THIRD AMENDMENT TO LEASE
AGREEMENT
(OAKWELL, TX)
Dated as of June 30, 2005 (the
“Effective Date”)
HR ACQUISITION OF SAN ANTONIO,
LTD. (f/k/a Capstone Capital of San Antonio, Ltd.),
an Alabama limited partnership (“Lessor”), ESC
IV, L.P ., a Washington limited partnership doing business
in Texas as Texas-ESC IV, L.P. (“Lessee”), and
EMERITUS CORPORATION , a Washington corporation
and DANIEL R. BATY , an individual resident of the
State of Washington (collectively, “Guarantor”), agree
as follows:
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1.
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Preliminary Statements
. Lessor entered into that certain
Lease Agreement dated as of December 31, 1996 with Integrated
Living Communities of Oakwell, L.P. (the “Original
Lessee”), as amended by that certain First Amendment to Lease
Agreement dated as of December 1, 1997, as assigned by the Original
Lessee to HB-ESC V, L.P., a Washington limited partnership
(“HB-ESC”) by Assignment and Assumption Agreement dated
as of May 9, 2002, as further amended by Second Amendment to Lease
Agreement dated as of May 9, 2002, as further assigned by HB-ESC to
Lessee by Assignment and Assumption of Lease Agreement dated as of
December, 31, 2003 (as amended to date and as further amended
hereby and as assigned, the “Lease”). Pursuant to the
Lease, Lessor, as landlord, and Lessee, as tenant, have leased
certain real property and improvements located at 3360 Oakwell
Court, San Antonio, Texas 78218, together with all Personal
Property (as defined in the Lease). Lessee has requested, and
Lessor has agreed, to further amend the Lease in the manner set
forth in this Third Amendment to Lease Agreement (this
“Amendment”), effective as of the date
hereof.
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2.
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Definitions . As used herein, the term “Lease”
means the Lease as hereby amended and modified. Unless the context
otherwise requires, all capitalized terms used herein without
definition shall have the definitions provided therefore in the
Lease.
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3.
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Amendments . The Lease is hereby amended as
follows:
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a.
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The caption on
Section 7.3 is hereby revised to read as follows: “Rent
Coverage—Consolidated and Facility”
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b.
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Section 7.3(a)
is hereby deleted in its entirety and the following inserted in
lieu thereof:
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(a)
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As used herein,
the following terms shall have the meanings indicated:
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“Consolidated Coverage Ratio” means,
as of the end of each quarterly reporting period, the ratio of (i)
EBITDARM on a consolidated basis
for the
Facility and the Related Facilities during the preceding twelve
month period to (ii) the principal (excluding any prepayments or
principal at maturity), interest and lease (capital and operating)
payment obligations of Lessee with respect to the Facility and the
Related Facilities (including the Minimum Rent but excluding the
Minimum Rent Adjustment and any principal and interest payments on
the Loan (as defined in Section 2.5 hereof)) during the preceding
twelve month period.
“EBITDARM” means, as of the end of
each quarterly reporting period, the income (or deficit) from all
operations related to the Facility or the Facility and the Related
Facilities, as applicable, during the preceding twelve month period
before any deduction for (i) interest charges paid or
accrued during the preceding twelve month period (including imputed
interest) on any lease (capital or operating) obligations
(including this Lease), (ii) income taxes for such period, (iii)
any amounts in respect of depreciation or amortization for such
period, (iv) the rent due under all leases (capital and operating)
including this Lease and the leases for the Related Facilities, as
applicable, during the preceding twelve month period and (v) any
actual or assumed management fees paid or incurred during the
preceding twelve month period.
“Facility
Coverage Ratio” means, as of the end of each quarterly
reporting period, the ratio of (i) EBITDARM on a consolidated basis
for the Facility during the preceding twelve month period to (ii)
the principal (excluding any prepayments or principal at maturity),
interest and lease (capital and operating) payment obligations of
Lessee with respect to the Facility (including the Minimum Rent but
excluding the Minimum Rent Adjustment and any principal and
interest payments on the Loan) during the preceding twelve month
period.
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c.
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The lead in
language in Section 7.3(b) is hereby deleted in its entirety and
the following inserted in lieu thereof:
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Lessee agrees and covenants with Lessor that, so
long as this Lease is in effect, Lessee will achieve and maintain, on a
consolidated basis, the Consolidated Coverage Ratios set forth
below:
Period
Required Consolidated Coverage
Ratio
(i)
Prior to the date in (ii)
No requirement
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(ii)
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For each
calendar quarter 1.05 to 1.0
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(iii)
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For each
calendar quarter 1.10 to 1.0
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(iv)
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For each
calendar quarter 1.15 to 1.0
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(v)
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For each
calendar quarter1.20 to 1.0
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beginning
1/1/10 and during
each calendar
year thereafter
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d.
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Section 7.3(c)
of the Lease is hereby deleted in its entirety and the following is
substituted therefore:
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Lessee agrees and covenants with Lessor that, so
long as this Lease is in effect, Lessee will achieve and maintain the
Facility Coverage Ratios set forth below:
Period
Required Facility Coverage
Ratio
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(i)
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Prior to the
date in (ii)No requirement
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(ii)
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For each
calendar quarter 1.0 to 1.0
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(iii)
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For each
calendar quarter 1.05 to 1.0
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during the
calendar years
beginning
1/1/09 and 1/1/10
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(iv)
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For each
calendar quarter1.10 to 1.0
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beginning
1/1/11 and during
each calendar
year thereafter
e.
The following shall be added as new
Section 7.3(d):
Lessee
acknowledges that the reporting requirements set forth in Section
24 hereof shall not be affected by the provisions of this Section
7.3 and accordingly that Lessee shall be required to provide all
the financial reports and information contained therein whether or
not Lessee is then required to comply with the covenants set forth
above.
f.
The following shall be added as new
Section 2.5:
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(a)
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As used herein,
the following terms shall have the meanings indicated:
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“Borrower” means Emeritus
Corporation, a corporation organized under the laws of the State of
Washington, its successors and permitted assigns.
“Lender” means Healthcare Realty
Trust Incorporated, its successors and assigns.
“Loan” has meaning set forth in Section 1.2 of the
Loan Agreement.
“Loan
Agreement” means the loan agreement of even date herewith
made between Lender and Borrower together with all other documents
evidencing, securing, amending, supplementing, extending, renewing
or otherwise related thereto.
“Minimum
Rent Adjustment” shall mean the dol
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