ALSTON&BIRD LLP
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PETER C. NOVEMBER DIRECT DIAL: 404-881-7872 E-MAIL:PNOVEMBER@ALSTON.COM
April 19, 2005
Mr. Jeffrey Riedler
Assistant Director
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0306
Re: LHC Group, Inc.
Supplemental Response to Form S-1/A
Filed April 7, 2005
File Number 333-120792
Dear Mr. Riedler:
At the request and on behalf of our client, LHC Group, Inc. (the
"Company"), we hereby file, via EDGAR, responses to the Staff's comment letter
dated April 13, 2005, which have been prepared by the Company with the
assistance of its legal counsel. As requested, these responses are keyed to
correspond to the Staff's comment letter. A copy of this letter and other
supplemental materials referenced herein, are being sent to the Staff via
overnight mail.
Unless the context requires otherwise, references to we, our, us, LHC or
the Company in this letter refer to LHC Group, Inc. All references in this
letter to the term "HTAT Exchange Agreement" refer to that certain Exchange
Agreement entered into on November 23, 2004 by and between Louisiana Healthcare
Group, LLC ("LHCG"), LHC Group and David Herbert, Christopher Thibodeaux, Daryl
Albro and Kevin Touchet (Messrs. Hebert, Thibodeaux, Albro and Touchet are
collectively referred to herein as the "HTAT Holders"), a copy of which is
attached hereto as Appendix A. All references in this letter to the term "Beta
----------
Exchange Agreement" refer to that certain Exchange Agreement entered into on
September 14, 2004 by and between LHCG, LHC Group and Beta Home Care, Inc.
("Beta"), a copy of which is attached hereto as Appendix B. All references in
----------
this letter to the term "HTAT Agreement" refer to that certain Shareholders'
Agreement entered into on April 29, 2004 between LHCG, and the HTAT Holders, a
Bank of America Plaza 90 Park Avenue 3201 Beechleaf 601 Pennsylvania Avenue, N.W.
101 South Tryon New York, NY 10016 Court, Suite 600 North Building, 10th Floor
Street, Suite 4000 212-210-9400 Raleigh, NC 27604-1062 Washington, DC 20004-2601
Charlotte, NC 28280-4000 Fax: 212-210-9444 919-862-2200 202-756-3300
704-444-1000 Fax: 919-862-2260 Fax: 202-756-3333
Fax: 704-444-1111
Mr. Jeffrey Reidler
April 19, 2005
Page 2
copy of which is attached hereto as Appendix C. All references in this letter to
the term "Beta Agreement" refer to that certain Operating Agreement for Acadian
Home Health Care Services, LLC entered into on January 1, 2004 between LHCG and
Beta, a copy of which is attached hereto as Appendix D. All references in this
letter to the term "St. Landry's Agreement" refer to that certain Operating
Agreement for St. Landry Extended Care Hospital, LLC entered into on April 15,
2004 between LHCG and the minority interest holders listed on the signatures
pages thereto (the "St. Landry's Holders"), a copy of which is attached hereto
as Appendix E.
COMMENT
1) In your March 25, 2005 response, you express your belief that the
reference to "freestanding financial instrument" in EITF 00-6 would
encompass an equity derivative on shares of a subsidiary even if the
equity derivative did not meet the SFAS 150 definition of "freestanding
financial instrument." In support of this belief you indicate that, if the
SFAS 150 definition of freestanding financial instrument applied to EITF
00-6, EITF 00-6 would essentially address a "null set" of instruments. We
are continuing to evaluate the company's conclusions. In order to
facilitate our evaluation, please address the following:
a) Please tell us how the company would account for the subsidiary
stock held by the minority shareholders if the terms of the equity
derivatives in question were in fact terms of and thus embedded in the
subsidiary stock held by the minority shareholders.
b) Please help us understand what you meant when you stated that
EITF 00-6 would address a "null set" of financial instruments if the
definition of SFAS 150 definition of "freestanding financial instrument"
applied to EITF 00-6. For example, are you asserting that EITF 00-6 would
not apply to forward contracts to sell common shares of a subsidiary?
c) Please provide any additional insight that you believe would help
us understand the views you expressed.
RESPONSE
(a) We believe the instrument described in the question above would be
some form of redeemable or puttable stock. If the instrument was mandatorily
redeemable (for example, if containing a forward agreement), it would be subject
to the guidance in paragraph 9 of FASB Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. If
the instrument were only contingently redeemable (for example, if the instrument
contains a contingent trigger, or
Mr. Jeffrey Reidler
April 19, 2005
Page 3
a put option), it would not be subject to Statement 150, as discussed in
paragraph 10s 15 of that standard).
The forward or put rights also must be analyzed as potential embedded
derivatives under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. We believe that the derivatives would not be bifurcated
under Statement 133 because the potential embedded derivative is not net
settleable. The derivatives do not provide for net-cash settlement and, further,
the underlying stock of the subsidiary would not be readily convertible to cash
as contemplated in paragraph 9c of Statement 133. (Our further analysis below
assumes Statement 133 would not require bifurcation.)
Therefore, there is no FASB literature on point for the instrument. As a
result, the guidance in the SEC's Accounting Series Release No. 268,
Presentation in Financial Statements of "Redeemable Preferred Stocks" would be
considered. Under this guidance, we would reflect the minority interest subject
to redemption at its current redemption amount.
That presentation raises the question as to how to recognize the initial
redemption amount, as well as changes to that redemption amount, if that amount
was different than the carrying amount of the minority interest in the
historical financial statements. Two EITF D-Topics suggest reflecting such an
adjustment in the numerator of the EPS calculation. In EITF Topic D-42, "The
Effect on the Calculation of Earnings per Share for the Redemption or Induced
Conversion of Preferred Stock," the SEC stated that the excess of the fair value
of the consideration transferred to the holders of the preferred stock over the
carrying amount of the preferred stock in the registrant's balance sheet
represents a return to the preferred stockholder and, therefore, should be
treated in a manner similar to the treatment of dividends paid to the holders of
the preferred stock in the calculation of earnings per share. In EITF Topic
D-98, "Classification and Measurement of Redeemable Securities," the SEC staff
stated that increases or decreases in the carrying amount shall reduce or
increase income applicable to common stockholders in the calculation of earnings
per share and the ratio of earnings to combined fixed charges and preferred
stock dividends. However, we would propose reclassifications to and from
additional paid in capital for changes in the redemption value, without
impacting the numerator for EPS purposes, for the reasons discussed below.
ASR 268 was released in July 1979, with the SEC staff noting, "There is a
significant difference between a security with mandatory redemption requirements
or whose redemption is outside the control of the issuer and conventional equity
capital. The Commission believes that it is necessary to highlight the future
cash obligations attached to this type of security so as to distinguish it from
permanent capital." (Emphasis added.) While we would agree that applying ASR 268
would provide transparent disclosure of amounts in the balance sheet that
highlight the future cash obligations, we do not believe that this redemption
represents any form of a preferential return to a group of shareholders as
contemplated in EITF Topics D-42 and D-98.
Mr. Jeffrey Reidler
April 19, 2005
Page 4
We believe that the recognition of changes in the redemption amount of a
preferred stock should be recognized as an adjustment to earnings available to
common shareholders because the actual redemption of the preferred security for
that amount would also result in such an adjustment. However, when common stock
of a parent or subsidiary is redeemable for fair value, we do not believe it is
appropriate to recognize the change in the redemption amount as a preferential
distribution. The redemption of common stock of the parent for fair value is
accounted for as a treasury stock transaction with no gain or loss recognized by
the enterprise. Accordingly, we believe that a redemption provision that may
require the enterprise to redeem its common stock for fair value similarly does
not result in a preferential distribution.
As discussed in paragraph 69 of FASB Concepts Statement No. 6, Elements of
Financial Statements, "distributions by an enterprise to its owners decrease its
net assets and decrease or terminate ownership interests of those that receive
them. Reacquisition by an entity of its own equity securities by transferring
assets or incurring liabilities to owners is a distribution to owners as that
concept is defined in that statement." In the case of redeemable minority
interest, the net assets of the enterprise are not increased or decreased.
Rather, upon redemption the enterprise would be acquiring additional investments
in its subsidiary at a purchase price that approximates the fair value of those
interests. Accordingly, the net assets of the enterprise would be unchanged and
this redemption would not constitute a preferential distribution, but a value
for value exchange (specifically, the acquisition of minority interest to be
recognized at fair value).
By reflecting changes to the redemption value as reclassifications to and
from additional paid in capital without impacting the numerator for EPS purposes
(including reversal of the reclassification if or when the put or forward was
exercised), we would also be positioned to properly apply step acquisition
guidance in FASB Statement No 141, Business Combinations. That is, the
adjustments to maintain minority interest at redemption value would be reversed
(without raising an issue of whether that reversal should be reflected in
earnings available to common shareholders) and the acquisition of the minority
interest would be recognized at fair value, with appropriate recognition of the
acquired portion of assets and liabilities at their current fair values.
Reflecting changes in redemption values in earnings available to common
shareholders would require either (a) the subsequent reversal of the adjustment
to earnings available to common shareholders, and corresponding reversal of the
EPS impact, to be able to recognize the acquisition of the minority interest at
its fair value or (b) no reversal, which would effectively result in no
adjustment to the carrying value of the assets and liabilities acquired in the
acquisition of minority interest. We believe that the former approach merely
introduces volatility into EPS that subsequently would be reversed and would not
provide useful information to investors. We believe that the latter approach
would violate the requirements of Statement 141.
Mr. Jeffrey Reidler
April 19, 2005
Page 5
(b) We believe the "concept of freestanding" as applied in EITF 00-6
(which would include the measured consideration of the definition in EITF Issue
96-13, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock," in conjunction with
consideration of the examples in EITF 00-6 and its related issues papers, which
illustrate various instruments requiring physical settlement) was broader than
the "definition of freestanding" in Statement 150. We further believe that
applying the more recent Statement 150 definition of freestanding to the
arrangement historically contemplated by EITF 00-6 would result in a reduction
of the situations that would fall under EITF 00-6 (admittedly not a 100%
reduction resulting in the "null set" comment above, but a significant reduction
nonetheless).
In most cases, forwards and puts on subsidiary shares represent exit
strategies or liquidity features for the minority investors. As such, they are
often entered into at the time the joint venture or subsidiary is created, or
when the parent becomes involved in the entity, and typically provide for
physical settlement. Some of those instruments are addressed by EITF Issue 00-4,
"Majority Owner's Accounting for a Transaction in the Shares of a Consolidated
Subsidiary and a Derivative Indexed to the Minority Interest in That
Subsidiary." However, some instruments may not be addressed by that issue; for
example, forwards that are not at a fixed price, individual put or call options,
or put and call option combinations where the strike prices are significantly
different. Those instruments may have been entered into in conjunction with
another transaction, or perhaps are not legally detachable and separately
exercisable, and thus not freestanding under the definition in Statement 150.
That would preclude EITF 00-6 from applying to those situations if the
definition in Statement 150 were the same as the concept in EITF 00-6.
Additionally, focusing on the substance of the legally detachable and separately
exercisable criteria, we believe many transactions in the past would, despite
their form, not meet the definition of freestanding under Statement 150, again
precluding EITF 00-6's applicability if it were the same as the concept in
Statement 150. As described in previous letters, we would cite as an example if
a parent company enters into a contract with the only minority shareholder of
its privately held subsidiary that allows the shareholder to put its shares to
the parent at a fixed price, that put option generally would be considered to be
embedded in the related shares as the Statement 150 definition of "freestanding"
is applied, but where we believe EITF 00-6 would be relevant (and in fact, this
appears to be the fact pattern in certain examples in the issue summaries for
that Issue).
In summary, we believe that if the substance of the Statement 150
definition of freestanding was applied in light of the traditional EITF 00-6
transactions, the result would be that most situations where put options or
forwards were used strategically would fall out of the scope of that issue. We
do not believe that would have been the intention of the EITF at the time EITF
00-6 was drafted.
Mr. Jeffrey Reidler
April 19, 2005
Page 6
(c) While we appreciate the complexity of this issue, and acknowledge
there may be several accounting models available, we believe the model we have
followed provides adequate transparency and disclosure to the users of our
financial statements regarding these arrangements. We understand that you held a
discussion with our audit firm to discuss the broader, non-company specific
aspects of the issues related to forwards and puts on subsidiary shares.
However, we want to reiterate for the Staff that we are willing to account for
the puts and the exchange agreements under any accounting model that the Staff
deems appropriate.
COMMENT
2) Refer to April 7, 2005 response 1. In order to help us evaluate whether
the Beta, HTAT, St. Landry equity derivatives, both written puts and
forwards, meet the "legally detachable" criteria in the SFAS 150
definition of "freestanding financial instrument," please address the
following:
a) Please tell us what you mean when you assert that the exchange
agreements are "specifically tied" to the put rights.
b) Please clarify for us why the operating agreements were not
amended to remove the written puts and what if any ramification from a
legal standpoint the existence of the written puts in the operating
agreements has on the company's analysis of the legally detachable
criteria.
c) Please confirm, if true, that these forwards would transfer with
the minority interest in all circumstances if the interests were
transferred.
d) Please confirm, if true, our understanding that the company
believes that neither the written puts nor the forward contracts related
to Beta, HTAT and St. Landry are legally detachable as that term is used
in SFAS 150.
RESPONSE
(a) In the preamble of the Beta Exchange Agreement and the HTAT Exchange
Agreement there is a reference in the third paragraph to the put options in the
Beta Agreement and the HTAT Agreement, as applicable. In the Beta Exchange
Agreement it states the "Pursuant to the terms of a written operating agreement
effective January 1, 2004 by and among the Parties ("Operating Agreement") and
acknowledged to be the current operating agreement of Acadian (a copy of which
is attached hereto as Exhibit I), Beta has an option to convert its Membership
Interest in Acadian into equity in LHC Group (the "Conversion Right") upon the
occurrence of certain triggering events,
Mr. Jeffrey Reidler
April 19, 2005
Page 7
including, but not limited to, the closing of a qualifying initial public
offering involving the equity of LHC Group." In the HTAT Exchange Agreement it
states the "Pursuant to the terms of a written Shareholders' Agreement effective
January 1, 2004 by and among the Parties ("Operating Agreement") and
acknowledged to be the current operating agreement of HTATTG (a copy of which is
attached hereto as Exhibit I), the Shareholders have options to convert their
Shares in HTATTG into equity in LHC Group (the "Conversion Right") upon the
occurrence of certain triggering events, including, but not limited to, the
closing of a qualifying initial public offering involving the equity of LHC
Group." Both the Beta Agreement and the HTAT Agreement then go on in the fourth
paragraph of the preamble to state that "The Parties wish to enter into this
Agreement in order to set their rights and obligations relating to the
Conversion Rights in the event of a Qualifying IPO."
Our reference in our letter dated April 7, 2005 to the term "specifically
tied" was intended to mean that the Beta Exchange Agreement and the HTAT
Exchange Agreement were entered into in order to (i) require the conversion
rights set forth in the Beta Agreement and the HTAT Agreement to be exercised
upon an initial public offering and (ii) to establish the exact number of shares
and the exact amount of cash Beta and the HTAT Holders will receive upon
exercise of their conversion rights upon LHC Group's initial public offering.
The point being that the Beta Exchange Agreement and the HTAT Exchange Agreement
were tied to the Beta Agreement and the HTAT Agreement, as applicable, because
they served to establish with certainty the outcome of the conversion rights
initially included in the Beta Agreement and the HTAT Agreement.
(b) The purpose of the Beta Exchange Agreement and the HTAT Exchange
Agreement was to establish the consideration to be received by Beta and the HTAT
Holders upon the exercise of their conversion rights in the event of an initial
public offering by LHC Group. The Beta Exchange Agreement and the HTAT Exchange
Agreement also served to definitively require Beta and HTAT to exercise their
conversion rights upon an initial public offering. We entered into the Beta
Exchange Agreement and the HTAT Exchange Agreement in order to remove any
uncertainty as to whether the conversion rights would be exercised and, if
exercised, how many shares of LHC Group would be issued. We believe it was
important for investors to have clarity on this issue prior to the completion of
this offering. There was no substantive reason why we entered into exchange
agreements as opposed to amending the Beta Agreement and the HTAT Agreement. We
elected not to amend the operating agreement to remove the put rights in their
entirety because the put rights have application in other scenarios such as the
sale of LHC Group, which is not covered by the Beta Exchange Agreement or the
HTAT Exchange Agreement. However, it should be noted that in Section 5(b) of
both the Beta Exchange Agreement and the HTAT Exchange Agreement it states that
"the terms of this Agreement shall serve in lieu of, and supersede in their
entirety the terms of the [Shareholders' Agreement/Operating Agreement] in their
entirety as it relates to the Conversion Rights." Accordingly, in the context of
the conversion rights upon an initial public offering, the conversion rights
were legally deleted and superseded.
Mr. Jeffrey Reidler
April 19, 2005
Page 8
(c) Section 9 of the Beta Exchange Agreement and the HTAT Exchange
Agreement states "This Agreement shall be binding upon and inure to the benefit
of the respective Parties hereto, their legal representatives, successors and
assigns." In our view this language means that any subsequent transferee of the
interests held by Beta or the HTAT Holders would be bound by the terms of the
Beta Exchange Agreement or HTAT Exchange Agreement, as applicable.
(d) We do not believe the written puts or the forward contracts are
legally detachable as that term is used in SFAS 150.
COMMENT
3) Refer to April 7, 2005 response 2. In order to help us evaluate whether
the Beta, HTAT, and St. Landry equity derivatives meet the "separately
exercisable" criteria in the SFAS 150 definition of "freestanding
financial instrument," please briefly describe the nature of the transfer
restrictions and help us understand their relevance to your analysis of
the separately exercisable criteria.
RESPONSE
In Section 6.1 of the Beta Agreement and Section 2.1 of the HTAT Agreement
it states that the equity interests may only be sold to a third party if the
holder complies with a right of first refusal. The right of first refusal
requires the selling member to offer its equity interests to the other members.
If the other members do not elect to purchase the interests, then the joint
venture entity has a right to purchase the interests. If the joint venture
entity elects not to acquire the interests, the selling member can sell their
interests to a third party. Both the HTAT Agreement and the Beta Agreement
clearly state that any subsequent transferee will be subject to these transfer
restrictions.
Mr. Jeffrey Reidler
April 19, 2005
Page 9
Based on the Staff's comments and our response to comments no. 2 and 3, we
believe that the exchange agreements and put option are not "legally detachable"
and are not "separately exercisable" and would not meet the definition of
"freestanding" under Statement 150. We have provided our views on the concept of
freestanding under EITF 00-6 both in the "white paper" submitted March 25, 2005
and the additional thoughts above in the response to Comment 1(b). We would
acknowledge that if the Staff does not accept our arguments as to how the
concept of freestanding under EITF 00-6 could differ from the definition of
freestanding in Statement 150, then the exchange agreements and put option would
not be accounted for under our EITF 00-6 model, but rather the model described
in the response to Comment 1(a) would be applied by the us.
COMMENT
4) In your March 25, 2005 response, you indicate the Beta and HTAT put
options included in the operating agreement become exercisable if the
company "undertakes" an initial public offering while the St. Landry put
option becomes exercisable "upon" an initial public offering. Please tell
us from a legal standpoint whether there is a distinction between these
exercise provisions. If there is no distinction from a legal standpoint,
please tell us when the holders' right to exercise is no longer
contingent. For example, is exercise contingent until the successful
completion of an initial public offering by the company or does the
initiation of that process cause the exercise right to be unconditional?
RESPONSE
Section 5.8 of the Beta Agreement and Section 8.1 of the HTAT Agreement
state that the conversion option become exercisable if LHC "undertakes" an
initial public offering. The Staff has previously asked us to clarify whether
"undertakes" means that the put option could be exercised upon commencement of
our initial public offering (i.e. prior to closing) or whether it means that the
option can only be exercised upon completion of our initial public offering. We
are not aware of any legal authority that specifically clarifies the definition
of the term "undertakes". However, we believe and, based on conversations with
Beta and the HTAT Holders, our joint venture partners believe that the term
"undertakes" was intended to mean the closing of our initial public offering.
This intent is evidenced by the fact that the Beta Exchange Agreement says in
the third paragraph of the preamble that "Beta has an option to convert its
Membership Interest in Acadian into equity in LHC Group (the "Conversion Right")
upon the occurrence of certain triggering events, including, but not limited to,
the closing of a qualifying initial public offering involving the equity of LHC
Group." Likewise, the HTAT Exchange Agreement states in the third paragraph of
the preamble that "Shareholders have options to convert their Shares in HTATTG
into equity in LHC Group (the "Conversion Right") upon the occurrence of certain
triggering events, including, but not limited to, the closing of a qualifying
initial public offering involving
Mr. Jeffrey Reidler
April 19, 2005
Page 10
the equity of LHC Group." Both exchange agreements, which were signed by the
parties to the Beta Agreement and the HTAT Agreement, state that the triggering
event is the "closing" of an initial public offering. For these reasons, we
believe that the put options with Beta and the HTAT Holders are only exercisable
upon closing of our initial public offering and not at an earlier point in the
offering process. Therefore, the exercise of the put options with Beta and the
HTAT Holders were contingent until the completion of our initial public
offering.
In Section 6.15 of the St. Landry's Agreement it states that the
conversion right is effective in the event LHC Group "undertakes" an initial
public offering. It does not provide that the conversion right is effective upon
an initial public offering. We have reviewed our letter filed with the staff on
March 25, 2005 and recognize we did use the term "upon" when referring to the
rights of the St. Landry's holders. Our reference to "upon" was intended to
paraphrase the rights of the St. Landry's Holders. The actual wording in the St.
Landry's Agreement is "undertakes." Although there is no exchange agreement in
the case of the St. Landry's Agreement to clarify that the term "undertakes"
means the closing of the initial public offering, it was our intention, and
based on conversation with the St. Landry's Holders, it was their intention at
the time the St. Landry's Agreement was executed for the conversion right to
only apply upon the closing of our initial public offering. The Staff should
know that the intention of this conversion right was to provide the St. Landry's
Holders the opportunity to obtain liquidity in the event we completed an initial
public offering. Until such time as the offering is completed, the conversion
right would not have its intended result of providing a liquidity event for the
St. Landry's Holders.
COMMENT
5) Refer to your response to question 3 of the letter dated April 7, 2005.
The company asserts that the put options embodied in the operating
agreement are fair value puts. This response provides little insight into
the basis for the company's belief. Please provide a more robust analysis
that is responsive to prior comment 3. In this analysis, please also
address the following:
a) Please explain and demonstrate why in all circumstances 5 times
EBITDA for the preceding 12 months will always equal fair value. For
example, why will the multiple always be "5" and the multiplier always be
EBITDA for the preceding 12 months.
b) Please explain and demonstrate why the share settlement formula
will in all circumstances equal fair value. For example, how are (1) the
percentage of common stock of the joint venture held by the minority
shareholders related or correlated to (2) the percentage of total
outstanding shares of common stock of LHC and/or (3) the joint venture's
proportionate contribution to consolidated LHC EBITDA?
c) Please help us understand how you reconcile your response 3 to
your response 4. For example, are you asserting in response 4 that the
company decided to issue to the HTAT minority shareholders a contingent
forward
Mr. Jeffrey Reidler
April 19, 2005
Page 11
agreement with a fair value of $680,000 in exchange for the cancellation
of the HTAT written put which had a fair value, as determined by the
option formula, of $0?
RESPONSE
a) and b) According to the Beta Agreement and HTAT Agreement, upon the
occurrence of certain events, including the sale, merger, or IPO of LHC common
stock ("Sale Event"), the minority interest holder has the option to:
1) convert their ownership interests into shares of LHC equity in accordance
with the following formula:
Conversion = Joint Venture EBITDA x LHC Shares x Joint Venture
--------------------
Shares LHC EBITDA Outstanding Minority Interest %
or,
2) to sell their ownership interests to LHC for a purchase price determined as
follows:
Purchase Price = Joint Venture EBITDA x 5 x Joint Venture Minority Interest %
According to each agreement, EBITDA is based on a twelve-month period
ending on the last day of the last calendar month prior to the Sale Event. The
St. Landry's Agreement contains the same conversion share option calculation,
but the St. Landry Holders have the option to sell their ownership interests to
LHC for a purchase price equal to product of i) the conversion shares times ii)
the average closing price of LHC's shares for the 30 days preceding date of
exercise.
These options create a range of possible conversion/redemption values for
the minority interest holder depending upon the price of LHC's shares at the
Sale Event. When the conversion/redemption values under option 1 or 2 are
compared to the percentage of joint venture EBITDA purchased ("Purchased
EBITDA"), the implied multiple of conversion/redemption value to Purchased
EBITDA will be equal to or less than LHC's IPO market value to EBITDA multiple.
Under the conversion option (option 1) the multiple of conversion value to
Purchased EBITDA will be equal to LHC's IPO market value to EBITDA multiple.
Assuming LHC is fairly priced by market participants at the IPO, the conversion
option (option 1) produces an equivalent conversion multiple for minority
interest holders.
Under the redemption option (option 2), the multiple will be 5x Purchased
EBITDA, which is less than LHC's anticipated IPO market value to EBITDA
multiple. LHC's multiple of IPO market value to EBITDA would have to fall below
5x before the redemption option (option 2) would become the preferred choice for
minority interest holders. The multiple of LHC's anticipated IPO market value to
trailing 12 month EBITDA was 11.8x based on a midpoint IPO price of $13 per
share at year-end 2004.
Mr. Jeffrey Reidler
April 19, 2005
Page 12
Further, LHC has a public competitor that traded at a market value to EBITDA
multiple ranging from 13.2x to 14.6x during 2004. Private home health agency
transactions have yielded multiples in excess of 7x. As such, the redemption
option (option 2) appears to be non-substantive.
(c) We examined our responses 3 and 4 in our letter dated April 7, 2005
and we understand the confusion. Our third party valuation confirms that in all
possible scenarios both the redemption and the conversion formula would result
in a price that is either equal to or less than fair value. As noted above, the
5 multiplier included in the redemption option yields a price that is less than
fair value as the multiplier in other similar market transactions is
consistently higher than 5. With respect to HTAT, we believe that, while the
formula would indicate no consideration should be paid to the minority interest
holders for their interests, HTAT has a fair value in excess of zero based on
the future prospects of the business.
COMMENT
6) Your April 7, 2005 response to question 4 suggests that incremental value
was given to the holders of the minority interests. However, in your
response and in subsequent discussions with the company, it appears that
the company did not apply any accounting to the exchange of the put
options for the forward contracts. Please provide an accounting analysis
that supports this lack of accounting treatment. Please consider at least
two perspectives in your analysis: why no accounting treatment is required
if the written puts are considered freestanding and thus marked to fair
value through the income statement pursuant to EITF 00-6, and why no
accounting treatment would be required if the written put options are not
considered to be freestanding financial instruments and thus arc not
evaluated separate and apart from the subsidiary shares.
RESPONSE
In calculating the price to be paid under the HTAT put option, the Company
observed that it did not yet have 12 months of trailing EBITDA data as required
by the formula, and that EBITDA to date was negative. As such, estimates were
developed to determine an expected fair value price under the put option based
on estimated measures (that is, on a pro forma basis) to be equitable to the
minority interest holders. That effort resulted in a price of $680,000, or the
fair value of the entity under those assumptions. Therefore, we struck the
negotiated exchange agreement with a forward price equal to $680,000, which was
equated to a fixed number of shares of LHC Group based on an expected initial
public offering price of $10 per share. The exchange agreement was then drafted
to require exchange of the minority interest shares for that fixed number of LHC
Group shares. We believe that, for at least some period in the future, that
formula in the
Mr. Jeffrey Reidler
April 19, 2005
Page 13
exchange agreement will result in a fair value forward contract. We recognize
that as time passes and the Company's operating results change (as well as the
relative contribution to operating results of its operating units), the Company
would have to continuously evaluate that assertion. The attendant accounting
will depend on the model the Company uses, as ultimately determined through the
current comment letter process with the Staff.
As for any value differential at the time of the modification from a put
option to the exchange agreement, we believe the relevant fair value comparison
is not to the then-forward price of $680,000 in the exchange agreement, but to
the fair value of the exchange agreement. That would involve comparing the
forward price to the fair value of the minority interest shares, discounting
that back from the assumed exercise date, and then including a probability
factor related to the resolution of the related contingencies. We believe that
the fair value of the exchange agreement, after considering those factors, would
not be materially different from the fair value of the put option, or close to
$0.
Given the conclusion that the put option and exchange agreement both had a
fair value of $0, or not materially different than $0, we believe there would be
no recognition of incremental value of the replacement of the put option with
the exchange agreement if the instruments were being accounted for separately.
The same would apply if the put option had been accounted for separately under
the EITF 00-6 model (as a written put option subject to the SEC staff's
longstanding position on written options) and then evaluated under EITF 00-6 as
a forward contract that received no accounting until exercise under that
guidance. If ASR 268 were being applied to the minority interest both before and
after the replacement of the put option with the exchange agreement, there would
again be no accounting as each feature included the IPO contingency, which was
within our control.
COMMENT
7) See your April 7, 2005 response 4 related to the November 2004 exchange
transaction related to the Beta written put option. Please address the
following:
a) Please tell us what you mean when you state that the $7.4 million
was calculated based on the intent of the parties involved.
b) Please tell us the payment that would result from strict
application of the written put option formula included in the Beta
operating agreement.
c) You appear to suggest that the minority shareholders may have
accepted consideration less than the fair value of the written put they
gave up. Is our understanding correct? If it is, please explain the
economic and business reasons for such a decision.
Mr. Jeffrey Reidler
April 19, 2005
Page 14
RESPONSE
a) In negotiating the conversion price under the exchange agreement,
there was a fundamental disagreement between us and Beta regarding the manner in
which EBITDA should be calculated for both the joint venture with Beta and for
LHC Group. The Beta Agreement was silent on the proper treatment of minority
interest in calculating EBITDA. In Beta's view, EBITDA for the joint venture
should have been calculated by adding back the minority interest, but for LHC
Group EBITDA should only be calculated by adding back the minority interest for
the joint venture with Beta and none of our other joint ventures. In our view
the minority interest should have been added back for the joint venture with
Beta and for purposes of LHC Group all minority interest should have been added
back. Under Beta's view of calculating EBITDA, the conversion price under the
Beta Agreement would have resulted in the payment of $8.8 million. Under our
interpretation, the conversion price should have resulted in a payment of $7.4
million. When we discussed $7.4 million in our previous response, it was in
reference to what we believe the conversion price should have yielded under our
methodology for calculating EBITDA.
b) As mentioned above, under our view of the strict application of the
Beta Agreement we believe the conversion formula should have resulted in a
payment of $7.4 million. Beta initially argued that the price should have been
$8.8 million under their view of the strict application of the Beta Agreement.
c) Based on our expected initial public offering price at the time the
Beta Exchange Agreement was entered into ($10 per share), we agreed to pay Beta
approximately $6.0 million in consideration under the Beta Exchange Agreement.
Of this $6.0, approximately $4.5 million was to be paid in shares of LHC Group
common stock and $1.5 million was to be paid in cash. Beta agreed to accept $6.0
as opposed to the $7.4 or $8.8 million figure for two reasons. First, we agreed
to pay them some portion of the consideration in cash, which was not required
under the Beta Agreement. We did this in order to limit the dilution to our
stockholders. Second, the joint venture with Beta was projected to contribute a
smaller portion of LHC Group's EBITDA in the future due to our growth rate
exceeding that of the joint venture with Beta. As the joint venture's EBITDA
contribution decreased, the value to be paid under the Beta Agreement upon our
initial public offering also decreased. Because we were entering into the
exchange agreement in advance of our offering, which at the time we had not
filed a registration statement, we were unwilling to pay them full value under
the Beta Agreement given that by the time the offering was projected to be
completed Beta would have received less than $7.4 million due to the joint
venture's diminishing contribution to our overall EBITDA. On the basis of these
factors, after extensive negotiations we mutually agreed upon the $6.0 price for
purposes of the Beta Exchange Agreement.
COMMENT
Mr. Jeffrey Reidler
April 19, 2005
Page 15
8) Refer to response your April 7, 2005 response 6. In order to help us
understand whether the change in control provisions of the Beta, HTAT and
St. Landry written put options and the Beta and HTAT forward contracts are
within the control of the company for purposes of ASR 268, please provide
to us a more detailed discussion of the composition of the board of
directors of the company. Include specifically the following items, as
well as any additional information or analysis in the context of EITF D-98
that may be helpful in determining whether the company has control over
the ability to cause the put to become exercisable through a change in
control:
a) Whether a change in control can be effected without the consent
or approval of the board.
b) What the size of the Board is and how it is determined. For
example, can the minority shareholders appoint a majority of the Board?
Please consider the preferred security holder example in EITF D-98 in
crafting your response.
c) The number of members on the board who are appointed by
management.
d) The number of members on the Board appointed by the minority
shareholder.
RESPONSE
a) Under Delaware law , a change of control of LHC Group carried out by
a merger or sale of substantially all of our assets would require the approval
of our Board of Directors. If approved by our Board of Directors, the
transaction would then be submitted to our stockholders for approval. Currently,
members of management hold approximately 59.8% of our outstanding common stock.
Accordingly, management acting in their capacity as stockholders could block any
change of control that was approved by our Board of Directors. It is possible
that a party could seek to acquire a majority of the outstanding shares of our
common stock directly from our stockholders and thereby implement a change of
control without the approval of our Board of Directors. However, given that
management of LHC Group holds approximately 59.8% of our common stock,
management acting together in their capacity as stockholders can block any
attempt to effect a change of control through the direct acquisition of our
outstanding common stock. This analysis regarding the ability of our Board of
Directors and management to control a change of control of LHC Group is limited
to a scenario where LHC Group is a private company. As a public company this
analysis could be different in two primary respects. First, following a public
offering, including our proposed initial public offering, it is likely that
management would no longer control a majority of our outstanding common stock.
Second, as a publicly traded company there are procedural
Mr. Jeffrey Reidler
April 19, 2005
Page 16
methods and fiduciary considerations that could limit the ability of the Board
of Directors to have the same level of control over a change of control
transaction.
b) Our Board of Directors currently has nine members: Keith G. Myers,
R. Barr Brown, John L. Indest, W. Patrick Mulloy, II, W.J. "Billy" Tauzin,
Earline H. Bihm, Ted W. Hoyt, Ronald T. Nixon and George A. Lewis. Messrs.
Myers, Brown and Indest are members of management. Mr. Nixon is a principle of
the Catalyst Group, which has made previous investments in LHC Group, as more
fully described in our registration statement. The remaining members of the
Board of Directors are not employed by or otherwise affiliated with the LHC
Group. All of our directors are elected by a plurality of the votes of our
outstanding shares of common stock. This means that in an election of directors
those candidates who receive the most votes are elected whether or not the votes
received by the director constitute a majority of our outstanding common stock.
Since management owns approximately 59.8% of our outstanding common stock prior
to our initial public offering, voting together as a single block management can
effectively elect a majority of the members of our Board of Directors. No party
has any contractual or other right to elect any member or number of members of
our Board of Directors. Further, neither Beta, the HTAT Holders nor the St.
Landry's Holders have any contractual rights to appoint any of the members of
our Board of Directors and collectively they do not hold a sufficient number of
shares of our common stock to appoint a majority of the members of our Board of
Directors.
c) We have three members of management on our Board of Directors, Keith
G. Myers, R. Barr Brown and John L. Indest. These members of management have
been elected to serve on our Board of Directors by our stockholders and not
through any special or contractual rights granted to management to elect the
members of our Board of Directors. However, prior to our initial public offering
members of management own approximately 59.8% of our outstanding shares of
common stock. Therefore, if management acted as a single voting block they could
elect a majority of the members of our Board of Directors.
d) None of the minority holders in any of our joint ventures, including
the joint ventures with Beta, the HTAT Holders and the St. Landry's Holders, has
the contractual right to appoint any of the members of our Board of Directors.
Our Board of Directors is elected by a plurality of the votes of the
stockholders of LHC Group. As previously stated, management currently ownes
approximately 59.8% of our common stock and therefore have the ability to elect
a majority of our directors if they vote together as a single block.
COMMENT
9) Please clarify for us your analysis under ASR 268 of the St. Landry
conversion rights upon successful completion of an initial public offering
by the company.
Mr. Jeffrey Reidler
April 19, 2005
Page 17
For example, are you asserting that the conversion right is within the
company's control because notwithstanding the terms of the option, which
provides for exercise of the conversion right upon a successful completion
of an initial public offering by the company, the company can control the
amount of its stockholder's equity and therefore prevent exercise of the
conversion right through the federal Stark law? Alternatively, are you
suggesting that the conversion right is not within the company's control
but subsequent accretion is not required because redemption is contingent
on meeting the requirements of the federal Stark law and you believe that
it is not probable that such requirements will be met? Consider the need
for revised disclosure.
RESPONSE
Set forth below is the applicable language from Section 6.15(e) of the St.
Landry's Agreement that addresses the limitations imposed by the federal Stark
law on the exercise of the conversion rights held by the St. Landry's Holders:
In addition to the other terms and conditions governing the Conversion
Option, the Members shall be subject to an additional condition precedent
to the Conversion Option in that the exercise of the Conversion Option
shall only be available so long as following the conversion, Manager's
Units fully comply with the requirements of Section 1877(c) of the Social
Security Act providing and exception for ownership in certain
publicly-traded securities as more fully detailed in 42 CFR 411.356.
This language means that the St. Landry's Holders are not permitted to
exercise their right to convert their membership interests into shares of our
common stock unless following our initial public offering we have at least $75
million in stockholders equity. In response to the Staff's question, we do not
believe that we can control our stockholders' equity and therefore prevent the
exercise of the conversion rights into LHC Group common stock through the
federal Stark law. However, we believe based on the current level of our
stockholders' equity and the expected increase in our stockholders' equity
resulting from our initial public offering, our stockholders equity will not
meet or exceed $75 million. Accordingly, we do not believe that the St. Landry's
Holders will have the right to exercise their conversion rights upon completion
of our initial public offering. Therefore under ASR 268, there would be no
accounting recognition triggered for the conversion right until this contingency
is resolved. However, as discussed in Question 10, the St. Landry's Holders have
a cash redemption right that is not subject to this contingency. We will revise
the disclosure in our registration statement to further explain to investors the
relationship between the federal Stark law and the right of the St. Landry's
Holders to exercise their conversion rights and the related contingency.
Mr. Jeffrey Reidler
April 19, 2005
Page 18
COMMENT
10) We note that the St. Landry written put option grants the minority
interest holders the right to require the company to redeem their minority
interest holdings in cash at any time 30 days after the company's initial
public offering. It appears that upon the company's initial public
offering, the redemption of the St. Landry's shares will be within the
control of the minority shareholders. Please tell us if our understanding
is correct. If it is, please give us an analysis of the application of ASR
268 and EITF D-98 to the St. Landry written put upon successful completion
of an initial public offering. Please explicitly address the
classification and measurement guidance in EITF D-98. Also please tell us
whether the written option has an expiration date. Consider the need for
revised disclosure for all points addressed here.
RESPONSE
Section 6.16 of the St. Landry's Agreement includes the redemption
provisions referred to in the Staff's comment. We read Section 6.16 to mean that
the St. Landry's Holders control the exercise of their redemption rights
following the completion of our initial public offering. There is no termination
date for these redemption rights following the completion of our initial public
offering. The redemption rights remain outstanding as long as the membership
interests held by the minority interest holders are outstanding.
Under the application of our current model under EITF 00-6, the redemption
right or put is considered to be at fair value or less and accordingly, no
accounting recognition would be required upon the completion of our initial
public offering. Under an ASR 268 model, the contingency related to this
redemption right will be resolved upon the completion of our initial public
offering, and accounting recognition would be triggered. The minority interest
would be adjusted to its redemption value periodically as calculated by the
redemption formula and recorded as outlined in our response to Question 1.
COMMENT
11) We note that the settlement of the Beta and HTAT forward agreements will
represent the acquisition of minority interest. Please provide to us the
company's assessment of the need to provide Article 11 of Regulation S-X
pro forma financial information related to the acquisition of the minority
interests triggered by the completion of the initial public offering or
that will become probable as a result of the offering.
RESPONSE
Mr. Jeffrey Reidler
April 19, 2005
Page 19
It is our understanding that in a step acquisition where the company is
already consolidated that pro forma information may be required. We analyzed the
need for pro forma financial information in accordance with Article 11 of
Regulation S-X. Article 11 indicates that, among other circumstances, pro forma
financial information is required if a significant business combination has
occurred in the latest fiscal year or subsequent interim period, or is probable.
While we do not believe these minority interest acquisitions are probable
of occurring at this time we did perform the tests of significance required by
Article 11. When we perform the tests of significance referenced in Article 11,
no individual acquisition is greater than 16.5% and therefore we believe pro
forma financial information is not required under Article 11 of Regulation S-X
for these acquisitions.
While we do not believe that audited historical financial statements or
pro forma information related to the acquisition of these minority interests is
required, we believe that the additional disclosure proposed in Appendix B of
our letter filed on March 25, 2005 provides adequate information about the
minority interest to allow an investor to fully analyze the impact of the
minority interest acquisitions.
COMMENT
12) Please update your financial statements to comply with Rule 3-12 of
Regulation S-X.
RESPONSE
Upon the resolution of the issues surrounding the proper accounting
treatment for the puts and forward contracts that are the subject of this
response letter, we will file an amendment to our registration statement that
will include financial statements that comply with Rule 3-12 of Regulation S-X.
Until this issue is resolved we are unable to finalize our audit for the year
ended December 31, 2004. In order to expedite any further review by the Staff of
our financial statements as of and for the period ended 12/31/04, we have
offered to file updated financial statements for 2004 without a signed audit
opinion. The Staff has stated that this would not be permitted.
If you have questions or comments about the matters discussed herein,
please call the undersigned at (404) 881-7872.
Sincerely,
Peter C. November
cc: Zafar Hasan
James Atkinson
Keith G. Myers
APPENDIX A
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT ("Agreement") made effective this 23rd day of
November, 2004, by and among LOUISIANA HEALTH CARE GROUP, LLC ("LHCG"), LHC
GROUP, LLC ("LHC Group"), and David Hebert, Christopher Thibodeaux, Daryl Albro
and Kevin Touchet (each individually a "Shareholder" and collectively the
"Shareholders"). LHCG, LHC Group and the Shareholders are referred to,
collectively, herein as the "Parties".
RECITALS
The Parties are the sole shareholders of Hebert, Thibodeaux, Albro and
Touchet Therapy Group, Inc. ("HTATTG"), with LHCG holding 51 shares of stock and
each other Shareholder owning the shares of stock as set forth opposite their
name in Section 1 below (the "Shares").
Pursuant to the terms of a written Shareholders' Agreement effective
May 1, 2004 by and among the Parties (the "Shareholders' Agreement")
acknowledged to be the current Shareholders' Agreement of HTATTG (a copy of
which is attached as Exhibit I), the Shareholders have options to convert their
Shares in HTATTG into equity in LHC Group (the "Conversion Right") upon the
occurrence of certain triggering events, including, but not limited to the
closing of a qualifying initial public offering involving the equity of LHC
Group.
The Parties wish to enter into this Agreement in order to set forth
their rights and obligations relating to the Conversion Rights in the event of a
Qualifying IPO.
THE PARTIES HEREBY AGREE TO THE FOLLOWING:
1. EXCHANGE. Upon the closing of a Qualifying IPO (as defined below), the
Shareholders shall transfer, convey and deliver to LHC Group all right,
title and interest hi the Shares in exchange for the following shares
of LHC Group common stock which shall be adjusted proportionately for
any and all stock splits occurring prior to the Qualifying IPO (the
"Restricted Securities"):
Pre-Split
HTATTG LHC Group
Shareholder Shares Shares
--------------------------------------------------
A. David Hebert 14.75 13,653
B. Christopher Thibodeaux 14.75 13,653
C. Daryl Albro 7.25 6,711
D. Kevin Touchet 12.25 11,339
LHCG, a wholly owned subsidiary of LHC Group, will retain its holding
of 51.00 shares of the common stock of HTATTG.
2. ISSUANCE OF STOCK CERTIFICATES/STOCK RESTRICTIONS. On the closing date
of the Qualifying
IPO, LHC Group shall issue stock certificates to the Shareholders
evidencing their ownership interest in the Restricted Securities. The
Shareholders hereby acknowledge that the Restricted Securities will not
be registered under the Securities Act (as defined below). The
Shareholders also agree not to sell or transfer the Restricted
Securities for a period of at least one year following the closing date
of the Qualifying IPO. Further, the Shareholders agree to execute a
lock up agreement in a form agreed to by LHC Group and the underwriters
in the Qualifying IPO pursuant to which the Shareholders will agree not
to sell any of the Restricted Securities for a period of one year
following the closing date of the Qualifying IPO.
3. RETURN OF SHARES. On the closing date of the Qualifying IPO, the
Shareholders shall return to LHC Group any and all certificates or
other instruments evidencing their ownership of the Shares or any other
class of stock in HTATTG, and shall, at the option of LHC Group,
deliver such other evidence of the transfer of their interest to LHC
Group as is reasonably required by LHC Group.
4. REPRESENTATIONS.
a. each Shareholder represents and warrants to LHC Group that he
has not assigned, transferred or conveyed any interest in the
Shares to any affiliate or other third party, and that he owns
such Shares free and clear of any and all liens, mortgages,
charges, encumbrances, voting trust or other restrictions of
any kind;
b. each Shareholder represents that he has received no material
information regarding this investment in LHC Group other than
information that is generally available to the public. Each
shareholder further acknowledges and represents that he has
not made his decision to enter into this Agreement, or caused
any other Shareholder to enter into this Agreement, based in
whole or in part on any representations of LHC Group, its
officers, shareholders, attorneys, consultants or agents
regarding LHC Group or its future, or the investment;
c. each Shareholder is converting his Shares into the Restricted
Securities for his own account, with the intention of holding
the Restricted Securities for investment and with no present
intention of dividing or allowing others to participate in
this investment or of reselling or otherwise participating,
directly or indirectly, in a distribution of the Restricted
Securities; and each Shareholder further represents that he
will not make any sale, transfer, or other disposition of the
Restricted Securities without registration under the
Securities Act (as defined below) and similar state acts
unless an exemption from registration is available under the
Securities Act and similar state acts.
d. The current facts surrounding this investment do not satisfy
conditions under Rule 144 under the Securities Act that would
permit the undersigned to resell the Restricted Securities
under such Rule; even if satisfaction of the conditions under
Rule 144 should occur, the undersigned could resell the
Restricted Securities in
reliance upon the provisions of Rule 144 only in limited
amounts and in accordance with the other terms and conditions
of Rule 144; and in connection with any resale of the
Restricted Securities by the undersigned that Rule 144 does
not permit, the undersigned must comply with some other
registration exemption.
e. Each of the Shareholders acknowledges that by reason of his
business or financial experience or the business or financial
experience of his professional advisor(s), he has the capacity
to protect his own interests in connection with the receipt of
the Restricted Securities.
5. SETTLEMENT AND COMPROMISE.
a. The Parties acknowledge and agree that, effective as of the
closing date of the Qualifying IPO, the terms of this
Agreement shall serve as a full and complete settlement and
compromise of any and all claims, demands, liens, lawsuits,
actions, causes of action, debts, costs, rights, liabilities,
damages, costs and expenses arising out of, related to, or in
any way connected with the Shareholders' ownership of the
Shares and the Parties' relationship under the Shareholders'
Agreement, provided that nothing in this Agreement shall
release any party of their obligations set forth in this
Agreement.
b. The Parties further acknowledge and agree that, effective as
of the date of this Agreement, the terms of this Agreement
shall serve in lieu of, and supersede in their entirety the
terms of the Shareholders' Agreement with regard to the
Conversion Rights notwithstanding any provision to the
contrary contained therein. The Shareholders hereby release
LHC Group, HTATTG and their officers, directors and affiliates
from any and all claims, demands, liens, lawsuits, actions,
causes of action, debts, costs, rights, liabilities, damages,
costs and expenses relating to or arising out of the
Conversion Rights excluding claims relating to the obligation
of LHC Group to issue the Restricted Securities required by
Section 1 hereof upon a Qualifying IPO.
6. CONDITION PRECEDENT. The Parties' obligations under this Agreement are
specifically conditioned upon the closing of a Qualifying IPO involving
the equity of LHC Group. A "Qualifying IPO" means the sale by LHC Group
or its successor of shares of its common stock in a firm commitment
underwritten public offering pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Securities Act") at a
total public offering price per share (prior to underwriters'
commissions and expenses) of not less than $10 (appropriately adjusted
for any stock split, dividend, combination or other recapitalization)
and which results in aggregate cash proceeds to LHC Group of not less
than $25 million (the "Qualifying IPO")
7. INDEMNIFICATION. Each Shareholder agrees to severally protect, defend,
reimburse, pay, indemnify, release, dismiss, discharge and forever hold
harmless LHC Group, its
Exchange Agreement 3 November 2004
successors and assigns, in respect of any and all losses, claims,
demands, liens, lawsuits, actions, causes of action, debts, costs,
rights, liabilities, damages, costs and expenses, whether known or
unknown, arising out of, related to, or in any way connected with their
ownership of the Shares, the Parties relationship under the
Shareholders' Agreement, or the representations made by the
Shareholders herein.
8. CLOSING DATE RELEASE. In consideration for the receipt of the
Restricted Securities, each Shareholder agrees that on the Closing Date
of the Qualifying IPO he will execute a general release of LHC Group
and HTATTG pursuant to which he agrees to release LHC Group, HTATTG and
their officers, directors and affiliates from any and all claims,
demands, liens, lawsuits, actions, causes of action, debts, costs,
rights, liabilities, damages, costs and expenses arising out of,
related to, or in any way connected with his ownership of the Shares,
the Conversion Rights and the Parties' relationship under the
Shareholders' Agreement.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the respective Parties hereto, their legal representatives,
successors and assigns.
10. ENTIRE AGREEMENT. This Agreement supersedes all agreements previously
made between the Parties hereto relating to its subject matter.
11. GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the laws of the State of Louisiana.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall be one and the same instrument.
[Signatures continued on next page]
Exchange Agreement 4 November 2004
IN WITNESS WHEREOF, the Parties have signed this Agreement on the date
first written above.
WITNESSES LHC GROUP, LLC
/s/ Beth Comeaux BY: /s/ Keith G. Myers
- ------------------------ -------------------------------
Keith G. Myers, Manager
/s/ Judy Mouton
- ------------------------ LOUISIANA HEALTH CARE GROUP, LLC
BY: LHC GROUP, LLC
BY: /s/ Keith G. Myers
-------------------------------
Keith G. Myers, Manager
SHAREHOLDERS
/s/ David Hebert
-----------------------------------
David Hebert
/s/ Christopher Thibodeaux
-----------------------------------
Christopher Thibodeaux
/s/ Daryl Albro
-----------------------------------
Daryl Albro
/s/ David Hebert
-----------------------------------
David Hebert
/s/ Kebin Touchet
-----------------------------------
Kebin Touchet
/s/ Richard A. MacMillan
-----------------------------
Richard A. MacMillan
Notary
Exchange Agreement 5 November 2004
EXHIBIT I
Exchange Agreement 6 November 2004
VII-50
HEBERT AND THIBODEAUX PHYSICAL THERAPY, INC.
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is entered into this 29th day of April, 2004, and is
effective as of the 1st day of May, 2004 (the "Effective Date") by and between
Louisiana Health Care Group, LLC, David D. Hebert, Christopher B. Thibodeaux,
Kevin P. Touchet and Daryl J. Albro (hereinafter separately referred to as
"Shareholder" and together as "Shareholders"), and Hebert and Thibodeaux
Physical Therapy, Inc., a corporation organized and existing under the laws of
the State of Louisiana, (hereinafter referred to as the "Corporation").
WITNESSETH:
WHEREAS, the Corporation presently has authorized One Hundred (100)
shares of common stock, One Hundred (100) of which are presently issued and
outstanding;
WHEREAS, the Shareholders own all of the outstanding shares of the
Corporation;
WHEREAS, the individual interest of each shareholder in the Corporation
is as follows:
NUMBER OF
NAME SHARES
---- ------
Louisiana Health Care Group, LLC 51.00
David D. Hebert 14.75
Christopher B. Thibodeaux 14.75
Kevin P. Touchet 12.25
Daryl J. Albro 7.25
WHEREAS, each Shareholder is presently employed by the Corporation;
WHEREAS, the parties have jointly negotiated the terms of this
Agreement and intend this Agreement to have effect from and after the Effective
Date noted above;
WHEREAS, the Shareholders believe that it is in the best interests of
the Shareholders and the Corporation to make provision for the terms governing
their relationships, and the future disposition of the shares of the
Corporation.
NOW, THEREFORE, in consideration of the employment of each Shareholder
by the Corporation, and the premises and mutual covenants and agreements
contained in this Agreement, and in order to consummate the purchase and sale of
the stock aforementioned, and to set forth the terms, rights and
responsibilities governing their relationships, it is hereby agreed as follows:
I.
DIRECTORS AND OFFICERS
1.1 For so long as this Agreement remains in effect, each Shareholder
agrees to vote all of such Shareholder's shares of common stock of the
Corporation entitled to vote which may now or hereafter be owned or
held of record by such Shareholder, or as to which such Shareholder now
or hereafter has voting power, and otherwise exert their best efforts
at all times in good faith, to effectuate the election of the following
candidates as Directors:
Directors
----------
Keith G. Myers
Earline Bihm
1.2 For so long as this Agreement remains in effect, each Shareholder
agrees to cause the elected directors to vote, and otherwise exert
their best efforts at all times in good faith, to effectuate the
election of the following candidates for office:
President: Keith G. Myers
Secretary-Treasurer: Christopher Thibodeaux
1.3 Each Shareholder in his capacity as Shareholder and Director, hereby
grants to, and is deemed to have executed in favor of, all of the other
Shareholders and Directors, an irrevocable proxy to vote, or to give
written consent with respect to, all the voting equity securities owned
by the grantor of the proxy (i) for the election of the officers and
board of directors as designated herein, (ii) against any amendment or
restatement of the Corporation's articles of incorporation, (iii)
against any amendment or restatement of the Corporation's bylaws, (iv)
against any increase in the number of directors, (v) against the
issuance of any stock or securities, or any subscriptions, warrants,
options or other rights for same, and (vi) against the termination of
the Corporation's Management Agreement with LHC Group, LLC or its
successors.
1.4 The shareholders agree to use their best efforts, in good faith, to
attend all meetings, to vote and act harmoniously, and to elect all
members of the Board and officers annually.
II.
RESTRICTIONS ON TRANSFER OF SHARES
2.1 RESTRICTION ON SHARES. So long as all the Shareholders are alive, each
shall not transfer or encumber, in any manner, the shares of the
Corporation which he now owns or may hereafter acquire, except as
follows:
A. SALE, TRANSFER OR ENCUMBRANCE OF SHARES. Any Shareholder who desires to
sell, transfer or encumber all or any part of his shares shall first
offer such shares for sale to the Corporation, and thereafter to the
other Shareholders who are parties to this Agreement at the same price
and on the same terms offered by a bonafide prospective purchaser, or
transferee, as the case may be. Within thirty (30) days of receipt of a
written offer, the Corporation shall have the right to purchase the
entirety of the shares thus offered or any lesser portion thereof for a
price in proportion to the offering price based on the number of shares
it agrees to purchase. In the event that the Corporation does not
purchase the entirety of the shares thus offered, the other
Shareholders may purchase the shares not so accepted, and in such case
shall be ratable to the respective holdings of such other Shareholders,
but if any such Shareholder, entitled to purchase shares, fails to
accept the offer, either in whole or in part, the other Shareholders
may purchase the shares not so accepted. If such other Shareholders
fail to purchase the shares within ten (10) days after written notice
from the selling Shareholder that the Corporation has refused the offer
of shares, the restrictions upon such shares, imposed by this
paragraph, shall automatically terminate at the end of thirty (30) days
from the date of the notice.
2.2 REVERSION OF STOCK UPON TERMINATION OF EMPLOYMENT. Upon the termination
of employment with the Corporation of a Shareholder, all the shares
held by said Shareholder shall revert to the Corporation, automatically
and immediately, effective upon the date the employment terminates.
Within ninety (90) days of the effective date of termination of
employment, the Corporation shall tender to the terminated Shareholder
an amount equal to the product of the book value of the Corporation and
the percentage of stock held by the terminated Shareholder (calculated
based upon the then issued and outstanding stock of the Corporation),
as of the effective date of termination of employment.
2.3 OPTION TO PURCHASE STOCK ON DEATH OR TERMINATION OF EMPLOYMENT. Upon
the death of a Shareholder, or upon the termination of employment of a
Shareholder by the Corporation the remaining Shareholders shall have
the option to purchase all the shares of stock of the Corporation owned
by the deceased or terminating Shareholder, upon the following terms:
A. RIGHT TO PURCHASE. The right to purchase in such case shall be
ratable to the respective holdings of the remaining
Shareholders, but if any such Shareholder fails to exercise
his option, either in whole or in part, the other Shareholders
may purchase such shares. The option to purchase the shares of
the decedent shall be exercised by serving written notice on
the representative of the succession of the decedent or the
terminating employee ("Transferror") within fifteen (15) days
after the qualification of such representative or the
termination of employment. In the event the remaining
Shareholders fail to purchase all the stock of the deceased or
terminating Shareholder, the Corporation may elect to purchase
the remaining stock.
B. PURCHASE PRICE. The purchase price shall be determined
according to Section 2.4 of this Agreement.
C. CLOSING. The closing of such purchase and sale shall take
place at the offices of the Corporation, on a date selected by
the Corporation, upon five (5) days notice to the Transferror,
which date shall not be more than one hundred eighty (180)
days from the date of the qualification of the Transferror or
the termination of employment and not less than thirty (30)
days following such date.
D. PAYMENT OF PURCHASE PRICE. In the event of the death of a
Shareholder, if the Shareholder is subject to an insurance
"buy-out" arrangement with the Corporation, the rights to
purchase the decedent's stock shall be exercisable only by the
Corporation and the Purchase Price shall be paid in full
within thirty (30) days of receipt of the proceeds by the
Corporation. Otherwise, and in the event a Shareholder's
employment is terminated, the purchase price shall be payable
as follows:
i. Ten (10%) percent to be paid in cash; and
ii. Ninety (90%) percent to be represented by a
promissory note executed by the purchasing
Shareholders, or the Corporation, as the case may be,
payable in one hundred twenty (120) equal monthly
installments, such note to be secured by the stock
and payable with interest thereon at a rate which
shall be established at the time of closing, and
which shall equal the average of the real estate
mortgage rate of interest charged by three (3) banks
with offices in Jefferson Davis Parish selected by
the Board of Directors of the Corporation.
E. SECURITY. Whenever a Shareholder purchases shares of capital
stock under this Agreement, such purchaser, unless he shall
have paid the entire purchase price in cash, shall, following
the delivery of the purchased stock, pledge the stock to the
Seller with a reservation of dividend and voting rights in
favor of the purchasing Shareholder, and deliver the
certificates of stock issued to the purchasing Shareholder to
the Seller as security for the payment of the unpaid purchase
price; and such capital stock shall be so held until the
entire purchase price shall be paid. Upon full payment of the
purchase price, the stock shall be returned to the purchasing
Shareholder.
F. FAILURE TO EXERCISE OPTION. Upon the failure of the surviving
Shareholders and/or the Corporation to exercise the option to
purchase all the shares of stock of the Corporation owned by
the decedent within one hundred eighty (180) days of his
death, the restrictions imposed in this paragraph shall
terminate.
2.4 PURCHASE PRICE. The price for each share of capital stock to be sold
under paragraph 2 of this Agreement shall be as follows:
A. In the event of death, the product of the equity interest of
the Shareholder, as of
the date of death, and the amount specified in the latest
executed Certificate of Agreed Value.
B. In the event of a termination of employment the product of the
value of equity interest of the Shareholder and the value of
the Corporation as determined by the Corporation's public
accounting firm. For purposes of ascertaining the value of the
Corporation, the following shall be observed:
i. No allowance shall be made for good will;
ii. All accounts payable shall be taken at face amount,
less discounts deductible therefrom, unless in the
opinion of the Corporation's accountant, a reserve is
necessary;
iii. All furniture and fixtures and equipment are to be
computed at the depreciated value appearing on the
books of the Corporation;
iv. Inventory or supplies shall be computed at cost or
market value, whichever is lower;
v. All unpaid and accrued federal, state, city and
municipal taxes, including, but not limited to,
sales, payroll, unemployment insurance, excise,
franchise and income, shall be deducted as
liabilities. The Federal Income Surtax Exemption and
State Income Tax Exemption shall be prorated for the
fiscal year involved. If the Corporation is treated
as an "S" corporation on the valuation date, state
and federal taxes shall be accrued as if the
Corporation was not an "S" corporation;
vi. Death proceeds of insurance held by the Corporation,
if any, insuring the life of a deceased Shareholder
whose stock is being valued for purchase under this
Agreement, shall not be included in the valuation to
the extent such proceeds exceed the unpaid premiums
and cash value on the policy of the insured
Shareholder;
vii. The date of determination of the stock value
("Valuation Date") shall be the last day of the month
immediately preceding the making of the Transferror's
offer, or the termination of the Shareholder's
employment.
viii. Contractual obligations of the Corporation,
contingent or otherwise, under non-qualified
"Deferred Compensation Agreements", "Salary
Continuation Agreements", or other such agreements
shall be fully valued as a liability of the
Corporation without discount for interest or any
contingency, including the termination of employment
of any contracting employee, which might reduce or
terminate the Corporation's obligation under such
agreement, unless such a contingency as to a
contractual obligation occurred before or on the date
of valuation, in which event, the
resulting reduction or termination in value of the
Corporation's liability shall be considered;
C. The cost of determination of such purchase price shall be paid
by the Corporation;
2.5 ENDORSEMENT OF STOCK CERTIFICATE. All certificates for shares of the
Corporation shall be endorsed with a statement indicating that transfer
of the shares represented by the certificate are subject to
restrictions contained in this Shareholders' Agreement.
2.6 VALUE OF PURCHASE PRICE FOR TAX PURPOSES. It is understood that the
Purchase Price, determined as set forth hereinabove, shall be the value
of the purchased shares for all tax purposes. In the event such value
is later increased by any federal or state taxing authority, any tax
liability resulting from such increase shall be borne by the parties
equally.
2.7 DEADLOCK. If any Shareholder becomes dissatisfied with the other
Shareholders, the operation of the Corporation, or otherwise, the
dissatisfied Shareholder shall have the right to deliver to the other
Shareholders in identical form a written offer setting forth the price
and other terms at which the offering Shareholder both:
A. Irrevocably offers to sell all, but not less than all, his
interest in the Corporation to the other Shareholders, or
B. Irrevocably offers to buy all, but not less than all, the
other Shareholders' interest in the Corporation.
i. Within fifteen (15) days after the offering
Shareholder delivers said offer to the other
Shareholders, the other Shareholders must accept
either the offer to sell or the offer to buy by
delivery of a written acceptance of either the offer
to sell or the offer to buy. Should the decision of
the other Shareholders to buy or sell not be
unanimous, each Shareholder who dissents from the
majority decision shall have the right to join with
the offering Shareholder to sell his interest to, or
to buy the interests of, the remaining other
Shareholders, as the case may be. If the other
Shareholders fail to deliver said notice of
acceptance within such thirty (30) day period, the
offering Shareholder shall elect which offer has been
accepted and shall give notice of such election to
the other Shareholders within ten (10) days after
such thirty (30) day period.
ii. Any offer, acceptance or notice of election under
this Agreement shall be deemed to be duly delivered
when delivered in person or when mailed by certified
mail, postage prepaid, addressed to the appropriate
recipient thereof at his last known address as shown
on the books of the Corporation.
iii. If there shall be more than one Shareholder
purchasing pursuant to this section, each of such
purchasing Shareholders shall be entitled to purchase
such proportionate part of the Corporation's
interests, being sold pursuant to this, as the
percentage interest then owned by him bears to the
total percentage interest then owned by all of the
Shareholders who shall desire to purchase part of the
Corporation's interests being sold, or such greater
part of the Corporation's interests being sold as
shall be agreed upon by all the Shareholders who
shall desire to purchase part of the Corporation's
interests being sold pursuant thereto.
iv. The closing of any purchase and sale under this
section shall be held at the principal office of the
Corporation (or such other place as may be agreed
upon by the offering Shareholder and the other
Shareholders), within ninety (90) days after delivery
of the initial offer to the other Shareholders. At
the closing, the amount of the purchase price shall
be paid in cash, or otherwise as specified in the
initial offer, against delivery of all documents
necessary to transfer all of the selling
Shareholder(s)' interests.
2.8 INDEBTEDNESS OF A SHAREHOLDER. In the event that there is a purchase
and sale of shares of stock or interest therein, pursuant to the
provisions herein above, and there is any indebtedness owed by the
selling Shareholder or his estate to any party to this Agreement, then,
notwithstanding the said provisions relating to the payment of the
purchase price, any amount to be paid for the stock being purchased
shall be applied first to reduce and satisfy any indebtedness owed by
the selling Shareholder or his estate to any party under this
Agreement.
2.9 DEFAULT. In the event of a default in any payment as provided for in
Paragraph 2.3 herein above, the Seller shall deliver to the surviving
or remaining Shareholders that portion of the shares of the purchasing
Shareholder equal to the ratio that the amount paid bears to the total
purchase price, and shall retain the balance of such shares. The estate
or the Seller, whichever the case may be, shall retain the portion of
the purchase price received and shall have a claim against the
surviving or remaining Shareholders for the difference between the
value of the shares as of the date of purchase and the value thereof as
of the date of default. No other claim for damages shall be available
to the estate or the Seller.
III.
ISSUANCE OF ADDITIONAL STOCK
3.1 No additional capital stock of this Corporation shall hereafter be
authorized, and no additional authorized capital stock of this
Corporation shall hereafter be issued, without the unanimous consent of
all the Shareholders.
IV.
NON-COMPETITION
5.1 NON-COMPETITION. In consideration of the issuance of stock in the
Corporation and the mutual obligations assumed under this Agreement by
each Shareholder and by the Corporation, each Shareholder agrees that
except as may be specifically agreed to in writing by the Corporation,
for throughout the term of this Agreement and during a period of two
(2) years following its termination, he shall not carry on or engage or
participate in any business the same as or in competition with the
Corporation within Jefferson Davis Parish. The phrase "the business of
the Corporation" means provision of physical therapy, occupational
therapy and/or cardiac rehabilitation services. The phrase "carry on or
engage or participate in a business the same as or in competition with
the Corporation" shall include but not be limited to, the doing, by the
Shareholder, of any of the following listed acts:
A. carrying on or engaging in any such business as a principal,
or on his own account, or solely or jointly with others, or as
a director, officer, agent, employee, consultant or partner
(general or limited) or stockholder or holder of any
partnership interest (general or limited) or holder of any
equity interest or membership interest of any entity,
including a sole proprietorship, corporation, partnership,
limited partnership or limited liability company; or
B. as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition or
the disposition of any such business; or
C. giving advice to any other person, firm, association or
corporation engaging in any such business; or
D. lending or allowing his name or reputation to be used in any
such business; or
E. allowing his skill, knowledge, experience or reputation to be
used in any such business; or
F. calling upon any person or entity to which the Corporation has
heretofore provided, is currently providing or has heretofore
been negotiating for the provision of physical therapy,
occupational therapy or cardiac rehabilitation services, for
the purpose of soliciting, diverting, enticing away the
business of such person or entity, or otherwise disrupting the
previously established or future relationship between such
person and the Corporation; or
G. hiring, offering to hire, or employing, or entering into
business with, whether as a joint venture, partnership,
corporation or otherwise, or offering or agreeing to do any of
the foregoing with any employees of the Corporation within
Jefferson Davis Parish.
5.2 ENFORCEMENT. It is the desire and intent of the parties that the
provisions of this Article V shall be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, to the extent
that the covenant hereunder shall be adjudicated to be invalid or
unenforceable in any one such jurisdiction, this Article V shall be
deemed amended to delete therefrom or reform the portion thus
adjudicated to be invalid or unenforceable, such deletion or
reformation to apply only with respect to the operation of this Article
in the particular jurisdiction in which such adjudication is made.
Moreover, each provision of this Agreement is intended to be severable;
and in the event that any one or more of the provisions contained in
this Agreement shall for any reason be adjudicated to be invalid or
unenforceable in any jurisdiction, the same shall not affect the
validity and enforceability of any other provisions of this Agreement
in that jurisdiction, but this Agreement shall be construed in such
jurisdiction as if such invalid or unenforceable provision had never
been contained therein. The parties agree that upon the breach or
threatened breach of any covenant of this Agreement, the Corporation
would suffer irreparable harm for which it would have no adequate
remedy at law and would, therefore, be entitled to injunctive relief
against any such breach or threatened breach as well as whatever other
remedies may be available to it.
VI.
TERMINATION
6.1 TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
occurrence of one of the following events:
A. The written agreement of the parties hereto or their permitted
successors in interest to that effect;
B. The bankruptcy, receivership, liquidation or dissolution of
the Corporation;
C. The disposal of all the shares of stock of any Shareholder
during his lifetime or by his succession representative or
estate upon his death, as to such retiring or deceased
Shareholder only, or
D. All of the issued and outstanding stock of the Corporation
becoming owned by a single Shareholder of the Corporation.
E. The Corporation or any of its officers, directors, or any
shareholder is:
(i) convicted of a felony relating to (i) federal or
state health care program fraud or abuse; or (ii) the
neglect or abuse of a patient; or
(ii) excluded or debarred from participation in the
Medicare or Medicaid programs.
VII.
OPERATIONS
7.1 LHC Group, LLC shall manage the operations of the Corporation pursuant
to a Management Services Agreement, and the Corporation should become
fully integrated with LHC Group's operations and collaborate with its
affiliates to maximize efficiency and profitability. Accordingly, the
Shareholders unanimously agree that the Corporation shall enter into a
Management Services Agreement with LHC Group, LLC conferring upon it
the authority and power to manage the day-to-day operations of the
Corporation and further providing it with the authority and powers
customarily conferred upon a Manager of a limited liability company.
7.2 The Shareholders unanimously agree that the Corporation should embark
on a path of growth to expand services into surrounding communities in
Southwest Louisiana including but not limited to Lake Arthur, Crowley,
and Lake Charles, doing business in markets outside of Jeff Davis
Parish as Louisiana Physical Therapy, an affiliate of Louisiana Health
Care Group, LLC. In furtherance of this goal, the Shareholders agree
that LHC Group marketing personnel based in Jennings shall be allocated
to promote the Corporation's services in proportion to the
Corporation's Net Revenues compared to those of Jeff Davis Home Health,
and Louisiana Hospice and Palliative Care of Jennings.
7.3 Unless otherwise agreed to by a two-thirds majority of the
Shareholders, the Shareholders agree that the Corporation shall
distribute to the Shareholders any Net Income in excess of the
foreseeable needs of the Corporation within 60 days of the end of each
calendar quarter.
7.4 The Corporation's books and records shall be kept on the accrual basis
of accounting.
VIII.
CONVERSION OPTION
8.1 In the event that LHC Group, LLC is sold, merged or otherwise acquired,
or if it undertakes an initial public offering (collectively referred
to herein as "Sale Event"), each shareholder of Hebert & Thibodeaux
Physical Therapy, Inc. shall have the option to: (i) exchange its
holdings of stock in the Corporation to LHC Group, LLC Membership Units
at a value proportionate to the earnings of Corporation in relation to
all other LHC Group, LLC operations or (ii) to sell its holdings of
Stock in the Corporation to Louisiana Health Care Group, LLC at a price
determined as the product of: (i) the Shareholder's percentage holdings
of stock in the Corporation, and (ii) FIVE HUNDRED PERCENT (500%) of
the Company's Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) for the twelve calendar month period ending on
the last day of the last calendar month prior to the event giving rise
to the valuation. LHC Group, LLC shall give each Shareholder no less
than ten (10) days written notice of the pendency of a
Sale event, and the Shareholder shall have an additional ten (10) days
to exercise this Conversion Option.
8.2 In the event that the Shareholder elects to exercise the first
alternative option, LHC Group, LLC agrees to complete the conversion of
the Shareholder's stock to LHC Group Units and to issue the Units
within thirty (30) days of receipt of notice of the exercise. The
proportionate number of Units to be issued shall be calculated as the
percentage holding of stock of the Shareholder multiplied by the
product of (i) the total issued and outstanding Units of LHC Group, LLC
as of the date of the notice and (ii) a fraction, the numerator of
which is the Corporation's EBITDA and denominator of which is LHC
Group, LLC's EBITDA. As a conditions precedent to the issuance of the
Units by LHC Group, LLC, the Shareholder will: (i) execute a written
consent to the Sale Event; and (ii) execute a counterpart to the
Operating Agreement. The Units issued to the Shareholder shall be
subject to all terms, conditions and restrictions contained in the
Operating Agreement. The Shareholder shall be bound by the terms and
conditions of the Sale Event in respect to the Units issued to it by
LHC Group, LLC.
8.3 In the event that the Shareholder elects to exercise the second
alternative option, LHC Group, LLC agrees to pay the purchase price by
delivery of an unsecured, non-negotiable promissory note in the amount
of the purchase price, with LHC Group, LLC as maker, payable in twenty
equal quarterly installments, commencing ninety days after the
effective date of the transfer, with interest at the prime rate
published in the Wall Street Journal on the date of the transfer
without prepayment penalties. The note shall contain a subordination
clause subordinating the note to all other debts of LHC Group, LLC. At
its sole option and discretion, LHC Group, LLC may pay all or part of
the purchase price in cash at the time of the transfer.
8.4 This Conversion Option shall terminate upon the earlier to occur of:
A. The termination of this Agreement;
B. The disposal of all the shares of stock of any Shareholder
during his lifetime or by his succession representative or
estate upon his death, as to such retiring or deceased
Shareholder only; or
C. Upon the withdrawal of Louisiana Health Care Group, LLC as a
shareholder of the Corporation.
8.6 The parties acknowledge and agree that it is their intention for this
Conversion Option to operate only so long as the Sale Event actually
occurs and closes. In the event that the Sale Event does not occur as
scheduled, the exchange performed under the option shall automatically
and immediately be rescinded, without any requirement of notice by
either party, and Shareholder shall surrender any Units received and,
likewise shall have returned to him the stock tendered for conversion,
or the stock shall be returned and the purchase price shall be returned
or promissory note cancelled, as the case may be.
8.5 LHC Group, LLC, the sole Member and Manager of Louisiana Health Care
Group, LLC, intervenes in this Shareholders' Agreement to acknowledge
and agree to the terms of this Conversion Option and to ratify such
terms.
IX.
MISCELLANEOUS
9.1 SHAREHOLDERS' RIGHTS OF CONTRIBUTION. If for any reason, a Shareholder
sustains any liabilities or is required to pay any losses arising out
of, or directly connected with, the Corporation, or the execution of
any agreements or guarantees in connection with the Corporation's
operations, which are in excess of his, her or its proportionate
holdings of shares in the Corporation, the other Shareholders shall
promptly reimburse the affected Shareholder this excess, so that each
and every Shareholder of the Corporation will then have paid its
proportionate share of such losses to the full extent of its holdings
of shares in the Corporation.
9.2 GOVERNING LAW. This Agreement, and all transactions contemplated
hereby, shall be governed by, construed and enforced in accordance with
the laws of the State of Louisiana.
9.3 RECORDS AND ACCOUNTS. Each business enterprise of the Corporation shall
maintain its own records and books of accounts, separate and apart from
any other business enterprise of the Corporation.
9.4 AMENDMENTS; MODIFICATION. This Agreement may be amended, modified, or
altered only by execution of a written agreement authorized by
corporate resolution and signed by all the parties hereto.
9.5 NOTICES. Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein, shall be
given in writing by United States certified mail addressed, in the case
of the Shareholders, to his address appearing in the records of the
Corporation, or to his residence, or to such other address as may be
designated by him, and, in the case of the Corporation, to the
principal office of the corporation, and shall be considered to have
been delivered on the 5th day following the date stamped by the post
office.
9.6 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions
hereof and the Agreement shall be construed in all respects as if such
invalid or unenforceable provision had been omitted.
9.7 BINDING EFFECT. This Agreement shall bind and, unless inconsistent with
its provisions, shall inure to the benefit of the Executor,
Administrator or Succession Representative, and the heirs and permitted
assigns of each of the Shareholders.
9.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to the matters addressed herein. This
Agreement shall not be construed or interpreted as a contract of
employment. This Agreement supersedes any prior Agreement of the
parties.
THUS DONE AND SIGNED, in Jennings, Louisiana on the day and year first
above written.
WITNESSES "SHAREHOLDERS"
/s/ Barr Brown /s/ David D. Hebert
- ------------------------------ --------------------------------
David D. Hebert
/s/ /s/ Christopher B. Thibodeaux
- ------------------------------ --------------------------------
Christopher B. Thibodeaux
"INTERVENOR"
LHC GROUP, LLC
BY: /s/ Keith G. Myers /s/ Kevin P. Touchet
--------------------------- -------------------------------
Keith G. Myers, Manager Kevin P. Touchet
/s/ Daryl J. Albro
-------------------------------
Daryl J. Albro
"CORPORATION"
HERBERT AND THIBODEAUX LOUISIANA HEALTH CARE
PHYSICAL THERAPY, INC. GROUP, LLC
BY: LHC GROUP, LLC, Manager
BY: /s/ Christopher B. Thibodeaux BY: /s/ Keith G. Myers
------------------------------ ---------------------------
Christopher Thibodeaux, Secretary-Treasurer Keith G. Myers, Manager
/s/ R. A. MacMillan
-----------------------------
Notary
CERTIFICATE OF AGREED VALUE
WHEREAS, Louisiana Health Care Group, LLC, David D. Hebert, Christopher
B. Thibodeaux, Kevin P. Touchet and Daryl J. Albro, (hereinafter referred to as
"Shareholders"), own all of the outstanding shares of Hebert & Thibodeaux
Physical Therapy, Inc., a Louisiana corporation, (hereinafter referred to as
"Corporation"), and
WHEREAS, Shareholders and Corporation have executed an Agreement
containing certain restrictions and obligations on the shares of stock of said
Corporation,
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Agreement, it is hereby agreed by the
undersigned as follows:
1. Value. Pursuant to Paragraphs 2.3 and 2.4 of said Agreement for the
purposes therein stated, for the current calendar year and continuing until a
new Certificate is executed by the parties hereto, the value of the shares of
said Corporation is hereby agreed to be_______________ DOLLARS ($_______) per
share.
THUS DONE AND SIGNED, on this the___day of____________, 200__, and
effective the_____day of_____________, 200__ in Jennings, Louisiana.
SHAREHOLDERS HEBERT AND THIBODEAUX PHYSICAL THERAPY, INC.
"CORPORATION"
BY:
- -------------------------- ---------------------------------------
David D. Hebert Christopher Thibodeaux, Sect-Treasurer
- -------------------------- LOUISIANA HEALTH CARE GROUP, LLC
Christopher B. Thibodeaux Shareholder
BY: LHC GROUP, LLC, Manager
BY:
- -------------------------- -------------------------------------
Kevin P. Touchet Keith G. Myers, Manager
- --------------------------
Daryl J. Albro
APPENDIX B
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT ("Agreement") made effective this 14th day of Sept.,
2004, by and among LOUISIANA HEALTH CARE GROUP, LLC ("LHCG"), LHC GROUP, LLC
("LHC Group") and BETA HOME CARE, INC. ("Beta"). LHCG, LHC Group and Beta are
referred to, collectively, herein as the "Parties". Christopher Baggett
("Baggett") and John Rudd ("Rudd") also join in this Agreement for the purposes
of acknowledging and agreeing to the actions of Beta.
RECITALS
The Parties are the sole members of Acadian Home Health Care Services,
LLC ("Acadian"), each owning the membership interest percentage ("Membership
Interest") opposite their name on Schedule A attached hereto.
Baggett and Rudd are the sole shareholders of Beta.
Pursuant to the terms of a written operating agreement effective
January 1, 2004 by and among the Parties ("Operating Agreement") and
acknowledged to be the current operating agreement of Acadian (a copy of which
is attached as Exhibit I), Beta has an option to convert its Membership
Interest in Acadian into equity in LHC Group (the "Conversion Right") upon the
occurrence of certain triggering events, including, but not limited to the
closing of a qualifying initial public offering involving the equity of LHC
Group.
The Parties wish to enter into this Agreement in order to set forth
their rights and obligations relating to the Conversion Rights in the event of
a Qualifying IPO.
THE PARTIES HEREBY AGREE TO THE FOLLOWING:
1. EXCHANGE. Upon the closing of a Qualifying IPO (as defined below),
Beta shall transfer, convey and deliver to LHC Group all right, title
and interest in the Membership Interest of Beta in Acadian, in
exchange for the following:
1.1 300,000 shares of LHC Group common stock, as adjusted
proportionately for any and all stock splits (the "Restricted
Securities"); and
1.2 cash consideration in an amount equal to the value of 153,772
shares of LHC Group common stock (without taking into
consideration, and which amount shall therefore not be
adjusted for, any stock splits between the date hereof and
the closing date of the Qualifying IPO) times the per share
offering price in a Qualifying IPO before underwriting
discounts and commissions, payable as follows:
(a) One-half of such cash consideration shall be payable
in cash within thirty (30) days following the
closing date of the Qualifying IPO; and
(b) The balance of such cash consideration shall be
payable within one hundred fifty (150) days
following the Closing Date of the Qualifying IPO.
2. ISSUANCE OF STOCK CERTIFICATES/STOCK RESTRICTIONS. On the closing date
of the Qualifying IPO, LHC Group shall issue stock certificates to
Beta evidencing its ownership interest in the Restricted Securities.
Beta, Rudd and Baggett hereby acknowledge that the Restricted
Securities will not be registered under the Securities Act (as defined
below). Beta also agrees not to sell or transfer the Restricted
Securities for a period of at least one year following the closing
date of the Qualifying IPO. Further, Beta agrees to execute a lock up
agreement in a form agreed to by LHC Group and the underwriters in the
Qualifying IPO pursuant to which Beta will agree not to sell any of
the Restricted Securities for a period of one year following the
closing date of the Qualifying IPO.
3. RETURN OF MEMBERSHIP INTEREST. On the closing date of the Qualifying
IPO, Beta shall return to LHC Group any and all certificates or other
instruments evidencing its ownership interest in Acadian, and shall,
at the option of LHC Group, deliver such other evidence of the
transfer of its interest to LHC Group as is reasonably required by LHC
Group.
4. REPRESENTATIONS.
a. Beta represents and warrants to LHC Group that it has not
assigned, transferred or conveyed any interest in the
Membership Interest in Acadian to any affiliate or other
third party, and that it owns such Membership Interest free
and clear of any and all liens, mortgages, charges,
encumbrances, voting trust or other restrictions of any kind;
b. Beta, Baggett and Rudd represent that they have received no
material information regarding this investment in LHC Group
other than information which is generally available to the
public. They further acknowledge and represent that they have
not made their decision to enter into this Agreement, or to
cause Beta to enter into this Agreement, based in whole or in
part on any representations of LHC Group, its officers,
shareholders, attorneys, consultants or agents regarding
LHC Group or its future, or the investment;
c. Beta is converting its Membership Interests into the
Restricted Securities for its own account, with the intention
of holding the Restricted Securities for investment and with
no present intention of dividing or allowing others to
participate in this investment or of reselling or otherwise
participating, directly or indirectly, in a distribution of
the Restricted Securities; and it will not make any sale,
transfer, or other disposition of the Restricted Securities
without registration under the Securities Act (as defined
below) and similar state acts unless an exemption from
registration is available under the Securities Act and
similar state acts.
d. The current facts surrounding this investment do not satisfy
conditions under Rule 144 under the Securities Act that would
permit the undersigned to resell the Restricted Securities
under such Rule; even if satisfaction of the conditions under
Rule 144 should occur, the undersigned could resell the
Restricted Securities in reliance upon the provisions of Rule
144 only in limited amounts and in accordance with the other
terms and conditions of Rule 144; and in connection with any
resale of the Restricted Securities by the undersigned that
Rule 144 does not permit, the undersigned must comply with
some other registration exemption.
e. Each of Beta, Rudd and Baggett is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated by the
Securities and Exchange Commission. Each of Beta, Rudd and
Baggett acknowledges that by reason of his or its business or
financial experience or the business or financial experience
of his professional advisor(s), he has the capacity to
protect his or its own interests in connection with Beta's
receipt of the Restricted Securities.
2
5. SETTLEMENT AND COMPROMISE.
a. The Parties acknowledge and agree that effective as of the
closing date of the Qualifying IPO the terms of this
Agreement shall serve as a full and complete settlement and
compromise of any and all claims, demands, liens, lawsuits,
actions, causes of action, debts, costs, rights, liabilities,
damages, costs and expenses arising out of, related to, or in
any way connected with Beta's ownership of the Membership
Interest in Acadian and the Parties' relationship under the
Operating Agreement, provided that nothing in this Agreement
shall release any party of its obligations set forth in this
Agreement.
b. The Parties further acknowledge and agree that effective as
of the date of this Agreement the terms of this Agreement
shall serve in lieu of, and supersede in their entirety the
terms of the Operating Agreement with regards to the
Conversion Rights notwithstanding any provision to the
contrary contained therein. Beta, Rudd and Baggett hereby
release LHC Group, Acadian and their officers, directors and
affiliates from any and all claims, demands, liens, lawsuits,
actions, causes of action, debts, costs, rights, liabilities,
damages, costs and expenses relating to or arising out of the
Conversion Rights excluding claims relating to the obligation
of LHC Group to issue the Restricted Securities and make the
cash payments required by Section 1 hereof upon a Qualifying
IPO.
6. CONDITION PRECEDENT. The Parties' obligations under this Agreement are
specifically conditioned upon the closing of a Qualifying IPO
involving the equity of LHC Group. A "Qualifying IPO" means the sale
by LHC Group or its successor of shares of its common stock in a firm
commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended (the
"Securities Act") at a total public offering price per share (prior to
underwriters' commissions and expenses) of not less than $10
(appropriately adjusted for any stock split, dividend, combination or
other recapitalization) and which results in aggregate cash proceeds
to LHC Group of not less than $25 million (the "Qualifying IPO").
7. INDEMNIFICATION. Beta, Baggett and Rudd agree to severally protect,
defend, reimburse, pay, indemnify, release, dismiss, discharge and
forever hold harmless LHC Group, its successors and assigns, in
respect of any and all losses, claims, demands, liens, lawsuits,
actions, causes of action, debts, costs, rights, liabilities, damages,
costs and expenses, whether known or unknown, arising out of, related
to, or in any way connected with Beta's ownership of the Membership
Interest in Acadian, the Parties relationship under the Operating
Agreement, or the representations made by Beta, Baggett and Rudd
herein.
8. CLOSING DATE RELEASE. In consideration for the receipt of the
Restricted Securities and the promise of LHC Group to make the cash
payments required by Section 1.2, Beta, Rudd and Baggett agree that on
the Closing Date of the Qualifying IPO they will execute a general
release of LHC Group and Acadian pursuant to which they agree to
release LHC Group, Acadian and their officers, directors and
affiliates from any and all claims, demands, liens, lawsuits, actions,
causes of action, debts, costs, rights, liabilities, damages, costs
and expenses arising out of, related to, or in any way connected with
Beta's ownership of the Membership Interest in Acadian, the Conversion
Rights and the Parties' relationship under the Operating Agreement.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the respective Parties hereto, their legal representatives,
successors and assigns.
3
10. ENTIRE AGREEMENT. This Agreement supersedes all agreements previously
made between the Parties hereto relating to its subject matter.
11. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Louisiana.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall be one and the same instrument.
[Signatures continued on next page]
4
IN WITNESS WHEREOF, the Parties have signed this Agreement on the date
first written above.
WITNESSES: LHC GROUP, LLC
/s/ Elistca R. Comeaux
- ------------------------------
/s/ Judy Morton By: /s/ Keith G. Myers
- ------------------------------ -----------------------------------
Keith G. Myers, Manager
LOUISIANA HEALTH CARE GROUP, LLC
By LHC Group, LLC, Manager
/s/ Elistca R. Comeaux
- ------------------------------
/s/ Judy Morton By: /s/ Keith G. Myers Manager
- ------------------------------ -----------------------------------
Keith G. Myers, Manager
BETA HOME CARE, INC.
/s/ Elistca R. Comeaux
- ------------------------------
/s/ Judy Morton By: /s/ Christopher Baggett
- ------------------------------ -----------------------------------
Christopher Baggett, President
/s/ Elistca R. Comeaux
- ------------------------------
/s/ Judy Morton /s/ Christopher Baggett
- ------------------------------ ---------------------------------------
Christopher Baggett
[Signatures continued on next page]
5
/s/ Elistca R. Comeaux
- ------------------------------
/s/ Judy Morton /s/ John Rudd
- ------------------------------ ---------------------------------------
John Rudd
/s/ Richard A. MacMillan
------------------------------
NOTARY PUBLIC
6
SCHEDULE A
MEMBERSHIP SCHEDULE
ACADIAN HOME HEALTH CARE SERVICES, L.L.C.
AS OF: JANUARY 1, 2004
LOUISIANA HEALTH CARE GROUP, LLC 62.50 UNITS
BETA HOMECARE, INC. 37.50 UNITS
APPENDIX C
VII-50
HEBERT AND THIBODEAUX PHYSICAL THERAPY, INC.
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is entered into this 29th day of April, 2004, and is
effective as of the 1st day of May, 2004 (the "Effective Date") by and between
Louisiana Health Care Group, LLC, David D. Hebert, Christopher B. Thibodeaux,
Kevin P. Touchet and Daryl J. Albro (hereinafter separately referred to as
"Shareholder" and together as "Shareholders"), and Hebert and Thibodeaux
Physical Therapy, Inc., a corporation organized and existing under the laws of
the State of Louisiana, (hereinafter referred to as the "Corporation").
WITNESSETH:
WHEREAS, the Corporation presently has authorized One Hundred (100) shares
of common stock, One Hundred (100) of which are presently issued and
outstanding;
WHEREAS, the Shareholders own all of the outstanding shares of the
Corporation;
WHEREAS, the individual interest of each shareholder in the Corporation is
as follows:
NUMBER OF
NAME SHARES
- -------------------------------- ---------
Louisiana Health Care Group, LLC 51.00
David D. Hebert 14.75
Christopher B. Thibodeaux 14.75
Kevin P. Touchet 12.25
Daryl J. Albro 7.25
WHEREAS, each Shareholder is presently employed by the Corporation;
WHEREAS, the parties have jointly negotiated the terms of this Agreement
and intend this Agreement to have effect from and after the Effective Date noted
above;
WHEREAS, the Shareholders believe that it is in the best interests of the
Shareholders and the Corporation to make provision for the terms governing their
relationships, and the future disposition of the shares of the Corporation.
NOW, THEREFORE, in consideration of the employment of each Shareholder by
the Corporation, and the premises and mutual covenants and agreements contained
in this Agreement, and in order to consummate the purchase and sale of the stock
aforementioned, and to set forth the terms, rights and responsibilities
governing their relationships, it is hereby agreed as follows:
I.
DIRECTORS AND OFFICERS
1.1 For so long as this Agreement remains in effect, each Shareholder agrees
to vote all of such Shareholder's shares of common stock of the
Corporation entitled to vote which may now or hereafter be owned or held
of record by such Shareholder, or as to which such Shareholder now or
hereafter has voting power, and otherwise exert their best efforts at all
times in good faith, to effectuate the election of the following
candidates as Directors:
Directors
Keith G. Myers
Earline Bihm
1.2 For so long as this Agreement remains in effect, each Shareholder agrees
to cause the elected directors to vote, and otherwise exert their best
efforts at all times in good faith, to effectuate the election of the
following candidates for office:
President: Keith G. Myers
Secretary-Treasurer: Christopher Thibodeaux
1.3 Each Shareholder in his capacity as Shareholder and Director, hereby
grants to, and is deemed to have executed in favor of, all of the other
Shareholders and Directors, an irrevocable proxy to vote, or to give
written consent with respect to, all the voting equity securities owned by
the grantor of the proxy (i) for the election of the officers and board of
directors as designated herein, (ii) against any amendment or restatement
of the Corporation's articles of incorporation, (iii) against any
amendment or restatement of the Corporation's bylaws, (iv) against any
increase in the number of directors, (v) against the issuance of any stock
or securities, or any subscriptions, warrants, options or other rights for
same, and (vi) against the termination of the Corporation's Management
Agreement with LHC Group, LLC or its successors.
1.4 The shareholders agree to use their best efforts, in good faith, to attend
all meetings, to vote and act harmoniously, and to elect all members of
the Board and officers annually.
II.
RESTRICTIONS ON TRANSFER OF SHARES
2.1 RESTRICTION ON SHARES. So long as all the Shareholders are alive, each
shall not transfer or encumber, in any manner, the shares of the
Corporation which he now owns or may hereafter acquire, except as follows:
A. SALE, TRANSFER OR ENCUMBRANCE OF SHARES. Any Shareholder who desires to
sell, transfer or encumber all or any part of his shares shall first offer
such shares for sale to the Corporation, and thereafter to the other
Shareholders who are parties to this Agreement at the same price and on
the same terms offered by a bonafide prospective purchaser, or transferee,
as the case may be. Within thirty (30) days of receipt of a written offer,
the Corporation shall have the right to purchase the entirety of the
shares thus offered or any lesser portion thereof for a price in
proportion to the offering price based on the number of shares it agrees
to purchase. In the event that the Corporation does not purchase the
entirety of the shares thus offered, the other Shareholders may purchase
the shares not so accepted, and in such case shall be ratable to the
respective holdings of such other Shareholders, hut if any such
Shareholder, entitled to purchase shares, fails to accept the offer,
either in whole or in part, the other Shareholders may purchase the shares
not so accepted. If such other Shareholders fail to purchase the shares
within ten (10) days after written notice from the selling Shareholder
that the Corporation has refused the offer of shares, the restrictions
upon such shares, imposed by this paragraph, shall automatically terminate
at the end of thirty (30) days from the date of the notice.
2.2 REVERSION OF STOCK UPON TERMINATION OF EMPLOYMENT. Upon the termination of
employment with the Corporation of a Shareholder, all the shares held by
said Shareholder shall revert to the Corporation, automatically and
immediately, effective upon the date the employment terminates. Within
ninety (90) days of the effective date of termination of employment, the
Corporation shall tender to the terminated Shareholder an amount equal to
the product of the hook value of the Corporation and the percentage of
stock held by the terminated Shareholder (calculated based upon the then
issued and outstanding stock of the Corporation), as of the effective date
of termination of employment.
2.3 OPTION TO PURCHASE STOCK ON DEATH OR TERMINATION OF EMPLOYMENT. Upon the
death of a Shareholder, or upon the termination of employment of a
Shareholder by the Corporation the remaining Shareholders shall have the
option to purchase all the shares of stock of the Corporation owned by the
deceased or terminating Shareholder, upon the following terms:
A. RIGHT to PURCHASE. The right to purchase in such case shall be
ratable to the respective holdings of the remaining Shareholders,
but if any such Shareholder fails to exercise his option, either in
whole or in part, the other Shareholders may purchase such shares.
The option to purchase the shares of the decedent shall be exercised
by serving written notice on the representative of the succession of
the decedent or the terminating employee ("Transferror") within
fifteen (15) days after the qualification of such representative or
the termination of employment. In the event the remaining
Shareholders fail to purchase all the stock of the deceased or
terminating Shareholder, the Corporation may elect to purchase the
remaining stock.
B. PURCHASE PRICE. The purchase price shall be determined according to
Section 2.4
of this Agreement.
C. CLOSING. The closing of such purchase and sale shall take place at
the offices of the Corporation, on a date selected by the
Corporation, upon five (5) days notice to the Transferror, which
date shall not be more than one hundred eighty (180) days from the
date of the qualification of the Transferor or the termination of
employment and not less than thirty (30) days following such date.
D. PAYMENT OF PURCHASE PRICE. In the event of the death of a
Shareholder, if the Shareholder is subject to an insurance "buy-out"
arrangement with the Corporation, the rights to purchase the
decedent's stock shall be exercisable only by the Corporation and
the Purchase Price shall be paid in full within thirty (30) days of
receipt of the proceeds by the Corporation. Otherwise, and in the
event a Shareholder's employment is terminated, the purchase price
shall be payable as follows:
i. Ten (10%) percent to be paid in cash; and
ii. Ninety (90%) percent to be represented by a promissory note
executed by the purchasing Shareholders, or the Corporation,
as the case may be, payable in one hundred twenty (120) equal
monthly installments, such note to be secured by the stock and
payable with interest thereon at a rate which shall be
established at the time of closing, and which shall equal the
average of the real estate mortgage rate of interest charged
by three (3) banks with offices in Jefferson Davis Parish
selected by the Board of Directors of the Corporation.
E. SECURITY. Whenever a Shareholder purchases shares of capital stock
under this Agreement, such purchaser, unless he shall have paid the
entire purchase price in cash, shall, following the delivery of the
purchased stock, pledge the stock to the Seller with a reservation
of dividend and voting rights in favor of the purchasing
Shareholder, and deliver the certificates of stock issued to the
purchasing Shareholder to the Seller as security for the payment of
the unpaid purchase price; and such capital stock shall be so held
until the entire purchase price shall be paid. Upon full payment of
the purchase price, the stock shall be returned to the purchasing
Shareholder.
F. FAILURE TO EXERCISE OPTION. Upon the failure of the surviving
Shareholders and/or the Corporation to exercise the option to
purchase all the shares of stock of the Corporation owned by the
decedent within one hundred eighty (180) days of his death, the
restrictions imposed in this paragraph shall terminate.
2.4 PURCHASE PRICE. The price for each share of capital stock to be sold under
paragraph 2 of this Agreement shall be as follows:
A. In the event of death, the product of the equity interest of the
Shareholder, as of
the date of death, and the amount specified in the latest executed
Certificate of Agreed Value.
B. In the event of a termination of employment the product of the value
of equity interest of the Shareholder and the value of the
Corporation as determined by the Corporation's public accounting
firm. For purposes of ascertaining the value of the Corporation, the
following shall be observed:
i. No allowance shall be made for good will;
ii. All accounts payable shall be taken at face amount, less
discounts deductible therefrom, unless in the opinion of the
Corporation's accountant, a reserve is necessary;
iii. All furniture and fixtures and equipment are to be computed at
the depreciated value appearing on the books of the
Corporation;
iv. Inventory or supplies shall be computed at cost or market
value, whichever is lower;
v. All unpaid and accrued federal, state, city and municipal
taxes, including, but not limited to, sales, payroll,
unemployment insurance, excise, franchise and income, shall be
deducted as liabilities. The Federal Income Surtax Exemption
and State Income Tax Exemption shall be prorated for the
fiscal year involved. If the Corporation is treated as an "S"
corporation on the valuation date, state and federal taxes
shall be accrued as if the Corporation was not an "S"
corporation;
vi. Death proceeds of insurance held by the Corporation, if any,
insuring the life of a deceased Shareholder whose stock is
being valued for purchase under this Agreement, shall not be
included in the valuation to the extent such proceeds exceed
the unpaid premiums and cash value on the policy of the
insured Shareholder;
vii. The date of determination of the stock value ("Valuation
Date") shall be the last day of the month immediately
preceding the making of the Transferror's offer, or the
termination of the Shareholder's employment.
viii. Contractual obligations of the Corporation, contingent or
otherwise, under non-qualified "Deferred Compensation
Agreements", "Salary Continuation Agreements", or other such
agreements shall be fully valued as a liability of the
Corporation without discount for interest or any contingency,
including the termination of employment of any contracting
employee, which might reduce or terminate the Corporation's
obligation under such agreement, unless such a contingency as
to a contractual obligation occurred before or on the date of
valuation, in which event, the
resulting reduction or termination in value of the
Corporation's liability shall be considered;
C. The cost of determination of such purchase price shall be paid by
the Corporation;
2.5 ENDORSEMENT OF STOCK CERTIFICATE. All certificates for shares of the
Corporation shall be endorsed with a statement indicating that transfer of
the shares represented by the certificate are subject to restrictions
contained in this Shareholders' Agreement.
2.6 VALUE OF PURCHASE PRICE FOR TAX PURPOSES. It is understood that the
Purchase Price, determined as set forth hereinabove, shall be the value of
the purchased shares for all tax purposes. In the event such value is
later increased by any federal or state taxing authority, any tax
liability resulting from such increase shall be borne by the parties
equally.
2.7 DEADLOCK. If any Shareholder becomes dissatisfied with the other
Shareholders, the operation of the Corporation, or otherwise, the
dissatisfied Shareholder shall have the right to deliver to the other
Shareholders in identical form a written offer setting forth the price and
other terms at which the offering Shareholder both:
A. Irrevocably offers to sell all, but not less than all, his interest
in the Corporation to the other Shareholders, or
B. Irrevocably offers to buy all, but not less than all, the other
Shareholders' interest in the Corporation.
i. Within fifteen (15) days after the offering Shareholder
delivers said offer to the other Shareholders, the other
Shareholders must accept either the offer to sell or the offer
to buy by delivery of a written acceptance of either the offer
to sell or the offer to buy. Should the decision of the other
Shareholders to buy or sell not be unanimous, each Shareholder
who dissents from the majority decision shall have the right
to join with the offering Shareholder to sell his interest to,
or to buy the interests of, the remaining other Shareholders,
as the case may be. If the other Shareholders fail to deliver
said notice of acceptance within such thirty (30) day period,
the offering Shareholder shall elect which offer has been
accepted and shall give notice of such election to the other
Shareholders within ten (10) days after such thirty (30) day
period.
ii. Any offer, acceptance or notice of election under this
Agreement shall be deemed to be duly delivered when delivered
in person or when mailed by certified mail, postage prepaid,
addressed to the appropriate recipient thereof at his last
known address as shown on the books of the Corporation.
iii. If there shall be more than one Shareholder purchasing
pursuant to this section, each of such purchasing Shareholders
shall be entitled to purchase such proportionate part of the
Corporation's interests, being sold pursuant to this, as the
percentage interest then owned by him bears to the total
percentage interest then owned by all of the Shareholders who
shall desire to purchase part of the Corporation's interests
being sold, or such greater part of the Corporation's
interests being sold as shall be agreed upon by all the
Shareholders who shall desire to purchase part of the
Corporation's interests being sold pursuant thereto.
iv. The closing of any purchase and sale under this section shall
be held at the principal office of the Corporation (or such
other place as may be agreed upon by the offering Shareholder
and the other Shareholders), within ninety (90) days after
delivery of the initial offer to the other Shareholders, At
the closing, the amount of the purchase price shall be paid in
cash, or otherwise as specified in the initial offer, against
delivery of all documents necessary to transfer all of the
selling Shareholder(s)' interests.
2.8 INDEBTEDNESS OF A SHAREHOLDER. In the event that there is a purchase and
sale of shares of stock or interest therein, pursuant to the provisions
herein above, and there is any indebtedness owed by the selling
Shareholder or his estate to any party to this Agreement, then,
notwithstanding the said provisions relating to the payment of the
purchase price, any amount to be paid for the stock being purchased shall
be applied first to reduce and satisfy any indebtedness owed by the
selling Shareholder or his estate to any party under this Agreement.
2.9 DEFAULT, In the event of a default in any payment as provided for in
Paragraph 2.3 herein above, the Seller shall deliver to the surviving or
remaining Shareholders that portion of the shares of the purchasing
Shareholder equal to the ratio that the amount paid bears to the total
purchase price, and shall retain the balance of such shares. The estate or
the Seller, whichever the case may be, shall retain the portion of the
purchase price received and shall have a claim against the surviving or
remaining Shareholders for the difference between the value of the shares
as of the date of purchase and the value thereof as of the date of
default. No other claim for damages shall be available to the estate or
the Seller.
III.
ISSUANCE OF ADDITIONAL STOCK
3.1 No additional capital stock of this Corporation shall hereafter be
authorized, and no additional authorized capital stock of this Corporation
shall hereafter be issued, without the unanimous consent of all the
Shareholders.
IV.
NON-COMPETITION
5.1 NON-COMPETITION. In consideration of the issuance of stock in the
Corporation and the mutual obligations assumed under this Agreement by
each Shareholder and by the Corporation, each Shareholder agrees that
except as may be specifically agreed to in writing by the Corporation, for
throughout the term of this Agreement and during a period of two (2) years
following its termination, he shall not carry on or engage or participate
in any business the same as or in competition with the Corporation within
Jefferson Davis Parish. The phrase "the business of the Corporation" means
provision of physical therapy, occupational therapy and/or cardiac
rehabilitation services. The phrase "carry on or engage or participate in
a business the same as or in competition with the Corporation" shall
include but not be limited to, the doing, by the Shareholder, of any of
the following listed acts:
A. carrying on or engaging in any such business as a principal, or on
his own account, or solely or jointly with others, or as a director,
officer, agent, employee, consultant or partner (general or limited)
or stockholder or holder of any partnership interest (general or
limited) or holder of any equity interest or membership interest of
any entity, including a sole proprietorship, corporation,
partnership, limited partnership or limited liability company; or
B. as agent or principal carrying on or engaging in any activities or
negotiations with respect to the acquisition or the disposition of
any such business; or
C. giving advice to any other person, firm, association or corporation
engaging in any such business; or
D. lending or allowing his name or reputation to be used in any such
business; or
E. allowing his skill, knowledge, experience or reputation to be used
in any such business; or
F. calling upon any person or entity to which the Corporation has
heretofore provided, is currently providing or has heretofore been
negotiating for the provision of physical therapy, occupational
therapy or cardiac rehabilitation services, for the purpose of
soliciting, diverting, enticing away the business of such person or
entity, or otherwise disrupting the previously established or future
relationship between such person and the Corporation; or
G. hiring, offering to hire, or employing, or entering into business
with, whether as a joint venture, partnership, corporation or
otherwise, or offering or agreeing to do any of the foregoing with
any employees of the Corporation within Jefferson Davis Parish.
5.2 ENFORCEMENT. It is the desire and intent of the parties that the
provisions of this Article V shall be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, to the extent
that the covenant hereunder shall be adjudicated to be invalid or
unenforceable in any one such jurisdiction, this Article V shall be deemed
amended to delete therefrom or reform the portion thus adjudicated to be
invalid or unenforceable, such deletion or reformation to apply only with
respect to the operation of this Article in the particular jurisdiction in
which such adjudication is made. Moreover, each provision of this
Agreement is intended to be severable; and in the event that any one or
more of the provisions contained in this Agreement shall for any reason be
adjudicated to be invalid or unenforceable in any jurisdiction, the same
shall not affect the validity and enforceability of any other provisions
of this Agreement in that jurisdiction, but this Agreement shall be
construed in such jurisdiction as if such invalid or unenforceable
provision had never been contained therein. The parties agree that upon
the breach or threatened breach of any covenant of this Agreement, the
Corporation would suffer irreparable harm for which it would have no
adequate remedy at law and would, therefore, be entitled to injunctive
relief against any such breach or threatened breach as well as whatever
other remedies may be available to it.
VI.
TERMINATION
6.1 TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
occurrence of one of the following events:
A. The written agreement of the parties hereto or their permitted
successors in interest to that effect;
B. The bankruptcy, receivership, liquidation or dissolution of the
Corporation;
C. The disposal of all the shares of stock of any Shareholder during
his lifetime or by his succession representative or estate upon his
death, as to such retiring or deceased Shareholder only; or
D. AH of the issued and outstanding stock of the Corporation becoming
owned by a single Shareholder of the Corporation.
E. The Corporation or any of its officers, directors, or any
shareholder is:
(i) convicted of a felony relating to (i) federal or state health
care program fraud or abuse; or (ii) the neglect or abuse of a
patient; or
(ii) excluded or debarred from participation in the Medicare or
Medicaid programs.
VII.
OPERATIONS
7.1 LHC Group, LLC shall manage the operations of the Corporation pursuant to
a Management Services Agreement, and the Corporation should become fully
integrated with LHC Group's operations and collaborate with its affiliates
to maximize efficiency and profitability. Accordingly, the Shareholders
unanimously agree that the Corporation shall enter into a Management
Services Agreement with LHC Group, LLC conferring upon it the authority
and power to manage the day-to-day operations of the Corporation and
further providing it with the authority and powers customarily conferred
upon a Manager of a limited liability company.
7.2 The Shareholders unanimously agree that the Corporation should embark on a
path of growth to expand services into surrounding communities in
Southwest Louisiana including but not limited to Lake Arthur, Crowley, and
Lake Charles, doing business in markets outside of Jeff Davis Parish as
Louisiana Physical Therapy, an affiliate of Louisiana Health Care Group,
LLC, In furtherance of this goal, the Shareholders agree that LHC Group
marketing personnel based in Jennings shall be allocated to promote the
Corporation's services in proportion to the Corporation's Net Revenues
compared to those of Jeff Davis Home Health, and Louisiana Hospice and
Palliative Care of Jennings.
7.3 Unless otherwise agreed to by a two-thirds majority of the Shareholders,
the Shareholders agree that the Corporation shall distribute to the
Shareholders any Net Income in excess of the foreseeable needs of the
Corporation within 60 days of the end of each calendar quarter.
7.4 The Corporation's books and records shall be kept on the accrual basis of
accounting.
VIII.
CONVERSION OPTION
8.1 In the event that LHC Group, LLC is sold, merged or otherwise acquired, or
if it undertakes an initial public offering (collectively referred to
herein as "Sale Event"), each shareholder of Hebert &Thibodeaux Physical
Therapy, Inc. shall have the option to: (i) exchange its holdings of stock
in the Corporation to LHC Group, LLC Membership Units at a value
proportionate to the earnings of Corporation in relation to all other LHC
Group, LLC operations or (ii) to sell its holdings of Stock in the
Corporation to Louisiana Health Care Group, LLC at a price determined as
the product of: (i) the Shareholder's percentage holdings of stock in the
Corporation, and (ii) FIVE HUNDRED PERCENT (500%) of the Company's
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
for the twelve calendar month period ending on the last day of the last
calendar month prior to the event giving rise to the valuation. LHC Group,
LLC shall give each Shareholder no less than ten (10) days written notice
of the pendency of a
Sale event, and the Shareholder shall have an additional ten (10) days to
exercise this Conversion Option.
8.2 In the event that the Shareholder elects to exercise the first alternative
option, LHC Group, LLC agrees to complete the conversion of the
Shareholder's stock to LHC Group Units and to issue the Units within
thirty (30) days of receipt of notice of the exercise. The proportionate
number of Units to be issued shall be calculated as the percentage holding
of stock of the Shareholder multiplied by the product of (i) the total
issued and outstanding Units of LHC Group, LLC as of the date of the
notice and (ii) a fraction, the numerator of which is the Corporation's
EBITDA and denominator of which is LHC Group, LLC's EBITDA. As a
conditions precedent to the issuance of the Units by LHC Group, LLC, the
Shareholder will: (i) execute a written consent to the Sale Event; and
(ii) execute a counterpart to the Operating Agreement. The Units issued to
the Shareholder shall be subject to all terms, conditions and restrictions
contained in the Operating Agreement The Shareholder shall be bound by the
terms and conditions of the Sale Event in respect to the Units issued to
it by LHC Group, LLC.
8.3 In the event that the Shareholder elects to exercise the second
alternative option, LHC Group, LLC agrees to pay the purchase price by
delivery of an unsecured, non-negotiable promissory note in the amount of
the purchase price, with LHC Group, LLC as maker, payable in twenty equal
quarterly installments, commencing ninety days after the effective date of
the transfer, with interest at the prime rate published in the Wall Street
Journal on the date of the transfer without prepayment penalties. The note
shall contain a subordination clause subordinating the note to all other
debts of LHC Group, LLC. At its sole option and discretion, LHC Group, LLC
may pay all or part of the purchase price in cash at the time of the
transfer.
8.4 This Conversion Option shall terminate upon the earlier to occur of:
A. The termination of this Agreement;
B. The disposal of all the shares of stock of any Shareholder during
his lifetime or by his succession representative or estate upon his
death, as to such retiring or deceased Shareholder only; or
C. Upon the withdrawal of Louisiana Health Care Group, LLC as a
shareholder of the Corporation.
8.6 The parties acknowledge and agree that it is their intention for this
Conversion Option to operate only so long as the Sale Event actually
occurs and closes. In the event that the Sale Event does not occur as
scheduled, the exchange performed under the option shall automatically and
immediately be rescinded, without any requirement of notice by either
party, and Shareholder shall surrender any Units received and, likewise
shall have returned to him the stock tendered for conversion, or the stock
shall be returned and the purchase price shall be returned or promissory
note cancelled, as the case may be.
8.5 LHC Group, LLC, the sole Member and Manager of Louisiana Health Care
Group, LLC, intervenes in this Shareholders' Agreement to acknowledge and
agree to the terms of this Conversion Option and to ratify such terms.
IX.
MISCELLANEOUS
9.1 SHAREHOLDERS' RIGHTS OF CONTRIBUTION. If for any reason, a Shareholder
sustains any liabilities or is required to pay any losses arising out of,
or directly connected with, the Corporation, or the execution of any
agreements or guarantees in connection with the Corporation's operations,
which are in excess of his, her or its proportionate holdings of shares in
the Corporation, the other Shareholders shall promptly reimburse the
affected Shareholder this excess, so that each and every Shareholder of
the Corporation will then have paid its proportionate share of such losses
to the full extent of its holdings of shares in the Corporation.
9.2 GOVERNING LAW. This Agreement, and all transactions contemplated hereby,
shall be governed by, construed and enforced in accordance with the laws
of the State of Louisiana.
9.3 RECORDS AND ACCOUNTS. Each business enterprise of the Corporation shall
maintain its own records and books of accounts, separate and apart from
any other business enterprise of the Corporation.
9.4 AMENDMENTS; MODIFICATION. This Agreement may be amended, modified, or
altered only by execution of a written agreement authorized by corporate
resolution and signed by all the parties hereto.
9.5 NOTICES. Any and all notices, designations, consents, offers, acceptances,
or any other communication provided for herein, shall be given in writing
by United States certified mail addressed, in the case of the
Shareholders, to his address appearing in the records of the Corporation,
or to his residence, or to such other address as may be designated by him,
and, in the case of the Corporation, to the principal office of the
corporation, and shall be considered to have been delivered on the 5th day
following the date stamped by the post office.
9.6 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof
and the Agreement shall be construed in all respects as if such invalid or
unenforceable provision had been omitted.
9.7 BINDING EFFECT. This Agreement shall bind and, unless inconsistent with
its provisions, shall inure to the benefit of the Executor, Administrator
or Succession Representative, and the heirs and permitted assigns of each
of the Shareholders.
9.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties with respect to the matters addressed herein. This Agreement shall
not be construed or interpreted as a contract of employment. This
Agreement supersedes any prior Agreement of the parties.
THUS DONE AND SIGNED, in Jennings, Louisiana on the day and year first
above written.
WITNESSES "SHAREHOLDERS"
BARR BROWN /s/ David D. Hebert
- ---------------------------------------------- -------------------------------
David D. Hebert
/s/ Christopher B. Thibodeaux
- ---------------------------------------------- -------------------------------
Christopher B. Thibodeaux
"INTERVENOR"
LHC GROUP, LLC
BY: /s/ Keith G. Myers /s/ Kevin P. Touchet
------------------------------------------ -------------------------------
Keith G. Myers, Manager Kevin P. Touchet
/s/ Daryl J. Albro
-------------------------------
Daryl J. Albro
"CORPORATION"
HEBERT AND THIBODEAUX LOUISIANA HEALTH CARE
PHYSICAL THERAPY, INC. GROUP, LLC
BY: LHC GROUP, LLC, Manager
BY: /s/ Christopher B. Thibodeaux BY: /s/ Keith G. Myers
------------------------------------------ ---------------------------
Christopher B. Thibodeaux, Secretary-Treasurer Keith G. Myers, Manager
----------------------------------
Notary
CERTIFICATE OF AGREED VALUE
WHEREAS, Louisiana Health Care Group, LLC, David D. Hebert, Christopher B,
Thibodeaux, Kevin P. Touchet and Daryl J. Albro, (hereinafter referred to as
"Shareholders"), own all of the outstanding shares of Hebert & Thibodeaux
Physical Therapy, Inc., a Louisiana corporation, (hereinafter referred to as
"Corporation"), and
WHEREAS, Shareholders and Corporation have executed an Agreement
containing certain restrictions and obligations on the shares of stock of said
Corporation,
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained in this Agreement, it is hereby agreed by the undersigned
as follows:
1. VALUE. Pursuant to Paragraphs 2.3 and 2.4 of said Agreement for the purposes
therein stated, for the current calendar year and continuing until a new
Certificate is executed by the parties hereto, the value of the shares of said
Corporation is hereby agreed to be _____________________________________________
DOLLARS ($________) per share.
THUS DONE AND SIGNED, on this the_________day of_____________, 200_____,
and effective the__________day of_______________________, 200______in Jennings,
Louisiana.
SHAREHOLDERS HEBERT AND THIBODEAUX PHYSICAL THERAPY, INC.
"CORPORATION"
_______________________________ BY: ________________________________________
David D. Hebert Christopher Thibodeaux, Sect-Treasurer
_______________________________ LOUISIANA HEALTH CARE GROUP, LLC
Christopher B. Thibodeaux Shareholder
BY: LHC GROUP, LLC, Manager
_______________________________ BY: _______________________________________
Kevin P. Touchet Keith G. Myers, Manager
_______________________________
Daryl J. Albro
APPENDIX D
OPERATING AGREEMENT
OF
ACADIAN HOME HEALTH CARE SERVICES, L.L.C.
This Operating Agreement is entered into and is effective as of the 1st
day of January, 2004 (the EFFECTIVE DATE), by and among the undersigned Members
who agree as set forth herein regarding the operations of Acadian Home Health
Care Services, L.L.C., a Limited Liability Company, organized under and existing
pursuant to the laws of the State of Louisiana:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
As used in this Agreement, defined terms have the meanings hereinafter set
forth:
(a) "Act" means the Louisiana Limited Liability Company Law, Louisiana
Revised Statutes 12:1301 et seq., and any successor statute as
amended.
(b) "Affiliate" means (i) any person directly or indirectly controlling,
controlled by or under common control with a Member; (ii) any person
owning or controlling 10% or more of the outstanding voting
securities or membership interest of a Member; (iii) any officer,
director, member, manager or other partner of a Member; and (iv) if
a Member is an officer, director, joint venturer, member, manager or
partner, any business or entity for which the Member acts in any
such capacity.
(c) "Agreement" or "Operating Agreement" means this Operating Agreement
as originally executed and as amended from time to time.
(d) "Articles" means the Articles of Organization of Acadian Home Health
Care Services, L.L.C., as filed with the Secretary of State of
Louisiana, as the same may be amended from time to time.
(e) "Calendar Quarter" means the three calendar month periods ending on
March 31st, June 30th, September 30th, and December 31st of each
year.
(f) "Capital Account" means a Capital Account maintained in accordance
with the rules contained in of the Regulations.
(g) "Capital Contribution" means any contribution to the capital of the
Company in cash, property or future services by a Member whenever
made.
(h) "Closing" means the Effective Date set forth above.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Company" means Acadian Home Health Care Services, L.L.C., a Limited
Liability Company organized under and existing pursuant to the laws
of the State of Louisiana.
(k) "Distributive Shares" means the share of distributed revenues from
the Company due to each Member under the Membership Interests
applicable to such distribution.
(l) "Fiscal Year" means the Company's fiscal year, which shall be the
calendar year.
(m) "Majority Vote" or "Votes" means given to these terms in Section
4.15.
(n) "Member" means any person executing this Agreement as a Member or
hereafter admitted to the Company as a Member as provided in this
Agreement, but does not include any person who has ceased to be a
Member in the Company.
(o) "Membership Interest" or "Interest" means a Member's interest in the
Company in which the Member shares in the income, gains, expenses,
profits, losses, deductions and credits of the Company, which
Interest is expressed as the percentage of the Member's holdings of
Units in the Company in proportion to the total issued and
outstanding Units of the Company.
(p) "Net Profits" and "Net Losses" means the Company's taxable income or
loss determined in accordance with the Code for each of its Fiscal
Years.
(q) "Net Revenues" means total charges of the Company for services
provided less contractual adjustments and allowances for bad debt.
(r) "Officer" means one or more individuals appointed by the Members to
whom the Members delegate specified responsibilities. The Members
may, but shall not be required to, amend this Agreement to create
such offices as they deem appropriate, including, but not limited
to, President, Vice Presidents, Secretary and Treasurer. The
Officers shall have such duties as are assigned to them by the
Members from time to time, which duties shall be memorialized by
written amendment to this Operating Agreement. All Officers shall
serve at the pleasure of the Members and the Members by Majority
Vote may remove any Officer from office without cause and any
Officer may resign at any time.
(s) "Person" means any individual, corporation, partnership, limited
liability company or any other entity eligible to be a Member under
the Act.
(t) "Properties" means all of the Company's interests in any movable or
immovable properties, contracts or other assets owned by the
Company.
(u) "Service Area" means Allen, Beauregard, Calcasieu, Cameron, and
Jefferson Davis Parishes in the State of Louisiana.
(v) "Transferor Member" means any Member who sells or transfers, or
offers to sell or transfer, or attempts to sell or transfer his
Units in the Company to another Person; or any Member who is subject
to a voluntary or involuntary withdrawal.
(w) "Treasury Regulations" or "Regulations" means the federal income tax
regulations, including temporary regulations, promulgated under the
Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
(x) "Units" means an interest in the Company acquired by a Member in
exchange for capital contributions to the Company. Units shall
represent an equity interest in the Company and shall have voting
rights equal to one vote per Unit as set forth herein. The maximum
authorized number of Units of the Company is ten million
(10,000,000).
ARTICLE 2
ORGANIZATION
2.1 INTENT
This Agreement constitutes the Operating Agreement of the Company, as
referred to in the Company's Articles and the Act.
2.2 FORMATION
The Company has been formed by the Members as a Louisiana limited
liability company by the filing of Articles pursuant to the Act.
2.3 PURPOSES
(a) The Company is formed for the purpose of acquiring and operating a
Medicare certified home health agency within the Service Area in the
State of Louisiana, and otherwise engaging in any lawful activity
for which limited liability companies may be formed under the laws
of the State of Louisiana as may be approved by the Members. In
furtherance thereof, the Company may exercise all powers necessary
to or reasonably connected with the Company's business which may be
legally exercised by limited liability companies under the Act, and
may engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
(b) The parties acknowledge that Louisiana Health Care Group, LLC owns
and operates several home health agencies in south-central
Louisiana, including agency offices located in Abbeville, Baton
Rouge, Bunkie, Clinton, Crowley, Eunice, Ferriday, Franklin,
Lafayette, New Iberia, Oakdalc, Opelousas, Palmetto, and Ville
Platte whose service areas may overlap with Company's Service Area.
The parties further acknowledge that Louisiana Health Care Group,
LLC is in the process of acquiring or establishing home health
agency offices in Bunkie and the greater Alexandria area. The
parties further acknowledge that the Company's home health agency's
authorized regulatory service area is that area within a fifty (50)
statute mile radius of Lake Charles, Louisiana, and that this
regulatory service area may result in the Company competing with
other home health agency offices owned by subsidiaries or Affiliates
of Louisiana Health Care Group, LLC. The parties agree that, while
they intend for the Company to compete vigorously with nonaffiliated
home health agencies, they do not intend for the Company to compete
with such other home health agencies owned by Louisiana Health Care
Group, LLC or its subsidiaries or Affiliates, but rather intend to
cooperate and act in conjunction with such Affiliated entities in
order to maximize the quality of care for patients at a minimum cost
resulting from cost-sharing activities and shared expertise.
Likewise the parties do not intend for such other home health
agencies of such Member or its Affiliates to compete with Company.
Therefore, the parties agree that the Company shall provide home
health care services to patients who reside closer to Company's home
health agency office than another home health agency office owned by
Louisiana Health Care Group, LLC or one of its subsidiaries or
Affiliates. Manager shall cause its Affiliates to refer patients to
Company who reside closer to Company's home health agency office
than to another home health agency office owned by Louisiana Health
Care Group, LLC or one of its subsidiaries or Affiliates.
(c) The parties agree that the foregoing limitations are not in the
nature of a non-
competition agreement, but rather are voluntary, self-imposed
restrictions on operations of the Company to protect other business
interests of the Company, the Members and their Affiliates, in the
absence of which Company would not have transferred the Membership
Interests to the Members and the Members would not have acquired
such interest.
(d) The parties further agree that these restrictions on the Company's
operations may only be modified or rescinded upon the unanimous
consent of the Members of the Company.
(e) Notwithstanding the foregoing, the obligations contained herein are
not intended to induce the referral of patients, items or services
and the Parties acknowledge that there is no requirement that either
Member refer patients to Company, except as may be consistent with
the wishes of the patient and with law.
2.4 REGISTERED OFFICE AND AGENT
The Company shall maintain a registered office and a registered agent in
the State of Louisiana, which office and agent may be changed by the
Members.
2.5 OTHER OFFICES
In addition to its registered office in Louisiana, the Company may have
other offices and places of business at such places, both within and
without the State of Louisiana, as the Members may from time to time
determine.
2.6 OPERATING AGREEMENT
The affairs of the Company shall be governed by the Act, its Articles and
this Operating Agreement. There shall be only one Operating Agreement
governing the affairs of the Company and the relationships of the Members
to one another as such relate to the business of the Company. Any oral or
written agreement between or among the Members relating to the Company and
the matters governed by this Operating Agreement shall be of no effect
whatsoever unless and until the Members agree by Majority Vote (or, if
applicable, by unanimous vote) to incorporate said agreement into this
Operating Agreement.
ARTICLE 3
MEMBERS
3.1 MEMBERS
The Members of the Company shall be those Persons who have joined in the
execution of this Agreement, and any other Persons who may be hereafter
approved for membership by the unanimous Vote of the Members.
3.2 EXECUTION OF THIS AGREEMENT
The admission of an additional Member shall not become effective until the
Person has executed this Agreement, or an appropriate supplement hereto,
pursuant to which the new Member agrees to be bound by, and subject to,
all of the terms and provisions hereof and restrictions herein.
3.3 MEMBERS HAVE NO EXCLUSIVE DUTY TO COMPANY
(a) No Member shall be required to perform services for the Company
solely by virtue of being a Member. Unless approved by the Members,
no Member shall perform services for the Company or be entitled to
compensation for services performed for the Company.
(b) Except as otherwise expressly stated herein, no Member shall be
required to participate in the Company as such Member's sole and
exclusive function and any Member shall be entitled to and may have
other business interests and may engage in other activities in
addition to those relating to the Company and in addition to those
permitted Related Party Transactions as described in Section 4.23.
No Member shall have a business interest or engage in activities
which are in direct competition with the Company's provision of home
health care services without the expressed written approval of the
other Members pursuant to a Majority Vote. Neither the Company nor
any Member shall have any right, by virtue of this Operating
Agreement, to share or participate in such other investments or
activities of the Member or to the income or proceeds derived
therefrom, and no member shall have any liability or responsibility
for any losses sustained by a Member in such other investments or
activities. The Member shall incur no liability to the Company or to
any of the Members as a result of engaging in any other business or
venture permitted by this Agreement.
ARTICLE 4
MANAGEMENT
4.1 MANAGERS
(a) The business of the Company shall be managed by a Manager, who may,
but need not, be Member, and who shall be a mandatary of the Company
for all matters in the ordinary course of its business. LHC GROUP,
LLC shall be the initial Manager of the Company, and appears herein
to accept said appointment. To the extent authorized by this
Agreement, the Manager shall have full, exclusive and complete
discretion, control, power and authority in the management of the
Company's affairs. The Manager shall have full power and authority
to undertake any activity described in this Article and to execute
and deliver on behalf of the Company such documents or instruments
which the Manager deems appropriate in the conduct of the Company's
business. No person, firm or corporation dealing with the Company
shall be required to inquire into the authority of the Manager to
take any action or make any decision.
(b) The Manager shall be required to devote to the Company's affairs
only such part of its time as is reasonably required to conduct the
operations contemplated under this Agreement and shall be free to
engage in any other business for its own account and/or for the
account of others, however, no such business interests and
activities may be in direct competition with the Company. Neither
the Company nor any of the Members shall have any rights by virtue
of this Agreement in any independent business ventures of the
Manager. The Manager shall not take or recommend any action which
may or will affect the Company's home health agency licensure or
Medicare certification, or which violates any law or regulation.
(c) Subject to the ultimate authority of the Members of the Company, the
day to day
management of the Company's operations within the Service Area shall
be conducted by the Manager under the oversight and direction of a
"Management Committee" which is hereby established. The Management
Committee shall not take or recommend any action which may or will
affect the Company's home health agency licensure or Medicare
certification, or which violates any law or regulation. Each
representative of the Members shall be assigned the following number
of votes and each Member hereby designates the following
representatives to exercise such votes on the Management Committee:
PARTY REPRESENTATIVE VOTES
- ------------------- --------------------- ------
Company Keith G. Myers 62.5
Beta HomeCare, Inc. Chris Baggett 37.5
The votes granted to the representatives are for purposes of the
management committee only and do not constitute "Votes" as same are
defined in Section 4.15. Representatives on the Management Committee may
meet and take action in accordance with the provisions of Sections 4.17
and 4.18 of this Agreement.
4.2 POWERS OF MANAGER.
The Manager shall have all necessary powers to carry out the purposes and
conduct the business of the Company including, without limitation,
excepting any specific limitations contained in this Agreement or in
applicable law, the authority, right and power on behalf of the Company
to:
(a) To negotiate all such contracts, agreements, and other undertakings
without binding the Company until same are approved by Majority Vote
(or if applicable, unanimous vote) of the Members;
(b) Hold, manage and defend the assets of the Company;
(c) Open, maintain and close bank accounts, designate and change
signatories on such accounts and draw checks and other orders for
the payment of monies;
(d) Acquire, buy, lease, sell, convey, assign, trade, exchange,
quitclaim, surrender, release, abandon or otherwise dispose of any
movable assets or interest therein or payable therefrom in an amount
not to exceed $25,000 without any further act or vote or grant of
authority by any Members and in connection therewith make any such
distributions as the Manager may deem appropriate from the proceeds
of such sale to the Members. Any such transaction exceeding $25,000
shall require the prior approval of 75% of the Votes;
(e) To collect and deposit all Company receipts and to disburse all
Company funds in payment of all ordinary and necessary expenses;
(f) Sue and be sued, complain and defend in the name of and on behalf of
the Company;
(g) Execute and deliver all negotiable instruments, checks, drafts or
other orders for the receipt or payment of funds belonging to the
Company;
(h) Execute powers of attorney, consents, waivers and such other
documents as may be necessary or appropriate before any court,
administrative board or agency of any governmental authority
affecting Company assets;
(i) Purchase insurance, at the Company's expense, to protect Company
assets against loss and to protect the Manager against liability to
third parties arising out of the Company's activities, provided that
any such insurance shall name each Member, individually as an
additional named insured;
(j) Prepare and file all returns for the Company and make all elections
for the Company with respect to federal and state income or other
taxes;
(k) Recommend employment of such agents, employees, accountants,
lawyers, clerical help and other assistance and services subject to
approval by Majority Vote;
(l) Grant and perfect security interests in the Company's accounts
solely for the purposes of obtaining operational financing as
provided in Section 4.23 and 4,29; and
(m) Execute and deliver such other documents and perform such other acts
as the Manager in his sole discretion may determine to be necessary
or appropriate to carry out the purposes of the Company
The foregoing powers of the Manager are subject to the limitation that no
specific action may be taken by the Manager over the prior objection to
such specific action by a Member unless and until such specific action is
approved by Majority Vote (or if applicable, unanimous vote).
4.3 CERTAIN LIMITATIONS ON AUTHORITY OF MANAGER.
All authority not specifically delegated to the Manager hereinbefore shall
be reserved to the Members. All decisions of the Members shall be
determined by Majority Vote; except that, the following matters shall
require the unanimous approval of the Members:
(a) To dissolve, liquidate or wind-up the business of the Company;
(b) To sell, exchange, lease, mortgage, pledge, encumber, or grant a
security interest in, or otherwise transfer assets, other than
inventory in the ordinary course of business, and other than
granting and perfecting security interests in the Company's accounts
as provided in 4.2(1) above;
(c) To merge or consolidate the Company with or into any other entity;
(d) Except as provided in Section 4.29 in relation to operational
financing, to incur indebtedness in excess of $25,000 in any one
transaction, or in excess of $100,000 in the aggregate, which
aggregate amount shall include any outstanding operational financing
amounts;
(e) To alienate, lease or encumber any immovable property belonging to
the Company;
(f) Confess to judgment against the Company;
(g) To admit new members;
(h) To file voluntary bankruptcy proceedings;
(i) To amend the Articles or this Agreement; and
(j) To make distributions to a Member or Members.
4.4 COMPENSATION AND REIMBURSEMENT OF MANAGER
Manager shall not receive any compensation for its services rendered in
its legal capacity as Manager of the limited liability company unless and
until same be established upon a Unanimous Vote. Manager shall be
reimbursed on a monthly basis for all direct costs and expenses reasonably
incurred on behalf of the Company. All compensation to Manager for
services rendered and all direct costs and expenses incurred by Manager on
behalf of the Company shall not exceed that which is reasonable and proper
for comparable services performed in a like manner in accordance with
industry standards, and shall to the extent applicable, meet the criteria
of any applicable safe harbor regulation.
4.5 LIABILITY AND INDEMNIFICATION OF MANAGER.
In addition to any other provision contained herein conferring similar
rights, the Manager shall not be liable, responsible, or accountable in
damages or otherwise to the Company or to any Member for any action taken
or any failure to act on behalf of the Company within the scope of the
authority conferred on the Manager by this Agreement or by law, unless the
action was taken or omission was made fraudulently or in bad faith or
unless the action or omission constituted gross negligence, or conduct
demonstrating a greater disregard of the duty of care than gross
negligence, including but not limited to, intentional tortious conduct or
intentional breach of Manager's duty of loyalty.
4.6 POWER OF ATTORNEY.
Each Member hereby constitutes and appoints the Manager as the Member's
true and lawful attorney and agent with full power and authority in the
Member's name, place, and stead solely for the purpose of executing,
swearing to, acknowledging, delivering, filing, and recording in the
appropriate public offices:
(a) All such certificates that are necessary or appropriate to qualify
or continue the Company as a limited liability company or conduct
the business of the Company in the jurisdictions in which the
Company may conduct business or own or lease property; and
(b) One or more fictitious or trade name certificates
The power of attorney granted herein shall be considered to be coupled
with an interest, and, to the extent permitted by applicable law, shall
survive the death, interdiction, withdrawal, resignation, retirement,
expulsion, bankruptcy, dissolution, or termination of existence of a
Member or interest holder. It shall also survive the Transfer of an
Interest, except that if the Transferee is admitted as a Member, this
power of attorney shall survive the delivery of the assignment for the
sole purpose of enabling the Manager, as attorney in fact, to execute,
acknowledge, and file any documents needed to effectuate the substitution.
4.7 RESIGNATION OR WITHDRAWAL OF MANAGER.
The Manager may resign upon giving written notice to the Company at least
thirty (30) days in advance. Upon the resignation or withdrawal of the
Manager, a new Manager may be elected by an unanimous vote of the Members.
4.8 OTHER AGENTS
The Members, on unanimous vote, may appoint other managers, agents, or
attorneys-in-fact as needed from time to time, whose authority to act for
the Company shall be stated in the written act or instrument pursuant to
which said agent or attorney in fact is appointed. Unless expressly
authorized to do so by the Members, no attorney-in-fact, employee or other
agent of the Company shall have any power or authority to bind or obligate
the Company in any way, or to pledge its credit.
4.9 REMOVAL OF MANAGER.
The Members, at any time and with or without cause, may remove a Manager
and elect a new Manager, upon unanimous Vote of the Members .
4.10 LIMITATION ON AUTHORITY OF MEMBERS.
No Member is an agent of the Company solely by virtue of being a Member,
and no Member has authority to act for the Company solely by virtue of
being a Member. This Section 4.10 supersedes any authority granted to the
Members by the Act. Any Member who takes any action or binds the Company
in violation of this Operating Agreement shall be solely responsible for
any loss and expense incurred by the Company as a result of the
unauthorized action and shall indemnify and hold the Company harmless with
respect to the loss or expense.
4.11 BUSINESS JUDGMENT.
The Managers and the Members shall be entitled to rely on information,
opinions, reports or statements, including but not limited to financial
statements or other financial data prepared or presented by: (i) any one
or more Members, Officers or employees of the Company whom the Member
reasonably believes to be reliable and competent in the matter presented,
(ii) legal counsel, public accountants, or other persons as to matters the
Member reasonably believes are within the person's professional or expert
competence, or (iii) a committee of Members on which he or she does not
vote if the Member reasonably believes the committee merits confidence.
4.12 MEETINGS OF THE MEMBERS
Subject to the notice requirement of Section 4.13, meetings of the Members
may be called at any time by a Manager, or by Members holding in the
aggregate thirty percent (30%) of the Units. If the meeting is called by
less than a majority in interest of the Members, it shall be held at the
registered office of the Company, unless all Members agree to an alternate
location. Subject to the foregoing, meetings of the Members may be held at
the office of the Company, or at such other place, either within or
without the State of Louisiana, at a time and date as designed in the
notice. Failure to hold an annual meeting shall not affect or vitiate the
Company's existence.
4.13 NOTICE OF MEETINGS
Written notice of the time and place of a meeting of Members shall be
given by the Person calling the meeting to all Members at least two (2)
days and not more than sixty (60) days prior to the date fixed for the
meeting. Notice of any Members' meeting may be waived in writing by any
Member at any time. Attendance at any meeting by a Member shall be deemed
a waiver of notice of such meeting unless such attendance is solely for
the purpose of objecting to the legality of the meeting on grounds of
inadequate or improper notice.
4.14 QUORUM
Except as may be otherwise required by the Act, the Articles or this
Agreement, the presence in person or by proxy of persons holding fifty-one
percent (51%) of the Votes shall be necessary to constitute a quorum at
any meeting of the Members.
4.15 VOTING
At any meeting of the Members, every Member having the right to vote shall
be entitled to vote in person, or by proxy. There shall be one vote
allotted for each Unit held by the Members (the "Votes"). Fractional Units
shall not be entitled to vote except in the event of a tie vote. Except
for actions requiring the unanimous or a supermajority consent or approval
of the Members as required by the Act, the Articles, or this Agreement, a
fifty-one percent (51%) majority of the Votes present and voting
("Majority Vote") shall decide any matter brought before the Members. On
demand of any Member, the vote on any question shall be by written ballot.
4.16 PROXIES
At any meeting of the Members, every Member shall be entitled to vote in
person or by proxy appointed by an instrument in writing subscribed by
such Member and bearing a date not more than eleven months prior to the
meeting, unless the instrument provides for a longer period. Any Member
may issue an irrevocable proxy to any other Member. A copy of such
instrument shall be filed prior to or at the meeting. The person granted a
Member's proxy has full authority to act as and on behalf of the Member
granting such authority, with all powers and rights incident thereto,
unless otherwise limited in such instrument.
4.17 WRITTEN CONSENT
Any action may be taken without a meeting of the Members if a consent in
writing, setting forth the action so taken, shall be signed by those
Members having sufficient votes to authorize the action. Such consent
shall have the same force and effect as a vote of the Members. A
photostatic, email, facsimile transmission, or similar reproduction of a
writing, signed by a Member, shall be regarded as an original for all
purposes. A copy of the written consent shall be distributed to each
non-consenting Member within fifteen (15) days of the date of such
consent. The failure to distribute such copies shall not vitiate or effect
the consent in any manner.
4.18 TELEPHONE CONFERENCE CALLS; EMAIL
Members may participate in meetings by means of a telephone conference
call or similar communication equipment provided that all Persons
participating in the meeting can hear and communicate with each other.
Participation in such a meeting shall constitute presence at the meeting,
except where a Person participates in the meeting for the express purpose
of objecting to the transaction of any business on the ground that the
meeting is
not lawfully called or convened. The Manager may poll the Members by
telephone and the results of such poll may constitute action by the
Members so long as no Member who has been polled objects to such action
prior to its adoption, and provided that any action taken by poll is
properly reduced to writing and a copy of the same provided to the Members
within ten (10) days following the poll. Members may take action by way of
serial email transmissions so long as each Member contemporaneously
receives a copy of the emails proposing and discussing such action and no
Member objects to such action prior to its adoption.
4.19 TAX RETURNS AND ELECTIONS
The Manager shall cause the preparation and timely filing of the Company's
tax returns, shall make such tax elections and determinations as appear to
be appropriate, and shall timely file all other writings required by any
governmental authority having jurisdiction to require such filing. Upon
the transfer of all of the Member's interest in the Company or upon the
death of a Member, or upon the distribution of any property of the Company
to a Member, the Company may (but shall not be required to) file an
election in accordance with the applicable Treasury Regulations to cause
the basis of such property to be adjusted for federal income tax purposes
as provided by the Code.
4.20 REIMBURSEMENT OF COSTS AND EXPENSES
Any Member acting for and on behalf of the Company shall be entitled to
reimbursement for all reasonable expenses, costs and other liabilities
reasonably incurred on behalf of the Company, except to the extent that
such expenses, costs and other liabilities are incurred in connection with
services that the Member has agreed to perform for the Company as a
contribution to its capital.
4.21 LIMITATION OF LIABILITY
Except as otherwise provided by the laws of the State of Louisiana, the
personal liability of each Member, if any, shall be limited to his capital
contribution to the Company as set forth herein. No Member has guaranteed
or shall have any obligation with respect to the return of a Member's
Capital Contributions or profits from the operation of the Company. No
Member shall be liable for any debt or liability of the Company unless
same shall be separately guaranteed or endorsed by a Member in that
Member's personal capacity. No Member shall be liable, responsible or
accountable in damages or otherwise to the Company or any other Member for
any loss or damage incurred by the Company or the Member by reason of any
act or omission performed or omitted by the Member on behalf of the
Company, provided that the Member acted (i) in good faith, and (ii) in a
manner reasonably believed by the Member to be within the scope of the
authority granted to him by this Agreement and in the best interest of the
Company. The foregoing limitation of liability shall not apply to such
losses to, or damages incurred by, the Company or the Members that result
from the Member's gross negligence, intentional misconduct or breach of a
fiduciary duty owed to the Company or the Members.
4.22 INDEMNITY
Except as otherwise provided for herein, to the fullest extent permitted
by law the Company shall indemnify, defend and hold harmless each Member
and make advances for expenses to each Member arising from any loss, cost,
expense, damage, claim or demand, in connection with the Company, the
Member's status as a Member of the Company, the Member's participation in
the management, business and affairs of the Company or such Member's
activities on behalf of the Company. The Company shall
also indemnify, defend and hold harmless its Officers, employees and
Managers from any loss, cost, expense, damage, claim or demand in
connection with the Company, any such Person's participation in the
business and affairs of the Company, or such Person's activities on behalf
of the Company. Each Member shall be named as an additional insured in any
liability insurance policy secured or obtained by or on behalf of the
Company. Upon request of any Member, each Member agrees to notify its
present or future insurer or insurers that it desires to waive subrogation
against the other parties to this Agreement and to verify that such waiver
has been made part of the policy. Each of the parties hereby agree to
indemnify, and hold the other harmless for any loss sustained because of
the other's failure to carry out the obligation provided in this agreement
relating to the waiver of subrogation.
4.23 RELATED PARTY TRANSACTIONS
(a) Anything in this Agreement to the contrary notwithstanding (other
than as provided in Section 4.23(b) and (c)), it is agreed by and
among the Company and its Members that the Company shall not enter
into any contract, agreement or transaction with any Member or
Affiliate of the Company; or with any individual family member
(spouse, child, sibling or parent) of any Member of the Company; or
with any Affiliate, corporation, partnership or legal entity owned
(10% or more) or controlled by any Member or Affiliate of the
Company, or an immediate family member thereof; or any individual
which is a shareholder or other equity interest owner in a
corporation, partnership or limited liability company which is a
Member or Affiliate, without the unanimous consent of the remaining
disinterested Members which shall be calculated by omitting the
votes attributable to the interested Member. The following are
non-exclusive examples of transactions covered by this section and
requiring consent of a majority of the disinterested Members:
(i) sale of the Company's real estate or movable property or
assets to the Members, their immediate family members or
related entities or Affiliates;
(ii) leasing of the Company's real estate or movable property or
assets, or any portion thereof to or from the Members, their
immediate family members or related entities or Affiliates;
(iii) entering into contracts for the management, servicing, repair
or improvement of the Company's business, real estate, movable
property or other assets, or any portion thereof, with the
Members, or their immediate family members or related entities
or Affiliates.
(iv) employment or professional services agreements.
(b) Notwithstanding the foregoing, the Members agree that LHC Group,
LLC, the Company's Manager, may provide operating capital to the
Company at its cost as provided in Section 4.29, and in conjunction
therewith shall be authorized to grant a security interest in the
Company's accounts receivables to any lender of such funds. Further,
the Members agree that LHC Group, LLC shall provide management
services to include payroll, billing, purchasing, accounts payable
processing, accounting, and similar services to the Company and
shall be entitled to reimbursement for its Direct Costs of
furnishing same. The term "Direct Costs " as used in this Section
4.23 (b) shall mean all reasonable expenses incurred by Manager on
behalf of the Company, including Manager's reasonable actual costs
of personnel, equipment, supplies and other expenses incurred in
providing the management services, including Manager's functional
allocation of home office costs according to Medicare principles of
cost allocation for payroll, salaries and benefits administration,
accounts payable, billing direction of home health operations, and
quality assurance and performance improvement, and provided that
such Direct Costs shall not exceed such charges as are reasonable
and necessary in accordance with industry standards and shall, to
the extent applicable, meet the criteria of any applicable safe
harbors
(c) Notwithstanding the foregoing, the Members agree that the Company
may enter into the following transactions with shareholders of Beta
HomeCare, Inc. (hereinafter "Beta"), or its affiliates as deemed
necessary for the continued operations of the home health agency:
(i) Lease of available office space for the home health agency at
fair market value for operations of the Company, provided the
parties intend that the lease shall meet the criteria of the
lease-rental safe harbor to the federal laws prohibiting
payments for referrals; and
(ii) Employment Agreements with John Rudd and Christopher Baggett
for the provision of services necessary for the operations of
the Company.
(d) In no event may the services provided or the expenses, rents or
other charges incurred under the foregoing provisions in any related
party transactions or any other transactions in which the Company is
involved, violate any criteria of any applicable safe harbor
provisions relating to federal laws prohibiting payments for
referrals or other regulations prohibiting payments in excess of
fair market value, to the end that all transactions in which the
Company is involved may comply with and not be in violation of any
applicable regulations.
4.24 CONTRACTS IN VIOLATION
Any contract, agreement, or transaction entered into without the unanimous
consent of the disinterested Members as required in Section 4.23 above or
as otherwise permitted herein, shall be absolutely null and void and of no
force and effect as concerns the Company and the disinterested Members.
4.25 NO INDEMNIFICATION
The limitation of liability and indemnification provisions of Sections
4.21 and 4.22 of this Agreement shall not apply to any transaction entered
into in violation of Sections 3.3 and 4.23 above. Furthermore, the
limitation of liability and indemnification provisions of Sections 4.21
and 4.22 of this Agreement shall not apply to any Member if that Member is
determined to have breached any fiduciary duty to the Company. In such
event, the Member shall promptly reimburse to the Company any sums
advanced under Sections 4.21 or 4.22.
4.26 MEMBERS' AND OFFICERS' COMPENSATION
Any salaries and other compensation of the Members or Officers shall be
fixed by the unanimous vote of disinterested Members , and no Member shall
be prevented from receiving such salary by reason of the fact that he is
also a Member of the Company. The salary fixed by the Members shall not
exceed reasonable compensation for the services rendered in accordance
with industry standards and any applicable regulations.
4.27 TAX ELECTIONS; TAX MATTERS PARTNER.
All elections required or permitted to be made by the Company under the
Code shall be made by a Majority Vote of the Members. For all purposes
permitted or required by the Code, the Members constitute and appoint its
initial Manager as Tax Matters Partner or, if he is no longer the Manager,
then such other Member or Manager as shall be elected by the Members by
Majority Vote. The provisions on limitations of liability and
indemnification of the Members set forth in Article 4 hereof shall be
fully applicable to the Tax Matters Partner in his or her capacity as
such. The Tax Matters Partner may resign at anytime by giving written
notice to the Company and each of the other Members. Upon the resignation
of the Tax Matters Partner, a new Tax Matters Partner may be elected by
Majority Vote of the Members.
4.28 INSURANCE.
The Company, for itself and its Members as additional insureds, shall
maintain in force and effect general commercial liability insurance
coverage of no less than $1,000,000 per incident and $3,000,000 in the
aggregate; professional liability insurance of no less than: (i)
$1,000,000 per incident and $3,000,000 in the aggregate, or (ii) $ 100,000
per incident and $300,000 in the aggregate, subject to and including
participation as a Qualified Healthcare Provider in the Louisiana
Patients' Compensation Fund; and workers' compensation insurance in the
minimum statutory amount for so long as this Agreement is in effect and
for a term of three (3) years thereafter.
4.29 FINANCING.
For the Company's benefit, LHC GROUP, LLC, as Manager, is hereby
authorized to obtain operational financing from its credit facility,
GMAC-RFC Health Capital or its successor, and is authorized to grant a
security interest of up to one hundred percent (100%) of Company's
accounts receivables to secure same, provided, however, that such
operational financing in the aggregate shall not exceed the greater of:
(i) $200,000 or (ii) one hundred twenty (120) days trailing net revenues
without the unanimous vote of the Members. For the purposes of this
section the trailing net revenues shall equal the sum of the net revenues
generated by the Company during the one hundred twenty (120) days
preceding the date of the determination of same.
ARTICLE 5
CAPITAL CONTRIBUTIONS AND ACCOUNTS, AND ACCOUNT ALLOCATIONS
5.1 CAPITAL CONTRIBUTIONS
(a) Initial Capital. The Members have this date terminated or caused the
termination of a joint venture between Beta HomeCare, Inc. and
Acadian Home Health Care Services, LLC, and the Members have caused
the joint venture to transfer all prior contributions to the Company
for the credit of each Member. In conjunction therewith, Louisiana
Health Care Group, LLC acquired twelve and one-half percent (12.5%)
Beta's interest in the venture and is therefore holding sixty-two
and one-half Units in the Company. Beta has been issued thirty-seven
and one- half Units of the Company.
(b) Allocation of Profits and Losses:
___________________________________Notwithstanding any provision of
this Agreement to the contrary, the parties agree
that the Members' Interests in income and losses of the
business activities conducted by the Company shall be equal to
the percentages calculated as of the time of the allocation by
dividing the Units held by each Member by the aggregate Units
held by all Members.
(c) Special Capital Contributions. It is anticipated that the Company
will from time to time require additional capital to purchase or
acquire additional assets or entities, or interests therein, and to
fund the future operations of the Company. The Members will
contribute to the capital of the Company, according to their
respective Membership Interests, as set forth in Sections 5. l(b)
above, cash sums equal to the sums necessary to defray the costs of
such operations not covered by Company revenues in such amounts as
are approved by an unanimous vote of the Members. Following
approval, should a Member fail to pay its share of authorized
additional capital within ten (10) days of written notice from any
Member or Manager to do so, it shall be liable to the other Member
or Members therefor, as provided in Section 5.1(d) below; provided,
however, that in lieu of the penalty set forth in Section 5.1(d),
upon a Majority Vote of the non-defaulting Members, the defaulting
Member shall be deemed to have forfeited its interest in the Company
to the non-defaulting Member or Members who choose to advance the
defaulting Member's unpaid capital contribution. Written notice of
forfeiture shall be delivered to the defaulting Member within sixty
(60) days of the default in capital contribution. The provisions of
this Section 5.1 (c) shall not apply to capital calls unless such
call has been approved by a unanimous vote prior to a default.
(d) Penalty for Failure to Make Capital Contributions. Upon failure of
any Member to promptly remit to the Company any sum due by it under
the terms of this Section 5.1, and if no non-defaulting Member
chooses to declare a forfeiture of interest under Section 5,1 (c)
above, then another Member may, but shall not be required to,
advance such sum or sums. Any Member making such an advance shall be
entitled to recover 300% of the amount of such advance from the
first Distributive Shares to which the other Member would have
otherwise been entitled as a Member of the Company in the absence of
its default hereunder. The provisions of this Section 5.1(d) shall
not apply to capital calls unless such call has been approved by the
unanimous consent of the Members prior to a default.
(e) Interest on and Return of Capital Contributions. No Member shall be
entitled to interest on such Member's Capital Contribution or to a
return of its Capital Contribution, except as otherwise specifically
provided for herein.
(f) Contributions for Losses. Absent the unanimous consent of the
Members to the contrary, the Parties agree that in the event any Net
Losses arise out of or result from the Company's operations, each
Party shall assume and pay the share of the Losses for that year
that is equal to its Interests.
5.2 CAPITAL ACCOUNTS
A Capital Account shall be maintained on the books of the Company for each
Member which shall be begun, determined and maintained through the full
term of the Company in accordance with the Capital Accounting rules of
Treasury Regulations, and otherwise in accordance with generally accepted
accounting principles consistently followed. A Member's Capital Account
shall consist of his capital contributions to the Company:
(1) Increased by his share of Company profits; and
(2) Decreased by his share of Company losses and by cash
distributions to him.
No Member shall withdraw any part of its Capital Account, except upon the
approval of the Members.
5.3 ALLOCATION OF PROFITS, GAINS AND LOSSES
(a) General Allocation. The Members will share in the income, gains,
profits, expenses, losses, deductions and credits of the Company in
accordance with the allocations set forth in Section 5.1. Each
Member's share of the Net Profits and Net Losses shall be allocated
for each Fiscal Year to the Members' Capital Accounts.
(b) Depletion Allocation. Depletion will be allocated to the Members in
the same proportions as they share in the income and profits of the
Company; provided, however, that depletion will not be allocated to
a Member to the extent that it causes or increases a negative
balance in his Capital Account.
(c) Qualified Income Offset. Notwithstanding the allocation rules set
forth in this Agreement, the Members agree to a "qualified income
offset" as defined in Treasury Regulations to allocate items of
income and gain in an amount and manner sufficient to eliminate as
quickly as possible any unexpected Capital Account deficit balance.
5.4 DISTRIBUTIONS
The Company's pre-tax Net Profits which arc in excess of the current or
projected needs of the Company maybe distributed on an interim basis each
Calendar Quarter to the Members in accordance with the allocations set
forth in Section 5.1 (b). Such payments are referred to herein as
"Distributive Shares." However, no distribution shall be made to Members
if prohibited by the Act. Such distributions shall be made no later than
60 days following the end of each Calendar Quarter. All interim quarterly
distributions shall be reconciled annually and corrective distributions
shall be made no later than March 31st of each year for the prior fiscal
year. Amounts calculated for any partial quarter or annual periods shall
be determined proportionately, but shall be subject to the annual
reconciliation.
5.5 LOANS TO COMPANY
To the extent unanimously approved by the Members, any Member may make a
secured or unsecured loan to the Company.
5.6 PRIORITY AND RETURN OF CAPITAL.
No Member shall have priority over any other Member, either as to the
return of Capital Contributions or as to Net Profits, Net Losses or
Distributions. This Section shall not apply to loans (as distinguished
from Capital Contributions) which a Member has made to the Company.
5.7 MEMBERS' RIGHTS OF CONTRIBUTION.
If for any reason, a Member sustains any liabilities or is required to pay
any losses arising out of, or directly connected with, the Company, or the
execution of any agreements or
guarantees in connection with the Company's operations, which are in
excess of his, her or its proportionate Membership Interest in the
Company, the other Members shall promptly reimburse such Member this
excess, so that each and every Member of the Company will then have paid
his, her or its proportionate share of such losses to the full extent of
his, her or its Membership Interest in the Company.
5.8 OPTION.
In the event that LHC Group, LLC (the "Manager") is sold, merged or
otherwise acquired, or if it undertakes an initial public offering
(collectively referred to herein as "Sale Event"), Beta HomeCare, Inc.
shall have the option to: (i) exchange its holdings of Units in the
Company to Units of Manager in accordance with the following terms; or
(ii) to sell its holdings of Units in the Company to the other Members in
proportion to their holdings of Units for a price determined in accordance
with Section 6.5, provided, however, that for the calculation of the
PURCHASE price, the Manager's cost allocation to the Company for the
fiscal year shall be the lesser of its actual costs or 17% of the Net
Revenues of the Company, AND PROVIDED FURTHER THAT THE PURCHASE PRICE
SHALL BE PAID IN 4 EQUAL QUARTERLY INSTALLMENTS COMMENCING NINETY DAYS
AFTER THE EFFECTIVE DATE OF THE TRANSFER.
(a) Manager shall provide thirty (30) days written notice to Beta of the
scheduled occurrence of a Sale Event, and that it is eligible to
exercise the option provided herein. Beta shall then have ten (10)
days to notify Manager of its intention to exercise the option.
(b) In the event that Beta exercises the option, Beta shall have the
right to exchange the Units held by it in the Company for Manager
Units in accordance with the following formula:
37.5% of the product of (i) the total issued and outstanding
Units of Manager as of the date of the notice and (ii) a
fraction, the numerator of which is the Company's EBITDA and
denominator of which is Manager's EBITDA.
The Company's and Manager's EBITDA shall be determined as the
Earnings Before Interest Taxes and Depreciation from the Company's
financial statements and Manager's consolidated financial statements
FOR THE TWELVE CALENDAR MONTH PERIOD ENDING ON THE LAST DAY OF THE
LAST CALENDAR MONTH PRIOR TO THE EVENT GIVING RISE TO THE VALUATION.
For the purposes of illustration, the following example of how the
number of Units to be converted will be calculated is provided:
EBITDA OUTST. BETA CONV.
9-30-2003 PROPOR. SHARES HOLD. SHARES
----------- ------- --------- ------ ----------
AHHCS $ 478,694 = 8.67% X 8,056,767 X 37.5% = 261,799
-----------
LHC GROUP $ 5,524,372
The parties understand that the foregoing example is for purposes of
illustration
only and is not indicative of current or future operations or
performance.
(c) Manager shall then issue the Units in Manager to Beta within ten
(10) days prior to the Sale Event. As a conditions precedent to the
issuance of the Units by Manager, Beta will: (i) execute a written
consent to the Sale Event; and (ii) execute a counterpart to
Manager's Operating Agreement. The Manager Units issued to Beta
shall be subject to all terms, conditions and restrictions contained
in Manager's Operating Agreement.
(d) Beta shall be bound by the terms and conditions of the Sale Event in
respect to the Units issued to it by Manager.
(e) The parties acknowledge and agree that it is their intention for
this Option to exchange to operate only so long as the Sale Event
actually occurs and closes. In the event that the Sale Event does
not occur as scheduled, the exchange performed under the option
shall automatically and immediately be rescinded, without any
requirement of notice by either party, and Beta shall surrender any
Units in Manager received by it, and shall receive the Company's
Units it tendered for exchange.
ARTICLE 6
TRANSFER OF INTERESTS AND WITHDRAWAL
6.1 RESTRICTIONS ON TRANSFER.
A Member may not sell or otherwise transfer the Member's Units in the
Company except as provided in this Article. In the event that a Member
sells or transfers, or purports or attempts to sell or otherwise transfer,
his, her or its Units except as provided in this Article, that Member
shall be deemed to have involuntarily withdrawn from the Company effective
on the date of the sale or transfer, or the purported or attempted sale or
transfer. Any such sale or transfer, or purported or attempted transfer
shall not have effect with respect to the Company and its Members, and any
such transferee shall be entitled only to receive the value of the Units
transferred in accordance with the provisions of Section 6.3. The transfer
restrictions of this Article shall be binding on the Members, the Company,
their heirs, legatees, legal representatives, successors, assigns, and
transferees.
6.2 BUY-SELL OFFERS
(a) At any time, either Member ("Transferor Member") may offer to
purchase all Units of the other Member (the "Remaining Member"). The
Transferor Member's offer shall: (i) be in writing; (ii) comply with
the notice requirements herein; and (iii) specify the purchase price
as the value for the Remaining Member's Interest in an amount not
less than that set forth in Section 6.5 for the Remaining Member's
Interest. The Transferor Member's offer to purchase shall also
contain an offer by the Transferor Member to sell all of the
Transferor Member's Units to the Remaining Member on the same terms
and conditions contained in the offer except that the purchase price
of the Member's Units shall be the value set forth in Section 6.5
for the Transferor Member's Units.
(b) Within thirty (30) days of the date of the notice of the Transferor
Member's offer, the Remaining Member shall provide notice to the
Transferor Member of its agreement to either (i) purchase the
Transferor Member's Units or (ii) sell its
Units to the Transferor Member in accordance with the terms of the
offer. Regardless of which offer is accepted by the Remaining
Member, the transfer of Units shall be completed within ninety (90)
days of the date of the notice of the Transferor Member's offer.
Transfer shall be effected by amendment to this Agreement, payment
of the purchase price and execution of other documents reasonably
necessary to complete the transfer. Payment of the purchase price
shall be as set forth in Section 6.5.
(c) If the Remaining Member accepts the Transferor Member's offer to
purchase its Units, the Transferor Member may assign all or part of
the right to purchase the Remaining Member's Units to others,
however, the Transferor Member shall remain liable to the Remaining
Member, jointly and severally with all such assignees, for timely
completion of the transfer and payment of the purchase price.
(d) If the Remaining Member fails to provide notice to the Transferor
Member as provided in Section 6.2(b), the Transferor Member's offer
to purchase the Membership Interest of the Remaining Member shall be
deemed accepted.
(e) In the event the transfer is not completed within ninety (90) days
of the date of notice of the Transferor Member's offer, the Company
and the non-defaulting Member may institute legal proceedings to
enforce the obligations of the defaulting Member and, if successful,
the defaulting Member shall be liable for all attorneys' fees and
costs incurred by the Company and the non-defaulting Member.
6.3 TRANSFER OF MEMBER'S INTEREST TO THIRD PARTIES.
(a) Notwithstanding any other provision of this Agreement to the
contrary, no Member may sell, assign, give, devise, pledge,
hypothecate, mortgage, or in any other manner transfer any portion
of his Units, without the prior written consent of all of the other
Members, and any such transfer shall be subject to the provisions of
this Section 6.3, provided, however, that this Section shall not
apply to a transfer under Section 6.2.
(b) If a Member desires to effect any such transfer to a third party,
such Member or his legal representative (the "Transferor Member")
shall first give written notice (the "Offer Notice") to the Company
and the other Members (the "Remaining Members") which shall state:
(i) The extent of the Units to be conveyed;
(ii) The complete terms upon which the Transferor Member seeks to
convey the Units (such terms to be limited to consideration
for the Units in the form of cash and/or notes receivable);
and
(iii) The name and address of any transferee relating to such
conveyance.
(c) Upon receipt of the Offer Notice, the Remaining Members shall have
the unrestricted right to (i) consent to such transfer; or (ii)
refuse to consent to such transfer, in which case such refusal shall
cause the following rights and obligations to arise in the following
order of priority, provided, however, that this Section shall not
apply to a transfer under Section 6.2:
(d) The Remaining Members shall have the option for a period of thirty
(30) days from receipt of the Offer Notice within which to purchase
the offered portion of
the Transferor Member's Units on the same terms and conditions set
forth in the Offer Notice. For the first fifteen (15) days of the
thirty (30) day period, each Remaining Member electing to purchase
part of the Transferor Member's Units shall have the primary right
to purchase a proportion of the Transferor Member's Units calculated
as the product of: the Units of the Transferor Member described in
the Offer Notice multiplied by a fraction, the numerator of which
shall consist of the purchasing Remaining Member's Units and the
denominator of which shall be the aggregate Units of the Remaining
Members electing to exercise their primary right to purchase the
Transferor Member's Units.
(e) In the event that any portion of the Transferor Member's Units
described in the Offer Notice has not been purchased by the
Remaining Members at the end of the initial fifteen (15) day period,
the remainder shall be available for purchase by these Remaining
Members in the exercise of their secondary right. Each Remaining
Member electing to exercise his secondary right shall have the
option for a period of fifteen (15) days to purchase, on a pro-rata
basis, such part of the Transferor Member's Units as was not elected
for purchase by the Remaining Members in the exercise of their
primary right.
(f) In the event that any portion of the Transferor Member's Units
described in the Offer Notice has not been purchased by the
Remaining Members at the end of the thirty (30) day period, the
Company shall have the option for a period of fifteen (15) days to
purchase any remaining portion of the Transferor Members' Units that
was not purchased by the Remaining Members in the exercise of either
their primary or their secondary rights.
(g) In the event that any portion of the Transferor Member's Units
described in the Offer Notice has not been purchased by the Company
at the end of the fifteen (15) day period, the Transferor Member may
transfer the Units on the terms contained in the Offer Notice, and
the consent of the Company and its Members if not expressly granted
shall be implied. The Transferor Member shall complete the transfer
within ninety (90) days (or such later date as may be specified in
the Offer Notice) after receipt of the Offer Notice by the Remaining
Members, but only with such transferee and only on such terms as
were specified in the Offer Notice.
6.4 INVOLUNTARY TRANSFERS OF UNITS.
(a) Any Member shall give written notice to the Company, if such Member
(the "Transferor Member"): (i) is deemed to have involuntarily
withdrawn from the Company under the terms of Section 6.12 of this
Agreement; (ii) becomes the subject of a proceeding under the U.S.
Bankruptcy Code, or if a trustee, receiver, liquidator, or other
representative of the Member's personal or business assets is or may
be appointed; or (iii) becomes insolvent or makes an assignment for
the benefit of the Member's creditors; or (iv) becomes involved in
any other proceeding or commits any other act by which such Member,
or a trustee, receiver, liquidator, or other representative of such
Member, is or may be permitted or required to acquire or convey all
or any portion of such Member's Units.
(b) The Company shall be obligated to purchase the entirety of the
Transferor Member's Units, which purchase shall be consummated in
the manner specified in this Section. The purchase price of any
Units purchased pursuant to this Section
shall be equal to the book value of the Units as of the close of the
Company's fiscal year immediately preceding the event resulting in
the involuntary transfer, less any negative Capital Account balance
of the Member. In the event the involuntary transfer is occasioned
prior to the end of the Company's first fiscal year, the purchase
price of any Units purchased pursuant to this Section shall be equal
to the book value of the Units as of the close of business on the
day on which the event causing the involuntary transfer occurred,
less any negative Capital Account balance of the Member. The book
value of the Units shall be determined by the Company's public
accountant, and the accountant's determination when rendered shall
be conclusive among the Members, unless a Member disputes such
determination by written notice within ten (10) business days of
notice to such Member of such book value. In the event of such
dispute, the disputing Member shall have the right to engage
independent public accountants to make such determination and the
average of the two accountants' determinations shall be conclusive.
(c) If the Company is obligated to purchase the interest of a Transferor
Member in the Company pursuant to the provisions of this Section,
the Company shall do so by giving written notice to the Transferor
Member, or the Transferor Member's trustee, receiver, or other
representative, or the appropriate court, all as the case may be.
Upon the giving of such notice, the Company, as purchaser, and the
Transferor Member, as seller, shall be obligated to consummate the
sale and purchase of the Units, or portion thereof, at the Company
offices within sixty (60) days after the date of the Company's
notice.
(d) The purchase price shall be paid by the Company with a
non-negotiable promissory note payable in twenty equal quarterly
installments, commencing ninety days after the effective date of the
transfer, with interest at the prime rate published in the Wall
Street Journal on the date of the transfer without prepayment
penalties. The note shall contain a subordination clause
subordinating the note to all other debts of the Company. The note
shall be unsecured, except that the Company may grant a security
interest securing payment of the promissory note in the Units
transferred if the cause of the involuntary withdrawal is specified
in Section 6.12 (c) (ii), only. At its sole option the Company may
pay all or part of the purchase price in cash at the time of the
transfer.
6.5 VALUATION FOR PURPOSES OF SECTIONS 6.2 & 6.12 (e). The Members agree that
the value of the Company for the purposes of valuing the Units described
in this Sections 6.2 & 6.12 (e) herein shall be equal to FIVE HUNDRED
PERCENT (500%) of the Company's Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) for the twelve calendar month
period ending on the last day of the last calendar month prior to the
event giving rise to the valuation. The value of a Member's interest under
Sections 6.2 & 6.12 (e) shall be the product of the Transferor Member's
percentage holdings of Units and the value of the Company, The purchase
price shall be paid by the transferee with an unsecured, non-negotiable
promissory note payable in twenty equal quarterly installments, commencing
ninety days after the effective date of the transfer, with interest at the
prime rate published in the Wall Street Journal on the date of the
transfer without prepayment penalties. If the Company is the transferee,
the note shall contain a subordination clause subordinating the note to
all other debts of the Company. At his, her or its sole option the
transferee may pay all or part of the purchase price in cash at the time
of the transfer. NOTWITHSTANDING THE FOREGOING, IN THE EVENT THAT A MEMBER
SELLS ITS UNITS PURSUANT TO SECTION 6.2 AFTER THE SECOND ANNUAL
ANNIVERSARY OF THE EFFECTIVE DATE, THE PURCHASE PRICE FOR THE UNITS SHALL
BE PAID BY THE TRANSFEREE IN FOUR EQUAL
QUARTERLY INSTALLMENTS COMMENCING NINETY DAYS AFTER THE EFFECTIVE DATE OF
THE TRANSFER. Notwithstanding, the foregoing, in the event that there is a
Sale Event (as defined in.Section 5.8 above), and any Member shall not
exercise the option provided in Section 5.8, then for purposes of the
valuation contained in this Section 6.5, the cost allocation for
management services provided to the Company shall be the lesser of the
actual costs or 15% of the Net Revenues of the Company following the
effective date of the Sale Event.
6.6 SURVIVAL OF LIABILITIES. No sale or other transfer of an Units, even if it
results in the substitution of the transferee or assignee as a Member
herein, shall release the Transferor or assignor from those liabilities to
the Company or the other Members which arose prior to such sale or
assignment or which otherwise survive such sale or assignment as a matter
of law.
6.7 NEGATIVE CAPITAL ACCOUNTS. If a Transferor Member has a negative Capital
Account balance, the Transferor Member shall pay the Company the amount of
the negative Capital Account balance as of the transfer date. If the
Transferor Member shall fail to pay the negative Capital Account balance,
the Company shall have the right to set-off or recoup any such amounts
from any distributions due to, or from any amounts owed by the Company to,
the Transferor Member, the transferee Member or the assignee.
6.8 LOANS AND PERSONAL GUARANTEES. Any loans owed by the Company to a
Transferor Member shall be paid in full at closing. On or before closing
of any transaction pursuant to this Article 6, the transferee Member shall
also be obligated to obtain a full release of the Transferor Member (and
the individual shareholder(s) or members of such Member) from all personal
guarantees granted on behalf of the Company.
6.9 RIGHTS OF PERMITTED TRANSFEREES OR ASSIGNEES. A permitted transferee or
assignee of a Member's Interest shall not become a Member without the
unanimous Vote of the Members and compliance with the provisions of
Section 3.2 of this Agreement. Any transferee or assignee of Units in the
Company who is not admitted to membership in the Company shall not be
entitled to vote, and shall not be entitled to participate in the
management of the Company, or to have access to any records or
communications of the Company or its Members, or to participate in any
manner in the operation of the Company. He, she or it will, however, be
bound by and subject to this Agreement and the terms and conditions of any
other agreement pertaining to the restrictions on the transfer of an
Interest in the Company.
6.10 SEVERABILITY. The parties agree that each term and condition contained in
this Article 6 shall be liberally construed to give effect to the parties'
intent and shall be considered severable; and if, for any reason, any
provision or provisions, or portions thereof, herein contained are
determined to be invalid, overbroad, or unenforceable for any reason, such
provision shall be deemed modified to the extent required to render it
valid, enforceable and binding, and such determination shall not affect
the validity or enforceability of any other provision of this Agreement.
In the event any provision of this Article 6 is held to be unenforceable
or void for any reason, the remainder of the provisions of this Article
shall be unaffected and shall remain in full force and effect in
accordance with its terms.
6.11 SPECIFIC PERFORMANCE; ENFORCEMENT.
(a) In addition to any other remedies provided for herein, in the event
any transfer required under this Article 6 is not timely completed
in accordance with the terms hereof, the Company and/or each
non-defaulting Member may seek specific
performance of the obligations of the defaulting party and may
institute legal proceedings to enforce the obligations of the
defaulting party and, if successful, the defaulting party shall be
liable for all reasonable attorneys' fees and costs incurred by the
non-defaulting party.
(b) The Members hereby declare and agree that it is impossible to
measure in money damages that which will accrue to the Company and
its Members by reason of a failure of any Member hereto to perform
any of the obligations under this Article 6. Therefore, if any party
hereto or the personal representatives of a decedent shall institute
any action or proceeding to enforce the provisions of this Article 6
by injunction (including the granting of a temporary restraining
order), any Member against whom such action or proceeding is brought
hereby waives the claim or defense therein that such Member or such
personal representative has an adequate remedy at law, and such
Member shall not urge in any such action or proceeding the claim or
defense that such remedy at law exists.
6.12 WITHDRAWAL OF A MEMBER
(a) Voluntary Withdrawal. Any Member may withdraw from the Company at
any time by notice to all other Members.
(b) Involuntary Withdrawal. Any circumstance compelling the involuntary
transfer of a Member's Interest, including, without limitation,
service of any writ of seizure applicable to his Interest or
adjudication of bankruptcy of a Member, shall be deemed a withdrawal
by the Member affected thereby effective upon the service of the
writ or notice of the adjudication.
(c) Automatic Involuntary Withdrawal. In addition to the other events of
withdrawal contained herein, a Member shall be deemed to have
withdrawn from the Company effective on the date on which one of the
following events occurs:
(i) the individual Member, or an officer, director, shareholder or
other equity holder of a corporate Member is convicted of a
felony (unless such felony is unrelated to the businesses of
the Company or the Members);
(ii) the individual Member dies, is interdicted or determined to be
incompetent; or
(iii) the Member materially breaches this Agreement and fails to
cure such breach within thirty (30) days of receipt of notice
of such breach;
(iv) the Member, or an officer, director, shareholder or other
equity holder of a corporate Member is excluded or debarred
from participation in the Medicare or Medicaid programs; or
(v) the Member sells or transfers, or attempts to sell or transfer
of the Member's interest in the Company without compliance
with the provisions of this Article VI.
(d) Withdrawal from the Company, in and of itself, shall under no
circumstances relieve the former Member of his, her or its
obligations to: (i) make any additional capital contributions
approved by the Members prior to the effective date of the former
Member's withdrawal; or (ii) to fulfill his, her or its contractual
obligations to the Company incurred or accrued prior to the
effective date of the
former Member's withdrawal. In either event, the Company shall have
a right of set-off against any distribution due to a withdrawing
former Member.
(e) In the event of a voluntary withdrawal of a Member, if the Company
is continued in accordance with the provisions of Section 7.1, the
withdrawing Member shall have distributed to him the amount
specified in Section 6.5 in accordance with the terms therein,
EXCEPT THAT THE AMOUNT DISTRIBUTED SHALL BE PAID OVER 20 EQUAL
QUARTERLY INSTALLMENTS WITHOUT REGARD TO THE TIME OF WITHDRAWAL.
(f) In the event of a voluntary withdrawal of a Member, if the Company
is not continued in accordance with the provisions of Section 7.1,
the Company shall be liquidated and dissolved according to the
provisions of Article 7.
ARTICLE 7
DISSOLUTION AND LIQUIDATION
7.1 DISSOLUTION
Subject to the remaining terms of this Agreement the Company shall be
dissolved upon the occurrence of any one of the circumstances hereinafter
set forth:
(1) upon the termination of this Agreement and the failure of the
Members to agree upon a new Operating Agreement within ninety (90)
days following the effective date of the termination; or
(2) upon approval of the Members by an unanimous vote; or
(3) Upon the death, interdiction, withdrawal, bankruptcy, liquidation or
dissolution of a Member or the occurrence of any other event which
terminates the continued membership of a Member in the Company,
however, such event shall not cause a dissolution of the Company if
within ninety (90) days after such event, the Company is continued
by the unanimous vote of the remaining Members.
7.2 DISSOLUTION FOR NON-COMPLIANCE WITH LAW.
The parties hereto acknowledge and agree that the terms and conditions of
this Agreement and the anticipated conduct of the parties hereunder are
intended to satisfy all state and federal laws and regulations related to
healthcare fraud and abuse and self-referral of patients, including,
without limitation, 42 U.S.C. Section 1320-7b; 42 U.S.C. Section 1395nn,
and La. R.S. 37:1744 and 1745. All contracts and compensation arrangements
of the Company shall likewise comply with law. Manager and Company shall
use their best efforts to comply with all laws and regulations regarding
billing for services provided by the Company. Should any change in
Louisiana or federal laws or regulations occur during the term of this
Agreement rendering any term or provision of this Agreement invalid, or
should the parties determine that this Agreement or the Members'
participation in the Company result in a violation of any such laws or
regulations, the parties agree that this Agreement shall be amended within
thirty (30) days of such change or determination. If the parties are
unable to agree to such modification or amendment during the said thirty
(30) days, the parties hereby agree that the Company shall be dissolved as
provided hereunder.
7.3 LIQUIDATION
Upon dissolution of the Company, if the Company is not continued, the
Members shall proceed diligently to finalize the affairs of the Company
and distribute its assets in accordance with the provisions of Section
7.5. During this period, the Members shall continue to operate and
otherwise deal with Properties of the Company, consistent with the
liquidation thereof, but shall have no further power or authority to bind
the Company except to sell or distribute its assets and wind up its
affairs in compliance herewith.
7.4 FINAL ACCOUNTING
Upon dissolution of the Company, the Members shall cause the Company's
accountant to make, at the Company's expense, a full and proper accounting
of the assets, liabilities, operations and Capital Accounts of the Company
as of and through the last day of the month in which the dissolution
occurs.
7.5 LIQUIDATION DISTRIBUTIONS
As expeditiously as possible after the dissolution of the Company, the
Members shall cause the debts and obligations of the Company to be paid
and discharged, including payment or offset of all obligations owed to
Members by the Company and all obligations of Members owed to the Company.
Thereafter, the remaining assets shall be distributed to the Members in
amounts proportionate to the Members' Units as determined on the date of
the distribution.
7.6 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS.
Except as provided by law or as expressly provided in this Operating
Agreement, upon dissolution, each Member shall look solely to the assets
of the Company for the return of the Member's Capital Account. If the
Company property remaining after the payment or discharge of the debts and
liabilities of the Company is insufficient to return the Capital Account
of one or more Members, including, without limitation, all or any part of
that Capital Account attributable to Capital Contributions, then such
Member or Members shall have no recourse against any other Member.
ARTICLE 8
BOOKS AND RECORDS
8.1 ACCOUNTING PERIOD.
The Company's accounting period shall be the Fiscal Year which shall begin
on January 1 st of each year.
8.2 RECORDS AND REPORTS.
At the expense of the Company, the Company shall maintain complete and
accurate books, records and accounts of all operations and expenditures of
the Company. The books of the Company shall be kept on the accrual basis.
The Company shall keep at its principal place of business the books of the
Company which shall contain a list showing the names and addresses of the
Members as of a reasonably current date and the extent of
their interest in the Company. Each Member, and their duly authorized
representatives, shall have the right at reasonable times to access and
examine, and audit at the Member's expense, if desired, the books of the
Company, including such financial records, and other reasonably available
records and information concerning the operation of the Company and to
make copies thereof at the expense of such Members, but only upon such
Member's written request. Manager agrees that it shall provide to each
Member reasonable access to its records supporting the Direct Costs and
other expenses charged or allocated to Company by Manager.
8.3 TAX RETURNS.
The Company shall prepare and timely file all tax returns required to be
filed by the Company pursuant to the Code and all other tax returns deemed
necessary and required in each jurisdiction in which the Company docs
business. Copies of such returns, or pertinent information therefrom,
shall be furnished to the Members upon request within a reasonable time
after the end of the Company's fiscal year.
8.4 AUDIT.
At the request of any Member, the books of the Company may be audited
annually at the expense of the Company by an independent public accounting
firm selected by the Manager.
8.5 ANNUAL REPORTS.
Within the following time periods after the close of each fiscal year, the
Company shall deliver to each Member the following:
(a) Within one hundred twenty (120) days after the end of such fiscal
year, financial statements of the Company for such year, including a
balance sheet, a profit and loss statement, a statement of Members'
equity and changes in financial position, such statements (i) to be
prepared in accordance with generally accepted accounting principles
and (ii) to include a summary itemization, by classification, of the
compensation and reimbursement paid by the Company, directly or
indirectly, to all Members.
(b) Within sixty (60) days after the close of such fiscal year, a report
providing such tax information as may be reasonably required by each
Member for federal and state income tax reporting purposes.
ARTICLE 9
NON-COMPETITION, NON-SOLICITATION AND NON-DISCLOSURE
9.1 NON-COMPETITION,
Each Member agrees that for so long as it is a Member of the Company, the
Member shall not own, control, manage, have a business interest in, or be
financially interested in a home health agency competing with the Company
in providing home health services within the Service Area without the
unanimous expressed written approval of the Members, PROVIDED, HOWEVER,
that such restriction shall not apply to services provided in the Service
Area by subsidiaries and Affiliates of Louisiana Health Care Group, LLC in
accordance with the terms contained in Section 2.3.
9.2 NON-SOLICITATION.
Each Member agrees that for so long as it is a Member of the Company and
for a period of one year following the transfer of its interests, its
voluntary or involuntary withdrawal from the Company, or the dissolution
and liquidation of the Company, the Member shall not, directly or
indirectly, through a subsidiary or affiliated companies or employee
leasing or staffing companies or otherwise, without the consent of the
Members, solicit for employment or hire or employ or contract with any
person to work for it who is or was employed by Company, Manager, or any
Member during the term of the Member's membership, whether or not such
employee is employed by the Company, Manager, or Member at the time of
such solicitation or hire. In the event a party violates this provision,
the offending party shall pay the other stipulated damages in an amount
equal to one year of such employee's most recent salary or wages paid to
the employee by the other party.
9.3 NON-DISCLOSURE.
Each Member acknowledges that it will have access to certain confidential
information, trade secrets and proprietary information which is
exclusively the property of another Member or the Manager; including,
without limitation, documents, recordings, photographs, policies,
procedures, forms, patient/customer/client lists, public relations and
employee training materials. Each party agrees that Manager's Service
Value Points (SVP(R)) system and its Lifeline(R) system are proprietary
trade secrets of Manager and which are subject to this Agreement. Each
Member agrees that it will not, for so long as it is a Member and for a
period of two (2) years following its voluntary or involuntary withdrawal,
disclose to any third party, or appropriate for their own use or for the
use of any third person, the other Member's or Manager's confidential
information, trade secrets or proprietary information.
9.4 INJUNCTIVE RELIEF.
Each Member acknowledges that in the event of any breach of this Article
4, the other parties remedies at law would be inadequate and therefore any
affected party shall be entitled to obtain relief by injunction to prevent
competition, solicitation or disclosure by the Member or Manager without
the need to prove irreparable harm. The affected Member's or Manager's
remedies, in any event, shall be cumulative of any and all other remedies
available pursuant to Louisiana law.
9.5 REASONABLENESS.
Each Member agrees that the business and time limitations set forth in
this Agreement are reasonable and properly required for the adequate
protection of the Company's business. If any provision of this Agreement
is held to exceed the business or time limitations permitted under
applicable law, then such provision shall be reformed to the maximum
business, geographic, or time limitations permitted under such applicable
law.
Article 10
MISCELLANEOUS PROVISIONS
10.1 FISCAL YEAR
The Fiscal Year of the Company shall begin on January 1st of each year.
10.2 PARTNERSHIP TAXATION
Neither the Company nor any Manager or Member may make an election for the
company to be excluded from the application of the provisions of
Subchapter K of the Code or any similar provisions of applicable state
law. The Members intend that the Company not be a partnership or joint
venture, and that no Member or Manager be a partner of or joint venturer
with any other Member or Manager, for any purpose other than federal and
state tax purposes, and this Agreement may not be construed to suggest
otherwise. The provisions of Section 5.1 (b) herein respecting the
allocation of Units shall control the allocation of income, loss and tax
items derived from the Company's operations.
10.3 NO PARTNERSHIP INTENDED FOR NON-TAX PURPOSES.
The Members have formed the Company under the Act, and expressly disavow
any intention to form a joint venture, a partnership or a partnership in
commendam (or limited partnership) under Louisiana law, or laws of any
other state. The Members do not intend to be partners one to another or
partners as to any third party. To the extent any Member, by word or
action, represents to another person that any other Member is a partner or
that the Company is a partnership, the Member making such wrongful
representation shall be liable to any other Member who incurs personal
liability by reason of such wrongful representation.
10.4 NOTICES
All communication or notices required or permitted to be given under this
Agreement shall be in writing, and any communication or notice shall be
deemed to have been duly made upon receipt by mail, or by facsimile
transmission receipt of which has been duly acknowledged. Any written
notice sent certified mail to the address of record of the recipient which
is returned by the post office as unclaimed or undeliverable for any
reason shall be deemed to have been received. A party may, by written
notice so delivered to the Company, change the address to which
communications or written notices shall be made under this Agreement.
10.5 AMENDMENTS
This Agreement may be amended only in writing approved by an unanimous
Vote.
10.6 EXECUTION
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to constitute an original, and each of which shall become
effective when one or more counterparts have been executed by each of the
parties hereto and delivered to the Company. The Members each agree to
cooperate, and to execute and deliver in a timely fashion any and all
additional documents necessary to effectuate the purposes of the Company
and this Operating Agreement.
10.7 APPLICABLE LAW; VENUE
This Agreement shall be governed by an construed and enforced in
accordance with the laws of the State of Louisiana.
10.8 SUCCESSORS OR ASSIGNS
The obligations herein undertaken and the rights herein conferred shall be
binding upon and inure to the benefit of the parties, and, where
applicable, their successors and assigns. None of the provisions of this
Operating Agreement shall be for the benefit of or enforceable by any
creditors of the Company or by any Person not a party hereto. This
Agreement is entered into solely to benefit the Company and its
subscribing Members, and is not entered into or intended for the benefit
of any third persons. The Parties agree that this Agreement shall not be
construed as a stipulation pour autrui or a third party beneficiary
contract.
10.9 REFERENCES
(a) Any reference in this Agreement to an Article, Section, or
Subsection shall be deemed to refer to the applicable Article,
Section or Subsection of this Agreement unless otherwise stated
herein.
(b) Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the
Person may in the context require.
10.10 EFFECTIVE DATE
This Agreement is entered as of the Effective Date set forth above, but
shall be deemed effective as of the date of the Company's filing of the
Articles with the Louisiana Secretary of State.
10.11 CONFLICTS WITH OTHER AGREEMENTS
(a) In the event of any conflict between the terms of this Agreement and
other permitted agreements by and between the parties hereto related
to the purposes of the Company, this Agreement shall prevail.
(b) The Company may acquire or enter into one or more written consulting
agreements or employment agreements with Members or affiliates of
Members. To the extent such arrangements are in writing and approved
or authorized by the Majority Vote of the disinterested Members, and
subject to Section 4.23 herein, such services may be compensated as
provided in said agreements and shall be deemed to be separate from
those services which the Member will provide to the Company as a
capital contribution pursuant to Section 5.1 (a) herein.
10.12 NO ACTION FOR PARTITION.
No Member shall have any right to maintain any action for partition with
respect to the property of the Company.
10.13 INVALIDITY.
The invalidity or unenforceability of any particular provision of this
Operating Agreement shall not affect the other provisions hereof, and the
Operating Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted. If any particular provision
herein is construed to be in conflict with the provisions of the Act,
the provisions of this Operating Agreement shall control to the fullest
extent permitted by applicable law. Any provision found to be invalid or
unenforceable shall not affect or invalidate the other provisions hereof,
and this Operating Agreement shall be construed in all respects as if such
conflicting provision were omitted.
10.14 DETERMINATION OF MATTERS NOT PROVIDED FOR IN THIS OPERATING AGREEMENT.
The Members shall decide any questions arising with respect to the Company
and this Operating Agreement which are not specifically or expressly
provided for in this Operating Agreement.
10.15 HIPAA
The HIPAA Business Associate Addendum attached hereto is made a part of
this agreement as if copied herein in extensio.
10.16 COUNTERPARTS AND FACSIMILE SIGNATURES.
This Agreement and any amendments or modifications thereto may be executed
in counterparts, each of which will be deemed to be an original, but all
of which together will constitute one and the same agreement. Also, the
Parties acknowledge that a facsimile of this Agreement shall be binding
and enforceable as an original and original signatures will be delivered
to replace all facsimile signatures.
10.17 COST OF ENFORCEMENT.
In the event that either Party shall be required to enforce the terms of
this Agreement, the prevailing Party shall be entitled to recover the
costs of such action, including, but not limited to, reasonable attorney's
fees.
10.18 SEVERABILITY.
The parties agree that each term and condition of this Agreement,
including the noncompetition agreement incorporated herein shall be
considered severable; and if, for any reason, any provision or provisions
herein are determined to be invalid, overbroad, or unenforceable for any
reason, such provision shall be deemed modified to the extent required to
render it valid, enforceable and binding, and such determination shall not
affect the validity or enforceability of any other provision of this
Agreement. The parties further agree that if any provision contained in
this Agreement is found by a court with competent jurisdiction to be
invalid, excessively broad, or otherwise unenforceable said court shall
reform such provision to render it enforceable consistent with the intent
of the parties. In the event that such an invalid, excessively broad, or
otherwise unenforceable provision cannot be reformed such that it may be
enforced, then said court shall, only to the extent necessary, strike the
invalid, excessively broad or unenforceable provision and enforce the
remaining provisions of this Agreement.
THUS DONE AND SIGNED, in multiple originals, in the city of Lafayette,
Lafayette Parish, Louisiana, on the day and in the month and year first above
written.
LHC GROUP, LLC BETA HOMECARE, INC.
Manager Member
By:_______________________________ By: ______________________________
Keith G. Myers, Manager Christopher Baggett, President
LOUISIANA HEALTH CARE GROUP, LLC
Member
BY: LHC GROUP, LLC, Manager
BY: ______________________________
Keith G. Myers, Manager
MEMBERSHIP SCHEDULE
ACADIAN HOME HEALTH CARE SERVICES, L.L.C.
AS OF: JANUARY 1, 2004
LOUISIANA HEALTH CARE GROUP, LLC 62.50 UNITS
BETA HOMECARE, INC. 37.50 UNITS
BUSINESS ASSOCIATE
CONTRACT ADDENDUM
THIS BUSINESS ASSOCIATE ADDENDUM, is incorporated into the Company's
Operating Agreement (the "Agreement") entered into by the parties; including,
ACADIAN HOME HEALTH CARE SERVICES, LLC (hereafter "COMPANY"), a Louisiana
limited liability company which provides home health services, and LHC GROUP,
LLC, (hereafter "MANAGER"), a Louisiana limited liability company, and BETA
HOMECARE, INC. (hereafter "BETA") to set forth the relationships and obligations
of the parties in respect to compliance with the requirements of the Health
Insurance Portability and Accountability Act of 1996.
1. INTRODUCTION: The Company, Beta and the Manager are subject to the Standards
for Privacy of Individually Identifiable Health Information (45 CFR Parts 160
and 164) (the "Privacy Rule"). The Company, Beta and Manager have entered into
an Operating Agreement of even date herewith. The Company, Beta and Manager may
provide, for or on behalf of one another, certain services described in the
Agreement and, in the process, receive individually identifiable health
information which is protected under the Privacy Rule ("PHI"). As a result, the
Company, Beta and Manager enter into this Addendum in order to comply with the
Privacy Rule.
2. USES AND DISCLOSURES OF PHI: Except as provided in Paragraph 3, the Company,
Beta and Manager are permitted and/or required to use and disclose the PHI they
obtain from one another, only to the extent such use or disclosure is: (i)
necessary to provide services to one another; (ii) permitted under the Privacy
Rule or (iii) in accordance with the terms contained herein. The Company, Beta
and Manager are specifically prohibited from any use or disclosure of the PHI
that would violate the requirements of the Privacy Rule.
3. OTHER PERMITTED USES AND DISCLOSURES: Notwithstanding Paragraph 2, the
Company, Beta and Manager may use the PHI to perform data aggregation services
(as defined in the Privacy Rule) if such use is necessary for the proper
management and administration of Company or Beta, or to carry out their legal
responsibilities hereunder. Manager may disclose the PHI if necessary for the
proper management and administration of the Manager or to carry out its legal
responsibilities, but only if:
(A) The disclosure is required by law; or
(B) The Company, Beta or Manager obtains reasonable assurances from the
person to whom the PHI is disclosed that it will be held confidentially and used
or further disclosed only as required by law or for the purpose for which it was
disclosed to the person, and the person notifies the Company, Beta or Manager of
any instances of which it is aware in which the confidentiality of the PHI has
been breached.
4. OTHER OBLIGATIONS OF THE COMPANY, BETA AND MANAGER: In addition to the
foregoing, the Company, Beta and Manager shall, with regard to the PHI:
(A) Not use or further disclose the PHI other than as permitted or
required by the Agreement or as required by law;
(B) Use appropriate and commercially reasonable safeguards to prevent use
or disclosure of the information other than as provided for by the Agreement;
(C) Promptly report to the other any use or disclosure of the information
not provided for by the Agreement of which it becomes aware, and have in place
procedures to mitigate any harmful effects from the inappropriate use or
disclosure;
(D) Ensure that any agents, including a subcontractor, to whom they
provide the PHI agrees to the same restrictions and conditions that apply to the
Company, Beta and Manager with respect to such information;
(E) Promptly make the PHI available to the other upon request in
compliance with the access provisions of the Privacy Rule;
(F) Promptly make the PHI available for amendment and incorporate any
amendments to the PHI maintained by the Company, Beta and Manager as required by
the Privacy Rule;
(G) Maintain data on all disclosures of PHI for which accounting is
required by the Privacy Rule for at least six years after the date of the last
such disclosure, and make that data available to the Company as necessary to
provide accountings of disclosures in accordance with the Privacy Rule;
(H) Make its internal books, and records relating to the use and
disclosure of the PHI available to the Secretary for purposes of determining the
Beta's and Company's compliance with the Privacy Rule; and
(I) At termination of the Agreement, to the extent feasible, recover all
PHI in the possession of its agents and subcontractors return or destroy all of
the PHI that the Company, Beta and Manager still maintain in any form and retain
no copies of such information or, if such return or destruction is not feasible,
extend the protections of the Agreement to the remaining PHI and limit further
uses and disclosures to those purposes that make the return or destruction of
the information infeasible.
(J) Remain knowledgeable of the requirements applicable to health care
providers under the Privacy Rule and provide appropriate education and training
to employees, officers, directors, agents, and contractors to ensure their
knowledge of and compliance with those provisions.
5. TERM: This Addendum shall become effective immediately upon execution of the
Operating Agreement and, except as hereinafter provided, shall remain in force
and effect until the last of the PHI is returned to the Beta or Company or
destroyed.
6. TERMINATION OF AGREEMENT: Notwithstanding any provision of the
Agreement to the contrary regarding term or termination, as hereinafter
provided, the Beta or Company is authorized to terminate the Agreement if it
determines that the Company, Beta or Manager respectively have violated a
material term of this Addendum (a "Privacy Breach").
A. Upon learning of a Privacy Breach, unless the Company or Beta
reasonably believes that the other or Manager has already remedied the condition
leading to or causing the Privacy Breach, the Company or Beta shall give written
notice to the other or Manager ("Notice").
B. If the Company or Beta has not received satisfactory assurances within
ten (10) days of the date of the Notice that Beta or Manager has cured the
breach or ended the violation, as applicable, then the Company or Beta shall
immediately terminate the Agreement if, in the its sole discretion, it
determines that termination is feasible. If it determines that termination is
not feasible, it shall immediately report the problem to the Secretary of the
Department of Health & Human Services.
7. CONFLICTING PROVISIONS: In the event that any requirements or provisions of
this Addendum should be in conflict with any requirements or provisions of the
Agreement, the requirements or provisions of this Addendum shall control.
8. CHANGES REQUIRED BY LAW: The parties hereto have acknowledged that this
Addendum is entered into in order to comply with the requirements of the Privacy
Rule. In the event that the provisions or interpretation of the Privacy Rule are
materially changed, or in the event that other law is enacted or interpreted
which materially effects the terms of this Addendum, the parties agree to enter
into a mutually acceptable amendment to this Addendum, on or before the
effective date of that change, to bring the terms hereof into compliance
therewith.
9. DEFINITIONS: As used in this Addendum, the following terms have the following
meanings:
"Business Associate" includes not only the person or entity executing this
Addendum, but also includes all of its employees, officers, directors,
agents, and contractors.
"Disclosure" or "disclose" means the release, transfer, provision of
access to, or divulging in any other manner of information outside the
entity holding the information, as more fully described in the Privacy
Rule.
"Use" means, with respect to individually identifiable health information,
the sharing, employment, application, utilization, examination, or
analysis of such information within an entity that maintains such
information, as more fully described in the Privacy Rule.
10. MISCELLANEOUS:
A. Ownership of PHI: The PHI to which the Company, Beta and Manager have
access under the Agreement or this Addendum shall be and remain the property of
the Company or Beta respectively as applicable.
B. Indemnification: Each party to this Addendum shall indemnify and hold
the other harmless from any and all liability, damages, costs and expenses,
including attorneys fees and costs of defense, resulting from the action or
omission of the other party with respect to the obligations undertaken by either
of them under this Addendum.
C. Injunctivc Relief: Notwithstanding any rights or remedies provided for
in this Addendum, the Beta and Company retain all rights to seek injunctive
relief to prevent or stop the inappropriate use or disclosure of PHI directly or
indirectly by the Company, Beta or Manager.
D. No Third Party Beneficiaries: Nothing in this Addendum is intended to
confer upon or create in, nor shall anything herein confer upon or create in,
any person other that the parties and their successors and assigns, any rights,
remedies, obligations, or liabilities whatsoever.
APPENDIX E
VI-38
Exhibit B-2
OPERATING AGREEMENT
OF
ST. LANDRY EXTENDED CARE HOSPITAL, L.L.C.
This Operating Agreement is entered into and is effective as of the 15th
day of April, 2004, by and among the undersigned Members who agree as set forth
herein regarding the operations of St. Landry Extended Care Hospital, LLC, a
Limited Liability Company, organized under and existing pursuant to the laws of
the State of Louisiana:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
As used in this Agreement, defined terms have the meanings hereinafter set
forth:
(a) "Act" means the Limited Liability Company Law, La. R.S. 12:1301 et
seq., and any successor statute as amended.
(b) "Agreement" or "Operating Agreement" means this Operating Agreement
as originally executed and as amended from time to time.
(c) "Articles" or "Articles of Organization." The Articles of
Organization of St. Landry Extended Care Hospital, L.L.C., as filed
with the Secretary of State of Louisiana, as the same may be amended
from time to time.
(d) "Capital Account" A Capital Account maintained in accordance with
the rules contained in of the Regulations.
(e) "Capital Contribution." Any contribution to the capital of the
Company in cash, property or future services by a Member whenever
made.
(f) "Fiscal Year." The Company's fiscal year, which shall be the
calendar year.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means St. Landry Extended Care Hospital, L.L.C., a Limited
Liability Company organized under and existing pursuant to the laws
of the State of Louisiana.
(i) "Distributive Shares" means the share of distributed revenues from
the Company due to each Member under the Membership Interests
applicable to such distribution.
(j) "Majority Vote" or " Votes" has the meaning given to these terms in
Section 4.15.
(k) "Member" means any person executing this Agreement as a Member or
hereafter admitted to the Company as a Member as provided in this
Agreement, but does not include any person who has ceased to be a
Member in the Company.
(l) "Membership Interest" or "Interest" means a Member's interest in the
Company in which the Member shares in the income, gains, expenses,
profits, losses, deductions and credits of the Company, which
Interest is expressed as the percentage of the Member's holdings of
any class of Units in the Company in proportion to the total issued
and outstanding Units of the same class of the Company.
(m) "Net Profits" and "Net Losses" The Company's taxable income or loss
determined in accordance with the Code for each of its Fiscal Years.
(n) "Officer." One or more individuals appointed by the Members to whom
the Members delegate specified responsibilities. The Members may,
but shall not be required to, amend this Agreement to create such
offices as they deem appropriate, including, but not limited to,
President, Vice Presidents, Secretary and Treasurer. The Officers
shall have such duties as are assigned to them by the Members from
time to time, which duties shall be memorialized by written
amendment to this Operating Agreement. All Officers shall serve at
the pleasure of the Members and the Members by Majority Vote may
remove any Officer from office without cause and any Officer may
resign at any time.
(o) "Person" has the meaning given that term in the Act.
(p) "Properties" means all of the Company's interests in any movable or
immovable properties, contracts or other assets owned by the
Company.
(q) "Service Area " means that area encompassed within St. Landry,
Evangeline and Lafayette Parishes, Louisiana.
(r) "Transferor Member" means any Member who sells or transfers, or
offers to sell or transfer, or attempts to sell or transfer his
Units in the Company to another Person; or any Member who is subject
to a voluntary or involuntary withdrawal.
(s) "Treasury Regulations." The federal income tax regulations,
including temporary regulations, promulgated under the Code, as such
regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
(t) "Units " means an interest in the Company acquired by a Member.
There shall be one class of Units. The Units shall have voting
rights equal to one vote per Unit. Units may be issued to certain
Members in exchange for capital contributions to the Company. Units
shall represent an equity interest in the Company and shall
represent a fully participating interest in the Company's management
and Net Profits as hereinafter set forth. The maximum authorized
number of Units of the Company is ONE HUNDRED THOUSAND (100,000).
ARTICLE 2
ORGANIZATION
2.1 INTENT
This Agreement constitutes the Operating Agreement of the Company, as
referred to in the Company's Articles of Organization and the Act.
2.2 FORMATION
The Company has been formed by the Members as a Louisiana limited
liability company by the filing of Articles of Organization (the
"Articles") pursuant to the Act and the issuance of a certificate by the
Secretary of State of Louisiana.
2.3 PURPOSES
The Company is formed for the purpose of engaging in any lawful activity
for which limited liability companies may be formed under the laws of the
State of Louisiana as may be approved by the Members. The Company has
established and operates a long-term acute care hospital in Opelousas,
Louisiana and long-term acute care hospital campus facility in Mamou,
Louisiana to provide hospital services to current and future patients of
the Company in the Service Area. In furtherance thereof, the Company may
exercise all powers necessary to or reasonably connected with the
Company's business which may be legally exercised by limited liability
companies under the Act, and may engage in all activities necessary,
customary, convenient, or incident to any of the foregoing.
2.4 REGISTERED OFFICE AND AGENT
The Company shall maintain a registered office and a registered agent in
the State of Louisiana, which office and agent may be changed by the
Members.
2.5 OTHER OFFICES
In addition to its registered office in Louisiana, the Company may have
other offices and places of business at such places, both within and
without the State of Louisiana, as the Members may from time to time
determine.
2.6 OPERATING AGREEMENT
The affairs of the Company shall be governed by the Act, its Articles and
this Operating Agreement. There shall be only one Operating Agreement
governing the affairs of the Company and the relationships of the Members
to one another as such relate to the business of the Company. Any oral or
written agreement between or among the Members shall be of no effect
whatsoever unless and until the Members agree by unanimous vote to
incorporate said agreement into this Operating Agreement. The Members
shall have the power to amend or repeal this Operating Agreement, and to
adopt a new Operating Agreement only upon the two-thirds (b's) majority of
the Votes as provided herein.
ARTICLE 3
MEMBERS
3.1 MEMBERS
The Members of the Company shall be those persons who have joined in the
execution of this Agreement, and any other persons who may be hereafter
approved for membership by the unanimous consent of the Members.
3.2 EXECUTION OF THIS AGREEMENT
The admission of an additional Member, including if applicable the spouse
of a Member, shall not become effective until the Person has executed this
Agreement, or an appropriate supplement hereto, pursuant to which the new
Member agrees to be bound by, and subject to, all of the terms and
provisions hereof and restrictions herein.
3.3 MEMBERS HAVE NO EXCLUSIVE DUTY TO COMPANY
(a) No Member shall be required to perform services for the Company
solely by virtue of being a Member. Unless approved by the Members,
no Member shall perform services for the Company or be entitled to
compensation for services performed for the Company.
(b) Except as otherwise expressly stated herein, no Member shall be
required to participate in the Company as such Member's sole and
exclusive function and any Member shall be entitled to and may have
other business interests and may engage in other activities in
addition to those relating to the Company other than permitted
Related Party Transactions as described in Section 4.23. No Member
shall have a business interest or engage in activities which are in
direct competition with the Company's provision of inpatient
long-term acute care hospital care services without the expressed
written approval pursuant to a two-thirds (2/3) Vote. Neither the
Company nor any Member shall have any right, by virtue of this
Operating Agreement, to share or participate in such other
investments or activities of the Member or to the income or proceeds
derived therefrom. The Member shall incur no liability to the
Company or to any of the Members as a result of engaging in any
other business or venture permitted by this Agreement.
ARTICLE 4
MANAGEMENT
4.1 MANAGERS
(a) The business of the Company shall be managed by one or more
Managers, who may, but need not, be Members, and who shall be a
mandatary of the Company for all matters in the ordinary course of
its business. LHC GROUP, LLC shall be the initial Manager of the
Company, and appears herein to accept said appointment. To the
extent authorized by this Agreement, the Manager shall have full,
exclusive and complete discretion, control, power and authority in
the management of the Company's affairs. The Manager shall have full
power and authority to undertake any activity described in this
Article and to execute and deliver on behalf of the Company such
documents or instruments which the Manager deems appropriate in the
conduct of the Company's business. No person, firm or corporation
dealing with the Company shall be required to inquire into the
authority of the Manager to take any action or make any decision.
(b) The Manager shall have, without limitation, authority to employ and
compensate the personnel reasonably necessary to conduct the
Company's business activity. The Manager shall be required to devote
to the Company's affairs only such part of its time and efforts as
is reasonably required to conduct the operations contemplated under
this Agreement and shall be free to engage in any other business for
its own account and/or for the account of others. Neither the
Company nor any of the Members shall have any rights by virtue of
this
Agreement in any independent business ventures of the Manager.
(c) Subject to the ultimate authority of the Members of the Company, the
day to day management of each long-term acute care hospital campus
shall be conducted by the Manager.
4.2 POWERS OF MANAGER.
The Manager shall have all necessary powers to carry out the purposes and
conduct the business of the Company including, without limitation,
excepting any specific limitations contained in this Agreement or in
applicable law, the authority, right and power on behalf of the Company
to:
(a) To negotiate and enter into, make and perform all such contracts,
agreements, and other undertakings binding the Company as the
Manager deems to be necessary, appropriate or advisable in
furtherance of the purposes of the Company;
(b) Acquire, hold, manage and defend the assets of the Company;
(c) Open, maintain and close bank accounts, designate and change
signatories on such accounts and draw checks and other orders for
the payment of monies;
(d) Lease, sell, convey, assign, trade, exchange, quitclaim, surrender,
release, abandon or otherwise dispose of any movable assets or
interest therein or payable therefrom not to exceed $100,000 without
any further act or vote or grant of authority by any Members and in
connection therewith make any such distributions as the Manager may
deem appropriate from the proceeds of such sale to the Members;
(e) To collect and deposit all Company receipts and to disburse all
Company funds in payment of all ordinary and necessary expenses;
(f) Sue and be sued, complain and defend in the name of and on behalf of
the Company;
(g) Execute and deliver all negotiable instruments, checks, drafts or
other orders for the receipt or payment of funds belonging to the
Company;
(h) Execute powers of attorney, consents, waivers and such other
documents as may be necessary or appropriate before any court,
administrative board or agency of any governmental authority
affecting Company assets;
(i) Purchase insurance, at the Company's expense, to protect Company
assets against loss and to protect the Manager against liability to
third parties arising out of the Company's activities, provided that
any such insurance shall name each Member, individually as an
additional insured;
(j) Prepare and file all returns for the Company and make all elections
for the Company with respect to federal and state income or other
taxes;
(k) Recommend employment of such agents, employees, accountants,
lawyers, clerical help and other assistance and services subject to
approval by Majority Vote;
(l) Grant and perfect security interests in the Company's accounts for
the purposes of obtaining operational financing;
(m) Execute and deliver such other documents and perform such other acts
as the Manager in his sole discretion may determine to be necessary
or appropriate to carry out the purposes of the Company; and
(n) Take any and all other action the Manager may deem necessary,
appropriate or advisable in furtherance of the purposes of the
Company.
4.3 CERTAIN LIMITATIONS ON AUTHORITY OF MANAGER.
Notwithstanding the provisions of Section 4.2, the Manager, acting alone,
shall not have the power to do any of the following on behalf of the
Company, each of which shall require approval of the Members as provided
herein:
(a) To dissolve, liquidate or wind-up the business of the Company;
(b) To sell, exchange, lease, mortgage or otherwise transfer assets in
excess of $100,000 per year, other than inventory;
(c) To merge or consolidate the Company with or into any other entity;
(d) To incur indebtedness in excess of $ 100,000 in any one transaction;
(e) To alienate, lease or encumber any immovable property belonging to
the Company;
(f) Confess to judgment against the Company;
(g) To admit new members;
(h) To file voluntary bankruptcy proceedings; and
(i) To amend the Articles or this Agreement.
4.4 COMPENSATION AND REIMBURSEMENT OF MANAGER.
Compensation for services rendered in his capacity as Manager shall be
established and thereafter modified at any time upon a Majority Vote
subject to the restrictions set forth in Section 4.23. In addition, the
Manager shall be reimbursed on a monthly basis for all direct costs and
expenses reasonably incurred on behalf of the Company.
4.5 LIABILITY AND INDEMNIFICATION OF MANAGER.
In addition to any other provision contained herein conferring similar
rights, the Manager shall not be liable, responsible, or accountable in
damages or otherwise to the Company or to any Member for any action taken
or any failure to act on behalf of the Company within the scope of the
authority conferred on the Manager by this Agreement or by law, unless the
action was taken or omission was made fraudulently or in bad faith or
unless the action or omission constituted gross negligence.
4.6 POWER OF ATTORNEY.
Each Member hereby constitutes and appoints the Manager as the Member's
true and lawful attorney and agent with full power and authority in the
Member's name, place, and stead to execute, swear to, acknowledge,
deliver, file, and record in the appropriate public offices:
(a) All such certificates that the Manager considers necessary or
appropriate to qualify or continue the Company as a limited
liability company; and
(b) One or more fictitious or trade name certificates
The power of attorney granted herein shall be considered to be coupled
with an interest, and, to the extent permitted by applicable law, shall
survive the death, interdiction, withdrawal, resignation, retirement,
expulsion, bankruptcy, dissolution, or termination of existence of a
Member or interest holder. It shall also survive the Transfer of an
Interest, except that if the Transferee is admitted as a Member, this
power of attorney shall survive the delivery of the assignment for the
sole purpose of enabling the Manager, as attorney in fact, to execute,
acknowledge, and file any documents needed to effectuate the substitution.
4.7 RESIGNATION OR WITHDRAWAL OF MANAGER.
The Manager may resign upon giving written notice to the Company at least
thirty (30) days in advance. The Manager shall be deemed to resign upon
any disposition of the membership interest of the Manager, if Manager is a
Member. Upon the resignation or withdrawal of the Manager, a new Manager
shall be elected by a majority in interest of the Members.
4.8 OTHER AGENTS
The Members, by Majority Vote, may appoint other managers, agents, or
attorneys-in-fact as needed from time to time, whose authority to act for
the Company shall be stated in the written act or instrument pursuant to
which said agent or attorney in fact is appointed. Unless expressly
authorized to do so by the Members, no attorney-in-fact, employee or other
agent of the Company shall have any power or authority to bind or obligate
the Company in any way, or to pledge its credit.
4.9 REMOVAL OF MANAGER.
The Members, at any time and with or without cause, may remove a Manager
and elect a new Manager, upon unanimous Vote of the Members other than the
Manager to be removed.
4.10 LIMITATION ON AUTHORITY OF MEMBERS.
No Member is an agent of the Company solely by virtue of being a Member,
and no Member has authority to act for the Company solely by virtue of
being a Member. This Section 4.10 supersedes any authority granted to the
Members by the Act. Any Member who takes any action or binds the Company
in violation of this Operating Agreement shall be solely responsible for
any loss and expense incurred by the Company as a result of the
unauthorized action and shall indemnify and hold the Company harmless with
respect to the loss or expense.
4.11 BUSINESS JUDGMENT.
The Managers and the Members shall be entitled to rely on information,
opinions, reports or statements, including but not limited to financial
statements or other financial data prepared or presented by: (i) any one
or more Members, Officers or employees of the Company whom the Member
reasonably believes to be reliable and competent in the matter presented,
(ii) legal counsel, public accountants, or other persons as to matters the
Member reasonably believes are within the person's professional or expert
competence, or (iii) a committee of Members on which he or she does not
vote if the Member reasonably believes the committee merits confidence.
4.12 MEETINGS OF THE MEMBERS
Subject to the notice requirement of Section 4.13, meetings of the Members
may be called at any time by a Manager, or by Members holding in the
aggregate thirty percent (30%) of the Units. If the meeting is called by
less than a majority in interest of the Members, it shall be held at the
registered office of the Company, unless all Members agree to an alternate
location. Subject to the foregoing, meetings of the Members may be held at
the office of the Company, or at such other place, either within or
without the State of Louisiana, at a time and date as designed in the
notice. Failure to hold an annual meeting shall not affect or vitiate the
Company's existence.
4.13 NOTICE OF MEETINGS
Written notice of the time and place of a meeting of Members shall be
given by the Person calling the meeting to all Members at least two (2)
days and not more than sixty (60) days prior to the date fixed for the
meeting. Notice of any Members' meeting may be waived in writing by any
Member at any time. Attendance at any meeting by a Member shall be deemed
a waiver of notice of such meeting unless such attendance is solely for
the purpose of objecting to the legality of the meeting on grounds of
inadequate or improper notice.
4.14 QUORUM
Except as may be otherwise required by the Act, the Articles or this
Agreement, the presence in person or by proxy of persons holding a
majority of the Votes shall be necessary to constitute a quorum at any
meeting of the Members.
4.15 VOTING
(a) At any meeting of the Members, every Member having the right to vote
shall be entitled to vote in person, or by proxy. There shall be one
vote allotted for each Unit held by each Member (the "Votes").
Fractional Units shall not be entitled to vote except in the event
of a tie vote. Except for actions requiring the unanimous or a
supermajority consent or approval of the Members as required by the
Act, the Articles, or this Agreement, a fifty-one percent (51%)
majority of the Votes present and voting ("Majority Vote") shall
decide any matter brought before the Members. On demand of any
Member, the vote on any question shall be by written ballot.
(b) The following actions shall require the unanimous consent of the
Members:
(i) expansion of the Company's business beyond the Service Area;
(ii) termination of the Company's Management Agreement with LHC
GROUP, LLC, other than for cause as provided in the Management
Agreement;
(iii) the sale of any Member's Membership Interest and Voting
Interest in accordance with Article 6; or
(iv) the selection of an appraiser to provide an independent
appraisal of the value of the Company.
4.16 PROXIES
At any meeting of the Members, every Member shall be entitled to vote in
person or by proxy appointed by an instrument in writing subscribed by
such Member and bearing a date not more than eleven months prior to the
meeting, unless the instrument provides for a longer period. Any Member
may issue an irrevocable proxy to any other Member. A copy of such
instrument shall be filed prior to or at the meeting. A proxy need not be
a Member.
4.17 WRITTEN CONSENT
Any action may be taken without a meeting of the Members if a consent in
writing, setting forth the action so taken, shall be signed by those
Members having sufficient votes to authorize the action. Such consent
shall have the same force and effect as a vote of the Members, provided
that written notice is give prior to or contemporaneously with the
execution of the proposed written consent. A photostatic, email, facsimile
transmission, or similar reproduction of a writing, signed by a Member,
shall be regarded as an original for all purposes. A copy of the written
consent shall be distributed to each non-consenting Member within fifteen
(15) days of the date of such consent. The failure to distribute such
copies shall not vitiate or effect the consent in any manner.
4.18 TELEPHONE CONFERENCE CALLS; EMAIL
Members may participate in meetings by means of a telephone conference
call or similar communication equipment provided that all Persons
participating in the meeting can hear and communicate with each other.
Participation in such a meeting shall constitute presence at the meeting,
except where a Person participates in the meeting for the express purpose
of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened. The Manager may poll the
Members by telephone and the results of such poll may constitute action by
the Members so long as no Member who has been polled objects to such
action prior to its adoption, and provided that any action taken by poll
is properly reduced to writing and a copy of the same provided to the
Members. Members may take action by way of serial email transmissions so
long as each Member contemporaneously receives a copy of the emails
proposing and discussing such action and no Member objects to such action
prior to its adoption.
4.19 TAX RETURNS AND ELECTIONS
The Manager shall cause the preparation and timely filing of the Company's
tax returns, shall make such tax elections and determinations as appear to
be appropriate, and shall timely file all other writings required by any
governmental authority having jurisdiction to require such filing. Upon
the transfer of all of the Member's interest in the Company or upon the
death of a Member, or upon the distribution of any property of the Company
to a Member, the Company may (but shall not be required to) file an
election in accordance with the applicable Treasury Regulations to cause
the basis of such property to be adjusted for federal income tax purposes
as provided by the Code.
4.20 REIMBURSEMENT OF COSTS AND EXPENSES
Any Member acting for and on behalf of the Company shall be entitled to
reimbursement for all expenses, costs and other liabilities reasonably
incurred on behalf of the Company, except to the extent that such
expenses, costs and other liabilities are incurred in connection with
services that the Member has agreed to perform for the Company as a
contribution to its capital.
4.21 LIMITATION OF LIABILITY
Except as otherwise provided by the laws of the State of Louisiana, the
personal liability of each Member, if any, shall be limited to his capital
contribution to the Company as set forth herein. No Member has guaranteed
or shall have any obligation with respect to the return of a Member's
Capital Contributions or profits from the operation of the Company. No
Member shall be liable for any debt or liability of the Company unless
same shall be separately guaranteed or endorsed by a Member in that
Member's personal capacity. No Member shall be liable, responsible or
accountable in damages or otherwise to the Company or any other Member for
any loss or damage incurred by the Company or the Member by reason of any
act or omission performed or omitted by the Member on behalf of the
Company, provided that the Member acted (i) in good faith, and (ii) in a
manner reasonably believed by the Member to be within the scope of the
authority granted to him by this Agreement and in the best interest of the
Company. The foregoing limitation of liability shall not apply to such
losses to, or damages incurred by, the Company or the Members that result
from the Member's gross negligence, intentional misconduct or breach of a
fiduciary duty owed to the Company or the Members.
4.22 INDEMNITY
Except as otherwise provided for herein, to the fullest extent permitted
by law the Company shall indemnify, defend and hold harmless each Member
and make advances for expenses to each Member arising from any loss, cost,
expense, damage, claim or demand, in connection with the Company, the
Member's status as a Member of the Company, the Member's participation in
the management, business and affairs of the Company or such Member's
activities on behalf of the Company. The Company shall also indemnify,
defend and hold harmless its Officers, employees and Managers from any
loss, cost, expense, damage, claim or demand in connection with the
Company, any such person's participation in the business and affairs of
the Company, or such Person's activities on behalf of the Company, unless
the action was taken or omission was made fraudulently or in bad faith or
unless the action or omission constituted gross negligence.
4.23 RELATED PARTY TRANSACTIONS
(a) Anything in this Agreement to the contrary notwithstanding, it is
agreed by and among the Company and its Members that the Company
shall not enter into any contract, agreement or transaction with any
Member of the Company; or with any individual family member (spouse,
child, sibling or parent) of any Member of the Company; or with any
corporation, partnership or other legal entity owned (10% or more)
or controlled by any Member of the Company, or an immediate family
member thereof; or any individual which is a shareholder or other
equity interest owner in a corporation, partnership or limited
liability company which is a Member, without the consent of a
Majority Vote of the remaining disinterested Members which shall be
calculated by omitting the votes attributable to the interested
Member. The following are non-exclusive examples of transactions
covered by this section and requiring consent of a majority of the
disinterested Members:
(i) sale of the Company's real estate or movable property or
assets to the Members, their immediate family members or
related entities;
(ii) leasing of the Company's real estate or movable property or
assets, or any portion thereof to or from the Members, their
immediate family members or related entities;
(iii) entering into contracts for the management, servicing, repair
or improvement of the Company's business, real estate, movable
property or other assets, or any portion thereof, with the
Members, or their immediate family members or related
entities.
(iv) employment or professional services agreements.
(b) Notwithstanding the foregoing, the Members unanimously agree,
approve and ratify the Management Services Agreement entered into
between the Company and LHC GROUP, LLC with the cost of same not to
exceed fifteen percent (15%) of the Company's net revenues.
4.24 CONTRACTS IN VIOLATION
Any contract, agreement, or transaction entered into without the consent
of a majority of the disinterested Members as required in Section 4.23
above, shall be absolutely null and void and of no force and effect as
concerns the Company and the disinterested Members.
4.25 NO INDEMNIFICATION
The limitation of liability and indemnification provisions of Sections
4.21 and 4.22 of this Agreement shall not apply to any transaction entered
into in violation of Sections 3.3 and 4.23 above. Furthermore, the
limitation of liability and indemnification provisions of Sections 4.21
and 4.22 of this Agreement shall not apply to any Member if that Member is
determined to have breached any fiduciary duty to the Company. In such
event, the Member shall promptly reimburse to the Company any sums
advanced under Sections 4.2l or 4.22.
4.26 MEMBERS' AND OFFICERS' COMPENSATION
Any salaries and other compensation of the Members or Officers shall be
fixed by the Members, and no Member shall be prevented from receiving such
salary by reason of the fact that he is also a Member of the Company.
4.27 TAX ELECTIONS; TAX MATTERS PARTNER.
All elections required or permitted to be made by the Company under the
Code shall be made by a Majority Vote of the Members. For all purposes
permitted or required by the Code, the Members constitute and appoint its
initial manager as Tax Matters Partner or, if he is no longer the Manager,
then such other Member or Manager as shall be elected by the Members by
Majority Vote. The provisions on limitations of liability and
indemnification of the Members set forth in Article 4 hereof shall be
fully applicable to the Tax Matters Partner in his or her capacity as
such. The Tax Matters Partner may resign at any time by giving written
notice to the Company and each of the other Members. Upon the resignation
of the Tax Matters Partner, a new Tax Matters Partner may be elected by
Majority Vote of the Members.
4.28 INSURANCE.
The Company shall maintain in force and effect general commercial
liability insurance coverage of no less than $1,000,000 per incident and
$3,000,000 in the aggregate; professional liability insurance of no less
than: (i) $1,000,000 per incident and $3,000,000 in the aggregate, or (ii)
$100,000 per incident and $300,000 in the aggregate, subject to and
including participation as a Qualified Healthcare Provider in the
Louisiana Patients' Compensation Fund; and workers' compensation insurance
in the minimum statutory amount for the full term of this Agreement and
for a term of three (3) years thereafter.
4.29 FINANCING.
For the Company's benefit, LHC GROUP, LLC, as Manager, is hereby
authorized to obtain operational financing from its credit facility,
GMAC-RFC Health Capital or its successor in interest, and shall be
authorized to grant a security interest of up to one hundred percent
(100%) of Company's accounts receivables to secure same.
ARTICLE 5
CAPITAL CONTRIBUTIONS AND ACCOUNTS, AND ACCOUNT ALLOCATIONS
5.1 CAPITAL CONTRIBUTIONS
(a) Initial Capital. The Members shall each own Units in the Company
with their initial Interests in the Company equal to the
proportionate percentages as shown in the Membership Schedule. The
Units shall represent a participation interest in the equity, Net
Profits and Net Losses of the Company.
(b) Allocation of Profits and Losses: Equity Interests.
Notwithstanding any provision of this Agreement to the contrary, the
parties agree that the Membership Interests in income and losses of
the business activities conducted by the Company shall be as set
forth opposite each Member's name on the attached Membership
Schedule. From and after the date this Agreement takes effect, the
Membership Interest for each Member shall be equal to the percentage
determined at any given time by dividing the Units held by such
Member as of such time by the aggregate Units held by all Members as
of such time.
(c) Special Capital Contributions. It is anticipated that the Company
will from time to time require additional capital to purchase or
acquire additional assets or entities, or interests therein, and to
fund the future operations of the Company. The Members will
contribute to the capital of the Company, according to their
respective Membership Interests, as set forth in Sections 5.1(b)
above, cash sums equal to the sums necessary to defray the costs of
such operations not covered by Company revenues, up to an cumulative
aggregate maximum amount of additional capital for all Members of
$10,000. Any requirement or project requiring capital in excess of
this amount shall require a two-thirds (b's) majority of the Votes.
Should a Member fail to pay its share of authorized additional
capital, it shall be liable to the other Member or Members therefor,
as provided in Section 5.1(d) below; provided, however, that in lieu
of the penalty set forth in Section 5.1(d), upon a Majority Vote of
the non-defaulting Members, the defaulting Member shall be deemed to
have forfeited its interest in the Company to the non-defaulting
Member or Members who choose to advance the defaulting Member's
unpaid capital contribution. Notice of the forfeiture shall be given
to the defaulting Member within sixty (60) days of the default in
capital contribution. The provisions of this Section 5.1(c) shall
not apply to capital calls in excess of the aggregate limit set
forth herein unless such call has been approved by the affirmative
vote of not less than eighty percent (80%) of the issued and
outstanding Units prior to a default.
(d) Penalty for Failure to Make Capital Contributions. Upon failure of
any Member to promptly remit to the Company any sum due by it under
the terms of this Agreement, and if no non-defaulting Member chooses
to declare a forfeiture of interest under Section 5.1(c) above, then
another Member may, but shall not be required to, advance such sum
or sums. Any Member making such an advance shall be entitled to
recover 300% of the amount of such advance from the first
Distributive Shares to which the other Member would have otherwise
been entitled as a Member of the Company in the absence of its
default hereunder. The provisions of this Section 5.1(d) shall not
apply to capital calls in excess of the aggregate limit set forth
herein unless such call has been approved by a Majority Vote prior
to a default.
(e) Special Capital Contributions for Acquisitions or New Business. It
is anticipated that the Company may acquire, and may participate in
the further development and operation of its Properties, and in
future business ventures. The Members may contribute to the capital
of the Company, according to their respective Membership Interests,
as set forth in Section 5.1(b) above, cash sums equal to the
acquisition cost of such interests or cash and personal guaranties
as required by the terms of any financing secured for such venture
or ventures. Should a Member fail to approve or elect to participate
in an acquisition, or new business opportunity by the Company upon
being given the opportunity the Member
electing to participate shall thereafter be free to acquire or
pursue such interests for its or their own account outside the
Company, or, the Company may go forward with such venture without
the participation of the non-participating Member and the
participating Members shall indemnify and hold harmless the
non-participating Member from all liability, loss or obligation
arising in any manner from such venture. In such event, expenses and
revenues shall be separately accounted for with respect to the new
venture and the participating Members only shall provide for the
expenses and share in the revenues or losses from such venture, and
no part of such costs, revenues or losses shall be allocated to the
non-participating Member.
(f) Interest on and Return of Capital Contributions. No Member shall be
entitled to interest on such Member's Capital Contribution or to a
return of its Capital Contribution, except as otherwise specifically
provided for herein.
5.2 CAPITAL ACCOUNTS
A Capital Account shall be maintained on the books of the Company for each
Member which shall be begun, determined and maintained through the full
term of the Company in accordance with the Capital Accounting rules of
Treasury Regulations, and otherwise in accordance with generally accepted
accounting principles consistently followed. A Member's Capital Account
shall consist of his capital contributions to the Company:
(1) Increased by his share of Company profits; and
(2) Decreased by his share of Company losses and by cash
distributions to him.
No Member shall withdraw any part of its Capital Account, except upon the
approval of the Members.
5.3 ALLOCATION OF PROFITS, GAINS AND LOSSES
(a) General Allocation. The Members will share in the income, gains,
expenses, losses, deductions and credits of the Company in
accordance with their Membership Interests. Each Member's share of
the Net Profits and Net Losses shall be allocated for each Fiscal
Year to the Members' Capital Accounts.
(b) Depletion Allocation. Depletion will be allocated to the Members in
the same proportions as they share in the income of the Company;
provided, however, that depletion will not be allocated to a Member
to the extent that it causes or increases a negative balance in his
Capital Account.
(c) Qualified Income Offset. Notwithstanding the allocation rules set
forth in this Agreement, the Members agree to a "qualified income
offset" as defined in Treasury Regulations to allocate items of
income and gain in an amount and manner sufficient to eliminate as
quickly as possible any unexpected Capital Account deficit balance.
5.4 DISTRIBUTIONS
The Company's Net Profits which are in excess of the current or projected
needs of the Company may be distributed on an interim basis each Calendar
Quarter to the Members in accordance with the allocations set forth in
Section 5.1. Such payments are referred to herein as "Distributive
Shares." Such distributions shall be made no later than 60 days
following the end of each Calendar Quarter. However, no distribution
shall he made to Members if prohibited by the Act. All interim
quarterly distributions shall be reconciled annually and corrective
distributions shall be made no later than March 31st of each year
for the prior fiscal year. Amounts calculated for any partial
quarter or annual periods shall be determined proportionately, but
shall he subject to the annual reconciliation.
The Company is subject to partnership taxation and is not subject to
taxation. Each Member receiving Distributive Shares shall be responsible
for payment of its own tax liabilities, if any.
5.5 LOANS TO COMPANY
To the extent approved by a Majority Vote of the Members, any Member may
make a secured or unsecured loan to the Company.
5.6 PRIORITY AND RETURN OF CAPITAL.
No Member shall have priority over any other Member, either as to the
return of Capital Contributions or as to Net Profits, Net Losses or
Distributions. This Section shall not apply to loans (as distinguished
from Capital Contributions) which a Member has made to the Company.
5.7 PERSONAL GUARANTEES OF THE MEMBERS
As a condition precedent to the admission of a Member and issuance of
Membership Interest to the Member, to the extent that any obligations of
the Company are required to be personally guaranteed by the Members of the
Company, upon the eighty percent (80%) Majority Vote of the Members, each
Member shall sign as surety, in his, her or its individual capacity, on
all outstanding obligations of the Company which are personally guaranteed
by the Members of the Company. Alternatively, any Member may satisfy this
condition precedent by arranging for such a personal guarantee by a third
person which is satisfactory to the other Members, and creditors of said
obligations. The Company and the Members of the Company acknowledge and
agree that the intention of each party is that all obligations of the
Company which require personal guarantees shall be guaranteed by the
Members in proportion to their membership interests, with each Member
retaining full rights of indemnity and contribution from the other Members
in proportion to the respective membership interests held by the Members.
If the Member fails to perform his, her or its obligations pursuant to
this Section 5.7 following provision often (10) days written notice
demanding performance, the Member shall be deemed to have voluntarily
withdrawn from the Company under Section 6.14 of this Agreement without
the requirement for further notice by either party.
5.8 MEMBERS' RIGHTS OF CONTRIBUTION.
If for any reason, a Member sustains any liabilities or is required to pay
any losses arising out of, or directly connected with, the Company, or the
execution of any agreements or guarantees in connection with the Company's
operations, which are in excess of his, her or its proportionate
Membership Interest in the Company, the other Members shall promptly
reimburse such Member this excess, so that each and every Member of the
Company will then have paid his, her or its proportionate share of such
losses to the full extent of his, her or its Membership Interest in the
Company.
ARTICLE 6
TRANSFER OF INTERESTS AND WITHDRAWAL
6.1 RESTRICTIONS ON TRANSFER. A Member may not sell or otherwise transfer the
Member's Units in the Company except as provided in this Article. In the
event that a Member sells or transfers, or purports or attempts to sell or
otherwise transfer, his, her or its Units except as provided in this
Article, that Member shall be deemed to have involuntarily withdrawn from
the Company effective on the date of the sale or transfer, or the
purported or attempted sale or transfer. Any such sale or transfer, or
purported or attempted transfer shall not have effect with respect to the
Company and its Members, and any such transferee shall be entitled only to
receive the value of the Units transferred in accordance with the
provisions of Section 6.3. The transfer restrictions of this Article shall
be binding on the Members, the Company, their heirs, legatees, legal
representatives, successors, assigns, and transferees.
6.2 VOLUNTARY TRANSFER OF MEMBER'S INTEREST TO THIRD PARTIES.
(a) Notwithstanding any other provision of this Agreement to the
contrary, no Member may sell, assign, give, devise, pledge,
hypothecate, mortgage, or in any other manner transfer any portion
of his Units, without the prior written consent of all of the other
Members, and any such transfer shall be subject to the provisions of
this Section 6.2.
(b) If a Member desires to effect any such transfer to a third party,
such Member or his legal representative (the "Transferor Member")
shall first give written notice (the "Offer Notice") to the Company
and the other Members (the "Remaining Members") which shall state:
(i) The extent of the Units to be conveyed;
(ii) The complete terms upon which the Transferor Member seeks to
convey the Units (such terms to be limited to consideration
for the Units in the form of cash and/or notes receivable);
and
(iii) The name and address of any transferee relating to such
conveyance.
(c) Upon receipt of the Offer Notice, the Remaining Members shall have
the unrestricted right to (i) consent to such transfer; or (ii)
refuse to consent to such transfer, in which case such refusal shall
cause the following rights and obligations to arise in the following
order of priority:
(d) The Remaining Members shall have the option for a period of thirty
(30) days from receipt of the Offer Notice within which to purchase
the offered portion of the Transferor Member's Units. For the first
fifteen (15) days of the thirty (30) day period, each Remaining
Member electing to purchase part of the Transferor Member's Units
shall have the primary right to purchase a proportion of the
Transferor Member's Units calculated as the product of: the Units of
the Transferor Member described in the Offer Notice multiplied by a
fraction, the numerator of which shall consist of the purchasing
Remaining Member's Units and the denominator of which shall be the
aggregate Units of the Remaining Members electing to exercise their
primary right to purchase the Transferor Member's Units.
(e) In the event that any portion of the Transferor Member's Units
described in the Offer Notice has not been purchased by the
Remaining Members at the end of the initial fifteen (15) day period,
the remainder shall be available for purchase by these Remaining
Members in the exercise of their secondary right. Each Remaining
Member electing to exercise his secondary right shall have the
option for a period of fifteen (15) days to purchase, on a pro-rata
basis, such part of the Transferor Member's Units as was not elected
for purchase by the Remaining Members in the exercise of their
primary right.
(f) In the event that any portion of the Transferor Member's Units
described in the Offer Notice has not been purchased by the
Remaining Members at the end of the thirty (30) day period, the
Company shall have the option for a period of fifteen (15) days to
purchase any remaining portion of the Transferor Members' Units that
was not purchased by the Remaining Members in the exercise of either
their primary or their secondary rights.
(g) In the event that any portion of the Transferor Member's Units
described in the Offer Notice has not been purchased by the Company
at the end of the fifteen (15) day period, the Transferor Member may
transfer the Units on the terms contained in the Offer Notice, and
the consent of the Company and its Members if not expressly granted
shall be implied. The Transferor Member shall complete the transfer
within ninety (90) days (or such later date as may be specified in
the Offer Notice) after receipt of the Offer Notice by the Remaining
Members, but only with such transferee and only on such terms as
were specified in the Offer Notice.
6.3 INVOLUNTARY TRANSFERS OF UNITS.
(a) If any Member (the "Transferor Member"): (i) is deemed to have
involuntarily withdrawn from the Company under the terms of this
Agreement; (ii) becomes the subject of any judicial proceeding,
including a proceeding under the U.S. Bankruptcy Code, or if a
trustee, receiver, liquidator, or other representative of the
Member's personal or business assets is or may be appointed; or
(iii) becomes insolvent or makes an assignment for the benefit of
the Member's creditors; or (iv) becomes involved in any other
proceeding or commits any other act by which such Member, or a
trustee, receiver, liquidator, or other representative of such
Member, is or may be permitted or required to acquire or convey all
or any portion of such Member's Units, such Member shall give
written notice to the Company.
(b) The Company shall be obligated to purchase the entirety of the
Transferor Member's Units, which purchase shall be consummated in
the manner specified in this Section. The purchase price of any
Units purchased pursuant to this Section shall be equal to the book
value of the Units as of the close of the Company's fiscal year
immediately preceding the event resulting in the involuntary
transfer, less any negative Capital Account balance of the Member.
In the event the involuntary transfer is occasioned prior to the end
of the Company's first fiscal year, the purchase price of any Units
purchased pursuant to this Section shall be equal to the book value
of the Units as of the close of business on the day on which the
event causing the involuntary transfer occurred, less any negative
Capital Account balance of the Member. The book value of the Units
shall be determined by the Company's public accountant, and the
accountant's determination when rendered shall be conclusive amongst
the
parties.
(c) If the Company is obligated to purchase the interest of a Transferor
Member in the Company pursuant to the provisions of this Section,
the Company shall do so by giving written notice to the Transferor
Member, or the Transferor Member's trustee, receiver, or other
representative, or the appropriate court, all as the case may be.
Upon the giving of such notice, the Company, as purchaser, and the
Transferor Member, as seller, shall be obligated to consummate the
sale and purchase of the Units, or portion thereof, at the Company
offices within sixty (60) days after the date of the Company's
notice.
(d) The purchase price shall be paid by the Company with a
non-negotiable promissory note payable in twenty equal quarterly
installments, commencing ninety days after the effective date of the
transfer, with interest at the prime rate published in the Wall
Street Journal on the date of the transfer without prepayment
penalties. The note shall contain a subordination clause
subordinating the note to all other debts of the Company. The
Company shall grant a security interest securing payment of the
promissory note in the Units transferred if the cause of the
involuntary withdrawal is specified in Sections (c) (ii) or (iii),
only. At its sole option the Company may pay all or part of the
purchase price in cash at the time of the transfer.
6.4 DEATH OF A MEMBER'S SPOUSE. In case of the death of an individual Member's
spouse ("decedent"), the Company shall have the option to redeem the Units
owned by the decedent, including the decedent's interest in the Company
arising from the marital regime of acquets and gains, if any. The Company
shall not automatically redeem the decedent's Units, but rather the
affected Member shall have the option, within ninety (90) days of notice
to the Company of the decedent spouse's death, to purchase the decedent's
interests in the Units. If the member does not exercise this right within
ninety (90) days of the notice of death, then the Company shall have the
option to redeem the decedent's interests in the Units at the price and on
the terms specified in Section 6.7 within the ensuing thirty (30) days.
6.5 DIVORCE OF A MEMBER. In the event of a divorce between an individual
Member and the spouse of that Member, the Company shall have the option to
redeem any Units granted to or owned by the spouse of the member. The
Company shall not automatically redeem this Units, but rather the affected
Member shall have the right within ninety (90) days of notice to the
Company of the earlier of (i) the final judicial decree of divorce, or
(ii) the execution of an agreement of separation of property between the
Member and the spouse of the Member, to purchase the Units belonging to
the spouse of the Member. If the Member does not timely exercise this
right, then the Company shall have the option to redeem the spouse's Units
at the price and on the terms specified in Section 6.7 within the ensuing
thirty (30) days.
6.6 DEATH OF A MEMBER. In the event of the death of an individual Member, the
Company shall have the option to redeem any Units, held by such Member, or
transferred by will or law or otherwise to any heirs or legatees of the
individual Member, at the price and on the terms specified in Section 6.7
within the ensuing ninety (90) days. In the event of the death of a
shareholder of a corporate Member, the Company shall have the option to
redeem any Units held by the affected corporate Member at the price and on
the terms specified in Section 6.7 within the ensuing thirty (30) days.
6.7 VALUATION AND PAYMENT FOR PURPOSES OF SECTIONS 6.4, 6.5, 6.6, & 6.14 (e).
(a) Valuation of Units. The Members agree that the value of the Company
for the purposes of valuing the Units described in Sections 6.4,
6.5, 6.6, & 6.14 (e) herein shall be equal to ONE HUNDRED PERCENT
(100%) of the Company's Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) for each of the five fiscal
years ending after the effective date of the event giving rise to
the valuation. The value of a Member's interest under Sections 6.4,
6.5, 6.6, & 6.14 (e) shall be the product of: (i) the Member's
percentage holdings of Units as of the event giving rise to the
valuation; and (ii) the value of the Company for each of the five
fiscal years ending after the effective date of the event giving
rise to the valuation. The value of the Member's Units for each
fiscal year shall be determined by the Company's accountant.
(b) Payment of the Purchase Price. The purchase price shall be paid by
the transferee with an unsecured, non-negotiable promissory note
payable in five annual installments, commencing on or before March
31st of the year following the effective date of the transfer, with
interest at the prime rate published in the Wall Street Journal on
the effective date of the transfer without prepayment penalties. If
the Company is the transferee, the note shall contain a
subordination clause subordinating the note to all other debts of
the Company. At his, her or its sole option the transferee may pay
all or part of the purchase price in cash at the time of the
transfer. Notwithstanding the foregoing, the Transferor Member, or
its successors and assigns, and the transferee may unanimously agree
upon an alternative value for the Units and an alternative method of
payment.
6.8 SURVIVAL OF LIABILITIES. No sale or other transfer of an Units, even if it
results in the substitution of the transferee or assignee as a Member
herein, shall release the transferor or assignor from those liabilities to
the Company or the other Members which arose prior to such sale or
assignment or which otherwise survive such sale or assignment as a matter
of law.
6.9 NEGATIVE CAPITAL ACCOUNTS. If a Transferor Member has a negative Capital
Account balance, the Transferor Member shall pay the Company the amount of
the negative Capital Account balance as of the transfer date. If the
Transferor Member shall fail to pay the negative Capital Account balance,
the Company shall have the right to set-off or recoup any such amounts
from any distributions due to, or from any amounts owed by the Company to,
the Transferor Member, the transferee Member or the assignee.
6.10 LOANS AND PERSONAL GUARANTEES. Any loans owed by the Company to a
transferor Member shall be paid in full at closing. On or before closing
of any transaction pursuant to this Article 6, the transferee Member shall
also be obligated to obtain a full release of the transferor Member (and
the individual shareholder(s) or members of such Member) from all personal
guarantees granted on behalf of the Company.
6.11 RIGHTS OF PERMITTED TRANSFEREES OR ASSIGNEES. A permitted transferee or
assignee of a Member's Interest shall not become a Member without the
Majority Vote of the Members and compliance with the provisions of Section
3.2 of this Agreement. Any transferee or assignee of Units in the Company
who is not admitted to membership in the Company shall not be entitled to
vote, and shall not be entitled to participate in the management of the
Company, or to have access to any records or communications of the Company
or its Members, or to participate in any manner in the operation of the
Company. He or she will, however, be bound by and subject to this
Agreement and the
terms and conditions of any other agreement pertaining to the restrictions
on the transfer of an Interest in the Company.
6.12 SEVERABILITY. The parties agree that each term and condition contained in
this Article 6 shall be liberally construed to give effect to the parties'
intent and shall be considered severable; and if, for any reason, any
provision or provisions, or portions thereof, herein contained are
determined to be invalid, overbroad, or unenforceable for any reason, such
provision shall be deemed modified to the extent required to render it
valid, enforceable and binding, and such determination shall not affect
the validity or enforceability of any other provision of this Agreement,
In the event any provision of this Article 6 is held to be unenforceable
or void for any reason, the remainder of the provisions of this Article
shall be unaffected and shall remain in full force and effect in
accordance with its terms.
6.13 SPECIFIC PERFORMANCE; ENFORCEMENT.
(a) In addition to any other remedies provided for herein, in the event
any transfer required under this Article 6 is not timely completed
in accordance with the terms hereof, the Company and/or each
non-defaulting Member may seek specific performance of the
obligations of the defaulting party and may institute legal
proceedings to enforce the obligations of the defaulting party and,
if successful, the defaulting party shall be liable for all
reasonable attorneys' fees and costs incurred by the non-defaulting
party.
(b) The Members hereby declare and agree that it is impossible to
measure in money damages that which will accrue to the Company and
its Members by reason of a failure of any Member hereto to perform
any of the obligations under this Article 6. Therefore, if any party
hereto or the personal representatives of a decedent shall institute
any action or proceeding to enforce the provisions of this Article 6
by injunction (including the granting of a temporary restraining
order), any Member against whom such action or proceeding is brought
hereby waives the claim or defense therein that such Member or such
personal representative has an adequate remedy at law, and such
Member shall not urge in any such action or proceeding the claim or
defense that such remedy at law exists.
(c) The exclusive venue for any action brought to enforce the terms of
this Article 6 shall be Lafayette Parish, Louisiana.
6.14 WITHDRAWAL OF A MEMBER
(a) Voluntary Withdrawal. Any Member may withdraw from the Company at
any time by providing ninety (90) days advance written notice to all
other Members.
(b) Involuntary Withdrawal. Any circumstance compelling the involuntary
transfer of a Member's Interest, including, without limitation,
service of any writ of seizure applicable to his Interest or
adjudication of bankruptcy of a Member, shall be deemed a withdrawal
by the Member affected thereby effective upon the service of the
writ or notice of the adjudication.
(c) Automatic Involuntary Withdrawal. In addition to the other events of
withdrawal contained herein, a Member shall be deemed to have
withdrawn from the Company effective on the date on which one of the
following events occurs:
(i) the individual Member, or an officer, director, shareholder or
other equity holder of a corporate Member is convicted of a
felony;
(ii) the individual Member dies, is interdicted or determined to be
incompetent; or
(iii) the Member breaches this Agreement and fails to cure such
breach within thirty (30) days of receipt of notice of such
breach;
(iv) the Member, or an officer, director, shareholder or other
equity holder of a corporate Member is excluded or debarred
from participation in the Medicare or Medicaid programs;
(v) the Member sells or transfers, or attempts to sell or transfer
of the Member's interest in the Company without compliance
with the provisions of this Article 6; or
(vi) the individual physician Member, or a physician officer,
director, shareholder, member or other equity holder of a
corporate Member fails to obtain, maintain, and exercise
active medical staff privileges at the Company's long-term
acute care hospital for any period exceeding thirty (30) days
without the written consent of Manager.
(d) Withdrawal from the Company, in and of itself, shall under no
circumstances relieve the former Member of his, her or its
obligations to: (i) make any additional capital contributions
approved by the Members prior to the effective date of the former
Member's withdrawal; or (ii) to fulfill his, her or its contractual
obligations to the Company incurred or accrued prior to the
effective date of the former Member's withdrawal. In either event,
the Company shall have a right of set-off against any distribution
due to a withdrawing former Member.
(e) In the event of a voluntary withdrawal of a Member, if the Company
is continued in accordance with the provisions of Section 7.1, the
withdrawing Member shall receive:
(i) the book value of the Member's Units as of the close of the
Company's Fiscal Year immediately preceding the effective date
of the withdrawal, less any negative Capital Account balance
of the Member, if the Member has held the Units for less than
one (1) year. The book value of the Interest shall be
determined by the Company's public accountant, and the
accountant's determination when rendered shall be conclusive
amongst the parties. The Company shall pay the book value of
the Units in the form of an unsecured, non-negotiable
promissory note, containing a subordination clause
subordinating the note to all other debts of the Company,
which note shall be payable in five annual installments,
commencing on or before March 31st of the year following the
effective date of the withdrawal, with interest at the prime
rate published in the Wall Street Journal on the effective
date of the withdrawal without prepayment penalties. At the
Company's sole option it may pay all or part of the book value
for the Units in cash at the time of the transfer; or
(ii) the amount set forth in, and payable in accordance with,
Section 6.7 above if the Member has held the Units for one (1)
year or longer.
(f) In the event of a voluntary withdrawal of a Member, if the Company
is not continued in accordance with the provisions of Section 7.1,
the Company shall be liquidated and dissolved according to the
provisions of Article 7.
6.15 CONVERSION OPTION
In the event that LHC Group, LLC ("Manager") undertakes an initial public
offering or is acquired by a publically traded company ("Conversion
Event"), each Member shall have the option to exchange his/her/its
holdings of Units in the Company to Units of Manager in accordance with
the following terms:
(a) Manager shall provide thirty (30) days written notice to the Members
of the scheduled occurrence of a Conversion Event, and that the
Members are eligible to exercise the option provided herein. Each
Member may notify Manager of his/her/its intention to exercise the
Conversion Option at any time following the Conversion Event.
(b) In the event that any Member exercises the conversion option, the
Member shall have the right to exchange the Units in the Company for
Manager Units in accordance with the following formula:
The number of Units of Manager due each exercising Member shall be
the product of (i) the exercising Member's Membership Interest in
the Company; (ii) the total issued and outstanding Units of Manager
as of the date of the notice and (iii) a fraction, the numerator of
which is the Company's EBITDA and denominator of which is Manager's
EBITDA.
The exercising Member's Membership Interest in the Company shall be
determined in accordance with Section 5.1 (b). The Company's and Manager's
EBITDA shall be determined as the Earnings Before Interest Taxes and
Depreciation from the Company's financial statements and Manager's
consolidated financial statements for the fiscal year ending prior to the
effective date of the exercise of the Conversion Option.
For the purposes of illustration, the following example of how the number
of Units to be converted will be calculated is provided:
EBITDA ISSUED MEMBER'S CONVERTED
I2-31-200X PROPORTION UNITS HOLDINGS UNITS
COMPANY $ 1,285,000 = 0.0767 X 8,350,000 X 0.1% = 640.5 UNITS
----------- -----------
LHC GROUP $16,751,000
The parties understand that the foregoing example is for purposes of
illustration only and is not indicative of current or future operations or
performance of the Company.
(c) Manager shall issue the Units in Manager to the exercising Members
within thirty (30) days of its receipt of notice of the exercise. As
a conditions precedent to the issuance of the Units by Manager, the
exercising Members will: (i) execute a written consent to the
Conversion Event if the option is exercised before the Conversion
Event; and (ii) execute a counterpart to Manager's Operating
Agreement as in effect on the date of the exercise of the option.
The Manager
Units issued to the exercising Members shall be subject to all
terms, conditions and restrictions contained in Manager's Operating
Agreement.
(d) The exercising Members shall be bound by the terms and conditions of
the Conversion Event in respect to the Units issued to them by
Manager.
(e) The parties acknowledge and agree that it is their intention for
this Conversion Option to exchange Units to operate only so long as
the Conversion Event actually occurs and closes. In the event that
the Conversion Event does not occur as scheduled, the exchange
performed under the option shall automatically and immediately be
rescinded, without any requirement of notice by either party, and
the exercising Members shall surrender any Units in Manager received
by them, and shall receive the Company's Units they tendered for
exchange.
(f) In addition to the other terms and conditions governing the
Conversion Option, the Members shall be subject to an additional
condition precedent to the Conversion Option in that the exercise of
the Conversion Option shall only be available so long as following
the conversion, the Manager's Units fully comply with the
requirements of Section 1877(c) of the Social Security Act providing
an exception for ownership in certain publicly-traded securities as
more fully detailed in 42 CFR 411.356. As of the Effective Date of
this Agreement the requirements to qualify for the exception
include:
(1) The securities must be securities that may be purchased on
terms generally available to the public following the public
offering;
(2) The securities must be listed on the New York Stock Exchange,
the American Stock Exchange, or any regional exchange in which
quotations are published on a daily basis, or be foreign
securities listed on comparable exchanges or traded under the
National Association of Securities Dealers automated quotation
system; and
(3) The ownership must be in a corporation that had shareholder
equity exceeding $75 million at the end of the corporation's
most recent fiscal year or on average during the previous
three fiscal years.
Note that these requirements are subject to change without advance
notice upon enactment of new legislation by Congress or the
publication of regulations amending the requirements of the
exception by the Centers for Medicare and Medicaid Services or other
governmental agencies.
6.16 REDEMPTION OF UNITS FOLLOWING PUBLIC OFFERING
Following a public offering by LHC Group, LLC ("Manager"), each Member who
does not exercise the Conversion Option contained in Section 6.15 shall
have the option to sell his/her/its holdings of Units in the Company to
Manager ("Redemption Option") in accordance with the following terms:
(a) At any time following thirty (30) days after a public offering, each
Member may notify Manager of his/her/its intention to exercise the
Redemption Option.
(b) In the event that any Member exercises the Redemption Option, the
Member shall have the right to sell his holdings of Units in the
Company to Manager in accordance with the following formula:
The sales price due each exercising Member shall be the product of
(i) the exercising Member's potential holdings of Units in the
Manager calculated as if the Conversion Option set forth in Section
6.15 had been exercised; and (ii) the average closing price of
Manager's Units or shares for the 30 days preceding the date of the
Member's exercise of the Redemption Option.
For the purposes of illustration, the following example of how the number
of Units to be converted will be calculated is provided:
EBITDA ISSUED MEMBER'S CONVERTED
12-31-200X PROPORTION UNITS HOLDINGS UNITS
COMPANY $ 1,285,000 = 0.0767 X 8,350,000 X 0.1% = 640.5
-----------
LHC GROUP $16,751,000
CONVERSION 30 DAY AVE. PROCEEDS
OPTION UNITS CLOSING PRICE
640.5 X $28.50 = $18.254
The parties understand that the foregoing example is for purposes of
illustration only and is not indicative of current or future operations or
performance of the Company.
(c) Manager shall close the Redemption Option within thirty (30) days of
its receipt of notice of the exercise.
ARTICLE 7
DISSOLUTION AND LIQUIDATION
7.1 DISSOLUTION
Subject to the remaining terms of this Agreement the Company shall be
dissolved upon the occurrence of any one of the circumstances hereinafter
set forth:
(1) upon the expiration of the term of the Company; or
(2) upon approval by a Majority Vote; or
(3) Upon the death, interdiction, withdrawal, bankruptcy, liquidation or
dissolution of a Member or the occurrence of any other event which
terminates the continued membership of a Member in the Company,
however, such event shall not cause a dissolution of the Company if
within ninety (90) days after such event, the Company is continued
by the unanimous vote of the remaining Members; or
(4) Upon the termination of this Agreement and the failure of the
Members to immediately enter into a new a agreement.
7.2 DISSOLUTION FOR NON-COMPLIANCE WITH LAW.
The parties hereto acknowledge and agree that the terms and conditions of
this Agreement and the anticipated conduct of the parties hereunder are
intended to satisfy all state and federal laws and regulations related to
healthcare fraud and abuse and self-referral of patients, including,
without limitation, 42 U.S.C. Section.1320-7b; 42 U.S.C.
Section 1395nn, and La. R.S. 37:1744 and 1745. Should any change in state
or federal laws or regulations occur during the term of this Agreement
rendering any term or provision of this Agreement invalid, or should the
parties determine that this Agreement or the Members' participation in the
Company result in a violation of any such laws or regulations, the parties
agree that this Agreement shall be amended within thirty (30) days of such
change or determination. If the parties are unable to agree to such
modification or amendment during the said thirty (30) days, the parties
hereby agree that the Company shall be dissolved as provided hereunder.
7.3 LIQUIDATION
Upon dissolution of the Company, if the Company is not continued, the
Members shall proceed diligently to finalize the affairs of the Company
and distribute its assets in accordance with the provisions of Section
7.5. During this period, the Members shall continue to operate and
otherwise deal with Properties of the Company, consistent with the
liquidation thereof, but shall have no further power or authority to bind
the Company except to sell or distribute its assets and wind up its
affairs in compliance herewith.
7.4 FINAL ACCOUNTING
Upon dissolution of the Company, the Members shall cause the Company's
accountant to make, at the Company's expense, a full and proper accounting
of the assets, liabilities, operations and Capital Accounts of the Company
as of and through the last day of the month in which the dissolution
occurs.
7.5 LIQUIDATION DISTRIBUTIONS
As expeditiously as possible after the dissolution of the Company, the
Members shall cause the debts and obligations of the Company to be paid
and discharged, including payment or offset of all obligations owed to
Members by the Company and all obligations of Members owed to the Company.
Thereafter, the remaining assets shall be distributed to the Members in
amounts proportionate to the Members' Units as determined on the date of
the distribution.
7.6 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS.
Except as provided by law or as expressly provided in this Operating
Agreement, upon dissolution, each Member shall look solely to the assets
of the Company for the return of the Member's Capital Account. If the
Company property remaining after the payment or discharge of the debts and
liabilities of the Company is insufficient to return the Capital Account
of one or more Members, including, without limitation, all or any part of
that Capital Account attributable to Capital Contributions, then such
Member or Members shall have no recourse against any other Member.
ARTICLE 8
BOOKS AND RECORDS
8.1 ACCOUNTING PERIOD.
The Company's accounting period shall be the Fiscal Year which shall begin
on January 1st of each year.
8.2 RECORDS AND REPORTS.
At the expense of the Company, the Company shall maintain complete and
accurate books, records and accounts of all operations and expenditures of
the Company. The Company shall keep at its principal place of business the
books of the Company which shall contain a list showing the names and
addresses of the Members as of a reasonably current date and the extent of
their interest in the Company. Each Member, and their duly authorized
representatives, shall have the right at reasonable times to examine the
books of the Company, including such list of names and addresses, and
other reasonably available records and information concerning the
operation of the Company and to make copies thereof at the expense of such
Members, but only upon such Member's written request.
8.3 TAX RETURNS.
The Company shall prepare and timely file all tax returns required to be
filed by the Company pursuant to the Code and all other tax returns deemed
necessary and required in each jurisdiction in which the Company does
business. Copies of such returns, or pertinent information therefrom,
shall be furnished to the Members upon request within a reasonable time
after the end of the Company's fiscal year.
8.4 AUDIT.
At the request of a Majority Vote of the Members, the books of the Company
shall be audited annually at the expense of the Company by an independent
public accounting firm selected by the Manager.
8.5 ANNUAL REPORTS.
Within the following time periods after the close of each fiscal year, the
Company shall deliver to each Member the following:
(a) Within one hundred twenty (120) days after the end of such fiscal
year, financial statements of the Company for such year, including a
balance sheet, a profit and loss statement, a statement of Members'
equity and changes in financial position, such statements (i) to be
prepared in accordance with generally accepted accounting principles
and (ii) to include a summary itemization, by classification, of the
compensation and reimbursement paid by the Company, directly or
indirectly, to all Members.
(b) Within sixty (60) days after the close of such fiscal year, a report
providing such tax information as maybe reasonably required by each
Member for federal and state income tax reporting purposes.
8.6 ACCRUAL BASIS OF ACCOUNTING.
The Parties agree that the financial records of the Company shall be kept
by the accrual method and in accordance with Medicare principles of cost
reimbursement.
8.7 ACCOUNTING DETERMINATIONS FINAL.
Any determinations, reports, recommendations, tax reports, cost reports,
and financial statements provided to the Members by the Company's
accountant shall be considered adopted and approved upon approval by the
Members. No Member shall have the right to challenge any such
determinations, reports, recommendations, tax reports, cost reports, and
financial statements after the date on which the same were approved by the
Members.
ARTICLE 9
CONFIDENTIALITY; NON-DISCLOSURE NON-SOLICITATION AND
NON-COMPETITION
9.1 CONFIDENTIALITY AND NON-DISCLOSURE.
The Members acknowledge that each party to this Agreement has strategies,
trade secrets, manuals, documents and methods of operation that are
proprietary in nature and are implemented through the use of proprietary
and confidential policy and procedures. The Members agree not to use for
their own benefit or to disclose or otherwise reveal any of the foregoing
proprietary and confidential information or materials to any person,
either directly or indirectly, whether or not for compensation or other
remuneration, except in the ordinary course of business while performing
duties on behalf of the Company. The obligation of confidentiality and
non-disclosure shall survive the termination of this Agreement for an
indeterminate time.
9.2 NON-DISCLOSURE.
Each Member acknowledges that it will have access to certain confidential
information, trade secrets and proprietary information which is
exclusively the property of another Member or the Manager; including,
without limitation, documents, recordings, photographs, policies,
procedures, forms, patient/customer/client lists, public relations and
employee training materials. Each party agrees that Manager's Service
Value Points (SVP(R)) system and its Lifeline(R) system are proprietary
trade secrets of Manager and which are subject to this Agreement. Each
Member agrees that it will not, for so long as it is a Member and for a
period of two (2) years following its voluntary or involuntary withdrawal,
disclose to any third party, or appropriate for their own use or for the
use of any third person, the other Member's or Manager's confidential
information, trade secrets or proprietary information.
9.3 NON-SOLICITATION.
Each Member agrees that it shall not induce or attempt to influence any
employee of the Company to terminate employment with such Member within
the Service Area while this Agreement is in effect.
9.4 NON-COMPETITION.
Each Member agrees that for so long as it is a Member of the Company, the
Member shall not own, control, manage, have a business interest in, or be
financially interested in a Medicare certified long-term acute care
hospital competing with the Company in providing hospital services within
the Service Area without the Majority Vote of the Members, PROVIDED,
HOWEVER, that such restriction shall not apply to services provided
in the Service Area by subsidiaries and Affiliates of Louisiana Health
Care Group, LLC.
9.5 INJUNCTIVE RELIEF.
Each Member acknowledges that in the event of any breach of this Article
9, the other parties remedies at law would be inadequate and therefore any
affected party shall be entitled to obtain relief by injunction to prevent
competition, solicitation or disclosure by the Member or Manager without
the need to prove irreparable harm. The affected Member's or Manager's
remedies, in any event, shall be cumulative of any and all other remedies
available pursuant to Louisiana law.
9.6 Notwithstanding any other provision of this Agreement, if a court of
competent jurisdiction should hold that the duration or scope (geographic
or otherwise) of the covenants contained in this Article 9 are
unreasonable or unenforceable, then, to the extent permitted by law, the
court may prescribe a duration and/or scope (geographic or otherwise) that
is reasonable and judicially enforceable. Nothing herein stated shall be
construed as prohibiting a Member from pursuing any other remedies
available to it for such breach or threatened breach, including the
recovery of damages from any breaching Member.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 FISCAL YEAR
The Fiscal Year of the Company shall begin on January 1st of each year.
10.2 PARTNERSHIP TAXATION
Neither the Company nor any Manager or Member may make an election for the
company to be excluded from the application of the provisions of
Subchapter K of the Code or any similar provisions of applicable state
law. The Members intend that the Company not be a partnership or joint
venture, and that no Member or Manager be a partner of or joint venturer
with any other Member or Manager, for any purpose other than federal and
state tax purposes, and this Agreement may not be construed to suggest
otherwise. The provisions of Section 5.1(b) herein respecting the
allocation of Units shall control the allocation of income, loss and tax
items derived from the Company's operations.
10.3 NO PARTNERSHIP INTENDED FOR NON-TAX PURPOSES.
The Members have formed the Company under the Act, and expressly disavow
any intention to form a joint venture, a partnership or a partnership in
commendam (or limited partnership) under Louisiana law, or laws of any
other state. The Members do not intend to be partners one to another or
partners as to any third party. To the extent any Member, by word or
action, represents to another person that any other Member is a partner or
that the Company is a partnership, the Member making such wrongful
representation shall be liable to any other Member who incurs personal
liability by reason of such wrongful representation.
10.4 NOTICES
All communication or notices required or permitted to be given under this
Agreement shall be in writing, and any communication or notice shall be
deemed to have been duly made upon receipt by mail, or by facsimile
transmission receipt of which has been duly substantiated. Any written
notice sent certified mail to the address of record of the recipient which
is returned by the post office as unclaimed or undeliverable for any
reason shall be deemed to have been received. A party may, by written
notice so delivered to the Company, change the address to which
communications or written notices shall be made under this Agreement.
10.5 AMENDMENTS
This Agreement may be amended only in writing approved by a Majority Vote.
10.6 EXECUTION
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to constitute an original, and each of which shall become
effective when one or more counterparts have been executed by each of the
parties hereto and delivered to the Company and the other parties. The
Members each agree to cooperate, and to execute and deliver in a timely
fashion any and all additional documents necessary to effectuate the
purposes of the Company and this Operating Agreement.
10.7 APPLICABLE LAW
This Agreement shall be governed by an construed and enforced in
accordance with the laws of the State of Louisiana.
10.8 SUCCESSORS OR ASSIGNS
The obligations herein undertaken and the rights herein conferred shall be
binding upon and inure to the benefit of the parties, and, where
applicable, their successors and assigns. None of the provisions of this
Operating Agreement shall be for the benefit of or enforceable by any
creditors of the Company or by any Person not a party hereto. This
Agreement is entered into solely to benefit the Company and its
subscribing Members, and is not entered into or intended for the benefit
of any third persons. The Parties agree that this Agreement shall not be
construed as a stipulation pour autrui or a third party beneficiary
contract.
10.9 REFERENCES
(a) Any reference in this Agreement to an Article, Section, or
Subsection shall be deemed to refer to the applicable Article,
Section or Subsection of this Agreement unless otherwise stated
herein.
(b) Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the
Person may in the context require.
10.10 EFFECTIVE DATE
This Agreement shall be deemed effective as of the date of the Company's
filing of the Articles of Organization with the Louisiana Secretary of
State.
10.11 CONFLICTING PROVISIONS; CONFLICTS WITH OTHER AGREEMENTS
(a) In the event that any provisions contained herein conflict, the
conflicting provision appearing first in the document shall prevail.
In the event of any conflict between the terms of this Agreement and
other permitted agreements by and between the parties hereto related
to the purposes of the company, this Agreement shall prevail.
(b) The Company may acquire or enter into one or more written consulting
agreements or employment agreements with Members or affiliates of
Members. To the extent such arrangements are in writing and approved
or authorized by the Majority Vote of the Members, and subject to
Section 4.23 herein, such services may be compensated as provided in
said agreements and shall be deemed to be separate from those
services which the Member will provide to the Company as a capital
contribution pursuant to Section 5.1 (a) herein.
10.12 No ACTION FOR PARTITION.
No Member shall have any right to maintain any action for partition with
respect to the property of the Company.
10.13 INVALIDITY.
The invalidity or unenforceability of any particular provision of this
Operating Agreement shall not affect the other provisions hereof, and the
Operating Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted. If any particular provision
herein is construed to be in conflict with the provisions of the Act, the
provisions of this Operating Agreement shall control to the fullest extent
permitted by applicable law. Any provision found to be invalid or
unenforceable shall not affect or invalidate the other provisions hereof,
and this Operating Agreement shall be construed in all respects as if such
conflicting provision were omitted.
10.14 DETERMINATION OF MATTERS NOT PROVIDED FOR IN THIS OPERATING AGREEMENT.
The Members shall decide any questions arising with respect to the Company
and this Operating Agreement which are not specifically or expressly
provided for in this Operating Agreement.
ARTICLE 11
INDEMNIFICATION OF ORGANIZER
11.1 INDEMNIFICATION OF ORGANIZER(S)
The Company shall indemnify the organizer(s) of the Company, to the
fullest extent permitted by law, make advances for expenses to him/her/it
arising from any loss, cost, expense, damage, claim or demand, in connection
with his/her/its actions and omissions respecting the organization of the
Company, or his/her/its participation in the management, business and affairs of
the Company prior to execution of this Operating Agreement, or his/her/its
activities on behalf of the Company.
Signatures Appear on Next Pages Following
VI-38
THUS DONE AND SIGNED, in multiple originals, in the city of Lafayette,
Louisiana effective as of the day and in the month and year first above written.
LOUISIANA HEALTH CARE GROUP,LLC
Member
BY: LHC GROUP, LLC, Manager
By: /s/ Keith G. Myers
-------------------------------
Keith G. Myers, Manager
LHC GROUP, LLC, Manager
By: /s/ Keith G. Myers
-------------------------------
Keith G. Myers, Manager
THUS DONE AND SIGNED, in multiple originals, in the city of Lafayette,
Lafayette Parish, Louisiana, effective as of the day and in the month and year
first above written.
___________________________________
Name:
ST. LANDRY EXTENDED CARE HOSPITAL, LLC
MEMBERSHIP SCHEDULE
as of: April 15, 2004
UNITS
Certificate Percent Units Member Date Issued
- ----------- ------- ------ ------------------------------- --------------
1 100.00% 95,000 Louisiana Health Care Group,LLC April 10, 2002
100.00% 95,000 ISSUED UNITS
THUS DONE AND SIGNED, in multiple originals, in the city of Lafayette,
Lafayette Parish, Louisiana on the day and in the month and year first above
written.
LHC GROUP , LLC BETA HOMECARE, INC.
Manager Member
BY: BY:/s/ Christopher Baggett
--------------------------- ---------------------------------
Keith G. Myers, Manager Christopher Baggett , President
LOUISIANA HEALTH CARE
GROUP, LLC
Member
BY: LHC GROUP , LLC, Manager
BY:
--------------------------------
Keith G. Myers, Manager