Exhibit 10.1

 

LETTER AGREEMENT

 

January 16, 2015

 

Sentinel RE Investment Holdings LP

c/o Kohlberg Kravis Roberts & Co. L.P.

9 West 57th Street, Suite 4200

New York, NY 10019

Attention: Billy Butcher and General Counsel

 

Re: Issuance of Series B Convertible Preferred Units and Change of Control

 

Ladies and Gentlemen:

 

Reference is hereby made to that certain Purchase Agreement, as amended by that
Amendment Agreement, dated February 10, 2014, that Second Amendment Agreement,
dated April 8, 2014, and that Third Amendment Agreement, dated December 22, 2014
(the “Third Amendment”) (collectively, the “Purchase Agreement”) by and among
Sentinel RE Investment Holdings LP, a Delaware limited partnership (the
“Investor”), Sentio Healthcare Properties, Inc., a corporation organized under
the laws of the State of Maryland (the “Company”), and Sentio Healthcare
Properties OP, L.P., a Delaware limited partnership (the “Partnership,” and
together with the Company, the “Sentio Parties”). Capitalized terms not
otherwise defined herein shall have the respective meanings assigned to such
terms in the Purchase Agreement.

 

Whereas, if the Partnership were to issue all Series B Convertible Preferred
Units, as calculated pursuant to Section 2.2 of the Purchase Agreement, for the
Exercised Put Amount related to the Construction Loan Put Exercise, the Investor
would beneficially own greater than 49% of the outstanding partnership interest
of the Partnership, triggering certain “change-of-control” provisions in the
Sentio Parties’ loan documents, which, without consents from the lenders
thereto, would cause the Sentio Parties to be in default under such loan
documents. Although the Sentio Parties are currently pursuing such requisite
lender consents, the Sentio Parties do not anticipate receiving all required
consents prior to the Closing of the Construction Loan Put Exercise and thus
wish to divide the issuance of the Series B Convertible Preferred Units for the
Construction Loan Put Exercise into two issuances.

 

In consideration of the mutual agreements and covenants contained herein, for
the reasons discussed above and for other good and value consideration, the
receipt and sufficiency of which is hereby acknowledged, the Sentio Parties and
the Investor hereby agree as follows:

 

 

 

 

1.          Issuance of Series B Convertible Preferred Units. Notwithstanding
anything to the contrary in the Purchase Agreement, upon the Closing of the
Construction Loan Put Exercise, the Partnership will issue to the Investor that
number of Series B Convertible Preferred Units that would cause the Investor’s
ownership interest in the Partnership to be 48.9% (such number of Series B
Convertible Preferred Units hereafter referred to as the “First Issuance”). The
balance of the Series B Convertible Preferred Units issuable upon the Closing of
the Construction Loan Put Exercise pursuant to the Third Amendment (which amount
will equal the difference between (i) the securities calculated pursuant to
Section 2.2 of the Purchase Agreement for the Construction Loan Put Exercise
(the “Full Issuance”) and (ii) the First Issuance) will then be issued upon the
earlier to occur of the following: (a) receipt of all lender consents listed on
Schedule A attached hereto, (b) four months following the Closing of the
Construction Loan Put Exercise, subject to one or more extensions beyond such
four-month period exercisable by the Investor in its discretion upon ten days’
notice to the Sentio Parties, (c) upon a Liquidation Event (as defined in the
Investor Rights Agreement), (d) at the Investor’s election, a sale of a material
amount of the assets of the Company or the Partnership, (e) at the Investor’s
election, a sale or issuance of any equity in the Company or the Partnership
other than (X) sales by holders of the stock of the Company in the ordinary
course or (Y) issuances pursuant to the Purchase Agreement and (f) at the
Investor’s election, the listing of securities of the Company or the Partnership
on a nationally recognized stock exchange. For all other purposes under the
Purchase Agreement, as well as the Investor Rights Agreement and the Partnership
Agreement (each as defined in the Purchase Agreement), including the receipt by
the Investor of distributions payable on the Series B Convertible Preferred
Units under Section 9.2(d)(iii)(F) of the Partnership Agreement (which shall be
accrued until they are paid to the Investor at the time of the Full Issuance),
the Investor shall be treated as having been issued the Full Issuance as of the
date of the Closing; provided that the Investor shall have only the voting
rights relating to the securities the Investor actually beneficially owns;
provided further that nothing herein shall be deemed to amend or modify Sections
9.2(d)(iii)(A) and 9.2(d)(iv)(D) of the Partnership Agreement. Notwithstanding
anything to the contrary in the Purchase Agreement, the Investor Rights
Agreement, the Partnership Agreement or this Letter Agreement, in no event shall
the Investor be required, without its prior written consent, to invest in the
Company in excess of $15,500,000 in the aggregate from the date of the First
Issuance unless the Investor has received the Full Issuance. The Sentio Parties
and the Investor agree that upon receipt of copies of the loan documents
evidencing the loan encumbering the property known as Buffalo Crossing (the
“Buffalo Crossing Loan”), Schedule A attached hereto shall be amended to reflect
whether lender consent is required with respect to the Buffalo Crossing Loan.

 

2.          Ratification. The Purchase Agreement and this Letter Agreement shall
remain in full force and effect and are hereby ratified and confirmed in all
respects.

 

3.          Governing Law. This Letter Agreement will be governed by and
construed in accordance with the internal procedural and substantive laws of the
State of New York, without giving effect to the choice of law provisions of such
state that would cause the application of the laws of any other jurisdiction.

 

4.          Counterparts. This Letter Agreement may be executed in counterparts
(including by facsimile or other electronic transmission), all of which will be
considered one and the same agreement and will become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
parties (including by facsimile or other electronic transmission).

 

[SIGNATURE PAGE FOLLOWS]

 

2

 

 

If the foregoing meets with your approval, please indicate your acceptance of
this Letter Agreement by countersigning a copy of this agreement in the space
indicated below.

 

  Very truly yours,       Sentio Healthcare Properties, Inc.       By: /s/ John
Mark Ramsey   Name: John Mark Ramsey   Title: President and Chief Executive
Officer       Sentio Healthcare Properties OP, L.P.       By: Sentio Healthcare
Properties, Inc., its     general partner       By: /s/ John Mark Ramsey   Name:
John Mark Ramsey   Title: President and Chief Executive Officer

 

Agreed to and accepted:   Sentinel RE Investment Holdings LP       By: Sentinel
RE Investment Holdings GP, as general partner       By: /s/ Billy Butcher  
Name:  Billy Butcher   Title:  Vice President        

 

 

 

 

SCHEDULE A

 

Lender Consents

 

Lender Consent Required:

 

1.Rome

2.Global/Dallas

3.Hedgecoxe

4.Caruth Haven

5.Oaks Bradenton

6.Greentree

7.Forestview

8.Floral Vale

9.Chattanooga

10.Amber Glen

11.Mill Creek

12.Hudson Creek

13.Sugar Creek

14.Buffalo Crossing

 

Lender Consent Not Required:

 

1.Oakleaf Portfolio

2.Bryan MOB

3.Blue Springs/Parkway

 

Conditional: Lender consent is not required provided that the applicable
condition set forth below is satisfied at the time of the Full Issuance. If the
applicable condition is not satisfied at the time of the Full Issuance, lender
consent is required.

 

Loan   Condition Standish Village   Compliance with the provisions of Section 7
of Exhibit B to that certain Senior Housing Loan and Security Agreement dated
December 6, 2013 St. Andrews Village   Compliance with the provisions of Section
7 of Exhibit B to that certain Multifamily Loan and Security Agreement – Seniors
Housing dated August 19, 2014 Woodbury Mews   The satisfaction of the carve outs
to a change of control scenario set forth in the definition of “Change of
Control”, including, but not limited to, the “Take Out/Management Criteria”.
MVI, Live Oak, Wildewood, Gables-Hudson   The Partnership or another entity
satisfactory to the administrative agent of the loan provides a carve out
guaranty to such agent in favor of the lenders under the loan along with notice
of such transfer prior to the Full Issuance on substantially the same form as
the guaranty executed by the Company in connection with the origination of
the  loan. Sumter Place   The Partnership or another entity satisfactory to the
administrative agent of the loan provides a carve out guaranty to such agent in
favor of the lenders under the loan along with notice of such transfer prior to
the Full Issuance on substantially the same form as the guaranty executed by the
Company in connection with the origination of the loan. Allentown   Borrower
provides the applicable lender with notice of such transfer within ten (10)
business days thereof. Court at Hilliard, Compass 1 and Compass 2   Receipt of
approval from HUD for each Form 2530 filed with HUD respect to (i) Investor’s
potential ownership of over 50% of the shares of the Company and (ii) each
member of the Board appointed by Investor.