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EXHIBIT 10.23
PALESTINE PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is made and
entered into as of June 30, 1997 by and among PHC OF DELAWARE, INC. formerly
known as Principal Hospital Company (the "Original General Partner"), a Delaware
corporation with its principal place of business at 109 Westpark Drive, Suite
180, Brentwood, TN 37027, Attn: President, as the original general partner,
Palestine-Principal G.P., Inc. (the "General Partner"), a Texas corporation with
its principal place of business at 109 Westpark Drive, Suite 180, Brentwood, TN
37027, Attn: President, as the substituted general partner, and those other
persons identified on Schedule A as limited partners (the "Limited Partners"),
WITNESSETH:
WHEREAS, the Original General Partner and Palestine-Principal, Inc. and
Mother Frances Hospital Regional Health Care Center as the original limited
partners (together, the "Original Limited Partners") formed the Partnership
pursuant to that certain Agreement of Limited Partnership dated July 17, 1996
(the "Original Partnership Agreement"); and
WHEREAS, the Original General Partner desires to resign as the general
partner of the Partnership, the General Partner desires to be admitted as the
substituted general partner of the Partnership, and the Original Limited
Partners consent and agree to such resignation and substitution; and
WHEREAS, the Original General Partner, the General Partner and the
Original Limited Partners desire to amend and restate the Original Partnership
Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings hereinafter contained, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Original
General Partner, the General Partner and the Original Limited Partners amend and
restate the Original Partnership Agreement as follows:
ARTICLE I
General
1.1. Formation.
The Original General Partner and the Original Limited Partners formed
the Partnership under and pursuant to the Texas Revised Limited Partnership Act
(the "Act"), caused a Certificate of Limited Partnership to be filed in the
Office of the Secretary of State of Texas on July 17, 1996, and have complied
with all other legal requirements to form and operate the Partnership. Except as
stated in this Agreement, the Act shall govern the rights and liabilities of the
Partnership.
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1.2. Withdrawal of the Original General Partner. Effective upon the
full execution of this Agreement, the Original General Partner will withdraw
from the Partnership with no further claim or right to any interest in the
Partnership as general partner, and the General Partner shall be admitted as the
substituted general partner of the Partnership.
1.3. Name.
The name of the Partnership shall be Palestine Principal Healthcare
Limited Partnership. The business of the Partnership may be conducted under any
name or names chosen by the General Partner in its discretion from time to time
and reflected in an amendment to the Certificate of Limited Partnership duly
recorded in the Office of the Secretary of State of Texas.
1.4. Term.
The term of the Partnership began on the date of the filing of the
Certificate of Limited Partnership with the Office of the Secretary of State of
Texas, and shall continue until December 31, 2036 unless earlier terminated in
accordance with the provisions hereof or as provided by law.
1.5. Registered Office and Registered Agent.
The registered office of the Partnership shall be located at 350 St.
Paul Street, Suite 2900, Dallas, Texas 75201, and the Partnership's registered
agent for service of process at such location shall be CT Corporation System.
The location of the Partnership's registered office and identity of the
registered agent may be changed from time to time by the General Partner,
without the necessity of obtaining consent from any Limited Partners, upon
filing a statement of change with the Office of the Secretary of State of Texas
in the manner provided in the Act.
1.6. Filings.
The General Partner and the Limited Partners, acting either directly or
through the General Partner as attorney-in-fact or through such person or
persons as the General Partner may appoint as attorney-in-fact, shall sign and
file such additional and further certificates, affidavits and other documents,
and amendments thereto, as may be necessary to enable the Partnership to
continue to conduct its business.
1.7. Purpose.
The purpose of the Partnership shall be (i) to own and operate the
Project; and (ii) to conduct such other activities as may be necessary or
appropriate to promote the business of the Partnership, it being agreed that
each of the foregoing is an ordinary part of the Partnership's business;
provided however, the Partnership shall not engage in any activities which are
not in conformance with the Ethical and Religious Directives for Catholic Health
Care Services as approved by the National Conference of Catholic Bishops or are
inconsistent with the mission and philosophy of the Sisters of the Holy Family
of Nazareth.
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1.8. Powers.
The Partnership shall have all powers reasonably necessary to achieve
its purposes hereunder. Without limiting the foregoing, the Partnership is
expressly authorized to do the following:
(a) acquire, by purchase or otherwise, the Project;
(b) take and hold property, real, personal and mixed, in
the Partnership's name;
(c) enter into any agreement with any person, firm or
corporation, including the General Partner, or any Affiliate of the
General Partner, requiring such person to perform services for the
Partnership or to assist the General Partner in the management of the
Partnership or its business, provided approval of the Partners is
received and further provided:
i) the compensation to be paid to the General
Partner or any of its Affiliate shall be consistent with the
provisions of this Agreement,
ii) the services to be performed shall be
appropriate for the management of the Partnership or its
business, and
iii) the agreement shall be no less favorable to
the Partnership than it would be if negotiated on an
arm's-length basis with an independent third party;
(d) borrow money from third parties, the General Partner
or Affiliates of the General Partner, but excluding other limited
partnerships sponsored by Affiliates of the General Partner, and issue
evidences of indebtedness in furtherance of any or all of the purposes
of the Partnership, and secure the same by grant of security interests
in assets of the Partnership,
(e) open and maintain one or more Partnership bank
accounts in which all monies received by the Partnership shall be
deposited;
(f) lease, sell, exchange, refinance or grant an option
for the sale of all or any portion of the real or property of the
Partnership, including the Project, at such rental, price or amount,
for cash, securities or other property, and upon such terms as the
General Partner may deem appropriate;
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(g) execute and deliver deeds, deeds of trust, notes,
leases, subleases, mortgages, bills of sale, financing statements,
security agreements, easements and any and all other instruments
appropriate to the conduct of the Partnership's business and the
financing thereof;
(h) lend its funds or make guarantees of others upon such
terms as the General Partner shall determine, but excluding loans to,
or guarantees of, the General Partner and any of its affiliates,
including other limited partnerships sponsored by Affiliates of the
General Partner;
(i) retain counsel, accountants, financial advisers and
other professional personnel; and
(j) engage in such other activities and incur such other
expenses as may be necessary or appropriate for the furtherance of the
Partnership's purposes, and execute, acknowledge and deliver any and
all instruments necessary to the foregoing.
1.9. Principal Place of Business.
The principal place of business of the Partnership shall be located at
4000 South Loop 256, Palestine, TX 75802, Attn: President. The General Partner
may from time to time by notice to all Partners change the address of the
principal place of business of the Partnership.
1.10. Liability of Partners.
No Limited Partner, by virtue of being a limited partner hereunder,
shall be personally liable for the debts, liabilities or obligations of the
Partnership beyond the extent of such Limited Partner's capital contribution,
together with the undistributed share of net profits of the Partnership from
time to time credited to such Limited Partner's capital account. The amount of
cash and other property contributed by a Limited Partner are the only
contributions that a Limited Partner shall be required to make to the
Partnership for the satisfaction of the debts, liabilities or obligations of the
Partnership.
The General Partner shall not be personally liable to any Limited
Partner for repayment of capital contributions of the Limited Partner or, except
as expressly provided in this Agreement, have any obligation to make any advance
or contribution of capital to the Partnership. The General Partner, however, is
liable for all recourse obligations, unlike Limited Partners, who have no such
personal liability, either to third parties, to the Partnership or to other
Partners, except as stated above or otherwise required by the Act.
1.11. Definitions.
As used herein, the following terms have the indicated meanings:
(a) "Act" shall have the meaning set forth in Section 1.1
hereof.
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(b) "Adverse Terminating Event" means, with respect to
any Class C Limited Partner, any Class B Limited Partner or any person
who owns an interest in a Qualified P.C. or a Qualified Retirement Plan
which is a Class B Limited Partner, any of the following:
1. The Class C Limited Partner, the Class B
Limited Partner or person who owns an interest in a Qualified
P.C. or a Qualified Retirement Plan which is a Class B Limited
Partner has breached the terms and conditions of this
Agreement, including without limitation, violating the
restrictions with respect to ownership of an interest in a
Competing Business as set forth in Article 11 or the transfer
restrictions set forth in Article 5, as determined in the
reasonable discretion of the General Partner; or
2. The Class C Limited Partner, the Class B
Limited Partner or such person who owns an interest in a
Qualified P.C. or a Qualified Retirement Plan which is a Class
B Limited Partner has disrupted the affairs of the Partnership
or has acted adversely to the best interests of the
Partnership, as determined in the reasonable discretion of the
General Partner.
(c) "Affiliate" means (i) any person directly or
indirectly controlling, controlled by or under common control with
another person; (ii) any person owning or controlling ten percent (10%)
or more of the outstanding voting securities of such other person;
(iii) any officer, director or partner of such person; and (iv) if such
other person is an officer, director or partner, any company for which
such person acts in any such capacity.
(d) "Capital Account" shall have that meaning assigned
pursuit to Section 2.4 hereof.
(e) "Capital Contribution" means the amount contributed
to the Partnership by each Partner.
(f) "Class A Limited Partners" shall mean (i) PPI and
Mother Frances, (ii) any permitted transferees of PPI and Mother
Frances who do not otherwise qualify as Class B Limited Partners, and
(iii) any Person who is hereafter admitted as a Class A Partner. "Class
A Limited Partner" means any one of the Class A Limited Partners.
(g) "Class B Limited Partners" means those Limited
Partners who are Qualified Purchasers. "Class B Limited Partner" means
any one of the Class B Limited Partners.
(h) "Class C Limited Partners" means those Limited
Partners who are management level employees of the Partnership or the
General Partner, or any Affiliate thereof. "Class C Limited Partner"
means any one of the Class C Limited Partners.
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(i) "Code" means the Internal Revenue Code of 1986, as
amended.
(j) "Distributable Cash" means, for the applicable
period, net income of the Partnership (other than capital
contributions), plus depreciation and amortization, plus or minus an
amounts retained as a reserve in the sole discretion of the General
Partner, minus principal payments on long term debt, all as determined
in accordance in accordance with generally accepted accounting
principles.
(k) "General Partner" means Palestine-Principal G.P.,
Inc., a Texas corporation, together with any additional or substitute
General Partner admitted pursuant to the provisions of this Agreement.
(l) "Limited Partners" means the persons admitted
pursuant to the provisions of this Agreement, but excluding assignees
of Limited Partners as to which the General Partner has not consented
to substitution.
(m) "Management Agreement" means the management agreement
of even date herewith between the Original General Partner and the
Partnership, as the same may be amended and/or assigned by the Original
General Partner from time to time.
(n) "Mother Frances" means Mother Frances Hospital
Regional Health Care Center.
(o) "Original General Partner" means PHC of Delaware,
Inc. formerly known as Principal Hospital Company, a Delaware
corporation.
(p) "Partners" means collectively the General Partner and
the Limited Partners. Reference to a "Partner" shall mean any one of
the Partners.
(q) "Partnership" means the Limited Partnership continued
by this Agreement.
(r) "Partnership Capital" means the total of the Capital
Contributions of the Partners, as hereinafter set forth, as adjusted to
reflect income, gains, losses, withdrawals and distributions. Capital
contributions of property shall be valued at net fair market value as
of the date of contribution.
(s) "Percentage Interest" means, as to a Partner, the
percentage obtained by dividing the Units of such Partner by an amount
equal to the total Units of all Partners; provided, however, if the
Class B Limited Partners, as a class, own more than nineteen percent
(19%) of the total Units outstanding at any time, then the aggregate
Percentage Interest of the Class B Limited Partners shall be nineteen
percent (19%) and the Percentage Interest of the General Partner and
the other Limited Partners, as a class, shall be eighty one percent
(81%). In such
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event, each Partner's Percentage Interest shall be equal to the
percentage obtained by dividing the number of Units owned by such
Partner by the number of Units owned by all of the Partners in the same
class as such Partner (with the Class B Limited Partners being treated
as one class and the General Partner and the other Limited Partners
being treated as one class), multiplied by eighty one percent (81%)
with respect to the General Partner and the Class A Limited Partners
and multiplied by nineteen percent (19%) with respect to the Class B
Limited Partners. The Partners hereby agree that their Percentage
Interests shall constitute their interests in the Partnership profits
for purposes of determining their respective shares of the
Partnership's "excess nonrecourse liabilities" (within the meaning of
section 1.752-3(a)(3) of the Regulations).
(t) "PPI" shall mean Palestine-Principal, Inc.
(u) "Project" shall mean Memorial Hospital, a 103 bed
general hospital in Palestine, Texas.
(v) "Qualified P.C." shall mean a professional
corporation, a professional limited liability company, a professional
registered limited liability partnership or other professional
partnership, all of whose members, shareholders or partners are
physicians who are members of the medical staff of the Project (as
defined in the medical staff bylaws of the Project, as amended from
time to time).
(w) "Qualified Purchasers" means physicians who are
members of the medical staff of the Project (as defined in the medical
staff bylaws of the Project, as amended from time to time) and
Qualified P.C.s. In addition, the term Qualified Purchaser shall also
include any Qualified Retirement Plan. "Qualified Purchaser" means any
one of the Qualified Purchasers.
(x) "Qualified Retirement Plan" shall mean any 401(k) or
other retirement plan which is wholly owned by one or more Qualified
Purchasers or a Qualified P.C.
(y) "Retirement" means a Class B Limited Partner who
attains the age of sixty-two (62) and who is no longer engaged in the
practice of medicine, either full-time or part-time, in the State of
Texas.
(z) "Securities Act" means the Securities Act of 1933, as
amended, or any similar law then in effect.
(aa) "Terminating Event" means, with respect to any
Class C Limited Partner, any Class B Limited Partner, or any person who
owns an interest in a Qualified P.C. or a Qualified Retirement Plan
which is a Class B Limited Partner, any of the following:
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1. The Class C Limited Partner, the Class B
Limited Partner or such person who owns an interest in a
Qualified P.C. or a Qualified Retirement Plan which is a Class
B Limited Partner has died or become permanently disabled; or
2. The Class C Limited Partner, the Class B
Limited Partner or such person who owns an interest in a
Qualified P.C. or a Qualified Retirement Plan which is a Class
B Limited Partner is taking or acquiescing to the taking of
any action seeking relief under, or advantage of, any
applicable debtor relief, liquidation, receivership,
conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization or similar law affecting the rights
or remedies of creditors generally, as in effect from time to
time. For the purpose of this definition, the term
"acquiescing" shall include, without limitation, the failure
to file within the time specified by law, an answer or
opposition to any proceeding commenced against such Class C
Limited Partner, Class B Limited Partner or such person who
owns an interest in a Qualified P.C. or a Qualified Retirement
Plan which is a Class B Limited Partner under any such law and
a failure to file, within thirty (30) days after its entry, a
petition, answer or motion to vacate or to discharge any
order, judgment or decree providing for any relief under any
such law.
(bb) "Trailing EBITDA" means the earnings before income
taxes, depreciation and amortization of the Partnership for the most
recently ended fiscal year of the Partnership, all of which components
shall be determined in accordance with generally accepted accounting
principles using the accrual method of accounting applied on a basis
consistent with the preceding period (using the Partnership's current
accounting policies).
(cc) "Valuation Amount" means the product of the
Partnership's Trailing EBITDA for the most recently completed fiscal
year multiplied by five (5), less any Partnership debt, including
without limitation capital leases, all as determined in accordance with
generally accepted accounting principles using the accrual method of
accounting applied on a basis consistent with the preceding period
(using the Partnership's current accounting policies).
(dd) "Valuation Price" means the Valuation Amount divided
by the number of Units outstanding as of the date of the Valuation
Amount.
ARTICLE II
Capital Contributions
2.1. Capital Contributions.
The capital contributed or agreed to be contributed by each Partner is
set forth in Schedule A attached to this Agreement.
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2.2. Additional Capital Contributions.
2.2.1. If the General Partner and the Class A Limited
Partners unanimously determine that the Partnership requires additional
capital contributions, each of the Partners shall contribute the funds
required according to such Partner's Percentage Interest. The total
amount and timing of such additional capital contributions shall be
determined by the General Partner and the Class A Limited Partners.
Unless otherwise specified by the General Partner and the Class A
Limited Partners in the determination of additional capital
contribution, the General Partner shall specify the payment date for
additional capital contributions upon ten days prior written notice to
the Partners consistent with such determination.
2.2.2. Notwithstanding the foregoing, at the election of
Mother Frances, PPI shall contribute the entire additional capital
contribution on behalf of Mother Frances, in which event such
additional capital contribution shall be treated as a loan to Mother
Frances followed by a contribution of capital by Mother Frances.
Amounts up to $250,000 treated as loaned by PPI to Mother Frances shall
bear interest at the Prime Rate plus one percent (l%), and amounts
exceeding $250,000 shall bear interest at the Prime Rate plus one and
one-half percent (1 1/2%).
2.2.3. Notwithstanding the foregoing, no Class B Limited
Partner shall be required to make such additional capital contribution,
provided that if any Class B Limited Partner elects not to make such
additional capital contribution (a "Noncontributing Partner"), PPI
shall have the right to contribute to the Partnership the amount of
cash that the Noncontributing Partner or Partners failed to contribute.
2.2.4. The Partners shall have thirty (30) days from the
General Partner's request in which to elect to make or not make such
additional capital contributions. Effective as of the end of such
thirty (30) day period, the Partners' Percentage Interests shall be
adjusted, as follows: each Partner's Percentage Interest thereafter
shall be equal to a fraction (converted to a percentage), the numerator
of which is equal to such Partner's "Base Amount" and the denominator
of which is equal to the sum of the Base Amounts of all the Partners.
For purposes hereof, each Partner's Base Amount shall be equal to the
sum of (1) the amount of cash contributed to the Partnership by such
Partner in respect of the current call for capital (including amounts
contributed under Section 2.2.3), plus (2) the product of (x) the
Partner's Percentage Interest (as in effect immediately before the
capital call in question) multiplied by (y) the Valuation Amount of as
of the date of such capital call. The number of Units held by each
Partner shall be adjusted automatically to reflect any change in the
Partners' Percentage Interests under this Section.
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2.2.5. The provisions of this Section 2.2 constitute an
agreement among the Partners only and are not intended to create any
right or interest on behalf of any person who is not a Partner or
require any Partner to make a capital contribution for the benefit of
any person who is not a Partner.
2.3. Withdrawal and Return of Contributions.
No Partner shall have the right to withdraw his contribution or to
receive any funds or property of the Partnership except as specifically provided
in this Agreement. No Partner shall have the right to demand and receive
property other than cash in return for his contributions.
2.4. Effect of Transfer of Partnership Interest.
The Partnership will maintain for each Partner an account to be
designated its "capital account," which will be determined and maintained
throughout the full term of the Partnership, in accordance with the capital
accounting rules of Treasury Regulation Section 1.704-1 (b)(2)(iv) including any
amendments thereto or successor regulations.
2.5. No Interest on Capital.
No interest shall be paid on capital contributions or on balances in
capital accounts.
2.6. Effect of Transfer of Partnership Interest.
Upon the transfer by any Partner of any or all of its Partnership
interest, pursuant to the provisions of Article V or Article VI of this
Agreement, the proportionate amount of its respective capital account balance,
determined in accordance with Section 2.4 hereof, shall be transferred to the
transferee of such Partnership interest; provided, however, that no transfer of
any Partnership interest shall, in and of itself, relieve the transferor of any
obligation to the Partnership, including, but not limited to, such transferor's
obligation, if any, to contribute to the capital of the Partnership.
ARTICLE III
Allocation of Income and Loss: Cash Distributions
3.1. Distribution of Distributable Cash.
Distributable Cash shall be apportioned among and distributed to the
Partners in proportion to their Percentage Interest. The first such distribution
shall be made on or before May 31, 1997. The second such distribution shall be
made on or before August 31, 1997. The third such distribution shall be made on
or before November 30, 1997. Thereafter, distributions shall be made on or
before the last day of each January, April, July and October.
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3.2. Profits and Losses.
"Profits" and "Losses" means for each fiscal year or other period, an
amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a). For this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss,
with the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this Section 3.3 shall be added to such
taxable income or loss; and
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuit to Treasury Regulation Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profits or Losses pursuant this Section 3.3 shall be subtracted from
such taxable income or loss.
3.3. Allocation of Profits and Losses.
3.3.1. Except to the extent provided in Sections 3.4 hereof,
the Profits of the Partnership shall be allocated as follows:
(a) First, to the Partners in proportion to
their negative capital accounts until all negative capital
accounts are eliminated;
(b) Next, to the Partners until their capital
accounts are in proportion to their Percentage Interest;
(c) All remaining Profits shall be allocated to
the Limited Partners and the General Partner in proportion to
their Percentage Interest.
3.3.2. The Losses of the Partnership shall be allocated to
the Limited Partners and the General Partner in proportion to their
Percentage Interest.
3.4. Special Allocations.
3.4.1. In the event the Limited Partners unexpectedly
receive any adjustments, allocations, or distributions described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1 (b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to the Limited
Partners in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations, the negative capital account
created by such adjustments, allocations or distributions as quickly as
possible. For purposes of the preceding sentence, Partners' Capital
Accounts shall be reduced for the items described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6). The
provisions of this Section 3.4.1 are intended to comply with the
requirements of
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Treasury Regulation Section 1.704-1(b), including any amendments or
successor regulations thereto, and shall be so interpreted.
3.4.2. If there is a net decrease in Partnership minimum
gain as defined in Regulation Section 1.704-2(d) during a Partnership
taxable year, then each Partner must be allocated items of income and
gain for each year in an amount equal to such Partner's share of the
net decrease in Partnership minimum gain as computed under Regulation
Section 1 .704-2(g)(2). The provisions of this Section 3.4.2 are
intended to comply with the requirements of Regulation Section 1.704-2,
including any amendments or successor regulations thereto, and shall be
so interpreted.
3.4.3. Notwithstanding any provision of this Article to the
contrary, to the extent allocations of loss or deductions to a Limited
Partner would cause such Limited Partner to have a negative Capital
Account balance, or increase the negative balance in a Limited
Partner's Capital Account, such loss or deduction shall be allocated
among those Limited Partners with positive Capital Account balances to
the extent thereof and in proportion thereto, with any remaining loss
or deduction being allocated to the General Partner. For the purposes
of this Section 3.4.3 distributions made prior to or contemporaneous
with any allocation to a Limited Partner shall be reflected in such
Partner's Capital Account prior to making such allocation to such
Partner, and a Partner's Capital Account shall be credited to the
extent (i) such Partner is unconditionally obligated to make additional
contributions to the Partnership; (ii) such Partner is unconditionally
obligated to fund a deficit in his Capital Account upon liquidation;
and (iii) such Partner is deemed to be obligated to restore his Capital
Account balance pursuant to Regulation Sections 1.704-2(s)(1) and
1.704-2(i)(5).
3.4.4. In no event shall the General Partner's interest in
each item of income, gain, loss, deduction or credit be less than one
percent (1%) of each such item at all times during the existence of the
Partnership.
3.5. Allocation for Purposes of Nonrecourse Liabilities.
Solely for purposes of Regulation Sections 1.752-3(a)(3), Partnership
profits shall be allocated to the Limited Partners and the General Partner in
proportion to their Percentage Interest.
3.6. Modification.
The General Partner, without the consent of the Limited Partners, may
modify the provisions of Article III hereof or any other provisions of this
Agreement if, after consultation with counsel to the Partnership, the General
Partner determines that such modification is necessary to (i) cause the
allocations conned in Article III to have substantial economic effect or
otherwise be respected for federal income tax purposes under Section 704 of the
Code; (ii) cause the allocation of Profits and Losses under Article III hereof
to conform, in accordance with the requirements of Section 704 of the Code, to
the distributions provided in Article III; or (iii) cause
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the provisions of the Agreement to comply with any applicable legislation,
regulation or rule enacted or promulgated after the date of this Agreement,
which change is necessary to enable the Partnership to carry out its purposes in
the manner contemplated by this Agreement. Any such amendment shall be so as to
cause the least significant deviation from the provisions of this Agreement as
originally set forth.
3.7. Consequences of Distributions.
Upon the determination to distribute funds in any manner expressly
provided in this Article III, made in good faith, the General Partner shall
incur no liability on account of such distribution, even though such
distribution may have resulted in the Partnership retaining insufficient funds
for the operation of its business which insufficiency resulted in loss to the
Partnership or necessitated the borrowing of funds by the Partnership.
3.8. Partner Admission Date: Allocation of Profits. Losses and
Distributions in Respective Partnership Interest Transferred.
A purchaser of the Partnership interest of a Limited Partner shall
become a Limited Partner on the date on which that both (a) its capital
contribution has been received, and (b) its subscription has been accepted by
the General Partner. If all or any portion of a Partnership interest is
transferred during any fiscal year of the Partnership, Profits or Losses
attributable to such Partnership interest for such fiscal year shall be divided
and allocated between a transferor and the transferee based on the time each
such party was, according to the books and records of the Partnership, the owner
of record of the Partnership interest transferred during the year in which the
transfer occurs utilizing any permissible convention selected by the General
Partner.
3.9. Distributions of Cash on New Issuances of Class B Units.
If additional Class B Limited Partner Units ("Class B Units") are
issued by the Partnership pursuant to Section 5.11 below, the cash paid to the
Partnership for such Units shall be distributed by the Partnership to PPI or the
current Class B Limited Partners, all as more fully set forth in this Section
3.9. The Partners agree that any such issuance and distributions constitute, and
shall be reported as, a sale by the Partners receiving such cash to the newly
admitted Class B Limited Partners.
(a) In the event that, immediately prior to the issuance
of the additional Units the aggregate Percentage Interest of the Class
B Limited Partners is less than nineteen percent (19%), PPI shall be
deemed to have sold to the newly admitted Class B Limited Partners a
portion of the Units then held by PPI, such portion to be determined as
follows:
i) If the number of Units issued to the newly
admitted Class B Limited Partners, when added to the number of
Units held by the current Class B Limited Partners, does not
exceed nineteen percent (19%) of the total number of Units
held by all Partners immediately
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prior to the issuance of the new Class B Units, PPI shall be
deemed to have sold to the newly admitted Class B Limited
Partners the Units purchased by such Partners pursuant to
Section 5.11. In such event, the cash paid to the Partnership
by the newly admitted Class B Limited Partners shall be
distributed to PPI and the number of Units deemed held by PPI
shall be correspondingly reduced.
ii) If the number of Units issued to the newly
admitted Class B Limited Partners, when added to the number of
Units held by the current Class B Limited Partners exceeds
nineteen percent (19%) of the total number of Units held by
all Partners, then, the following procedure shall be
implemented:
1. The number of each Partner's Units
shall be multiplied by a fraction, the numerator of
which is the aggregate number of Units outstanding
after the issuance of the Units to the newly admitted
Class B Partners, and the denominator of which is the
aggregate number of Units outstanding prior the
issuance of the Units to the newly admitted Class B
Partners.
2. PPI and all of the current Class B
Limited Partners shall be deemed to have sold a
portion of their Units, as adjusted, in accordance
with the following formula:
a. PPI shall be deemed to
have sold to the newly admitted Class B
Limited Partners, the number of Units it
holds, as adjusted, which is in excess of
the product of (i) eighty-one percent (81%)
minus the aggregate Percentage Interest of
the General Partner and Mother Francis, and
(ii) the aggregate number of Units
outstanding after the issuance of the Units
to the newly admitted Class B Limited
Partners, and the number of Units deemed
held by PPI shall be correspondingly
reduced.
b. The existing Class B
Limited Partners shall be deemed to have
sold the remaining number of Units issued to
the newly admitted Class B Limited Partners,
and the number of Units deemed held by the
existing Class B Limited Partners.
3. The cash paid to the Partnership by
the newly admitted Class B Limited Partners shall be
distributed to PPI and the existing Class B Limited
Partners in proportion to the number of Units they
are deem to have sold to the newly admitted Class B
Limited Partners.
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iii) By way of illustration, if PPI owns 94
Units, Mother Frances owns 5 units, and the General Partner
owns 1 Unit, and at such time, new Class B Limited Partners
are issued 15 new Class B Units, PPI would be deemed to have
sold 15 Units to the new Class B Limited Partners
(representing the reduction in its Percentage Interest from
ninety four percent (94%) to seventy nine percent (79%). Based
upon the foregoing, the cash paid by the new Class B Limited
Partners shall be distributed by the Partnership to PPI.
iv) By way of further illustration, if the
General Partner owns 1 Unit, Mother Frances owns 5 Units, the
current Class B Limited Partners own 15 Units, and PPI owns 79
Units, at such time, new Class B Limited Partners are issued
10 new Class B Units, then:
1. The number of Units owned by the
General Partner shall be increased to 1.1 (1 times
110/100), the number of Units owned by Mother Frances
shall be increase to 5.5 (5 times 110/100), the
number of Units owned by the existing Class B Limited
Partners shall be increased to 16.5 (15 times
110/100) and the number of Units owned by PPI shall
be increased to 86.9 (79 times 110/100).
2. PPI shall be deemed to have sold
4.4 Units to the newly admitted Class B Limited
Partners (86.9 minus (75 times 110)).
3. The existing Class B Limited
Partners shall be deemed to have sold 5.6 Units to
the newly admitted Class B Limited Partners (10 minus
4.4).
4. Forty-four percent (4.4/10) of the
cash paid to the Partnership by the newly admitted
Class B Limited Partners shall be distributed to PPI
and fifty-six percent (56%) of the cash paid to the
Partnership by the newly admitted Class B Limited
Partners shall be distributed to the existing Class B
Limited Partners.
5. After such transaction, the
Percentage Interests of the Partners shall be as
follows:
General Partner 1% (1.1/110)
Mother Frances 5% (5.5/110)
Class B Limited Partners
Existing 9.90 (10.9/110)
Newly Admitted 9.09% (10/110)
-----
Total 19% (20.9/110)
PPI 75% (82.5/110)
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(b) If the old Class B Limited Partners own nineteen
percent (19%) or more of the total number of Units outstanding at the
time new Class B Units are issued pursuant to Section 5.11, the old
Class B Limited Partners shall be deemed to have sold a portion of
their interests in the Partnership to the new Class B Limited Partners
and all of the cash contributed by the new Partners shall be
distributed solely to the old Class B Limited Partners.
(c) In the event that PPI or the Class B Limited Partners
are deemed to have sold a portion of their Units or interest in the
Partnership pursuant to this Section 3.9, the new Class B Limited
Partner shall be deemed to have acquired or assumed a corresponding
portion of the Capital Accounts(s) of PPI or such Class B Limited
Partners, and neither the old Limited Partners' nor the new Limited
Partners' Capital Accounts shall be increased or decreased by the
amount of cash contributed to, or distributed by, the Partnership.
(d) All sales deemed made by, and all distributions
required to be made to, PPI or the old Class B Limited Partners shall
be apportioned among such Partners on the basis of the number of (i)
the Class A Units or (ii) the Class B Units owned by them,
respectively.
3.10. Distributions of Cash on New Issuances of Class C Units.
If additional Class C Limited Partner Units ("Class C Units") are
issued by the Partnership, PPI shall be deemed to have sold to the newly
admitted Class C Limited Partners the Units purchased by such Partners pursuant
to Section 5.12, below. In such event, the cash paid to the Partnership by the
newly admitted Class C Limited Partners shall be distributed to PPI and the
number of Units deemed held by PPI shall be correspondingly reduced. The new
Class C Limited Partner shall be deemed to have acquired or assumed a
corresponding portion of the Capital Account of PPI, and neither PPI's nor the
new Class C Limited Partners' Capital Accounts shall be increased or decreased
by the amount of cash contributed to, or distributed by, the Partnership.
ARTICLE IV
Rights, Duties and Obligations of the General Partner
4.1. General Partner to Manage Business.
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Subject to Section 4.8 hereof, the General Partner shall manage and
control the business of the Partnership with full, exclusive and complete
discretion in the management and control of said business, and shall make all
decisions affecting said business. The Limited Partners, as such, shall not and
shall have no right or power to take part in the control of the business,
affairs and/or operations of the Partnership. The General Partner may, from time
to time, delegate any or all of such responsibilities to third parties which,
under the General Partner's supervision, will perform such acts and services for
the Partnership as the General Partner may approve.
4.2. Powers of the General Partner.
Subject to Section 4.8 hereof, the General Partner shall have all
powers necessary or desirable to carry out the purposes, business and objectives
of the Partnership and its duties as set forth herein and all of the power and
authority in connection therewith as may be specifically stated in this
Agreement or as may be otherwise provided by law. The General Partner
specifically has the power and authority to execute agreements, at the
Partnership's expense and in its name, for the acquisition of the Project and
the Financing in connection therewith.
4.3. Tax Matters Partner.
The General Partner shall serve as the Tax Matters Partner pursuit to
Section 6231(a)(7)(A) of the Code, and shall take such action as may be required
to register such status with the Internal Revenue Service. The Tax Matters
Partner ("TMP") is responsible for all administrative and judicial proceedings
for the assessment and collection of tax deficiencies or the read of tax
overpayments arising out of a Partner's distributive share of items of income,
deduction, credit and/or of any other Partnership item (as that term is defined
in the Code or in regulations issued by the Internal Revenue Service) allocated
to the Partners affecting any Partner's tax liability. The TMP shall promptly
give notice to all Partners of any administrative or judicial proceedings
pending before the Internal Revenue Service involving any Partnership item and
the progress of any such proceeding. Such notice shall be in compliance with
such regulations as are issued by the Internal Revenue Service. The TMP shall
have all the powers provided to a tax matters partner in Sections 6221 through
6233 of Code, including the specific power to extend the statute of limitations
with respect to any matter which is attributable to any Partnership item or
affecting any item pending before the Internal Revenue Service and to select the
forum to mitigate any issue or liability arising from Partnership items. The TMP
may resign his position by giving thirty (30) days written notice to all
Partners, whereupon the Partners shall designate a new TMP. The TMP shall be
entitled to reimbursement for any and all reasonable expenses incurred with
respect to any administrative and/or judicial proceedings affecting the
Partnership.
4.4. Duties of the General Partner.
4.4.1. The General Partner shall use its best efforts to
carry out the purposes, business and objectives of the Partnership;
shall devote such time to Partnership business as shall be reasonably
required to carry out such purposes, business and objectives; and shall
use its best efforts to assure the efficient management and operation
of the Partnership.
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4.4.2. The General Partner shall supervise the preparation
and filing of the tax returns of the Partnership; shall, on behalf of
the Partnership, make such tax elections and determinations as appear
to be appropriate; and shall advise the Limited Partners of their
shares of tax liabilities.
4.4.3. The General Partner shall cause the Partnership at
all times to maintain such insurance, in such amounts and against such
other risks, as the General Partner deem advisable to protect the
Partnership.
4.4.4. The General Partner shall maintain separate Financial
accounts so that the funds of the Partnership shall be kept separate
and will not be commingled with any other funds.
4.5. Compensation of the General Partner and its Affiliates.
The General Partner shall receive no compensation for its services as
General Partner, except that the General Partner shall be entitled to its
interest in Profits, Losses, and Cash Flow as set forth elsewhere in this
Agreement. The General Partner shall be entitled to receive repayment of any
moneys lent the Partnership, together with interest, if any, provided in
connection with any such loan. The General Partner shall be entitled to receive
reimbursement for expenses as set forth in Article IX hereof. Affiliates of the
General Partner shall be entitled to receive reasonable compensation for
services rendered to the Partnership, provided the Class A Partners approve the
terms of the services and compensation and the requirements of Section 1.8(c)
are met.
4.6. Other Interests of Partners.
Except as set forth in Article XI, any Partner may engage in other
business including business of a nature which is the same as or similar to the
business of this Partnership without duty or obligation to account to the
Partnership in connection therewith. Any Partner may, in his individual
capacity, lend money to or otherwise deal with the Partnership and shall have no
liability or obligation to the Partnership in connection with such dealings
unless the dealings are manifestly unfair or the benefits received by such
Partner are unreasonable.
4.7. Amendment of Partnership Agreement.
Except as set forth below, no amendment to this Agreement shall be made
without the consent of the Class A Partners. Notwithstanding the foregoing,
amendments to reflect any one or more of the following events may be made by the
General Partner when required in order to carry out the other provisions of this
Agreement and to comply with law and no such amendments shall require the vote,
approval or written consent of any of the other Partners:
(a) Transfer of any limited partnership interest pursuant to
Article V or VI.
(b) Change in the name of the Partnership, the location of the
principal place
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of business of the Partnership, the name or place of residence
of a Partner, the location of the Partnership's registered
office or the identity of the Partnership's registered agent.
(c) Substitution of a Limited Partner pursuant to Article V or VI.
(d) Correction of a nonsubstantive error in this Agreement; and
(e) Amendments necessary to cause the Agreement to comply with
applicable law, regulation or rule; including, but not limited
to, any amendment deemed necessary by the General Partner to
permit the Partnership to be treated as a partnership for
federal income tax purposes.
4.8. Major Decisions Requiring Unanimous Partner Approval.
Notwithstanding anything herein to the contrary, the following
described actions shall be referred to as "Major Decisions" and shall require
the affirmative approval of all of the Partners:
(a) Any act in contravention of this Agreement.
(b) Any act which would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise
provided in this Agreement.
(c) The knowing performance of any act that would subject any
Limited Partner to liability as a General Partner in any
jurisdiction.
4.9. Certain Decision Requiring Approval of Class A Limited
Partners.
Notwithstanding anything herein to the contrary, the following
described actions shall require the affirmative approval of the General Partner
and the Class A Limited Partners.
(a) The replacement, modification, consolidation, refinancing or
extension of any mortgage or other Financing instrument
covering any property owned by the Partnership.
(b) Confessing a judgment against the Partnership in connection
with any threatened or pending legal action.
(c) Dissolution or liquidation of the Partnership.
(d) The sale, lease, or transfer of all or substantially all of
the Partnership's assets.
(e) The filing of a voluntary petition or initiation of
proceedings to have the Partnership adjudicated bankrupt or
insolvent, or the consent to the institution of bankruptcy or
insolvency proceedings against the
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Partnership, or the filing of a petition seeking or consenting
to reorganization or relief of the Partnership as debtor under
any applicable federal or state law relating to bankruptcy,
insolvency, or other relief for debtors with respect to the
Partnership; or the seeking or consent to the appointment of
any trustee, receiver, conservator, assignee, sequestrator,
custodian, liquidator (or other similar official) of the
Partnership or of all or my substantial part of the properties
and assets of the Partnership, or the making of any general
assignment for the benefit of creditors of the Partnership, or
admitting in writing the inability of the Partnership to pay
its debts generally as they become due or the declaration of a
moratorium on the Partnership debt or the taking any action in
furtherance of any such action.
(f) Amendment, modification or alteration of this Agreement,
except as permitted in section 4.7.
(g) Merger or consolidation with any other entity.
(h) Approval of Medical Staff Bylaws for the Project.
(i) Credentialing of physicians on the medical staff of the
Project.
(j) Approval of managed care contracts relating to the Project
with over 5,000 covered lives.
(k) Approval of a Charity Care Policy for the Project.
(l) Approval of the annual budget for the Project.
(m) Approval of the administrator/CEO for the Project.
(n) Amendment of the Management Agreement.
(o) Admission of an additional or substitute general partner.
4.10. Liability of General Partner to Partnership or to Limited
Partners.
The General Partner, its employees, agents and assigns, shall not be
liable to the Limited Partners or to the Partnership for any loss suffered which
arises out of an act or omission of the General Partner, its employees, agents
and assigns, if, in good faith, it was determined by the General Partner that
such act or omission was in the best interests of the Partnership and such act
or omission did not constitute negligence or fraud. The General Partner, its
employees, agents and assigns, shall be indemnified by the Partnership against
any and all claims, demands and losses whatsoever if: (i) the indemnitee
conducted itself in good faith; and (ii) reasonably believed (a) in the case of
conduct in its official capacity with the Partnership, that its conduct was in
its best interests and (b) in all other cases, that its conduct was at least not
opposed to its best interests; and (iii) in the case of any criminal proceeding,
it had no reasonable cause to believe its conduct was unlawful.
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ARTICLE V
Admission and Withdrawal of Partners and
Transfers of Partnership Interests
5.1. Transfers of Partnership Interests.
The transfer of an interest in the Partnership shall mean the
transfer, alienation, sale, assignment, pledge or other disposition or
encumbrance of all or any part of an existing interest in the Partnership,
whether voluntarily or involuntarily, whether for or without consideration, and
includes a transfer by death or incompetency of a Partner, by operation of law,
by bankruptcy of a Partner, by foreclosure or judicial sale or otherwise. In the
event of the transfer of all or any part of the interest in the Partnership of a
Partner in accordance with this Agreement, this Agreement shall be amended as
necessary to reflect the transfer of the interest.
5.2. Permissible Transfers/Withdrawals.
No transfer or assignment of a Partnership interest shall be
made except on the following conditions:
(a) Any Class A Limited Partner may, without the
consent of any other Partner, freely transfer all or any part
of its Partnership interest to the General Partner or any
other Class A Limited Partner;
(b) PPI may, without consent of any other
Partner, freely transfer a portion of its Partnership interest
to a Class B Limited Partner or a Qualified Purchaser provided
that subsequent to such transfer the Percentage Interest of
all Class B Limited Partners does not exceed nineteen percent
(19%) in the aggregate;
(c) PPI may, without consent of any other
Partner, freely transfer a portion of its Partnership interest
to any person eligible as a Class C Limited Partner;
(d) Any Partner may, with the consent of the
General Partner, which consent may be withheld for any reason
in the sole discretion of General Partner, may transfer all or
any portion of its Partnership interest to any other Partner;
and
(e) Any Partner may transfer all or a portion of
its Partnership interest to another person or entity in
accordance with the provisions of this Article V.
In the event that any Partner shall at any time attempt to transfer its interest
in the Partnership or withdraw from the Partnership in violation of the
provisions of this Agreement, such transfer or withdrawal shall be considered
void ab initio, and the Partnership shall, in addition to all other rights and
remedies at law and in equity, be entitled to a decree or order restraining and
enjoining such transfer or withdrawal, and the offending Partner shall not plead
in defense thereto that there would be an adequate remedy at law, it being
expressly acknowledged and agreed that
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damages at law will be an inadequate remedy for a breach or threatened breach of
the provisions concerning transfer or withdrawal set forth in this Agreement.
5.3. Bankruptcy, Resignation, Dissolution, Liquidation or
Removal of the General Partner.
Upon the bankruptcy, resignation, dissolution, liquidation,
conversion or removal of a General Partner, the Partnership shall dissolve
pursuant to Section 7.1 of this Agreement unless a substitute General Partner is
elected by the unanimous vote of the Limited Partners within sixty (60) days and
such Limited Partners vote to continue the business of the Partnership.
5.4. Dissolution of Limited Partner.
The bankruptcy, dissolution, liquidation, or termination of a
Limited Partner shall not cause the termination or dissolution of the
Partnership and the business of the Partnership shall continue. Upon any such
occurrence, the trustee or receiver of such Limited Partner shall have all the
rights of such Limited Partner for the purpose of settling or managing its
estate or property, subject to satisfying conditions precedent to the admission
of such assignee as a substitute Limited Partner. The transfer by such trustee
or receiver of any Partnership interest shall be subject to all of the
restrictions hereunder to which such transfer would have been subject if such
transfer had been made by such bankrupt, dissolved, liquidated or terminated
Limited Partner.
5.5. Provisions Intended to Ensure Compliance with
Securities Laws.
5.5.1. Restrictions on Transfer. In addition to the
provisions of Section 5.2 hereof, Partnership interests are
not transferable except pursuant to (i) public offerings
registered under the Securities Act, (ii) Rule 144 of the
Securities and Exchange Commission (or any similar rule then
in force) if such rule is available, and (iii) subject to the
conditions specified in Section 5.5.2 hereof any other legally
available means of transfer.
5.5.2. Procedure for Transfer. In connection with
the transfer of any Partnership interests (other than a
transfer referred to in clauses (i) or (ii) of Section 5.5.1
above), the holder thereof will deliver written notice to the
General Partner describing in reasonable detail the transfer
or proposed transfer, together with an opinion (reasonably
satisfactory to the General Partner) of counsel which (to the
General Partner's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of
Partnership interests may be effected without registration of
such Partnership interests under the Securities Act.
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5.6. No Transfer Which Violates Safe Harbors.
The General Partner may prevent, in its sole discretion, any
transfer that would cause the Partnership not to satisfy any safe harbor
provided in Internal Revenue Service Notice 88-75 or subsequent administrative
or legislative provision permitting the Partnership to avoid being a "publicly
traded partnership" under Section 7704 of the Code.
5.7. Additional General Partner: Transfer of General
Partner's and PPI's Interest.
No additional General Partner shall be admitted to the
Partnership without the prior written consent of all of the Limited Partners.
The General Partner shall not transfer its interest in the Partnership without
the consent of all of the Limited Partners. Notwithstanding the foregoing, the
General Partner may transfer its Partnership interest to a substitute General
Partner without the consent of the Limited Partners if (a) PPI is selling its
entire Partnership interest in the same transaction; and (ii) Mother Frances has
the right to sell its Partnership interest in the same transaction for a price
equivalent to that received by PPI, adjusted pro rata based on their respective
Partnership interests. PPI shall not transfer its interest in the Partnership
without the consent of Mother Frances, unless Mother Frances has the right to
sell its entire Partnership interest in the same transaction for a price
equivalent to that received by PPI, adjusted pro rata based on their respective
partnership interests.
5.8. Transferees as Substitute Partners.
5.8.1. A party who acquires an interest in the
Partnership and who becomes a substitute Partner as herein
provided shall succeed to all of the rights and powers of a
Partner with respect to the interest in the Partnership which
is acquired. A party who does not become a substitute Partner
shall be entitled only to receive the share of profits and
losses and the share of distributions of cash and the return
of capital contributions to which the Partner from whom he
acquired his interest in the Partnership would have been
entitled with respect to the interest in the Partnership which
is acquired but, notwithstanding any other provision in this
Agreement to the contrary, shall have no right to require any
information or account of Partnership transactions, no right
to inspect the Partnership books and no other rights and
powers of a Partner. A party who does not become a substitute
Partner shall nevertheless be subject to all of the provisions
of this Agreement and to all of the restrictions and
liabilities under this Agreement with respect to the interest
acquired.
5.8.2. A Transferee of a General Partner's interest
may become a substitute General Partner only in accordance
with Section 5.7 hereof. In the event of the transfer of a
limited partnership interest in accordance with this
Agreement, the transferee may become a substitute Limited
Partner only with the written consent of the General Partner
which may be withheld in its sole discretion, and upon
satisfaction of the following conditions:
(a) The receipt by the General Partner of a
written instrument setting
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forth the intention of the transferor that
the transferee become a substituted Limited
Partner;
(b) The receipt by the General Partner of such
information, documents and fees as the
General Partner may deem necessary or
desirable to effect the admission of the
transferee as a substitute Limited Partner,
including, without limitation, an opinion of
counsel satisfactory to the General Partner
that such substitution will not violate the
provisions of any applicable securities
laws, rules or regulations.
5.9. Permitted Transfers by Mother Frances.
Notwithstanding anything in this Agreement to the contrary,
Mother Frances shall have the right to transfer its Partnership interest to
Trinity Mother Frances Health System or to an Affiliate that is one hundred
percent (100%) owned though stock ownership (or governed through membership
rights in the case of a not-for-profit organization) by one or more members of
the Trinity Mother Frances Health System group, otherwise Mother Frances shall
not transfer any Partnership interest except in accordance with the following
procedures:
5.9.1. Right of First Refusal. For fifteen (15)
days Mother Frances shall grant to PPI a right of first
refusal (the "First Refusal") to purchase Mother Frances's
Partnership interest at a price equal to a bona fide written
offer to Mother Frances by an independent third party.
5.9.2. Notice of Intent to Sell. The First Refusal
shall be granted by written notice of intention to make a bona
fide disposition by Mother Frances stating the offer to sell,
the Partnership interest offered, purchase price therefor
which shall be the terms on which Mother Frances proposes to
dispose of its Partnership interest, and the name and address
of the on to whom Mother Frances desires to transfer the
Partnership interests.
5.9.3. Notice of Exercise. The First Refusal may be
exercised only by actual delivery to Mother Frances, prior to
the termination of the time period, of a notice of exercise.
5.9.4. Closing. The closing of the purchase of the
Partnership interest pursuit to the right of first refusal
described in this Section 5.9 shall take place on the date
designated by PPI in the notice of exercise described in
clause 5.9.3 above, which date shall not be more than sixty
(60) days nor less than five (5) days after the delivery of
such notice. At the closing, Mother Frances shall deliver to
PPI duly executed instruments transferring Mother Frances's
Partnership interest to PPI against payment of the purchase
price by a delivery of a check or wire transfer of funds to an
account designated by Mother Frances. PPI will be entitled to
receive customary representations and warranties from Mother
Frances regarding such sale.
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5.9.5. Failure to Exercise Right of First Refusal.
If PPI does not exercise its First Refusal, Mother Frances may
transfer its Partnership interest to the purchaser at the
purchase price and on the terms described in the notice
delivered pursuit to clause 5.9.3 above.
5.10. Partners' Representations and Warranties.
5.10.1. Partners' Investment Representations. Each
Partner hereby represents that he or it is acquiring the
Partnership interests set forth in Schedule A for its own
account with the present intention of holding such securities
for investment purposes and that it has no intention of
selling such securities in a public distribution in violation
of federal or state securities laws; provided that nothing
contained herein will prevent the Partners and the subsequent
holders of such securities from transferring such securities
in compliance with the provisions of Article V hereof.
5.10.2. Other Representations and Warranties of the
Partners. Each Partner hereby severally represents and
warrants to and covenants and agrees with the Partnership
that:
a. Such Partner has had an opportunity
to ask questions and receive answers concerning the
terms and conditions of the securities purchased
hereunder and has had full access to such other
information concerning the Partnership as such
Partner may have requested and that in making its
decision to invest in the securities being purchased
hereunder he or it is not in any way relying on the
fact that any other party has decided to be a Partner
hereunder or to invest in the securities;
b. Such Partner is an "accredited
investor" as defined in Rule 501(a) under the
Securities Act;
c. Such Partner is able to bear the
economic risk of its investment in the Partnership
purchased hereunder for an indefinite period of time,
including the risk of a complete loss of such
Partner's investment in the Partnership.
5.11 Admission of Additional Class B Limited Partners.
Subject to approval of the Class A Limited Partners, the General Partner may
issue limited partnership interests in the Partnership, not to exceed nineteen
percent (19%), to Persons who are Qualified Purchasers and admit them to the
Partnership as additional Limited Partners, which in all instances shall comply
with applicable securities laws. The terms of each issuance must be approved by
the Class A Limited Partners. The General Partner will not permit any Person to
become an additional Class B Limited Partner unless such Person certifies in
writing to the General Partner that the Person is a Qualified Purchaser and
agrees to be bound by the terms of this Agreement. The General Partner shall do
all things necessary to comply with the Act and is authorized to do all things
it deems to be necessary or advisable in connection with the Partnership for
admitting any additional Limited Partner, including, but not limited to,
complying with any statute, rule,
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regulation or guideline issued by any federal, state or other governmental
agency.
5.12 Admission of Additional Class C Limited Partners.
Subject to approval of the Class A Limited Partners, the General Partner may
issue limited partnership interests in the Partnership to individuals who are
eligible as Class C Limited Partners and admit them to the Partnership as
additional Limited Partners, which in all instances shall comply with applicable
securities laws. The terms of each issuance must be approved by the Class A
Limited Partners. The General Partner will not permit any individual to become
an additional Class C Limited Partner unless such individual agrees to be bound
by the terms of this Agreement. The General Partner shall do all things
necessary to comply with the Act and is authorized to do all things it deems to
be necessary or advisable in connection with the Partnership for admitting any
additional Limited Partner, including, but not limited to, complying with any
statute, rule, regulation or guideline issued by any federal, state or other
governmental agency.
ARTICLE VI
Special Put/Call Rights in Favor of Mother Frances
6.1. Call Right. So long as this Agreement shall be in
effect Mother Frances shall have the right to acquire additional Class A Units
from the Partnership sufficient for Mother Frances to own ten percent (10%) of
the Partnership interests of the Partnership on the following terms:
6.1.1. Price. The price Mother Frances shall pay
for such additional Class A Units shall be, for each one
percent (1%) interest in the Partnership, one percent (1%) of
the sum of (i) the net working capital of the Partnership as
shown on the most recently available balance of the
Partnership prior to the date such Class A Units are issued
plus (ii) the greater of (x) $21,900,000 or (y) the product
obtained by multiplying (five) 5 times Trailing EBITDA, less
(iii) the debt of the Partnership as shown on such balance
sheet.
6.1.2. Mechanics of Exercise. If Mother Frances
desires to exercise its Call Right, it shall deliver notice to
the General Partner during the first or seventh months after
the annual audited financial statements of the Partnership are
delivered to Mother Frances with respect to the prior year and
simultaneously tender the price for the additional Class A
Units in cash.
6.1.3. Termination of Call Rights. If Mother
Frances exercises its right to put its Partnership interests
to PPI or the Partnership pursuant to Section 6.2, its rights
under this Section 6.1 shall forthwith cease.
6.2. Put Right. Commencing July 1, 1998, Mother Frances
shall have the right to put its original five percent (5%) Partnership interest
in the Partnership (or so much thereof as shall be remaining in the event of the
issuance of Class B Units pursuant to Section 5.11) either to PPI or the
Partnership (at the option of PPI) on the following terms:
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6.2.1. Price. The price PPI or the Partnership
shall pay to Mother Frances for such Partnership interest
shall be five percent (5%) of the sum of (i) the net working
capital of the Partnership as shown on the most recently
available balance of the Partnership prior to the date such
Partnership interest is issued plus (ii) the greater of (x)
$21,900,000 or (y) the product obtained by multiplying 5 times
Trailing EBITDA, less (iii) the debt of the Partnership as
shown on such balance sheet.
6.2.2. Mechanics of Exercise. If Mother Frances
desires to exercise its Put Right, it shall deliver notice to
the General Partner during the ninety (90) days after the
annual audited financial statements of the Partnership are
delivered to Mother Frances with respect to the prior year,
and the Partnership or PPI shall pay the price for such
additional Partnership interest in cash within thirty (30)
days.
6.2.3. Termination of Put Rights. If Mother Frances
exercises its right to purchase additional Partnership
interest pursuant to Section 6.1, its rights under this
Section 6.2 shall forthwith cease.
6.3. Adjustment of Percentage Interest. In the event of
the exercise of the Call Right or Put Right under this Article, the Percentage
Interests of the Class A and the Class B Limited Partners shall be adjusted in
proportion to the number of Units owned by them of the date of the transfer
pursuant to this Article.
ARTICLE VII
Special Put/Call Rights with Respect to Class B and Class C Units
7.1 Partnership's and General Partner's Right of First
Refusal with Respect to Class B Limited Partners. Subject to the restrictions on
transfer set forth in Article 5, if any Class B Limited Partner receives or
obtains an offer from a Qualified Purchaser or another Partner to acquire in any
manner all or any part of its interest in the Partnership which offer the Class
B Limited Partner intends to accept, the Class B Limited Partner shall promptly
notify the General Partner in writing of the offer received, including the name
of the offeror, the number of whole or partial Units offered to be purchased,
the proposed purchase price and the other terms and conditions of the offer. The
Partnership shall have the option for a period of sixty (60) days from the day
the General Partner receives notice of such offer to purchase such Class B
Limited Partner's interest in the Partnership on the same terms and conditions
contained in the offer. The Partnership may exercise its option by notifying the
Class B Limited Partner proposing to sell prior to the end of such sixty (60)
day period of its exercise of the option and shall thereafter purchase such
Class B Limited Partner's interest within the subsequent sixty (60) day period
(unless such exercise is subsequently revoked). If the Partnership does not
exercise its option, the General Partner shall have the option to purchase such
Class B Limited Partner's interest in the Partnership on the same terms and
conditions within the subsequent thirty (30) day period. If the Partnership and
the General Partner fail to or both indicate in writing that they will not
exercise the option, within the periods provided above, or if either the
Partnership or the General
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Partner exercises the option but fails to effect the purchase within the
prescribed period, the Class B Limited Partner, in accordance with and subject
to the provisions of Article 5, may convey or dispose of the part of the
Partner's interest in the Partnership that was the subject of the offer but only
at the price, terms and conditions, and to the party specified in the offer
notice to the General Partner. If terms and conditions more favorable to the
proposed purchaser than, or in any material manner different from, those offered
to the Partnership and the General Partner should be agreed to by the Class B
Limited Partner, the Partnership and the General Partner shall again have the
option to purchase the selling Limited Partner's interest in the Partnership
which is subject to the more favorable or different purchase terms in accordance
with this Section 7.1. Neither the General Partner nor the Partnership shall be
liable or accountable to any Class B Limited Partner which attempts to transfer
its interest in the Partnership for any loss, damage, expense, cost, or
liability resulting from the Partnership's or General Partner's exercise or
failure to exercise the purchase option under this Section 7.1, delay in
notifying the Class B Limited Partner of the Partnership's or the General
Partner's intention not to exercise the purchase option, or its enforcement of
the requirements of this Section 7.1 in the event that it elects not to exercise
the purchase option. The Partnership's or the General Partner's failure to
exercise the purchase option or to indicate in writing that it is electing not
to exercise the option shall not be deemed a consent of the General Partner to
allow any third party transferee to become a Substituted Limited Partner, such
consent being controlled by the provisions of Section 5.7.
7.2. Occurrence of Terminating Event or Adverse
Terminating Event.
7.2.1 In the event a Terminating Event shall occur
with respect to any Class C Limited Partner, any Class B
Limited Partner or any person who owns an interest in a
Qualified P.C. or a Qualified Retirement Plan which is a Class
B Limited Partner, such Class C Limited Partner, Class B
Limited Partner or such Class C Limited Partner's or Class B
Limited Partner's successor or other legal representative
shall give written notice thereof to the Partnership within
thirty (30) days of the occurrence of such event. Upon the
receipt of such written notice, the Partnership shall have the
right, but not the obligation, for the ensuing sixty (60) days
to purchase such Class C Limited Partner's or Class B Limited
Partner's interest in the Partnership. If the Partnership has
not received written notice of a Terminating Event with
respect to any Class C Limited partner, any Class B Limited
Partner or any person who owns an interest in a Qualified P.C.
or a Qualified Retirement Plan which is a Class B Limited
Partner as required under this Section 7.2.1, the Partnership
will have the right to purchase such Class C Limited Partner's
or Class B Limited Partner's interest in the Partnership for
sixty (60) days after the Partnership has actual knowledge of
the occurrence of any such event and gives written notice
thereof to such Class C Limited partner or such Class B
Limited Partner. Notwithstanding anything to the contrary in
this Agreement, the failure of a Class C Limited Partner or a
Class B Limited Partner to notify the Partnership of the
occurrence of a Terminating Event as required under this
Section 7.2.1 shall not constitute the occurrence of an
Adverse Terminating Event.
7.2.2 In the event the General Partner determines
that an Adverse Terminating Event has occurred with respect to
any Class C Limited Partner, any
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Class B Limited Partner or any person who owns an interest in
a Qualified P.C. or a Qualified Retirement Plan which is a
Class B Limited Partner, the Partnership shall give written
notice thereof to such Partner and, for a period of sixty (60)
days from the date of such notice, the Partnership shall have
the right, but not the obligation, to purchase such Partner's
interest in the Partnership.
7.2.3 In the event the Partnership does not elect
to exercise its right to purchase such Partner's interest in
the Partnership pursuant to subsections (a) or (b) above, then
the General Partner shall have the right, but not the
obligation, within the immediate subsequent thirty (30) day
period following the time period indicated in Section 7.2.1
hereof to purchase such Partner's interest, pursuant to the
same terms provided in Section 7.3 hereof, for Partnership
purchases of such Partner's interest.
7.3 Payment for Partnership Interest.
7.3.1 If any Class C Limited Partner's or any
Class B Limited Partner's interest in the Partnership is
purchased because of the occurrence of a Terminating Event,
the amount the Partnership will pay for each Unit owned by
such Partner shall be equal to the Valuation Price.
7.3.2 If the Partnership purchases any Class C
Limited Partner or any Class B Limited Partner's interest in
the Partnership as a result of an Adverse Terminating Event,
the amount to be paid by the Partnership to such Partner shall
be equal to the lesser of (i) the Valuation Price multiplied
by the number of such Partners Units, or (ii) the amount paid
by such Partner to acquire his Units less any distributions
other than distributions of Distributable Cash Flow, including
without limitation any deemed distributions, any distributions
pursuant to Section 3.9 and any returns of capital, but not
less than one (1) dollar.
7.3.3 If the Partnership purchases any Class C
Limited Partner's or any Class B Limited Partner's interest in
the Partnership as provided in this Section 7.3, the
Partnership shall pay any such amounts owed therefor to such
Partner or its successor in a lump sum or, at the sole and
absolute discretion of the General Partner, in up to sixty
(60) equal monthly payments with interest at the Prime Rate on
the unpaid principal balance. If the General Partner exercises
its discretion for the Partnership to pay for a Partnership
interest in monthly installments, the first such installment
will be paid to the Partner or his successor in interest on
the first day of the month after thirty (30) days have expired
since the Partner's interest in the Partnership has been
purchased. Each subsequent installment shall be paid on the
first day of each successive month until the full amount owed
to the Partner or his successor in interest has been paid. The
Partnership may pre-pay in whole or in part the amount owed
without penalty. The Partnership's obligation to pay the
Partner in monthly installments under this Section 7.3 will be
evidenced by a nonrecourse promissory note executed by the
General Partner on behalf of the Partnership.
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7.4. Subsequent Legislation. If any Class C Limited
Partner's or any Class B Limited Partners are prohibited from owning an interest
in the Partnership as a result of the enactment of any statute, regulation or
other law or the judicial or administrative interpretation of any existing or
future statute, regulation or other law, the General Partner shall attempt to
restructure the Partnership in order to comply with such enactment or
interpretation. If any Class B Limited Partner shall be so prohibited from
owning an interest in the Partnership and the Partnership cannot be so
restructured, the Partnership will purchase all the Class B Limited Partners'
interests in the Partnership as provided in this Section 7.4. Additionally, if
the enactment of any statute, regulation or other law or the judicial or
administrative interpretation of any existing or future statute, regulation or
law shall have the effect of limiting reimbursement of health care costs through
government or other payor programs or otherwise materially and adversely affects
the manner in which the Partnership or its Affiliates shall operate their
businesses, the General Partner shall attempt to restructure the Partnership to
eliminate the adverse effect and if the Partnership cannot be so restructured,
the General Partner, at its sole and absolute discretion, shall have the option
to cause the Partnership to purchase all of the Class C Limited Partners' and or
Class B Limited Partners' interests in the Partnership as provided in this
Section 7.4. The Partnership shall pay each such Partner for his interest in the
Partnership the Valuation Price of such interest. Such amount will be paid to
each such Partner, at the sole and absolute discretion of the General Partner,
in a lump sum, in sixty (60) equal monthly payments with interest on the unpaid
principal balance at the Prime Rate. If the General Partner exercise its
discretion to pay for a Partnership interest in sixty (60) monthly installments,
the first such installment shall be paid to such Limited Partner on the first
day of the month after thirty (30) days have expired since the Partner's
interest in the Partnership had been terminated, with subsequent installments
paid on the first day of each successive month thereafter until paid in full.
The Partnership may pre-pay in whole or in part the amount owed without penalty.
The Partnership's obligation to pay the such Partners in sixty (60) equal
monthly installments under this Section 7.4 will be evidenced by nonrecourse
promissory notes executed by the General Partner on behalf of the Partnership.
7.5. Divorce of Class C Limited Partner or a Class B
Limited Partner. In the event of a divorce of a Class C Limited P, a Class B
Limited Partner or a person who owns an interest in a Qualified P.C. or a
Qualified Retirement Plan which is a Class B Limited Partner in which all or any
part of the divorcing Partner's or person's interest in the Partnership is
awarded to the spouse, the divorcing Partner or person shall have the first and
prior right to purchase from the spouse the interest or portion thereof to be
transferred to the spouse. In the event the divorcing Partner or person is
unable or unwilling to purchase such interest within sixty (60) days of the
order or settlement agreement effecting the award, the Partnership shall have
the exclusive right to purchase such interest for a period of sixty (60) days
after the expiration of such prior sixty (60) day period or the earlier receipt
by the Partnership of written notice from the divorcing Partner or person that
he is unable or unwilling to purchase such interest. The Partnership shall give
written notice to the spouse of its election to purchase such interest within
such sixty (60) day period. In the event of the purchase by either the divorcing
Partner or person or the Partnership, the purchase price for such interest shall
be the Valuation Price, multiplied by that percentage of the interest of the
divorcing Partner or person which was awarded to the spouse. The last day of the
month in which the order or settlement agreement effecting the award was dated
will be the time used as the reference time for determining the last ended
period for purposes of the Valuation Price; the purchase price so determined
will be payable in the manner
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described in Section 7.3.3.
7.6 Repurchase of Excess Interest. In the event any Class
B Limited Partner at any time owns more one than one percent (1%) of the
Partnership interests, the Partnership shall have the exclusive right to
purchase that portion of such Partnership interest which exceeds one percent
(1%) of the Partnership interest (the "Excess Interest") for a period of sixty
(60) days after the Partnership receives notice of the ownership of such Excess
Interest. The Partnership shall give written notice to such Class B Limited
Partner of its election to purchase such Excess Interest within such sixty (60)
day period. The purchase price for such Excess Interest shall be the lesser of
a) the Valuation Price multiplied by the Excess Interest or b) the purchase
price paid by such Class B Limited Partner for that portion or portions of such
Class B Limited Partners Partnership interest which caused such Class B Limited
Partner's Partnership interest to be in excess of one percent (1%) of the
Partnership interests multiplied by the Excess Interest. The last day of the
month in which such Class B Limited Partner became the owner of such Excess
Interest will be the time used as the reference time for determining the last
ended period for purposes of the Valuation Price. For the purpose of this
Section 7.6, the Partnership interests of any individual Class B Limited Partner
shall be aggregated with the Partnership interests of any Class B Limited
Partner which is a Qualified P.C. or a Qualified Retirement Plan in which the
individual Class B Limited Partner has any interest, and the interests of any
Class B Limited Partner which is a Qualified P.C. shall be aggregated with the
interests of any Class B Limited Partner which is Qualified Retirement Plan in
which such Qualified P.C. or any individual Qualified Purchaser, whether or not
a Class B Limited Partner, has any interest.
7.7 Put and Call Provisions. At anytime following the
third anniversary of the acquisition of a Partnership interest by a Class B
Limited Partner, such Class B Limited Partner shall have the right, upon sixty
(60) days prior written notice to the Partnership, to require the Partnership to
repurchase such Partnership interest. The purchase price for such Partnership
interest shall be the lesser of (i) the Valuation Price multiplied by the number
of such Class B Limited Partner's Units, or (ii) the amount paid by the Class B
Limited Partner to acquire his Units less any distributions other than
distributions of Distributable Cash Flow, including without limitation any
deemed distributions, any distributions pursuant to Section 3.9 and any returns
of capital, but not less than one (1) dollar. At anytime following the third
anniversary of the acquisition of a Partnership interest by a Class B Limited
Partner, the Partnership, at the sole discretion of the General Partner, shall
have the right, upon sixty (60) days prior written notice to the any Class B
Limited Partner, to require such Class B Limited Partner to sell such
Partnership interest to the Partnership. The purchase price for such Partnership
interest shall be the Valuation Price multiplied by the number of such Class B
Limited Partner's Units. The last day of the month in which the notice of the
exercise of the provisions of this Section either by a Class B Limited Partner
or the Partnership will be the time used as the reference time for determining
the last ended period for purposes of the Valuation Price.
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7.8 Federal Income Tax Treatment. In the event the
Partnership exercises the right to purchase any Partner's interest in the
Partnership under this Article VII, one hundred percent (100%) of all payments
made by the Partnership to such Partner hereunder in consideration for such
Partner's Partnership interest will, for Federal income tax purposes, be
classified as a Code Section 736(b) payment except for such Partner's share of
the Partnership's "unrealized receivables," as defined in Code Section 751(c)
which will be classified as a Code Section 736(a)(1) payment. The General
Partner shall conclusively determine or cause to be determined any such
Partner's share of "unrealized receivables." Neither the Partnership nor the
General Partner shall be liable to any Person for any inaccuracy in determining
any such Partner's share of the Partnership's "unrealized receivables."
ARTICLE VIII
Dissolution and Termination
8.1. Events Causing Dissolution and Termination.
The Partnership shall be dissolved upon (1) the expiration of
the term of the Partnership stated in this Agreement; (2) the sale of all of the
assets of the Partnership and the distribution of the net proceeds therefrom;
(3) at any time with the written consent of the General Partner and of all of
the Class A Limited Partners; (4) the resignation, dissolution and liquidation
or conversion of the General Partner if no substitute General Partner is elected
within sixty (60) days as provided in Section 5.3; and (5) any other event as
may be provided by law. The Partnership shall be terminated when the winding up
of Partnership affairs has been completed following dissolution.
8.2. Winding Up Affairs on Dissolution.
Upon dissolution of the Partnership, the General Partner, or
the persons required or permitted by law to carry out the winding up of the
affairs of the Partnership, shall promptly notify all Partners of such
dissolution; shall wind up the affairs of the Partnership; shall prepare and
file all instruments or documents required by law to be filed to reflect the
dissolution of the Partnership; and, after paying or providing for the payment
of all liabilities and obligations of the Partnership, shall distribute the
assets of the Partnership as provided by law and the terms of this Agreement.
8.3. Distributions in Accordance with Capital Accounts.
Notwithstanding any other provision of this Agreement, upon
liquidation of the Partnership (or any Partner's interest in the Partnership)
liquidating distributions shall be made, in all cases,in accordance with the
Partners' positive capital account balances determined after all adjustments to
the Partners' capital accounts for the taxable year. Such distribution shall be
made within the time periods required by Treasury Regulation Section 1.704-1(b).
In the event that upon liquidation of the Partnership, the General Partner has a
deficit balance in its capital account, the General Partner shall contribute to
the capital of the Partnership an amount of money equal to the lesser of (a)
such deficit balance, or (b) the excess of 1.01 percent of the total capital
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contributions by the Limited Partners to the Partnership over the total amount
of capital contributions made to the Partnership by the General Partner. Any
amounts contributed by the General Partner shall be added to the amounts
described above and shall be distributed in the manner provided in this Section
6.4.
ARTICLE IX
Fiscal Matters
9.1. Books and Records.
The General Partner shall maintain full and accurate books of
the Partnership at its principal place of business or at such other place as may
be designated from time to time by the General Partner, showing all receipts and
expenditures assets and liabilities, profits and losses, and all other records
necessary for recording the Partnership's business and affairs. Each Partner and
its duly authorized representatives shall at all time have access to and may
inspect and copy any of such books and records.
9.2. Fiscal Year.
The fiscal year of the Partnership shall end on December 31 of
each year.
9.3. Reports to Partners.
The General Partner shall cause to be prepared at the
Partnership's expense, and shall deliver to each Partner the following reports:
9.3.1. Within seventy-five (75) days after the end
of each Fiscal Year, all information necessary for the
preparation of the Limited Partners' federal income tax
returns;
9.3.2. Any Partner may obtain, at such Partner's
expense, such other reports on the Partnership's operations
and conditions as such Partner may reasonably request, which
reports shall be mailed by the General Partner within one (1)
month after notice of such Partner's request.
9.4. Bank Accounts and Temporary Investments.
All funds of the Partnership shall be deposited in its name in
such checking, savings or other accounts as shall be designated by the General
Partner from time to time separate and apart from, and not commingled with, the
accounts of any other persons, including the accounts of the General Partner or
its Affiliates. Withdrawals therefrom shall be made upon such signature or
signatures as the General Partner may designate.
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9.5. Accounting Decisions.
All decisions as to accounting matters shall be made by the
General Partner in accordance with generally accepted accounting principles
consistency applied, unless another method of accounting not in accordance with
generally accepted accounting principles is selected for tax reporting purposes.
ARTICLE X
Expenses of the Partnership
10.1. Reimbursement of Expenses Incurred by the General
Partner.
All expenses of the Partnership's business should be billed
directly to and paid by the Partnership. The General Partner shall be reimbursed
by the Partnership for all direct expenses incurred by it to unrelated third
parties in connection with the Partnership's business, including legal,
accounting, and financial services.
ARTICLE XI
Special Covenant of Class C Limited Partners and Class B
Limited Partners
11.1. Non-Ownership Provision. Each Class C Limited Partner
and Class B Limited Partner agrees that while he is a Partner and for two (2)
years thereafter neither he nor any of his Affiliates shall, directly or
indirectly, hold an ownership interest in any health care facility (which shall
include, without limitation, general acute care hospitals, specialty hospitals,
comprehensive rehabilitation facilities, rehabilitation agencies, diagnostic
imaging centers, inpatient or outpatient psychiatric or substance abuse
facilities, ambulatory or other types of surgery centers and/or home health
agencies) that is located within the greater of a) fifty (50) miles of the
Project or b) Anderson County Texas and counties contiguous thereto. ("Competing
Business") without the prior written consent of the General Partner. Each such
Partner expressly agrees that neither he nor any of his Affiliates shall violate
the terms of this Section 11.1 while such Limited Partner is a limited partner
of the Partnership and for a period of two (2) years thereafter. Notwithstanding
anything to the contrary in this Section 11.1, no such Partner will be in
violation of this Section 11.1 if such Partner or any Affiliate of such Partner
held an ownership interest in a Competing Business on or before January 1, 1997
and such Partner or Affiliate provided written notice thereof to the General
Partner prior to his admission as a Partner. Nothing in this Section 11.1 is
intended to prevent a Class B Limited Partner from practicing medicine, being a
member of the medical staff of, or referring patients to, any other hospital or
health care facility.
11.2. Limitation. If a court shall hold that the duration
and/or scope (geographic or otherwise) of the agreement contained in Section
11.1 is unreasonable, 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. The parties agree to accept such determination,
subject
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to their rights of appeal, which the parties hereto agree shall be substituted
in place of any and every offensive part of Section 11.1, and as so modified,
Section 11.1 of this Agreement shall be as fully enforceable as if set forth
herein by the parties in the modified form.
ARTICLE XII
General Provisions
12.1. Notices.
All notices, consents, waivers, directions, requests, votes or
other instruments or communications provided for under this Agreement shall be
in writing, signed by the party giving the same, and shall be deemed properly
given when actually received, if delivered in person, or when mailed, if sent by
registered or certified United States mail, postage prepaid, addressed: (a) in
the case of the Partnership, to the Partnership at the principal place of
business of the Partnership; or (b) in the case of any Partner individually, to
such Partner at his address set forth in Schedule A hereto. Each Partner may, by
written notice to all other Partners, specify any other address for the receipt
of such instruments or communications.
12.2. Power of Attorney.
Subject to the requirements of this Agreement, each Partner,
by the execution of this Agreement, hereby irrevocably constitutes and appoints
the General Partner, its successor and assigns, as its true and lawful attorney
and agent, with full power and authority in his name, place and stead to swear
to, execute, acknowledge, deliver, file and record in any appropriate public
office any certificate or other instrument which may be necessary, desirable or
appropriate to qualify or to continue the Partnership as a limited partnership
in the State of Texas; any amendment to this Agreement or to any certificate or
other instrument which may be necessary, desirable or appropriate to reflect the
admission of a Partner, the withdrawal of a Partner or the transfer of all or
any part of the interest of a Partner in the Partnership or any additional
capital contributions or withdrawal of capital contributions by a Partner; any
conveyance of Partnership property; any mortgage or other encumbrance of
Partnership property and related documents; any note or other instrument
evidencing a Partnership obligation and related documents; and any certificates
or instrument which may be appropriate, necessary or desirable to reflect the
dissolution and termination of the Partnership. The power of attorney granted
hereby shall not be affected by disability of the principal, shall be deemed to
be coupled with an interest and shall survive the death or incompetency of any
Partner and the transfer by any Partner of its interest as Partner in the
Partnership.
12.3. Meetings.
Meetings of all Partners may be called by the General Partner
and/or any Limited Partner. Upon receipt of a written request stating the
purpose(s) of the meeting, the General Partner shall provide all Partners within
ten (10) days after receipt of said request, written notice of the meeting, and
the purpose thereof to be held on a date not less than fifteen (15) nor more
than sixty (60) days after receipt of said request. Any such meetings shall be
held at the principal
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place of business of the Partnership.
12.4. Integration.
This Agreement embodies the entire agreement and understanding
among the Partners and supersedes all prior agreements and understandings, if
any, among and between the Partners relating to the subject matter hereof.
12.5. Applicable Law.
This Agreement and the rights of the Partners shall be
governed by and construed and enforced in accordance with the laws of the State
of Texas.
12.6. Counterparts.
This Agreement may be executed in several counterparts and all
counterparts so executed shall constitute one agreement binding on all the
parties hereto, notwithstanding that all the parties are not signatory to the
original or the same counterpart, except that no counterpart shall be authentic
unless signed by the General Partner.
12.7. Severability.
In case any one or more of the provisions contained in this
Agreement or any application thereof shall be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and any other application thereof shall not in any
way be affected or impaired thereby.
12.8. Binding Effect.
Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon, and inure to the benefit of, the Partners and
their respective heirs, executors, administrators, successors and assigns.
12.9. Waiver of Action of Partition.
The Partners agree that the property of the Partnership is not
and will not be suitable for partition and that all the property of the
Partnership should be dealt with as a single, integral unit. Accordingly, each
of the Partners hereby irrevocably waives any and all rights that it may have to
maintain an action for partition of any of the property of the Partnership,
either as a partition in kind or a partition by sale.
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IN WITNESS WHEREOF, the undersigned, being all of the Partners of the
partnership, have executed and acknowledged this Agreement as of the day first
above written.
ORIGINAL GENERAL PARTNER:
PHC OF DELAWARE, INC.
formerly known as
Principal Hospital Company,
a Delaware corporation
By: /s/ John M. Rutledge
------------------------------------------
John M. Rutledge
Title: Vice President and COO
SUBSTITUTED GENERAL PARTNER:
PALESTINE-PRINCIPAL G.P., INC.,
a Texas corporation
By: /s/ John M. Rutledge
------------------------------------------
John M. Rutledge
Title: Vice President and COO
CLASS A LIMITED PARTNERS:
PALESTINE-PRINCIPAL, INC.,
a Tennessee corporation
By: /s/ John M. Rutledge
------------------------------------------
John M. Rutledge
Title: Vice President and COO
MOTHER FRANCES HOSPITAL REGIONAL
HEALTH CARE CENTER,
a Texas not-for-profit corporation
By: /s/ William Bellenfant
------------------------------------------
Title: President
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MOTHER FRANCES HOSPITAL REGIONAL
HEALTH CARE CENTER,
a Texas not-for-profit corporation
By: /s/ William Bellenfant
--------------------------------------
Title: President
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Schedule A
PALESTINE PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP
NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS
OF PARTNERS AND NUMBER OF UNITS
The names and addresses of the Partners are set forth below.
The amounts contributed or to be contributed by each Partner as its capital
contribution to the Partnership and the number of Units owned by each Limited
Partner are also set forth below opposite its name:
Name and Address Capital Percentage Units
Contribution Interest
GENERAL PARTNER:
Palestine-Principal G.P., Inc. $ 100,000 1% 10
109 Westpark Drive, Suite 180
Brentwood, TN 37027
Attn: President
CLASS A LIMITED PARTNERS:
Palestine-Principal, Inc. $9,400,000 94% 940
109 Westpark Drive, Suite 180
Brentwood, TN 37027
Attn: President
Mother Frances Hospital $ 500,000 5% 50
Regional Health Care Center
800 Fast Dawson
Tyler, TX 75701
Attn: President
CLASS B LIMITED PARTNERS:
None
CLASS C LIMITED PARTNERS:
None
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