Exhibit 10.15
OPERATING AGREEMENT
OF
ST. ▇▇▇▇▇▇ EXTENDED CARE HOSPITAL, L.L.C.
This Operating Agreement is entered into and is effective as of the 15th
day of April, 2004, by and among the undersigned Members who agree as set forth
herein regarding the operations of St. ▇▇▇▇▇▇ Extended Care Hospital, 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 St. ▇▇▇▇▇▇ Extended Care Hospital, 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 St. ▇▇▇▇▇▇ Extended Care Hospital, 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.
(l) "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 Opelousas,
Louisiana and long-term acute care hospital campus facility in Mamou,
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. 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;
(l) 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 4.2l 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 an 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 a two-thirds (b's) 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 he 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 he 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 often (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 any 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 full 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.
6.15 CONVERSION OPTION
In the event that LHC Group, LLC ("Manager") undertakes an initial public
offering or is acquired by a publically traded company ("Conversion
Event"), each Member shall have the option to exchange his/her/its
holdings of Units in the Company to Units of Manager in accordance with
the following terms:
(a) Manager shall provide thirty (30) days written notice to the Members
of the scheduled occurrence of a Conversion Event, and that the
Members are eligible to exercise the option provided herein. Each
Member may notify Manager of his/her/its intention to exercise the
Conversion Option at any time following the Conversion Event.
(b) In the event that any Member exercises the conversion option, the
Member shall have the right to exchange the Units in the Company for
Manager Units in accordance with the following formula:
The number of Units of Manager due each exercising Member shall be
the product of (i) the exercising Member's Membership Interest in
the Company; (ii) the total issued and outstanding Units of Manager
as of the date of the notice and (iii) a fraction, the numerator of
which is the Company's EBITDA and denominator of which is Manager's
EBITDA.
The exercising Member's Membership Interest in the Company shall be
determined in accordance with Section 5.1 (b). The Company's and Manager's
EBITDA shall be determined as the Earnings Before Interest Taxes and
Depreciation from the Company's financial statements and Manager's
consolidated financial statements for the fiscal year ending prior to the
effective date of the exercise of the Conversion Option.
For the purposes of illustration, the following example of how the number
of Units to be converted will be calculated is provided:
EBITDA ISSUED MEMBER'S CONVERTED
I2-31-200X PROPORTION UNITS HOLDINGS UNITS
COMPANY $ 1,285,000 = 0.0767 X 8,350,000 X 0.1% = 640.5 UNITS
----------- -----------
LHC GROUP $16,751,000
The parties understand that the foregoing example is for purposes of
illustration only and is not indicative of current or future operations or
performance of the Company.
(c) Manager shall issue the Units in Manager to the exercising Members
within thirty (30) days of its receipt of notice of the exercise. As
a conditions precedent to the issuance of the Units by Manager, the
exercising Members will: (i) execute a written consent to the
Conversion Event if the option is exercised before the Conversion
Event; and (ii) execute a counterpart to Manager's Operating
Agreement as in effect on the date of the exercise of the option.
The Manager
Units issued to the exercising Members shall be subject to all
terms, conditions and restrictions contained in Manager's Operating
Agreement.
(d) The exercising Members shall be bound by the terms and conditions of
the Conversion Event in respect to the Units issued to them by
Manager.
(e) The parties acknowledge and agree that it is their intention for
this Conversion Option to exchange Units to operate only so long as
the Conversion Event actually occurs and closes. In the event that
the Conversion Event does not occur as scheduled, the exchange
performed under the option shall automatically and immediately be
rescinded, without any requirement of notice by either party, and
the exercising Members shall surrender any Units in Manager received
by them, and shall receive the Company's Units they tendered for
exchange.
(f) In addition to the other terms and conditions governing the
Conversion Option, the Members shall be subject to an additional
condition precedent to the Conversion Option in that the exercise of
the Conversion Option shall only be available so long as following
the conversion, the Manager's Units fully comply with the
requirements of Section 1877(c) of the Social Security Act providing
an exception for ownership in certain publicly-traded securities as
more fully detailed in 42 CFR 411.356. As of the Effective Date of
this Agreement the requirements to qualify for the exception
include:
(1) The securities must be securities that may be purchased on
terms generally available to the public following the public
offering;
(2) The securities must be listed on the New York Stock Exchange,
the American Stock Exchange, or any regional exchange in which
quotations are published on a daily basis, or be foreign
securities listed on comparable exchanges or traded under the
National Association of Securities Dealers automated quotation
system; and
(3) The ownership must be in a corporation that had shareholder
equity exceeding $75 million at the end of the corporation's
most recent fiscal year or on average during the previous
three fiscal years.
Note that these requirements are subject to change without advance
notice upon enactment of new legislation by Congress or the
publication of regulations amending the requirements of the
exception by the Centers for Medicare and Medicaid Services or other
governmental agencies.
6.16 REDEMPTION OF UNITS FOLLOWING PUBLIC OFFERING
Following a public offering by LHC Group, LLC ("Manager"), each Member who
does not exercise the Conversion Option contained in Section 6.15 shall
have the option to sell his/her/its holdings of Units in the Company to
Manager ("Redemption Option") in accordance with the following terms:
(a) At any time following thirty (30) days after a public offering, each
Member may notify Manager of his/her/its intention to exercise the
Redemption Option.
(b) In the event that any Member exercises the Redemption Option, the
Member shall have the right to sell his holdings of Units in the
Company to Manager in accordance with the following formula:
The sales price due each exercising Member shall be the product of
(i) the exercising Member's potential holdings of Units in the
Manager calculated as if the Conversion Option set forth in Section
6.15 had been exercised; and (ii) the average closing price of
Manager's Units or shares for the 30 days preceding the date of the
Member's exercise of the Redemption Option.
For the purposes of illustration, the following example of how the number
of Units to be converted will be calculated is provided:
EBITDA ISSUED MEMBER'S CONVERTED
12-31-200X PROPORTION UNITS HOLDINGS UNITS
COMPANY $ 1,285,000 = 0.0767 X 8,350,000 X 0.1% = 640.5
-----------
LHC GROUP $16,751,000
CONVERSION 30 DAY AVE. PROCEEDS
OPTION UNITS CLOSING PRICE
640.5 X $28.50 = $18.254
The parties understand that the foregoing example is for purposes of
illustration only and is not indicative of current or future operations or
performance of the Company.
(c) Manager shall close the Redemption Option within thirty (30) days of
its receipt of notice of the exercise.
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. Section.1320-7b; 42 U.S.C.
Section 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 maybe 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 Notwithstanding 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
EXHIBIT A
ST. ▇▇▇▇▇▇ EXTENDED CARE HOSPITAL, LLC
MEMBERSHIP SCHEDULE
as of: April 15, 2004
Units
Certificate Percent Units Member Date Issued
----------- ------- ------ -------------------------------- --------------
1 95,000 Louisiana Health Care Group, LLC April 10, 2002
2 100 ▇▇▇▇ ▇▇▇▇▇▇▇ May 31, 2004
3 100 ▇▇▇▇▇ ▇▇▇ May 31, 2004
4 100 ▇▇▇▇ ▇▇▇▇▇▇ May 31, 2004
5 100 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ May 31, 2004
6 100 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ May 31, 2004
7 100 ▇▇▇ ▇▇▇▇▇▇▇▇ May 31, 2004
8 100 ▇▇▇▇ ▇▇▇▇▇▇▇▇ May 31, 2004
9 100 ▇▇ ▇▇▇▇▇▇▇▇▇ May 31, 2004
10 100 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ May 31, 2004
11 400 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ May 31, 2004
12 400 ▇▇▇▇▇ ▇▇▇ May 31, 2004
13 400 ▇▇ ▇▇▇▇▇▇▇▇▇ May 31, 2004
14 100 ▇▇▇▇▇▇ ▇▇▇▇▇ May 31, 2004
15 100 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ May 31, 2004
16 100 ▇▇▇▇▇ ▇▇▇▇▇▇▇ May 31, 2004
17 100 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ May 31, 2004
18 400 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ May 31, 2004
19 400 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ May 31, 2004
20 100 ▇▇▇▇▇ ▇▇▇▇▇▇ May 31, 2004
21 300 ▇▇▇▇▇ ▇▇▇▇▇▇ May 31, 2004
22 400 ▇▇▇▇ ▇▇▇▇▇▇▇▇ May 31, 2004
23 200 ▇▇▇▇▇ ▇▇▇▇▇▇▇ May 31, 2004
24 200 ▇▇▇▇▇▇ ▇▇▇▇▇ May 31, 2004
25 100 ▇▇▇▇▇▇ ▇▇▇▇▇ May 31, 2004
100.00% 99,600 ISSUED UNITS