THIRD AMENDMENT TO LEASE AGREEMENT (OAKWELL, TX) Dated as of June 30, 2005 (the “Effective Date”)
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 XXXXXX
X. XXXX,
an
individual resident of the State of Washington (collectively, “Guarantor”),
agree as follows:
| 1. |
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 0000 Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxx 00000, 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.
|
| 2. |
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.
|
| 3. |
Amendments.
The Lease is hereby amended as
follows:
|
| a. |
The
caption on Section 7.3 is hereby revised to read as follows: “Rent
Coverage—Consolidated and Facility”
|
| b. |
Section
7.3(a) is hereby deleted in its entirety and the following inserted
in
lieu thereof:
|
| (a) |
As
used herein, the following terms shall have the meanings
indicated:
|
“Consolidated
Coverage Ratio” means, as of the end of each quarterly reporting period, the
ratio of (i) EBITDARM on a consolidated basis
1
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.
| c. |
The
lead in language in Section 7.3(b) is hereby deleted in its entirety
and
the following inserted in lieu
thereof:
|
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
| (ii) |
For
each calendar quarter 1.05
to 1.0
|
during
the calendar year
beginning
1/1/07
2
| (iii) |
For
each calendar quarter 1.10
to 1.0
|
during
the calendar year
beginning
1/1/08
| (iv) |
For
each calendar quarter 1.15
to 1.0
|
during
the calendar year
beginning
1/1/09
| (v) |
For
each calendar quarter1.20
to 1.0
|
during
the calendar year
beginning
1/1/10 and during
each
calendar year thereafter
| d. |
Section
7.3(c) of the Lease is hereby deleted in its entirety and the following
is
substituted therefore:
|
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
| (i) |
Prior
to the date in (ii)No
requirement
|
| (ii) |
For
each calendar quarter 1.0
to 1.0
|
during
the calendar year
beginning
1/1/08
| (iii) |
For
each calendar quarter 1.05
to 1.0
|
during
the calendar years
beginning
1/1/09 and 1/1/10
| (iv) |
For
each calendar quarter1.10
to 1.0
|
during
the calendar year
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.
3
f. The
following shall be added as new Section 2.5:
| (a) |
As
used herein, the following terms shall have the meanings
indicated:
|
“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 dollar amount which would be required to be paid
on a monthly basis from the Minimum Rent Adjustment Effective Date in order
to
fully amortize the then current balance of the Loan allocated to this Lease
(the
“Fixed Component of the Minimum Rent Adjustment”), together with a monthly
return at the rate stated in Section 2(a) of the Note (the “Return Component of
the Minimum Rent Adjustment”), over a period of time until midnight on April 30,
2013.
“Minimum
Rent Adjustment Effective Date” means the date of the occurrence of an Event of
Default (as defined in the Loan Agreement) under the Loan Agreement, which
is
not waived by Lender.
“Minimum
Rent Adjustment Schedule” means a schedule setting out the Fixed Component of
the Minimum Rent Adjustment and the Return Component of the Minimum Rent
Adjustment payable by Lessee to Lessor each month in respect of this
Lease.
“Note”
means the Promissory Note of even date herewith made by Borrower in favor of
Lender pursuant to the Loan Agreement, together with all other documents
evidencing, securing, amending, supplementing, extending, renewing or otherwise
related thereto.
4
“Rent
Adjustment Notice” means a written notice from the Lender to the Borrower and
Lessee requiring the Minimum Rent Adjustment to be paid from and after the
Minimum Rent Adjustment Effective Date.
| (b) |
In
the event Lessee receives a Rent Adjustment Notice, Lessor and Lessee
shall prepare a Minimum Rent Adjustment Schedule in accordance with
the
provisions of this Agreement within ten (10) days after receipt by
Lessee
of the Rent Adjustment Notice and thereafter, Lessee shall pay to
Lessor
each month, the Minimum Rent Adjustment in accordance with the Minimum
Rent Adjustment Schedule. The first installment of the Minimum Rent
Adjustment shall be payable on the first day of the calendar month
following the date on which the Minimum Rent Adjustment Schedule
is agreed
upon. Each payment of the Minimum Rent Adjustment is to be made in
the
same manner and at the same time as the Minimum Rent provided however,
for
all other purposes, the Minimum Rent Adjustment shall not be included
within the definition of Minimum Rent.
|
| (c) |
Payment
of the Minimum Rent Adjustment shall be effective as of the Minimum
Rent
Adjustment Effective Date and shall last until the repayment in full
of
the sums due under the Loan allocated to this
Lease.
|
| (d) |
The
Minimum Rent Adjustment shall be paid in addition to the Minimum
Rent,
Additional Charges or any other amounts due under this Lease; provided
however, (i) no rent cap or other maximum rental increase in this
Lease
shall be affected in any manner by the application of the Minimum
Rent
Adjustment; (ii) annual Minimum Rent increases and other rent increases
provided for in this Lease shall be calculated as though no Minimum
Rent
Adjustment is payable and (iii) no determination of Fair Market Rental
Value shall be affected in any manner by the Minimum Rent Adjustment.
|
| (e) |
From
and after the date on which the first installment of Minimum Rent
Adjustment becomes payable by Lessee pursuant to Section 2.5(b) above,
all
payments received by Lessor and denominated by Lessee as payments
of
Minimum Rent and Minimum Rent Adjustment, shall be first applied
towards
payment of the Minimum Rent due in respect of the period to which
the
payment relates and then towards payment of the Minimum Rent Adjustment
due in accordance with the Minimum Rent Adjustment Schedule. The
payment
allocated to the Minimum Rent
|
5
Adjustment
shall then be applied first to the Return Component of the Minimum Rent
Adjustment (with such amount being credited dollar for dollar against the Return
Component of the Minimum Rent Adjustment due) and second, to the Fixed Component
of the Minimum Rent Adjustment due in accordance with the Minimum Rent
Adjustment Schedule (such amount to be credited dollar for dollar against the
Fixed Component of the Minimum Rent Adjustment due).
| (f) |
If
any installment of Minimum Rent Adjustment is not paid within ten
days
after the date when due, Lessee shall pay to Lessor interest at the
Overdue Rate on the amount unpaid, from the date when due to the
payment
thereof.
|
g. The
language appearing at (c) of Article XVIII is hereby deleted in its entirety
and
the following inserted in lieu thereof:
all
other
sums (other than the Minimum Rent Adjustment), if any, payable pursuant to
the
provisions of this Lease with respect to the Leased Property.
| h. |
Section
19.2 of the Lease is hereby deleted in its
entirety.
|
| i. |
Section
19.4 of the Lease is hereby deleted in its entirety and the following
is
substituted therefor:
|
Lessee
shall have the option to purchase the Leased Property as of the last day of
the
Initial Term (the “Closing Date”) upon written notice to Lessor delivered no
later than 180 days prior to the end of the Initial Term (the “Option Exercise
Notice”) for a purchase price equal to the Minimum Purchase Price, provided that
no Event of Default has occurred and is continuing on the date of the Option
Exercise Notice and no Event of Default has occurred and is continuing on the
Closing Date. If not sooner exercised, the option to purchase granted hereby
will expire and be of no further force and effect upon the expiration of the
Initial Term or the earlier termination of this Lease. As a condition to the
exercise of the option to purchase, Lessee shall be required to simultaneously
exercise its option to purchase set forth in all the Related Leases still in
existence at the time of the Lessee’s exercise of the option relating to the
Leased Property. Notwithstanding anything in this Lease or the Related Leases
to
the contrary, Lessee shall have no option to purchase the Leased Property or
any
other Leased Property under any Related
Leases
so long as any Event of Default has occurred and is continuing on the Option
Exercise Date or on the Closing Date for any such Leased
Property.
6
j. The
following shall be added to Section 37.1 after the definition of
“Land”:
“Landlord’s
Investment” means $7,984,286 plus the sum of all Capital Addition Costs relating
to the Leased Property paid for or financed by Lessor which as of the date
of
repurchase of the Leased Property have not been repaid by Lessee, less the
net
amount (after deduction of all reasonable legal fees and other costs and
expenses, including expert witness fees, incurred by Lessor in connection with
obtaining any such award or proceeds) of all Awards received by Lessor from
Condemnation of the Leased Property.
k. The
definition of “Minimum Purchase Price” set forth in Section 37.1 of this Lease
is hereby amended to read as follows:
“Minimum
Purchase Price” means the greater of (i) the Fair Market Value of the Leased
Property at the time of delivery of the Option Exercise Notice or (ii) the
Landlord’s Investment as such amount is increased at the rate of three percent
compounded annually for each year (to be prorated for partial years) between
the
Effective Date and the Closing Date.
l. The
definition of “Rent” set forth in Section 37.1 of this Lease is hereby amended
to read as follows:
“Rent” means,
collectively, the Minimum Rent, the Additional Charges and if applicable, the
Minimum Rent Adjustment (the latter being separate from the Minimum
Rent).
| 4. |
Counterparts.
This Amendment may be executed in one or more counterparts, each
of which
shall be an original and taken together shall constitute one and
the same
document. Signature and acknowledgment pages, if any, may be detached
from
the counterparts and attached to a single copy of this document to
physically form one document. The failure of any party hereto to
execute
this Amendment or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.
|
| 5. |
Waivers.
Lessee hereby (i) acknowledges that, as of the date hereof, to Lessee’s
knowledge there is no default on the part of Lessor under the Lease,
and
(ii) acknowledges that, as of the date hereof, there are no offsets
or
defenses to payment of the obligations of the Lessee under the
Lease. Lessor
acknowledges and agrees that Lessee has not been in compliance prior
to
the date of this Amendment with the Facility Coverage Ratio set forth
in
the Lease prior to the date of this Amendment and agrees that, by
execution of this Amendment, any such non-compliance is and shall
be
waived.
|
| 6. |
Execution
by Guarantor.
Guarantor has joined in the execution of this Amendment for the purpose
of
(i) agreeing to the terms and conditions of this Amendment, and (ii)
confirming Guarantor’s guaranty of payment and performance of all of the
Obligations, which in the case of the guaranty by Xxxxxx X. Xxxx,
shall
not include any obligations relating to payment of the Minimum Rent
Adjustment.
|
| 7. |
Entire
Agreement.
This Amendment, the Loan Agreement and the documents executed pursuant
to
the terms of the Loan Agreement, set forth the entire understanding
and
agreement of the parties hereto in relation to the subject matter
hereof
and supersede any prior negotiations and agreements between the parties
relative to the subject matter
hereof.
|
| 8. |
Force
and Effect of Amendment.
Except as specifically amended, modified, or supplemented as set
forth in
this Amendment, the Lease remains in full force and effect.
|
| 9. |
Execution
by Telefacsimile.
Any copy of this Amendment bearing a signature of a party to this
Amendment and sent by facsimile to any other party shall be deemed
a
manually-executed original of this Amendment, and shall be deemed
sufficient to bind such party.
|
7
IN
WITNESS WHEREOF,
intending to be legally bound hereby, the parties hereto have caused this Third
Amendment to Lease Agreement to be executed as of the day and year first above
written.
LESSOR:
HR
ACQUISITION OF SAN ANTONIO, LTD.
By
its
general partner:
HR
Acquisition of Texas, Inc.
/s/
X.X. Xxxxxx
Xxxxxx
By:
X.X. Xxxxxx Xxxxxx
Title:
Senior Vice President and Chief Operating Officer
LESSEE:
ESC
IV,
L.P.
By
ESC XX
XX, Inc.
Its:
General Partner
By:
:/s/
Xxxxxxx X. Xxxxxxx
Xxxxxxx
X. Xxxxxxx
Title:
Director of Real Estate Finance
GUARANTOR:
Emeritus
Corporation
By: :/s/
Xxxxxxx X. Xxxxxxx
Xxxxxxx
X. Xxxxxxx
Title: Director
of Real Estate Finance
:/s/
Xxxxxx X. Xxxx
Xxxxxx
X.
Xxxx
8
