Document:

<PAGE>   1
                                                                     EXHIBIT 4.2

                              AMENDED AND RESTATED
                          SECOND SUPPLEMENTAL INDENTURE
                           DATED AS OF JANUARY 2, 1998

                                       TO

                                    INDENTURE
                          DATED AS OF DECEMBER 19, 1997

                                     BETWEEN

                         ALTERRA HEALTHCARE CORPORATION

                                       AND

                     UNITED STATES TRUST COMPANY OF NEW YORK

                                   AS TRUSTEE

                     ---------------------------------------

                    5.25% CONVERTIBLE SUBORDINATED DEBENTURES
                                    DUE 2002
                     ---------------------------------------
<PAGE>   2
                              AMENDED AND RESTATED
                          SECOND SUPPLEMENTAL INDENTURE

         AMENDED AND RESTATED SECOND SUPPLEMENTAL INDENTURE, dated as of January
2, 1998 between Alterra Healthcare Corporation, a Delaware corporation (the
"Company"), and United States Trust Company of New York, a New York State
banking corporation (the "Trustee"), to that certain Indenture, dated as of
December 19, 1997, between the Company (previously named Alternative Living
Services, Inc.) and the Trustee (the "Indenture").

         WHEREAS, the parties hereto have entered into the Indenture which
provides for the issuance by the Company of the individual series of securities
thereunder, upon the Company and Trustee entering into a supplemental indenture
to the Indenture authorizing such series; and

         WHEREAS, the Company has issued its second series of securities
thereunder, designated its 5.25% Convertible Subordinated Debentures Due 2002
(the "Debentures"), pursuant to the Second Supplemental Indenture dated as of
January 2, 1998 (the "Second Supplemental Indenture");

         WHEREAS, the Company wishes to amend and restate the Second
Supplemental Indenture in its entirety as herein provided; and

         WHEREAS, all acts necessary to constitute this Amended and Restated
Second Supplemental Indenture as a valid, binding and legal obligation of the
Company have been done and performed.

         NOW, THEREFORE, witnesseth that, in consideration of the premises and
of the covenants contained herein, it is hereby agreed as follows:

                                   ARTICLE ONE

                           The Terms of the Debentures

         In accordance with Sections 2.01 and 2.02 of the Indenture, the Company
will issue a Global Debenture in the aggregate principal amount of $18,750,000.
Each Debenture shall be substantially in the following form:
<PAGE>   3
                           ALTERRA HEALTHCARE CORPORATION

                           5.25% Convertible Subordinated Debenture Due 2002

                  ALTERRA HEALTHCARE CORPORATION, a Delaware corporation,
promises to pay to

                                    SPECIMEN

or registered assigns, the principal sum of 18,750,000 Dollars, on December 15,
2002

                                Cusip 02145K AB3

                Interest Payment Dates:         June 15 and December 15
                          Record Dates:          June l and December 1

                  Additional provisions of this Security are set forth on the
other side of this Security.

Dated:  April 7, 2000

ALTERRA HEALTHCARE CORPORATION

By: __________________________________________________
     William F. Lasky
     Chief Executive Officer, President and Director

By: ___________________________________________________
     John D. Peterson
     Vice President, Assistant Secretary and Controller

[SEAL]

CERTIFICATE OF AUTHENTICATION

UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, certifies that this is one
of the Securities referred to in the within mentioned Indenture.

By: _______________________________________
      Authorized Signatory

[SEAL]

Dated:  __________, 2000

                                      -2-
<PAGE>   4
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                                      -3-
<PAGE>   5
                         ALTERRA HEALTHCARE CORPORATION
                5.25% Convertible Subordinated Debenture Due 2002

         1. Interest. Alterra Healthcare Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semiannually on June 15 and December 15 of each year beginning June 15, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 19, 1997;
provided that, if there is no existing Default in the payment of interest, and
if this Security is authenticated between a record date referred to on the face
hereof and the next succeeding interest payment date, interest shall accrue from
such interest payment date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.

         2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are the registered Holders of the
Securities at the close of business on the June 1 or December 1 next preceding
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay principal and
interest by its check payable in such money. It may mail an interest check to a
Holder's registered address.

         The final installment of principal of and premium, if any, on this
Security shall be payable only upon surrender of this Security at the office or
agency of the Trustee in the Borough of Manhattan, City and State of New York.
Payments of principal of and premium, if any, and interest on this Security
shall be made at the office or agency of the Trustee maintained in the Borough
of Manhattan, City and State of New York or, in the case of any such payments
other than the final payment of principal and premium, if any, at the Company's
option, by check mailed to the Person entitled thereto at such Person's address
last appearing on the Company's register.

         3. Registrar and Agents. Initially, United States Trust Company of New
York will act as Registrar, Paying Agent, Conversion Agent and agent for service
of notices and demands. The Company may change any Registrar, co-registrar,
Paying Agent, Conversion Agent and agent for service of notices and demands
without notice. The Company or any of its Subsidiaries may act as Paying Agent
or Conversion Agent. The address of United States Trust Company of New York is
114 West 47th Street, New York, New York 10036-1532.

         4. Indenture; Limitations. The Company issued the Securities under an
 Indenture dated as of December 19, 1997 (the "Indenture") between the Company
 and United States Trust Company of New York (the "Trustee"). Capitalized terms
 herein are used as defined in the Indenture unless otherwise defined herein.
 The terms of the Securities include those stated in the Indenture and those
 made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
 IndEnture. The Securities are subject to all such terms, and the Holders of the
 Securities are referred to the Indenture and said Act for a statement of them.

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<PAGE>   6
         The Securities are general unsecured obligations of the Company limited
to $18,750,000 aggregate principal amount. The Indenture imposes certain
limitations on the ability of the Company to, among other things, make payments
in respect of its Capital Stock, merge or consolidate with any other Person and
sell, lease, transfer or otherwise dispose of its properties or assets.

         The Securities shall be deemed to be of the same series as the
$125,000,000 principal amount of 5.25% Convertible Subordinated Debentures Due
2002 issued by the Company on December 19, 1997 pursuant to that certain
Supplemental Indenture dated as of December 19, 1997.

         5. Redemption by the Company. Subject to Section 7 herein, the Company
may redeem the Securities, in whole or from time to time in part, at its option
at any time on or after December 31, 2000 (provided, however, the Company may
not exercise its option to redeem any Securities unless the Company has
sufficient authorized shares to give effect to full conversion of the
Securities), at a redemption price equal to 100% of the principal amount
thereof, plus accrued interest to the Redemption Date (the "Redemption Price"),
and, notwithstanding anything in the Indenture to the contrary, including,
without limitation, Section 3.01 thereof, the Securities may only be redeemed by
the Company at the Redemption Price set forth in this Section 5 and not at the
redemption price set forth in Section 3.01 of the Indenture (which Section 3.01,
as it relates to the redemption price for the Securities, is amended by this
Section 5).

         6. Notice of Redemption. Notice of redemption will be mailed at least
30 days, but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 principal amount may be redeemed in part, but only in whole
multiples thereof. On and after the Redemption Date interest ceases to accrue on
Securities or portions of them called for redemption.

         7. Conversion. A Holder of a Security may convert such Security into
shares of common stock of the Company commencing 180 days after December 19,
1997 and thereafter at any time prior to maturity, subject to the following
provisions of this Section 7. If the Security is called for redemption, the
Holder may convert it at any time before the close of business on the date fixed
for such redemption. The initial conversion price is $28.75 per share, subject
to adjustment in certain events. In the event the Holder of this Security seeks
to convert all or any portion of this Security into Common Stock at a time when
the Company does not have sufficient authorized shares of Common Stock to
satisfy such conversion, such conversion shall not be permitted, in which event
the Holder will have the right to require the Company to repurchase this
Security for an amount payable in cash equal to the principal amount of this
Security plus accrued interest. The Company has agreed to seek stockholder
approval at its 1998 Annual Meeting of Stockholders of an amendment to its
Restated Certificate of Incorporation ("Certificate") increasing the number of
authorized shares of Common Stock to an amount at least sufficient to permit the
conversion of all the Securities. Until such date as the Company's Certificate
has been so amended, the Company will not (i) exercise its right to voluntarily
redeem the Debentures pursuant to Section 5 hereof or (ii) issue additional
shares of Common

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<PAGE>   7
Stock or securities convertible into or exchangeable for Common Stock except for
(A) employee stock options to acquire Common Stock granted under the Company's
existing stock option plans and (B) shares of Common Stock issuable upon
conversion of any Security or Other Debentures or upon the exercise of stock
options.

         To convert a Security, a Holder must (1) complete and sign the
conversion notice on the back of the Security; (2) surrender the Security to the
Conversion Agent; (3) furnish appropriate endorsements and transfer documents if
required by the Registrar or Conversion Agent; and (4) pay any transfer or
similar tax if required. No payment or adjustment is to be made on conversion
for interest accrued hereon or for dividends on shares of common stock issued on
conversion; provided, however, that if a Security is surrendered for conversion
after the record date for a payment of interest and on or before the interest
payment date, then, notwithstanding such conversion, the interest falling due to
such interest payment date will be paid to the Person in whose name the Security
is registered at the close of business on such record date and any Security
surrendered for conversion during the period from the close of business on any
regular record payment date to the opening of business on the corresponding
interest payment date must be accompanied by payment of an amount equal to the
interest payable on such interest payment date. A Holder may convert a portion
of a Security if the portion is $1,000 principal amount or an integral multiple
thereof.

         To determine the number of shares issuable upon conversion of a
Security, divide the principal amount to be converted by the conversion price in
effect on the conversion date. The Company will deliver a check for any
fractional share.

         If the Company is a party to a consolidation or merger or a transfer or
lease of all or substantially all of its assets, the right to convert a Security
into shares of common stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another Person.

         8. Certain Rights to Require Repurchases of Securities by the Company.
(a) In the event of any Change in Control (as defined below) occurring after the
date of issuance of the Securities and on or prior to maturity thereof, each
Holder shall have the right, at such Holder's option, to require the Company to
purchase, and upon the exercise of such right, the Company shall, subject to the
provisions of the Indenture, purchase, all or any part of such Holder's
Securities on the date (the "Repurchase Date") that is 75 days after the date
the Company gives notice of the Change in Control at a price in cash (the
"Repurchase Price") equal to 101% of the principal amount thereof, together with
accrued and unpaid interest to the Repurchase Date. In connection with the
exercise of the repurchase right by a Holder prior to a Redemption Date, a
Holder's right to exercise his repurchase right shall terminate at the close of
business on the Business Day prior to the Redemption Date.

                  (b) On or before the fifteenth (15th) day after the occurrence
of a Change in Control, the Company or, at the request of the Company, the
Trustee shall give notice of the occurrence of the Change in Control and of the
repurchase right set forth herein arising as a result thereof to the Trustee and
each Holder of the Securities at such Holder's registered address. Such notice
shall state: (1) the event constituting the Change in Control and the date
thereof;

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<PAGE>   8
(2) the Repurchase Date; (3) the date by which the repurchase right must be
exercised; (4) the Repurchase Price; and (5) the procedures a Holder must follow
to exercise a repurchase right. No failure of the Company to give the foregoing
notice shall limit any Holder's right to exercise a repurchase right.

         Each Holder desiring to exercise the repurchase right shall deliver to
the Company and to the Trustee on or before the tenth (10th) day prior to the
Repurchase Date (1) written notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the principal amount of the
Security or Securities (or portion of a Security) to be repurchased and a
statement that an election to exercise the repurchase right is being made
thereby and (2) the Security or Securities with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable. If the Repurchase Date falls between any
record date and the next succeeding interest payment date, Securities to be
repurchased must be accompanied by payment from the Holder of an amount equal to
the interest thereon which the registered Holder thereof is to receive on such
interest payment date. A Holder that fails to exercise a repurchase right in
accordance with the terms hereof shall waive such repurchase right but the
rights of such Holder to receive principal of and interest on the Securities and
all other rights of such Holder shall not be affected thereby.

         In the event that a repurchase right is exercised with respect to less
than the entire principal amount of a surrendered Security, the Company shall
execute and deliver to the Trustee and the Trustee shall authenticate for
issuance in the name of the Holder a new Security or Securities in the aggregate
principal amount of the unrepurchased portion of such surrendered Security.

         On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in the Indenture) an amount of
money sufficient to pay the Repurchase Price of the Securities which are to be
repurchased on the Repurchase Date.

                  (c) If any Security surrendered for repurchase shall not be so
purchased on the Repurchase Date, the principal shall, until purchased, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate per annum borne by such Security.

                  (d) For purposes hereof, a "Change in Control" will occur
when: (1) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons; (2) there shall be
consummated any consolidation or merger of the Company (A) in which the Company
is not the continuing or surviving corporation (other than a consolidation or
merger with a wholly-owned subsidiary of the Company in which all Common Stock
outstanding immediately prior to the effectiveness thereof are changed into or
exchanged for the same consideration) or (B) pursuant to which the Common Stock
is converted into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which the holders of the Common Stock
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the common stock of the continuing or surviving
corporation immediately after such consolidation or merger; or (3) any person,
or any persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof, acquires beneficial ownership (as defined

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<PAGE>   9
in Rule 13d-3 under the Exchange Act) of at least 50% of the total voting power
of all classes of capital shares of the Company entitled to vote generally in
the election of directors of the Company.

                  (e) Notwithstanding clause (d)(3) of the foregoing definition,
a Change in Control will not be deemed to have occurred solely by virtue of the
Company, any Subsidiary, any employee share purchase plan, share option plan, or
other share incentive plan or program, retirement plan or automatic dividend
reinvestment plan; or any substantially similar plan of the Company or any
Subsidiary or any Person holding securities of the Company for or pursuant to
the terms of any such employee benefit plan, filing or becoming obligated to
file a report under or in response to Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report) under the Exchange Act disclosing beneficial
ownership by it of shares or securities of the Company, whether at least 50% of
the total voting power referred to in clause (d)(3) of the foregoing definition
or otherwise. A recapitalization or a leveraged buyout or similar transaction
involving members of management or their affiliates will constitute a Change in
Control if it meets the foregoing definition.

         Notwithstanding the foregoing, a Change in Control as described above
will not be deemed to have occurred if: (i) the Current Market Price of the
Common Stock on the date of a Change in Control is at least equal to 105% of the
Conversion Price in effect immediately preceding the time of such Change in
Control; or (ii) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change in Control to
the holders of Common Stock consists of common shares that are, or immediately
upon issuance will be, listed on a national securities exchange or quoted on the
Nasdaq National Market, and as a result of such transaction the Securities will
become convertible solely into such common shares of common stock; or (iii) the
consideration in the transaction giving rise to such Change in Control to the
holders of Common Stock consists of cash, securities that are, or immediately
upon issuance will be, listed on a national securities exchange or quoted on the
Nasdaq National Market, or a combination of cash and such securities, and the
aggregate fair market value of such consideration (which, in the case of such
securities, shall be equal to the average of the daily Closing Prices of such
securities during the ten (10) consecutive Trading Days commencing with the
sixth Trading Day following consummation of such transaction) is at least 105%
of the Conversion Price in effect on the date immediately preceding the closing
date of such transaction.

         If a Change in Control shall have occurred under clause (d)(2) above,
the Company shall deliver to the Trustee the Officers' Certificate and Opinion
of Counsel as well as the notices called for under the Indenture.

         For purposes of this definition of Change in Control, "Current Market
Price" on any date means the average daily Closing Prices for the five
consecutive Trading Days selected by the Company commencing not more than ten
Trading Days before, and ending not later than, the date in question; and
"Trading Day", with respect to any stock exchange or securities market, means
any Monday, Tuesday, Wednesday, Thursday or Friday on which such stock exchange
or securities market is open for business.

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<PAGE>   10
         9. Subordination. This Security is subordinated to all Senior
Indebtedness of the Company. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made to
any Holders of Securities. Any Securityholder by accepting this Security agrees
to the subordination and authorizes the Trustee to give it effect.

         In addition to all other rights of Senior Indebtedness described in the
Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of any instrument relating to the
Senior Indebtedness or extension or renewal of the Senior Indebtedness.

         This Security shall rank pari passu with the Company's 7% Convertible
Subordinated Debentures due 2004 and 6.75% Convertible Subordinated Debentures
due 2006 (collectively, the "Other Debentures").

         10. Denominations, Transfer, Exchange. This Security is one of a duly
authorized issue of Securities of the Company designated as its 5.25%
Convertible Subordinated Debentures due 2002 limited in aggregate principal
amount to $143,750,000 (including the $125,000,000 principal amount of 5.25%
Convertible Subordinated Debentures due 2002 issued on December 19, 1997). The
Securities are in registered form without coupons in denominations of $1,000
principal amount and integral multiples thereof. A Holder may register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption or register the transfer
of or exchange any Securities for a period of 15 days before a selection of
Securities to be redeemed.

         11. Persons Deemed Owners. The registered Holder of a Security may be
treated as its owner for all purposes.

         12. Unclaimed Money. If money for the payment of principal or interest
on any Securities remains unclaimed for three years, the Trustee and the Paying
Agent will pay the money back to the Company at its request. After that, Holders
may look only to the Company for payment.

         13. Discharge Prior to Redemption or Maturity. The Indenture will be
discharged and canceled except for certain sections thereof upon payment of all
the Securities, or upon the irrevocable deposit with the Trustee of funds or
U.S. Government Obligations maturing on or before such payment date or
Redemption Date, sufficient to pay principal, premium, if any, and interest on
such payment or redemption.

         14. Amendment and Waiver. Subject to certain exceptions, without notice
to the Holders of the Securities, the Indenture or the Securities may be amended
with the consent of the Holders of at least a majority in principal amount of
the Securities then outstanding and any existing default or compliance with any
provision may be waived with the consent of the Holders of a majority in
principal amount of the Securities then outstanding. Without the consent of or

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<PAGE>   11
notice to any Securityholder, the Company may amend the Indenture or the
Securities to, among other things, provide for uncertificated Securities, to
establish another series of securities as permitted by the Indenture, to cure
any ambiguity, defect or inconsistency or make any other change that does not
adversely affect the rights of any Securityholder.

         15. Successors. When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.

         16. Defaults and Remedies. If an Event of Default, as defined in the
Indenture, occurs and is continuing, the Trustee or the Holders of a majority in
principal amount of Securities may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Securities may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it,
subject to the provisions of the TIA, before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in principal
amount of the Securities then outstanding may direct the Trustee in its exercise
of any trust or power with respect to the Securities. The Company is required to
file periodic reports with the Trustee as to the absence of any Default or Event
of Default.

         17. Trustee Dealings with the Company. United States Trust Company of
New York, the Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.

         18. No Recourse Against Others. No stockholder, director, officer or
incorporator, as such, past, present or future, of the Company or any successor
corporation or trust shall have any liability for any obligation of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. This waiver and
release are part of the consideration for the issuance of the Securities.

         19. Authentication. This Security shall not be valid until the Trustee
or an authenticating agent appointed by the Trustee signs the certificate of
authentication on the other side of this Security.

         20. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).

         THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE. IT ALSO WILL FURNISH THE TEXT OF THIS
SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: ALTERRA HEALTHCARE
CORPORATION, 10000 INNOVATION DRIVE, MILWAUKEE, WISCONSIN 53226, ATTENTION:
CHIEF FINANCIAL OFFICER.

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<PAGE>   12
                                 ASSIGNMENT FORM

If you the Holder want to assign this Security, fill in the form below and have
your signature guaranteed:

For value received, I or we assign and transfer this Security to

                      (INSERT ASSIGNEE'S SOCIAL SECURITY OR
                           TAX IDENTIFICATION NUMBER)

             -------------------------------------------------------

             -------------------------------------------------------

 ................................................................................

 ................................................................................

 ................................................................................
              (Print or type assignee's name, address and zip code)

and irrevocably appoint.........................................................

 ..................................................        agent to transfer this
Security on the books of the Company.  The agent may substitute another to act
for him.
--------------------------------------------------------------------------------

Date:...........................................................................

Your signature:.................................................................
                  (Sign exactly as your name appears on the other
                  side of this Security)

Signature Guaranteed By:........................................................

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<PAGE>   13
                                CONVERSION NOTICE

To convert this Security into shares of common stock of the Company, check the
box:

                                 ---------------

                                 ---------------

To convert only part of this Security, state the principal amount to be
converted (which must be a minimum of $1,000 or any multiple thereof):

              -----------------------------------------------------
              $

              -----------------------------------------------------

If you want the Security certificate, if any, made out in another person's name,
fill in the form below:

                    (INSERT OTHER PERSON'S SOCIAL SECURITY OR
                           TAX IDENTIFICATION NUMBER)

        ----------------------------------------------------------------

        ----------------------------------------------------------------

 ................................................................................

 ................................................................................

 ................................................................................
            (Print or type other person's name, address and zip code)
--------------------------------------------------------------------------------

Date:...........................................................................

Your signature:.................................................................
                  (Sign exactly as your name appears on the other
                  side of this Security)

Signature Guaranteed By:........................................................

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<PAGE>   14
                  IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Second Supplemental Indenture to be duly executed, all as
of the date first written above.

                                   ALTERRA HEALTHCARE CORPORATION

                                   By: /s/ William F. Lasky
                                       -----------------------------------------
                                   Name:  William F. Lasky
                                   Title:  Chief Executive Officer and President

                                   UNITED STATES TRUST COMPANY OF
                                   NEW YORK, AS TRUSTEE

                                   By: /s/ Christine C. Collins
                                       -----------------------------------------
                                       Authorized Signatory<PAGE>   1

                                                                     EXHIBIT 4.3
                          AMENDMENT TO RIGHTS AGREEMENT

         This Amendment (the "Amendment") is made as of the 26th day of April,
2000, to the Rights Agreement dated as of December 10, 1998 (the "Rights
Agreement') between ALTERRA HEALTHCARE CORPORATION, a Delaware corporation
formerly known as Alternative Living Services, Inc. (the "Company"), and
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent (the "Rights Agent").

                                   WITNESSETH:

         WHEREAS, the Board of Directors of the Company on December 10, 1998,
authorized the issuance of certain rights to purchase Common Stock of the
Company and declared a dividend of such rights; and

         WHEREAS, as of December 10, 1998, the Company and the Rights Agent
entered into the Rights Agreement to set forth their mutual agreements with
respect to the rights authorized by the Board of Directors on December 10, 1998;
and

         WHEREAS, the Board of Directors of the Company on April 25, 2000
authorized an amendment to the terms of the Rights Agreement;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

         1.       All terms used in this Amendment which are not defined in this
                  Amendment have the meaning given those terms in the Agreement.

         2.       Section 1(a) of the Rights Agreement is hereby amended and
                  restated in its entirety as follows:

                           (a)      "Acquiring Person" shall mean any Person (as
                                    such term is hereinafter defined) who or
                                    which, together with all Affiliates and
                                    Associates (as such terms are hereinafter
                                    defined) of such Person, shall be the
                                    Beneficial Owner (as such term is
                                    hereinafter defined) of 15% or more of the
                                    Common Shares of the Company then
                                    outstanding, but shall not include (i) the
                                    Company, (ii) any Subsidiary (as such term
                                    is hereinafter defined) of the Company,
                                    (iii) any employee benefit plan of the
                                    Company or any Subsidiary of the Company,
                                    (iv) any entity holding Common Shares for or
                                    pursuant to the terms of any such plan or
                                    (v) any Exempt Person. Notwithstanding the
                                    foregoing, no Person shall become an
                                    "Acquiring Person" as the result of an
                                    acquisition of Common Shares by the Company
                                    which, by reducing the number of shares
                                    outstanding, increases the proportionate
                                    number of shares beneficially owned by such
                                    Person to 15% or more of the Common Shares
                                    of the Company then outstanding; provided,
                                    however, that if a Person shall become the
                                    Beneficial Owner of 15% or more of
<PAGE>   2
                                    the Common Shares of the Company then
                                    outstanding by reason of share purchases by
                                    the Company and shall, after such share
                                    purchases by the Company, become the
                                    Beneficial Owner of any additional Common
                                    Shares of the Company, then such Person
                                    shall be deemed to be an "Acquiring Person".
                                    Notwithstanding the foregoing, if the Board
                                    of Directors of the Company determines in
                                    good faith that a Person who would otherwise
                                    be an "Acquiring Person", as defined
                                    pursuant to the foregoing provisions of this
                                    paragraph (a), has become such
                                    inadvertently, and such Person divests as
                                    promptly as practicable a sufficient number
                                    of Common Shares so that such Person would
                                    no longer be an "Acquiring Person", as
                                    defined pursuant to the foregoing provisions
                                    of this paragraph (a), then such Person
                                    shall not be deemed to be an "Acquiring
                                    Person" for any purposes of this Agreement.

         3.       Section 1 of the Rights Agreement is hereby amended by adding
                  a new Section 1(g)-1 to read in its entirety as follows:

                           "(g)-1 "Exempt Person" shall mean (i) each Purchaser
                           (as defined in that certain Purchase Agreement (the
                           "Purchase Agreement") dated as of April 26, 2000 (the
                           "Purchase Date") by and among the Company and each
                           such Purchaser referenced therein, including any
                           permitted assignee of any Purchaser (each a "First
                           Tier Owner" and, collectively, the "First Tier
                           Owners"); (ii) the Affiliates and Associates of each
                           such First Tier Owner; and (iii) any Person not
                           covered by (ii), above, who or which is the
                           Beneficial Owner of Common Shares beneficially owned
                           by a First Tier Owner solely by reason of the
                           relationship of such Person to such First Tier Owner
                           or to any Affiliate or Associate of such First Tier
                           Owner (each Person described in this clause (iii), a
                           "Second Tier Owner"); provided, however, any such (x)
                           First Tier Owner, (y) Affiliate and Associate of each
                           such First Tier Owner, and (z) Second Tier Owner
                           (each such Person described in the foregoing clauses
                           (x), (y) and (z), a "Subject Owner") shall cease to
                           be an Exempt Person at the time that such Subject
                           Owner is the Beneficial Owner of a percentage of the
                           outstanding Common Shares of the Company that is more
                           than the sum of (A) the lowest percentage of the
                           outstanding Common Shares of the Company beneficially
                           owned by such Subject Owner at the close of business
                           on the Purchase Date (including for purposes thereof
                           the Common Shares that may be beneficially owned by
                           such Subject Owner, upon or after such date,
                           resulting from (1) the purchase or the exercise of
                           any exchange, conversion, put or similar right or
                           feature (including, without limitation, the right to
                           receive securities in the form of dividends or
                           interest), of (a) the securities to be purchased by
                           any First Tier Owner or for which any such First Tier
                           Owner has an option to purchase pursuant to the
                           Purchase Agreement (the "Purchased Securities") or
                           (b) the securities so issued or issuable pursuant to
                           such rights or features (the "Derivative Securities")
                           or the payment of any
<PAGE>   3
                           interest or dividends in respect of the Purchased
                           Securities or Derivative Securities and (2) all First
                           Tier Owners being deemed a "group" within the meaning
                           of Rule 13d-5 under the Exchange Act solely as a
                           result of their acquisition of Purchased Securities
                           pursuant to the Purchase Agreement) or at any time
                           thereafter, (B) any increase in such percentage
                           referred to in the foregoing clause (A) caused solely
                           by the acquisition of Common Shares by the Company,
                           and (C) 1%.

         4.       This Amendment shall be deemed to be a contract made under the
                  laws of the State of Delaware and for all purposes shall be
                  governed by and construed in accordance with the laws of such
                  state applicable to contracts to be made and performed
                  entirely within such state.

         5.       The Amendment may be executed in any number of counterparts
                  and each of such counterparts shall for all purposes be deemed
                  to be an original, and all such counterparts shall together
                  constitute but one and the same instrument.

         6.       If any term, provision, covenant or restriction of this
                  Amendment is held by a court of competent jurisdiction or
                  other authority to be invalid, illegal, or unenforceable, the
                  remainder of the terms, provisions, covenants and restrictions
                  of this First Amendment shall remain in full force and effect
                  and shall in no way be affected, impaired or invalidated.

         7.       Except as specifically set forth in this Amendment, the Rights
                  Agreement shall remain in full force and effect.

                            [SIGNATURES ON NEXT PAGE]
<PAGE>   4
         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

                                    ALTERRA HEALTHCARE CORPORATION

                                    By: /s/ William F. Lasky
                                        ----------------------------------------
                                            Name: William F. Lasky
                                                  ------------------------------
                                            Title: President & CEO
                                                   -----------------------------
         Attest:

         /s/ Mark W. Ohlendorf
         ----------------------------
         ----------------------------

                     AMERICAN STOCK TRANSFER & TRUST COMPANY

                                    By: /s/ Herbert J. Lemmer
                                        ----------------------------------------
                                            Name: Herbert J. Lemmer
                                                  ------------------------------
                                            Title: Vice President
                                                   -----------------------------
         Attest:

         /s/ Susan Silber
         ----------------------------
         ----------------------------

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