<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 333-84755-53
DODGE CITY HEALTHCARE GROUP, L.P.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
KANSAS 10-1275266
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3001 AVENUE A 67801
DODGE CITY, KANSAS (Zip Code)
(Address Of Principal Executive Offices)
</TABLE>
Registrant's Telephone Number, Including Area Code: (316) 225-8401
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The Registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K (as modified by grants of no-action relief) and
is therefore filing this form with the reduced disclosure format specified
therein.
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PART I
ITEM 1. BUSINESS
Dodge City Healthcare Group, L.P., a Kansas limited partnership (the
"Partnership"), was organized on March 1, 1995. Dodge City Healthcare Partner,
Inc., a Kansas corporation ("DCHP"), is the general partner of the Partnership
with a 1.1% partnership interest. The limited partners of the Partnership are
Western Plains Regional Hospital, LLC, a Delaware limited liability company
("WPRH"), and Dodge City Outpatient Surgical Facility Inc., a Kansas corporation
("DCOSF"), with partnership interests of 68.9% and 30.0%, respectively. DCHP and
WPRH are indirect wholly owned subsidiaries of LifePoint Hospitals, Inc., a
Delaware corporation ("LifePoint"), through its direct wholly owned subsidiary,
LifePoint Hospitals Holdings, Inc. ("Holdings").
On May 11, 1999 (the "Distribution Date"), Columbia/HCA Healthcare
Corporation ("Columbia/HCA") completed the tax-free spin-off of its operations
comprising the America Group by distributing all outstanding shares of LifePoint
to its shareholders (the "Distribution"). As a result, Columbia/HCA's combined
70.0% interest in the Partnership was transferred to LifePoint and LifePoint
assumed the rights as sole general partner of the Partnership. Information
regarding Columbia/HCA included in this report on Form 10-K is derived from
reports and other information filed by Columbia/HCA with the Securities and
Exchange Commission.
The Partnership owns and operates Western Plains Regional Hospital, a
110-bed acute care hospital, and an outpatient surgery center which provide
health care services to patients in and around Dodge City, Kansas. LifePoint's
obligations under its bank credit facilities are secured by a pledge of
substantially all of the assets of LifePoint and its subsidiaries, including
first priority mortgages on each of LifePoint's hospitals, including Western
Plains Regional Hospital. The Partnership receives payment for patient services
from the federal government primarily under the Medicare program, state
governments under their respective Medicaid programs, preferred provider
organizations and other private insurers and directly from patients.
The partnership agreement provides that the Partnership is to distribute,
in quarterly installments to the general and limited partners in accordance with
their respective ownership interests, an amount equal to 90% of its annual
income. The partnership agreement further provides that profits and losses of
the Partnership will be allocated to the partners in accordance with their
respective ownership interests.
ITEM 2. PROPERTIES
Information with respect to the Partnership's hospital and other operations
can be found in Item 1 of this report under the caption, "Business."
ITEM 3. LEGAL PROCEEDINGS
GENERAL
The Partnership is, from time to time, subject to claims and suits arising
in the ordinary course of business. In certain of these actions, plaintiffs
request punitive or other damages against the Partnership that may not be
covered by insurance. The Partnership is currently not a party to any proceeding
which, in management's opinion, would have a material adverse effect on the
Partnership's business, financial condition or results of operations.
GOVERNMENTAL INVESTIGATION OF COLUMBIA/HCA AND RELATED LITIGATION
Based upon its review of public filings and statements made by
Columbia/HCA, the Partnership's management understands that Columbia/HCA and its
subsidiaries are subject to various claims, suits and investigations for periods
prior to the Distribution Date and that Columbia/HCA may be, either currently or
in the future, subject to various claims, suits or investigations for periods
after the Distribution Date. Any discussion contained in this report regarding
such matters is based solely upon such public filings and statements.
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In March 1997, various facilities of Columbia/HCA's El Paso, Texas
operations were searched by federal authorities pursuant to search warrants, and
government agents removed various records and documents. In February 1998, an
additional warrant was executed and a single computer was seized.
In July 1997, various Columbia/HCA affiliated facilities and offices were
searched pursuant to search warrants. During July, September and November 1997,
Columbia/HCA also was served with subpoenas requesting records and documents
related to laboratory billing and DRG coding in various states and home health
operations in various jurisdictions, including, but not limited to, Florida. In
January 1998, Columbia/HCA received a subpoena which requested records and
documents relating to physician relationships. In June 1999, Columbia/HCA
received a subpoena seeking records related to home health operations. In March
2000, Columbia/HCA received a subpoena that requested records relating to wound
care centers.
The United States District Court for the Middle District of Florida, in
Fort Myers, issued an indictment against three employees of a subsidiary of
Columbia/HCA in July 1997. The indictment related to the alleged false
characterization of interest payments on certain debt resulting in Medicare and
TRICARE (formerly CHAMPUS) overpayments since 1986 to Columbia Fawcett Memorial
Hospital, a Port Charlotte, Florida hospital that was acquired by Columbia/HCA
in 1992. Columbia/HCA was served with subpoenas for various records and
documents. In July 1998, a fourth employee of a subsidiary of Columbia/HCA was
indicted by a superseding indictment. According to published reports, on July 2,
1999, a federal jury in Tampa, Florida found two Columbia/HCA employees guilty
of conspiracy and making false statements on Medicare and TRICARE cost reports
for the years 1992 and 1993 and on a Medicaid cost report for 1993. Both were
found not guilty of obstructing a federal auditor. One other employee was
acquitted on all counts for which he had been charged and the jury was unable to
reach a verdict with respect to another employee. This employee and the
government executed an agreement to defer prosecution for 18 months after which
charges will be dismissed. The two convicted employees were sentenced in
December 1999 and both have appealed to the 11th Circuit.
Several hospital facilities affiliated with Columbia/HCA in various states
have received individual federal and/or state government inquiries, both
informal and formal, requesting information related to reimbursement from
government programs. Management of the Partnership understands that Columbia/HCA
is cooperating in these investigations and that Columbia/HCA understands,
through written notice and other means, that it is a target in these
investigations. Columbia/HCA may be subject to additional subpoenas and other
investigative and prosecutorial activity in these and other jurisdictions in the
future.
Columbia/HCA also is the subject of a formal order of investigation by the
Commission. Columbia/HCA understands that the investigation includes the
anti-fraud, periodic reporting and internal accounting control provisions of the
federal securities laws.
Columbia/HCA is a defendant in several qui tam actions, or actions under
state statutes which are brought by private parties on behalf of the United
States of America, which have been unsealed and served on Columbia/HCA. The
actions allege, in general, that Columbia/HCA and certain subsidiaries and/or
affiliated partnerships violated the False Claims Act, 31 U.S.C. (S)3729 et
seq., for improper claims submitted to the government for reimbursement. The
lawsuits generally seek damages of three times the amount of all Medicare or
Medicaid claims (involving false claims) presented by the defendants to the
federal government, civil penalties of not less than $5,000 nor more than
$10,000 for each such Medicare or Medicaid claim, attorneys' fees and costs. The
government has intervened in six unsealed qui tam actions against Columbia/HCA.
Columbia/HCA is aware of additional qui tam actions that remain under seal and
believes that there may be other sealed qui tam cases of which Columbia/HCA is
unaware.
Since April 1997, numerous federal securities class action and derivative
lawsuits have been brought against Columbia/HCA and a number of its current and
former directors, officers and employees. On October 10, 1997, all of the
securities class action claims were consolidated into a single-captioned case
which seeks the certification of a class of persons or entities who acquired
Columbia/HCA's Common Stock from April 9, 1994 to September 9, 1997. The lawsuit
alleges, among other things, that the defendants committed violations of the
federal securities laws by materially inflating Columbia/HCA's revenues and
earnings through a number of practices, including upcoding, maintaining reserve
cost reports, disseminating false and
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misleading statements, cost shifting, illegal reimbursements, improper billing,
unbundling and violating various Medicare laws. The lawsuit seeks compensatory
damages, costs and expenses.
On October 10, 1997, all derivative law claims filed in federal court were
consolidated into a single-captioned case. The lawsuit alleges, among other
things, derivative claims against the individual defendants that they
intentionally or negligently breached their fiduciary duties to Columbia/HCA by
authorizing, permitting or failing to prevent Columbia/HCA from engaging in
various schemes to improperly increase revenue, upcoding, improper cost
reporting, improper referrals, improper acquisition practices and overbilling.
In addition, the lawsuit asserts a derivative claim against some of the
individual defendants for breaching their fiduciary duties by engaging in
insider trading. The lawsuit seeks restitution, damages, recoupment of fines or
penalties paid by Columbia/HCA, restitution and pre-judgment interest against
the alleged insider trading defendants, and costs and disbursements. In
addition, the lawsuit seeks orders prohibiting Columbia/HCA from paying
individual defendants employment benefits, terminating all improper business
relationships with individual defendants, and requiring Columbia/HCA to
implement effective corporate governance and internal control mechanisms
designed to monitor compliance with federal and state laws and ensure reports to
the Board of material violations of law.
Several derivative actions have been filed in state court by certain
purported stockholders of Columbia/HCA against certain of Columbia/HCA's current
and former officers and directors alleging breach of fiduciary duty and failure
to take reasonable steps to ensure that Columbia/HCA did not engage in illegal
practices which exposed Columbia/HCA to significant damages.
Columbia/HCA and/or certain of its current and/or former officers and/or
directors are defendants in a number of federal and state court actions filed by
patients and/or payers, alleging, in general, improper and fraudulent billing,
overcharging, coding and physician referrals, as well as other violations of
law, and also are defendants in certain general liability and other claims.
Certain of the lawsuits have been conditionally certified as class actions and
others are purported class actions.
It is too early to predict the effect or outcome of any of the ongoing
investigations or qui tam, stockholder derivative and class action lawsuits, or
whether any additional investigations or litigation will be commenced. If
Columbia/HCA is found to have violated federal or state laws relating to
Medicare, Medicaid or similar programs, then Columbia/HCA could be subject to
substantial monetary fines, civil and criminal penalties, and exclusion from
participation in the Medicare and Medicaid programs. Similarly, the amounts in
question in the qui tam, stockholder derivative and class action lawsuits are
substantial, and Columbia/HCA could be subject to substantial costs resulting
from an adverse outcome of one or more of such lawsuits. Any such sanctions or
losses could have a material adverse effect on Columbia/HCA's financial position
and results of operations.
Pursuant to the distribution agreement entered into by and among
Columbia/HCA, LifePoint and Triad, Columbia/HCA ("Distribution Agreement") has
agreed to indemnify LifePoint in respect of any losses which it may incur as a
result of the proceedings described above. Columbia/HCA has also agreed to
indemnify LifePoint and its subsidiaries, including the Partnership, in respect
of any losses which it may incur as a result of proceedings which may be
commenced by government authorities or by private parties in the future that
arise from acts, practices or omissions engaged in prior to the Distribution
Date and relate to the proceedings described above. Columbia/HCA has also agreed
that, in the event that any hospital owned by LifePoint, including Western
Plains Regional Hospital, is permanently excluded from participation in the
Medicare and Medicaid programs as a result of the proceedings described above,
Columbia/HCA will make a cash payment to LifePoint in an amount (if positive)
equal to five times the excluded hospital's 1998 income from continuing
operations before depreciation and amortization, interest expense, management
fees, impairment of long-lived assets, minority interests and income taxes, as
set forth on a schedule to the Distribution Agreement, less the net proceeds of
the sale or other disposition of the excluded hospital. LifePoint has agreed
that, in connection with the government investigations described above, it will
participate with Columbia/HCA in negotiating one or more compliance agreements
setting forth each of their agreements to comply with applicable laws and
regulations. If any of such indemnified matters were successfully asserted
against LifePoint, or any of its facilities, including the Partnership, and
Columbia/HCA
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failed to meet its indemnification obligations, then such losses could have a
material adverse effect on the business, financial position, results of
operations or prospects of LifePoint and the Partnership. Columbia/ HCA has not
indemnified LifePoint for losses relating to any acts, practices and omissions
engaged in by LifePoint or the Partnership after the Distribution Date, whether
or not LifePoint or the Partnership is indemnified for similar acts, practices
and omissions occurring prior to the Distribution Date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted pursuant to General Instruction I to Form 10-K (the "Instruction").
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
The Partnership's equity securities are not publicly traded. The
Partnership files reports under the Securities Exchange Act of 1934 because of
its status as a non-wholly owned subsidiary guarantor of Holdings' $150 million
Senior Subordinated Notes due May 15, 2009.
ITEM 6. SELECTED FINANCIAL DATA
Omitted pursuant to the Instruction.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion should be read together with the historical financial
statements of the Partnership and the related notes thereto included elsewhere
herein.
OVERVIEW
On May 11, 1999, Columbia/HCA completed the Distribution. As a result,
Columbia/HCA's interest in the Partnership was transferred to LifePoint, and
LifePoint assumed the rights as sole general partner of the Partnership.
FORWARD-LOOKING STATEMENTS
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains disclosures which are forward-looking
statements. Forward-looking statements include all statements that do not relate
solely to historical or current facts, and can be identified by the use of words
such as "may," "believe," "will," "expect," "project," "estimate," "anticipate,"
"plan" or "continue." These forward-looking statements are based on the current
plans and expectations of the Partnership and are subject to a number of
uncertainties and risks that could significantly affect current plans and
expectations and the Partnership's future financial condition and results. These
factors include, but are not limited to, (i) the highly competitive nature of
the health care business, (ii) the efforts of insurers, health care providers
and others to contain health care costs, (iii) possible changes in the Medicare
program that may further limit reimbursements to health care providers and
insurers, (iv) changes in federal, state or local regulation affecting the
health care industry, (v) the possible enactment of federal or state health care
reform, (vi) the ability to attract and retain qualified management and
personnel, including physicians, (vii) liabilities and other claims asserted
against the Partnership, including without limitation, liabilities for which the
Partnership may be indemnified by Columbia/HCA, (viii) changes in accounting
practices, (ix) changes in general economic conditions, and (x) other risk
factors. As a consequence, current plans, anticipated actions and future
financial condition and results may differ from those expressed in any
forward-looking statements made by or on behalf of the Partnership. You are
cautioned not to unduly rely on such forward-looking statements when evaluating
the information presented in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues increased 1.8% to $32.7 million for the year ended December 31,
1999, compared to $32.2 million for the year ended December 31, 1998, primarily
as a result of increases in the volume of patients treated at the Partnership's
facilities. Inpatient admissions increased 1.3% and equivalent admissions
(adjusted to reflect combined inpatient and outpatient volume) increased 5.4%
for the year ended December 31, 1999, compared to the year ended December 31,
1998. Revenues per equivalent admission decreased 2.8% for the year ended
December 31, 1999, compared to the year ended December 31, 1998. The decline in
revenues per equivalent admission resulted from several factors, including
decreases in Medicare reimbursement rates mandated by the federal Balanced
Budget Act of 1997 (the "Balanced Budget Act") which became effective October 1,
1997 (such rates lowered revenues by approximately $0.5 million for the year
ended December 31, 1999 compared to periods prior to the effective date of the
Balanced Budget Act), and
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increases in the number of managed care payers (managed care as a percentage of
total admissions increased to 30.7% for the year ended December 31, 1999,
compared to 28.2% for the year ended December 31, 1998 which generally pay less
per patient than traditional indemnity insurance plans).
Allocation of personnel costs decreased as a percentage of revenues to
34.2% for the year ended December 31, 1999, from 36.8% for the year ended
December 31, 1998, primarily as a result of improvements in labor productivity.
Man hours per equivalent admission decreased 12.6% over the same period in the
prior year.
Supplies expenses increased to 12.8% as a percentage of revenues for the
year ended December 31, 1999, from 12.0% for the year ended December 31, 1998
primarily due to the 2.8% decline in revenues per equivalent admission, while
the cost of supplies per equivalent admission increased 2.4%. The higher cost of
supplies per equivalent admission resulted from significant increases in
pharmaceutical costs and other increases in new product development costs and
general inflation.
Other operating expenses decreased as a percentage of revenues to 14.7% for
the year ended December 31, 1999, from 16.5% for the year ended December 31,
1998. Other operating expenses consist primarily of contract services, physician
recruitment, professional fees, repairs and maintenance, rents and leases,
utilities, insurance and non-income taxes. The decrease was primarily due to
decreases in contract services and repairs and maintenance.
Provision for doubtful accounts increased as a percentage of revenues to
8.7% for the year ended December 31, 1999, from 7.1% for the year ended December
31, 1998 due to the Partnership experiencing employee turnover in its business
office in fiscal 1999 which delayed billings and negatively impacted collection
efforts.
Depreciation and amortization expense increased to $1.7 million for the
year ended December 31, 1999, from $1.6 million for the year ended December 31,
1998, primarily due to routine capital expenditures.
Interest expense remained at $0.6 million for the years ended December 31,
1999 and 1998. The consistency in the amount of interest expense recorded during
1999 and 1998 is attributable to the consistency in the intercompany balances
payable to affiliates and interest rates charged during the respective periods.
Management fees were $0.7 million and $0.6 million for the years ended
December 31, 1999 and 1998, respectively. Management fees are charged to the
Partnership by the general partner based upon the Partnership's net patient
revenues.
Net income was $6.7 million for the year ended December 31, 1999, compared
to $6.0 million for the year ended December 31, 1998, primarily due to increases
in revenue and decreases in certain expenses as described above.
YEAR 2000 COMPLIANCE
The Partnership did not experience any material disruptions or other
effects caused by the Year 2000 problem, nor does the Partnership expect to
experience any material disruptions or other effects caused by the Year 2000
problem in the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS
The Partnership's Financial Statements are included at the end of this
report on Form 10-K beginning on page F-1, and incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted pursuant to the Instruction.
ITEM 11. EXECUTIVE COMPENSATION
Omitted pursuant to the Instruction.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted pursuant to the Instruction.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted pursuant to the Instruction.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to Financial Statements, Financial Statement Schedules and Exhibits:
(1) Financial Statements: See Item 8 herein.
The Financial Statements of the Partnership required to be included in
Part II, Item 8, are indexed on Page F-1 and submitted as a separate
section of this report.
(2) Financial Statement Schedules:
All schedules are omitted, because they are not applicable or not
required, or because the required information is included in the financial
statements or notes thereto.
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Certificate of Limited Partnership.
3.2 -- Certificate of Amendment to Certificate of Limited
Partnership.
3.3 -- Amended and Restated Limited Partnership Agreement of Dodge
City Healthcare Group, L.P., dated March 1, 1995.
3.4 -- Amendment to Article 6.1 of Limited Partnership Agreement,
dated June 13, 1997.
3.5 -- Second Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated April 8, 1999.
3.6 -- Third Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated November 4, 1999.
4.1 -- Indenture (including form of 10 3/4% Senior Subordinated
Notes due 2009) dated as of May 11, 1999, between
HealthTrust, Inc.-The Hospital Company and Citibank N.A. as
Trustee, incorporated by reference from Exhibit 4.2(a) to
LifePoint Hospitals' Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, File No. 0-29818.
4.2 -- Form of 10 3/4% Senior Subordinated Notes due 2009 (filed as
part of Exhibit 4.1).
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Brentwood, State of Tennessee, on March 29, 2000.
DODGE CITY HEALTHCARE GROUP, L.P.
By: Dodge City Healthcare Partner,
Inc.
Its: General Partner
By: /s/ SCOTT L. MERCY
------------------------------------
Scott L. Mercy
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ SCOTT L. MERCY Chairman, Chief Executive March 29, 2000
- ----------------------------------------------------- Officer and Director
Scott L. Mercy (Principal Executive Officer)
/s/ KENNETH C. DONAHEY Senior Vice President and Chief March 29, 2000
- ----------------------------------------------------- Financial Officer (Principal
Kenneth C. Donahey Financial and Accounting
Officer)
/s/ JAMES M. FLEETWOOD, JR. President, Chief Operating March 29, 2000
- ----------------------------------------------------- Officer and Director
James M. Fleetwood, Jr.
</TABLE>
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DODGE CITY HEALTHCARE GROUP, L.P.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Statements of Income -- for the years ended December 31,
1999, 1998 and 1997....................................... F-3
Balance Sheets -- December 31, 1999 and 1998................ F-4
Statements of Cash Flows -- for the years ended December 31,
1999, 1998 and 1997....................................... F-5
Statements of Partners' Capital -- for the years ended
December 31, 1999, 1998 and 1997.......................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
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REPORT OF INDEPENDENT AUDITORS
The Partners
Dodge City Healthcare Group, L.P.
We have audited the accompanying balance sheets of Dodge City Healthcare
Group, L.P. (a Kansas limited partnership) (the "Partnership") as of December
31, 1999 and 1998, and the related statements of income, partners' capital, and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dodge City Healthcare Group,
L.P. (a Kansas limited partnership) at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Nashville, Tennessee
March 2, 2000
F-2
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DODGE CITY HEALTHCARE GROUP, L.P.
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $32,737 $32,154 $31,777
Allocation of personnel costs............................... 11,204 11,820 10,465
Supplies.................................................... 4,179 3,871 3,921
Other operating expenses.................................... 4,819 5,318 6,115
Provision for doubtful accounts............................. 2,841 2,295 1,588
Depreciation and amortization............................... 1,741 1,634 1,303
Interest expense............................................ 619 601 408
Management fees............................................. 657 646 613
------- ------- -------
26,060 26,185 24,413
------- ------- -------
Net income........................................ $ 6,677 $ 5,969 $ 7,364
======= ======= =======
</TABLE>
See accompanying notes.
F-3
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DODGE CITY HEALTHCARE GROUP, L.P.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, less allowance for doubtful accounts
of $2,997 and $3,185 as of December 31, 1999 and
1998................................................... $ 5,304 $ 4,467
Inventories............................................... 1,215 966
Prepaid expenses and other................................ 118 68
-------- --------
6,637 5,501
Property and equipment, at cost:
Land...................................................... 319 319
Buildings and improvements................................ 9,858 9,481
Equipment................................................. 10,308 9,551
Construction in progress.................................. -- 22
-------- --------
20,485 19,373
Accumulated depreciation.................................. (11,182) (9,838)
-------- --------
9,303 9,535
Intangible assets, net of accumulated amortization of $1,444
and $1,145 at December 31, 1999 and 1998.................. 10,503 10,802
-------- --------
$ 26,443 $ 25,838
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable.......................................... $ 585 $ 791
Accrued expenses.......................................... 274 336
Current maturities of long-term debt...................... -- 19
-------- --------
859 1,146
Intercompany balances payable to affiliate.................. 10,740 11,515
Long-term debt.............................................. -- 301
Partners' capital:
Limited partners (990 units authorized and 890 units
issued and outstanding)................................ 13,377 12,732
General partner (10 units authorized, issued and
outstanding)........................................... 1,467 144
-------- --------
14,844 12,876
-------- --------
$ 26,443 $ 25,838
======== ========
</TABLE>
See accompanying notes.
F-4
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DODGE CITY HEALTHCARE GROUP, L.P.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 6,677 $ 5,969 $ 7,364
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for doubtful accounts........................ 2,841 2,295 1,588
Depreciation and amortization.......................... 1,741 1,634 1,303
Increase (decrease) in cash from operating assets and
liabilities:
Accounts receivable.................................. (2,361) (3,444) (1,541)
Inventories, prepaid expenses and other current
assets.............................................. (299) (22) 69
Accounts payable and accrued expenses................ (268) (340) 38
------- ------- -------
Net cash provided by operating activities......... 8,331 6,092 8,821
Cash flows from investing activities:
Purchases of property and equipment, net.................. (1,210) (1,658) (1,659)
------- ------- -------
Net cash used in investing activities..................... (1,210) (1,658) (1,659)
Cash flows from financing activities:
Decrease in long-term debt, net........................... (320) (940) (83)
Increase (decrease) in intercompany balances payable to
affiliate, net......................................... (775) 3,974 (227)
Distributions............................................. (6,026) (7,468) (6,852)
------- ------- -------
Net cash used in financing activities............. (7,121) (4,434) (7,162)
------- ------- -------
Change in cash.............................................. -- -- --
Cash at beginning of year................................... -- -- --
------- ------- -------
Cash at end of year......................................... $ -- $ -- $ --
======= ======= =======
Supplemental information:
Interest payments......................................... $ 619 $ 601 $ 408
======= ======= =======
Supplemental schedule of noncash transactions:
Contribution from Columbia/HCA............................ $ 1,317 $ -- $ --
======= ======= =======
</TABLE>
See accompanying notes
F-5
<PAGE> 16
DODGE CITY HEALTHCARE GROUP, L.P.
STATEMENTS OF PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WESTERN PLAINS
REGIONAL
HOSPITAL, INC./ DODGE CITY
MANAGING WESTERN PLAINS OUTPATIENT
GENERAL REGIONAL SURGICAL
PARTNER HOSPITAL, LLC FACILITY, INC. TOTAL
-------- --------------- -------------- -------
<S> <C> <C> <C> <C>
Partners' capital at January 1, 1997............... $ 154 $ 9,531 $ 4,178 $13,863
Net income....................................... 81 5,074 2,209 7,364
Distributions.................................... (75) (4,722) (2,055) (6,852)
------ ------- ------- -------
Partners' capital at December 31, 1997............. 160 9,883 4,332 14,375
Net income....................................... 66 4,112 1,791 5,969
Distributions.................................... (82) (5,146) (2,240) (7,468)
------ ------- ------- -------
Partners' capital at December 31, 1998............. 144 8,849 3,883 12,876
Net income....................................... 73 4,601 2,003 6,677
Distributions.................................... (67) (4,151) (1,808) (6,026)
Contribution from Columbia/HCA................... 1,317 -- -- 1,317
------ ------- ------- -------
PARTNERS' CAPITAL AT DECEMBER 31, 1999............. $1,467 $ 9,299 $ 4,078 $14,844
====== ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 17
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND ACCOUNTING POLICIES
Dodge City Healthcare Group, L.P., a Kansas limited partnership (the
"Partnership"), was organized on March 1, 1995. Dodge City Healthcare Partner,
Inc., a Kansas corporation ("DCHP"), is the general partner of the Partnership
with a 1.1% partnership interest. The limited partners of the Partnership are
Western Plains Regional Hospital, LLC, a Delaware limited liability company
("WPRH"), and Dodge City Outpatient Surgical Facility Inc., a Kansas corporation
("DCOSF"), with partnership interests of 68.9% and 30.0%, respectively. DCHP and
WPRH are indirect wholly owned subsidiaries of LifePoint Hospitals, Inc., a
Delaware corporation ("LifePoint"), through its direct wholly owned subsidiary,
LifePoint Hospitals Holdings, Inc. ("Holdings").
On May 11, 1999, Columbia/HCA Healthcare Corporation ("Columbia/HCA")
completed the tax-free spin-off of its operations comprising the America Group
by distributing all outstanding shares of LifePoint to its shareholders (the
"Distribution"). As a result, Columbia/HCA's combined 70.0% interest in the
Partnership was transferred to LifePoint and LifePoint assumed the rights as
sole general partner of the Partnership. Information regarding Columbia/HCA
included in this report on Form 10-K is derived from reports and other
information filed by Columbia/HCA with the Securities and Exchange Commission.
The Partnership owns and operates Western Plains Regional Hospital, a
110-bed acute care hospital, and an outpatient surgery center which provide
health care services to patients in and around Dodge City, Kansas. The
Partnership receives payment for patient services from the federal government
primarily under the Medicare program, state governments under their respective
Medicaid programs, preferred provider organizations and other private insurers
and directly from patients.
The partnership agreement provides that the Partnership is to distribute,
in quarterly installments to the general and limited partners in accordance with
their respective ownership interests, an amount equal to 90% of its annual
income. The partnership agreement further provides that profits and losses of
the Partnership will be allocated to the partners in accordance with their
respective ownership interests.
As further defined in the partnership agreement, the general partner is
obligated to manage and supervise the Partnership business and affairs. The
Partnership shall be dissolved on December 31, 2050, unless sooner dissolved by
law or pursuant to the partnership agreement or unless extended by amendment to
the partnership agreement.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Partners' Capital
Subsequent to the Distribution, partners' capital of the managing general
partner and of Western Plains Regional Hospital, LLC represent the collective
capital of the Partnership owned by LifePoint. Prior to the Distribution,
partners' capital of the managing general partner and of Western Plains Regional
Hospital, Inc. represent the collective capital of the Partnership owned by
Columbia/HCA.
Revenues
The Partnership has entered into agreements with third-party payers,
including government programs and managed care health plans, under which the
Partnership is paid based upon established charges, the cost of providing
services, predetermined rates per diagnosis, fixed per diem rates or discounts
from established charges.
F-7
<PAGE> 18
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenues are recorded at estimated amounts due from patients and
third-party payers for the healthcare services provided. Settlements under
reimbursement agreements with third-party payers are estimated and recorded in
the period the related services are rendered and are adjusted in future periods
as final settlements are determined. The net adjustments to estimated
settlements resulted in increases/(decreases) to revenues of approximately
($99,000), $217,000 and $1,100,000 for the years ended December 31, 1999, 1998
and 1997, respectively. Management believes that adequate provisions have been
made for adjustments that may result from final determination of amounts earned
under these programs. Pursuant to the terms of the distribution agreement
between LifePoint and Columbia/HCA, LifePoint and its subsidiaries, including
the Partnership, are responsible for the Medicare, Medicaid and Blue Cross cost
reports, and associated receivables and payables, for all periods ending after
May 11, 1999. Columbia/HCA agreed to indemnify LifePoint and its subsidiaries,
including the Partnership, with respect to cost reports relating to periods
ending on or prior to the Distribution. Net settlement liabilities of
approximately $1,317,000 recorded by the Partnership as of May 11, 1999 were
deemed to be assumed by Columbia/HCA and, accordingly, recorded as a
contribution from Columbia/HCA to the capital of the Partnership. The net
settlement payable estimated as of December 31, 1999 and 1998, which is included
in accounts receivable in the accompanying balance sheets, approximated $0 and
$352,000, respectively.
The Partnership provides care without charge to patients who are
financially unable to pay for the health care services they receive. Because the
Partnership does not pursue collection of amounts determined to qualify as
charity care, they are not reported in revenues.
Accounts Receivable
The Partnership receives payment for services rendered from federal and
state agencies (under the Medicare, Medicaid and TRICARE programs), managed care
health plans, commercial insurance companies, employers and patients. During the
years ended December 31, 1999, 1998 and 1997, approximately 21%, 27%, and 24%,
respectively, of the Partnership's revenues related to patients participating in
the Medicare program. Management recognizes that revenues and receivables from
government agencies are significant to the Partnership's operations, but
management does not believe that there are significant credit risks associated
with these government agencies. Management of the Partnership does not believe
that there are any other significant concentrations of revenues from any
particular payer that would subject the Partnership to any significant credit
risks in the collection of its accounts receivable.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Long-Lived Assets
(a) Property and Equipment
Property and equipment are stated at cost. Routine maintenance and repairs
are charged to expense as incurred. Expenditures that increase capacities or
extend useful lives are capitalized.
Depreciation expense, computed by the straight-line method, was
approximately $1,442,000, $1,335,000 and $994,000 for the years ended December
31, 1999, 1998 and 1997, respectively. Buildings and improvements are
depreciated over estimated useful lives ranging from 10 to 40 years. Estimated
useful lives of equipment vary generally from 3 to 10 years.
(b) Intangible Assets
Intangible assets consists primarily of costs in excess of the fair value
of identifiable net assets acquired and are amortized using the straight-line
method over 40 years. When events, circumstances and operating
F-8
<PAGE> 19
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
results indicate that the carrying values of certain long-lived assets and the
related identifiable intangible assets might be impaired, the Partnership
prepares projections of the undiscounted future cash flows expected to result
from the use of the assets and their eventual disposition. If the projections
indicate that the recorded amounts are not expected to be recoverable, such
amounts are reduced to estimated fair value.
Income Taxes
The Partnership is not an income tax paying entity. No provision is made in
the accounts of the Partnership since such taxes are liabilities of the
individual partners of the Partnership, and the amounts thereof depend on their
respective tax situations.
The Partnership's tax returns and the amounts of distributable Partnership
income or loss are subject to examination by the federal and state taxing
authorities. In the event of an examination of the Partnership's tax return, the
tax liability of the partners could be changed if any adjustment to the
Partnership taxable income or loss is ultimately sustained by the taxing
authorities.
Professional and General Liability Risks
The cost of professional and general liability coverage is allocated to the
Partnership by LifePoint post-Distribution, and by Columbia/HCA
pre-Distribution, based on actuarially determined estimates. The actuarially
determined estimate of cost allocated to the Partnership by LifePoint is
discounted to its present value using a rate of 6%. LifePoint, as well as
Columbia/HCA, maintains reserves for professional and general liability risks.
Accordingly, no reserve for liability risks is recorded on the accompanying
balance sheets. Columbia/HCA assumed the liability for all professional and
general liability claims of the Partnership incurred prior to the Distribution.
The cost for the years ended December 31, 1999, 1998 and 1997 was approximately,
$214,000, $188,000 and $211,000, respectively.
Personnel assigned to the Partnership participate in a self-insured program
for health insurance administered by LifePoint post-Distribution and by
Columbia/HCA pre-Distribution. Cost for health insurance is allocated to the
Partnership based upon claims paid and an estimate of claims incurred but not
reported. LifePoint, as well as Columbia/HCA, maintains reserves for incurred
but not reported health claims. Accordingly, no reserve for incurred but not
reported health claims is recorded on the accompanying balance sheets.
Columbia/HCA assumed the liability for all health claims incurred prior to the
Distribution. The cost for the years ended December 31, 1999, 1998 and 1997,
based on the Partnership's experience, was approximately $1,031,000, $974,000,
and $541,000, respectively.
Intercompany Balances to Affiliate
Intercompany balances payable to affiliate represent the net excess of
funds transferred to or paid on behalf of the Partnership over funds transferred
to the centralized cash management account of LifePoint post-Distribution and
Columbia/HCA pre-Distribution. Generally, this balance is increased by
partnership distributions and disbursements made by LifePoint on behalf of the
Partnership for operating expenses and to pay the Partnership's debt, completed
construction project additions, fees and services provided by LifePoint,
including information systems services and other operating expenses, such as
personnel costs, interest and insurance. Generally, the balance is decreased
through daily cash deposits by the Partnership to the account. Prior to the
Distribution, the Partnership was charged interest on the outstanding
intercompany balance at each month end at various rates ranging from 6% to 10%.
For periods after the Distribution, the Partnership is being charged interest at
prime rates which approximated 8.5% at December 31, 1999. In the opinion of
LifePoint management, the interest rate charged has been at prevailing market
rates. Interest expense under this arrangement is included in the Statements of
Income.
F-9
<PAGE> 20
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Management Fees
In accordance with the terms of the partnership agreement, the general
partner receives a monthly management fee based upon the Partnership's net
patient revenues. The management fee charged to the Partnership is not
necessarily indicative of the actual costs which may have been incurred had the
Partnership operated as an entity unaffiliated with LifePoint post-Distribution
or Columbia/HCA pre-Distribution; however, in the opinion of the Partnership's
management, the management fee charged is reasonable.
NOTE 2 -- LONG-TERM DEBT
Long-term debt of the Partnership consisted of the following at December
31, (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
9.38% note payable; principal and interest payable in
monthly installments through June 2009.................... $-- $320
Less current portion of long-term debt...................... -- 19
--- ----
$-- $301
=== ====
</TABLE>
In June 1999, the Partnership repaid the outstanding balance of the 9.38%
note payable.
Guarantee of Long-Term Debt
On May 11, 1999, Holdings assumed from Columbia/HCA $150 million in Senior
Subordinated Notes maturing on May 15, 2009. In November 1999, in a registered
exchange offer, Holdings issued a like aggregate principal amount of notes in
exchange for these notes (the "Notes"). The Notes are unsecured obligations and
are subordinated in right of payment to all existing and future senior
indebtedness. The Notes are guaranteed jointly, severally and unconditionally by
all of Holdings' operating subsidiaries including the Partnership.
On May 11, 1999, Holdings also assumed from Columbia/HCA the obligations
under a Bank Credit Agreement (the "Credit Agreement") with a group of lenders
with commitments aggregating $210 million. The Credit Agreement consists of a
$60 million term loan facility, an $85 million term loan facility, and a $65
million revolving credit facility (collectively the "Bank Facilities").
As of December 31, 1999, $25 million of the $60 million term loan facility
was drawn, with the remaining $35 million available for limited purposes to be
drawn by May 11, 2000. The final payment under this term loan facility is due
November 11, 2004.
The $85 million term loan facility was drawn in full at the time of the
Distribution. The final payment under this term loan is due November 11, 2005.
The $65 million revolving credit facility is available for working capital
and other general corporate purposes, and any outstanding amounts thereunder
will be due and payable on November 11, 2004. No amounts were outstanding under
this facility as of December 31, 1999.
Holdings' obligations under the Bank Facilities are guaranteed by its
subsidiaries including the Partnership.
The subsidiary guarantees of the Notes and the Bank Facilities are secured
by a pledge of substantially all of the subsidiaries' assets including all of
the assets of the Partnership.
F-10
<PAGE> 21
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- LEASES
Operating lease rental expense relating primarily to the rental of
buildings and equipment for the years ended December 31, 1999, 1998 and 1997 was
approximately $136,000, $163,000 and $580,000, respectively.
NOTE 4 -- RETIREMENT PLANS
Personnel assigned to the Partnership subsequent to the Distribution
participate in LifePoint's employee stock ownership plan ("ESOP"). Under the
ESOP, shares of LifePoint common stock will be allocated ratably to participants
over the next ten years, beginning in fiscal year 1999. ESOP expense is
allocated to the Partnership based upon the average market price of shares
committed to be released during the accounting period. ESOP expense allocated to
the Partnership was approximately $145,000 for the year ended December 31, 1999
and is included in "Allocation of Personnel Costs" in the accompanying
Statements of Income.
Personnel assigned to the Partnership during the year ended December 31,
1998 and 1997 participated in Columbia/HCA's defined contribution retirement
plans which covered substantially all personnel assigned to the Partnership. The
Partnership reimbursed a Columbia/HCA affiliate for personnel costs, including
contributions to the plan. Benefits were determined primarily as a percentage of
a participant's earned income. The cost of these plans was approximately
$307,000 and $370,000 during 1998 and 1997, respectively.
NOTE 5 -- RELATED PARTIES
To facilitate payroll administration, all personnel assigned to perform
duties for the Partnership are employed by a LifePoint affiliate
post-Distribution and a Columbia/HCA affiliate pre-Distribution. The Partnership
reimburses the affiliate for the direct costs (i.e., salaries and related
benefits) associated with such personnel. Such reimbursements are recorded as
"Allocation of Personnel Costs" in the accompanying Statements of Income.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
Columbia/HCA Investigations, Litigation and Indemnification Rights
Columbia/HCA is currently the subject of several federal investigations
into certain of its business practices, as well as governmental investigations
by various states. Management of the Partnership understands that Columbia/HCA
is cooperating in these investigations and that Columbia/HCA understands,
through written notice and other means, that it is a target in these
investigations. Given the breadth of the ongoing investigations, Columbia/HCA
expects additional investigative and prosecutorial activity to occur in these
and other jurisdictions in the future. Columbia/HCA is the subject of a formal
order of investigation by the Securities and Exchange Commission (the
"Commission"). The Commission investigation includes the anti-fraud, periodic
reporting and internal accounting control provisions of the federal securities
laws. According to published reports, on July 2, 1999, a federal jury in Tampa,
Florida found two Columbia/HCA employees guilty of conspiracy and making false
statements on Medicare and TRICARE cost reports for the years 1992 and 1993 and
on a Medicaid cost report for 1993. Both were found not guilty of obstructing a
federal auditor. One other employee was acquitted on all counts for which he had
been charged and the jury was unable to reach a verdict with respect to another
employee. This employee and the government executed an agreement to defer
prosecution for 18 months after which charges will be dismissed. The two
convicted employees were sentenced in December 1999 and both have appealed to
the 11th Circuit.
Columbia/HCA is a defendant in several qui tam actions brought by private
parties on behalf of the United States of America, which have been unsealed and
served on Columbia/HCA. The actions allege, in general, that Columbia/HCA and
certain subsidiaries and/or affiliated partnerships violated the False Claims
Act by submitting improper claims to the government for reimbursement. The
lawsuits seek damages of three
F-11
<PAGE> 22
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
times the amount of all Medicare or Medicaid claims (involving false claims)
presented by the defendants to the federal government, civil penalties of not
less than $5,000 nor more than $10,000 for each such Medicare or Medicaid claim,
attorneys' fees and costs. The government has intervened in six unsealed qui tam
actions against Columbia/HCA. Columbia/HCA is aware of additional qui tam
actions that remain under seal and believes that there are other sealed qui tam
cases of which it is unaware.
Columbia/HCA is a defendant in a number of other suits, which allege, in
general, improper and fraudulent billing, overcharging, coding and physician
referrals, as well as other violations of law. Certain of the suits have been
conditionally certified as class actions.
It is too early to predict the effect or outcome of any of the ongoing
investigations or qui tam and other actions, or whether any additional
investigations or litigations will be commenced. If Columbia/HCA is found to
have violated federal or state laws relating to Medicare, Medicaid or similar
programs, Columbia/HCA could be subject to substantial monetary fines, civil and
criminal penalties, and exclusion from participation in the Medicare and
Medicaid programs. Similarly, the amounts in question in the qui tam and other
actions are substantial, and Columbia/HCA could be subject to substantial costs
resulting from an adverse outcome of one or more of such actions. In addition, a
number of derivative actions have been brought by purported stockholders of
Columbia/HCA against certain current and former officers and directors of
Columbia/HCA alleging breach of fiduciary duty and failure to take reasonable
steps to ensure that Columbia/HCA did not engage in illegal practices.
Management believes that the ongoing governmental investigations and
related media coverage may have had a negative effect on Columbia/HCA's results
of operations (which include LifePoint for the periods prior to the date of the
Distribution which are presented herein). The extent to which LifePoint may or
may not continue to be affected after the Distribution by the ongoing
investigations of Columbia/HCA, the initiation of additional investigations, if
any, and the related media coverage cannot be predicted. It is possible that
these matters could have a material adverse effect on the financial condition or
results of operations of LifePoint in future periods.
In connection with the Distribution, Columbia/HCA has agreed to indemnify
LifePoint and its subsidiaries, including the Partnership, in respect of any
losses which it may incur arising from the proceedings described above.
Columbia/HCA has also agreed to indemnify LifePoint in respect of any losses,
which it may incur as a result of proceedings which may be commenced by
government authorities or by private parties in the future that arise from acts,
practices or omissions engaged in prior to the date of the Distribution and
relate to the proceedings described above. Columbia/HCA has also agreed that, in
the event that any hospital owned by LifePoint, including Western Plains
Regional Hospital, as of the date of the Distribution is permanently excluded
from participation in the Medicare and Medicaid programs as a result of the
proceedings described above, then Columbia/HCA will make cash payments to
LifePoint based on amounts as defined in the Distribution Agreement by and among
Columbia/HCA and LifePoint. LifePoint has agreed with Columbia/HCA that, in
connection with the pending governmental investigations, it will negotiate with
the government with respect to a compliance agreement setting forth LifePoint's
agreement to comply with applicable laws and regulations. If any of such
indemnified matters were successfully asserted against LifePoint, or any of its
facilities, including the Partnership, and Columbia/HCA failed to meet its
indemnification obligations, then such losses could have a material adverse
effect on the business, financial position, results of operations or prospects
of LifePoint and the Partnership. Columbia/HCA has not indemnified LifePoint or
the Partnership for losses relating to any acts, practices and omissions engaged
in by LifePoint or the Partnership after the Distribution, whether or not
LifePoint or the Partnership is indemnified for similar acts, practices and
omissions occurring prior to the date of the Distribution.
F-12
<PAGE> 23
DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
General Liability Claims
The Partnership is subject to claims and suits arising in the ordinary
course of business. The Partnership is currently not a party to any proceeding
which, in the opinion of management, would have a material adverse effect on the
Partnership's business, financial condition or results of operations.
Other
Final determination of amounts earned under prospective payment and
cost-reimbursement activities is subject to review by appropriate governmental
authorities or their agents.
NOTE 7 -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
A summary of activity in the Partnership's allowance for doubtful accounts
follows (in thousands):
<TABLE>
<CAPTION>
ADDITIONS ACCOUNTS
BALANCES AT CHARGED TO WRITTEN OFF, BALANCE AT
BEGINNING COSTS AND NET OF THE END OF
OF PERIOD EXPENSES RECOVERIES THE PERIOD
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1997............... $3,496 $1,588 $(2,897) $2,187
Year ended December 31, 1998............... 2,187 2,295 (1,297) 3,185
Year ended December 31, 1999............... 3,185 2,841 (3,029) 2,997
</TABLE>
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for accounts
receivable, accounts payable and long-term debt approximate fair value because
of the short-term maturity of these instruments.
F-13
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
3.1 -- Certificate of Limited Partnership.
3.2 -- Certificate of Amendment to Certificate of Limited
Partnership.
3.3 -- Amended and Restated Limited Partnership Agreement of Dodge
City Healthcare Group, L.P., dated March 1, 1995.
3.4 -- Amendment to Article 6.1 of Limited Partnership Agreement,
dated June 13, 1997.
3.5 -- Second Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated April 8, 1999.
3.6 -- Third Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated November 4, 1999.
4.1 -- Indenture (including form of 10 3/4% Senior Subordinated
Notes due 2009) dated as of May 11, 1999, between
HealthTrust, Inc.-The Hospital Company and Citibank N.A. as
Trustee, incorporated by reference from Exhibit 4.2(a) to
LifePoint Hospitals' Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, File No. 0-29818.
4.2 -- Form of 10 3/4% Senior Subordinated Notes due 2009 (filed as
part of Exhibit 4.1).
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
1. DODGE CITY HEALTHCARE GROUP, L.P.
------------------------------------------------------------------------------
(Name of Limited Partnership; shall contain the words "Limited
Partnership" or the abbreviation L.P.)
2. C/O THE CORPORATION COMPANY, INC., 515 SO. KANSAS AVENUE,
-----------------------------------------------------------------------------
TOPEKA, KANSAS 66603
SHAWNEE COUNTY
(Address of Registered Office)
3. THE CORPORATION COMPANY, INC.
-----------------------------------------------------------------------------
(Name of Registered Agent at above address for Service of Process)
4. NAME AND ADDRESS OF GENERAL PARTNER:
WESTERN PLAINS REGIONAL HOSPITAL, INC. 3001 Avenue A
Dodge City, Kansas 67801
5. THE LAST DATE UPON WHICH THE LIMITED PARTNERSHIP IS TO BE DISSOLVED:
NOVEMBER 22, 2050
Signed this 2nd day of December, 1994.
Signature of all general partners:
Western Plains Regional Hospital, Inc.
/s/ Rachel A. Seifer
---------------------------------------
By: Rachel A. Seifer
Vice President
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF LIMITED PARTNERSHIP
To the Secretary of State
State of Kansas
The undersigned, a general partner of the limited partnership
hereinafter named, hereby certifies that:
1. The name of the limited partnership as it presently appears on the
records of the Secretary of the State of Kansas is DODGE CITY HEALTHCARE GROUP,
L.P.
2. The statement in the Certificate of Limited Partnership as now in
force and effect, relating to the name and address of the General Partner is
hereby amended to read as follows:
The name and address of the sole general partner of the Partnership
is as follows:
Name Address
Columbia/HCA of Dodge City, Inc. 201 West Main Street
Louisville, KY 40202
SIGNED on this 5th day of January, 1995
COLUMBIA/HCA OF DODGE CITY, INC., THE
GENERAL PARTNER OF DODGE CITY HEALTHCARE
GROUP, L.P.
By: /s/ Linda J. McDonald
----------------------------------------
Name: Linda J. McDonald
Title: Assistant Secretary
<PAGE> 2
CHANGE OF LOCATION OF REGISTERED OFFICE
AND/OR
CHANGE OF RESIDENT AGENT OF LIMITED PARTNERSHIP
To the Secretary of State of Kansas
The undersigned being a general partner of ____________________________
(Name of Limited Partnership)
DODGE CITY HEALTHCARE GROUP, L.P.
- --------------------------------------------------------------------------------
a limited partnership organized and existing under and by virtue of the laws of
the state of Kansas does hereby certify that the limited partnership has duly
adopted the following designation of Kansas registered office and/or resident
agent.
The registered office in the state of Kansas of the limited
partnership is:
c/o The Prentice-Hall Corporation System, Kansas, Inc.,
Suite 1108, 534 South Kansas Avenue, Topeka 66603
- --------------------------------------------------------------------------------
Name and Number City Zip Code
The resident agent of the limited partnership in the state of Kansas is
The Prentice-Hall Corporation System, Kansas, Inc.
- --------------------------------------------------------------------------------
Name
The undersigned is authorized to execute and file this certificate and
executes this certificate under the pains and penalties of perjury.
---------------------------------------------
By:
------------------------------------------
NOTE: The address of resident agent and registered office must be the same.
The resident agent must be an individual, a Kansas corporation, or the
limited partnership itself, if it is a Kansas limited partnership.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE.
<PAGE> 3
CERTIFICATE OF CHANGE OF ADDRESS OF RESIDENT AGENT'S OFFICE
I John H. Pelletier, Assistant Vice President of The Prentice-Hall
Corporation System, Kansas, Inc., do hereby certify for an on behalf of said
corporation that The Prentice-Hall Corporation System, Kansas, Inc., a
corporation organized and existing under and by virtue of the laws of the state
of Kansas, is the resident agent for the limited partnerships per the attached
list.
I further certify that The Prentice-Hall Corporation System, Kansas,
Inc., as resident agent for the limited partnerships named on the attached list,
has maintained the registered office of each said limited partnership at the
address of Suite 1108, 534 South Kansas Avenue, Topeka, Shawnee County, Kansas
66603, with the office of the Secretary of State.
I further certify that the new address to which such resident agent of
each said limited partnership as hereby changed effective December 20, 1999, is
200 S.W. 30th Street, Topeka, Shawnee County, Kansas 66611, where, at said new
address, such resident agent will thereafter maintain a registered office for
each of the limited partnerships per the attached list.
Dated: December 16, 1999
-------------------------------------------
John H. Pelletier, Assistant Vice President
Attest:
- ---------------------------
Vicki Schreiber, Asst. Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that, on December 16, 1999, before me, Merryll Wiener,
a Notary Public duly authorized by law to take acknowledgement of deeds,
personal came John H. Pelletier, Assistant Vice President of The Prentice-Hall
Corporation System, Kansas, Inc., and Vicki Schreiber, Assistant Secretary of
said corporation, who are known to me, and who each executed the foregoing
Certificate of Change of Address of Resident Agent's Office before me and
acknowledged the same to be his act and deed and the act and deed of said
corporation, and acknowledged that the facts stated herein are true.
Given under my hand and official seal on December 16, 1999
-------------------------------------------
Notary Public
Official Seal
<PAGE> 4
2210532 DODGE CITY HEALTHCARE GROUP, L.P.
<PAGE> 1
EXHIBIT 3.3
- --------------------------------------------------------------------------------
THE LIMITED PARTNERSHIP INTERESTS CREATED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LAW OF THE STATE
OF KANSAS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACTS. THE INTERESTS MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER SUCH ACTS OR AN
OPINION OF COUNSEL THAT SUCH TRANSFER MAY BE LEGALLY EFFECTED WITHOUT SUCH
REGISTRATION. ADDITIONAL RESTRICTIONS ON TRANSFER AND SALE ARE SET FORTH IN THIS
AGREEMENT.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
DODGE CITY HEALTHCARE GROUP, L.P.
(a Kansas Limited Partnership)
<PAGE> 2
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
DODGE CITY HEALTHCARE GROUP, L.P.
(a Kansas Limited Partnership)
This Amended and Restated Limited Partnership Agreement is entered into
and shall be effective as of the first day of March, 1995 by and among
Columbia/HCA of Dodge City, Inc., a Kansas corporation as general partner,
American Medicorp Development Co., a Delaware corporation, as the original
limited partner, Western Plains Regional Hospital, Inc., a Kansas corporation,
as a limited partner, and Dodge City Outpatient Surgical Facility, Inc., a
Kansas corporation as a limited partner.
WITNESSETH:
WHEREAS, the General Partner and the Original Limited Partner are
parties to that certain Limited Partnership Agreement of Dodge City Healthcare
Group, L.P. (the "Partnership Agreement"); and
WHEREAS, the General Partner and the Original Limited Partner desire to
amend the Partnership Agreement, and DCSF desires to execute the amended
Partnership Agreement, as provided herein.
NOW, THEREFORE, the General Partner and the Original Limited Partner
hereby amend the Partnership Agreement, and DCSF hereby executes the Partnership
Agreement, as follows:
ARTICLE 1. DEFINITIONS
As used herein the following terms have the following meanings:
1.1 "Act" means the Kansas Limited Partnership Act, KSA 56-1a101 et
seq., as amended from time to time.
1.2 "Additional Limited Partner" means a Person who is admitted into
the Partnership pursuant to the terms of Article 13 hereof.
1.3 "Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of the relevant Partnership fiscal year increased by:
(a) any amounts which such Person is obligated to restore or is deemed obligated
to
1
<PAGE> 3
restore under the standards set by Regulation Section 1.704-l(b)(2)(ii)(c) (or
is deemed obligated to restore under Regulation Section 1.704-2(g) and (i)(5);
and decreased by (b) the items described in Sections 1.704 1(b)(2)(ii)(d)(4),
(5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Section 1.704-(b)(2)(ii)(d) of the Regulations and
shall be interpreted consistently therewith.
1.4 "Adverse Terminating Event" means, with respect to any Class A
Limited Partner, any of the following:
(a) The Class A Limited Partner has breached the terms and
conditions of this Agreement, including without limitation, violating
the transfer restrictions set forth in this Agreement, as determined in
the sole reasonable discretion of the General Partner; or
(b) The Class A Limited Partner has materially and maliciously
either (i) disrupted the affairs of the Partnership, or (ii) acted
adversely to the best interests of the Partnership, as determined in
the sole reasonable discretion of the General Partner.
1.5 "Affiliate" means, with respect to any Class A or Class C Limited
Partner (exclusive of DCSF and DCSF Affiliates and Columbia and Columbia
Affiliates), (i) any person or entity that directly or indirectly controls, is
controlled by, or is under common control with, a Partner, (ii) any entity of
which a Partner owns 10% or more of the outstanding voting securities, (iii) any
entity of which a Partner is an officer, director, or general partner, (iv) any
entity described in clauses (i) through (iii) of this Section of which a Partner
is an officer, director, general partner, trustee, or holder of 10% or more of
the voting securities, or (v) any child, grandchild (whether through marriage,
adoption or otherwise), sibling (whether through adoption or otherwise), parent
or spouse of a Partner. As used in this definition of "Affiliate," the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of an entity whether through
ownership of voting securities, by contract or otherwise.
1.6 "Agreement" means this Limited Partnership Agreement of Dodge City
Healthcare Group, L.P. as from time to time amended pursuant to this Agreement.
1.7 "Approval of the Committee" means a matter has been approved by
both the WPRH Members voting a single vote as a block and also by the DCSF
Members voting a single vote as a block; provided, however, that, if and at such
time as the aggregate Partner's Sharing Percentage of DCSF and the DCSF
Affiliates is less than ten percent (10%) then "Approval of the Committee" shall
mean approval of the WPRH Members. The General Partner's Board of Directors
2
<PAGE> 4
shall elect the five WPRH members, and determine the manner and frequency of
their selection, the quorum and votes necessary to take any action by the WPRH
Members (including, but not limited to, deciding how said block will cast its
single vote at any meeting of the Board of Advisors on any issue), which matters
are delegated for decision to the WPRH Members and which are reserved for
approval of the General Partner's Board of Directors, and all other matters
internal to the WPRH Members. DCSF's Board of Directors shall elect the five
DCSF members, and determine the manner and frequency of their selection, the
quorum and votes necessary to take any action by the DCSF Members (including,
but not limited to, deciding how said block will cast its single vote at any
meeting of the Board of Advisors on any issue), which matters are delegated for
decision to the WPRH Members and which are reserved for approval of DCSF's Board
of Directors, and all other matters internal to the DCSF Members.
1.8 "Approval of the Partners" or "Approved by the Partners" means the
approval of those Partners who own at least 80% of the issued and outstanding
Units of any Class at the time the proposed Partnership action is being
considered for approval.
1.9 "Bankruptcy" means, as to any Partner, the Partner's taking or
acquiescing to the taking of any action seeking relief under, or advantage of,
any applicable debtor relief, liquidation, receivership, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar law
affecting the rights or remedies of creditors generally, as in effect from time
to time. For the purpose of this definition, the term "acquiescing" shall
include, without limitation, the failure to file, within thirty (30) days after
its entry, a petition, answer or motion to vacate or to discharge any order,
judgment or decree providing for any relief under any such law.
1.10 "Board of Advisors" has the meaning set forth in Section 12.1.
1.11 "Capital Account" means a capital account to be established for
each Partner (or transferee of a Partner who is not admitted to the Partnership
as a Partner, provided that the maintenance of such Capital Account will not
constitute the admission of the transferee as a Substituted Limited Partner)
which shall be (i) credited with the amount of Capital Contribution and the
initial Gross Market Value of any party contributed to the Partnership by such
Person, with any Profit allocated to such Person and any items in the nature of
income and gain which are specially allocated under Sections 5.3 and 5.4 hereof
and with the amount of any Partnership liabilities that are assumed by such
Person or that are secured by any Partnership property distributed to such
Person and (ii) debited with the amount of cash and the Gross Market Value (as
determined at the time of distribution) of any property distributed to such
Person by the Partnership, with any Loss allocated to such Person and any items
in the nature of expenses and losses that are specially allocated under Sections
5.3 and 5.4 and with the amount of any liabilities of such
3
<PAGE> 5
Partner that are assumed by the Partnership or that are secured by any property
contributed by such Person to the Partnership.
In the event any Partner transfers his interest in the Partnership in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor Partner to the extent such Capital Account
relates to such transferred interest. In determining the amount of any liability
for purposes of this Section there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
1.12 "Capital Contribution" means, as to any Partner, the amount of
cash or the Gross Market Value of all property contributed to the Partnership by
the Partner, which is set forth opposite such Partner's name on the attached
Exhibit "A" under the heading "Capital Contribution."
1.13 "WPHI Members" means those members of the Board of Advisors
elected or appointed from time to time by the General Partner.
1.14 "DCSF Members" means those members of the Board of Advisors
elected or appointed from time to time by DCSF.
1.15 "Class A Limited Partners" means any lawful holder of a Class A
Unit, which shall be limited to (i) Qualified Purchasers, (ii) Columbia and/or
any Columbia Affiliate, and (iii) DCSF and/or any DCSF Affiliate; together with
any person or entity to which said Unit may be lawfully and properly assigned
under the provisions of this Agreement. "Class A Limited Partner" means any one
of the Class A Limited Partners.
1.16 "Class B Limited Partners" means any lawful holder of a Class B
Unit, which shall be limited to (i) Columbia and/or any Columbia Affiliate, and
(ii) DCSF and/or any DCSF Affiliate; together with any person or entity to which
said Unit may be lawfully and properly assigned under the provisions of this
Agreement. The sole initial Class B Limited Partner shall be DCSF. "Class B
Limited Partner" means any one of the Class B Limited Partners.
1.17 "Class C Limited Partners" means any lawful holder of a Class C
Unit, which shall be limited to those limited partners of the Partnership who
are (i) management level employees of the General Partner (but not more than ten
such employees), and (ii) Columbia and/or any Columbia Affiliate; together with
any person or entity to which said Unit may be lawfully and properly assigned
under the provisions of this Agreement. Any individual who may lawfully hold
Class C Units pursuant to the foregoing definition is hereinafter referred to as
a "Qualified Class C Limited Partner." "Class C Limited Partner" means any one
of the Class C Limited Partners.
4
<PAGE> 6
1.18 "Class D Limited Partners" means any lawful holder of a Class D
Unit, which shall be limited to Columbia and/or any Columbia Affiliate; together
with any person or entity to which said Unit may be lawfully and properly
assigned under the provisions of this Agreement. The sole initial Class D
Limited Partner is Western Plains Regional Hospital, Inc.
1.19 "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
1.20 "Columbia" means Columbia/HCA Healthcare Corporation, a Delaware
corporation, and any successor in interest.
1.21 "Columbia Affiliate" means any corporation which may be conducted
with Columbia by a chain of one or more corporations linked through 75% stock
ownership, or any partnership (general or limited) orders of partnerships of
which Columbia Corporate Affiliates are the sole general partners therein,
irrespective of any ownership interest in the Partnership. For this purpose, the
parties agree that if Columbia owns 75% of subsidiary A and subsidiary A owns
75% of Subsidiary B, subsidiary B is not "linked through 75% stock ownership"
with Columbia (but rather is linked through 56.25% ownership) and is therefore
not a Columbia Affiliate.
1.22 "Contribution Agreement" means the Contribution Agreement among
the General Partner, WPRH, DCSF and the Partnership, pursuant to which hospital
and DCSF assets were contributed to the Partnership in exchange for Units.
1.23 "DCSF" shall mean Dodge City Outpatient Surgical Facility, Inc.
1.24 "Depreciation" means, for each Partnership fiscal year or other
Partnership period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable with respect to a Partnership asset for such
year or other period, except as provided in this Section. If the Partnership
asset's adjusted basis for federal income tax purposes differs from its Gross
Market Value at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Gross Market Value as
the federal income tax depreciation, amortization, or other cost recovery
deduction for such year or other period bears to such beginning adjusted tax
basis. If, however, the federal income tax depreciation, amortization or other
cost recovery deduction for such year is zero, Depreciation shall be determined
with reference to such beginning Gross Market Value using any reasonable method
selected by the General Partner.
1.25 "Economic Risk of Loss" has the meaning set forth in Section
1.752-2 of the Regulations.
5
<PAGE> 7
1.26 "General Partner" means any lawful holder of a Class GP Unit,
which shall be limited to Columbia and/or any Columbia Affiliates; together with
any person or entity to which said Units may be lawfully and properly assigned
under the provisions of this Agreement. The initial General Partner shall be
Columbia/HCA of Dodge City, Inc. the interest of the General Partner herein
shall be represented by 10 GP Units.
1.27 "Gross Market Value" means, with respect to any Partnership asset,
the adjusted basis of such asset for federal income tax purposes, except as
follows:
(a) The initial Gross Market Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset as determined by the contributing Partner and the Partnership.
(b) The Gross Market Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the General Partner, as of the following times:
(i) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more
than a de minimis capital contribution;
(ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership assets as consideration for
the disposition of an interest in the Partnership; and
(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-l(b)(2)(ii)(g).
Adjustments pursuant to subsections (a) and (b) above shall be made
only if the General Partner reasonably determines that such adjustments
are necessary or appropriate to reflect the relative economic interests
of the Partners in the Partnership.
(c) If the Gross Market Value of an asset has been determined or
adjusted as provided in this Section, the Gross Market Value of the
respective asset shall thereafter be adjusted by the Depreciation taken
into account with respect to the asset for purposes of computing Profit
and Loss.
(d) The Gross Market Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of the distributed
asset, as determined by the General Partner, on the date of
distribution.
(e) The Gross Market Value of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of the
Partnership assets pursuant to Code Section
6
<PAGE> 8
734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining the Partners' Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m). The
Gross Market Value of the Partnership assets shall not, however, be
adjusted under this Section to the extent that the General Partner
determines that an adjustment pursuant to Section ?(b) is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section.
1.28 "Hospital" means Western Plains Regional Hospital located at 3001
Avenue A, Dodge City, Kansas and its related facilities, together with the
Facilities (as defined in the Contribution Agreement) and any other hospitals or
health care facilities subsequently acquired by the Partnership.
1.29 "Initial Closing" means the consummation of the transaction
whereby the first Class A Limited Partner is admitted to the Partnership.
1.30 "DCSF Affiliate" means any entity which (through either 100% stock
ownership or sole membership) directly controls or is controlled by, or is under
common control with, DCSF, irrespective of any ownership interest in the
Partnership.
1.31 "Limited Partner" means any Partner owning one or more Class A,
Class B, Class C, or Class D Units. "Limited Partners" means all of the persons
or entities who are limited partners of the Partnership as defined in this
Section. The interests of Limited Partners shall be represented by 990 Units,
comprised of 100 Class A Units, 270 Class B Units, 100 Class C Units, and 520
Class D Units.
1.32 "Liquidator" means the Person who liquidates the Partnership under
Article 16 hereof.
1.33 "Net Revenues from Health Care Services" shall mean net revenues
derived by the Partnership from services and supplies rendered to Hospital
patients, as consistently determined on an accrual basis and under generally
accepted accounting principles (U.S.). Notwithstanding the foregoing,
(a) If Hospital bills any goods or services for third-parties
"under arrangements" or otherwise in which the Hospital, as a practical
manner, collects revenue and pays over a portion thereof to third-party
health care providers, health care practitioners, or independent
contractors, Net Revenues from Health Care Services shall exclude any
revenues collected in connection with such transactions and be limited
to the profits Hospital makes from such relationship, and
(b) Net Revenues from Health Care Services shall in all events
exclude any amounts derived from transactions in which gain or loss of
a capital nature for federal income tax purposes is or could be
realized, and
7
<PAGE> 9
(c) All expenses arising from contractual adjustments, bad debt
charge offs and reserves, taxes, charity or similar care, and
administrative discounts shall be deducted and reduce Net Revenues from
Health Care Services.
If the existing billing relationship among hospitals, doctors, patients, private
third-party payors, and governmental payors changes, either by reason of
legislative decree or otherwise (including changing market conditions), and as a
result the Net Revenues from Health Care Services as defined above fail to
accurately reflect the level of medical care activity taking place within the
Hospital, the Partners agree to meet and negotiate in good faith toward an
alternative definition of the General Partner's compensation set forth in
Section 8.8 below.
1.34 "Nonaffiliated Limited Partners" means any Limited Partner which
is not Columbia, Columbia Affiliate, or General Partner, or employed by any of
the foregoing.
1.35 "Nonrecourse Deductions" means any and all items of loss,
deduction or expenditures (described in Section 705(a)(2)(B) of the Code), that,
in accordance with the principles of Section 1.70i2(c) of the Regulations, are
attributable to a Nonrecourse Liability.
1.36 "Nonrecourse Liability" has the meaning set forth in Section
1.752-l(a)(2) of the Regulations.
1.37 "Original Limited Partner" means American Medicorp Development
Co., a Delaware corporation.
1.38 "Partner Nonrecourse Debt" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
1.39 "Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including any expenditure described in Section
705(a)(2)(B) of the Code) that, in accordance with the principles of Section 1
.704-2(i), are attributable to a Partner Nonrecourse Debt.
1.40 "Partners" means the General Partner and the Limited Partners,
collectively. "Partner" means any one of the Partners.
1.41 "Partnership" means the limited partnership formed under this
Agreement.
1.42 "Partnership Minimum Gain" means the amount determined in
accordance with the principles of Section 1.704-2(d) of the Regulations.
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<PAGE> 10
1.43 "Partner's Sharing Percentage" means the number of Units held by a
Partner, divided by the total number of Units outstanding. As set forth in
Section 4.1 below, as of the initial execution of this Agreement there are 900
Units outstanding, 10 of which are owned by General Partner, 620 by WPRH, and
270 of which are owned by DCSF. The initial sharing percentage is thus 1.1111%
for General Partner (10/900), 68.8889 for WPRH (620/900), and 3096 for DCSF
(2701900). If, pursuant to the provisions hereof, all Class A Units are issued
(and no other transfers occur), the Sharing Percentages will be 1% for General
Partner (10/1,000); 62% for WPRH (620/1,000), 27% for DCSF (27011,000), and 10%
for the Class A Partners (100/1,000).
1.44 "Person" means any individual, partnership, corporation, trust or
other entity.
1.45 "Profits and Losses" means for each fiscal year or other period an
amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this Section shall be added to such taxable income
or loss;
(b) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Sections 1.704-l(b)(2)(iv)(1) and 1.704-2(j)
and (i)(1) of the Regulations and not otherwise taken into account in
computing Profits or Losses pursuant to this Section shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Market Value of any Partnership asset
is adjusted pursuant to the other provisions of this Agreement, hereof,
the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing
Profits or Losses;
(d) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Market Value of
the property disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Gross Market Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such fiscal
year or other
9
<PAGE> 11
period, calculated in accordance with the definition of "Depreciation"
herein; and
(f) Notwithstanding any other provision of this Section, any items
which are specially allocated pursuant to Sections 5.3 and 5.4 hereof
shall not be taken into account in computing Profits or Losses.
1.46 "Qualified Purchaser" means, with respect to the Class A Units, a
member of the medical staff of the Hospital (as defined in the medical staff
bylaws of the Hospital, as amended from time to time) or a professional
corporation with ninety percent (90%) of the shareholders being members of the
medical staff of the Hospital.
1.47 "Substituted Limited Partner" means any person or entity lawfully
admitted to the Partnership pursuant to the provisions of this Agreement
regarding the same.
1.48 "Syndication Expenses" means all expenditures classified as
syndication expenses pursuant to Treasury Regulations Section 1.709-2(b).
Syndication Expenses shall be taken into account under this Agreement at the
time they would be taken into account under the Partnership's method of
accounting if they were deductible expenses.
1.49 "Terminating Event" means, with respect to any Class A Limited
Partner, any of the following:
(a) The Class A Limited Partner has died or become permanently
disabled; or
(b) The Class A Limited Partner is in Bankruptcy as defined
herein.
1.50 "Treasury Regulations" or "Regulations" means Income Tax
Regulations, including Temporary Regulations, promulgated under the Code, as
such regulations may be amended from time to time (including corresponding
provisions in succeeding regulations).
1.51 "Units" means all or a part of the issued and outstanding
ownership interests of the Partnership held by the Limited Partners. "Unit"
means any one of the Units. The Units shall consist of 1,000 Units, divided into
the following Classes:
10 Class GP Units
l00 Class A Units
270 Class B Units
100 Class C Units
520 Class D Units
10
<PAGE> 12
1.52 "WPRR" means Western Plains Regional Hospital, Inc.
ARTICLE 2. FORMATION OF PARTNERSHIP
2.1 Formation. The Original Limited Partner and the General Partner
have formed the Partnership pursuant to the Act. The General Partner filed the
Certificate of Limited Partnership in the office of the Secretary of State of
the State of Kansas, and has complied with all other legal requirements to form
and operate the Partnership. Except as stated in this Agreement, the Act shall
govern the rights and liabilities of the Partners.
2.2 Withdrawal of Original Limited Partner. Upon the admission of DCSF
as a Class B Limited Partner, the Original Limited Partner will withdraw from
the Partnership with no claim or right to any interest in the Partnership as a
Limited Partner. The General Partner will return to the Original Limited Partner
its capital contribution to the Partnership upon such withdrawal. By execution
of this Agreement, (i) each Limited Partner hereby waives and releases the
Original Limited Partner from any and all liability that all or any of them may
have against such Original Limited Partner by reason of its actions as the
Original Limited Partner of the Partnership, and (ii) General Partner represents
to each Limited Partner that nothing happened between the date of formation and
the admission of DCSF that would adversely affect the Partnership, or the
interests of any Limited Partner herein, it being acknowledged and agreed that
the sole purpose of admitting the Original Limited Partner and the creation of
the Partnership for the period before DCSF was admitted was to form the
Partnership for the purpose of initiating the transaction contemplated herein,
and in the Contribution Agreement.
2.3 Name. The name of the Partnership is "Dodge City Healthcare Group,
L.P." and the business of the Partnership shall be conducted under that name or
such other names as may be approved by the Partners from time to time.
2.4 Principal Office. The principal office of the Partnership shall be
located at 3001 Avenue A, Dodge City, Kansas 67801 or at such other place or
places as the General Partner may from time to time determine.
2.5 Term. The Partnership has begun on the date the General Partner
filed the Certificate of Limited Partnership with the Secretary of State of the
State of Kansas, and shall continue until the date on which the Partnership is
dissolved pursuant to the provisions hereof and thereafter, to the extent
provided for by applicable law, until wound up and terminated pursuant to the
provisions hereof.
2.6 Registered Agent and Office. The registered agent of the
Partnership shall be CT Corporation System, and the registered office of the
Partnership shall be located at CT Corporation, 515 South Kansas Avenue, Topeka,
Kansas 66603. The registered office or the registered agent, or both, may be
changed by the General Partner upon filing the statement required by the Act.
11
<PAGE> 13
ARTICLE 3. PURPOSES AND POWERS OF THE PARTNERSHIP; NATURE OF THE BUSINESS OF THE
PARTNERSHIP
3.1 Purposes. The purposes of the Partnership are (i) to own, manage,
operate, lease or take any action in connection with operating the Hospital;
(ii) to acquire (through asset acquisition, stock acquisition, lease or
otherwise) and develop other property, both real and personal, in connection
with providing health care related services, including without limitation,
general acute care hospitals, specialty care hospitals, nursing homes, home
health care agencies, health maintenance organizations, psychiatric facilities
and other health care providers; (iii) to enter into, from time to time, such
financial arrangements as the General Partner may determine to be necessary,
appropriate or advisable (including, without limitation, borrowing money and
issuing evidences of indebtedness and securing the same by mortgage, deed of
trust, security interest or other encumbrance upon one or more or all of the
Partnership assets); (iv) to sell, assign, lease, exchange or otherwise dispose
of, or refinance or additionally finance, one or more or all of the Partnership
assets; (v) to promote and invest in rural development of physicians; and (vi)
generally to engage in such other business and activities and to do any and all
other acts and things that the General Partner deems necessary, appropriate or
advisable from time to time in furtherance of the purposes of the Partnership as
set forth in this Section.
3.2 Nature of the Business. The nature of the business of the
Partnership shall be to own, manage, operate, lease or take any action in
connection with the ownership of the Hospital and outpatient healthcare
facilities.
3.3 Powers. Subject to the limitations contained in this Agreement and
in the Act, the Partnership purposes may be accomplished by the General Partner
taking any action permitted under this Agreement that is customary or reasonably
related to accomplishing such purposes.
ARTICLE 4. CAPITAL CONTRIBUTIONS, LOANS, CAPITAL ACCOUNTS
4.1 Capital Contributions. General Partner and DCSF have each made
contributions of property to the capital of the Partnership pursuant to the
Contribution Agreement. In return therefor, the Partnership has issued the
following Units:
To General Partner: 10 GP Units
To WPRH: 100 Class C Units, and S20 Class D Units
To DCSF: 270 Class B Units
No Class A Units were issued as of the date this amended Agreement was initially
adopted, but may be issued as set forth herein.
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4.2 No Additional Capital Contributions. Under no circumstances will
any Limited Partner be required to make any contributions to the capital of the
Partnership in excess of his or her Capital Contribution.
4.3 Capital Accounts. A Capital Account shall be established for each
Partner. If any Partner is both a General Partner and a Limited Partner, such
Partner will have one Capital Account for both such interests in the
Partnership. No Partner shall receive any interest or salary with respect to his
Capital Account. No Partner shall have the right to demand the return of his
contribution to the capital of the Partnership, except as otherwise provided in
this Agreement. Should any Partner become entitled to receive a return of his
contribution to the capital of the Partnership, such Partner shall not have the
right to receive property other than cash, except as otherwise provided in this
Agreement.
All of the provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Section 1.7041(b), and
shall be interpreted and applied in a manner consistent with the Regulations. If
the General Partner determines that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities that are secured by
contributed or distributed property or that are assumed by the Partnership or
any of the Partners) are computed in order to comply with the Regulations, the
General Partner may make such modifications, provided that such modifications
are not likely to have a material effect on the amounts distributable to any
Partner from the Partnership. The General Partner shall also make appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Section 1.704 1(b) of the Regulations.
4.4 Loans. Any Limited Partner, with the consent of the General
Partner, may lend money to the Partnership. If the General Partner or, with the
written consent of the General Partner, any Limited Partner makes any loan or
loans to the Partnership, the amount of any such loan shall not be treated as a
contribution to the capital of the Partnership but shall be a debt due from the
Partnership. Any Partner's loan to the Partnership shall be repayable out of the
Partnership's cash and shall bear interest (i) if covered by the Contribution
Agreement, under the terms set forth in the Contribution Agreement, and (ii) if
not covered by the Contribution Agreement, at prevailing market rates.
ARTICLE 5. ALLOCATIONS
5.1. Allocations of Profits. Profits for any Partnership fiscal year
shall be allocated to the Partners in the following order of priority:
(a) First, 100% to the General Partner until the cumulative Profits
allocated pursuant to this Section for the current and all prior fiscal
years are
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equal to the cumulative Losses allocated to the General Partner
pursuant to Section 5.2(b); and
(b) Second, to the Partners in proportion to each Partner's Sharing
Percentage.
5.2 Allocations of Losses.
(a) Subject to the limitation in Section 5.2(b) below, Losses for
any Partnership fiscal year shall be allocated to the Partners in
proportion to each Partner's Sharing Percentage.
(b) To the extent Losses allocated to a Limited Partner pursuant to
Section 5.2(a) would create or increase a deficit in the balance of
such Limited Partner's Adjusted Capital Account, such Losses shall be
allocated instead to the General Partner.
5.3 Special Allocations. Thee following special allocations shall be
made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other provision of
this Article, if there is a net decrease in Partnership Minimum Gain
during any Partnership fiscal year, each Partner shall be allocated
items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain during such year in the manner and
amounts provided in Regulation Sections 1.704 2(f)(6), 1.704-2(g)(2),
1.704-2(j)(2)(i) and 1.704-2(i) or any successor provisions. For
purposes of this Section 5.3(a), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or
gain required hereunder shall be effected, prior to the application of
any other allocations pursuant to this Section 5.3(a) with respect to
such fiscal year. This Section is intended to comply with the minimum
gain chargeback requirement in Section 1.704 2(f) of the Regulations
and shall be interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Article except Section 5.3(a), if there is a net
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse
Debt during any Partnership fiscal year, each Partner who has a share
of the Partner Minimum Gain attributable to such Partner Nonrecourse
Debt shall be allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in the manner and amounts
provided in Regulations Sections 1.704-2(i)(4) and 1.704 2(j)(2) (ii)
or any successor provisions. For purposes of this Section 5.3(b), each
Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected,
prior to the application of any
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other allocations pursuant to this Section 5.3(b) with respect to such
fiscal year. This Section is intended to comply with the minimum gain
chargeback requirement in such Sections of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Limited Partner
unexpectedly receives any adjustments, allocations, or distributions
described in Sections 1.704 l(b)(2)(u)(d)(4), 1.7041(b)(2)(ii)(d)(5) or
1.704 1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income
and gain shall be specially allocated to each such Limited Partner in
an amount and manner sufficient to eliminate, to the extent required by
the Regulations, the deficit balance, if any, in the Adjusted Capital
Account created by such adjustments, allocations or distributions as
quickly as possible, unless such deficit balance is otherwise
eliminated pursuant to Section 5.3(a) or (b).
(d) Gross Income Allocation. In the event any Limited Partner has a
deficit Capital Account at the end of any Partnership fiscal year which
is in excess of the sum of (i) the amount such Limited Partner is
obligated to restore pursuant to any provision of this Agreement and
(ii) the amount such Limited Partner is deemed to be obligated to
restore under Sections 1.704-2(g) and 1.704-2(i)(5) of the
Regulations, each such Limited Partner shall be allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 5.3(d)
shall be made only if and to the extent that such Limited Partner would
have a deficit balance in its Adjusted Capital Account in excess of
such sum after all other allocations provided for in this Article 5
have been made as if this Section were not in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
year or other period shall be allocated to the Partners in proportion
to each Partner's Sharing Percentage.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any fiscal year or other period shall be allocated to
the Partner who bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Section 1.704 2(i) of the
Regulations.
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Sections 734(b)
or 7430b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in
determining Capital Accounts, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
such basis) and such gain or loss shall be specially
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<PAGE> 17
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Regulations.
5.4 Curative Allocations. Notwithstanding any other provision of this
Article 5 (other than Section 5.3), the allocations contained in Section 5.3
shall be taken into account in making the allocations contained in Sections 5.1
and 5.2 so that, to the extent possible, the net amount of items of income,
gain, loss and deduction allocated to each Partner under Sections 5.1, 5.2 and
5.3, together, shall be equal to the net amount of such items that would have
been allocated to each Partner under Sections 5.1 and 5.2 had the allocations
under Section 5.3 not otherwise been provided for. The General Partner shall
have reasonable discretion, with respect to each fiscal year, to apply the
provisions of this Section 5.4 and thereby allocate income, gain, loss and
deduction in such order and proportion as the General Partner deems equitable,
practicable and consistent with this Agreement and the applicable Regulations.
5.5 Tax Allocations.
(a) Code Section 704(c). If any Partner contributes any property to
the Partnership that has a Gross Market Value that is in excess of or
less than its adjusted basis for federal income tax purposes at the
time of such contribution, then all gain, loss and deduction with
respect to the contributed property shall, solely for federal income
tax purposes, be allocated among the Partners so as to take account of
the variation between the adjusted basis of such property and its
initial Gross Market Value as required under Code Section 704(c).
(b) Partnership Asset Adjustments. In the event the Gross Market
Value of any Partnership asset is adjusted pursuant to Section 1.27,
subsequent allocations of Partnership income, gain, loss and deduction
with respect to such asset, as calculated for tax purposes, shall take
account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Market Value in accordance
with the principles of Code Section 704(c), as required pursuant to
Regulation Section 1.704-l(b)(4)(i).
(c) Consistent Allocation. Except as provided above in Sections
5.5(a) and (b), Partnership income, gain, loss, deduction and credit,
as calculated for tax purposes, shall be allocated among the Partners,
to the extent possible, in accordance with the allocations of the
corresponding Profits, Losses or items thereof pursuant to Sections 5.1
through 5.3.
(d) Adjustments by the Partners. Any elections or other decisions
related to Partnership tax allocations pursuant to this Section 5.5
shall be
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made by the General Partner in any manner that reasonably reflects the
purpose and intention of this Agreement. Partnership tax allocations
pursuant to this Section 5.5 are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into
account in computing, any Partner's Capital Account or distributive
Share of the Partner-ship's Profit or Loss (or any item thereof), or
Partnership distributions to any of the Partners under this Agreement.
5.6 Other Allocation Rules.
(a) In the event that Limited Partners are admitted to the
Partnership on different dates during any Partnership fiscal year,
Partnership income or loss allocated to the Partners for each such
fiscal year shall be allocated among the Partners in proportion to each
Partner's Sharing Percentage from time to time during such fiscal year
in accordance with Code Section 706, using any convention permitted by
law and selected by the General Partner.
(b) For purposes of determining Partnership income, gain, losses
and deductions allocable to any period, all such Partnership items
shall be determined on a daily, monthly or other basis, as determined
by the General Partner using any permissible method under Code Section
706 and the Regulations thereunder.
(c) The Partners are aware of the income tax consequences of the
Partnership allocations made under this Section and hereby agree to be
bound by the provisions of this Section in reporting their share of
Partnership income and loss for federal income tax purposes.
ARTICLE 6. DISTRIBUTIONS
6.1 Distribution of Excess Cash. Except as otherwise provided in this
Agreement, or as may otherwise be prohibited or required by applicable law, the
General Partner may determine in its reasonable judgment to what extent (if any)
the Partnership's cash on hand exceeds its current and anticipated needs,
including, without limitation, for operating expenses, debt service, authorized
acquisitions, and a seasonable contingency reserve. If such an excess exists,
the General Partner may cause the Partnership to distribute to the Partners an
amount in cash equal to that excess to the Partners in proportion to each
Partner's Sharing Percentage.
Subject to the foregoing provisions of this Section, it is the
understanding of the Partners that the Partnership will, at a minimum,
distribute cash on a yearly basis in an amount sufficient to provide each
Partner with sufficient funds to pay income tax obligations on Partnership
earnings assuming each Partner's Sharing Percentage of such earnings were fully
taxable to such Partner at the highest federal individual income tax rate
(taking into account the phase-out of exemptions,
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deductions, and other similar items dependent upon the amount of a taxpayer
taxable income, adjusted gross income, or similar income related concepts), plus
the highest Kansas individual income tax rate (taking into account the phase-out
of the deductions, and other similar items dependent upon the amount of a
taxpayer taxable income, adjusted gross income, or similar income-related
concepts).
6.2 Limit on Distributions. The General Partner shall not make
distributions to a Partner as provided in Section 6.1 if the result of such
distributions would be to cause such Partner to have an Adjusted Capital Account
deficit or to have an increase in its Adjusted Capital Account deficits.
6.3 Compensation or Reimbursement to the General Partner. Authorized
amounts payable as compensation or reimbursement to the General Partner or to
any Person other than in his capacity as a Partner in the Partnership, such as
for services rendered, goods purchase or money borrowed, shall not be treated as
a distribution for purposes of this Article 6.
ARTICLE 7. BANK ACCOUNTS, BOOKS OF ACCOUNT, TAX COMPLIANCE AND FISCAL YEAR
7.1 Bank Accounts; Investments. The General Partner shall establish one
or more bank accounts as provided in Section 8.1(g) into which all Partnership
funds shall be deposited. No other funds shall be deposited into these accounts.
Funds deposited in the Partnership's bank accounts may be withdrawn only to pay
Partnership debts or obligations or to be distributed to the Partners under this
Agreement. Partnership funds, however, may be invested in such securities and
investments, as the General Partner may select, until withdrawn for Partnership
purposes; provided, however, that no Partnership funds shall be invested in the
securities of Columbia or any Columbia Affiliate unless (i) Approved by the
Committee, and, in addition, (ii) such investment is consistent with the General
Partner's fiduciary duties hereunder.
7.2 Books and Records. The General Partner shall keep books of account
and records relative to the Partnership's business. The books shall be prepared
in accordance with generally accepted accounting principles using the accrual
method of accounting. The accrual method of accounting shall also be used by the
Partnership for income tax purposes. The Partnership's books and records shall
at all times be maintained at the principal business office of the Partnership
or its accountants and shall be available for inspection by the Limited Partners
or their duly authorized representatives during reasonable business hours. The
books and records shall be preserved for four years after the term of the
Partnership ends.
7.3 Determination of Profit and Loss: Audited Financial Statements. All
items of Partnership income, expense, gain, loss, deduction and credit shall be
determined with respect to, and allocated in accordance with, this Agreement for
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each Partner for each Partnership fiscal year. Within seventy-five (75) days
after the end of each Partnership fiscal year, the General Partner shall cause
to be prepared, at Partnership expense, financial statements of the Partnership
for the preceding fiscal year, including, without limitation, a balance sheet,
profit and loss statement, statement of cash flows and statement of the balances
in the Partners' Capital Accounts, prepared in accordance with generally
accepted accounting principles consistently applied with prior periods and
audited by a major certified public accounting firm. These audited financial
statements shall be available for inspection and copying during ordinary
business hours at the reasonable request of any Partner, and will be furnished
to DCSF and to any other Partner upon written request therefor.
7.4 Tax Returns and Information. The Partners intend for the
Partnership to be treated as a partnership for tax purposes. The General Partner
shall prepare or cause to be prepared all federal, state and local income and
other tax returns which the Partnership is required to file and shall furnish
such returns to the Limited Partners, together with a copy of each Limited
Partner's Form K-l and any other information which any Limited Partner may
reasonably request relating to such returns, within ninety (90) days after the
end of each Partnership fiscal year.
7.5 Tax Audits. The General Partner shall be the tax matters partner of
the Partnership under Section 6231(a)(7) of the Code. The General Partner shall
inform the Limited Partners of all matters which may come to its attention in
its capacity as tax matters Partner by giving the Limited Partners notice
thereof within ten (10) days after becoming so informed. The General Partner
shall not take any action contemplated by Sections 6222 through 6232 of the Code
unless the General Partner has first given the Limited Partner notice of the
contemplated action and received the Approval of the Partners to the
contemplated action. This provision is not intended to authorize the General
Partner to take any action which is left to the determination of the individual
Partner under Sections 6222 through 6232 of the Code.
7.6 Fiscal Year. The Partnership fiscal year shall be the calendar
year.
ARTICLE 8. RIGHTS, OBLIGATIONS, INDEMNIFICATION AND REMOVAL OF THE GENERAL
PARTNER
8.1 Rights of the General Partner as Manager. Subject to the
limitations imposed upon the General Partner in this Agreement (including,
without limitation, Sections 8.3, 8.4, and 12.2), to the fiduciary obligations
and limitations imposed upon it at law, and to the express provisions regarding
any of the following as may be set forth in the Contribution Agreement, the
General Partner shall have full, exclusive and complete duty and right to manage
and control, and, within its discretion, shall make all decisions and take any
necessary or appropriate action in connection with, the Partnership's business.
Without limiting the General Partner's
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power or authority under this Agreement or the Act, the General Partner may take
the following actions if, as, and when it deems any such action to be necessary,
appropriate or advisable, at the sole cost and expense of the Partnership,
subject however in all respects to the limitations imposed on the General
Partner in this Agreement (including, without limitation, Sections 8.3, 8.4 and
12.2):
(a) Borrow money from any source, including without limitation from
the General Partner, Columbia or a Columbia Affiliate and, if security
is required therefor' to mortgage or subject to any other security
device its interest in the Partnership (including its General Partner
interest) or any portion of the Partnership's property, to obtain
replacements of any mortgage or other security device, and to prepay,
in whole or in part, refinance, increase, modify, consolidate or extend
any mortgage or other security device, all of the foregoing at such
terms and in such amounts as the General Partner deems, in its sole
discretion, to be in the best interest of the Partnership;
(b) Acquire and enter into any contract of insurance which the
General Partner deems necessary and proper for the protection of the
Partnership, for the conservation of the Partnership's assets, or for
any purpose convenient or beneficial to the Partnership;
(c) Employ from time to time on behalf of the Partnership,
individuals (including employees of the General Partner, the Limited
Partners, or any of their Affiliates) on such terms and for such
compensation as the General Partner shall determine (but not in an
amount which would be considered unreasonable based upon the scope of
an individual employee's duties and responsibilities), and to enter
into agreements for the transfer of Partnership interests to such
persons as expressly permitted below;
(d) Make decisions as to accounting principles and elections,
whether for book or tax purposes (and such decisions may be different
for each purpose);
(e) Set up or modify record keeping, billing and accounts payable
accounting systems;
(f) Lease or purchase real and/or personal property in fulfillment
of the Partnership purposes and for the operation of the Hospital and
other Partnership property;
(g) Open checking and savings accounts, in banks or similar
financial institutions, in the name of the Partnership, and deposit
cash in and withdraw cash from such accounts;
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(h) Adjust, arbitrate, compromise, sue or defend, abandon, or
otherwise deal with and settle any and all claims in favor of or
against the Partnership, as the General Partner shall, in its sole
discretion, deem proper;
(i) Enter into, make, perform and carry out all types of contracts,
leases, and other agreements, and amend, extend, or modify any
contract, lease, or agreement at any time entered into by the
Partnership, provided that the General Partner uses its best efforts to
insure that all such contracts, leases, or agreements are the result of
arm's length transactions and are representative of fair market value;
(j) Execute, on behalf of and in the name of the Partnership, any
and all contracts, leases, agreements, instruments, notes,
certificates, titles or other documents of any kind or nature as deemed
necessary and desirable by the General Partner; and
(k) Do all acts necessary or desirable to carry out the business
for which the Partnership is formed or which may facilitate the General
Partner's exercise of its powers hereunder.
8.2 Right to Rely on General Partner. No person, firm or governmental
body dealing with the Partnership shall be required to inquire into, or to
obtain any other documentation as to, the authority of the General Partner to
take any action permitted under Section 8.1. Furthermore, any person or entity
dealing with the Partnership may rely upon a certificate signed by the General
Partner as to the following:
(a) The identity of the General Partner or any Limited Partner,
(b) The existence or nonexistence of any fact or facts that
constitute a condition precedent to acts by the General Partner or
which are in any other manner germane to the affairs of the
Partnership;
(c) The persons or entities who are authorized to execute and
deliver any instrument or document of the Partnership; or
(d) Any act or failure to act by the Partnership on any other
matter whatsoever involving the Partnership or any Partner.
8.3 Specific Limitations on General Partner. Notwithstanding anything
to the contrary in this Agreement or the Act, without the prior written approval
of all of the Limited Partners to the specific act in question, the General
Partner shall have no right, power or authority to do any of the following acts,
each of which is considered outside the ordinary course of Partnership business:
(a) To do any act in contravention of this Agreement;
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(b) To change or reorganize the Partnership into any other legal
form;
(c) To dissolve the Partnership at will.
8.4 Additional Limitations on the Authority of the General Partner.
Without the Approval of the Committee, the General Partner shall have no
authority to do any of the following:
(a) Cease to operate the Surgicenter in substantially the same way
as it is operated as of the date of its contribution to the Partnership
under the Contribution Agreement, including, but not limited to,
maintaining its current operating hours and days and maintaining three
operating rooms; or
(b) Substantially curtail or eliminate a material service being
offered at the Hospital; or
(c) Sell, exchange, lease, assign, or otherwise transfer more than
five percent (5%) of the assets of the Partnership (as determined from
audited financial statements of the Partnership as of the close of the
immediately preceding fiscal year of the Partnership); or
(d) Approve the annual capital budget, or approve any action which
would result in an expenditure or action causing a material variation
therefrom or not authorized therein; or
(e) Encumber more than fifty percent (50%) of the assets of the
Partnership or incur debt exceeding fifty percent (50%) of the value of
the assets (as determined from audited financial statements of the
Partnership as of the close of the immediately preceding fiscal year of
the Partnership); or
(f) Select or appoint the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer or Director of Nursing; or
(g) Materially alter existing policies concerning purchasing
services and supplies under existing Hospital contracts.
With respect to 8.4(g), the parties hereto acknowledge and agree that
Partnership may participate in Columbia's Group Purchasing Program provided it
does not participate in any competing program, and each Partner agrees that all
information with regard to pricing or any other terms of the Group Purchasing
Program will remain confidential and will not be used by such Partner or the
Partnership in any manner or divulged to any other party. The limitations in
this Section shall not be applicable to any General Partner or any Liquidator in
winding up and liquidating the business of the Partnership.
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8.5 Management Obligations of the General Partner, The General Partner
shall devote its time to the Partnership to manage and supervise the Partnership
business and affairs, but nothing in this Agreement shall preclude the General
Partner, at the expense of the Partnership, from employing any Columbia
Affiliate, or a third party if Approved by the Committee, to provide management
or other services to the Partnership, always subject, however, to the control of
the General Partner. Subject to any other provisions hereof, any transaction
between the Partnership and the General Partner, Columbia or any Columbia
Affiliate is hereby expressly authorized provided that the terms of such
transactions and generally no less favorable to the Partnership than the terms
that would be made available to the Partnership in arm's length transactions
with independent third parties. Columbia or any Columbia Affiliate shall not be
entitled to duplicate compensation (whether by direct billing to the Partnership
or through the process of reimbursement) for services which are required to be
rendered to the Partnership by the General Partner. The management obligations
of the General Partner include the following:
(a) The General Partner will provide management services in such
areas as: long-range planning, management planning, quality assurance
programs, materials management, management development, professional
recruitment, performance appraisal systems, personnel development,
facilities development and productivity improvement programs;
(b) The General Partner will provide management services in areas
such as: budget control systems, financial reporting practices,
interfaces with lenders, contractual agreements, business office
procedures, accounts receivable management, risk management programs,
financial modeling, capital planning, cost accounting analysis and
third-party reimbursement;
(c) The General Partner will provide marketing and corporate
communication management services in areas such as: competitive
environment assessments, health services marketing, management of
community and public relations, product-line analysis, new service
development, management of governmental affairs, market research and
opinion attitude surveys;
(d) The General Partner will provide management services for areas
such as: service utilization analysis, systems development, supply and
charge systems, manpower utilization and control systems, technical
clinical skills training, new product evaluation and educational
programs for clinical staff;
(e) The General Partner will provide management services for areas
such as: medical staff orientation programs, medical staff issues,
practice promotion and selection of physician private practice
workshops; and
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(f) The General Partner will encourage the exchange of written
materials between Columbia affiliated hospitals subject to
confidentiality requirements, will provide the Partnership with access
to materials such as: procedures manuals, bylaws, regulations and
rules.
8.6 Indemnification of the General Partner.
(a) Except to the extent such indemnification may be prohibited by
law, and except for acts in violation of any of the obligations of the
General Partner or Columbia under any other agreement between or among
the General Partner, Columbia, DCSF and the DCSF Affiliates or this
Agreement, the Partnership, its receiver, or its trustee shall
indemnify, hold harmless, and pay all Judgments and claims against the
General Partner relating to any liability or damage incurred or
suffered by the General Partner by reason of any act performed or
omitted to be performed (but not constituting willful misconduct or
gross negligence) by the General Partner or his agents or employees in
connection with the Partnership's business, including reasonable
attorneys' fees incurred by the General Partner in connection with the
defense of any claim or action based on any such act or omission. Such
liability or damage caused by the General Partner's acts or omissions
in connection with the business of the Partnership includes but is not
limited to any attorneys' fees incurred by the General Partner in
connection with the defense of any action based on such acts or
omissions, which attorneys' fees may be paid as incurred.
(b) Subject to the exceptions upon indemnification set forth m
Section 8.6(a), in the event any Limited Partner shall bring a legal
action against the General Partner, including a Partnership derivative
suit, the Partnership shall indemnify, hold harmless, and pay all
expenses of the General Partner, including but not limited to
attorneys' fees incurred in the defense of such action, unless the
General Partner shall be adjudicated guilty of gross negligence or
willful misconduct in connection with the performance of its duties as
General Partner to the Partnership. For purposes of this Section 8.6,
the terms "willful misconduct" or "gross negligence" shall include (but
not be limited to) acts of fraud.
(c) The Partnership shall indemnify, hold harmless, and pay all
expenses, costs or liabilities of the General Partner which (or who)
for the benefit of the Partnership makes any deposit, acquires any
option, makes any payment, or assumes any obligation in connection with
any property proposed to be acquired by the Partnership and which (or
who) suffers any financial loss as a result of such action.
(d) Any indemnification required herein to be made by the
Partnership shall be made promptly following the fixing of any loss,
liability,
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or damage incurred or suffered. If, at any time, the Partnership has
insufficient funds to provide such indemnification as herein provided,
it shall provide such indemnification if and as the Partnership
generates sufficient funds, and prior to any distribution to the
Partners.
Notwithstanding the foregoing provisions of this Section, the General
Partner shall not be indemnified by the Partnership from any liability for
actions or omissions that constitute willful misconduct or gross negligence or
for actions or omissions that constitute violations of state or federal
securities laws (other than as are caused by actions of any Partner other than
the General Partner or as are caused by or related to information supplied by
any Partner other than the General Partner or statements or representations made
by the General Partner in reliance on any warranty or representation of any
other Partner or affiliate thereof).
8.7 Reimbursement. The General Partner shall be entitled to be
reimbursed for any and all reasonable costs and expenses incurred by it in
connection with managing and operating the Partnership and its properties and
business (including, but not limited to, the salaries and benefits of employees
working at the Hospital, but other than for services which it is to provide in
return for its 2% of Net Revenues from Health Care Services compensation, as set
forth in Sections 8.5 and 8.8), subject to the limitations in Section 8.5 and
elsewhere herein.
8.8 Compensation of the General Partner. As compensation and
consideration for the performance of its duties and responsibilities as General
Partner, the General Partner shall be entitled to receive a monthly management
fee of 2% of the Partnership's Net Revenues from Health Care Services for the
preceeding month. Such management fee will be paid on or before the twentieth
(20th) day of each month after the month the Partnership starts to conduct
business operations. The General Partner shall provide DCSF and each member of
the Board of Advisors with complete information regarding the calculation of
such fee at the time said fee is paid; and shall make available to the WPRH
Members and DCSF Members all supporting information relevant thereto. Subject to
the provisions of Section 8.5 and any other express provisions herein, the
General Partner may (at General Partner's sole expense) contract with Columbia
or any Columbia Affiliate for assistance to it in rendering management services
to the Partnership; and may contract wit-in third parties for the same if
Approved by the Committee.
8.9 Removal. Upon the written approval of the Nonaffiliated Limited
Partners having a minimum of 90% of the Partner's Sharing Percentages in the
Partnership held by Nonaffiliated Limited Partners, the General Partner may be
removed from the Partnership for willful misconduct or gross negligence in the
performance of its duties hereunder. Removal of the General Partner shall be
effective thirty (30) days following receipt by the General Partner of a written
notice executed by the requisite Nonaffiliated Limited Partners, as provided in
the preceding sentence, referencing its removal and stating the grounds
therefor. If the
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General Partner is removed as provided herein, all Units in the Partnership held
by the General Partner shall automatically be converted to equivalent Units to
be held by the General Partner as a Class D Limited Partner. If the General
Partner is removed from the Partnership and the Partnership is not
reconstituted, but rather is liquidated in accordance with this Agreement, then
the General Partner shall be entitled to receive from the Partnership only the
liquidation distributions to which it is entitled pursuant to this Agreement.
Nothing in this Section shall affect any interest in the Partnership the General
Partner may own in its capacity as a Limited Partner.
Nothing in the preceding paragraph shall preclude any Partner (whether
or not such Partner participates in a vote to remove the General Partner, and
irrespective of the outcome of any such vote) from seeking such removal in
connection with any proper judicial proceeding. In addition, the removal of a
General Partner shall not preclude, in a proper case, any action by a Partner or
the Partnership to recover money damages from the General Partner, whether or
not based upon the same grounds relied upon for the removal of the General
Partner.
8.10 Compliance with Law. The General Partner shall at all times use
its good faith best efforts to cause the Partnership to comply with all
statutes, laws, ordinances and government rules and regulations to which it is
subject, including, without limitation, the Medicare and Medicaid Anti-Fraud and
Abuse or Anti-Kickback Amendments to the Social Security Act (presently codified
in Section 1128B(b) of the Social Security Act), the federal "anti-dumping" law,
the various items of legislation known as the "Stark Bill," and Kansas laws
corresponding in structure to the foregoing federal laws. The General Partner
shall institute a formal compliance program to ensure compliance with the
foregoing laws.
ARTICLE 9. RIGHTS AND STATUS OF LIMITED PARTNERS
9.1 General. The Limited Partners have the rights and the status of
limited partners under the Act. The Limited Partners shall not take part in the
management or control of the Partnership business, or sign for or bind the
Partnership, such powers being vested exclusively in the General Partner.
9.2 Limitation of Liability. No Limited Partner shall have any personal
liability whatever, solely by reason of his status as a Limited Partner of the
Partnership, whether to the Partnership, the General Partner or any creditor of
the Partnership, for the debts of the Partnership or any of its losses beyond
the amount of the Limited Partner's obligation to contribute his Capital
Contribution to the Partnership.
9.3 Bankruptcy; Death; Etc. Neither the Bankruptcy, death, disability
nor declaration of incompetence or incapacity of a Limited Partner shall
dissolve the Partnership, but the rights of a Limited Partner to share in the
Profits and Losses
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of the Partnership and to receive distributions of Partnership funds shall, on
the happening of such an event, devolve upon the Limited Partner's estate, legal
representative or successor in interest, as the case may be, subject to this
Agreement, and the Partnership shall continue as a limited partnership under the
Act. The Limited Partner's estate, representative or successor in interest shall
be entitled to receive distributions and allocations with respect to such
Limited Partner's interest in the Partnership and shall be liable for all of the
obligations of the Limited Partner. Furthermore, the Limited Partner's estate,
representative or successor in interest shall have no right to any information
or accounting of the affairs of the Partnership, shall not be entitled to
inspect the books or records of the Partnership, and shall not be entitled to
any of the rights of a general partner or limited partner under the Act or this
Agreement unless such estate, representative or successor in interest is
admitted to the Partnership as a Substituted Limited Partner.
ARTICLE 10. SPECIAL COVENANTS OF THE PARTNERS
10.1 Covenant Not to Compete. Except as otherwise provided in this
Section 10.1, each Class A and Class C Limited Partner agrees that while he is a
Limited Partner and for two (2) years thereafter neither be nor any of his
Affiliates shall, directly or indirectly, hold an ownership interest in an acute
care hospital, specialty hospital, comprehensive rehabilitation facility,
rehabilitation agency, diagnostic imaging center, inpatient or outpatient
psychiatric or substance abuse facility, or ambulatory or other type of surgery
center that is located within a forty (40) mile radius of the hospital
("Competing Business") without the prior written consent of the General Partner.
Each Class A and Class C Limited Partner expressly agrees that neither he nor
any of his Affiliates shall violate the teens of this Section 10.1 while such
Limited Partner is a limited partner of the Partnership and for a period of two
(2) years thereafter. Notwithstanding anything to the contrary in this Section
10.1, no Class A or Class C Limited Partner will be in violation of this Section
10.1 if such Limited Partner or any Affiliate of such Limited Partner held an
ownership interest in a Competing Business, and each such Limited Partner who
holds or whose Affiliate holds such an interest shall have given. written notice
thereof to the General Partner on or before the earlier of (i) delivery of his
or her subscription agreement for the first Class A or Class C Unit acquired or
(ii) the acquisition of the first said Unit. Nothing in this Section 10.1 is
intended to prevent such a Limited Partner from being a member of the medical
staff of, or referring patients to, any other hospital.
Notwithstanding anything else contained in this Section 10.1, Columbia
and the Columbia Affiliates are prohibited from acquiring, directly or
indirectly, an interest in any Competing Business located within a forty (40)
mile radius of the Hospital, other than through the Partnership, unless
Nonaffiliated Limited Partners owning a majority of the aggregate Partner's
Sharing Percentage of the Nonaffiliated Limited Partners fail to approve a
proposal by the General Partner for
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the Partnership to acquire such interest on the same basis, at a meeting called
to vote on such issue in accordance with Article 11 hereof, or unless such
meeting is not held within thirty (30) days after the date upon which the
Limited Partners are given notice of such proposal.
10.2 Limitation. In the event of an actual or threatened breach by any
of the Class A or Class C Limited Partner or the General Partner of Section
10.1, any party to this Agreement shall be entitled to an injunction in any
appropriate court in Kansas, or elsewhere, restraining the actual or threatened
breach by such Partner. If a court shall hold that the duration and/or scope
(geographic or otherwise) of the covenant contained in Section 10.1 is
unreasonable, then, to the extent permitted by law, the court may prescribe a
duration and/or scope (geographic or otherwise) that is reasonable and
judicially enforceable. The parties agree to accept such determination, subject
to their rights of appeal, which the parties hereto agree shall be substituted
in place of any and every offensive part of this Agreement, and as so modified,
the Agreement shall be as fully enforceable as if set forth herein by the
parties in the modified form. Nothing herein stated shall be construed as
prohibiting any party hereto from pursuing any other remedies available for such
breach or threatened breach, including the recovery of damages.
10.3 Capital Improvements. The General Partner agrees, and the Partners
contemplate, that the Partnership will (subject to the identification of proper
projects) expend up to the amount of One Million Dollars ($1,000,000) per annum
for capital expenditures during the first five (5) years of this Agreement.
These expenditures will be discussed and approved by the Board of Advisors, as
contemplated in Section 8.4 above in connection with the annual establishment of
a capital budget.
ARTICLE 11. MEETINGS AND MEANS OF VOTING
11.1 Meetings of the Partners. Meetings of the Partners may be called
by the General Partner and shall be promptly called upon the written request of
any one or more Limited Partners who own in the aggregate 10% or more of the
aggregate Partner's Sharing Percentage in the Partnership. The notice of a
meeting shall state the nature of the business to be transacted at such meeting,
and actions taken at any such meeting shall be limited to those matters
specified in the notice of the meeting. Notice of any meeting shall be given to
all Partners not less than three (3) and not more than thirty (30) days prior to
the date of the meeting. Partners may vote in person or by proxy at such
meeting.
Except as otherwise expressly provided in this Agreement or required by
the express provisions of the Act (without regard to future amendment), the
requisite vote of the Partners shall be the Approval of the Partners which shall
control all decisions for which the vote of the Partners is required hereunder.
Each Partner's voting rights shall be the same as that Partner's Sharing
Percentage at the time of
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the vote. The presence of any Partner at a meeting shall constitute a waiver of
notice of the meeting with respect to such Partner. The Partners may, at their
election, participate in any regular or special meeting by means of conference
telephone or similar communications equipment by means of which all Persons
participating in the meeting can hear each other. A Partner's participation in a
meeting pursuant to the preceding sentence shall constitute presence in person
at such meeting for all purposes of this Agreement.
11.2 Vote By Proxy. Each Limited Partner may authorize any person or
entity to act on the Partner's behalf by proxy on all matters in which a Limited
Partner is entitled to participate, whether by waiving notice of any meeting, or
voting or participating at a meeting. Every proxy must be signed by the Limited
Partner authorizing such proxy or such Limited Partner's attorney-in-fact. No
proxy shall be valid after the expiration of eleven (11) months after the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Limited Partner-executing it.
11.3 Conduct of Meeting. Each meeting of Partners shall be conducted by
the General Partner or by a person or entity appointed by the General Partner.
The meeting shall be conducted pursuant to such rules as may be adopted by the
General Partner or the person or entity appointed by the General Partner for the
conduct of the meeting.
11.4 Action Without a Meeting. Notwithstanding anything to the contrary
in this Agreement, any action that may be taken at a meeting of the Partners may
be taken without a meeting if a consent in writing setting forth the action so
taken is Approved by the Partners. In the event any action is taken pursuant to
this Section, it shall not be necessary to comply with any notice or timing
requirements set forth in this Article. Prompt written notice of the taking of
action without a meeting shall be given to the Partners who have not consented
in writing to such action.
11.5 Closing of Transfer Record; Record Date. For the purpose of
determining the Partners entitled to notice of or to vote at any meeting of
Partners, any reconvening thereof, or by consent, the General Partner may
provide that the transfer record shall be closed for at least ten (10) days
immediately preceding such meeting (or such shorter time as may be reasonable in
light of the period of the notice) or the first solicitation of consents in
writing. If the transfer record is not closed and if no record date is fixed for
determining the Partners entitled to notice of or to vote at a meeting of
Partners or by consent, the date on which the notice of the meeting is mailed or
the first written consent is received by the General Partner shall be the record
date for such determination.
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ARTICLE 12. BOARD OF ADVISORS; GRIEVANCE PROCEDURE
12.1 Board of Advisors. Effective for all purposes on the date of this
Agreement, the General Partner and DCSF shall form a management committee for
the Partnership (the "Board of Advisors") by appointing thereto five WPRH
Members and five DCSF Members, as applicable. The Board of Advisors shall be
created and operate to consider those matters pertaining to the business of the
Partnership for which Approval of the Committee is required.
12.2 Authority of the Board of Advisors. In addition to considering
those matters pertaining to the business of the Partnership for which Approval
of the Committee is required, the Board of Advisors shall review, advise and
make recommendations with respect to the following matters related to operating
and managing the Hospital:
(a) Operating and managing the Hospital in accordance with
accreditation guidelines of JCAHO:
(b) Establishing new services and program to be offered by the
Hospital;
(c) Establishing budgets for the Hospital;
(d) Establishing strategic plans for the Hospital;
(e) Establish quality of care standards the Hospital;
(f) Reviewing operating results, both revenues and expenses;
(g) Establishing contracts and other arrangements with Physicians,
and
(h) Reviewing at each meeting the calculation of the General
Partner's compensation under Section 8.8 hereof.
In order that the Board of Advisor's duties may be properly carried out
hereunder, the General Partner shall notify all members of the Board of Advisors
of all information relevant to the forgoing (and provide each member to whatever
other information the member shall reasonably request to inform himself or
herself about the same), and shall afford the Board of Advisors sufficient time
and opportunity to review, advise and make recommendations with respect to the
same.
12.3 Manner of Exercise of Board of Advisors' Authority. All
responsibilities granted to the Board of Advisors under this Agreement shall be
exercised by the Board of Advisors as a body, and no member of the Board of
Advisors, acting alone, shall have the authority to act on behalf of the Board
of Advisors.
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12.4 Meetings of the Board of Advisors. The Board of Advisors shall
hold regular meetings on at least a quarterly basis. In addition, each member of
the Board of Advisors shall be available at all reasonable times to consult with
other members of the Board of Advisors on matters relating to the duties of the
Board of Advisors. Meetings of the Board of Advisors shall be held at the call
of the General Partner, the Chairman of the Board of Advisors, or the WPRH
Members or DCSF Members requesting such meeting through such Chairman, upon not
less than five (5) business days written or telephonic notice to the members of
the Board of Advisors, such notice specifying all matters to come before the
Board of Advisors for action at such meeting. The presence of any member of the
Board of Advisors at a meeting shall constitute a waiver of notice of the
meeting with respect to such member. The members of the Board of Advisors may,
at their election, participate in any regular or special meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. A member's
participation in a meeting pursuant to the preceding sentence shall constitute
presence in person at such meeting for all purposes of this Agreement. Proxy
votes shall be permitted as established in accordance for proxies at meetings of
the Partners.
12.5 Grievance Procedure. If one (or more) Limited Partners owning in
the aggregate 50 or more Units has a grievance against the Partnership or the
operation of the Hospital, said Partner(s) shall set forth the grievance in full
in writing and submit it to the General Partner with a formal statement that the
provisions of this Section 12.5 are being invoked. If the matter is not resolved
to the satisfaction of the complaining Partner(s) within 20 days, either the
General Partner or the complaining Partner(s) shall have the right and privilege
to send a copy of the grievance to the Division President of Columbia for the
Kansas City Division (or to any person having responsibilities similar to that
office as conducted as of the date this Agreement is signed). The Division
President shall meet personally with representatives of the General Partner and
with the complaining Partner(s), in Dodge City, Kansas, in an effort to mediate
and resolve the grievance. If those efforts fail to reach a satisfactory
solution within 30 days after the matter is referred to the Division President
of Columbia for said Division, then either the General Partner or the
complaining Partner(s) shall have the right and privilege to send a copy of the
grievance to the Group President of Columbia for the Central Group (or to any
person having responsibilities similar to that office as conducted as of the
date this Agreement is signed). The Group President shall meet personally with
representatives of the General Partner and with the complaining Partner(s), in
Dodge City, Kansas, in an effort to mediate and resolve the grievance. If those
efforts fail to reach a satisfactory solution within 30 days after the matter is
referred to the Group President of Columbia for said Group, then either the
General Partner or the complaining Partner(s) shall be entitled to transfer the
grievance to the Chief Operating Officer of Columbia, who shall meet with
representatives of the General Partner and with the complaining Partner(s) in an
effort to mediate a resolution of the grievance. General Partner shall utilize
its best efforts to secure
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the cooperation of the Columbia personnel designated above; it being
acknowledged and agreed that Columbia, as part of the negotiation of this
Agreement, represented that its personnel would be available and willing to
undertake the foregoing. Nothing herein shall preclude any party from pursuing
such other remedies at it may have, regardless of whether and either before or
after this grievance procedure is pursued.
ARTICLE 13. TRANSFER OF RIGHTS AND ADDITIONAL LIMITED PARTNERS
13.1 Transfers By Limited Partners; General Provisions. A Limited
Partner may sell, assign, transfer, pledge or hypothecate all or any part of
his, her, or its Units in the Partnership only in strict accordance with the
provisions of this Section, Section 14, and the other provisions of this
Agreement, and then (unless otherwise expressly provided herein) only with the
prior consent of the General Partner. The General Partner in its sole discretion
may withhold its consent to any transfer for which such consent is required with
or without reasonable cause. Except for transfers to DCSF under Section 13.4(c),
a Limited Partner, with the prior consent of the General Partner, may only sell
his interest in the Partnership if the following conditions are satisfied:
(a) The sale, transfer or assignment is with respect to one or
more Units, and is
(i) In the case of Class A Units, to another Qualified
Purchaser or the Partnership, or
(ii) In the case of Class B Units, to DCSF or a DCSF
Affiliate, to the General Partner, WPRH, a transferee Approved by
the Committee, or as otherwise expressly set forth herein,
(iii) In the case of Class C Units, to a Qualified Class C
Limited Partner, Columbia, Columbia Affiliate, General Partner,
WPRH, or a transferee Approved by the Committee,
(iv) In the case of Class D Units, to the General Partner,
WPRH, Columbia, any Columbia Affiliate, or a transferee Approved
by the Committee (or, if applicable under Section 14.1(d) below,
approved the Nonaffiliated Limited Partners as defined and applied
in said Section);
(b) The sale, transfer or assignment, when aggregated with any
prior sales, transfers or assignments of Partnership interests, does
not result in a sale or exchange within a twelve (12) month period of
50% or more of the total interests in the Partnership's capital and
profits within the meaning of Code Section 708(b);
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(c) The Limited Partner and his transferee execute, acknowledge and
deliver to the General Partner such instruments of transfer and
assignment with respect to such transaction as are in form and
substance satisfactory to the General Partner;
(d) Unless waived in writing by the General Partner, the Limited
Partner delivers to the General Partner an opinion of counsel
satisfactory to the General Partner, covering such securities and tax
laws and other aspects of the proposed transfer as the General Partner
may reasonably request;
(e) The Limited Partner has furnished to the transferee a written
statement showing the name and taxpayer identification number of the
Partnership in such form and together with such other information as
may be required under Section 6050K of the Code and the Regulations
thereunder; and
(f) The Limited Partner pays the Partnership a transfer fee that is
sufficient to pay all reasonable expenses of the Partnership in
connection with such transaction.
Any Limited Partner who thereafter sells, assigns or otherwise
transfers all or any portion of his interest in the Partnership shall promptly
notify the General Partner of such transfer and shall furnish to the General
Partner the name and address of the transferee and such other information as may
be required under Section 6050K of the Code and the Regulations thereunder.
Notwithstanding the foregoing o, any other provisions hereof, DCSF
shall be entitled without the consent of the General Partner:
(i) To pledge, encumber, or otherwise give as collateral for loans
or other indebtedness the proceeds of which are used in connection with
the redemption of any DCSF shareholder, all or any of its Class B Units
or any other Units held by it, and the pledgee or other holder of any
such pledge, encumbrance, or security interest may exercise its rights
with respect thereto, including without limitation, its rights to
foreclose, transfer, convey, sell or assign such partnership interest
or Units, without the consent of, or notice to, any other Partner; and
(ii) Transfer all of its Class B Units or other Units held by it to
one DCSF Affiliate (if said DCSF Affiliate agrees to be bound by the
provisions hereof).
13.2 Substituted Limited Partner. No Person taking or acquiring, by
whatever means, the interest of any Limited Partner in the Partnership shall be
admitted as a Substituted Limited Partner without the consent of the General
Partner (which consent may be unreasonably withheld) and unless such Person:
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(a) Elects to become a Substituted Limited Partner by delivering
notice of such election to the Partnership;
(b) Executes, acknowledges and delivers to the Partnership such
other instruments as the General Partner may deem necessary or
advisable to effect the admission of such person as a Substituted
Limited Partner, including, without limitation, the written acceptance
and adoption by such person of the provisions of this Agreement; and
(c) Pays a transfer fee to the Partnership in an amount sufficient
to cover all reasonable expenses connected with the admission of such
person or entity as a Substituted Limited Partner.
13.3 Bans Adjustment. Upon the transfer of all or part of an interest
in the Partnership, at the request of the transferee of the interest the General
Partner may, in its sole discretion, cause the Partnership to elect, pursuant to
Section 754 of the Code or the corresponding provisions of subsequent law, to
adjust the basis of the Partnership properties as provided by Sections 734 and
743 of the Code.
13.4 Transfer by General Partner.
(a) The Limited Partners have entered into this Agreement, in
part, based upon the identity of the General Partner. Therefore, except
as expressly provided in this Section, the General Partner, in its
capacity as General Partner, may not withdraw from the Partnership or
sell, assign, hypothecate or otherwise transfer, voluntarily or by
operation of law, all or any part of its GP Units to any person or
entity. In all events, and regardless of whether any transfer of GP
Units has occurred, the General Partner shall at all times remain a
Columbia Affiliate (except as set forth in Section 13.4(c) immediately
below).
(b) The General Partner or any Columbia Affiliate holding any GP
Units may, if all other provisions of this Agreement are satisfied, do
the following without the consent of any Partner if, but only if, the
General Partner shall at all times remain a Columbia Affiliate and
retain operational control of the Partnership:
(i) Pledge, encumber, or otherwise give as collateral for
loans or other indebtedness, all or any of its GP Units or any
other Units held by it, and the pledgee or other holder of any
such pledge, encumbrance, or security interest may exercise its
rights with respect thereto, including without limitation, its
rights to foreclose, transfer, convey, sell or assign such general
partnership interest or Units, without the consent of, or notice
to, any other Partner (provided, however, that any such
foreclosure or shift in operational control shall render the
General Partner before such foreclosure liable for damages
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for the breach of the covenant made in this Section that the
General Partner having operational control shall at all times
remain a Columbia Affiliate); and
(ii) Transfer all of its GP Units or other Units held by it
to one Columbia Affiliate (if said Columbia Affiliate agrees
to be bound by the provisions hereof, and Western Plains
Regional Hospital, Inc. remains liable as a guarantor for the
faithful performance of this Agreement by said Columbia
Affiliate).
(c) If General Partner, Columbia, and/or any Columbia Affiliate(s)
holding Units (collectively, the "Selling Partners") receive or obtain
an offer from a party which is not Columbia or a Columbia Affiliate to
acquire in any manner any of their GP Units, then said offer may be
accepted if, but only if, all 10 GP Units, all 100 Class C Units, and
all S20 Class D Units are to be sold as part of the offer, and said
Units ("Single Package Units") are first offered to DCSF in accordance
with the following procedure: The Selling Partners shall promptly
notify DCSF in writing of the offer received, including the name of the
offeror, the proposed purchase price and the other terms and conditions
of the offer. DCSF shall have the option for a period of sixty (60)
days from the day it receives notice of such offer to agree to purchase
the Single Package Units on the same terms and conditions contained in
the offer. DCSF may exercise its option by notifying the General
Partner prior to the end of the sixty (60) day period of its agreement
to exercise the option. If DCSF fails to or indicates in writing that
it will not exercise the option within the period provided, or if DCSF
exercises the option but fails to effect the purchase within the later
of the period prescribed in such offer or a reasonable time, the
Selling Partners may convey or dispose of the Single Package Units but
only at the price, terms and conditions, and to the party specified in
the offer notice to DCSF. If terms and conditions more favorable to the
proposed purchaser than, or in any material manner different from,
those offered to the Selling Partners should be agreed to by the
Selling Partners and such third party purchaser, DCSF shall again have
the option to purchase Single Package Units upon and subject to the
more favorable or different purchase terms in accordance with this
section.
13.5 Restriction of Transfer By General Partner. Except for transfers
otherwise permitted pursuant to Section 13.4(c) hereof, the General Partner may
not transfer any Units in the Partnership in a manner which would result in the
termination of the Partnership for federal income tax purposes or constitute an
event of default (or an event which, upon notice or the passage of time, or
both, would constitute a default) under any agreement or instrument by which the
Partnership borrowed money or by which its assets are encumbered, and any such
attempted transfer shall be null and void.
13.6 Admission of Class A Limited Partners. The General Partner is
authorized to issue the authorized but unissued Class A Units to persons who are
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Qualified Purchasers and to admit them to the Partnership as Additional Limited
Partners, which in all instances shall comply with applicable securities laws.
Except as provided in this Section, the General Partner shall have complete
discretion in determining the consideration to be paid therefor, which must be
based on fair market value (which must be fully paid in cash or property at the
time of subscription) and the terms and conditions with respect to the
Partnership for admitting Additional Limited Partners; provided, however, that
for the one-year period following the Initial Closing, the General Partner may
not sell Class A Units for less than $15,000 per Unit. The General Partner will
not permit any person or entity to become an Additional Limited Partner unless
such person or entity certifies in writing to the General Partner that the
person is a Qualified Purchaser and agrees to be bound by the terms of this
Agreement. The General Partner shall do all things necessary to comply with the
Act and is authorized to do all things it deems to be necessary or advisable in
connection with the Partnership for admitting any Additional Limited Partner,
including, but not limited to, complying with any statute, rule, regulation or
guideline issued by any federal, state or other governmental agency.
13.7 Transfer Procedures. The General Partner shall establish a
transfer procedure consistent with this Article 13 to ensure that all conditions
precedent to the admission of a Substituted Limited Partner or Additional
Limited Partner have been complied with, and shall execute a certificate that
such covenant has been complied with and shall, upon the written request of any
Limited Partner, deliver to such Limited Partner a copy thereof.
13.8 Invalid Transfer. No transfer of an interest in the Partnership
that is in violation of Article 13 shall be valid or effective, and the
Partnership shall not recognize any improper transfer for the purposes of making
allocations, payments of profits, return of capital contributions or other
distributions with respect to such Partnership interest, or part thereof. The
Partnership may enforce the provisions of this Article ? either directly or
indirectly or through its agents by entering an appropriate stop transfer order
on its books or otherwise refusing to register or transfer or permit the
registration or transfer on its books of any proposed transfers not in
accordance with Article 13.
13.9 Distributions and Allocations in Respect of a Transferred
Ownership Interest. If any Partner sells, assigns or transfers any part of his
interest in the Partnership during any accounting period in compliance with the
provisions of this Article 13, Partnership income, gain, deductions and losses
attributable to such interest for the respective period shall be divided and
allocated between the transferor and the transferee by taking into account their
varying interests during the applicable accounting period in accordance with
Code Section 706(d), using the daily proration method. All Partnership
distributions on or before the effective date of such transfer shall be made to
the transferor, and all such Partnership distributions thereafter shall be made
to the transferee. Solely for purposes of
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making Partnership tax allocations and distributions, the Partnership shall
recognize a transfer on the day following the day of transfer. Neither the
Partnership nor the General Partner shall incur any liability for making
Partnership allocations and distributions in accordance with the provisions of
this Section, whether or not the General Partner or the Partnership has
knowledge of any transfer of any interest in the Partnership or part thereof
where the transferee is not admitted as a Substituted Limited Partner.
13.10 Additional Requirements of Admission to Partnership. The General
Partner shall not admit any Person as a Limited Partner if such admission would
have the effect of causing the Partnership to be re-classified for federal
income tax purposes as an association (taxable as a corporation under the Code),
or which would violate any Medicare or other health care law, rule or
regulation, or which would violate applicable exemptions from securities
registration and securities disclosure provisions under federal and state
securities laws.
13.11 Amendment to Exhibit "A". The General Partner shall amend Exhibit
"A" attached to this Agreement from time to time to reflect the admission of any
successor General Partner, Substituted Limited Partners or Additional Limited
Partners, or the termination of any Partner's interest in the Partnership.
ARTICLE 14. PARTNERSHIP'S RIGHT TO LIQUIDATE PARTNERSHIP INTERESTS
14.1 Right of First Refusal.
(a) Class A Units. If any Class A Limited Partner receives or
obtains an offer from a third-party (who must be a Qualified Purchaser)
to acquire in any manner all or any part of his Class A Units in the
Partnership, which offer the Class A Limited Partner intends to accept,
the Class A Limited Partner shall promptly notify the General Partner
in writing of the offer received, including the name of the offeror,
the number of whole or partial Units offered to be purchased, the
proposed purchase price and the other terms and conditions of the
offer. The Partnership shall have the option for a period of thirty
(30) days from the day it receives notice of such offer to liquidate
such Class A Limited Partner's
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interest in the Partnership on the same terms and conditions contained
in the offer. The Partnership may exercise its option by notifying the
Class A Limited Partner prior to the end of the thirty (30) day period
of its intent to exercise the option. If the Partnership fails to or
indicates in writing that it will not exercise the option within the
period provided, or if the Partnership exercises the option but fails
to effect the liquidation within a reasonable time thereafter, the
Class A Limited Partner, in accordance with and subject to the
provisions of Article 13 (including, without limitation, the General
Partner's right to approve such transfer), may convey or dispose of the
part of the Class A Limited Partner's interest in the Partnership that
was the subject of the offer but only at the price, terms and
conditions, and to the party specified in the notice to the
Partnership. If terms and conditions more favorable to the proposed
purchaser than, or in any material manner different from, those offered
to the Partnership should be agreed to by the Class A Limited Partner
and such third party purchaser, the Partnership shall again have the
option to liquidate the Class A Limited Partner's interest in the
Partnership which is subject to the more favorable or different
purchase terms in accordance with this Section. Neither the General
Partner nor the Partnership shall be liable or accountable to any Class
A Limited Partner who attempts to transfer his interest in the
Partnership for any loss, damage, expense, cost, or liability resulting
from the Partnership's exercise or failure to exercise the purchase
option under this Section, delay in notifying the Class A Limited
Partner of the Partnership's intention not to exercise the purchase
option, or its enforcement of the requirements of this Section in the
event that it elects not to exercise the purchase option. The
Partnership's failure to exercise the purchase option or to indicate in
writing that it is electing not to exercise the option shall not be
deemed a consent of the General Partner to allow any third party
transferee to become a Substituted Class A Limited Partner, such
consent being controlled by the provisions of Article 13.
(b) Class B Units. Class B Units may only be held by DCSF or DCSF
Affiliates, the General Partner, WPRH, as Approved by the Committee, or
as otherwise expressly permitted in Section 13.1(a)(ii); provided,
however, that if at any time Class B Units are to be transferred upon
the Approval of the Committee other than to DCSF, DCSF Affiliates, or
the General Partner, the right of first refusal set forth in Section
14.1(a) above shall apply the same as if it referred to Class B Units
rather than Class A Units.
(c) Class C Units. Except for transfers to DCSF under Section
13.4(c), Class C Units may only be held by Qualified Class C Limited
Partners, Columbia, Columbia Affiliates, or as Approved by the
Committee; provided, however, that if at any time Class C Units are to
be transferred (other than pursuant to Section 13.4(c)) with the
Approval of the Committee other than to a Qualified Purchaser,
Columbia, or a Columbia Affiliate, the right of first refusal set forth
in Section 14.1(a) above shall apply the same as if it referred to
Class C Units rather than Class A Units (and the decision of whether or
not the Partnership shall exercise said right of first refusal shall be
made by a majority vote of the Nonaffiliated Limited Partners).
(d) Class D Units. Except for transfers to DCSF under Section
13.4(c), Class D Units may only be held by the General Partner, WPRH,
Columbia, or any Columbia Affiliate, or as Approved by the Committee;
provided, however, that if at any time Class D Units are to be
transferred
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(other than pursuant to Section 13.4(c)) with the Approval of the
Committee other than to a Columbia or a Columbia Affiliate, the right
of first refusal set forth in Section 14. l(a) above shall apply the
same as if it referred to Class D Units rather than Class A Units (and
the decision of whether or not the Partnership shall exercise said
right of first refusal shall be made by a majority vote of the
Nonaffiliated Limited Partners).
14.2 Occurrence of Terminating Event or Adverse Terminating Event.
(a) In the event a Terminating Event shall occur with respect to
any Class A Limited Partner as set forth in Section 1.48, such Partner,
or the Partner's successor or other legal representative, shall give
written notice thereof to the Partnership within thirty (30) days of
the occurrence of such event. Upon the receipt of such notice, the
Partnership shall have the right, but not the obligation, for the
ensuing sixty (60) days to elect to liquidate such Partner's interest
in the Partnership. If the Partnership has not received written notice
of a Terminating Event with respect to any Class A Limited Partner as
required under this Section 14.2(a), the Partnership will have the
right to elect to liquidate such Partner's interest in the Partnership
for sixty (60) days after the Partnership has actual knowledge of the
occurrence of any such event and gives written notice thereof to the
Class A Limited Partner. Notwithstanding anything to the contrary in
this Agreement, the failure of a Class A Limited Partner to notify the
Partnership of the occurrence of a Terminating Event as required under
this Section shall not constitute the occurrence of an Adverse
Terminating Event.
(b) In the event the General Partner determines that an Adverse
Terminating Event has occurred with respect to any Class A Limited
Partner, the Partnership shall give written notice thereof to such
Partner and, for a period of sixty (60) days from the date of such
notice, the Partnership shall have the right, but not the obligation,
to elect to liquidate such Partner's interest in the Partnership.
(c) In the event the Partnership does not elect to exercise its
right to liquidate such Partner's interest in the Partnership pursuant
to subsections (a) or (b) above, then the Class B Limited Partner(s)
shall have the right to purchase such Partner's interest, pursuant to
the terms provided in Section 14.3 hereof.
14.3 Payment for Partnership Interest.
(a) If any Class A Limited Partner's interest in the Partnership
is liquidated because of the occurrence of a Terminating Event prior to
the third anniversary of the date of this Agreement, the amount the
Partnership will pay for each Unit owned by such Partner shall be equal
to the greater of (i)
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the "Fair Market Value" of each of his Units, as determined in
accordance with Section 14.3(c); or (ii) the amount the Partner paid to
acquire his Units less any distributions to such Partner pursuant to
Section 6.1 hereof; and if any Class A Limited Partner's interest in
the Partnership is liquidated because of the occurrence of a
Terminating Event on or after the third anniversary of the date of this
Agreement, the amount the Partnership will pay for each Unit owned by
such Partner shall be equal to the "Fair Market Value" of each of his
units as determined in accordance with Section 14.3(c).
(b) If the Partnership liquidates any Class A Limited Partner's
interest in the Partnership as a result of an Adverse Terminating
Event, the amount to be paid by the Partnership to such Partner shall
be equal to the lesser of (i) the Fair Market Value of such Partner's
interest, as determined in accordance with Section 14.3(c); or (ii) the
amount paid by the Class A Limited Partner to acquire his Units less
any distributions to such Partner pursuant to Section 6.1 hereof.
(c) If the Partnership liquidates any Class A Limited Partner's
interest in the Partnership as provided in this Section, the Fair
Market Value of each Unit owned by such Class A Limited Partner shall
be equal to four (4) times the average annual Net Cash from Operations
distributed with respect to a Unit during the three (3) years
immediately preceding the date a Terminating Event (or Adverse
Terminating Event, as the case may be) has occurred with respect to
such Partner (or if the Partnership teas been in existence for less
than three (3) years, an annual average for the period of time the
Partnership has been in existence). For purposes of this Section
14.3(c), the term "Net Cash From Operations" means the gross cash
revenues received from Partnership operations less amounts used to pay
or establish reserves for all Partnership expenses, debt payments
(principal and interest), capital improvements, capital replacements
and contingencies, all as determined by the General Partner. Net Cash
From Operations shall not be reduced by depreciation, amortization,
cost recovery deductions or similar allowances, but shall be increased
by any reductions of reserves previously established.
(d) If the Partnership liquidates any Class A Limited Partner's
interest in the Partnership as provided in this Section, the
Partnership shall pay any such amounts owed therefor to such Partner or
its successor in a lump sum or, at the discretion of the General
Partner, in up to sixty (60) equal monthly payments with interest at
the "prime" or base rate as established from time to time by Chemical
Bank on the unpaid principal balance. If the General Partner exercises
its discretion to pay for a liquidated Partnership interest in monthly
installments, the first such installment will be paid to the Partner or
his successor in interest on the first day of the month after thirty
(30) days have expired since the Partner's interest in the
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Partnership has been terminated. Each subsequent installment shall be
paid on the first day of each successive month until the full amount
owed to the Partner or its successor in interest has been paid. The
Partnership's obligation to pay the Partner in monthly installments
under this Section will be evidenced by a nonrecourse promissory note
executed by the General Partner on behalf of the Partnership.
14.4 Subsequent Legislation. If the Class A Limited Partners are
prohibited from owning an interest in the Partnership as a result of the
enactment of any statute, regulation or other law or the judicial or
administrative interpretation of any existing or future statute, regulation or
other law, the Partnership will liquidate the interests in the Partnership of
all the Class A Limited Partners as provided in this Section. The Partnership
shall pay each such Class A Limited Partner for his interest in the Partnership
the greater of (i) the "Fair Market Value" of each of his Units, as determined
in accordance with Section 14.3(c), or (ii) the amount the Partner paid to
acquire his Units less any distributions to such Partner pursuant to Section 6.1
hereof; and if any Class A Limited Partner's interest in the Partnership is
liquidated because of the occurrence of a Terminating Event on or after the
third anniversary of the date of this Agreement, the amount the Partnership will
pay for each Unit owned by such Partner shall be equal to the "Fair Market
Value" of each of his units as determined in accordance with Section 14.3(c).
Such amount will be paid to each Limited Partner in eighty-four (84) equal
monthly payments with interest on the unpaid principal balance at the rate
announced from time-to-time by Citibank as its "prime" or base rate, as such
rate may be in effect. The first such installment shall be paid to each such
Limited Partner on the first day of the month after thirty (30) days have
expired since the Partner's interest in the Partnership had been terminated,
with subsequent installments paid on the first day of each successive month
thereafter until paid in full. The Partnership's obligation to pay such Limited
Partners in eighty-four (84) equal monthly installments under this Section will
be evidenced by nonrecourse promissory notes executed by the General Partner on
behalf of the Partnership.
ARTICLE 15. DISSOLUTION
15.1 Causes. Each Partner expressly waives any right which he or it
might otherwise have to dissolve the Partnership except as set forth in this
Article. The Partnership shall be dissolved upon the first to occur of the
following:
(a) The Approval by the Partners of an instrument dissolving the
Partnership;
(b) the occurrence of any other circumstance which, by law, would
require that the Partnership be dissolved, including, but not limited
to, the Bankruptcy, dissolution, removal, or any other occurrence which
would legally disqualify the General Partner from acting hereunder;
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(c) The General Partner determines in its reasonable discretion,
backed in all events by an unqualified opinion of outside legal counsel
addressed to the Partnership and its Partners and reasonably acceptable
to a majority of the Nonaffiliated Limited Partners, that a rule,
ordinance, regulation, statute or government pronouncement has been
enacted that would make any material aspect of this Agreement or the
activities conducted by the Partnership unlawful or eliminate or
substantially reduce, either directly or indirectly, the benefits that
would accrue to the Partners (including the General Partner) with
respect to continuing the Partnership's business operations, and that
there is no reasonable way in which the Partnership's operations can be
conformed to the requirements of said law; or
(d) December 31, 2050.
Nothing contained in Section 15.1(b) is intended to grant to any
Partner or Partners the right or power to dissolve the Partnership other than in
accordance with Sections 15.1(a), (c), and (d). Dissolution pursuant to Section
15.1(b) or other than in accordance with Sections 15.1(a), (c), and (d) shall be
considered breach of the Agreement if effected by the actions or inactions of
one or more Partners; and nothing herein shall exonerate any Partner from
liability to the Partnership and the remaining Partners if said Partner's
actions or inactions caused or impermissibly contributed to such a dissolution.
15.2 Reconstitution. If the Partnership is dissolved as a result of an
event other than as permitted in Sections 15.1(a), (c), and (d), and the
Partnership may be continued if a successor general partner is selected, the
Partnership may be reconstituted and its business continued if, within ninety
(90) days after the date of dissolution, a majority of Nonaffiliated Limited
Partners affirmatively elect to reconstitute the Partnership, agree on the
identity of the new general partner or partners, and execute an instrument
confirming such facts. At such time, without the execution or delivery of
additional instruments, the GP Units held by the General Partner shall be
converted into interests of limited partner interest; the successor general
partner shall entitled (upon reaching a mutually satisfactory agreement with the
holder thereof) to acquire any Unit of Limited Partnership interest (which
acquired Units, upon such transfer, shall be deemed to have been converted into
Units representing a general partner's interest), and all provisions of this
Agreement restricting the General Partner to being Columbia or a Columbia
Affiliate, or permitting any transfer of GP Units to Columbia or Columbia
Affiliates, shall be deemed to have been deleted without the execution or
delivery of additional interests. If the Partnership is reconstituted, an
amendment to this Agreement shall be executed and an amended Certificate of
Limited Partnership filed of record.
15.3 Interim Manager. If the Partnership is dissolved as a result of an
event described in Section 15.1(b), or otherwise, by reason of a breach by the
General Partner, Columbia, or any Columbia Affiliate, those Nonaffiliated
Limited Partners
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who own Units representing a majority of the aggregate Partner's Sharing
Percentage of all of the Nonaffiliated Limited Partners may appoint an interim
manager of the Partnership, who shall have and may exercise only the rights,
powers and duties of a general partner necessary to preserve the Partnership
assets, under (a) the new general partner is elected under Section 15.2, if the
Partnership is reconstituted; or (b) a Liquidator is appointed under Article 16,
if the Partnership is not reconstituted. The interim manager shall not be liable
as a general partner to the Limited Partners and shall, while acting in the
capacity of interim manager on behalf of the Partnership, be entitled to the
same indemnification rights as are set forth for the General Partner above. The
interim manager appointed as provided herein shall be entitled to receive such
reasonable compensation for its services as may be agreed upon by such interim
manager and those Nonaffiliated Limited Partners who own Units representing a
majority of the aggregate Partner's Sharing Percentage of the Nonaffiliated
Limited Partners.
ARTICLE 16. WINDING UP AND TERMINATION
16.1 General. If the Partnership is dissolved and is not reconstituted,
the General Partner (or in the event that the General Partner has withdrawn or
been expelled or is deemed to be in Bankruptcy, a Liquidator or liquidating
committee selected by those Limited Partners who own at least 67% of the
aggregate Partners' Sharing Percentage) shall commence to wind up the affairs of
the Partnership and to liquidate and sell the Partnership's assets. The party or
parties actually conducting such liquidation in accordance with the foregoing
sentence, whether the General Partner, a Liquidator or a liquidating committee,
is herein referred to as the "Liquidator." The Liquidator (if other than the
General Partner) shall have sufficient business expertise and competence to
conduct the winding up and termination of the Partnership and, in the course
thereof, to cause the Partnership to perform any contracts which the Partnership
has or thereafter enters into. The Liquidator shall have full right and
unlimited discretion to determine the time, manner and terms of any sale or
sales of Partnership property under such liquidation, having due regard for the
activity and condition of the relevant market and general financial and economic
conditions. The Liquidator (if other than the General Partner) appointed as
provided herein shall be entitled to receive such reasonable compensation for
its services as shall be agreed upon by the Liquidator and those Limited
Partners who own at least 67% of the aggregate
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Partners' Sharing Percentage. If the General Partner serves as the Liquidator,
the General Partner shall not be entitled to receive any fee for carrying out
the duties of the Liquidator. The Liquidator may resign at any time by giving
fifteen (15) days prior written notice and may be removed at any time, with or
without cause, by written notice of Limited Partners who own at least 67% of the
aggregate Partners' Sharing Percentage. Upon the death, dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all the rights, powers and duties of the original
Liquidator) will, within thirty (30) days thereafter, be appointed by those
Limited Partners who own at least 67% of the aggregate Partners' Sharing
Percentage, evidenced by written appointment and acceptance. The right to
appoint a successor or substitute Liquidator in the manner provided herein shall
be recurring and continuing for so long as the functions and services of the
Liquidator are authorized to continue under the provisions hereof, and every
reference herein to the Liquidator will be deemed to refer also to any such
successor or substitute Liquidator appointed in the manner herein provided. The
Liquidator shall have and may exercise, without further authorization or consent
of any of the parties hereto or their legal representatives or successors in
interest, all of the powers conferred upon the General Partner under the terms
of this agreement to the extent necessary or desirable in the good faith
judgment of the Liquidator to perform its duties and functions. The Liquidator
(if other than the General Partner) shall not be liable as a general partner to
the Limited Partners and shall, while acting in such capacity on behalf of the
Partnership, be entitled to the indemnification rights set forth above for the
General Partner.
16.2 Court Appointment of Liquidator. If, within ninety (90) days
following the date of dissolution or other time provided in Section 15.1, a
Liquidator or successor Liquidator has not been appointed in the manner provided
therein, any interested party shall have the right to make application to any
United States Federal District Judge (in his individual and not judicial
capacity) for the District of Kansas sitting in Wichita for appointment of a
Liquidator or successor Liquidator, and the Judge, acting as an individual and
not in his judicial capacity, shall be fully authorized and empowered to appoint
and designate a Liquidator or successor Liquidator who shall have all the
powers, duties, rights and authority of the Liquidator herein provided.
16.3 Liquidation. In the course of winding up and terminating the
business and affairs of the Partnership, the assets of the Partnership (other
than cash) shall be sold, its liabilities and obligations to creditors,
including any Partners who properly made loans to the Partnership as provided
above, and all expenses incurred in its liquidation shall be paid, and all
resulting items of Partnership income, gain, loss or deduction shall be credited
or charged to the Capital Accounts of the Partners in accordance with Articles 4
and 5. All Partnership property shall be sold upon liquidation of the
Partnership and no Partnership property shall be distributed in kind to the
Partners. Thereafter, all Partnership assets shall be distributed among the
Partners in the ratio of the then credit balances in their Capital Accounts.
Upon the completion of the liquidation of the Partnership and the distribution
of all the Partnership funds, the Partnership shall terminate and the General
Partner (or the Liquidator, as the case may be) shall have the authority to
execute and record all documents required to effectuate the dissolution and
termination of the Partnership.
16.4 Creation of Reserves. After making payment or provision for
payment of all debts and liabilities of the Partnership and all expenses of
liquidation, the Liquidator may set up such cash reserves as the Liquidator may
deem reasonably
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necessary for any contingent or unforeseen liabilities or obligations of the
Partnership.
16.5 Final Statement. Within a reasonable time following the completion
of the liquidation, the Liquidator shall supply to each of the Partners a
statement which shall set forth the assets and the liabilities of the
Partnership as of the date of complete liquidation, each Partner's pro rata
portion of distributions under this Agreement, and the amount retained as
reserves by the Liquidator under this Agreement.
16.6 Compliance with Timing Requirements of Regulations. In the event
the Partnership is "liquidated" within the meaning of Regulations Section 1.704
1(b)(2)(u)(g), (a) distributions shall be made pursuant to this Article to the
Partners who have positive Capital Accounts in compliance with Regulations
Section 1.704 1(b)(2)(ii)(b)(2), and (b) if the General Partner's Capital
Account has a deficit balance (after giving effect to all contributions,
distributions, and allocations for all taxable years, including the year during
which such liquidation occurs), the General Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance
to zero in compliance with Regulations Section 1.704-l(b)(2)(ii)(b)(3). If any
Person who is not a General Partner has a deficit balance in his Capital Account
(after giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or any other Person for any purpose
whatsoever. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the Partners may instead be
distributed to a trust established for the benefit of the Partners for the
purposes of liquidating Partnership property, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or obligations
of the Partnership or of the Partners arising out of or in connection with the
Partnership. The assets of any such trust shall be distributed to the Partners
from time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Partnership would
otherwise have been distributed to the Partners pursuant to this Agreement.
16.7 Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article, in the event the Partnership is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no event described in
Section 15.1 has occurred, the Partnership's properties shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, the Partnership shall be
deemed to have distributed the Partnership's properties in kind to the Partners,
who shall be deemed to have assumed and taken such assets subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter,
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the Partners shall be deemed to have recontributed the Partnership's properties
in kind to the Partnership, which shall be deemed to have assumed and taken such
assets subject to all such liabilities.
ARTICLE 17. POWER OF ATTORNEY
17.1 General Partner as Attorney-in-Fact. Each Limited Partner hereby
makes, constitutes, and appoints the General Partner, with full power of
substitution and resubstitution, his true and lawful attorney-in-fact for him
and in his name, place, and stead and for his use and benefit to sign, execute,
certify, acknowledge, swear to, file, and record (a) this Agreement and all
agreements, certificates, instruments, and other documents amending or changing
this Agreement as now or hereafter amended which the General Partner may deem
necessary, desirable, or appropriate including, without limitation, amendments
or changes to reflect (i) the valid exercise by any General Partner of any power
granted to it under this Agreement; (ii) any amendments adopted by the Partners
in accordance with the terms of this Agreement; (iii) the valid admission of any
Substituted Limited Partner or Additional Limited Partner to the Partnership; or
(iv) the valid disposition by any Partner of his interest in the Partnership;
and (b) any certificates, instruments, or documents as may be required by, or
may be appropriate under, the laws of the State of Kansas.
17.2 Nature of Special Power. The power of attorney granted pursuant to
this Article:
(a) is a special power of attorney coupled with an interest and is
irrevocable;
(b) may be exercised by any such attorney-in-fact by listing the
Limited Partners executing any agreement, certificate, instrument, or
other document with the single signature of any such attorney-in-fact
acting as attorney-in-fact for such Limited Partners; and
(c) shall survive the death, disability, legal incapacity,
Bankruptcy, insolvency, dissolution, or cessation of existence of a
Limited Partner and shall survive the delivery of an assignment by a
Limited Partner of the whole or a portion of his interest in the
Partnership, except that where the assignment is of such Limited
Partner's entire interest in the Partnership and the assignee, with the
consent of the General Partner, is admitted as a Substituted Limited
Partner, the power of attorney shall survive the delivery of such
assignment for the sole purpose of enabling any such attorney-in-fact
to effect such substitution.
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ARTICLE 18. MISCELLANEOUS
18.1 Notices. All notices given pursuant to this Agreement shall be in
writing and shall be deemed effective when personally delivered or when placed
in the United States mail, registered or certified with return receipt
requested, or when sent by prepaid telegram or facsimile followed by
confirmatory letter. For purposes of notice, the addresses of the Partners shall
be as stated under their names on the attached Exhibit "A"; provided, however,
that each Partner shall have the right to change his address with notice
hereunder to any other location by the giving of thirty (30) days notice to the
General Partner in the manner set forth above.
18.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive federal laws of the United States and the
laws of the State of Kansas, and the courts of competent jurisdiction, federal
and state, sitting in such State shall be the exclusive courts of jurisdiction,
and more particularly the federal courts in Wichita, Kansas, for venue purposes
and for litigation or other proceedings as between the parties that may be
brought, or arise out of, or by reason of this Agreement.
18.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Partners, and their respective heirs, legal
representatives, successors and permitted assigns; provided, however, that
nothing contained herein shall negate or diminish the transfer or other
restrictions set forth herein.
18.4 Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner. The failure by any party to specifically
enforce any term or provision hereof or any rights of such party hereunder shall
not be construed as the waiver by that party of its rights hereunder. The waiver
by any party of a breach or violation of any provision of this Agreement shall
not operate as, or be construed to be, a waiver of any subsequent breach of the
same or other provision hereof.
18.5 Time. Time is of the essence with respect to this Agreement.
18.6 Waiver of Partition. Notwithstanding any statute or principle of
law to the contrary, each Partner hereby agrees that, during the term of the
Partnership, he or it shall have no right (and hereby waives any right that he
or it might otherwise have had) to cause any Partnership property to be
partitioned and/or distributed in kind.
18.7 Entire Agreement. This Agreement contains the entire agreement
among the Partners relating to the subject matter hereof, and all prior
agreements relative hereto which are not contained herein are terminated. This
Agreement
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supersedes, amends and restates in its entirety the Limited Partnership
Agreement for the Partnership previously executed with the Original Limited
Partner.
18.8 Amendments. Except as otherwise expressly provided in this
Agreement, amendments or modifications may be made to this Agreement only by
setting forth such amendments or modifications in a document Approved by the
Partners and any alleged amendment or modification herein which is not so
documented shall not be effective as to any Partner. The General Partner may,
without the consent of any Limited Partner, amend any provision of this
Agreement and execute, swear to, acknowledge, deliver, file and record whatever
documents may be required in connection therewith to reflect:
(a) a change in the location of the principal place of business of
the Partnership not inconsistent with the provisions of Section 3.2, or
a change in the registered office or the registered agent of the
Partnership;
(b) admission of a Limited Partner into the Partnership or
termination of any Limited Partner's interest in the Partnership in
accordance with this Agreement;
(c) qualification of the Partnership as a limited partnership
under the laws of any state or that is necessary or advisable in the
opinion of the General Partner to ensure that the Partnership will not
be treated as an association taxable as a corporation for federal
income tax purposes, provided, in either case, such action shall not
adversely affect any Limited Partner;
(d) a change (i) that is of an inconsequential nature and does not
adversely affect the Limited Partners in any material respect; (ii)
that is necessary or desirable to satisfy any requirements, conditions
or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or contained in any federal
or state statute, compliance with any of which the General Partner
deems to be in the best interest of the Partnership and the limited
Partners; or (iii) that is required or contemplated by this Agreement;
(e) an addition to the representations, duties, or obligations of
the General Partner; or
(f) a change to any provision in this Agreement required to be so
changed by the staff of the Securities and Exchange Commission or other
federal agency or by a State Securities Commissioner or similar
official, which change is deemed by such commission, agency or official
to be for the benefit or protection of the Limited Partners.
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However, no amendment or modification which disproportionately affects
the interest of any Partner in the capital, Profits or Losses of, or
distributions or allocations with respect to, the Partnership shall be effective
as to any Partner unless the same has been set forth in a document duly executed
by such Partner.
18.9 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. Subject to the provisions of Section ?, if
any provision of this Agreement or the application thereof to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, but the extent of such invalidity or unenforceability does not
destroy the basis of the bargain among the Partners as expressed herein, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, but rather shall be
enforced to the greatest extent permitted by law.
18.10 Gender and Number. Whenever required by the context, as used in
this Agreement, the singular number shall include the plural and the neuter
shall include the masculine or feminine gender, and vice versa.
18.11 Exhibits. Each Exhibit to this Agreement is incorporated herein
for all purposes.
18.12 Additional Documents. Each Partner, upon the request of the
General Partner, agrees to perform all further acts and execute, acknowledge and
deliver any documents that may be reasonably necessary, appropriate or desirable
to carry out the provisions of this Agreement.
18.13 Section Headings. The section headings appearing in this
Agreement are for convenience of reference only and are not intended, to any
extent or for any purpose, to limit or define the text of any section.
18.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original but all of which shall constitute but one
document
18.15 DCSF's Right of First Refusal. If the Partnership or the General
Partner receives or obtains an offer from a third-party to acquire in any manner
either
(i) The Hospital (as defined in Article 1 above, being in general
terms [without limitation] both the assets contributed to the
Partnership by Western Plains Regional Hospital, Inc., together with
all replacements and expansions thereof, and those assets contributed
by Dodge City Outpatient Surgical Facility, Inc., together with all
replacements and expansions thereof), or
49
<PAGE> 51
(ii) The SurgiCenter Assets (being the Facilities (as defined in
the Contribution Agreement) together with all replacements and
expansions thereof) which offer the General Partner intends to accept
and has received approval to accept under Section 8.4, the General
Partner shall promptly notify DCSF in writing of the offer received,
including the name of the offeror, the proposed purchase price and the
other terms and conditions of the offer. DCSF shall have the following
option(s) for a period of thirty (30) days from the day it receives
notice of such offer:
a. If an event described in Subsection (i) above has occurred,
to agree to purchase the Hospital on the same terms and conditions
contained in the offer, or
b. If an event described in either Subsection (i) or (ii)
above has occurred, to agree to purchase only the Surgicenter
Assets on the same terms and conditions as contained in the offer
with respect to the Surgicenter Assets; provided that DCSF shall
have a right to purchase the Surgicenter Assets separate from the
remaining Hospital assets following an event described in
Subsection (i) above only if it is reasonably practicable to
allocate a portion of the offer for the Hospital to the
Surgicenter Assets.
DCSF may exercise its option by notifying the General Partner prior to the end
of the thirty (30) day period of its intent to exercise the option. If DCSF
fails to or indicates in writing that it will not exercise the option within the
period provided, or if DCSF exercises the option but fails to effect the
purchase within the later of the period prescribed in such offer or a reasonable
time, the Partnership may convey or dispose of the assets which were the subject
of the offer, but only at the price, terms and conditions, and to the party
specified in the offer notice to DCSF. If terms and conditions more favorable to
the proposed purchaser than, or in any material manner different from, those
offered to DCSF should be agreed to by the Partnership or the General Partner
and such third party purchaser, DCSF shall again have the option to purchase the
Hospital (or the Surgicenter Assets, as the case may be) upon and subject to the
more favorable or different purchase terms in accordance with this Section.
Neither DCSF, the General Partner, nor the Partnership shall be liable or
accountable to any Limited Partner for any loss, damage, expense, cost, or
liability resulting from DCSF's exercise or failure to exercise the purchase
option under this Section, delay in notifying the General Partner of DCSF's
intention not to exercise the purchase option, or its enforcement of the
requirements of this Section in the event that it elects not to exercise the
purchase option.
50
<PAGE> 52
IN WITNESS WHEREOF, the Partners have executed this Agreement on this
first day of March, 1995.
GENERAL PARTNER:
Columbia/HCA of Dodge City, Inc.
By:
-----------------------------------------
ORIGINAL LIMITED PARTNER
American Medicorp Development Co.
By:
-----------------------------------------
LIMITED PARTNERS:
Western Plains Regional Hospital, Inc.
By:
-----------------------------------------
Dodge City Outpatient Surgery Facility, Inc.
By:
-----------------------------------------
51
<PAGE> 53
EXHIBIT A
<TABLE>
<CAPTION>
CAPITAL
GENERAL PARTNER CONTRIBUTION UNITS
- --------------- ------------ -----
<S> <C> <C>
Columbia/HCA of Dodge City, Inc. $125,000 10
CAPITAL
CLASS A LIMITED PARTNERS CONTRIBUTION UNITS
- ------------------------ ------------ -----
N/A
CAPITAL
CLASS B LIMITED PARTNERS CONTRIBUTION UNITS
- ------------------------ ------------ -----
Dodge City Outpatient Surgical Facility, Inc. $3,375,000 270
CAPITAL
CLASS C LIMITED PARTNERS CONTRIBUTION UNITS
- ------------------------ ------------ -----
Western Plains Regional Hospital, Inc. $1,250,000 100
CAPITAL
CLASS D LIMITED PARTNERS CONTRIBUTION UNITS
- ------------------------ ------------ -----
Western Plains Regional Hospital, Inc. $6,500,000 520
</TABLE>
<PAGE> 1
EXHIBIT 3.4
AMENDMENT TO ARTICLE 6.1 OF
LIMITED PARTNERSHIP AGREEMENT
This Amendment to Article 6.1 of the Limited Partnership Agreement of
Dodge City Healthcare Group, LP, dated March 1, 1995, is entered into on June
13, 1997, between Dodge City Healthcare Group, LP by and through its general
partner (Partnership) and Dodge City Outpatient Surgical Facility, Inc. (Limited
Partner).
WHEREAS, subject to change based on the cash needs of the Partnership,
the General Partner agrees to distribute 90% of book pretax income for 1997 to
1999 and 85% thereafter until the intercompany debt is retired. Further, the
Partnership agrees to distribute these profits on a quarterly basis by April 15,
June 15, September 15, and January 15 of each year (i.e., approximate due dates
of estimated quarterly federal and state income tax payments). By the fourth
quarter distribution on January 15, the total amount distributed for the year
should equal approximately 90% of the estimated annual distribution (i.e., 90%
of 90%, or 81% of pretax income for 1997). In March of each year, a final
distribution will be made to reconcile the quarterly distributions to the annual
distribution amount.
WHEREAS, for 1997, the Partnership agrees to distribute the Limited
Partner's portion of these distribution payments as follows:
<TABLE>
<CAPTION>
Quarter Distribution Date Amount
------- ----------------- ------
<S> <C> <C>
1st & 2nd June 1997 $600,000
3rd September 15, 1997 $250,000
4th January 15, 1998 $250,000
Final Adjustment March 1998 To be determined
</TABLE>
WHEREAS, both parties agree to maintain the existing accounting
methodology for bad debts for income tax purposes and therefore forego filing an
amended 1996 Partnership income tax return in regards to the bad debts incurred
by the facility.
Dodge City Healthcare Group, LP Dodge City Outpatient Surgical
by and through Columbia/HCA of Facility, Inc.
Dodge City, its General Partner
By: By:
----------------------------------- -----------------------------
Kevin Gross Jack R. Shearer, CRNA
Division President President
By:
-----------------------------
Mohammad Amawi, MD
By:
-----------------------------
Kelly Cohoon, DDS
<PAGE> 1
EXHIBIT 3.5
SECOND AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
DODGE CITY HEALTHCARE GROUP, L.P.
This Second Amendment to the Amended and Restated Limited Partnership
Agreement of Dodge City Healthcare Group, L.P. is entered into as of April 8,
1999 (this "Amendment") by and among Columbia/HCA of Dodge City, Inc., a Kansas
corporation (the "General Partner"), Western Plains Regional Hospital, Inc., a
Kansas corporation ("WPRH"), Western Plains Regional Hospital, LLC, a Delaware
limited liability company ("Western Plains LLC") and Dodge City Outpatient
Surgical Facility, Inc., a Kansas corporation ("DCSF"). All capitalized terms
used herein but not defined shall have the meanings given to them in the Amended
and Restated Limited Partnership Agreement of Dodge City Healthcare Group, L.P.
dated as of March 1, 1995 among the General Partner, American Medicorp
Development Co., WPRH and DCSF, as amended by the Amendment to Article 6.1 of
Limited Partnership Agreement dated June 13, 1997 (collectively, the
"Partnership Agreement").
W I T N E S S E T H :
WHEREAS, Columbia/HCA Healthcare Corporation ("Columbia"), the parent
of WPRH, desires to undertake an internal restructuring (the "Restructuring") in
connection with a proposed pro-rata distribution by Columbia of all of the
shares of stock of two directly or indirectly wholly-owned subsidiaries to
Columbia's shareholders (the "Spin-off");
WHEREAS, as part of the Restructuring, it is proposed that (i) WPRH
transfer and assign all of its Units in the Partnership to Western Plains LLC,
of which WPRH is the sole member, (ii) WPRH merge into HealthTrust, Inc. - The
Hospital Company, another wholly-owned subsidiary of Columbia ("HealthTrust"),
which subsidiary will succeed to WPRH's 100% limited liability company interest
in Western Plains LLC and 100% stock ownership interest in the General Partner
(the "Merger"), (iii) HealthTrust contribute such ownership interests in Western
Plains LLC and the General Partner (the "HealthTrust Contribution") to LifePoint
Hospitals, Inc., one of the directly or indirectly wholly-owned subsidiaries of
Columbia whose stock will be distributed to Columbia's shareholders in
connection with the Spin-off ("LifePoint"), (iv) LifePoint transfer, assign or
contribute its 100% limited liability company interest in Western Plains LLC and
its 100% stock ownership interest in the General Partner to one of its directly
or indirectly wholly-owned subsidiaries (the "LifePoint Contribution") and (v)
additional transfers, assignments or contributions of such 100% limited
liability company interest in Western Plains LLC and its 100% stock
<PAGE> 2
ownership interest in the General Partner may be made by one or more directly or
indirectly wholly-owned subsidiaries of LifePoint to other indirectly
wholly-owned subsidiaries of LifePoint (collectively, the "Additional
Contributions");
WHEREAS, the General Partner, WPRH and DCSF are parties to the
Partnership Agreement; and
WHEREAS, the General Partner, WPRH, as a withdrawing Limited Partner,
Western Plains LLC, as a Substituted Limited Partner in place of WPRH, and DCSF,
as a Limited Partner, desire to amend the Partnership Agreement on the terms and
conditions set forth herein to account for, among other things, (i) the
admission of Western Plains LLC as a Substituted Limited Partner in place of
WPRH as a result of the transfer and assignment by WPRH to Western Plains LLC of
all of its Units in the Partnership and (ii) the proposed contribution of WPRH's
100% limited liability company interest in Western Plains LLC and 100% stock
ownership interest in the General Partner to LifePoint in connection with the
Spin-off, as a result of which Spin-off neither the General Partner nor Western
Plains LLC shall be a Columbia Affiliate as such term is defined in the
Partnership Agreement;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendment of Certain Definitions.
(a) The definition of "Class C Limited Partners" set forth in
Section 1.17 of the Partnership Agreement is hereby amended and restated in its
entirety to read as follows:
"1.17 `Class C Limited Partners' means any lawful holder of a
Class C Unit, which shall be limited to those limited partners of
the Partnership who are (i) management level employees of the
General Partner (but not more than ten such employees) and (ii)
Columbia and/or any Columbia Affiliate before the effective date of
the Spin-off and LifePoint and/or any LifePoint Affiliate on or
after the effective date of the Spin-off; together with any person
or entity to which said Unit may be lawfully and properly assigned
under the provisions of this Agreement. Any individual who may
lawfully hole Class C Units pursuant to the foregoing definition is
hereinafter referred to as a
2
<PAGE> 3
`Qualified Class C Limited Partner.' `Class C Limited Partner' means
any one of the Class C Limited Partners."
(b) The definition of "Class D Limited Partners" set forth in
Section 1.18 of the Partnership Agreement is hereby amended and restated in its
entirety to read as follows:
"1.18 `Class D Limited Partners' means any lawful holder of a
Class D Unit, which shall be limited to Columbia and/or any Columbia
Affiliate before the effective date of the Spin-off and LifePoint
and/or any LifePoint Affiliate on or after the effective date of the
Spin-off; together with any person or entity to which said Unit may
be lawfully and properly assigned under the provisions of this
Agreement. The sole current Class D Limited Partner is Western
Plains Regional Hospital, LLC."
(c) The definition of "Columbia Affiliate" set forth in Section 1.21
of the Partnership Agreement is hereby amended and restated in its entirety to
read as follows:
"1.21 `Columbia Affiliate' means any corporation or limited
liability company which may be connected with Columbia by a chain of
one or more corporations or limited liability companies linked
through 75% stock ownership or 75% limited liability company
interest, as the case may be, or any partnership (general or
limited) or limited liability company or tiers of partnerships or
limited liability companies of which Columbia Corporate Affiliates
are the sole general partners or members therein, irrespective of
any ownership interest in the Partnership. For this purpose, the
parties agree that if Columbia owns 75% of a subsidiary A and
subsidiary A owns 75% of subsidiary B, subsidiary B is not "linked
through 75% stock ownership" with Columbia (but rather is linked
through 56.25% ownership) and is therefore not a Columbia
Affiliate."
(d) The definition of "General Partner" set forth in Section 1.26 of
the Partnership Agreement is hereby amended and restated in its entirety to read
as follows:
"1.26 `General Partner' means any lawful holder of a Class GP
Unit which shall be limited to Columbia and/or any Columbia
Affiliate before the effective date of the Spin-off and LifePoint
and/or any LifePoint Affiliate on or after the effective date of the
Spin-off; together with any person or entity to which said Units may
be lawfully and properly assigned under the provisions of this
Agreement. The initial General Partner shall be Columbia/HCA of
Dodge City, Inc. The
3
<PAGE> 4
interest of the General Partner herein shall be represented by 10 GP
Units."
(e) The definition of "Nonaffiliated Limited Partners" set forth in
Section 1.34 of the Partnership Agreement is hereby amended and restated in its
entirety to read as follows:
"1.34 `Nonaffiliated Limited Partners' means any Limited Partner
which is not Columbia, a Columbia Affiliate before the effective
date of the Spin-off, LifePoint or a LifePoint Affiliate on or after
the effective date of the Spin-off, or the General Partner, or
employed by any of the foregoing."
2. Addition of Certain Definitions. Article 1 of the Partnership
Agreement is hereby amended by adding the following definitions thereto as
Sections 1.53, 1.54 and 1.55.
"1.53 `LifePoint' means LifePoint Hospitals, Inc., a Delaware
corporation to be formed by Columbia or a Columbia Affiliate inn
connection with the Spin-off.
1.54 `LifePoint Affiliate' means any corporation or limited
liability company which may be connected with LifePoint by a chain
of one or more corporations or limited liability companies linked
through 100% stock ownership or 100% limited liability company
interest, as the case may be, or any partnership (general or
limited) or limited liability company or tiers of partnerships or
limited liability companies of which LifePoint Corporate Affiliates
are the sole general partners or members therein, irrespective of
any ownership interest in the Partnership.
1.55 `Spin-off' means the proposed pro-rate distribution by
Columbia of all of the shares of stock of two directly or indirectly
wholly-owned subsidiaries of Columbia, including LifePoint, to
Columbia's shareholders."
3. Amendment of Section 6.1. Section 6.1 of the Partnership Agreement
is hereby amended by inserting the following additional paragraphs as the second
and third paragraphs of such section:
"Subject to the preceding paragraph, the General Partner, in
good faith, hereby agrees for each Partnership fiscal year occurring
prior to the time the intercompany debt, as reflected on the
Partnership's financial statements, is retired to cause the Partnership
to distribute to the Partners, on an aggregate basis, ninety percent
(90%) of the annual book pretax income of the Partnership for such
Partnership fiscal year (the "Annual Distribution
4
<PAGE> 5
Amount"). The General Partner further agrees to cause the Partnership
to distribute (i) approximately ninety percent (90%) of the Annual
Distribution Amount to the Partners in four quarterly installments on
each of April 15, June 15 and September 15 of each Partnership fiscal
year, and on each January 15 following such Partnership fiscal year, or
on such other dates that coincide with the due dates of estimated
quarterly federal and state income tax payments, and (ii) a final
distribution to the Partners in respect of the Annual Distribution
Amount in the March following such Partnership fiscal year to the
extent necessary to reconcile the quarterly distributions to the Annual
Distribution Amount, provided, however, that to the extent that
quarterly distributions made by the Partnership in accordance with the
above exceeds the Annual Distribution Amount, future quarterly
distributions made in accordance with the above in the succeeding
Partnership fiscal year or years shall be reduced accordingly."
"In addition to the preceding paragraph, as soon as
practicable following the Merger, the HealthTrust Contribution, the
LifePoint Contribution and the Additional Contributions, the General
Partner shall make a one-time distribution of cash to the Partners in
an amount sufficient to reimburse the Partners for the present value of
the tax benefits lost as a result of the Merger, the HealthTrust
Contribution, the LifePoint Contribution and/or any of the Additional
Contributions, as determined by the General Partner and agreed upon by
the Limited Partners. Such distribution shall be made on an after-tax
basis taking into account any income recognized by the Partners as a
result of such distribution and using such assumptions as are set forth
in the paragraph immediately following below."
4. Amendment of Section 10.1. The first paragraph of Section 10.1 of
the Partnership Agreement is hereby amended and restated to read in its entirety
as follows:
"Except as otherwise provided in this Section 10.1, each Class
A and Class C Limited Partner agrees that while he is a Limited Partner
and for four (4) years thereafter neither he nor any of his Affiliates
shall, directly or indirectly, hold an ownership interest in an acute
care hospital, specialty hospital, comprehensive rehabilitation
facility, rehabilitation agency, diagnostic imaging center, inpatient
or outpatient psychiatric or substance abuse facility, or ambulatory or
other type of surgery center that is located within a forty (40) mile
radius of the Hospital ("Competing Business") without the prior written
consent of the General Partner. Each Class A and Class C Limited
Partner expressly agrees that neither he nor any of his Affiliates
shall violate the terms of this Section 10.1 while such Limited Partner
is a limited partner of the Partnership and for a period of four (4)
years thereafter. Notwithstanding anything to the contrary in this
Section
5
<PAGE> 6
10.1,. no Class A or Class C Limited Partner will be in violation of
this Section 10.1 if such Limited Partner or any Affiliate of such
Limited Partner held an ownership interest in a Competing Business, and
each such Limited Partner who holds or whose Affiliate holds such an
interest shall give written notice thereof to the General Partner on or
before the earlier of (i) delivery of his or her subscription agreement
for the first Class A or Class C Unit acquired or (ii) the acquisition
of the first said Unit. Nothing in this Section 10.1 is intended to
prevent such a Limited Partner from being a member of the medical staff
of, or referring patients to, any other hospital."
5. Amendment of Section 10.3. Section 10.3 of the Partnership Agreement
is hereby amended and restated in its entirety to read as follows:
"10.3 Capital Improvements. The General Partner agrees, and
the Partners contemplate, that the Partnership will (subject to
identification of proper projects) expend up to the amount of One
Million Dollars ($1,000,000) per annum for capital expenditures during
the entire term of the Partnership. The Board of Advisors shall have
the right to discuss, review, approve and direct the amount, spending
and allocation of any such expenditures in connection with the annual
establishment of a capital budget pursuant to Section 8.4 above. If a
Limited Partner, with representatives on the Board of Advisors and
which owns in the aggregate 50 or more Units, disagrees with the Board
of Advisors' directions with respect to the amount, spending and
allocation of such expenditures, then any such Limited Partner may
elect to file a grievance in accordance with the procedures set forth
in Section 12.5 below."
6. Amendment of Section 12.2. Section 12.2 of the Partnership Agreement
is hereby amended by (i) deleting "and" from the end of subparagraph (g), (ii)
replacing the period at the end of subparagraph (h) with a semicolon and (iii)
adding the following subparagraphs (i) and (j):
"(i) Payment of any additional management fee to the General
Partner, with the exception of the monthly information system fee, in
excess of the management fee determined to be payable under Section 8.8
hereof; and
(j) Establishing a bonus structure for the Hospital
administration, which shall be established by reference to financial,
patient, physician and employee satisfaction considerations, as well as
other relevant considerations."
7. Amendment of Section 12.5. Section 12.5 of the Partnership Agreement
is hereby amended and restated to read in its entirety as follows:
6
<PAGE> 7
"12.5 Grievance Procedure. If one (or more) Limited Partners
owning in the aggregate 50 or more Units has a grievance against the
Partnership or the operation of the Hospital, said Partner(s) shall set
forth the grievance in full in writing and submit it to the General
Partner with a formal statement that the provisions of this Section
12.5 are being invoked. If the matter is not resolved to the
satisfaction of the complaining Partner(s) within 20 days, either the
General Partner or the complaining Partner(s) shall have the right and
privilege to send a copy of the grievance to the Chief Operating
Officer of LifePoint, who shall meet with representatives of the
General Partner and with the complaining Partner(s) in an effort to
mediate a resolution of the grievance. The General Partner shall
utilize its best efforts to secure the cooperation of the Chief
Operating Officer of LifePoint; it being acknowledged and agreed that
LifePoint has represented that its Chief Operating Officer will be
available and willing to undertake the foregoing. Nothing herein shall
preclude any party from pursuing such other remedies as it may have,
regardless of whether and either before or after this grievance
procedure is pursued."
8. Amendment of Section 13.4. (a) The last sentence of Section 13.4(a)
of the Partnership Agreement is hereby amended and restated to read in its
entirety as follows:
"In all events, and regardless of whether any transfer of GP Units
has occurred, the General Partner shall at all times remain either a
Columbia Affiliate before the effective date of the Spin-off or a
LifePoint Affiliate on or after the effective date of the Spin-off
(except as set forth in Section 13.4(c) immediately below)."
(b) Section 13.4(b) of the Partnership Agreement is hereby amended
and restated to read in its entirety as follows:
"The General Partner or any Columbia Affiliate and/or LifePoint
Affiliate holding any GP Units may, if all provisions of this
Agreement are satisfied, do the following without the consent of
any Partner, if, but only if, the General Partner shall at all
times remain a Columbia Affiliate before the effective date of
the Spin-off or a LifePoint Affiliate on or after the effective
date of the Spin-off, and in either case retain operational
control of the Partnership:
(i) Pledge, encumber, or otherwise give as
collateral for loans or other indebtedness, all or
any of its GP Units or any other Units held by it,
and the pledgee or other holder of any such pledge,
encumbrance, or security interest may exercise its
rights with respect thereto, including without
limitation, its rights to foreclose, transfer,
convey, sell or assign such general
7
<PAGE> 8
partnership interest or Units, without consent of, or
notice to, any other Partner (provided, however, that
any such foreclosure or shift in operational control
shall render the General Partner before such
foreclosure liable for damages for the breach of the
covenant made in this Section that the General
Partner having operational control shall at all times
remain a Columbia Affiliate before the effective date
of the Spin-off or a LifePoint Affiliate on or after
the effective date of the Spin-off); and
(ii) Transfer all of its GP Units or other
Units held by it to one Columbia Affiliate before the
effective date of the Spin-off or a LifePoint
Affiliate on or after the effective date of the
Spin-off (if such affiliate agrees to be bound by the
provisions hereof, and Western Plains LLC remains
liable as a guarantor for the faithful performance of
this Agreement by such affiliate)."
9. Amendment of Section 14.1. Subparagraphs (c) and (d) of Section 14.1
of the Partnership Agreement are hereby amended and restated to read in its
entirety as follows:
"(c) Class C Units. Except for transfers to DCSF
under Section 13.4(c), Class C Units may only be held by (i)
Qualified Class C Limited Partners, (ii) until the effective
date of the Spin-off, Columbia or Columbia Affiliates, and on
and after the effective date of the Spin-off, LifePoint or
LifePoint Affiliates, or (iii) as Approved by the Committee;
provided, however, if at any time Class C Units are to be
transferred (other than pursuant to Section 13.4(c)) with the
Approval of the Committee other than to (y) a Qualified
Purchaser or (z) until the effective date of the Spin-off,
Columbia or a Columbia Affiliate, and on and after the
effective date of the Spin-off, LifePoint or a LifePoint
Affiliate, the right of first refusal set forth in Section
14.1(a) above shall apply the same as if it referred to Class
C Units rather than Class A Units (and the decision of whether
or not the Partnership shall exercise said right of first
refusal shall be made by a majority vote of the Nonaffiliated
Limited Partners).
(d) Class D Units. Except for transfers to DCSF under
Section 13.4(c), Class D Units may only be held by (i) the
General Partner, (ii) Western Plains LLC, (iii) until the
effective date of the Spin-off, Columbia or Columbia
Affiliates, and on and after the effective date of the
Spin-off, LifePoint or LifePoint Affiliates, or (iv) as
Approved by the Committee; provided, however, if at any time
Class D Units are to be transferred (other than pursuant to
Section 13.4(c)) with the Approval of the Committee other than
to, until the effective
8
<PAGE> 9
date of the Spin-off, Columbia or a Columbia Affiliate, and on
and after the effective date of the Spin-off, LifePoint or a
LifePoint Affiliate, the right of first refusal set forth in
Section 14.1(a) above shall apply the same as if it referred
to Class D Units rather than Class A Units (and the decision
of whether or not the Partnership shall exercise said right of
first refusal shall be made by a majority vote of the
Nonaffiliated Limited Partners)."
10. References to Columbia and/or Columbia Affiliates. Except as
expressly set forth herein, (a) all references to "WPRH" in the Partnership
Agreement shall, as the context requires, be deemed to be references to "Western
Plains LLC" and (b) on and after the effective date of the Spin-off, all
references to "Columbia Affiliates" in the Partnership Agreement shall, as the
context requires, be deemed to be references to "LifePoint" and/or "LifePoint
Affiliates."
11. Amendment of Exhibit A. Exhibit A to the Partnership Agreement is
hereby amended and restated in its entirety to read in the form attached hereto.
12. Effective Time of Amendments. The parties hereto hereby agree that
all of the amendments to the Partnership Agreement set forth in this Amendment
shall be effective as of April 8, 1999.
13. Termination of the Amendments. The parties hereto hereby agree that
if at any time the General Partner receives notice that Columbia, or any duly
authorized committee, officer or director of Columbia, has determined, for any
reason, not to implement, effect or consummate the Spin-off, then all of the
amendments to the Partnership Agreement effected by this Agreement shall be
rescinded, cancelled and terminated with and from effect from the date of any
such determination.
14. Binding Effect. This Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
15. Partnership Agreement in Effect. Except as hereby amended, the
Partnership Agreement shall remain in full force and effect and is hereby
ratified and confirmed by the parties hereto.
16. Governing Law. This Amendment shall be governed by the laws of the
State of Kansas.
17. Counterparts. This Amendment may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed as of the day and year first above written.
COLUMBIA/HCA OF DODGE CITY, INC.
By:
-----------------------------------------
Name:
Title:
WESTERN PLAINS REGIONAL HOSPITAL, INC.
By:
-----------------------------------------
Name:
Title:
WESTERN PLAINS REGIONAL HOSPITAL, LLC
By:
-----------------------------------------
Name:
Title:
DODGE CITY OUTPATIENT SURGICAL FACILITY, INC.
By:
-----------------------------------------
Name:
Title:
10
<PAGE> 1
EXHIBIT 3.6
THIRD AMENDMENT
TO THE
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
DODGE CITY HEALTHCARE GROUP, L.P.
THIS THIRD AMENDMENT TO THE AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF DODGE CITY HEALTHCARE GROUP, L.P. ("Amendment") is made and entered
into as of November 4, 1999, by and among Dodge City Healthcare Partner, Inc., a
Kansas corporation and successor in interest to Columbia/HCA of Dodge City,
Inc., as general partner (the "General Partner"), Western Plains Regional
Hospital, LLC, a Delaware limited liability company and a limited partner of the
Partnership (as such term is hereinafter defined) ("Western Plains"), and Dodge
City Outpatient Surgical Facility, Inc., a Kansas corporation and a limited
partner of the Partnership ("Dodge City Limited Partner" and, together with
Western Plains, the "Limited Partners").
R E C I T A L S:
WHEREAS, the General Partner and the Limited Partners are parties to
that certain Amended and Restated Limited Partnership Agreement of Dodge City
Healthcare Group, L.P., dated March 1, 1995, as amended by that certain
Amendment to Article 6.1 of Limited Partnership Agreement dated June 13, 1997,
and that certain Second Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P. dated as of April 8,
1999 (the "Agreement"), all of which relate to Dodge City Healthcare Group, L.P.
(the "Partnership"); and
WHEREAS, in connection with a corporate restructuring (the "Spin-Off")
of Columbia/HCA Healthcare Corporation ("Columbia"), the General Partner and
Western Plains became affiliates of LifePoint;
WHEREAS, LifePoint and the LifePoint Affiliates incurred the LifePoint
Debt (as hereinafter defined) at the time of the Spin-Off and, pursuant to the
terms of the LifePoint Debt, the LifePoint Affiliates were required to execute
and deliver, to the maximum extent possible, full guarantees of the LifePoint
Debt and LifePoint was required to pledge, to the maximum extent possible, all
of the assets of the LifePoint Affiliates;
WHEREAS, the Agreement, prior to this Amendment, would not permit the
General Partner to pledge all of the assets of the Partnership or to cause the
Partnership to execute a full guarantee of the LifePoint Debt (the "Partnership
Limitations") and, as a result, Columbia has agreed to act as guarantor of the
<PAGE> 2
LifePoint Debt to the extent actually necessary, due to the Partnership
Limitations, to fully guarantee the LifePoint Debt (the "Columbia Guarantee");
WHEREAS, in consideration for the issuance of the Columbia Guarantee,
Columbia will charge LifePoint a significant fee;
WHEREAS, following arms-length discussions, in connection with the
execution of this Amendment, the Dodge City Limited Partner has received payment
of $1,000,000, which amount the parties have agreed is intended to compensate
the Dodge City Limited Partner, and which constitutes adequate consideration,
for the anticipated decrease in the value of the investment of the Dodge City
Limited Partner in the Partnership, as well as for any other investment risk to
the Dodge City Limited Partner associated with the Amendment or the Actions (as
such term is hereinafter defined); and
WHEREAS, the General Partner and the Limited Partners desire to amend
the Agreement as set forth in this Amendment, pursuant to Section 18.8 of the
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements contained herein, the sufficiency of which is hereby
acknowledged, the parties hereby agree and consent to the following:
A G R E E M E N T:
1. Amendment to Section 8.1(a) of the Agreement. The Agreement is hereby amended
by deleting the text of Section 8.1(a) in its entirety and substituting in
replacement thereof the following:
(a) Incur debt and borrow money in any amount and from any
source, and/or guarantee the repayment and full performance of any debt
or debts of LifePoint or any LifePoint affiliate, and, if security is
required therefor or to secure the debts of the General Partner,
LifePoint or any LifePoint Affiliate, to mortgage, encumber, pledge or
subject to any other security device its interest in the Partnership
(including its General Partner interest) or all or any portion of the
Partnership's property, to obtain replacements of any mortgage,
encumbrance, pledge or other security device, and to prepay, in whole
or in part, refinance, increase, modify, consolidate or extend any
mortgage, encumbrance, pledge or other security device, all of the
foregoing at such terms and in such amounts as the General Partner
deems appropriate;
2. Amendment to Section 8.4(c) of the Agreement. The Agreement is hereby amended
by deleting the text of Section 8.4(c) in its entirety and substituting in
replacement thereof the following:
2
<PAGE> 3
Sell, exchange, lease, assign or otherwise transfer more than five
percent (5%) of the assets of the Partnership (as determined from
audited financial statements of the Partnership as of the close of
business of the immediately preceding fiscal year of the Partnership),
excluding (i) the Actions, (ii) sales of used or obsolete equipment in
the ordinary course of business, (iii) the grant of pledges, liens
and/or security interests, and (iv) any transfer as a result of the
enforcement of any pledge, lien and/or security interest.
3. Deletion of Section 8.4(e) of the Agreement. The Agreement is hereby further
amended by deleting Section 8.4(e) of the Agreement in its entirety and
substituting in replacement thereof the following:
(e) Intentionally deleted;
4. Consent of Limited Partners. The Limited Partners hereby expressly agree and
acknowledge that the purpose of this Amendment is to revise the Agreement to
permit the General Partner, for and on behalf of the Partnership, to (a) execute
and deliver a full, unconditional guarantee (on a joint and several basis with
LifePoint and other LifePoint Affiliates) of the obligations of LifePoint and
the LifePoint Affiliates under LifePoint's $150,000,000 Senior Subordinated
Notes due 2009 and all existing and future senior indebtedness of LifePoint and
the LifePoint Affiliates including, without limitation, LifePoint's Credit
Agreement dated May 11, 1999, as the same may be modified or amended from time
to time without notice to the Limited Partners (the "LifePoint Debt"), and (b)
to pledge all of the assets of the Partnership to secure such obligations under
the LifePoint Debt (the "Actions"). Further, the Limited Partners hereby
expressly authorize and consent to the taking of the actions by the General
Partner, for and on behalf of the Partnership (and any other actions necessary
or appropriate to further evidence, secure or permit LifePoint and/or the
LifePoint Affiliates to fully perform their obligations under the LifePoint
Debt).
5. Requisite Approval. Upon execution and delivery of the Amendment by the
parties hereto, which parties represent Partners owning the requisite percentage
of the issued and outstanding Units of any Class set forth in Sections 1.8 and
18.8 of the Agreement, the parties hereto expressly agree that this Amendment
shall constitute and be deemed to be an amendment to, and part of, the
Agreement.
6. No Other Changes. Except as expressly set forth or contemplated in this
Amendment, the terms and conditions of the Agreement shall remain in place and
shall not be altered, amended or changed in any manner whatsoever, except by any
further amendment to the Agreement made in accordance with the terms of the
Agreement, as hereby amended.
3
<PAGE> 4
7. No Requirement to Refer. The parties agree that nothing contained in the
Agreement or this Amendment is intended to induce any party to generate
referrals to the Hospital.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
executed and delivered shall be deemed an original effective for binding the
parties hereto, but all of which shall together constitute one and the same
instrument.
9. Defined Terms. Capitalized terms used herein without definition shall have
the same meanings ascribed to such terms in the Agreement.
10. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the substantive federal laws of the United States and the laws
of the State of Kansas, and the courts of competent jurisdiction, federal and
state, sitting in such State shall be the exclusive courts of jurisdiction, and
more particularly the federal courts in Wichita, Kansas, for venue purposes and
for litigation or other proceedings as between the parties that may be brought,
or arise out of, or by reason of this Amendment.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.
3 to Amended and Restated Limited Partnership Agreement of Dodge City Healthcare
Group, L.P., and hereby consent to the amendment and modification of the
Agreement provided herein as of the date first above written.
GENERAL PARTNER:
Dodge City Healthcare Partner, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
LIMITED PARTNERS:
Western Plains Regional Hospital, LLC
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Dodge City Outpatient Surgery Facility, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF INCOME AND BALANCE SHEETS FOR DODGE CITY HEALTHCARE GROUP, L.P.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 8,301
<ALLOWANCES> 2,997
<INVENTORY> 1,215
<CURRENT-ASSETS> 6,637
<PP&E> 20,485
<DEPRECIATION> 11,182
<TOTAL-ASSETS> 26,443
<CURRENT-LIABILITIES> 859
<BONDS> 10,740
0
0
<COMMON> 0
<OTHER-SE> 14,844
<TOTAL-LIABILITY-AND-EQUITY> 26,443
<SALES> 0
<TOTAL-REVENUES> 32,737
<CGS> 0
<TOTAL-COSTS> 15,383
<OTHER-EXPENSES> 4,819
<LOSS-PROVISION> 2,841
<INTEREST-EXPENSE> 619
<INCOME-PRETAX> 6,677
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,677
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
