EXHIBIT 10.16
OPERATING AGREEMENT
OF
LHCG-III, L.L.C.
This Operating Agreement is entered into and is effective as of the 1st
day of January, 2005, by and among the undersigned Members who agree as set
forth herein regarding the operations of LHCG-III, LLC, a Limited Liability
Company, organized under and existing pursuant to the laws of the State of
Louisiana:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
As used in this Agreement, defined terms have the meanings hereinafter
set forth:
(a) "Act" means the Limited Liability Company Law, La. R.S.
12:1301 et seq., and any successor statute as amended.
(b) "Agreement" or "Operating Agreement" means this Operating
Agreement as originally executed and as amended from time to
time.
(c) "Articles" or "Articles of Organization." The Articles of
Organization of LHCG-III, L.L.C., as filed with the Secretary
of State of Louisiana, as the same may be amended from time to
time.
(d) "Capital Account" A Capital Account maintained in accordance
with the rules contained in of the Regulations.
(e) "Capital Contribution." Any contribution to the capital of the
Company in cash, property or future services by a Member
whenever made.
(f) "Fiscal Year." The Company's fiscal year, which shall be the
calendar year.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means LHCG-III, L.L.C., a Limited Liability Company
organized under and existing pursuant to the laws of the State
of Louisiana.
(i) "Distributive Shares" means the share of distributed revenues
from the Company due to each Member under the Membership
Interests applicable to such distribution.
(j) "Majority Vote" or "Votes" has the meaning given to these
terms in Section 4.15.
(k) "Member" means any person executing this Agreement as a Member
or hereafter admitted to the Company as a Member as provided
in this Agreement, but does not include any person who has
ceased to be a Member in the Company.
(1) "Membership Interest" or "Interest" means a Member's interest
in the Company in which the Member shares in the income,
gains, expenses, profits, losses, deductions and credits of
the Company, which Interest is expressed as the percentage of
the Member's holdings of any class of Units in the Company in
proportion to the total issued and outstanding Units of the
same class of the Company.
(m) "Net Profits" and "Net Losses" The Company's taxable income or
loss determined in accordance with the Code for each of its
Fiscal Years.
(n) "Officer." One or more individuals appointed by the Members to
whom the Members delegate specified responsibilities. The
Members may, but shall not be required to, amend this
Agreement to create such offices as they deem appropriate,
including, but not limited to, President, Vice Presidents,
Secretary and Treasurer. The Officers shall have such duties
as are assigned to them by the Members from time to time,
which duties shall be memorialized by written amendment to
this Operating Agreement. All Officers shall serve at the
pleasure of the Members and the Members by Majority Vote may
remove any Officer from office without cause and any Officer
may resign at any time.
(o) "Person" has the meaning given that term in the Act.
(p) "Properties" means all of the Company's interests in any
movable or immovable properties, contracts or other assets
owned by the Company.
(q) "Service Area" means that area encompassed within St. ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ and Lafayette Parishes, Louisiana.
(r) "Transferor Member" means any Member who sells or transfers,
or offers to sell or transfer, or attempts to sell or transfer
his Units in the Company to another Person; or any Member who
is subject to a voluntary or involuntary withdrawal.
(s) "Treasury Regulations." The federal income tax regulations,
including temporary regulations, promulgated under the Code,
as such regulations may be amended from time to time
(including corresponding provisions of succeeding
regulations).
(t) "Units" means an interest in the Company acquired by a
Member. There shall be one class of Units. The Units shall
have voting rights equal to one vote per Unit. Units may be
issued to certain Members in exchange for capital
contributions to the Company. Units shall represent an equity
interest in the Company and shall represent a fully
participating interest in the Company's management and Net
Profits as hereinafter set forth. The maximum authorized
number of Units of the Company is ONE HUNDRED THOUSAND
(100,000).
ARTICLE 2
ORGANIZATION
2.1 INTENT
This Agreement constitutes the Operating Agreement of the Company, as
referred to in the Company's Articles of Organization and the Act.
2.2 FORMATION
The Company has been formed by the Members as a Louisiana limited
liability company by the filing of Articles of Organization (the
"Articles") pursuant to the Act and the issuance of a certificate by
the Secretary of State of Louisiana.
2.3 PURPOSES
The Company is formed for the purpose of engaging in any lawful
activity for which limited liability companies may be formed under the
laws of the State of Louisiana as may be approved by the Members. The
Company has established and operates a long-term acute care hospital in
Lafayette, Louisiana and long-term acute care hospital campus facility
in New Iberia, Louisiana and Eunice Louisiana to provide hospital
services to current and future patients of the Company in the Service
Area. In furtherance thereof, the Company may exercise all powers
necessary to or reasonably connected with the Company's business which
may be legally exercised by limited liability companies under the Act,
and may engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
2.4 REGISTERED OFFICE AND AGENT
The Company shall maintain a registered office and a registered agent
in the State of Louisiana, which office and agent may be changed by the
Members.
2.5 OTHER OFFICES
In addition to its registered office in Louisiana, the Company may have
other offices and places of business at such places, both within and
without the State of Louisiana, as the Members may from time to time
determine.
2.6 OPERATING AGREEMENT
The affairs of the Company shall be governed by the Act, its Articles
and this Operating Agreement. There shall be only one Operating
Agreement governing the affairs of the Company and the relationships of
the Members to one another as such relate to the business of the
Company. Any oral or written agreement between or among the Members
shall be of no effect whatsoever unless and until the Members agree by
unanimous vote to incorporate said agreement into this Operating
Agreement. The Members shall have the power to amend or repeal this
Operating Agreement, and to adopt a new Operating Agreement only upon
the two-thirds (b's) majority of the Votes as provided herein.
ARTICLE 3
MEMBERS
3.1 MEMBERS
The Members of the Company shall be those persons who have joined in
the execution of this Agreement, and any other persons who may be
hereafter approved for membership by the unanimous consent of the
Members.
3.2 EXECUTION OF THIS AGREEMENT
The admission of an additional Member, including if applicable the
spouse of a Member, shall not become effective until the Person has
executed this Agreement, or an appropriate supplement hereto, pursuant
to which the new Member agrees to be bound by, and subject to, all of
the terms and provisions hereof and restrictions herein.
3.3 MEMBERS HAVE NO EXCLUSIVE DUTY TO COMPANY
(a) No Member shall be required to perform services for the
Company solely by virtue of being a Member. Unless approved by
the Members, no Member shall perform services for the Company
or be entitled to compensation for services performed for the
Company.
(b) Except as otherwise expressly stated herein, no Member shall
be required to participate in the Company as such Member's
sole and exclusive function and any Member shall be entitled
to and may have other business interests and may engage in
other activities in addition to those relating to the Company
other than permitted Related Party Transactions as described
in Section 4.23. No Member shall have a business interest or
engage in activities which are in direct competition with the
Company's provision of inpatient long-term acute care hospital
care services without the expressed written approval pursuant
to a two-thirds (2/3) Vote. No individual member shall have
an ownership or investment interest in any long-term acute
care hospital in Iberia or Lafayette Parishes without a two
thirds (2/3) Vote. Neither the Company nor any Member shall
have any right, by virtue of this Operating Agreement, to
share or participate in such other investments or activities
of the Member or to the income or proceeds derived therefrom.
The Member shall incur no liability to the Company or to any
of the Members as a result of engaging in any other business
or venture permitted by this Agreement.
ARTICLE 4
MANAGEMENT
4.1 MANAGERS
(a) The business of the Company shall be managed by one or more
Managers, who may, but need not, be Members, and who shall be
a mandatary of the Company for all matters in the ordinary
course of its business. LHC GROUP, LLC shall be the initial
Manager of the Company, and appears herein to accept said
appointment. To the extent authorized by this Agreement, the
Manager shall have full, exclusive and complete discretion,
control, power and authority in the management of the
Company's affairs. The Manager shall have full power and
authority to undertake any activity described in this Article
and to execute and deliver on behalf of the Company such
documents or instruments which the Manager deems appropriate
in the conduct of the Company's business. No person, firm or
corporation dealing with the Company shall be required to
inquire into the authority of the Manager to take any action
or make any decision.
(b) The Manager shall have, without limitation, authority to
employ and compensate the personnel reasonably necessary to
conduct the Company's business activity. The Manager shall be
required to devote to the Company's affairs only such part of
its time and efforts as is reasonably required to conduct the
operations contemplated under this Agreement and shall be free
to engage in any other
business for its own account and/or for the account of others.
Neither the Company nor any of the Members shall have any
rights by virtue of this Agreement in any independent business
ventures of the Manager.
(c) Subject to the ultimate authority of the Members of the
Company, the day to day management of each long-term acute
care hospital campus shall be conducted by the Manager.
4.2 POWERS OF MANAGER.
The Manager shall have all necessary powers to carry out the purposes
and conduct the business of the Company including, without limitation,
excepting any specific limitations contained in this Agreement or in
applicable law, the authority, right and power on behalf of the Company
to:
(a) To negotiate and enter into, make and perform all such
contracts, agreements, and other undertakings binding the
Company as the Manager deems to be necessary, appropriate or
advisable in furtherance of the purposes of the Company;
(b) Acquire, hold, manage and defend the assets of the Company;
(c) Open, maintain and close bank accounts, designate and change
signatories on such accounts and draw checks and other orders
for the payment of monies;
(d) Lease, sell, convey, assign, trade, exchange, quitclaim,
surrender, release, abandon or otherwise dispose of any
movable assets or interest therein or payable therefrom not to
exceed $100,000 without any further act or vote or grant of
authority by any Members and in connection therewith make any
such distributions as the Manager may deem appropriate from
the proceeds of such sale to the Members;
(e) To collect and deposit all Company receipts and to disburse
all Company funds in payment of all ordinary and necessary
expenses;
(f) ▇▇▇ and be sued, complain and defend in the name of and on
behalf of the Company;
(g) Execute and deliver all negotiable instruments, checks, drafts
or other orders for the receipt or payment of funds belonging
to the Company;
(h) Execute powers of attorney, consents, waivers and such other
documents as may be necessary or appropriate before any court,
administrative board or agency of any governmental authority
affecting Company assets;
(i) Purchase insurance, at the Company's expense, to protect
Company assets against loss and to protect the Manager against
liability to third parties arising out of the Company's
activities, provided that any such insurance shall name each
Member, individually as an additional insured;
(j) Prepare and file all returns for the Company and make all
elections for the Company with respect to federal and state
income or other taxes;
(k) Recommend employment of such agents, employees, accountants,
lawyers, clerical help and other assistance and services
subject to approval by Majority Vote;
(1) Grant and perfect security interests in the Company's accounts
for the purposes of obtaining operational financing;
(m) Execute and deliver such other documents and perform such
other acts as the Manager in his sole discretion may determine
to be necessary or appropriate to carry out the purposes of
the Company; and
(n) Take any and all other action the Manager may deem necessary,
appropriate or advisable in furtherance of the purposes of the
Company.
4.3 CERTAIN LIMITATIONS ON AUTHORITY OF MANAGER.
Notwithstanding the provisions of Section 4.2, the Manager, acting
alone, shall not have the power to do any of the following on behalf of
the Company, each of which shall require approval of the Members as
provided herein:
(a) To dissolve, liquidate or wind-up the business of the Company;
(b) To sell, exchange, lease, mortgage or otherwise transfer
assets in excess of $100,000 per year, other than inventory;
(c) To merge or consolidate the Company with or into any other
entity;
(d) To incur indebtedness in excess of $ 100,000 in any one
transaction;
(e) To alienate, lease or encumber any immovable property
belonging to the Company;
(f) Confess to judgment against the Company;
(g) To admit new members;
(h) To file voluntary bankruptcy proceedings; and
(i) To amend the Articles or this Agreement.
4.4 COMPENSATION AND REIMBURSEMENT OF MANAGER.
Compensation for services rendered in his capacity as Manager shall be
established and thereafter modified at any time upon a Majority Vote
subject to the restrictions set forth in Section 4.23. In addition, the
Manager shall be reimbursed on a monthly basis for all direct costs and
expenses reasonably incurred on behalf of the Company.
4.5 LIABILITY AND INDEMNIFICATION OF MANAGER.
In addition to any other provision contained herein conferring similar
rights, the Manager shall not be liable, responsible, or accountable in
damages or otherwise to the Company or to any Member for any action
taken or any failure to act on behalf of the Company within the scope
of the authority conferred on the Manager by this Agreement or by law,
unless the action was taken or omission was made fraudulently or in bad
faith or unless the action or omission constituted gross negligence.
4.6 POWER OF ATTORNEY.
Each Member hereby constitutes and appoints the Manager as the Member's
true and lawful attorney and agent with full power and authority in the
Member's name, place, and stead to execute, swear to, acknowledge,
deliver, file, and record in the appropriate public offices:
(a) All such certificates that the Manager considers necessary or
appropriate to qualify or continue the Company as a limited
liability company; and
(b) One or more fictitious or trade name certificates
The power of attorney granted herein shall be considered to be coupled
with an interest, and, to the extent permitted by applicable law, shall
survive the death, interdiction, withdrawal, resignation, retirement,
expulsion, bankruptcy, dissolution, or termination of existence of a
Member or interest holder. It shall also survive the Transfer of an
Interest, except that if the Transferee is admitted as a Member, this
power of attorney shall survive the delivery of the assignment for the
sole purpose of enabling the Manager, as attorney in fact, to execute,
acknowledge, and file any documents needed to effectuate the
substitution.
4.7 RESIGNATION OR WITHDRAWAL OF MANAGER.
The Manager may resign upon giving written notice to the Company at
least thirty (30) days in advance. The Manager shall be deemed to
resign upon any disposition of the membership interest of the Manager,
if Manager is a Member. Upon the resignation or withdrawal of the
Manager, a new Manager shall be elected by a majority in interest of
the Members.
4.8 OTHER AGENTS
The Members, by Majority Vote, may appoint other managers, agents, or
attorneys-in-fact as needed from time to time, whose authority to act
for the Company shall be stated in the written act or instrument
pursuant to which said agent or attorney in fact is appointed. Unless
expressly authorized to do so by the Members, no attorney-in-fact,
employee or other agent of the Company shall have any power or
authority to bind or obligate the Company in any way, or to pledge its
credit.
4.9 REMOVAL OF MANAGER.
The Members, at any time and with or without cause, may remove a
Manager and elect a new Manager, upon unanimous Vote of the Members
other than the Manager to be removed.
4.10 LIMITATION ON AUTHORITY OF MEMBERS.
No Member is an agent of the Company solely by virtue of being a
Member, and no Member has authority to act for the Company solely by
virtue of being a Member. This Section 4.10 supersedes any authority
granted to the Members by the Act. Any Member who takes any action or
binds the Company in violation of this Operating Agreement
shall be solely responsible for any loss and expense incurred by the
Company as a result of the unauthorized action and shall indemnify and
hold the Company harmless with respect to the loss or expense.
4.11 BUSINESS JUDGMENT.
The Managers and the Members shall be entitled to rely on information,
opinions, reports or statements, including but not limited to financial
statements or other financial data prepared or presented by: (i) any
one or more Members, Officers or employees of the Company whom the
Member reasonably believes to be reliable and competent in the matter
presented, (ii) legal counsel, public accountants, or other persons as
to matters the Member reasonably believes are within the person's
professional or expert competence, or (iii) a committee of Members on
which he or she does not vote if the Member reasonably believes the
committee merits confidence.
4.12 MEETINGS OF THE MEMBERS
Subject to the notice requirement of Section 4.13, meetings of the
Members may be called at any time by a Manager, or by Members holding
in the aggregate thirty percent (30%) of the Units. If the meeting is
called by less than a majority in interest of the Members, it shall be
held at the registered office of the Company, unless all Members agree
to an alternate location. Subject to the foregoing, meetings of the
Members may be held at the office of the Company, or at such other
place, either within or without the State of Louisiana, at a time and
date as designed in the notice. Failure to hold an annual meeting shall
not affect or vitiate the Company's existence.
4.13 NOTICE OF MEETINGS
Written notice of the time and place of a meeting of Members shall be
given by the Person calling the meeting to all Members at least two (2)
days and not more than sixty (60) days prior to the date fixed for the
meeting. Notice of any Members' meeting may be waived in writing by any
Member at any time. Attendance at any meeting by a Member shall be
deemed a waiver of notice of such meeting unless such attendance is
solely for the purpose of objecting to the legality of the meeting on
grounds of inadequate or improper notice.
4.14 QUORUM
Except as may be otherwise required by the Act, the Articles or this
Agreement, the presence in person or by proxy of persons holding a
majority of the Votes shall be necessary to constitute a quorum at any
meeting of the Members.
4.15 VOTING
(a) At any meeting of the Members, every Member having the right
to vote shall be entitled to vote in person, or by proxy.
There shall be one vote allotted for each Unit held by each
Member (the "Votes"). Fractional Units shall not be entitled
to vote except in the event of a tie vote. Except for actions
requiring the unanimous or a supermajority consent or approval
of the Members as required by the Act, the Articles, or this
Agreement, a fifty-one percent (51%) majority of the Votes
present and voting ("Majority Vote") shall decide any matter
brought before the Members. On demand of any Member, the vote
on any question shall be by written ballot.
(b) The following actions shall require the unanimous consent of
the Members:
(i) expansion of the Company's business beyond the
Service Area;
(ii) termination of the Company's Management Agreement
with LHC GROUP, LLC, other than for cause as provided
in the Management Agreement;
(iii) the sale of any Member's Membership Interest and
Voting Interest in accordance with Article 6; or
(iv) the selection of an appraiser to provide an
independent appraisal of the value of the Company.
4.16 PROXIES
At any meeting of the Members, every Member shall be entitled to vote
in person or by proxy appointed by an instrument in writing subscribed
by such Member and bearing a date not more than eleven months prior to
the meeting, unless the instrument provides for a longer period. Any
Member may issue an irrevocable proxy to any other Member. A copy of
such instrument shall be filed prior to or at the meeting. A proxy need
not be a Member.
4.17 WRITTEN CONSENT
Any action may be taken without a meeting of the Members if a consent
in writing, setting forth the action so taken, shall be signed by those
Members having sufficient votes to authorize the action. Such consent
shall have the same force and effect as a vote of the Members, provided
that written notice is give prior to or contemporaneously with the
execution of the proposed written consent. A photostatic, email,
facsimile transmission, or similar reproduction of a writing, signed by
a Member, shall be regarded as an original for all purposes. A copy of
the written consent shall be distributed to each non-consenting Member
within fifteen (15) days of the date of such consent. The failure to
distribute such copies shall not vitiate or effect the consent in any
manner.
4.18 TELEPHONE CONFERENCE CALLS; EMAIL
Members may participate in meetings by means of a telephone conference
call or similar communication equipment provided that all Persons
participating in the meeting can hear and communicate with each other.
Participation in such a meeting shall constitute presence at the
meeting, except where a Person participates in the meeting for the
express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened. The Manager
may poll the Members by telephone and the results of such poll may
constitute action by the Members so long as no Member who has been
polled objects to such action prior to its adoption, and provided that
any action taken by poll is properly reduced to writing and a copy of
the same provided to the Members. Members may take action by way of
serial email transmissions so long as each Member contemporaneously
receives a copy of the emails proposing and discussing such action and
no Member objects to such action prior to its adoption.
4.19 TAX RETURNS AND ELECTIONS
The Manager shall cause the preparation and timely filing of the
Company's tax returns, shall make such tax elections and determinations
as appear to be appropriate, and shall timely file all other writings
required by any governmental authority having jurisdiction to require
such filing. Upon the transfer of all of the Member's interest in the
Company or upon the death of a Member, or upon the distribution of any
property of the Company to a Member, the Company may (but shall not be
required to) file an election in accordance with the applicable
Treasury Regulations to cause the basis of such property to be adjusted
for federal income tax purposes as provided by the Code.
4.20 REIMBURSEMENT OF COSTS AND EXPENSES
Any Member acting for and on behalf of the Company shall be entitled to
reimbursement for all expenses, costs and other liabilities reasonably
incurred on behalf of the Company, except to the extent that such
expenses, costs and other liabilities are incurred in connection with
services that the Member has agreed to perform for the Company as a
contribution to its capital.
4.21 LIMITATION OF LIABILITY
Except as otherwise provided by the laws of the State of Louisiana, the
personal liability of each Member, if any, shall be limited to his
capital contribution to the Company as set forth herein. No Member has
guaranteed or shall have any obligation with respect to the return of a
Member's Capital Contributions or profits from the operation of the
Company. No Member shall be liable for any debt or liability of the
Company unless same shall be separately guaranteed or endorsed by a
Member in that Member's personal capacity. No Member shall be liable,
responsible or accountable in damages or otherwise to the Company or
any other Member for any loss or damage incurred by the Company or the
Member by reason of any act or omission performed or omitted by the
Member on behalf of the Company, provided that the Member acted (i) in
good faith, and (ii) in a manner reasonably believed by the Member to
be within the scope of the authority granted to him by this Agreement
and in the best interest of the Company. The foregoing limitation of
liability shall not apply to such losses to, or damages incurred by,
the Company or the Members that result from the Member's gross
negligence, intentional misconduct or breach of a fiduciary duty owed
to the Company or the Members.
4.22 INDEMNITY
Except as otherwise provided for herein, to the fullest extent
permitted by law the Company shall indemnify, defend and hold harmless
each Member and make advances for expenses to each Member arising from
any loss, cost, expense, damage, claim or demand, in connection with
the Company, the Member's status as a Member of the Company, the
Member's participation in the management, business and affairs of the
Company or such Member's activities on behalf of the Company. The
Company shall also indemnify, defend and hold harmless its Officers,
employees and Managers from any loss, cost, expense, damage, claim or
demand in connection with the Company, any such person's participation
in the business and affairs of the Company, or such Person's activities
on behalf of the Company, unless the action was taken or omission was
made fraudulently or in bad faith or unless the action or omission
constituted gross negligence.
4.23 RELATED PARTY TRANSACTIONS
(a) Anything in this Agreement to the contrary notwithstanding, it
is agreed by and among the Company and its Members that the
Company shall not enter into any contract, agreement or
transaction with any Member of the Company; or with any
individual family member (spouse, child, sibling or parent) of
any Member of the Company; or with any corporation,
partnership or other legal entity owned (10% or more) or
controlled by any Member of the Company, or an immediate
family member thereof; or any individual which is a
shareholder or other equity interest owner in a corporation,
partnership or limited liability company which is a Member,
without the consent of a Majority Vote of the remaining
disinterested Members which shall be calculated by omitting
the votes attributable to the interested Member. The following
are non-exclusive examples of transactions covered by this
section and requiring consent of a majority of the
disinterested Members:
(i) sale of the Company's real estate or movable property
or assets to the Members, their immediate family
members or related entities;
(ii) leasing of the Company's real estate or movable
property or assets, or any portion thereof to or from
the Members, their immediate family members or
related entities;
(iii) entering into contracts for the management,
servicing, repair or improvement of the Company's
business, real estate, movable property or other
assets, or any portion thereof, with the Members, or
their immediate family members or related entities.
(iv) employment or professional services agreements.
(b) Notwithstanding the foregoing, the Members unanimously agree,
approve and ratify the Management Services Agreement entered
into between the Company and LHC GROUP, LLC with the cost of
same not to exceed fifteen percent (15%) of the Company's net
revenues.
4.24 CONTRACTS IN VIOLATION
Any contract, agreement, or transaction entered into without the
consent of a majority of the disinterested Members as required in
Section 4.23 above, shall be absolutely null and void and of no force
and effect as concerns the Company and the disinterested Members.
4.25 NO INDEMNIFICATION
The limitation of liability and indemnification provisions of Sections
4.21 and 4.22 of this Agreement shall not apply to any transaction
entered into in violation of Sections 3.3 and 4.23 above. Furthermore,
the limitation of liability and indemnification provisions of Sections
4.21 and 4.22 of this Agreement shall not apply to any Member if that
Member is determined to have breached any fiduciary duty to the
Company. In such event, the Member shall promptly reimburse to the
Company any sums advanced under Sections 4.21 or 4.22.
4.26 MEMBERS' AND OFFICERS' COMPENSATION
Any salaries and other compensation of the Members or Officers shall be
fixed by the Members, and no Member shall be prevented from receiving
such salary by reason of the fact that he is also a Member of the
Company.
4.27 TAX ELECTIONS; TAX MATTERS PARTNER.
All elections required or permitted to be made by the Company under the
Code shall be made by a Majority Vote of the Members. For all purposes
permitted or required by the Code, the Members constitute and appoint
its initial manager as Tax Matters Partner or, if he is no longer the
Manager, then such other Member or Manager as shall be elected by the
Members by Majority Vote. The provisions on limitations of liability
and indemnification of the Members set forth in Article 4 hereof shall
be fully applicable to the Tax Matters Partner in his or her capacity
as such. The Tax Matters Partner may resign at any time by giving
written notice to the Company and each of the other Members. Upon the
resignation of the Tax Matters Partner, a new Tax Matters Partner may
be elected by Majority Vote of the Members.
4.28 INSURANCE.
The Company shall maintain in force and effect general commercial
liability insurance coverage of no less than $1,000,000 per incident
and $3,000,000 in the aggregate; professional liability insurance of no
less than: (i) $1,000,000 per incident and $3,000,000 in the aggregate,
or (ii) $100,000 per incident and $300,000 in the aggregate, subject to
and including participation as a Qualified Healthcare Provider in the
Louisiana Patients' Compensation Fund; and workers' compensation
insurance in the minimum statutory amount for the full term of this
Agreement and for a term of three (3) years thereafter.
4.29 FINANCING.
For the Company's benefit, LHC GROUP, LLC, as Manager, is hereby
authorized to obtain operational financing from its credit facility,
GMAC-RFC Health Capital or its successor in interest, and shall be
authorized to grant a security interest of up to one hundred percent
(100%) of Company's accounts receivables to secure same.
ARTICLE 5
CAPITAL CONTRIBUTIONS AND ACCOUNTS, AND ACCOUNT ALLOCATIONS
5.1 CAPITAL CONTRIBUTIONS
(a) Initial Capital. The Members shall each own Units in the
Company with their initial Interests in the Company equal to
the proportionate percentages as shown in the Membership
Schedule. The Units shall represent a participation interest
in the equity, Net Profits and Net Losses of the Company.
(b) Allocation of Profits and Losses; Equity Interests.
Notwithstanding any provision of this Agreement to the
contrary, the parties agree that the Membership Interests in
income and losses of the business activities conducted by the
Company shall be as set forth opposite each Member's name on
the attached Membership Schedule. From and after the date this
Agreement takes effect, the Membership Interest for each
Member shall be equal to the percentage determined at any
given time by dividing the Units held by such Member as of
such time by the aggregate Units held by all Members as of
such time.
(c) Special Capital Contributions. It is anticipated that the
Company will from time to time require additional capital to
purchase or acquire additional assets or entities, or
interests therein, and to fund the future operations of the
Company. The Members will contribute to the capital of the
Company, according to their respective Membership Interests,
as set forth in Sections 5.1(b) above, cash sums equal to the
sums necessary to defray the costs of such operations not
covered by Company revenues, up to a cumulative aggregate
maximum amount of additional capital for all Members of
$10,000. Any requirement or project requiring capital in
excess of this amount shall require an eighty percent (80%)
majority of the Votes. Should a Member fail to pay its share
of authorized additional capital, it shall be liable to the
other Member or Members therefor, as provided in Section
5.1(d) below; provided, however, that in lieu of the penalty
set forth in Section 5.1(d), upon a Majority Vote of the
non-defaulting Members, the defaulting Member shall be deemed
to have forfeited its interest in the Company to the non-
defaulting Member or Members who choose to advance the
defaulting Member's unpaid capital contribution. Notice of the
forfeiture shall be given to the defaulting Member within
sixty (60) days of the default in capital contribution. The
provisions of this Section 5.1(c) shall not apply to capital
calls in excess of the aggregate limit set forth herein unless
such call has been approved by the affirmative vote of not
less than eighty percent (80%) of the issued and outstanding
Units prior to a default.
(d) Penalty for Failure to Make Capital Contributions. Upon
failure of any Member to promptly remit to the Company any sum
due by it under the terms of this Agreement, and if no
non-defaulting Member chooses to declare a forfeiture of
interest under Section 5.1(c) above, then another Member may,
but shall not be required to, advance such sum or sums. Any
Member making such an advance shall be entitled to recover
300% of the amount of such advance from the first Distributive
Shares to which the other Member would have otherwise been
entitled as a Member of the Company in the absence of its
default hereunder. The provisions of this Section 5.1(d) shall
not apply to capital calls in excess of the aggregate limit
set forth herein unless such call has been approved by a
Majority Vote prior to a default.
(e) Special Capital Contributions for Acquisitions or New
Business. It is anticipated that the Company may acquire, and
may participate in the further development and operation of
its Properties, and in future business ventures. The Members
may contribute to the capital of the Company, according to
their respective Membership Interests, as set forth in Section
5.1(b) above, cash sums equal to the acquisition cost of such
interests or cash and personal guaranties as required by the
terms of any financing secured for such venture or ventures.
Should a Member fail to approve or elect to participate in an
acquisition, or new business opportunity by the Company upon
being given the opportunity the Member
electing to participate shall thereafter be free to acquire or
pursue such interests for its or their own account outside the
Company, or, the Company may go forward with such venture
without the participation of the non-participating Member and
the participating Members shall indemnify and hold harmless
the non-participating Member from all liability, loss or
obligation arising in any manner from such venture. In such
event, expenses and revenues shall be separately accounted for
with respect to the new venture and the participating Members
only shall provide for the expenses and share in the revenues
or losses from such venture, and no part of such costs,
revenues or losses shall be allocated to the non-participating
Member.
(f) Interest on and Return of Capital Contributions. No Member
shall be entitled to interest on such Member's Capital
Contribution or to a return of its Capital Contribution,
except as otherwise specifically provided for herein.
5.2 CAPITAL ACCOUNTS
A Capital Account shall be maintained on the books of the Company for
each Member which shall be begun, determined and maintained through the
full term of the Company in accordance with the Capital Accounting
rules of Treasury Regulations, and otherwise in accordance with
generally accepted accounting principles consistently followed. A
Member's Capital Account shall consist of his capital contributions to
the Company:
(1) Increased by his share of Company profits; and
(2) Decreased by his share of Company losses and by cash
distributions to him.
No Member shall withdraw any part of its Capital Account, except upon
the approval of the Members.
5.3 ALLOCATION OF PROFITS, GAINS AND LOSSES
(a) General Allocation. The Members will share in the income,
gains, expenses, losses, deductions and credits of the Company
in accordance with their Membership Interests. Each Member's
share of the Net Profits and Net Losses shall be allocated for
each Fiscal Year to the Members' Capital Accounts.
(b) Depletion Allocation. Depletion will be allocated to the
Members in the same proportions as they share in the income of
the Company; provided, however, that depletion will not be
allocated to a Member to the extent that it causes or
increases a negative balance in his Capital Account.
(c) Qualified Income Offset. Notwithstanding the allocation rules
set forth in this Agreement, the Members agree to a "qualified
income offset" as defined in Treasury Regulations to allocate
items of income and gain in an amount and manner sufficient to
eliminate as quickly as possible any unexpected Capital
Account deficit balance.
5.4 DISTRIBUTIONS
The Company's Net Profits which are in excess of the current or
projected needs of the Company may be distributed on an interim basis
each Calendar Quarter to the Members in accordance with the allocations
set forth in Section 5.1. Such payments are referred to herein as
"Distributive Shares." Such distributions shall be made no later than
60 days
following the end of each Calendar Quarter. However, no distribution
shall be made to Members if prohibited by the Act. All interim
quarterly distributions shall be reconciled annually and corrective
distributions shall be made no later than March 31st of each year for
the prior fiscal year. Amounts calculated for any partial quarter or
annual periods shall be determined proportionately, but shall be
subject to the annual reconciliation.
The Company is subject to partnership taxation and is not subject to
taxation. Each Member receiving Distributive Shares shall be
responsible for payment of its own tax liabilities, if any.
5.5 LOANS TO COMPANY
To the extent approved by a Majority Vote of the Members, any Member
may make a secured or unsecured loan to the Company.
5.6 PRIORITY AND RETURN OF CAPITAL.
No Member shall have priority over any other Member, either as to the
return of Capital Contributions or as to Net Profits, Net Losses or
Distributions. This Section shall not apply to loans (as distinguished
from Capital Contributions) which a Member has made to the Company.
5.7 PERSONAL GUARANTEES OF THE MEMBERS
As a condition precedent to the admission of a Member and issuance of
Membership Interest to the Member, to the extent that any obligations
of the Company are required to be personally guaranteed by the Members
of the Company, upon the eighty percent (80%) Majority Vote of the
Members, each Member shall sign as surety, in his, her or its
individual capacity, on all outstanding obligations of the Company
which are personally guaranteed by the Members of the Company.
Alternatively, any Member may satisfy this condition precedent by
arranging for such a personal guarantee by a third person which is
satisfactory to the other Members, and creditors of said obligations.
The Company and the Members of the Company acknowledge and agree that
the intention of each party is that all obligations of the Company
which require personal guarantees shall be guaranteed by the Members in
proportion to their membership interests, with each Member retaining
full rights of indemnity and contribution from the other Members in
proportion to the respective membership interests held by the Members.
If the Member fails to perform his, her or its obligations pursuant to
this Section 5.7 following provision of ten (10) days written notice
demanding performance, the Member shall be deemed to have voluntarily
withdrawn from the Company under Section 6.14 of this Agreement without
the requirement for further notice by either party.
5.8 MEMBERS' RIGHTS OF CONTRIBUTION.
If for any reason, a Member sustains any liabilities or is required to
pay any losses arising out of, or directly connected with, the Company,
or the execution of any agreements or guarantees in connection with the
Company's operations, which are in excess of his, her or its
proportionate Membership Interest in the Company, the other Members
shall promptly reimburse such Member this excess, so that each and
every Member of the Company will then have paid his, her or its
proportionate share of such losses to the full extent of his, her or
its Membership Interest in the Company.
ARTICLE 6
TRANSFER OF INTERESTS AND WITHDRAWAL
6.1 RESTRICTIONS ON TRANSFER. A Member may not sell or otherwise transfer
the Member's Units in the Company except as provided in this Article.
In the event that a Member sells or transfers, or purports or attempts
to sell or otherwise transfer, his, her or its Units except as
provided in this Article, that Member shall be deemed to have
involuntarily withdrawn from the Company effective on the date of the
sale or transfer, or the purported or attempted sale or transfer. Any
such sale or transfer, or purported or attempted transfer shall not
have effect with respect to the Company and its Members, and any such
transferee shall be entitled only to receive the value of the Units
transferred in accordance with the provisions of Section 6.3. The
transfer restrictions of this Article shall be binding on the Members,
the Company, their heirs, legatees, legal representatives, successors,
assigns, and transferees.
6.2 VOLUNTARY TRANSFER OF MEMBER'S INTEREST TO THIRD PARTIES.
(a) Notwithstanding any other provision of this Agreement to the
contrary, no Member may sell, assign, give, devise, pledge,
hypothecate, mortgage, or in any other manner transfer any
portion of his Units, without the prior written consent of
all of the other Members, and any such transfer shall be
subject to the provisions of this Section 6.2.
(b) If a Member desires to effect any such transfer to a third
party, such Member or his legal representative (the
"Transferor Member") shall first give written notice (the
"Offer Notice") to the Company and the other Members (the
"Remaining Members") which shall state:
(i) The extent of the Units to be conveyed;
(ii) The complete terms upon which the Transferor Member
seeks to convey the Units (such terms to be limited
to consideration for the Units in the form of cash
and/or notes receivable); and
(iii) The name and address of any transferee relating to
such conveyance.
(c) Upon receipt of the Offer Notice, the Remaining Members shall
have the unrestricted right to (i) consent to such transfer;
or (ii) refuse to consent to such transfer, in which case
such refusal shall cause the following rights and obligations
to arise in the following order of priority:
(d) The Remaining Members shall have the option for a period of
thirty (30) days from receipt of the Offer Notice within
which to purchase the offered portion of the Transferor
Member's Units. For the first fifteen (15) days of the thirty
(30) day period, each Remaining Member electing to purchase
part of the Transferor Member's Units shall have the primary
right to purchase a proportion of the Transferor Member's
Units calculated as the product of: the Units of the
Transferor Member described in the Offer Notice multiplied by
a fraction, the numerator of which shall consist of the
purchasing Remaining Member's Units and the denominator of
which shall be the aggregate Units of the Remaining Members
electing to exercise their primary right to purchase the
Transferor Member's Units.
(e) In the event that any portion of the Transferor Member's
Units described in the Offer Notice has not been purchased by
the Remaining Members at the end of the initial fifteen (15)
day period, the remainder shall be available for purchase by
these Remaining Members in the exercise of their secondary
right. Each Remaining Member electing to exercise his
secondary right shall have the option for a period of fifteen
(15) days to purchase, on a pro-rata basis, such part of the
Transferor Member's Units as was not elected for purchase by
the Remaining Members in the exercise of their primary right.
(f) In the event that any portion of the Transferor Member's
Units described in the Offer Notice has not been purchased by
the Remaining Members at the end of the thirty (30) day
period, the Company shall have the option for a period of
fifteen (15) days to purchase any remaining portion of the
Transferor Members' Units that was not purchased by the
Remaining Members in the exercise of either their primary or
their secondary rights.
(g) In the event that any portion of the Transferor Member's
Units described in the Offer Notice has not been purchased by
the Company at the end of the fifteen (15) day period, the
Transferor Member may transfer the Units on the terms
contained in the Offer Notice, and the consent of the Company
and its Members if not expressly granted shall be implied.
The Transferor Member shall complete the transfer within
ninety (90) days (or such later date as may be specified in
the Offer Notice) after receipt of the Offer Notice by the
Remaining Members, but only with such transferee and only on
such terms as were specified in the Offer Notice.
6.3 INVOLUNTARY TRANSFERS OF UNITS.
(a) If any Member (the "Transferor Member"): (i) is deemed to
have involuntarily withdrawn from the Company under the terms
of this Agreement; (ii) becomes the subject of way judicial
proceeding, including a proceeding under the U.S. Bankruptcy
Code, or if a trustee, receiver, liquidator, or other
representative of the Member's personal or business assets is
or may be appointed; or (iii) becomes insolvent or makes an
assignment for the benefit of the Member's creditors; or (iv)
becomes involved in any other proceeding or commits any other
act by which such Member, or a trustee, receiver, liquidator,
or other representative of such Member, is or may be
permitted or required to acquire or convey all or any portion
of such Member's Units, such Member shall give written notice
to the Company.
(b) The Company shall be obligated to purchase the entirety of
the Transferor Member's Units, which purchase shall be
consummated in the manner specified in this Section. The
purchase price of any Units purchased pursuant to this
Section shall be equal to the book value of the Units as of
the close of the Company's fiscal year immediately preceding
the event resulting in the involuntary transfer, less any
negative Capital Account balance of the Member. In the event
the involuntary transfer is occasioned prior to the end of
the Company's first fiscal year, the purchase price of any
Units purchased pursuant to this Section shall be equal to
the book value of the Units as of the close of business on
the day on which the event causing the involuntary transfer
occurred, less any negative Capital Account balance of the
Member. The book value of the Units shall be determined by
the Company's public accountant, and the accountant's
determination when rendered shall be conclusive amongst the
parties.
(c) If the Company is obligated to purchase the interest of a
Transferor Member in the Company pursuant to the provisions
of this Section, the Company shall do so by giving written
notice to the Transferor Member, or the Transferor Member's
trustee, receiver, or other representative, or the
appropriate court, all as the case may be. Upon the giving of
such notice, the Company, as purchaser, and the Transferor
Member, as seller, shall be obligated to consummate the sale
and purchase of the Units, or portion thereof, at the Company
offices within sixty (60) days after the date of the
Company's notice.
(d) The purchase price shall be paid by the Company with a
non-negotiable promissory note payable in twenty equal
quarterly installments, commencing ninety days after the
effective date of the transfer, with interest at the prime
rate published in the Wall Street Journal on the date of the
transfer without prepayment penalties. The note shall contain
a subordination clause subordinating the note to all other
debts of the Company. The Company shall grant a security
interest securing payment of the promissory note in the Units
transferred if the cause of the involuntary withdrawal is
specified in Sections (c) (ii) or (iii), only. At its sole
option the Company may pay all or part of the purchase price
in cash at the time of the transfer.
6.4 DEATH OF A MEMBER'S SPOUSE. In case of the death of an individual
Member's spouse ("decedent"), the Company shall have the option to
redeem the Units owned by the decedent, including the decedent's
interest in the Company arising from the marital regime of acquets and
gains, if any. The Company shall not automatically redeem the
decedent's Units, but rather the affected Member shall have the
option, within ninety (90) days of notice to the Company of the
decedent spouse's death, to purchase the decedent's interests in the
Units. If the member does not exercise this right within ninety (90)
days of the notice of death, then the Company shall have the option to
redeem the decedent's interests in the Units at the price and on the
terms specified in Section 6.7 within the ensuing thirty (30) days.
6.5 DIVORCE OF A MEMBER. In the event of a divorce between an individual
Member and the spouse of that Member, the Company shall have the
option to redeem any Units granted to or owned by the spouse of the
member. The Company shall not automatically redeem this Units, but
rather the affected Member shall have the right within ninety (90)
days of notice to the Company of the earlier of (i) the final judicial
decree of divorce, or (ii) the execution of an agreement of separation
of property between the Member and the spouse of the Member, to
purchase the Units belonging to the spouse of the Member. If the
Member does not timely exercise this right, then the Company shall
have the option to redeem the spouse's Units at the price and on the
terms specified in Section 6.7 within the ensuing thirty (30) days.
6.6 DEATH OF A MEMBER. In the event of the death of an individual Member,
the Company shall have the option to redeem any Units, held by such
Member, or transferred by will or law or otherwise to any heirs or
legatees of the individual Member, at the price and on the terms
specified in Section 6.7 within the ensuing ninety (90) days. In the
event of the death of a shareholder of a corporate Member, the Company
shall have the option to redeem any Units held by the affected
corporate Member at the price and on the terms specified in Section
6.7 within the ensuing thirty (30) days.
6.7 VALUATION AND PAYMENT FOR PURPOSES OF SECTIONS 6.4,6.5,6.6, & 6.14(e).
(a) Valuation of Units. The Members agree that the value of the
Company for the purposes of valuing the Units described in
Sections 6.4, 6.5, 6.6, & 6.14(e) herein shall be equal to
ONE HUNDRED PERCENT (100%) of the Company's Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) for
each of the five fiscal years ending after the effective date
of the event giving rise to the valuation. The value of a
Member's interest under Sections 6.4, 6.5,6.6, & 6.14(e)
shall be the product of: (i) the Member's percentage holdings
of Units as of the event giving rise to the valuation; and
(ii) the value of the Company for each of the five fiscal
years ending after the effective date of the event giving
rise to the valuation. The value of the Member's Units for
each fiscal year shall be determined by the Company's
accountant.
(b) Payment of the Purchase Price. The purchase price shall be
paid by the transferee with an unsecured, non-negotiable
promissory note payable in five annual installments,
commencing on or before March 31st of the year following the
effective date of the transfer, with interest at the prime
rate published in the Wall Street Journal on the effective
date of the transfer without prepayment penalties. If the
Company is the transferee, the note shall contain a
subordination clause subordinating the note to all other
debts of the Company. At his, her or its sole option the
transferee may pay all or part of the purchase price in cash
at the time of the transfer. Notwithstanding the foregoing,
the Transferor Member, or its successors and assigns, and the
transferee may unanimously agree upon an alternative value
for the Units and an alternative method of payment.
6.8 SURVIVAL OF LIABILITIES. No sale or other transfer of an Units, even
if it results in the substitution of the transferee or assignee as a
Member herein, shall release the transferor or assignor from those
liabilities to the Company or the other Members which arose prior to
such sale or assignment or which otherwise survive such sale or
assignment as a matter of law.
6.9 NEGATIVE CAPITAL ACCOUNTS. If a Transferor Member has a negative
Capital Account balance, the Transferor Member shall pay the Company
the amount of the negative Capital Account balance as of the transfer
date. If the Transferor Member shall fail to pay the negative Capital
Account balance, the Company shall have the right to set-off or recoup
any such amounts from any distributions due to, or from any amounts
owed by the Company to, the Transferor Member, the transferee Member
or the assignee.
6.10 LOANS AND PERSONAL GUARANTEES. Any loans owed by the Company to a
transferor Member shall be paid in full at closing. On or before
closing of any transaction pursuant to this Article 6, the transferee
Member shall also be obligated to obtain a full release of the
transferor Member (and the individual shareholder(s) or members of
such Member) from all personal guarantees granted on behalf of the
Company.
6.11 RIGHTS OF PERMITTED TRANSFEREES OR ASSIGNEES. A permitted transferee
or assignee of a Member's Interest shall not become a Member without
the Majority Vote of the Members and compliance with the provisions of
Section 3.2 of this Agreement. Any transferee or assignee of Units in
the Company who is not admitted to membership in the Company shall not
be entitled to vote, and shall not be entitled to participate in the
management of the Company, or to have access to any records or
communications of the Company or its Members, or to participate in any
manner in the operation of the Company. He or she will, however, be
bound by and subject to this Agreement and the
terms and conditions of any other agreement pertaining to the
restrictions on the transfer of an Interest in the Company.
6.12 SEVERABILITY. The parties agree that each term and condition contained
in this Article 6 shall be liberally construed to give effect to the
parties' intent and shall be considered severable; and if, for any
reason, any provision or provisions, or portions thereof, herein
contained are determined to be invalid, overbroad, or unenforceable
for any reason, such provision shall be deemed modified to the extent
required to render it valid, enforceable and binding, and such
determination shall not affect the validity or enforceability of any
other provision of this Agreement. In the event any provision of this
Article 6 is held to be unenforceable or void for any reason, the
remainder of the provisions of this Article shall be unaffected and
shall remain in fall force and effect in accordance with its terms.
6.13 SPECIFIC PERFORMANCE; ENFORCEMENT.
(a) In addition to any other remedies provided for herein, in the
event any transfer required under this Article 6 is not
timely completed in accordance with the terms hereof, the
Company and/or each non-defaulting Member may seek specific
performance of the obligations of the defaulting party and
may institute legal proceedings to enforce the obligations of
the defaulting party and, if successful, the defaulting party
shall be liable for all reasonable attorneys' fees and costs
incurred by the non-defaulting party.
(b) The Members hereby declare and agree that it is impossible to
measure in money damages that which will accrue to the
Company and its Members by reason of a failure of any Member
hereto to perform any of the obligations under this Article
6. Therefore, if any party hereto or the personal
representatives of a decedent shall institute any action or
proceeding to enforce the provisions of this Article 6 by
injunction (including the granting of a temporary restraining
order), any Member against whom such action or proceeding is
brought hereby waives the claim or defense therein that such
Member or such personal representative has an adequate remedy
at law, and such Member shall not urge in any such action or
proceeding the claim or defense that such remedy at law
exists.
(c) The exclusive venue for any action brought to enforce the
terms of this Article 6 shall be Lafayette Parish, Louisiana.
6.14 WITHDRAWAL OF A MEMBER
(a) Voluntary Withdrawal. Any Member may withdraw from the
Company at any time by providing ninety (90) days advance
written notice to all other Members.
(b) Involuntary Withdrawal. Any circumstance compelling the
involuntary transfer of a Member's Interest, including,
without limitation, service of any writ of seizure applicable
to his Interest or adjudication of bankruptcy of a Member,
shall be deemed a withdrawal by the Member affected thereby
effective upon the service of the writ or notice of the
adjudication.
(c) Automatic Involuntary Withdrawal. In addition to the other
events of withdrawal contained herein, a Member shall be
deemed to have withdrawn from the Company effective on the
date on which one of the following events occurs:
(i) the individual Member, or an officer, director,
shareholder or other equity holder of a corporate
Member is convicted of a felony;
(ii) the individual Member dies, is interdicted or
determined to be incompetent; or
(iii) the Member breaches this Agreement and fails to cure
such breach within thirty (30) days of receipt of
notice of such breach;
(iv) the Member, or an officer, director, shareholder or
other equity holder of a corporate Member is
excluded or debarred from participation in the
Medicare or Medicaid programs;
(v) the Member sells or transfers, or attempts to sell
or transfer of the Member's interest in the Company
without compliance with the provisions of this
Article 6; or
(vi) the individual physician Member, or a physician
officer, director, shareholder, member or other
equity holder of a corporate Member fails to obtain,
maintain, and exercise active medical staff
privileges at the Company's long-term acute care
hospital for any period exceeding thirty (30) days
without the written consent of Manager.
(d) Withdrawal from the Company, in and of itself, shall under no
circumstances relieve the former Member of his, her or its
obligations to: (i) make any additional capital contributions
approved by the Members prior to the effective date of the
former Member's withdrawal; or (ii) to fulfill his, her or
its contractual obligations to the Company incurred or
accrued prior to the effective date of the former Member's
withdrawal. In either event, the Company shall have a right
of set-off against any distribution due to a withdrawing
former Member.
(e) In the event of a voluntary withdrawal of a Member, if the
Company is continued in accordance with the provisions of
Section 7.1, the withdrawing Member shall receive:
(i) the book value of the Member's Units as of the close
of the Company's Fiscal Year immediately preceding
the effective date of the withdrawal, less any
negative Capital Account balance of the Member, if
the Member has held the Units for less than one (1)
year. The book value of the Interest shall be
determined by the Company's public accountant, and
the accountant's determination when rendered shall
be conclusive amongst the parties. The Company shall
pay the book value of the Units in the form of an
unsecured, non-negotiable promissory note,
containing a subordination clause subordinating the
note to all other debts of the Company, which note
shall be payable in five annual installments,
commencing on or before March 31st of the year
following the effective date of the withdrawal, with
interest at the prime rate published in the Wall
Street Journal on the effective date of the
withdrawal without prepayment penalties. At the
Company's sole option it may pay all or part of the
book value for the Units in cash at the time of the
transfer; or
(ii) the amount set forth in, and payable in accordance
with, Section 6.7 above if the Member has held the
Units for one (1) year or longer.
(f) In the event of a voluntary withdrawal of a Member, if the
Company is not continued in accordance with the provisions of
Section 7.1, the Company shall be liquidated and dissolved
according to the provisions of Article 7.
ARTICLE 7
DISSOLUTION AND LIQUIDATION
7.1 DISSOLUTION
Subject to the remaining terms of this Agreement the Company shall be
dissolved upon the occurrence of any one of the circumstances
hereinafter set forth:
(1) upon the expiration of the term of the Company; or
(2) upon approval by a Majority Vote; or
(3) Upon the death, interdiction, withdrawal, bankruptcy,
liquidation or dissolution of a Member or the occurrence of
any other event which terminates the continued membership of
a Member in the Company, however, such event shall not cause
a dissolution of the Company if within ninety (90) days after
such event, the Company is continued by the unanimous vote of
the remaining Members; or
(4) Upon the termination of this Agreement and the failure of the
Members to immediately enter into a new a agreement.
7.2 DISSOLUTION FOR NON-COMPLIANCE WITH LAW.
The parties hereto acknowledge and agree that the terms and conditions
of this Agreement and the anticipated conduct of the parties hereunder
are intended to satisfy all state and federal laws and regulations
related to healthcare fraud and abuse and self-referral of patients,
including, without limitation, 42 U.S.C. ss.1320-7b; 42 U.S.C.
ss.1395nn, and La. R.S. 37:1744 and 1745. Should any change in state
or federal laws or regulations occur during the term of this Agreement
rendering any term or provision of this Agreement invalid, or should
the parties determine that this Agreement or the Members'
participation in the Company result in a violation of any such laws or
regulations, the parties agree that this Agreement shall be amended
within thirty (30) days; of such change or determination. If the
parties are unable to agree to such modification or amendment during
the said thirty (30) days, the parties hereby agree that the Company
shall be dissolved as provided hereunder.
7.3 LIQUIDATION
Upon dissolution of the Company, if the Company is not continued, the
Members shall proceed diligently to finalize the affairs of the
Company and distribute its assets in accordance with the provisions of
Section 7.5. During this period, the Members shall continue to operate
and otherwise deal with Properties of the Company, consistent with the
liquidation thereof, but shall have no further power or authority to
bind the Company except to sell or distribute its assets and wind up
its affairs in compliance herewith.
7.4 FINAL ACCOUNTING
Upon dissolution of the Company, the Members shall cause the Company's
accountant to make, at the Company's expense, a full and proper
accounting of the assets, liabilities, operations and Capital Accounts
of the Company as of and through the last day of the month in which
the dissolution occurs.
7.5 LIQUIDATION DISTRIBUTIONS
As expeditiously as possible after the dissolution of the Company, the
Members shall cause the debts and obligations of the Company to be
paid and discharged, including payment or offset of all obligations
owed to Members by the Company and all obligations of Members owed to
the Company. Thereafter, the remaining assets shall be distributed to
the Members in amounts proportionate to the Members' Units as
determined on the date of the distribution.
7.6 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS.
Except as provided by law or as expressly provided in this Operating
Agreement, upon dissolution, each Member shall look solely to the
assets of the Company for the return of the Member's Capital Account.
If the Company property remaining after the payment or discharge of
the debts and liabilities of the Company is insufficient to return the
Capital Account of one or more Members, including, without limitation,
all or any part of that Capital Account attributable to Capital
Contributions, then such Member or Members shall have no recourse
against any other Member.
ARTICLE 8
BOOKS AND RECORDS
8.1 ACCOUNTING PERIOD.
The Company's accounting period shall be the Fiscal Year which shall
begin on January 1st of each year.
8.2 RECORDS AND REPORTS.
At the expense of the Company, the Company shall maintain complete
and accurate books, records and accounts of all operations and
expenditures of the Company. The Company shall keep at its principal
place of business the books of the Company which shall contain a list
showing the names and addresses of the Members as of a reasonably
current date and the extent of their interest in the Company. Each
Member, and their duly authorized representatives, shall have the
right at reasonable times to examine the books of the Company,
including such list of names and addresses, and other reasonably
available records and information concerning the operation of the
Company and to make copies thereof at the expense of such Members, but
only upon such Member's written request.
8.3 TAX RETURNS.
The Company shall prepare and timely file all tax returns required to
be filed by the Company pursuant to the Code and all other tax returns
deemed necessary and required in each jurisdiction in which the
Company does business. Copies of such returns, or
pertinent information therefrom, shall be furnished to the Members
upon request within a reasonable time after the end of the Company's
fiscal year.
8.4 AUDIT.
At the request of a Majority Vote of the Members, the books of the
Company shall be audited annually at the expense of the Company by an
independent public accounting firm selected by the Manager.
8.5 ANNUAL REPORTS.
Within the following time periods after the close of each fiscal year,
the Company shall deliver to each Member the following:
(a) Within one hundred twenty (120) days after the end of such
fiscal year, financial statements of the Company for such
year, including a balance sheet, a profit and loss statement,
a statement of Members' equity and changes in financial
position, such statements (i) to be prepared in accordance
with generally accepted accounting principles and (ii) to
include a summary itemization, by classification, of the
compensation and reimbursement paid by the Company, directly
or indirectly, to all Members.
(b) Within sixty (60) days after the close of such fiscal year, a
report providing such tax information as may be reasonably
required by each Member for federal and state income tax
reporting purposes.
8.6 ACCRUAL BASIS OF ACCOUNTING.
The Parties agree that the financial records of the Company shall be
kept by the accrual method and in accordance with Medicare principles
of cost reimbursement.
8.7 ACCOUNTING DETERMINATIONS FINAL.
Any determinations, reports, recommendations, tax reports, cost
reports, and financial statements provided to the Members by the
Company's accountant shall be considered adopted and approved upon
approval by the Members. No Member shall have the right to challenge
any such determinations, reports, recommendations, tax reports, cost
reports, and financial statements after the date on which the same
were approved by the Members.
ARTICLE 9
CONFIDENTIALITY; NON-DISCLOSURE NON-SOLICITATION AND NON-COMPETITION
9.1 CONFIDENTIALITY AND NON-DISCLOSURE.
The Members acknowledge that each party to this Agreement has
strategies, trade secrets, manuals, documents and methods of operation
that are proprietary in nature and are implemented through the use of
proprietary and confidential policy and procedures. The Members agree
not to use for their own benefit or to disclose or otherwise reveal
any of the foregoing proprietary and confidential information or
materials to any person, either directly or indirectly, whether or not
for compensation or other remuneration,
except in the ordinary course of business while performing duties on
behalf of the Company. The obligation of confidentiality and
non-disclosure shall survive the termination of this Agreement for an
indeterminate time.
9.2 NON-DISCLOSURE.
Each Member acknowledges that it will have access to certain
confidential information, trade secrets and proprietary information
which is exclusively the property of another Member or the Manager;
including, without limitation, documents, recordings, photographs,
policies, procedures, forms, patient/customer/client lists, public
relations and employee training materials. Each party agrees that
Manager's Service Value Points (SVP(R)) system and its Lifeline(R)
system are proprietary trade secrets of Manager and which are subject
to this Agreement. Each Member agrees that it will not, for so long as
it is a Member and for a period of two (2) years following its
voluntary or involuntary withdrawal, disclose to any third party, or
appropriate for their own use or for the use of any third person, the
other Member's or Manager's confidential information, trade secrets or
proprietary information.
9.3 NON-SOLICITATION.
Each Member agrees that it shall not induce or attempt to influence
any employee of the Company to terminate employment with such Member
within the Service Area while this Agreement is in effect.
9.4 NON-COMPETITION.
Each Member agrees that for so long as it is a Member of the Company,
the Member shall not own, control, manage, have a business interest
in, or be financially interested in a Medicare certified long-term
acute care hospital competing with the Company in providing hospital
services within the Service Area without the Majority Vote of the
Members, PROVIDED, HOWEVER, that such restriction shall not apply to
services provided in the Service Area by subsidiaries and Affiliates
of Louisiana Health Care Group, LLC.
9.5 INJUNCTIVE RELIEF.
Each Member acknowledges that in the event of any breach of this
Article 9, the other parties remedies at law would be inadequate and
therefore any affected party shall be entitled to obtain relief by
injunction to prevent competition, solicitation or disclosure by the
Member or Manager without the need to prove irreparable harm. The
affected Member's or Manager's remedies, in any event, shall be
cumulative of any and all other remedies available pursuant to
Louisiana law.
9.6 Not withstanding any other provision of this Agreement, if a court of
competent jurisdiction should hold that the duration or scope
(geographic or otherwise) of the covenants contained in this Article 9
are unreasonable or unenforceable, then, to the extent permitted by
law, the court may prescribe a duration and/or scope (geographic or
otherwise) that is reasonable and judicially enforceable. Nothing
herein stated shall be construed as prohibiting a Member from pursuing
any other remedies available to it for such, breach or threatened
breach, including the recovery of damages from any breaching Member.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 FISCAL YEAR
The Fiscal Year of the Company shall begin on January 1st of each
year.
10.2 PARTNERSHIP TAXATION
Neither the Company nor any Manager or Member may make an election for
the company to be excluded from the application of the provisions of
Subchapter K of the Code or any similar provisions of applicable state
law. The Members intend that the Company not be a partnership or joint
venture, and that no Member or Manager be a partner of or joint
venturer with any other Member or Manager, for any purpose other than
federal and state tax purposes, and this Agreement may not be
construed to suggest otherwise. The provisions of Section 5.1(b)
herein respecting the allocation of Units shall control the allocation
of income, loss and tax items derived from the Company's operations.
10.3 NO PARTNERSHIP INTENDED FOR NON-TAX PURPOSES.
The Members have formed the Company under the Act, and expressly
disavow any intention to form a joint venture, a partnership or a
partnership in commendam (or limited partnership) under Louisiana law,
or laws of any other state. The Members do not intend to be partners
one to another or partners as to any third party. To the extent any
Member, by word or action, represents to another person that any other
Member is a partner or that the Company is a partnership, the Member
making such wrongful representation shall be liable to any other
Member who incurs personal liability by reason of such wrongful
representation.
10.4 NOTICES
All communication or notices required or permitted to be given under
this Agreement shall be in writing, and any communication or notice
shall be deemed to have been duly made upon receipt by mail, or by
facsimile transmission receipt of which has been duly substantiated.
Any written notice sent certified mail, to the address of record of
the recipient which is returned by the post office as unclaimed or
undeliverable for any reason shall be deemed to have been received. A
party may, by written notice so delivered to the Company, change the
address to which communications or written notices shall be made under
this Agreement.
10.5 AMENDMENTS
This Agreement may be amended only in writing approved by a Majority
Vote.
10.6 EXECUTION
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to constitute an original, and each of which
shall become effective when one or more counterparts have been
executed by each of the parties hereto and delivered to the Company
and the other parties. The Members each agree to cooperate, and to
execute
and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Operating
Agreement.
10.7 APPLICABLE LAW
This Agreement shall be governed by an construed and enforced in
accordance with the laws of the State of Louisiana.
10.8 SUCCESSORS OR ASSIGNS
The obligations herein undertaken and the rights herein conferred
shall be binding upon and inure to the benefit of the parties, and,
where applicable, their successors and assigns. None of the provisions
of this Operating Agreement shall be for the benefit of or enforceable
by any creditors of the Company or by any Person not a party hereto.
This Agreement is entered into solely to benefit the Company and its
subscribing Members, and is not entered into or intended for the
benefit of any third persons. The Parties agree that this Agreement
shall not be construed as a stipulation pour autrui or a third party
beneficiary contract.
10.9 REFERENCES
(a) Any reference in this Agreement to an Article, Section, or
Subsection shall be deemed to refer to the applicable
Article, Section or Subsection of this Agreement unless
otherwise stated herein.
(b) Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular, and plural, as the
identity of the Person may in the context require.
10.10 EFFECTIVE DATE
This Agreement shall be deemed effective as of the date of the
Company's filing of the Articles of Organization with the Louisiana
Secretary of State.
10.11 CONFLICTING PROVISIONS; CONFLICTS WITH OTHER AGREEMENTS
(a) In the event that any provisions contained herein conflict,
the conflicting provision appearing first in the document
shall prevail. In the event of any conflict between the terms
of this Agreement and other permitted agreements by and
between the parties hereto related to the purposes of the
company, this Agreement shall prevail.
(b) The Company may acquire or enter into one or more written
consulting agreements or employment agreements with Members
or affiliates of Members. To the extent such arrangements are
in writing and approved or authorized by the Majority Vote of
the Members, and subject to Section 4.23 herein, such
services may be compensated as provided in said agreements
and shall be deemed to be separate from those services which
the Member will provide to the Company as a capital
contribution pursuant to Section 5.1 (a) herein.
10.12 NO ACTION FOR PARTITION.
No Member shall have any right to maintain any action for partition
with respect to the property of the Company.
10.13 INVALIDITY.
The invalidity or unenforceability of any particular provision of this
Operating Agreement shall not affect the other provisions hereof, and
the Operating Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. If any particular
provision herein is construed to be in conflict with the provisions of
the Act, the provisions of this Operating Agreement shall control to
the fullest extent permitted by applicable law. Any provision found to
be invalid or unenforceable shall not affect or invalidate the other
provisions hereof, and this Operating Agreement shall be construed in
all respects as if such conflicting provision were omitted.
10.14 DETERMINATION OF MATTERS NOT PROVIDED FOR IN THIS OPERATING AGREEMENT.
The Members shall decide any questions arising with respect to the
Company and this Operating Agreement which are not specifically or
expressly provided for in this Operating Agreement.
ARTICLE 11
INDEMNIFICATION OF ORGANIZER
11.1 INDEMNIFICATION OF ORGANIZER(S)
The: Company shall indemnify the organizer(s) of the Company, to the
fullest extent permitted by law, make advances for expenses to him/her/it
arising from any loss, cost, expense, damage, claim or demand, in connection
with his/her/its actions and omissions respecting the organization of the
Company, or his/her/its participation in the management, business and affairs
of the Company prior to execution of this Operating Agreement, or his/her/its
activities on behalf of the Company.
SIGNATURES APPEAR ON NEXT PAGES FOLLOWING
THUS DONE AND SIGNED, in multiple originals, in the city of Lafayette,
Louisiana, effective as of the day and in the month and year first above
written.
LOUISIANA HEALTH CARE GROUP, LLC
Member
BY: LHC GROUP, LLC, Manager
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
LHC GROUP, LLC, Manager
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
LHCG-III LLC
MEMBERSHIP SCHEDULE
as of: January 31, 2005
CERTIFICATE PERCENTAGE UNITS MEMBER DATE ISSUED
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1 76.460% 76,466 Louisiana Health Care Group, LLC July 12, 2002
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2 .800% 800 ▇▇▇▇▇▇▇▇ ▇▇▇▇ January 31, 2005
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3 2.000% 2,000 ▇▇▇▇▇ ▇▇▇▇▇▇ January 31, 2005
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4 .650% 650 ▇▇▇▇ ▇▇▇▇▇ January 31, 2005
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5 2.000% 2,000 ▇▇▇▇▇▇ ▇▇▇▇▇ January 31, 2005
------------------------------------------------------------------------------------------------
6 4.000% 4,000 ▇▇▇▇ ▇▇▇▇▇▇ January 31, 2005
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7 2.000% 2,000 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ January 31, 2005
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8 .500% 500 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ January 31, 2005
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9 1.000% 1,000 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ January 31, 2005
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10 .484% 484 ▇▇▇▇ ▇▇▇▇▇▇ January 31, 2005
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11 .500% 500 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ January 31, 2005
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12 .300% 300 ▇▇▇▇ ▇▇▇▇▇▇▇ January 31, 2005
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13 .100% 100 ▇▇▇▇▇▇ ▇▇▇▇▇▇ January 31, 2005
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14 .650% 650 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ January 31, 2005
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15 .650% 650 ▇▇▇▇▇▇ Hankenhaf January 31, 2005
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16 .400% 400 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ January 31, 2005
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17 .500% 500 ▇▇▇▇▇▇ ▇▇▇▇▇▇ January 31, 2005
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18 .500% 500 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ January 31, 2005
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19 2.500% 2,500 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ January 31, 2005
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20 4.000% 4,000 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ January 31, 2005
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TOTALS 100.00% 100,000
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