thereof" or words of like import referring to the
Purchase Agreement, shall mean and be a reference to the Purchase Agreement as
amended by this First Amendment.
B. Except as specifically amended by this First Amendment, the
Purchase Agreement as specifically amended by this First Amendment is
unmodified, shall remain in full force and effect.
C. This First Amendment and the legal relations between the Parties
shall be governed by and construed in accordance with the laws of the State of
Delaware applicable to contracts made and performed in such state and without
regard to conflicts of law principles.
D. In accordance with Section 11.6 of the Purchase Agreement, this
First Amendment may be executed and delivered in one or more counterparts and by
different Parties in separate counterparts. All of such counterparts shall
constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each Party and delivered to the other Parties thereto.
[Remainder of page left blank intentionally.]
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IN WITNESS WHEREOF, the Parties have executed and delivered this First
Amendment as of the date first written above.
BUYER:
SUNRISE ASSISTED LIVING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: President
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SELLERS:
MARRIOTT SENIOR HOLDING CO.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Vice President
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MARRIOTT INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Vice President
---------------------------
MARRIOTT MAGENTA HOLDING
COMPANY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Title: Vice President
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S-1
[THE SCHEDULES AND EXHIBITS REFERENCED IN THIS FIRST AMENDMENT
TO STOCK PURCHASE AGREEMENT HAVE BEEN INTENTIONALLY OMITTED.]
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