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EXHIBIT 10.97
CONSENT TO MERGER
AND AMENDMENT TO STERLING HOUSE CORPORATION -
HEALTH CARE REIT, INC. LEASES
THIS CONSENT TO MERGER AND AMENDMENT TO LEASES (this "Agreement") is
made effective as of the 1st day of November, 1999, by and among STERLING HOUSE
CORPORATION, a Kansas corporation having its principal place of business at 000
Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxx 00000 ("Sterling"), in
its individual capacity and on behalf of certain of its subsidiaries and
affiliates, ALTERRA HEALTHCARE CORPORATION, a Delaware corporation formerly
known as Alternative Living Services, Inc., having its principal place of
business at 000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxx 00000
("Alterra"), and HEALTH CARE REIT, INC., a Delaware corporation having its
principal place of business at Xxx XxxXxxx, Xxxxx 0000, X.X. Xxx 0000, Xxxxxx,
Xxxx 00000-0000 ("HCRI"), in its individual capacity and on behalf of certain of
its subsidiaries and affiliates.
W I T N E S S E T H:
WHEREAS, HCRI, and certain of its subsidiaries and affiliates as
landlords or lessors (HCRI, and such subsidiaries and affiliates being
hereinafter collectively referred as "Landlord"), and Sterling, and certain of
its subsidiaries and affiliates as tenants or lessees (Sterling, and such
subsidiaries and affiliates being hereinafter collectively referred to as
"Tenant"), have from time to time executed and entered into certain Lease
Agreements with respect to certain assisted living facilities, such Lease
Agreements being more particularly described and identified on Exhibit "A",
attached hereto and incorporated herein by reference (collectively the "Sterling
Leases");
WHEREAS, Sterling is a wholly-owned subsidiary of Alterra, and Alterra
has guaranteed the Sterling Leases;
WHEREAS, Alterra and Sterling intend to consummate a merger pursuant to
which Sterling will be merged into Alterra and Alterra shall be the surviving
corporation and Alterra, as successor by merger to Sterling, will succeed as a
matter of law to all liabilities and obligations of Sterling as tenant under the
Sterling Leases (the "Merger"); and
WHEREAS, HCRI, on behalf of itself and its subsidiaries and affiliates,
desires to consent to the Merger and, in connection therewith, HCRI, on behalf
of itself and its subsidiaries and affiliates, and Sterling, on behalf of itself
and its subsidiaries and affiliates, desire to modify and amend the Sterling
Leases as is more particularly described below to make certain provisions of the
Sterling Leases
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consistent with the provisions of other lease agreements existing by and between
Alterra and HCRI (collectively the "Alterra Leases").
NOW, THEREFORE, for and in consideration of the foregoing recitals, the
sum of Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. CONSENT TO MERGER. HCRI, on behalf of itself and its subsidiaries
and affiliates, hereby (i) consents to the Merger, (ii) accepts Alterra as the
tenant under the Sterling Leases, and (iii) agrees that the Merger and the
failure of Sterling to survive the merger shall not cause or create any event of
default or default under the Sterling Leases or the Alterra Leases or any
guaranty, security agreement or other document or instrument executed or
delivered in connection therewith.
2. DEFINED TERMS. Initial capitalized terms used herein and not
otherwise defined herein shall have the meanings respectively ascribed to such
defined terms in the Alterra Leases.
3. ANNUAL FINANCIAL STATEMENTS. The definition of "Annual Financial
Statements" appearing in Article 1.3 of each Sterling Lease shall be deleted in
its entirety and the following substituted in lieu thereof:
"Annual Financial Statements' means the Tenant's unaudited balance
sheet and statement of income for the most recent fiscal year on an
individual facility and consolidated basis and an unaudited operating
statement for the Facility for the most recent fiscal year."
4. MATERIAL OBLIGATION. The definition of "Material Obligation"
appearing in Article 1.3 of each Sterling Lease shall be deleted in its entirety
and the following substituted in lieu thereof:
"Material Obligation' means [i] any indebtedness secured by a security
interest in or a lien, deed of trust or mortgage on any of the Leased
Property and any agreement relating thereto; [ii] any obligation or
agreement that is material to the operation of the Facility; [iii] any
indebtedness or capital lease of Tenant that has an outstanding
principal balance of at least $1,000,000.00 in any one instance or at
least $1,000,000.00 in the aggregate and any agreement relating
thereto; and [iv] any sublease of the Leased Property."
5. IMPOSITIONS AND UTILITIES.
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(a) Payment of Impositions. The Section entitled "Payment of
Impositions" in each Sterling Lease shall be amended to provide Tenant with
fifteen (15) business days after the due date of each Imposition to provide
Landlord with proof of payment.
(b) Discontinuance of Utilities. The following language (in
bold type) shall be added to the last sentence of the Section entitled
"Discontinuance of Utilities" appearing in each Sterling Lease:
"...under this Lease, UNLESS LANDLORD HAS FAILED TO MAKE PROMPT PAYMENT
OF UTILITY EXPENSES TO THE EXTENT THAT FUNDS FOR SUCH EXPENSES
HAVE BEEN DEPOSITED WITH LANDLORD UNDER SS.3.4 ABOVE."
6. INSURANCE.
(a) Mortgages. The following language (or substantially
similar language) appearing in the Section entitled "Mortgages" in the Article
dealing with insurance in each Sterling Lease shall be deleted in its entirety:
"[iii] loss adjustment of claims in excess of $5,000.00 shall
require the consent of the mortgagee;"
Said language shall be replaced by the following:
"[iii] loss adjustment of claims in excess of $50,000.00 shall
require the consent of mortgagee, which consent shall not be
unreasonably withheld;"
7. INDEMNITY.
(a) Limitation of Landlord's Liability. The following language
shall be added as the last sentence of the Section entitled "Limitation of
Landlord's Liability" in each Sterling Lease:
"The foregoing limitation does not apply to loss, injury, death or
damage caused by Landlord's gross negligence or willful
misconduct."
8. USE AND ACCEPTANCE OF PREMISES.
(a) Conditions of Use and Occupancy. The following language
(in bold type) shall be added to the last sentence of the Section entitled
"Conditions of Use and Occupancy" in each Sterling Lease:
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"... condition thereof AND ACCOMPANIED BY A REPRESENTATIVE OF
TENANT TO THE EXTENT SUCH A REPRESENTATIVE IS AVAILABLE."
9. DEFAULT AND REMEDIES.
(a) Events of Default.
(i) The following language (or any substantially
similar language) appearing in subsection (e) of the Section entitled "Events of
Default" in each Sterling Lease shall be deleted in its entirety:
"(e) Tenant abandons or vacates the Leased Property or any material
part thereof or ceases to do business for any reason."
Said language shall be replaced by the following:
"(e) Tenant abandons or vacates the Leased Property or any material
part thereof or ceases to do business or ceases to exist for
any reason for any one or more days except as a result of
condemnation or casualty."
(ii) The following language (or any substantially
similar language) appearing in subsection (j) of the Section entitled
"Events of Default" in each Sterling Lease shall be deleted in its entirety:
"(j) The occurrence of any change in Tenant's leasehold interest in the
Leased Property, or any change in the or management of Tenant,
except as permitted under ss.14.6 hereof, without the prior
written consent of Landlord."
Said language shall be replaced by the following:
"(j) Except as otherwise specifically permitted herein, the assignment,
sublease or the occurrence of any other change in Tenant's
leasehold interest in the Leased Property, which shall not
include any change in Tenant's stock ownership."
10. DAMAGE AND DESTRUCTION.
(a) No Rent Abatement. The following language (or any
substantially similar language) appearing in the Section entitled "No Rent
Abatement" in each Sterling Lease shall be deleted in its entirety:
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"Rent will not xxxxx pending the repairs or rebuilding of the Leased
Property."
Said language shall be replaced by the following:
"Except to the extent that business interruption insurance
proceeds are received by Landlord, Rent will not xxxxx pending
the repairs or rebuilding of the Lease Property."
11. CONDEMNATION.
(a) Total Taking. The following language (or any substantially
similar language) appearing in the Section entitled "Total Taking" in each
Sterling Lease shall be deleted in its entirety:
"All damages awarded for Taking under the power of eminent domain shall
be the property of the Landlord, whether such damages shall be
awarded as compensation for diminution in value of the
Leasehold or the fee of the Leased Property."
Said language shall be replaced by the following:
"All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord, except
for damages awarded to Tenant as compensation for diminution
in value of the leasehold of the Leased Property provided the
award to Landlord is not less than the Lease Amount."
(b) The following language shall be added to the Section of
each Sterling Lease entitled "Total Taking" as Section 10.1.1:
"If the entirety of any Leased Property is taken during the final 18
months of the Initial Term or the Renewal Term and Landlord
elects to terminate each applicable Phase Lease, Tenant shall
have the option to purchase each applicable Phase Leased
Property (but not less than all applicable Phase Leased
Property). Tenant shall give Landlord notice of Tenant's
election to purchase within 15 days after delivery of the
notice of Landlord's intent to terminate. If Tenant elects to
purchase all of the Leased Property, the purchase price shall
be the Fair Market Value as determined in accordance with the
provisions of this Lease entitled "Option to Purchase" and all
other terms of the option to purchase shall be in accordance
with such provisions.
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12. NEGATIVE COVENANTS.
(a) No Debt. The following language (or any substantially
similar language) appearing in the subsection of each Sterling Lease entitled
"No Debt" in the Article entitled "Negative Covenants" shall be deleted in its
entirety:
"No Debt. Tenant shall not create, incur, assume, or permit to exist
any indebtedness relating to the Facility other than [i] trade
debt incurred in the ordinary course of Tenant's business;
[ii] indebtedness relating to the Letter of Credit; [iii]
indebtedness that is secured by any Permitted Lien; [iv]
unsecured indebtedness for working capital in an amount not to
exceed $25,000 per facility and $600,000 in the aggregate for
the facilities operated by Tenant or Corridor and financed by
Landlord or leased to Tenant by Landlord; and [v] unsecured
indebtedness for working capital in any amount for facilities
not financed by Landlord."
Said language shall be replaced by the following:
"No Debt. Tenant shall not create, incur, assume, or permit to exist
any indebtedness related to the Facility other than [i] trade
debt incurred in the ordinary course of Tenant's business;
[ii] indebtedness for each Facility working capital purposes
in an amount not to exceed $150,000.00 per Facility; [iii]
indebtedness that is secured by any Permitted Lien; and [iv]
unsecured indebtedness that will no cause Tenant to be in
violation of ss.15.7.
(b) No Transfer. The following language (in bold type) shall
be added to the last sentence of the subsection entitled "No Transfer" in the
Article of each Sterling Lease entitled "Negative Covenants" appearing in each
Sterling Lease:
"... any Permitted Lien AND TRANSFERS TO AN AFFILIATE."
(c) No Dissolution. The following language (in bold type)
shall be added to the last sentence of the subsection entitled "No Dissolution"
in the Article entitled "Negative Covenants" appearing in each Sterling Lease:
"... acquired) EXCEPT FOR MERGERS, CONSOLIDATIONS OR OTHER STRUCTURAL
CHANGES IN TENANT THAT WILL NOT CAUSE TENANT TO BE IN
VIOLATION of SS.15.7."
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(d) Changes in Executive Officers. The following language (or
any substantially similar language) appearing in the subsection entitled "No
Change in Management" in the Article entitled "Negative Covenants" in each
Sterling Lease shall be deleted in its entirety:
"No Change in Management. Neither Xxxxxxx X. Xxxxxxxx nor
Xxxxxx X. Xxxx shall cease to be an active principal officer
and executive manager of Tenant unless the replacement
officers are qualified and experienced in the management of
assisted living facilities or other similar facilities and the
replacements are reasonably acceptable to, and reasonably
approved in advance, by Landlord."
(e) Subordination of Payments to Affiliates. The following
language (in bold type) shall be added to the Section entitled "Subordination of
Payment to Affiliates" appearing in the Article entitled "Negative Covenants" in
each Sterling Lease:
"... any Affiliate, EXCEPT FOR ORDINARY PAYROLL."
(f) Limits on Management Fees. The following language (or any
substantially similar language) appearing in the Section entitled "Limits on
Management Fees" in the Article entitled "Negative Covenants" in each Sterling
Lease shall be deleted in its entirety:
"Limits on Management Fees. Tenant shall not pay management
fees or pay any compensation in the nature of or in lieu of
management fees in excess of 8% of annual revenues. Landlord
may, at Tenant's request, and after Tenant has provided such
information as Landlord may require, approve a change in the
management fees payable during any particular fiscal year."
13. AFFIRMATIVE COVENANTS.
(a) Change in Control. The following language (or any
substantially similar language) appearing in the subsection entitled "Existence
and Change in Ownership" appearing in the Section entitled "Affirmative
Covenants" in each Sterling Lease shall be deleted in its entirety:
"Existence and Change in Ownership. Tenant shall maintain its
existence throughout the terms of this Agreement."
Said language shall be replaced by the following:
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"Existence and Change in Control. Tenant or any entity into
which Tenant is merged shall maintain its existence throughout
the term of this Agreement."
(b) No Investments. The text of the subsection entitled "No
Investments" appearing in the Article entitled "Affirmative Covenants" in each
Sterling Lease shall be deleted in its entirety and the following text shall be
substituted therefor:
"No Investments. Tenant shall not purchase or otherwise acquire, hold,
or invest in securities (whether capital stock or instruments
evidencing indebtedness) of or make loans or advances to any
person, including, without limitation, any Affiliate, or any
shareholder, member or partner of Tenant, or any Affiliate,
except for cash balances temporarily invested in short-term or
money market securities and except for purchases,
acquisitions, advances, investments or loans that will not
cause Tenant to be in violation of ss.15.7."
(c) Furnish Documents. The Article entitled "Furnish
Documents" appearing in each Sterling Lease shall be amended to provide Tenant
with ninety (90) days after the end of each fiscal year to deliver the documents
set forth therein.
14. ALTERATIONS, CAPITAL IMPROVEMENTS AND SIGNS.
(a) Approval of Alterations. The following language shall be
added as the fourth sentence of the Section entitled "Approval of Alterations"
appearing in each Sterling Lease:
"Approval of Alterations. Provided Tenant has given Landlord written
notice at the time of delivery of the Plans and Specifications
of the effect of Landlord's failure to respond, Landlord's
failure to respond within sixty (60) days of receipt of Plans
and Specifications shall be deemed to constitute Landlord's
approval."
15. ASSIGNMENT AND SALE OF LEASED PROPERTY.
(a) Prohibition on Assignment and Subletting. The following
language (or any substantially similar language) appearing in the subsection
entitled "Prohibition on Assignment and Subletting" in the Article entitled
"Assignment and Sale of Leased Property" in each Sterling Lease shall be deleted
in its entirety:
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"Prohibition on Assignment or Subletting. Tenant acknowledges that
Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant. Tenant may
not assign, sublet, mortgage, hypothecate, pledge, or transfer
any interest in this Lease, or in the Leased Property, in
whole or in part, without the prior written consent of
Landlord, which Landlord may withhold in its sole and absolute
discretion. The following transactions will be deemed an
assignment or sublease requiring Landlord's prior written
consent: [i] an assignment by operation of law; [ii] an
imposition (whether or no consensual) of a lien, mortgage, or
encumbrance upon Tenant's interest in the Lease; and [iii] an
arrangement (including but not limited to, management
agreements, concessions, licenses, and easements) which allows
the use or occupancy of all or part of the Leased Property by
anyone other than Tenant, Sterling Management Company, Inc. or
any other permitted manager; and [iv] a change of ownership of
Tenant except as permitted under ss.15.6. Landlord's consent
to any assignment or sublease will not release Tenant (or any
guarantor) from its payment and performance obligations under
this Lease, but rather Tenant, any guarantor, and Tenant's
assignee or sublessee will be jointly and severally liable for
such payment and performance. An assignment or sublease
without the prior written consent of Landlord will be void at
the Landlord's option. Landlord's consent to one assignment or
sublease will not waive the requirement of its consent to any
subsequent assignment or sublease."
Said language shall be replaced by the following:
"Prohibition on Assignment and Subletting. Tenant acknowledges that
Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant. Tenant may
not assign, mortgage, hypothecate, pledge, or transfer any
interest in this Lease, or in the Leased Property, in whole or
in part, without the prior written consent of Landlord, which
Landlord may withhold in its sole and absolute discretion. The
following transactions will be deemed an assignment or
sublease requiring Landlord's prior written consent: [1] an
assignment by operation of law (other than as a result of
mergers, consolidation or other structured changes in Tenant
that will not cause Tenant to be in violation of ss.15.7);
[ii] an imposition (whether or not consensual) of a lien,
mortgage, or encumbrance upon Tenant's interest in the Lease;
and [iii] an arrangement (including but not limited to,
management agreements, concessions, licenses, and easements)
which allows the use or occupancy of all or part of the Leased
Property
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by anyone other than Tenant or any other permitted manager.
Landlord's consent to any assignment or sublease will not
release Tenant (or any guarantor) from its payment and
performance obligations under this Lease, but rather Tenant,
any guarantor, and Tenant's assignee or sublessee will be
jointly and severally liable for such payment and performance.
An assignment or sublease without the prior written consent of
Landlord will be void at the Landlord's option. Landlord's
consent to one assignment or sublease will not waive the
requirement of its consent to any subsequent assignment or
sublease. Subject to the foregoing and ss.18.2, Landlord shall
consent to a sublease of the Facility or a management
agreement, provided the sublessee or manager is an Affiliate
and the execution of the sublease or management agreement does
not result in a lapse in licensure."
16. QUIET ENJOYMENT, SUBORDINATION, ATTACHMENTS AND ESTOPPEL
CERTIFICATES.
(a) Estoppel Certificates. The text of the Article
entitled "Estoppel Certificates" appearing in each Sterling Lease shall be
amended as follows:
"[d] to Tenant's knowledge,... [e] to Tenant's knowledge,..."
17. MISCELLANEOUS.
(a) Landlord's Modification. The following language (in bold
type) shall be added to the Article entitled "Landlord's Modification" appearing
in each Sterling Lease:
"... modification acceptable IN TENANT'S REASONABLE DISCRETION PROVIDED
SUCH MODIFICATION DOES NOT MATERIALLY DIMINISH TENANT'S RIGHTS
UNDER THE LEASE."
18. Except as expressly modified above, the Sterling Leases are hereby
ratified and confirmed and shall remain in full force and effect. It is the
intent of the parties that the modifications and amendments set forth herein be
liberally construed consistent with the parties intent for the provisions of the
Sterling Leases to be consistent with the comparable provisions of the Alterra
Leases, and the failure of any particular Sterling Lease to not contain any
provision herein referenced shall not impair or impact the effect of such
provision as so modified or amended in the remainder of the Sterling Leases.
19. SUCCESSORS AND ASSIGN. This Agreement shall be binding upon and
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inure to the benefit of the parties hereto and their respective successors and
assigns.
20. FURTHER ASSISTANCE. The parties hereto hereby agree to execute and
deliver such further assurances as shall be necessary or appropriate to evidence
the Consent to the Merger and the modifications and amendments to the Sterling
Leases as herein set forth.
[SIGNATURES ARE ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
WITNESS: STERLING HOUSE CORPORATION,
a Kansas corporation
/s/Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxxxx
------------------- ----------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxxxx
Title: Vice Prseident
[SIGNATURES CONTINUE ON NEXT PAGE]
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WITNESS: HEALTH CARE REIT, INC., a Delaware
corporation
/s/ Xxxx X. Xxxxx By: /s/ Xxxx X. Xxxxx
----------------- -----------------
Name: Name: Xxxx X. Xxxxx
Title: Vice President and
Corporate Secretary
[SIGNATURES CONTINUE ON NEXT PAGE]
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Alterra Healthcare Corporation hereby acknowledges and agrees to the foregoing
modifications and amendments and is relying hereon in consummating the Merger.
WITNESS: ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation
/s/Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxxxx
------------------- -------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxxxx
Title: Senior Vice Prseident
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EXHIBIT A
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RESIDENCE ADDRESS DATE OF TRANSACTION
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Alterra Sterling House of Bartlesville North 0000 X.X. Xxxxx Xxxx. 0/0/00
Xxxxxxxxxxxx, XX 00000
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Alterra Sterling House of Cedar Hill 000 X. Xxxxxxxx Xxxx 0/00/00
Xxxxx Xxxx, XX 00000
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Alterra Sterling House of Chickasha 000 Xxxxxxx Xxxx Xxxx 0/00/00
Xxxxxxxxx, XX 00000
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Alterra Sterling House of Claremore 0000 X. Xxx. 00 0/00/00
Xxxxxxxxx, XX 00000
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Alterra Sterling House of Desoto 000 X. Xxxxxxxx Xxx Xxxx 0/00/00
Xxxxxx, XX 00000-0000
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Alterra Sterling House of Xxxxxx 000 X. Xxxxx Xxxx 00/00/00
Xxxxxx, XX 00000
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Alterra Sterling House of Edmond 000 X. Xxxxxxxx 00/0/00
Xxxxxx, XX 00000
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Alterra Sterling House of Enid 0000 X. Xxxxxx Xxxx 0/0/00
Xxxx, XX 00000
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Alterra Sterling House of Lawton 0000 X. X. Xxx Xxxx. 00/00/00
Xxxxxx, XX 00000
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Alterra Sterling House of Midwest City 000 X. Xxxx Xxxxx Xxxxx 0/0/00
Xxxxxxx Xxxx, XX 00000
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Alterra Sterling House of Muskogee 0000 Xxxxxxxx Xxxx 0/0/00
Xxxxxxxx, XX 00000
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Alterra Sterling House of Norman 0000 X. Xxxxxxx Xx. 00/00/00
Xxxxxx, XX 00000
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Alterra Sterling House of Oklahoma City South 0000 XX 00xx Xxxxxx 0/00/00
Xxxxxxxx Xxxx, XX 00000
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Alterra Sterling House of Owasso 00000 X. 00xx Xxxxx Xxxxx 0/00/00
Xxxxxx, XX 00000
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Alterra Sterling House of Palestine 000 Xxxxxxx Xxxxx 0/00/00
Xxxxxxxxx, XX 00000
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Alterra Sterling House of Ponca City 0000 X. Xxxxxxx Xxx. 0/00/00
Xxxxx Xxxx, XX 00000
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Alterra Sterling House of Shawnee 0000 X. Xxxxxxxx 0/0/00
Xxxxxxx, XX 00000
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Alterra Sterling House of Stillwater 0000 X. XxXxxxx Xxxx 0/00/00
Xxxxxxxxxx, XX 00000
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Alterra Sterling House of Texarkana 0000 Xxxxxx Xxxx 0/00/00
Xxxxxxxxx, XX 00000
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Alterra Sterling House of Waxahachie 0000 Xxxxx Xxxxxx 0/00/00
Xxxxxxxxxx, XX 00000
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