Exhibit 10.3.5
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CMBS MASTER LEASE AMENDMENT AGREEMENT
BY AND AMONG
KINDRED HEALTHCARE, INC.
(f/k/a Vencor, Inc.),
KINDRED HEALTHCARE OPERATING, INC.
(f/k/a Vencor Operating, Inc.),
AND
VENTAS FINANCE I, LLC
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CMBS MASTER LEASE AMENDMENT AGREEMENT
THIS CMBS MASTER LEASE AMENDMENT AGREEMENT (hereinafter this "Agreement" )
is dated as of the 30th day of June, 2003, and is by and among VENTAS
FINANCE I, LLC, a Delaware limited liability company (together with its
successors and assigns, "Lessor"), having an office at 0000 Xxxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, and KINDRED HEALTHCARE, INC., a Delaware
corporation (f/k/a Vencor, Inc.) ("Kindred"), and KINDRED HEALTHCARE OPERATING,
INC., a Delaware corporation (f/k/a Vencor Operating, Inc.) ("Operator";
Operator, jointly and severally with Kindred and permitted successors and
assignees of Operator and Kindred, "Tenant"), both having an office at 000 Xxxxx
0xx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
RECITALS
A. Lessor's predecessor in interest and Tenant entered into a certain
Master Lease Agreement dated as of December 12, 2001 (as the same may have been
or may hereafter be amended, amended and restated, supplemented, modified,
severed, renewed, extended or replaced, the "Lease"), demising to Tenant certain
properties.
X. Xxxxxx'x affiliate, Ventas Realty, Limited Partnership, and Tenant
entered into an Agreement for Sale of Real Estate and Master Lease Amendments
dated May 14, 2003 (as the same may have been heretofore amended, amended and
restated, supplemented, modified, renewed, extended or replaced, the
"Sale/Amendment Agreement").
X. Xxxxxx and Tenant desire to amend the Lease on the terms set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereby agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not defined
herein shall have the meaning ascribed thereto in the Lease.
2. No Accrued Rent. Lessor and Tenant acknowledge and agree that a
Refinancing Transaction has occurred and that, therefore, the Base Rent provided
for in the Lease shall at all times be payable on a current basis, not partly on
a current basis and partly on an accrual basis, and, notwithstanding anything to
the contrary contained in the Lease, Lessor and Tenant agree that, for all
purposes of the Lease, (a) Accrued Rent and Accrued Rent Interest shall equal
zero, (b) a Refinancing Transaction shall be deemed to have occurred under
subsection (i), (ii) and/or (iii) of the definition of "Refinancing Transaction"
contained in Section 2.1 of the Lease, (c) Base Rent shall at all times equal
Current Rent and vice versa, (d) the Unpaid Accrued Rent Due Date shall be
deemed to have occurred on the date of this Agreement, (e) Schedule 2.1B of the
Lease is hereby deleted from the Lease, and (f) the definition of "Current Rent"
contained in Section 2.1 of the Lease is hereby amended by deleting therefrom
the words "two percent (2%)
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of the Prior Period Base Rent; provided, however, that, from and after the
Unpaid Accrued Rent Due Date, for the remainder of the Rent Calculation Year
during which such Unpaid Accrued Rent Due Date occurs and for each Rent
Calculation Year thereafter, subject to satisfaction of the aforesaid 75% of
Adjusted Base Patient Revenues test, the amount referenced in this subsection
(b) (ii) shall equal three and one-half percent (3.5%), rather than two percent
(2%), of the Prior Period Base Rent (i.e. from and after the Unpaid Accrued Rent
Due Date, Current Rent shall equal Base Rent)" and substituting in their place
the words "three and one-half percent (3.5%) of the Prior Period Base Rent."
3. New Definition. Section 2.1 of the Lease is hereby amended by adding
thereto, in the proper alphabetical location, the following new definition:
""Lease Amendment Date": means June 30, 2003."
4. Article XXVI Amendments. Article XXVI of the Lease is hereby amended
in the following respects:
(a) Section 26.1 of the Lease is hereby amended by adding to the end
of subsection (j) thereof the word "and" and by adding thereafter the following
new subsections:
"(k) Within three (3) Business Days following Tenant's receipt thereof,
true, correct and complete copies of all professional negligence, malpractice
and/or general liability actuarial studies, reports and/or analyses prepared
from time to time for or by Tenant or at Tenant's direction other than those
prepared by its independent auditors;
(l) Within sixty (60) days after the close of each fiscal quarter, for any
insurance company owned or controlled by Tenant (a "Captive Insurance Company"),
an unaudited balance sheet and statement of operations as of the close of each
such period and the related unaudited statements of income, cash flows and
stockholders equity for such period and for the year to date of each Captive
Insurance Company, setting forth in each case in comparative form the
corresponding figures for the previous year, all prepared in accordance with
generally accepted accounting principles and all certified in an Officer's
Certificate to Lessor as being complete and accurate to the best of Tenant's
knowledge, subject to normal year end adjustments;
(m) Within one hundred eighty (180) days after the close of each Fiscal
Year, for each Captive Insurance Company, a balance sheet and statement of
operations as of the close of such Fiscal Year and the related statements of
income, cash flows and stockholder's equity for such Fiscal Year, in each case
with accompanying notes and schedules, prepared in accordance with generally
accepted accounting principles and audited by a firm of independent certified
public accountants of recognized standing selected by Tenant, which accountants
shall have issued an audit report thereon;
(n) Contemporaneously with the Lease Amendment Date, copies of the
organizational documents, including, without limitation, any amendments thereto
prior to the Lease Amendment Date, for each Captive Insurance Company, and,
within five (5) Business Days following entry
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into any subsequent amendment thereof, a true, correct and complete copy of any
such amendment;
(o) Within sixty (60) days following the end of each quarter during the
Term, reports, as of such quarter-end, (i) indicating the amount of the then
current "total loss pick" set for professional negligence and malpractice claims
against Tenant and its Subsidiaries and Affiliates and the then current
breakdown of such "total loss pick" (x) between claims incurred and reported and
claims incurred but not yet reported and (y) among claims incurred, whether or
not reported, that are (1) insured by the Captive Insurance Company(ies), (2)
insured by insurers other than a Captive Insurance Company, and (3) not insured
by a Captive Insurance Company or another insurer, (ii) indicating the amount to
be reserved by Tenant at the aforesaid then current "total loss pick" for
claims, whether or not reported, that are uninsured or that are insured by the
Captive Insurance Company(ies) and a reasonably detailed explanation of how such
reserved amount was calculated and determined, (iii) identifying the portion of
the reserve amount referenced in subsection (ii) above that will be funded, and
the portion of such reserve that will not be funded, to the Captive Insurance
Company(ies) by Tenant, and (iv) confirming that the amount to be funded to the
Captive Insurance Company(ies) by Tenant is being funded on budget or, if there
is a shortfall in the funding of the amount to be funded, detailing Tenant's
plan for funding such shortfall to the Captive Insurance Company(ies), and, in
addition, in each monthly Officer's Certificate delivered by Tenant pursuant to
subsection (a) above, Tenant shall include therein a certification that Tenant
is recording general and professional liability costs, on a monthly basis, in a
manner consistent with the most recent actuarial valuations;
(p) On or prior to the date which is one hundred (100) days following the
end of each Fiscal Year, a report that allocates all professional negligence and
malpractice liability expenses incurred by Tenant and its Subsidiaries and
Affiliates during such preceding Fiscal Year to each Facility under this Lease,
to each of the other Facilities under the Leases and to all other
healthcare-related facilities of Tenant and its Subsidiaries and Affiliates that
are not leased by Tenant under the Leases and that explains the methodology of
such allocation in reasonable detail;
(q) Within thirty (30) days following the end of each month during the
Term, Medicaid Rate Variance Reports, as of such month-end, prepared by Tenant
for the Facilities under this Lease, and under all of the Leases, that are
skilled nursing facilities, which report shall be substantially in the form
delivered by Tenant to Lessor or its affiliate on May 14, 2003 or another form
reasonably acceptable to Lessor, and, within forty-five (45) days following the
end of each month during the Term, the "Xxxxxx Xxxxxx Medicaid Rate Report," or
a substantially similar report reasonably acceptable to Lessor, each as of such
month-end, providing a state by state evaluation and prediction of Medicaid
rates;
(r) Within forty-five (45) days following the end of each month during the
Term, operating reports, as of such month-end, for each Facility under this
Lease, and under each of the Leases, and for all Facilities under each of the
Leases, and under all of the Leases, in the form
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delivered to Lessor or its affiliate on May 14, 2003 or another form reasonably
acceptable to Lessor;
(s) Within thirty (30) days following the end of each month during the
Term, a "QA Management Activity Report", as of such month-end, prepared by
Tenant for each Facility under this Lease, and under each of the Leases, in the
form delivered to Lessor or its affiliate on May 14, 2003 or another form
reasonably acceptable to Lessor, and, relative thereto, promptly following
Tenant's receipt of a written request therefor from Lessor, true, correct and
complete copies of any survey deficiency reports and/or plans of correction
relative to any of the aforesaid Facilities designated by Lessor;
(t) Within sixty (60) days after the commencement of each Fiscal Year, an
annual capital expenditures budget for such Fiscal Year, relating only to the
Leased Properties, in the form delivered to Lessor or its affiliate on May 14,
2003 or another form reasonably acceptable to Lessor and, within fifteen (15)
days after any material amendment to such annual capital expenditures budget, a
true, correct and complete copy of such amendment;
(u) Within forty-five (45) days following the end of each month during the
Term, a capital expenditures report, as of such month-end, relative to each
Facility under this Lease, and under all of the Leases, in the form delivered to
Lessor or its affiliate on May 14, 2003 or another form reasonably acceptable to
Lessor, and, including with each such report, project level expenditure detail
by Facility;
(v) Within thirty (30) days after the close of each of the first three
fiscal quarters, and within thirty (30) days after the close of each Fiscal
Year, a report, in form reasonably acceptable to Lessor, regarding changes in
the number of licensed beds and so-called "banked beds", at each Facility, at
all Facilities in the aggregate under this Lease and at all Facilities in the
aggregate under all of the Leases."
(b) Section 26.3 of the Lease is hereby amended by adding to the end
thereof the following additional provisions: "Relative to the foregoing matters,
(a) Tenant agrees that those officers and managerial-level employees of Tenant
and its Subsidiaries and Affiliates as are reasonably designated by Lessor shall
attend the above described quarterly and/or Facility level meetings and reviews,
(b) each of the aforesaid quarterly meetings and reviews shall, unless otherwise
agreed by Lessor and Tenant, occur on the first Tuesday that is more than
fifteen (15) days following the earlier of the date of filing or the filing due
date of the Form 10Q or 10K, as applicable, that Tenant is required to file
following the close of the quarter-to-be-reviewed, and (c) the aforesaid
Facility level meetings and reviews shall, unless otherwise agreed by Lessor and
Tenant, occur simultaneously with the aforesaid quarterly meetings and reviews
and, in addition, from time to time at other times designated by Lessor upon ten
(10) Business Days written notice to Tenant."
(c) Article XXVI of the Lease is hereby amended by adding to the end
thereof the following new Section 26.5, Section 26.6 and Section 26.7:
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"Section 26.5 Additional Tenant Assistance. Tenant agrees that Tenant's
chief executive officer and chief financial officer shall be made available by
Tenant, upon two (2) Business Days (five (5) Business Days, if an in-person
meeting is required) prior verbal and electronic notice from Lessor, to hold
meetings with, make presentations to and/or answer questions and inquiries by
investment advisers, analysts, underwriters, bankers and other lenders, rating
agencies and other persons and organizations designated by Lessor in connection
with transactions conducted by Lessor from time to time. Tenant shall not be
required to incur any out-of-pocket expenses (other than nominal expenses) in
connection with any such request by Lessor.
Section 26.6 Electronic Format. All reports, statements and other materials
delivered by or on behalf of Tenant to Lessor under this Article XXVI shall be
delivered to Lessor in electronic format, if available.
Section 26.7 Similar Reports. If Tenant shall at any time begin to prepare
new or additional reports, statements or other materials containing the same or
similar information as is contained in any of the reports, statements or other
materials that Tenant is required to deliver to Lessor by the terms of the other
Sections of this Article XXVI, Tenant shall deliver such new or additional
reports, statements or other materials to Lessor, promptly following Tenant's
preparation of the same."
5. No Other Amendments. Except as provided in this Agreement, the Lease
remains in full force and effect without modification.
6. Successors and Assigns. This Agreement and the covenants and
agreements herein contained shall be binding upon and inure to the benefit of
Lessor and Tenant and their respective heirs, devisees, successors and assigns.
7. Integrated Agreement; Modifications; Waivers. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes any and all prior representations,
understandings and agreements, whether written or oral, with respect to such
subject matter. Each of the parties hereto acknowledges that it has not relied
upon, in entering into this Agreement, any representation, warranty, promise or
condition not specifically set forth in this Agreement. No supplement,
modification or waiver of any provision of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
8. Headings and Captions. The headings and captions of the paragraphs of
this Agreement are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement or any provision hereof.
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9. Gender and Number. As used in this Agreement, the neuter shall include
the feminine and masculine, the singular shall include the plural, and the
plural shall include the singular, except where expressly provided to the
contrary.
10. Severability. In the event that any paragraph, section, sentence,
clause or phrase contained in this Agreement becomes or is held by any court of
competent jurisdiction to be illegal, null or void or against public policy, the
remaining paragraphs, sections, sentences, clauses or phrases contained in this
Agreement shall not be affected thereby.
11. Counterparts. This Agreement and any amendment to this Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto were upon the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed these presents the day
and year first above written.
TENANT:
KINDRED HEALTHCARE, INC., a
Delaware corporation formerly known as
Vencor, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxxxx
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Title: Vice President of Corporate
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Legal Affairs and Corporate
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Secretary
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TENANT:
KINDRED HEALTHCARE OPERATING, INC.,
a Delaware corporation formerly known
as Vencor Operating, Inc.
By: /s/ Xxxxxx X. Xxxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxxxx
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Title: Vice President of Corporate
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Legal Affairs and Corporate
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Secretary
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LESSOR:
VENTAS FINANCE I, LLC, a Delaware
limited liability company
By: /s/ T. Xxxxxxx Xxxxx
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T. Xxxxxxx Xxxxx, Executive
Vice President
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