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Res 015-96 1/16/1996A RESOLUTION NO. A (n A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WICHITP FALLS, TEXAS, AUTHORIZING THE MAYOR TO EXECUTE' A MANAGEMENT CONTRACT AND LEASE AGREEMENT WITH THE WICHITA COUNTY-CITY OF WICHITA FALLS HOSPITAL BOARD, THE WICHITA GENERAL SERVICE CORPORATION, AND WICHITA COUNTY, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF SAID AGREEMENT; FINDING AND DETERMINING THAT THE MEETING AT WHICH THIS RESOLUTION WAS PASSED WAS OPEN TO THE PUBLIC AS REQUIRED BY LAW. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WICHITA FALLS, TEXAS: SECTION 1. That the Mayor be and is hereby authorized to execute on behalf of the City of Wichita Falls a Management Contract and Lease Agreement with the Wichita County-City of Wichita Falls Hospital Board, the Wichita General service Corporation, and Wichita County, in accordance with the terms and conditions of said contract, attached hereto and made a part hereof for all purposes . SECTION 2 . It is hereby found and determined that the meeting at which this resolution was passed was open to the public as required by law. PASSED AND APPROVED this the 16th day of January, 1996. M A Y O R ATTEST: jTh e G0 (.(T) t City Clerk THE STATE OF`TEXAS )KNOW ALL MEN BY THESE PRESENTS: COUNTY OF WICHITA ) MANAGEMENT CONTRACT AND LEASE AGREEMENT This Management Contract and Lease Agreement This "Lease Agreement") is made and entered to be deemed effective January 1, 1996, by and between the Wichita County-City of Wichita Falls, Texas, Hospital Board, dba Wichita General Hospital, a body corporate and politic organized under the laws of the State of Texas (the "Board") , and Wichita General Service Corporation, a Texas non-profit corporation the Corporation") .Additional parties hereto, to the extent required for the covenants herein made, are the City of Wichita Falls, Texas and the Commissioners' Court of Wichita County, Texas. W I T N E S S E T H : WHEREAS, the Board was created by Resolutions of the City Council of the City of Wichita Falls, Texas, and the Commissioner's Court of Wichita County, Texas, pursuant to authority granted by Section 265. 031 et seq. of the Texas Health and Safety Code, in order to facilitate the operation of a general medical and surgical community hospital in the City of Wichita Falls, Texas (hereinafter referred to as the CITY-COUNTY LEASE DKS122195 Page 1 a Hospital") ; and, WHEREAS, Wichita General Service Corporation is a validly created and duly existing Texas non-profit corporation created under the provisions of the Texas Non-Profit Corporation Act, Article 1396-1.01 et. seq. , V.A.C.S. ; and, WHEREAS, on March 1, 1983, the Board issued and sold its Wichita County-City of Wichita Falls, Texas, Hospital Board Revenue Bonds, Series 1983" (the "1983 Hospital Bonds") in the total principal sum of $17, 600, 000. 00; and, WHEREAS, the 1983 Hospital Bonds were secured by a certain Trust Indenture dated as of the 1st day of March, 1983, defined below between the Board and the InterFirst Bank of Wichita Falls, Texas, (now known as Nations Bank of Texas, N.A. ) as Trustee (the "Trustee") ; and, WHEREAS, the 1983 Hospital Bonds were refunded in 1987 pursuant to powers granted to the issuer by Article 717k V.A.C.S. , and the refunding bonds are entitled Wichita County- City of Wichita Falls, Texas, Hospital Board Hospital Revenue Refunding Bonds (Wichita General Hospital Project Series 1987) The "1987 Hospital Bonds") , and were issued in the amount of 21,295,000. 00; and, WHEREAS, the 1987 Hospital Bonds are secured by a certain Trust Indenture dated as of March 1, 1987 ("Trust Indenture") between the Board and the Trustee; and, WHEREAS, The City Council of the City of Wichita Falls and CITY-COUNTY LEASE DKS122195 Page 2 A 1 the Commissioner's Court of Wichita County have resolved to authorize this Lease Agreement as evidenced by the resolutions attached as Exhibits "A" and "B" hereto; and, WHEREAS, by Corporate Resolution, the Directors of the Corporation have empowered its undersigned officers to enter into this Lease Agreement as evidenced by the corporate Resolution attached as Exhibit "C" hereto; and, WHEREAS, the Board has given serious consideration to the present and future health care needs of the residents of the community served by the Hospital and has determined that it is in the best interest of the community for the Board to enter into a Management Contract and Lease Agreement with the Corporation whereby the Corporation may become the operating entity of the Hospital to the extent authorized by this Agreement; and, WHEREAS, the Corporation is desirous of leasing the Hospital from the Board, such leasing being permitted and provided for by Section 265. 037 of the Texas Health and Safety Code, Revised Civil Statutes of Texas; and, WHEREAS, the Internal Revenue Service has determined the Corporation to be an organization described in Section 501 (c) (3) of the Internal Revenue Code of 1986, as amended, and has further determined that the Corporation is not a private foundation as described in Section 509 (a) of the Internal Revenue Code, said determinations being material conditions CITY-COUNTY LEASE DKS122195 Page 3 precedent and continuing substantial requisites for this agreement; NOW, THEREFORE, for and in consideration of the mutual covenants, promises and agreements herein contained, the Board and the Corporation, hereby covenant, promise and agree as follows: 1. Lease of Premises. In consideration of the covenants of the Corporation to provide community medical and hospital services and care at the Wichita General Hospital and related facilities, the Board does hereby lease to the Corporation and the Corporation does hereby lease and take from the Board, those certain tracts or parcels of land described in Exhibit D" hereto (the "Land") , together with all buildings, equipment, fixtures and facilities now or hereafter erected, constructed or situated thereon (the "Improvements") , together with all personal property used or useful in connection with the operation of the Hospital, including, but not limited to, equipment, machinery, furniture, vehicles, accounts, contract rights, interests resulting from Joint Venture Agreements, general intangibles, inventory, consumable supplies and small tools (the "Personal Property") , and together with all rights, powers, easements, licenses, rights of way, and other interests in property, real, personal or mixes, now owned and appurtenant thereto (the Land, the Improvements, the Personal Property, and interests appurtenant thereto, hereinafter collectively CITY-COUNTY LEASE DKS122195 Page 4 f 1 referred to as the "Leased Premises") . 2 . Warranty of Title. The Board represents and warrants that it owns the Leased Premises in fee simple, free and clear of all encumbrances, except as set forth and described on Exhibit "E" to this Lease Agreement, the Trust Indenture, and statutory restrictions imposed under Section 265.031 et seq. of the Texas Health and Safety Code. The Board further warrants that it has the lawful authority to enter into this Lease Agreement and covenants that it will execute or procure any further necessary assurances of title and authority that may be reasonably required for the protection of the Corporation. 3 . Covenant of Quiet Enjoyment. Except as otherwise expressly provided in this Lease Agreement, and so long as no default exists hereunder, the Board covenants to do no act to disturb the peaceful and quiet occupation and enjoyment of the Leased Premises by the Corporation. 4 . Warranty of Fulfillment of Existing Obligations. The Board represents and warrants that, at the time of the execution and delivery of this Lease Agreement, it is not in default of its obligations under the 1987 Hospital Bonds, and Trust Indenture, or any other obligations which are secured by, or related to the Leased premises. The Board further represents and warrants that the execution and delivery of this Lease Agreement will not constitute such a default. 5.Assignment of Board's Rights,. The Board assigns to CITY-COUNTY LEASE DKS122195 Page 5 l the Corporation, for the term of this Lease Agreement, all of the Board's rights under, or in connection with, leases of real estate, equipment leases, office leases, employment agreements, warranties and guarantees, other executory agreements, and transferrable g overnmental or quasi-governmental licenses and permits relating to the operation of the Hospital. In addition, the Corporation shall have access to, and the right to use, all customer lists of the Hospital, all books and records relating to the medical care, operations, financial condition, personnel and patients of the Hospital, and all telephone exchange numbers presently in use, or reserved for the use, by the Hospital. As further consideration for the Corporation of the obligationstheCororations hereingassumptionbyP described, and to the extent not already performed through previous agreements, the Board herewith assigns and delivers to the Corporation its deposits of operating capital and funds registered to its account and in its name in financial and savings institutions listed on the attached Exhibit "F" , if any, and if there are none, the word "None" shall be inserted on such exhibit. The Corporation acknowledges receipt of such deposits in the amounts set forth by separate letter executed contemporaneously with this Lease Agreement, if there are such sums on deposit. In accordance with Paragraph 10 of this Lease Agreement, the Corporation agrees to periodically and upon reasonable notice to provide the Board the Hospital's operating CITY-COUNTY LEASE DKS122195 Page 6 1 r information, including but not limited to, an accounting for all sums registered upon deposit or to its credit in such institutions. Further, the Corporation agrees to provide the Board at all times material to this Lease Agreement evidence of fidelity bond coverages on all employees entrusted with such funds. 6. Cash Security Interest. As additional security for this Lease Agreement, Corporation grants and pledges to the Board a security interest and first lien in and to any and all income, rents, profits, and gross revenues of the Corporation, including, but not limited to all patient revenues, third party payments, accounts receivable, monies in bank accounts, cash on hand, cash equivalents, securities, articles and items of equipment, inventory, furniture and supplies. The Corporation expressly covenants and agrees that it accepts and assumes in a fiduciary capacity, the above described monies and revenues along with all fiduciary duties and responsibilities attendant thereto, and agrees that it will at all times manage said monies and revenues in support of the Board and its duties and responsibilities as established by either statute or the Trust Indenture for the bonded indebtedness still in force. 7 . Term of Lease.The initial term of the Lease Agreement shall commence legally on January 1, 1996, and shall continue through the period ending on December 31, 2000. In CITY-COUNTY LEASE DKS122195 Page 7 the event the Corporation loses its 501(c) (3) exemption from the Internal Revenue Service, then this Lease Agreement shall be deemed to be voidable subject to the curative opportunities for default as provided for in this Lease Agreement. 8. Annual Budget. For each fiscal year of the Corporation which commences during the term of this Lease Agreement, the Corporation shall provide copies of its proposed operating and capital expenditures budgets and its management plan for such fiscal year (collectively, the "Budget Documents") to the BOARD sufficiently in advance of the date action is to be taken by the Corporation's Board of Directors with respect thereto to enable the members of the Board to review the budget documents, to ask questions of the Corporation's staff and to submit suggested additions, deletions and revisions to the budget documents to the Corporation's Board of Directors prior to its final action thereon. In addition, the members of the Board shall be asked to attend the meeting of the Corporation's Board of Directors at which action is to be taken on the budget documents to express their opinion thereon directly to the Corporation's Board of Directors. The Corporation'soration's Board of Directors shall, in good faith, review any suggested additions, deletions and revisions to the budget documents received from members of the board and attempt to be responsive thereto, but the final approval of the budget documents shall be solely within the CITY-COUNTY LEASE DKS122195 Page 8 A 1 control of the Corporation's Board of Directors. The Corporation's Board of Directors' approval of the capital expenditures budget as a whole shall not abrogate the requirements of paragraphs 10 and 24 hereof requiring Board approval for any individual capital expenditure exceeding 500,000. 9. Investment Portfolio. The Corporation will provide to the Board on a monthly basis reports on the Corporation's Investment Portfolio. The Corporation shall engage independent investment advisors to manage the portfolio in accordance with the Corporation's investment policy and an investment management agreement executed by both the Corporation and the investment advisor. 10. Provisions of Health Care. a) The Corporation will operate the Hospital and all affiliated entities in such a manner to ensure high quality and comprehensive hospital care, reflective of local standards of care, and responsive to the current and anticipated demands from and within the communities served by the Hospital, to assure an effective, efficient and economic program manifesting financial viability. For purposes of this Agreement, except where otherwise specifically modified, "affiliated entities" shall mean all of the land, hospitals, buildings, structures, equipment, services, and other facilities of every nature whatsoever constituting Wichita General Hospital, including but CITY-COUNTY LEASE DKS122195 Page 9 i 1 not limited to, the Women's Imaging Center, in Wichita Falls, Texas, together with all future Board-approved improvements, enlargements, and additions thereto, and replacements thereof, acquired or constructed from any sources, including the issuance of revenue bonds, and by the following or any subsidiary thereof: 1) the Wichita General Hospital of Wichita Falls, Texas, (2) the System as defined in Section 1.01 of the Trust Indenture, and (3) the Corporation and any other corporation or entity which includes any of these entities, including clinics and any other method of delivering hospital care as defined herein. Board approval shall be required for any capital improvement calling for an expenditure of more than 500, 000 per individual project or any expenditure for any interest in real estate. Title to any capital improvements for which title is granted shall be in the name of the Board. Such term does not include interests of independent non-owned joint venturers or partners, and does not include the resulting joint ventures or partnerships as long as the entry into such joint ventures or partnerships does not diminish the existing Hospital care available to medically indigent residents of Wichita County. The Corporation covenants and agrees that it will at all times use its best efforts to maintain and operate the Leased Premises and affiliated entities in compliance with all laws, ordinances, orders, rules, regulations, and requirements of duly constituted public authorities which may CITY-COUNTY LEASE DKS122195 Page 10 be applicable to the Leased Premises or to the repair and alteration thereof, or to the use or manner of use of the Leased Premises, and to meet standards and requirements and provide hospital care of such quality and in such manner as shall enable the Hospital to participate in, and provide services in connection with, recognized health and hospital insurance programs, and agrees that, so long as it shall remain a participating hospital under the Medicare, Medicaid, Blue Cross, Blue Shield, or other programs, for so long as those or any other appropriate programs remain viable, it will use its best efforts to comply with the standards and requirements for remaining a participating hospital thereunder.The Corporation further covenants that in the operation and maintenance of the Leased Premises and affiliated entities it will comply with applicable federal and state laws prohibiting discrimination based on race, religion, creed, color, sex or national origin. The Corporation further covenants and agrees that during the term of this Lease Agreement it will use its best efforts to continuously operate the Leased Premises in a manner that will maintain its certifications for reimbursements and licensure and its accreditation, if compliance with accreditation requiredstandardsisuired to maintain the operationsq of the Leased Premises and if failure to comply would adversely affect revenues from the Leased Premises. The Corporation agrees that it and all its affiliated entities shall admit CITY-COUNTY LEASE DKS122195 Page 11 s and/or provide treatment to any person at any facility under their control where hospital care is provided without regard to his or her ability to pay for hospital care rendered. It is agreed that the term "Hospital Care" shall include the various types of ser vi ces offered by the Hospitalital at the commencement date of this Lease Agreement, including the future development and improvement of those services, as well as such additional services as may be generally recognized and delivered by medical and surgical hospitals of similar size and nature in communities of similar size in the State of Texas, and which additional services the Corporation is able to deliver at the time the need for same arises. T he term "Hospital Care" shall not include physicians fees except those required of the Hospital by State or Federal Law or by contract. b) In consideration of the authorization of this Lease Agreement by the City Council of the City of Wichita Falls, Texas and the Commissioners' Court of Wichita County, Texas, and the covenants made herein by the Commissioners' Court with respect to payments and reimbursements to the Corporation for indigent care, the Corporation agrees that it shall provide hospital care to medically indigent residents of Wichita County as required of the Hospital by State or Federal law or by this contract. Notwithstanding anything to the contrary, the Hospital shall not be responsible for hospital care which is provided or has been provided by any other non-affiliated CITY-COUNTY LEASE DKS122195 Page 12 l entity, or care which exceeds the capacity and/or ability of the Hospital to deliver at the time the need for such care arises. c) The Corporation further covenants that it will neither refer nor permit the referral of County Jail inmates, juveniles in County detention, nor medically indigent residents of Wichita County to other institutions, unless it is documented as part of the patient record that the facilities of the Corporation or the expertise of the medical staff are inadequate or inappropriate to provide the patient care required for that patient. d) The rates, fees, charges, and rents established or caused to be established by the Corporation for the use of the Hospital shall be substantially commensurate with facilities of similar size and nature in communities of similar size within the State of Texas. Such rates, fees, charges and rent shall be sufficient to provide money adequate to meet its obligations hereunder, as well as to pay all operating costs and debt service, and provide reserves therefor, all as provided by State law and the existing Trust Indenture. 11. Provision for Indigent Health Care. Wichita County, pursuant to Section 61.001 et seq, of the Health and Safety Code (the "Code") will meet its statutory obligations for funding of health care services to the County's eligible residents under this Code. Accordingly, and CITY-COUNTY LEASE DKS122195 Page 13 simultaneously with the execution of this Lease Agreement, Wichita County will select the Corporation as one of the County-mandated providers of health care service pursuant to Section 61.030 of the Code. As a mandated provider, the Corporation will provide to eligible County residents hospital services set forth under the Code that are within its capacity as designated in paragraph 8 of this Agreement, and will be entitled to receive reimbursement from the County for such hospital services upon proper documentation of such services rendered, at a rate of reimbursement as then currently set by the Texas Department of Health. The County is obligated by State Law to reimburse mandated providers a total sum for accounts and services in sums up to ten percent (10%) of the then current gross revenue tax levy (hereinafter referred to as GRTL) and of the amount, the corporation agrees to a limitation in the first year of this Lease Agreement to ten percent (10%) of the ten percent (10%) GRTL figure as a maximum amount the Corporation can expect from the County until such time as the County has expended the ten percent (10%) of the GRTL and in subsequent years of this Lease Agreement a limitation of fifty However,figure. 50$gpercent ( ) of the ten percent (10%) in the subsequent years of this Lease Agreement the fifty (50%) limitation is subject to an adjustment as follows: For each one million dollars ($1,000, 000) of revenue and gains in excess of expenses and losses as determined by an annual audit of the CITY-COUNTY LEASE DKS122195 Page 14 hospital as of September 30th of each year, the limitation for the next year of the Lease Agreement will be reduced by ten percent (10%) ; provided, however that in no event shall the limitation be reduced below ten percent (10%) of the ten percent (10%) GRTL figure. The limitations contained herein shall be based upon the State of Texas fiscal year. This covenant by the County is accepted by the Corporation as consideration for this Lease Agreement, and to induce it to provide indigent care within the limits herein set forth, provided, however, that the county hereby additionally covenants to expend reimbursements to other mandated providers to the extent necessary to provide indigent care services incurred outside the Hospital up to the County's remaining statutory responsibility. Once the county has expended the amount of ten (10%) of the GRTL and thus qualifies for State pool reimbursement of eighty (80%) percent of all qualified additional indigent health care expenditures, the Corporation shall receive reimbursement per the Texas Department of Health formula from the County of all eligible expenditures without limitation. Should the Corporation cease to be a mandated provider for any reason of indigent health care for the County during the term of this Lease Agreement, then in that event this Lease Agreement shall terminate as of the date the Corporation ceases to be a mandated provider. CITY-COUNTY LEASE DKS122195 Page 15 12 . Special Provisions for operating Deficits. a) If the schedule of rates, fees and charges for the system, defined as "Revenues" in Section 1.01 of the Trust Indenture, does not for any reason produce in any fiscal year an amount of net revenues sufficient for the purposes stated in Section 5.01(a) (1) of the said Trust Indenture, the Lease Agreement shall be subject to a declaration of default by the Board. Upon the making of such declaration of default, all properties addressed by this Lease Agreement, of any nature personal, including all cash, bank whatsoever, real or p g accounts, and securities of whatever nature shall revert to the Wichita County, City of Wichita Falls, Texas, Hospital Board, subject to paragraphs (c) and (d) of this section.Net revenues, for purposes of this Lease Agreement, shall be defined as the excess of revenues over expenses including depreciation, such depreciation computed on a basis consistent with generally accepted accounting principles. b) The special provision for operating deficits shall be applicable only if all the Net Revenues of all affiliated entities of the Corporation are included in the calculation for the System. For purposes of this Paragraph, affiliated entities shall mean all of the hospitals, buildings, structures, equipment, services, and other facilities of every nature whatsoever constituting Wichita General Hospital in Wichita Falls, Texas, and the Corporation, together with all CITY-COUNTY LEASE DKS122195 Page 16 future improvements, enlargements, and additions thereto, and replacements thereof, acquired or constructed from any sources, including the issuance of revenue bonds, and by the following or any subsidiary thereof: (1) the Wichita General Hospital, in Wichita Falls, Texas, (2) the System as defined in Section 1.01 of the Trust Indenture, (3) the Corporation and/or (4) any related holding company or other corporation or entity which includes any of these entities, including but not limited to Joint Venture interests, professional office buildings, clinics, ambulatory care units, data processing, parking garages, nursing homes, sales of in-patient or out-patient drugs or supplies, alcoholism/detoxification programs, real estate companies and service corporations.However, this definition of the "System" shall not be deemed to include the Wichita General Hospital Foundation or any other philanthropic entity or organization principally funded by charitable contributions. c) For the Corporation to invoke the special provisions notify the Board, the 10 a yofparagraphitmustnot P g Commissioners' Court of Wichita County, Texas and the City Council of Wichita Falls, Texas, in writing, of the circumstances requiring the invocation. After providing such notice, the Corporation, the Board, the City Council of Wichita Falls, Texas and Commissioners' Court of Wichita County, Texas, shall enter into negotiations for reviewing the status of the CITY-COUNTY LEASE DKS122195 Page 17 Lease Agreement. d) If, within ninety (90) days after receiving such written notice of the deficit and requested review of this Lease Agreement, the Board, the City Council of Wichita Falls, Texas, the Commissioners' Court of Wichita County, Texas and the Corporation have not agreed upon a means to make up the deficit that resulted in the invoking of the special provision, then the Corporation shall have the right to terminate this Lease Agreement upon ninety (90) days written notice. e) In no event shall any provisions of this Lease Agreement result in obligating Wichita County, Texas or the City of Wichita Falls, Texas to provide for payments for indigent health services in excess of the obligation of the County or City under State and Federal law. f) The Commissioners' Court of Wichita County, Texas, and the City of Wichita Falls, Texas, reserve the right to provide hospital care in any manner authorized by law, including but not limited to providing such care through the Corporation or its affiliated entities, or such other provider or entity as the Commissioners' Court of Wichita County and City of Wichita Falls may determine. The exercise of this right shall not enlarge the responsibilities of the Corporation as set forth herein. g) The Corporation agrees to indemnify and hold the Board, the County and the City harmless against any and all CITY-COUNTY LEASE DKS122195 Page 18 claims, demands, charges, cost and expenses including attorney's fees for defense of such claim and demands arising from the Corporation's operations and use of the Leased Premises. 13 . Mutual Aareement to Terminate. Notwithstanding any provision herein to the contrary, this Lease Agreement may be concluded or terminated by mutual agreement of the parties in writing at any time during the initial term or any renewal hereof. In such event, all properties leased, pledged, encumbered, or otherwise assigned hereunder shall revert to and become the property of the Board, a political subdivision of the State of Texas, as shall all other assets and liabilities of the Corporation or affiliated entities be distributed to or assumed by said Board, and the Corporation shall then be dissolved in accordance with the laws of the State of Texas and applicable regulations of the Internal Revenue Code applicable to 501(c) (3) organizations generally. 14 . Non-Renewal or Termination. In the event the Corporation or the Board elects not to renew this Lease Agreement at the end of any term, or it be terminated as provided herein, then in that event the Corporation shall then be dissolved and all assets and liabilities of the Corporation shall be distributed or assumed by the Board as specified in paragraph 11 herein. 15. Condition of Premises. The Corporation shall CITY-COUNTY LEASE DKS122195 Page 19 a a maintain the Leased Premises in good repair and operating condition. The Corporation shall permit no liens to be affixed to the realty and improvements. Any such encumbrances so created shall be void and of no validity, force or effect, as an attempt to affix a lien against realty owned by a Texas political subdivision. The Corporation agrees to indemnify and hold the Board harmless from all costs and expenses in removing such liens. 16. Operating Information. The Corporation shall furnish the Board copies of minutes of the Corporation Board meetings and shall furnish periodically the Board with copies of the annual operating and financial statements of the Hospital and periodic reports. The Board will be permitted, upon giving reasonable advance notice t o the Corporation, to inspect the Leased Premises and review records related to the operations thereon so that the Board may be satisfied as to the keeping of the covenants and conditions contained in this Lease Agreement. The Corporation shall also be required to furnish to the Board upon request, evidence of compliance with licensing, accreditation and indigent care requirements. The City and County shall be furnished the same information upon reasonable notice. The Corporation will cause the hospital to have its financial statements audited by independent certified public accountants, acceptable to the Board, such audit to be conducted in CITY-COUNTY LEASE DKS122195 Page 20 a accordance with generally accepted auditing standards. Such financial statements shall be prepared in accordance with general accepted accounting principles. Additionally the Board may require special reports as a part of the audit engagement with the content and form of those reports specified by the Board. The Corporation will submit its recommendation to the Board of the audit firm to conduct the annual audit six months prior to its fiscal year end. The audit firm shall deliver its audit report to the Board concurrently with or prior to the delivery of such report to the Corporation. 17. Assignment and Sublease Prohibited. Except as provided herein, neither this Lease Agreement nor any part thereof or the Leased Premises shall be assignable or sublet without the express written approval of the Board. 18. Payment of Obligations; Additional Indebtedness. The Corporation shall keep all obligations created by or arising from the lease of the Leased Premises paid and discharged before they become delinquent, and if the Board should in the future at the Corporation's request incur other or further debts or obligations related to the Leased Premises the "Additional Indebtedness") , the Corporation will likewise keep, perform and discharge the additional indebtedness at the Corporation's sole cost and expense so that the Board is fully protected. 19. Insurance Coveraae for the Board. The Corporation CITY-COUNTY LEASE DKS122195 Page 21 shall provide, either under its own blanket insurance policies or under a separate insurance policy, directors' and officers' liability insurance, which insurance shall jointly and severally insure the Board and the individual members of the Board (the "Board Members") . Such insurance shall provide for coverage for each Board Member in an amount of not less than One Million Dollars ($1,000,000.00) ; provided, however, that the Corporation shall only provide insurance for the Board and the Board Members for claims arising during or related to the operations of the Hospital during the term or extensions thereof of the Lease Agreement, and further provided that the Corporation shall not be required to provide insurance for the Board or the Board Members against any claims arising out of any willful or wrongful misconduct of the Board or any of the Board Members or other standard exclusions from such policies. 20. Insurance Coverage for the Leased Premises. a) At a minimum, the Corporation will provide and maintain continuously during the initial term and any extended term, an insurance policy or policies covering the Leased Premises against loss or losses which are required to be provided by the Board by Section 7. 11 of the Trust Indenture. If requested by the Board, and if such insurance is available at reasonable rates, the Corporation shall carry, at its own expense, public liability insurance in reasonable amounts to protect the Board; and CITY-COUNTY LEASE DKS122195 Page 22 l b) (i) In case of the destruction of or damage to the Leased Premises, or any part thereof, for which destruction or loss insurance is maintained, the Corporation may collect the insurance proceeds for such loss, for and on behalf of the Board, but (1) shall use the proceeds for the repair or replacement of the Leased Premises so that the Leased Premises are restored as nearly as possible to their condition prior to the casualty, and (2) subject to the provisions for control over and use of insurance proceeds contained in the Trust Indenture. Should such insurance proceeds be insufficient to properly repair or restore the Leased Premises (and needed additional funds not be readily obtainable from other acceptable sources of financing) , or such repair or restoration be otherwise not feasible, the Lease Agreement may be terminated by either party. ii) Any insurance adjustment which may be made shall be made by the Corporation with the consent of the Board, which consent shall not be unreasonably withheld. 21. Annual Budget of the Board. The Board shall submit to the Corporation an annual budget to be funded by the Corporation. Such budget shall be submitted on or before September 1 of each year this Lease Agreement remains in effect. The Board shall use the funding provided by the Corporation to pay the operating expenses of the Board. In no event shall any annual budget of the Board exceed $1, 000. In CITY-COUNTY LEASE DKS122195 Page 23 the event unanticipated expenses are incurred or expected to be incurred by the Board, the Board may request an amendment to its budget from the Corporation. Such request for additional funding shall be made in a timely fashion by the Board and approval shall be discretionary by the Corporation. 22 . Condemnation. a) If, during the term of this Lease Agreement or any extension or renewal thereof, all or a substantial part substantial part being defined as any portion of the Leased Premises, the condemnation of which would unduly interfere with or burden the intended use of the Leased Premises) of the Leased Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain, or should be sold to the condemning authority under threat of condemnation, the Corporation shall collect the condemnation award or the amount of the settlement in lieu thereof, for and on behalf of the Board, but (1) shall use such amount for the purchase of property acceptable to the Corporation and the Board and on such property shall construct a replacement facility for the Hospital, and (2) subject to any provision for control over and use of such amount contained in the Trust Indenture. Should the amount received upon condemnation or settlement be insufficient (and needed additional funds not be readily obtainable from other acceptable sources of financing) , or the Corporation and the CITY-COUNTY LEASE DKS122195 Page 24 Board be unable to agree upon a proper site for the replacement facility or the construction of the replacement facility be otherwise not feasible, this Lease Agreement may be terminated by either party and the provisions of paragraph 12 hereof shall control. b) If this Lease Agreement terminates under this Paragraph 22 , the Board and the Corporation shall each be entitled to receive and retain such separate awards and portions of lump sum awards as may be allocated to their respective interests in any condemnation proceedings. The termination of this Lease Agreement shall not affect the rights, if any, of the respective parties to such awards. 23 . Licenses. The Corporation shall take such actions as may be necessary to keep any governmental and quasi- governmental licenses and permits in force which are required to operate the Hospital or occupy the Leased Premises and shall comply with any lawful requirements relating to the operation of the Hospital or occupation of the Leased Premises. The Board agrees to join and cooperate fully with the Corporation in such actions when reasonably necessary for the Corporation to meet its obligations under this Lease Agreement. Loss of licensing shall constitute a material breach of this Lease Agreement. 24 . Additional Facilities. Written approval of the Board shall be required prior to enlargements, additions, CITY-COUNTY LEASE DKS122195 Page 25 replacements or substitutions to the Leased Premises (the Additional Facilities") ; (1) that exceed the provisions of Section 7.05 of the Trust Indenture; (2) or if the amount to be expended for any enlargement, addition, replacement, or substitution to the Leased Premises is in excess of the budgeted depreciation expense for the period expended and would cause action to be initiated under Paragraph 10 herein. Additionally, the Corporation agrees to submit all proposed capital expenditures valued in excess of $500, 000 per individual project for the review and approval of the Board prior to such expenditure by the Corporation. The Board and the Corporation further agree to cooperate in all matters in connection with any proposed tax-exempt financing for the construction of such additional facilities and issuance of bonds to finance such construction when determined to be in the best interest of the Hospital and the community. The additional facilities, when constructed, shall become a part of Approval Leased Premises and shall be owne d by pp rovaltheBoard. shall not be granted, if in the opinion of bond counsel, such approval would constitute violation of the provisions of any existing bond trust indenture. 25. Payment of Impositions: Compliance with Laws. a) Before interest or penalties are due thereon, the Corporation shall pay and discharge all taxes of every kind and nature (including, for example, federal income tax withholding CITY-COUNTY LEASE DKS122195 Page 26 on wages) , all charges for any easement or agreement maintained for the benefit of any of the Leased Premises, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, ad valorem taxes, if any, and all other public charges whether of like or different nature, imposed upon or assessed against the Board, the Corporation or the Leased Premises, or arising in respect of the occupancy, use of possession thereof (collectively, the Impositions") . In any event that any Impositions may be paid in installments, the Corporation shall have the option to pay such assessment in installments, and in such event, the Corporation shall be liable for only those installments which become due during the term of the Lease Agreement. The Corporation shall prepare and file all tax reports required by governmental authorities which relate to the Impositions. The Corporation shall deliver to the Board, within twenty (20) days of receipt thereof, copies of all settlements and notices pertaining to the impositions which may be issued by any governmental authority. b) The Corporation shall comply with and conform to all present and future laws, codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations and requirements of every duly constituted governmental authority and all covenants, restrictions and conditions of record which may be CITY-COUNTY LEASE DKS122195 Page 27 applicable to the Corporation or the Leased Premises, or to the use, manner of use, occupancy, possession, operation or maintenance of the Leased Premises (collectively, the "Legal Requirements") . c) The Corporation and the System's properties, real and personal, whether owned or leased by the Board or the Corporation will remain exempt from ad valorem taxes so long as the Corporation complies with the terms and conditions of the Lease Agreement and is not in default. 26. Permitted Contest. The Corporation shall not be required to (i) pay any Imposition, or (ii) comply with any Legal Requirement so long as the Corporation shall contest, in good faith and at its expense, the existence, the amount, or the validity thereof, or the extent of its or the Board's liability therefor, by appropriate proceedings which shall operate during the pendency thereof to prevent (i) the collection of, or other realization upon, the Imposition, (ii) the sale, forfeiture or loss of any of the Leased Premises to satisfy the payment of any Imposition or payment of any damages caused by the violation of any such Legal Requirement, (iii) any interference with the use of occupancy by the Corporation of any of the Leased Premises, and (iv) the cancellation of any fire or other insurance policy. The Corporation further agrees that each such contest shall be promptly and diligently prosecuted to a final conclusion, except that the Corporation CITY-COUNTY LEASE DKS122195 Page 28 further agrees that each such contest shall be promptly and diligently prosecuted to a final conclusion, except that the Corporation shall, so long as the conditions of the first sentence of this paragraph are at all times complied with, have the right to attempt to settle or compromise such contest through negotiations. The Corporation shall pay, and save the Board, County or City harmless against, any and all losses, judgments, decrees and costs (including reasonable attorney's fees and expenses) in connection with any such contest and shall, promptly after the final determination of such contest, fully pay and discharge the amounts which may be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all cost and expensesfines, interests, c enses thereof or inP connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof. No such contest shall subject the Board to the risk of any civil or criminal liability or contravene any provision of the 1987 Hospital Bonds or the Trust Indenture. 27 . Default. a) If the Board, County, and/or City should claim that the Corporation defaulted in the performance of one or more of its obligations hereunder, the Board shall give the Corporation written notice specifying the claimed default. If the Corporation does not contest the claimed default it shall have CITY-COUNTY LEASE DKS122195 Page 29 thirty (30) days from the receipt of such notice to (1) pay any delinquent amounts due hereunder; or (2) perform any of the or other provisions of this Leasepcovenants, conditions Agreement; provided, however, that if such performance required work to be done, actions to be taken, or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such thirty (30) day period, no default shall be deemed to have occurred or to exist if, and so long as, the Corporation shall commence such performance within the thirty (30) day period and shall diligently and continuously prosecute the same to completion. If the actions required by this paragraph are not undertaken by the Corporation, then the Board may terminate the Lease 1 the Corporation Agreement. In no event shall oration be granted moreP than ninety (90) days to cure the declared default. b) Upon the occurrence of such events of default, the Board shall have the right to terminate this Lease, in which event the Corporation shall immediately surrender the Leased CityPremisestotheBoard, l or County. Should the Board at anyY time terminate this Lease Agreement for any breach, in addition to any other remedies it may have, it may recover from the Corporation all damages it may incur by reason of such breach, including the cost of recovering the Premises, and all of such amounts shall be immediately due and payable from the Corporation to the Board, City or County. Pursuit of any of CITY-COUNTY LEASE DKS122195 Page 30 the remedies of the Corporation shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any damages accruing to the Board by reason of the violation of any of the terms, provisions, and covenants herein contained. c) If the Corporation fails to meet, comply with, or perform any covenant, agreement, or obligation on its part required within the time limits and in the manner required in this Lease Agreement, the Corporation shall be deemed to be in default. Such obligations specifically include but are not limited to the obligations set forth in Paragraphs 8, 9 and 14 of this Lease Agreement. If the Corporation is in default, the Board or the County may enforce specific performance of this Lease Agreement against the Corporation. d) If any affiliated entity fails to meet, comply with, or perform any covenant, agreement, or obligation on its part required within the time limits and in the manner required in this contract, the affiliated entity shall be deemed to be in default.If any affiliated entity defaults and fails to perform any obligations of the Corporation under this Lease Agreement, the Board of the County may enforce specific performance of this contract against the affiliated entity. 28. Assignment to Affiliated Entity of the Corporation. The Corporation may assign any or part of its rights under this CITY-COUNTY LEASE DKS122195 Page 31 Lease Agreement to an affiliated entity of the Corporation, upon the conditions that said assignee accept such assignment and assume and agree to perform all obligations of the Corporation hereunder and such assignment receives the express written consent of the Board. 29. Board's Right to Re-enter the Leased Premises. In the event of default herein, which default remains uncontested or uncured by the Corporation as provided in Paragraph 24 of this Lease Agreement, the Board shall have the right, after giving the notice provided for in Paragraph 24 , in addition to such other remedies as may be available to it at law, to re- enter the premises and to resume possession of the Leased Premises and to take possession of all Personal Property leased to the Corporation and covered by this Lease Agreement, and to resume control over all Hospital operations upon the Leased premises. To the extent of any contract, sublease, lease, agreement or other arrangement which has been entered into by the Corporation or any of its affiliated entities pursuant to the terms of Paragraph 25, the Board may assume management and control over all services, to the extent of the ownership interest of the Corporation or affiliated entity, provided pursuant to Paragraph 15 and 25, including without limitation possession of all personal property, real property, mixed property, cash, bank accounts, securities or accounts receivable utilized in the performance of said services. CITY-COUNTY LEASE DKS122195 Page 32 30. Termination of the Lease. The Corporation shall leave as a part of the Leased Premises all fixtures which have been installed, and all personal property acquired for the Hospital with Corporation funds, during the term of the Lease Agreement. 31. Medical Staff. The Corporation agrees to maintain the medical staff by-laws and rules and regulations in compliance with the requirements of appropriate accreditation authorities. 32 . Hospital Auxiliary. The Corporation agrees to maintain affiliation with the Wichita General Hospital Auxiliary. 33 . Hospital By-Laws. The Corporation agrees to maintain in force lawful by-laws; reserving however, autonomy to review, amend, and adopt such by-laws as reasonably necessary for the operation of the Leased Premises, within the covenants of this Lease. 34 . Composition and Appointment of the Corporation Board. a) The Board of Directors of the Corporation shall consist of at least eleven (11) members, two of whom shall be members of the Board. One of the two members of the Board serving on the Corporation's Board of Directors shall be selected by the City Council of the City of Wichita Falls, Texas and the other member of the Board so serving shall be selected by the Commissioners Court of Wichita County, Texas. CITY-COUNTY LEASE DKS122195 Page 33 b) The Board of the Corporation shall be autonomous and self-perpetuating and shall elect and appoint its own successor members except for the members of the Board appointed pursuant to paragraph 34 (a) . c) The original and all successor members of the Board of Directors of the Corporation must be residents of Wichita County at the time of appointment and shall remain such at all times during their tenure on the Board. 35. Invalidity of Provisions. If any provision of this Lease Agreement shall be invalid, illegal, unenforceable, or in contravention of the Trust Indenture, the validity, legality and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. If a particular provision's invalidity would render the Lease Agreement invalid, then the Board and Corporation agree to modify the Lease Agreement, if such modification is legally possible, to preserve the original intent of the Board and Corporation. 36. Notices. All notices required, permitted, or desirable hereunder shall be sufficiently given if sent by certified United States Mail, postage prepaid, addressed as follows: Chairman of the Board Wichita County-City of Wichita Falls, Texas, Hospital Board 1600 8th Street Wichita Falls, Texas 76301 CITY-COUNTY LEASE DKS122195 Page 34 President and C.E.O. Wichita General Service Corporation 1600 Eighth Street Wichita Falls, TX 76301 Copies of such notice shall be provided at the same time to the Wichita County Judge and the City Manager of the City of Wichita Falls. 37 . Governing Law. This Lease Agreement is being executed and delivered, and is intended to be performed, in the County of Wichita, State of Texas, and the laws of such State shall govern the validity, construction, enforcement, and interpretation of this Lease Agreement, unless otherwise specified herein. 38. Entirety and Amendments. This Lease Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings, if any, relating to the Leased Premises, and may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. 39. Multiple Counterparts. This Lease Agreement may be executed in a number of identical counterparts. If so executed, each of such counterparts is to be deemed an original for all purposes, and all such counterparts shall, collectively, constitute one agreement, but in making proof of this Lease Agreement, it shall not be necessary to produce or account for more than one such counterpart. 40. Parties Bound. This Lease Agreement shall be binding CITY-COUNTY LEASE DKS122195 Page 35 upon and inure to the benefit of the Board and the Corporation and their respective heirs, personal representatives, successors, and permitted assigns. 41. Amendment. This Lease Agreement may be amended or modified at any time by mutual agreement of all the parties but only in writing duly executed by all parties. 42. Further Acts. In addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by the Board and the Corporation, the Board and the Corporation agree to perform, execute and/or deliver or cause to be performed, executed and/or delivered any and all such further acts, deeds, and assurances as may be necessary to consummate the transactions contemplated hereby. The Corporation agreesrees further that it shall not enter into anyP agreement or contract with a health care provider which is not an affiliated entity which would materially and adversely affect the hospital services provided by the Hospital without obtaining the prior consent of the Board. 43 . Time of the Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Lease Agreement. IN TESTIMONY WHEREOF, the parties to this Lease Agreement have executed it as of the day and year first above written, each representative of each party hereby certifying that individual has been duly authorized to execute the same in the CITY-COUNTY LEASE DKS122195 Page 36 4 capacity shown. BOARD: CORPORATION: Wichita County-City of Wichita General Service Wichita Falls, Texas, Corporation Hospital Board By: By: Chairman Chairman APPROVED: City W. hi a Fa i4 e. =s Attest: By: 10' Ma or City ler Commissioners' Court of Wichita County, Texas By: County Judge STATE OF TEXAS COUNTY OF WICHITA This instrument was acknowledged before me on the of the day of 199_, by Wichita County-City of Wichita Falls, Texas, Hospital Board, in such capacity and on behalf of said Board. Notary Public, State of Texas STATE OF TEXAS CITY-COUNTY LEASE DKS122195 Page 37 COUNTY OF WICHITA This instrument was acknowledged before me on the day of 199 , by Chairman of the Wichita General servi a Corporation, a Texas Corporation, in such capacity and on behalf of said Corporation. Notary Public, State of Texas STATE OF TEXAS COUNTY OF WICHITA This instrument was acknowledged before me on the day of 199 , by Michael Lam, Mayor of the City of Wichita Falls, Texas, in such capacity and on behalf of said Board. Notary Public, State of Texas STATE OF TEXAS COUNTY OF WICHITA This instrument was acknowledged before me on the day of 199 , by Nick Gipson, County Judge, for the Commissioners' Court of Wichita County, Texas, in such capacity and on behalf of said Commissioners' Court. Notary Public, State of Texas CITY-COUNTY LEASE DKS122195 Page 38 I i " STATE OF TEXAS KNOW ALL MEN BY THESE PRESENTS: COUNTY OF WICHITA § ADDENDUM NUMBER ONE TO MANAGEMENT CONTRACT AND LEASE AGREEMENT WHEREAS, the Wichita County-City of Wichita Falls, Texas, Hospital Board, d/b/a Wichita General Hospital, the Wichita General Service Corporation, the City of Wichita Falls, Texas, and the County of Wichita, Texas, have executed a Management Contract and Lease Agreement amongst themselves dated January 1, 1996; and, WHEREAS, it is desirable to amend said contract by addendum so as to address the issues of expenditures of excess funds and investments of net revenues. NOW, THEREFORE, the undersigned parties to said original Hospital Management Contract and Lease Agreement hereby agree to the followin g addendum: 1 . That paragraph 8, entitled Annual Budget, be amended to add at the end of said paragraph the following language: "Expenditures of excess funds outside of the annual operating and capital budgets shall require the approval of both the Corporation and the Board before being encumbered. Excess funds shall be defined as prior year funds 2 not pledged to support the annual capital and operating budgets. " 2 . That paragraph 9, entitled Investment of Net Revenues, be amended to add at the end of said paragraph the following language: "Investments by the Corporation shall be made in conformance with the Public Fund Investment Act, Chapter 2256 of the Texas Government Code. " IN TESTIMONY HEREOF, the parties to this addendum have executed it as of the day and year indicated, each representative of each party certifying that the individual has been duly authorized to execute the same in the capacity shown. BOARD: CORPORATION: Wichita County-City of Wichita General ServiceYY Wichita Falls, Texas, Corporation Hospital Board By: By: Chairman Chairman APPROVED: City of Wichita Falls Texas Attest: C .VU CCJ Mayor City Clerk 3 Commissioners' Court of Wichita County, Texas By: County Judge STATE OF TEXAS COUNTY OF WICHITA § This instrument was acknowledged before me on the day of 1996, by Chairman of the Wichita County-City of Wichita Falls, Texas, Hospital Board, in such capacity and on behalf of said Board. Notary Public, State of Texas STATE OF TEXAS COUNTY OF WICHITA § This instrument was acknowledged before me on the day of 1996, by Chairman of the Wichita General Service Corporation, a Texas Corporation, in such capacity and on behalf of said Corporation. Notary Public, State of Texas STATE OF TEXAS COUNTY OF WICHITA § This instrument was acknowledged before me on the \lot day of ¢^ 1996, by Michael Lam, Mayor of the City of Wichi : Fall1ss, Texas, in such capacity and on behalf of said Corporation. 81%;••Zo. "OA‘us.)%1.9.4. Y.?r, •,, Notary Public, State of Texas i t LINDA MERRILL y*(3*i Notary Public,State of Toxw;;sdd 4 My Commission Expris 12.22•7Q AI i 4 STATE OF TEXAS COUNTY OF WICHITA § This instrument was acknowledged before me on the day of 1996, by Nick Gipson, County Judge, for the Commissioners ' Court of Wichita County, Texas, in such capacity and on behalf of said Commissioners ' Court. Notary Public, State of Texas