JOINT DEVELOPMENT AGREEMENT

Transcription

1 JOINT DEVELOPMENT AGREEMENT This Joint Development Agreement ( Agreement ) is entered into this 11th day of May, 2015 by and among the Randolph County Commission (the Commission or County ), the Randolph County Health Care Authority ( Randolph Authority ), The Health Care Authority of the Town of Wedowee ( Wedowee Authority ) and Tanner Medical Center, Inc. ( Tanner ) (each, a Party, and collectively, the Parties ). WHEREAS, Randolph Authority is the owner of Wedowee Hospital, that building known as the Medical Arts Building, that building known as the Dr. Israel Building and assets related to the foregoing and leases such assets to Wedowee Authority, which operates Wedowee Hospital pursuant to the lease with Randolph Authority; and WHEREAS, Wedowee Hospital is experiencing financial difficulty and uncertainty with regard to its long-term ability to provide high quality, cost effective health care services to the residents of Randolph County, Alabama and is an outdated hospital facility in need of replacement; and WHEREAS, Tanner has donated at least $1,000, to date to the financial support of Wedowee Hospital, provides the services of an experienced hospital administrator to manage Wedowee Hospital at no charge and has invested at least $7,000, in Randolph County to create a modern medical office building and urgent care center; and WHEREAS, the Commission, Randolph Authority and Wedowee Authority have each separately sent a letter to Tanner expressing their desire and intent to partner with Tanner to help ensure the long-term availability and accessibility of quality health care in Randolph County, Alabama through the replacement of Wedowee Hospital with a new, state-of-the-art hospital providing twenty-four hour a day, everyday emergency services and such other hospital services as are needed and appropriate for Randolph County; and WHEREAS, after extensive discussion and study by and amongst the Parties, the Parties have concluded that the most effective approach to ensuring the long-term availability and accessibility of quality health care to the residents of Randolph County is the development and construction of a new state-of-the-art hospital facility in Randolph County to replace Wedowee Hospital, to be owned by the Randolph Authority and leased and operated by Tanner (the Hospital ) with the closure upon commencement of operations of the Hospital of the Wedowee Hospital and the Medical Arts Building and the Dr. Israel Building; and WHEREAS, the Parties have also concluded that the financial support of the residents of Randolph County is an important and necessary step to ensure the construction and long-term viability of the Hospital, and therefore have agreed that the development and construction of the Hospital shall be conditioned on the approval by the voters of Randolph County of up to a one percent increase to the sales tax levied in Randolph County; and WHEREAS, the Parties have come to an agreement with respect to the basic material terms and conditions of the development, financing, construction, equipping and leasing of the Hospital (the Affiliation ) which may be formalized in separate definitive agreements as provided in this Agreement; and

2 WHEREAS, the Parties desire that the actions taken in accordance with this Agreement in furtherance of the Affiliation shall be accomplished within the required time periods set forth in this Agreement, unless the Parties subsequently mutually agree in writing to amend, modify or revise such requirements. NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and sufficient consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: 1. Approval of Up to a One Percent Sales Tax Increase. Notwithstanding anything in this Agreement to the contrary, the Parties shall not be obligated to perform their respective obligations described in any other provision of this Agreement unless the conditions set forth in Sections 1(a), 1(b) and 1(c) below are satisfied. (a) Enactment of Legislation to Hold Special Election. As a condition to the Parties respective obligations provided in every other provision of this Agreement, no later than April 15, 2015, legislation shall have been introduced in the Alabama Legislature to permit the Commission, after conducting an advisory election by the eligible voters of Randolph County on or before October 31, 2015, for the purpose of indicating their support, to levy up to a one percent increase in the sales tax levied within Randolph County, Alabama for the support of the existing Wedowee Hospital and construction and support of the Hospital in Wedowee, Alabama as described more fully below (the Legislation ). On or before June 15, 2015, the Alabama Legislature shall have passed and the Governor of Alabama shall have signed the Legislation, which is to become effective upon the Governor of Alabama s signature, approving the special election to be held in Randolph County, Alabama, to approve up to a one percent increase in the sales tax levied within Randolph County, Alabama for the support of the existing Wedowee Hospital and construction and support of the Hospital in Wedowee, Alabama and granting authority to the Commission to levy such tax. The Legislation shall further provide that upon complete repayment of any debt issued by the Randolph Authority or any other entity or person pursuant to Section 3 of this Agreement for the construction of the Hospital, the additional sales tax levy shall immediately cease. In furtherance of the satisfaction of the condition described in the preceding sentence, the Commission, Randolph Authority and Wedowee Authority each individually agree in good faith to use their best efforts to: (i) secure passage and enactment of the Legislation and (ii) to generate community support of the passage of the Legislation. Tanner shall engage Capital Resources of Alabama, LLC as sales tax legislation consultant for the purpose of drafting the Legislation and generating support in the Alabama Legislature for the passage of the Legislation. All costs incurred by Tanner in the research and review of possible candidates that resulted in selection of Capital Resources of Alabama, LLC, shall be the sole responsibility of Tanner. All costs and fees incurred by Tanner or the Commission for the services provided by Capital Resources of Alabama, LLC shall be paid by Tanner and reimbursed to Tanner by the Commission if the additional sales tax is approved by the eligible voters of Randolph County on or before October 31, 2015, as described in Section 1(b) of this Agreement; provided, however, that such costs and fees may be reimbursed to Tanner from proceeds of the Financing (defined in Section 3 of this Agreement) pursuant to Section 3 of this Agreement if such Financing occurs. 2

3 (b) Approval by Voters of Randolph County. As a condition to the Parties respective obligations provided in every other provision of this Agreement, provided that the Legislation described in Section 1(a) above shall have been enacted approving the authority of the Commission to levy up to a one percent sales tax increase after a special election or referendum to be held in Randolph County, Alabama, then no later than October 31, 2015, the County shall hold the election or referendum for the eligible voters of Randolph County to approve or disapprove up to one percent increase in the sales tax to be levied in Randolph County for the support of the existing Wedowee Hospital and construction and support of the Hospital as described more fully below. In furtherance of the satisfaction of the condition described in the preceding sentence, the Commission, Randolph Authority and Wedowee Authority each individually agree in good faith to use their best effort to generate support for the approval by the voters of Randolph County, Alabama of such sales tax increase. With advice and input from the Commission, Tanner will conduct public relations and education in furtherance of the approval of the sales tax increase by the voters of Randolph County. Tanner shall engage Jonathan Gray of Strategy Public Relations to provide public relations support and education advice in furtherance of the approval of the sales tax increase by the voters of Randolph County. All costs incurred by Tanner in the research and review of possible candidates that resulted in the selection of Jonathan Gray of Strategy Public Relations shall be the sole responsibility of Tanner. All costs and fees incurred by Tanner to provide public relations support and education advice in furtherance of the approval of the sales tax increase by the voters of Randolph County shall be paid by Tanner and reimbursed to Tanner by the Commission if the additional sales tax is approved by the eligible voters of Randolph County on or before October 31, 2015; provided, however, that such costs and fees may be reimbursed to Tanner from proceeds of the Financing pursuant to Section 3 of this Agreement if such Financing occurs. (c) Amount of Additional Sales Tax Levy and Use of Additional Sales Tax Proceeds. As a condition to the Parties respective obligations provided in every other provision of this Agreement, provided that the eligible voters of Randolph County approve on or before October 31, 2015, an increase of up to one percent in the sales tax collected in Randolph County, the Commission will levy the additional sales tax of one percent to provide approximately $1,750, more or less in sales tax proceeds. Notwithstanding anything herein to the contrary, it shall be the sole decision of the Commission as to authorizing an additional sales tax levy sufficient to provide for the construction and operating support of the Hospital if approved by the voters, provided however, no later than ninety (90) days following the approval by the voters of Randolph County of an additional sales tax levy of up to one percent, the Commission shall either approve or disapprove an additional levy sufficient to provide for the construction and operating support of the Hospital. The Parties agree that the proceeds of the additional one percent sales tax increase shall be used to support the operations of Wedowee Hospital while the Hospital is being constructed and then for the construction and operational support of Hospital, including but not limited to: (i) pay in full the Randolph Authority s debt repayment obligations related to any financing for the construction of the Hospital as provided in Section 3 in accordance with the schedule of repayments set forth in agreements governing such financing; (ii) annually provide to Tanner Sub (defined below in this Agreement) all remaining sales tax proceeds after the annual payment of the debt obligations described at 1(c)(i) above to be used by Tanner Sub for the operational support of Hospital; and (iii) after the use of the proceeds in accordance with Sections 1(c)(i) and 1(c)(ii) above, any remaining proceeds of the additional sales tax increase shall be used by Tanner Sub for other general improvements to operations 3

4 of the Hospital or additional retirement of the debt described in Section 1(c)(i) above. Unless Tanner agrees otherwise the Commission and the Randolph Authority shall use the proceeds from the additional sales tax levy solely for the support of the existing Wedowee Hospital and construction and operational support of the Hospital as described in this Agreement until such time as any debt initially incurred to construct the Hospital is repaid by the Randolph Authority in full; provided however, any failure by the County or the Randolph Authority at any time to apply and disburse all additional sales tax proceeds levied by the County for the purposes and in the manner described in this Section 1(c) shall be a material breach of this Agreement and any and all agreements described in this Agreement including, but not limited to, the Hospital Lease described in Section 4 of this Agreement, giving rise to a right on behalf of Tanner and Tanner Sub to terminate with cause this Agreement and any and all agreements described in this Agreement. Provided further, should the voters of Randolph County on or before October 31, 2015, approve an increase of up to one percent in the sales tax collected in Randolph County for the support of the existing Wedowee Hospital and construction and operational support of the Hospital as described in this Agreement and then the Commission fails within ninety (90) days following October 31, 2015, to levy an additional sales tax of one percent to provide for the construction and operating support of the Hospital as described more fully below, then the County shall reimburse and pay to Tanner all amounts loaned or advanced by Tanner to the Wedowee Authority for Wedowee Hospital s support from and after the effective date of this Agreement until October 31, 2015, and all costs and expenses incurred by Tanner to perform this Agreement from February 1, 2015, until January 31, 2016 as described in this Agreement. 2. Construction of Hospital. Subject to the satisfaction of all the conditions described in Section 1 and other provisions of this Agreement, the Randolph Authority shall own and finance and Tanner, jointly with the Randolph Authority, shall develop, plan, design, construct and equip the Hospital upon land donated by Tanner by deed to the Randolph Authority as more fully defined herein. The land to be donated by Tanner to the Randolph Authority shall be contained within an approximate eighteen (18) acre tract of land located in Randolph County now owned by Tanner, as described more fully below. The amount of land to be donated by Tanner to the Randolph Authority shall be sufficient for the complete location of the Hospital building together with land for adequate parking lots and ingress and egress to the Hospital. The Parties estimate the amount of land needed to be donated by Tanner to the Randolph Authority as four (4) acres more or less, to include cross easements for the benefit of all parties. The Randolph Authority, Tanner and Tanner Sub shall no later than sixty (60) days after a Certificate of Need ( CON ) is granted in accordance with Section 2(a)(i) of this Agreement enter into a detailed agreement with respect to the obligations of the Parties described in the preceding sentence, with such obligations conditioned on the satisfaction of certain conditions described below or otherwise agreed to by the Parties to be included in such agreement (the Hospital Construction Agreement ). The Parties agree now to the following terms with regard to the financing and development, planning, design, construction and equipping of the Hospital, which terms may also be included in the Hospital Construction Agreement in addition to all detailed terms for the construction of the Hospital: (a) Responsibilities of Tanner. Except as otherwise provided in this Agreement or agreed to by each party to the Hospital Construction Agreement, Tanner shall be responsible for the accomplishment of the following: (i) obtaining a CON or an exemption therefrom in the name of the Randolph Authority, including any statutory or regulatory fees associated therewith, 4

5 and legal or consulting fees in furtherance thereof; provided that Tanner shall employ and direct legal counsel and all other necessary consultants to assist in obtaining a CON or an exemption therefrom; and (ii) the Hospital. developing, planning, designing, managing construction and opening With regard to Tanner s responsibilities set forth at Section 2(a)(i) and (ii) above, Tanner shall be reimbursed all costs and expenses it incurs by the Randolph Authority from proceeds of the Financing pursuant to Section 3 of this Agreement if such Financing occurs, including but not limited to appropriate and reasonable fees for the provision by Tanner of its management staff to manage and supervise the development, design, planning, construction management, equipping and opening of the Hospital. All costs and expenses incurred by Tanner to perform Section 2(a)(i) or (ii) responsibilities shall not be reimbursed to Tanner if the up to one percent sales tax levy is not approved by the voters of Randolph County on or before October 31, Tanner shall contribute up to Six Million Dollars ($6,000,000.00) in value of furniture and equipment, including but not limited to medical diagnostic or treatment equipment for use in the Hospital and the value of Tanner s contributed equipment shall not be included in the total final Construction Costs as defined below; provided further, should any of the diagnostic or treatment equipment included in the $6,000,000 in value contribution by Tanner be leased equipment, Tanner shall be responsible for paying all costs relating to the lease of such equipment during the term of this Agreement. All costs associated with the maintenance or upkeep of any furniture or equipment contributed by Tanner shall be an ongoing operating expense of the Hospital and not Tanner s responsibility. As further described at Section 2(b)(i) below, in the event the Construction Costs (as defined below) exceed $20,000, then Tanner shall pay the difference between $20,000, and the final total Construction Costs and Tanner shall not be reimbursed by the Randolph Authority or the County for such payment. (b) Responsibilities of The Randolph Authority. Except as otherwise provided in this Agreement or agreed to by each party to the Hospital Construction Agreement, the Randolph Authority shall be solely responsible for and pay when due: (i) each and every lawful cost, expense and obligation of every kind and nature, foreseen and unforeseen, which arises or accrues from or relates to the construction of the Hospital (the Construction Costs ); provided, however, in the event final total Construction Costs exceed $20,000, then Tanner shall pay the difference between $20,000, and the final total Construction Costs and Tanner shall not be reimbursed by the County or the Randolph Authority for such payment; (ii) the employment of an architect(s) selected by Tanner to work with Tanner to plan and design the Hospital to include the development of plans and specifications sufficient to enable as accurately as possible an estimate of the total Construction Costs and the submission to public bid for the selection of a general contractor; provided further until the Financing described in Section 3 occurs and the Randolph Authority may be reimbursed the cost of employing and architect(s) under 5

6 this provision, Tanner shall pay the fees and expenses of the architect(s) and shall be reimbursed by the Randolph Authority for those fees and expenses from the proceeds of the Financing described in Section 3; (iii) all lawful real estate taxes, personal property taxes, business and occupation taxes, license fees and assessments of every kind and nature relating to the whole or any part of the construction of the Hospital, which may arise or accrue during the planning, design, construction or opening of the Hospital; and (iv) all lawful charges for gas, water, sewer, electricity, light, heat, power, telephone, oxygen, and other utilities and services, used, rendered, or supplied to, upon or in connection with the construction of the Hospital, which may arise or accrue during the construction of the Hospital. Fees, costs or expenses incurred by the Randolph Authority pursuant to its responsibilities in Section 2(b) (ii), (iii) or (iv) shall be included in the calculation of total final Construction Costs. All fees, costs or expenses incurred by the Randolph Authority under this Section 2(b) may be reimbursed from proceeds of the Financing pursuant to Section 3 of this Agreement if such Financing occurs. (c) Hospital Site. The Hospital shall be constructed on real property adjacent to Tanner East Alabama Clinic on U.S. 431 on approximately four (4) acres within an eighteen (18) acre (more or less) parcel of land currently owned by Tanner and located within Randolph County. As described above in this Agreement, upon execution of the Hospital Construction Agreement Tanner shall donate by deed to the Randolph Authority the approximate four (4) acres of land for the location of the Hospital, parking lots and ingress and egress to the Hospital. If, for any reason, such site is deemed unsuitable for construction of the Hospital, Tanner shall have the right in its sole discretion to terminate this Agreement, the Hospital Construction Agreement and any other definitive agreement related to the Affiliation then in effect and upon such termination the Affiliation shall cease. (d) Specifications. The Hospital shall be constructed as a 15-bed Medicare participating acute care hospital (or any other Medicare reimbursement designation, including Critical Access Hospital, as Tanner may decide in its sole discretion) with a 24- hour, 7-days a week emergency department with a minimum of: fifteen (15) patient rooms, laboratory, and radiology. The Hospital shall also have, at a minimum, such space, facilities and equipment necessary to provide the Core Services, defined below. (e) Hospital to Become Part of Hospital Lease. Upon the completion of construction of the Hospital, licensure of the Hospital and the Hospital Lease becoming effective the Hospital shall be property subject to the Hospital Lease and shall be subject to the Randolph Authority s rights with regard to the surrender of assets by Tanner at the Hospital Lease s expiration or earlier termination (as more fully described in the Hospital Lease). (f) Conditions to Financing and Construction of Hospital. The Randolph Authority s obligations to finance the construction of the Hospital and Tanner s and the Randolph Authority s obligations to develop, plan, design, construct and equip the Hospital shall not become effective unless at a minimum the following conditions are satisfied: 6

7 (i) been satisfied. All conditions described in Section 1 of this Agreement shall have (ii) Not later than August 1, 2015, the Parties shall have submitted a Letter of Intent for a CON to the Alabama State Health Planning and Development Agency ( SHPDA ), no later than September 1, 2015 the Parties shall have submitted a CON application to SHPDA and no later than April 30, 2016, the Parties shall have received from SHPDA a CON or an exemption therefrom and any other approval from the State of Alabama or other governmental agency required prior to the commencement of construction of the Hospital. In furtherance of the satisfaction of this condition and subject to Section 2(a)(i) of this Agreement, Tanner shall engage Melton, Espy & Williams, PC, a law firm experienced in Alabama CON law (together with any others required for the preparation and submission of a CON application) to represent the parties before the SHPDA in furtherance of the Parties application for a CON or exemption therefrom. (iii) Tanner shall have selected and the Randolph Authority shall have employed Tanner s selected architect(s) for the planning and design of the Hospital, to include the development of plans and specifications sufficient to enable as accurately as possible an estimate of the total Construction Costs and the submission to public bid for the selection of a general contractor. (iv) The plan and design of the Hospital including the estimate of probable Construction Costs and documents sufficient to enable public bid to select a general contractor shall be approved by the Commission, the Randolph Authority and Tanner. (v) The Randolph Authority by public bid shall select a general contractor to construct the Hospital; provided, however, if as a result of the public bid process no final bids are received that result in the probable total Construction Costs to be equal to or less than $20,000,000.00, then the Randolph Authority shall have the right to, and upon Tanner s request shall be required to, reject all bids. In the event no final bids are received that result in the probable total Construction Costs to be equal to or less than $20,000,000.00, Tanner shall have the right to either (x) have the architect redesign the project to achieve probable total Construction Costs equal to or less than $20,000, and the Randolph Authority resubmit for public bid, provided that Tanner shall have the same right of termination if no bids received are equal to or less than $20,000,000.00; (y) terminate this Agreement and all other agreements related to the Affiliation; or (z) accept the bid. (vi) The Randolph Authority, Tanner or a contractor on behalf of the Randolph Authority or Tanner shall have obtained a Phase I Environmental Survey for the site upon which the Hospital will be located indicating that such site is environmentally suitable to commence construction which shall be included in the Construction Costs. (vii) The Randolph Authority, Tanner, or a contractor on behalf of the Randolph Authority or Tanner, shall have obtained all regulatory permits and 7

8 approvals, including but not limited to zoning and a building permit, necessary to commence construction of the Hospital on the selected site which shall be included in the Construction Costs. (viii) The Hospital Lease and Core Services Agreement shall have been approved and executed by the Commission, Randolph Authority, Wedowee Authority, Tanner and Tanner Sub, as applicable. The Parties agree that the Hospital Construction Agreement, Hospital Lease and Core Services Agreement shall each be in final form and ready to be acted upon by the Commission, Randolph Authority, Wedowee Authority, Tanner, and Tanner Sub, as applicable, no later than thirty (30) days after a CON is granted in accordance with Section 2(a)(i) of this Agreement and execution of these Agreements by the respective Parties shall occur no later than sixty (60) days after a CON is granted in accordance with Section 2(a)(i) of this Agreement or this Agreement will terminate unless such time is extended by mutual written agreement of the Parties. (g) Construction Timeline. Attached to the Hospital Construction Agreement as an exhibit shall be a proposed construction timeline for the construction of the Hospital which sets forth dates by which significant pre-construction and construction actions shall be completed ( Construction Timeline ). Subject to the conditions precedent to the Parties obligations with regard to the financing and development, planning, design, construction and equipping of the Hospital, the Construction Timeline shall provide the date by which the selection process by public bid for a general contractor shall commence, the date for selection of the general contractor and the commencement of construction which shall be no later than September 1, Unless good cause exists as described below, Tanner shall complete all actions by the dates set forth on the Construction Timeline. Construction of the Hospital shall not begin until financing for the cost of construction has been secured as described in Section 3 of this Agreement and the Hospital Lease has been executed by the parties thereto. As used in the foregoing sentence, construction of the Hospital shall mean the point at which the Randolph Authority incurs an obligation to pay a contractor or contractors to construct the Hospital. The foregoing notwithstanding, the Hospital Construction Agreement shall provide that the Randolph Authority and Tanner shall negotiate in good faith to modify the date by which any particular action shall occur or be completed if it is reasonably foreseeable that the occurrence or completion of such action will be delayed past the date set forth in the Construction Timeline due to a reason outside the control of the parties, as described in more detail in the Hospital Construction Agreement. (h) Planning; Construction Contracts. (i) Planning. Tanner shall consult with and solicit input from the Randolph Authority and its consultants, if any, with regard to the planning, design and construction process for the Hospital and shall provide to the Commission and the Randolph Authority reports on a regular basis on the progress of the planning, design and construction of the Hospital. The Parties agree that the Hospital building shall be designed so as to be functional for other uses should it ever cease to be used as a hospital as defined herein. 8

9 (ii) Contracts. The Parties acknowledge that contracts for architectural and engineering services, construction, and equipping shall be contracts between the Randolph Authority and the appropriate contracting company. The Randolph Authority shall be kept reasonably informed by Tanner of the agreements and contracts to be entered into for the design, construction, equipping and licensure of the Hospital and progress with all construction timelines. The Randolph Authority shall grant to Tanner in the Hospital Construction Agreement, to the extent permitted by law and except as otherwise provided for in this Agreement, the power and authority to enter into and perform the responsibilities pursuant to all contracts relating to the design, construction, equipping and licensure of the Hospital, and to negotiate contracts relating to the design, construction, equipping and licensure of the Hospital for execution by the Randolph Authority, and to review and analyze the performance of said third parties who provide services and products to the Hospital; provided further upon prior approval of the Randolph Authority, Tanner may act on behalf of the Randolph Authority based upon what Tanner determines to be in the best interest of the construction of the Hospital. 3. Construction/Long-Term Financing. If the conditions precedent to each Party s respective obligations as provided in Section 2(f) are satisfied and subject to the terms of this Section 3, the Randolph Authority shall obtain long term financing for a term of not more than thirty (30) years in an amount not to exceed $20,000, plus the reimbursement of all reimbursable expenses of the Parties described in this Agreement plus any cost incurred to borrow, issue or incur the long term financing. A method of financing including the possible use of taxable or tax-exempt debt by an appropriate issuer, including, but not limited to, Randolph Authority as the issuer (the Financing ) shall be developed and recommended by Tanner to the Randolph Authority with the Randolph Authority to determine, in its sole discretion, the method of financing or funding all amounts which are the responsibility of the Randolph Authority pursuant to this Agreement or the Hospital Construction Agreement. With Tanner s advice the Randolph Authority shall engage an experienced financing advisor to provide advice and guidance with regard to the Financing. If requested by the Randolph Authority, Tanner shall be responsible for managing the process to obtain the Financing. Prior to committing to the Financing, the Commission and the Randolph Authority shall consult with Tanner and any financial advisors retained under this Section 3 to determine whether the Financing and its repayment schedule is financially feasible taking into account the projected sales tax proceeds, projected revenues from operation of the Hospital and the projected operating expenses of the Hospital. After such consultation and with Tanner s prior approval, the Randolph Authority, with the advice of the financing advisor, shall adopt and implement a Financing plan to pay for: (i) the design, construction, equipping (excluding therefrom Tanner s responsibility for any final total Construction Costs in excess of $20,000, and furniture and equipment provided by Tanner as described at Section 2(a)) and opening of the Hospital; (ii) reimbursement of all reimbursable expenses of the Parties described in this Agreement that may be lawfully reimbursed by a financing; and (iii) any cost incurred to borrow, issue or incur the long term Financing. The term of any such Financing shall not: (x) exceed thirty (30) years: (y) be extended beyond a term of thirty (30) years by any means; and (z) be subsequently added to or increased for any reason in any amount above or in addition to the amount borrowed or financed to design, construct and equip the Hospital (excluding therefrom equipment provided by Tanner as described at Section 2(a) above) to enable the Hospital to be licensed as a hospital in Alabama 9

10 and commence operations. Tanner with the Randolph Authority s approval may begin work on the Financing in advance of the Parties respective satisfaction of the obligations provided in Section 2(f) so that the closing of the Financing does not delay commencement of construction of the Hospital. All costs incurred by the Randolph Authority with regard to the Financing, including fees for services provided by any financing advisor, shall be the sole responsibility of the Randolph Authority; provided, however, that such costs and fees may be reimbursed to the Randolph Authority or paid directly from proceeds of the Financing if such Financing occurs. Notwithstanding anything else in this Agreement to the contrary, the Parties agree that any cost or expense of any Party provided for or described in this Agreement, including the costs and expenses of any Party described in Sections 1 or 2 of this Agreement, that is allowed to be reimbursed from proceeds of the Financing shall be reimbursed from such proceeds to the full extent allowable. 4. Hospital Lease. Subject to the continuing satisfaction of all the conditions described in Section 1 and all other provisions of this Agreement, the Randolph Authority, Tanner and a wholly-controlled, non-profit tax exempt affiliate of Tanner ( Tanner Sub ) shall no later than sixty (60) days after a CON is granted in accordance with Section 2(a)(i) of this Agreement enter into a detailed lease agreement pursuant to which the Randolph Authority shall lease to Tanner Sub the Hospital and all assets related to the Hospital upon completion of the construction, equipping and licensure of the Hospital (the Hospital Lease ). The Parties hereto agree to the following terms and conditions with regard to the leasing of the Hospital by the Randolph Authority to Tanner Sub, which such terms and conditions shall also be contained within the Hospital Lease: All obligations of Tanner Sub as stated herein, financial and otherwise, shall be guaranteed as to performance by Tanner during the term of the Hospital Lease. Upon completion of construction and licensure of the Hospital, the Hospital and the operating assets of the Hospital shall be leased to Tanner Sub for a term of thirty-five (35) years. Tanner Sub with the guidance and operational management assistance of Tanner as more fully described in Section 12 of this Agreement will be responsible for operating the Hospital, billing and collecting charges for services and payment of all Hospital expenses. Tanner Sub shall obtain and hold the Medicare provider numbers for the Hospital. At all times during the term of the Hospital Lease Tanner Sub shall provide licensed hospital services at Hospital, including providing emergency care services twenty-four (24) hours a day, 365 days a year and such other appropriate hospital services in addition to emergency care services that will be utilized by the citizens of Randolph County; provided however, no service offered at the Hospital shall jeopardize the financial viability of the Hospital. The Hospital Lease shall provide that Tanner and Tanner Sub may consider and, if appropriate: (i) implement expanded services at the Hospital or (ii) change, modify or eliminate any hospital service, other than 24/7 emergency room service during the first five years after the opening of the Hospital, no longer needed nor legally required for licensure which jeopardizes the financial viability of the Hospital or if necessary to adapt to changing clinical, third party payment or licensure requirements. 10

11 If the County and the Randolph Authority at all times fully and completely comply with the requirements of Section 1(c) of this Agreement and all additional sales tax proceeds are solely used or applied by the County and the Randolph Authority as described in Section 1(c) above, then at any time during the first five (5) years of the Hospital Lease if all revenue sources, including the additional sales tax proceeds paid to Tanner Sub, are insufficient to pay the operating expenses of Hospital, Tanner shall donate funds to Tanner Sub sufficient to pay the difference. At all times during the term of the Hospital Lease the Randolph Authority will be the owner and lessor of the Hospital and the name and all relevant signage of the Hospital shall begin with the word Tanner. In accordance with Section 1(c) of this Agreement, all proceeds of the additional sales tax increase available after payment of the debt obligations described at Section 1(c)(i) above shall be paid solely to Tanner Sub by the County for the operational support of Hospital; with any remaining proceeds of the additional sales tax increase (after operational support has been satisfied) to be used by Tanner Sub for general improvements to operations of the Hospital or additional retirement of the debt described in Section 1(c)(i) above, after payment of all costs to maintain Hospital. Any failure by the County or the Randolph Authority at any time to apply and disburse all additional sales tax proceeds levied by the County for the purposes of and in the manner described in Section 1(c) shall be a material breach of the Hospital Lease and any and all agreements described in this Agreement giving rise to a right on behalf of Tanner and Tanner Sub to terminate with cause the Hospital Lease, this Agreement and any and all agreements described in this Agreement. All assets leased to Tanner Sub under the Hospital Lease will return to the Randolph Authority at the Hospital Lease s expiration or earlier termination. Beginning at the expiration of five (5) years from the commencement of the Hospital Lease and continuing for the remaining term of the Hospital Lease, if Hospital revenues from all sources, including the additional sales tax proceeds (after payment by the Randolph Authority of amounts due for principal and interest pursuant to the Financing), are annually insufficient to pay operating expenses, then Tanner Sub and Tanner shall have the right to terminate the Hospital Lease and cease operating a licensed hospital. Should such an event occur, the terms of the Core Services Agreement shall govern the Parties respective obligations and commitments with regard to the provision of services after the occurrence of such event. The Randolph Authority shall have no reversionary interest in any asset owned by Tanner or Tanner Sub other than what the Randolph Authority leases to Tanner Sub under the Hospital Lease. To ensure continuity of care in the community, Wedowee Hospital s medical staff members in good standing immediately prior to the commencement date of the Hospital Lease shall maintain such medical staff privileges at the Hospital immediately upon the commencement date of the Hospital Lease. 11

12 The Hospital Lease will contain all those terms and provisions customarily included in a lease by an Alabama county, hospital authority or municipality of a hospital. Tanner and Tanner Sub will use its best efforts to recruit or provide needed physicians and other health care providers to meet the healthcare needs of the residents of Randolph County consistent with the scope of services commonly available in communities served by hospitals of similar size to the Hospital, and will bring to the Hospital Tanner s experience in aligning physicians with the Hospital s overall quality and financial goals. Tanner and Tanner Sub will continue the provision of indigent and charity care with the Hospital. Provided that governmental and Tanner s requirements for employment are satisfied on an individual-by-individual basis, Tanner or Tanner Sub will employ all Wedowee Hospital employees wanting to be employed by Tanner to continue working at the Hospital with all Hospital employees being integrated into Tanner with expanded career opportunities. 5. Core Services. Subject to the satisfaction of the conditions described in Section 1 and all other provisions of this Agreement, the Parties to this Agreement will enter into a written agreement (the Core Services Agreement ) to address clinical and non-clinical services to be provided in the Hospital under the Hospital Lease or by Tanner in the event the Hospital Lease is terminated by Tanner Sub and Tanner prior to the expiration of its term. The Core Services Agreement shall describe as of the date of this Agreement the services Tanner understands that Wedowee Hospital offers. Additionally the Core Services Agreement shall: Obligate, as long as the Hospital Lease is in effect, Tanner Sub, as guaranteed by Tanner, to operate a licensed hospital. Obligate, as long as the Hospital Lease is in effect, the Parties to work together in good faith to periodically review and change the hospital services provided at Hospital for the citizens of Randolph County to meet their needs, maintain the financial viability of the Hospital and adapt to changing clinical, third party payment and licensure requirements; provided however, Tanner and Tanner Sub may consider and, if appropriate, implement expanded services at the Hospital or change, modify or eliminate any hospital service (other than emergency room service within the first five years after Hospital opens for business) no longer needed nor legally required for licensure which jeopardizes the financial viability of the Hospital. Require in the event Tanner Sub and Tanner terminate the Hospital Lease any time after the fifth anniversary of the opening of the Hospital for business Tanner and the Randolph Authority for a period of ninety (90) days to exclusively negotiate new agreements for the conversion of the Hospital to another health care service, if feasible. Additionally as a part of the conversion to a new health care service and conditioned upon Tanner Sub s continued receipt of all additional sales tax proceeds (after payment by the Randolph Authority of amounts due for principal and interest pursuant to the Financing), Tanner will implement for the remaining term of the Hospital Lease as if it had it not been terminated, if legally and financially feasible, clinical alternatives to meet the need for access by Randolph County citizens to emergency care services, including a free standing emergency care service if permitted by Alabama law, or if not permitted by Alabama law, then direct access to a 12

13 physician twenty-four (24) hours a day, seven (7) days a week; provided, however, if any one of the following shall occur: (i) if annually the proceeds of the sales tax collected by the County in accordance with Section 1 of this Agreement which remain after payment by the Randolph Authority of its debt obligations pursuant to the Financing plus revenues of the service(s) to be provided by Tanner pursuant to this Section 5 are not sufficient to cover the costs of the provision of such service; (ii) Tanner after continued good faith efforts is unable to recruit a sufficient number of physicians to provide direct access to a physician twentyfour (24) hours a day, seven (7) days a week or (iii) the Randolph Authority enters into an agreement with any third party for the use of the Hospital to provide or to be a location for health services, then Tanner shall have the right in its sole discretion to either discontinue such service and explore with the Commission and the Randolph Authority other financially feasible health service alternatives or cease entirely providing any health services as described in this Section 5. In the event Tanner or Tanner Sub ceases entirely to provide health services as described in this Section 5, Tanner and Tanner Sub shall have no right to receive future additional sales tax proceeds. Require, in the event after ninety (90) days from the date of termination of the Hospital Lease Tanner, Tanner Sub and the Randolph Authority are unable to reach an agreement for the conversion to and operation by Tanner of another health care service within the Hospital, Tanner to assist the Randolph Authority to find a health care provider who will attempt to utilize the Hospital to provide health care services acceptable to the Commission and the Randolph Authority with all available sales tax proceeds directed for the support of that new service and provider or the earlier payoff of the debt borrowed to construct the Hospital; provided further, in the event the Randolph Authority enters into an agreement with any other entity who will utilize the Hospital for any health care service Tanner shall be released from any and all requirements to provide after termination of the Hospital Lease any and all services described in this Section Employees. Upon the reasonably imminent completion of construction of the Hospital and prior to the commencement of the Hospital Lease, Tanner or Tanner Sub will offer employment to all of the employees of Wedowee Hospital who want to be employed at the Hospital on the commencement date of the Hospital Lease as follows: Subject to compliance with governmental requirements and Tanner s customary employment screening practices, Tanner or Tanner Sub will make written offers of employment to each Wedowee Hospital employee employed at Wedowee Hospital on the commencement date of the Hospital Lease who applies for such employment to work at the Hospital. The amount of salary or wages and the type and value of benefits provided by Tanner to those employees shall not be less than those received by those employees from their current employer as of the date of this Agreement. Tanner shall honor the hired employees prior service credit with Wedowee Hospital for purposes of satisfying pre-existing condition limitations in Tanner s welfare benefit plans. Tanner shall honor prior length of service for purposes of eligibility and vesting in Tanner s retirement and other benefit plans. 13

14 7. Charity Care and Indigent Care. Throughout the term of the Hospital Lease, Tanner Sub will provide indigent and charity care at the Hospital, including access to Hospital services by indigent persons, in full compliance with state and federal law without discrimination, and will neither enact, nor will it cause or permit to be enacted, financial admission policies that have the effect of denying essential medical services or treatment solely because of a patient s immediate inability to pay for hospital services. 8. Operation of Wedowee Hospital During Construction; Proceeds from Sales Tax Levy; Closure of Wedowee Hospital. (a) During the development, planning and construction of the Hospital the Wedowee Authority shall continue to operate and maintain Wedowee Hospital and Tanner shall continue to make available to Wedowee Authority the services of a qualified hospital administrator to provide executive-level administrator and management services for the operation of Wedowee Hospital on the same terms and conditions as exist as of the date of this Agreement. (b) From the point in time that the County begins to collect or receive proceeds from the additional sales tax levy described in Section 1 of this Agreement until commencement of Hospital s operations pursuant to the Hospital Lease, the County shall pay to the Wedowee Authority monthly from the proceeds of the additional sales tax levy funds sufficient to satisfy any outstanding current liabilities and pay any ongoing difference between revenues received and expenses incurred. (c) Upon commencement of Hospital s operation pursuant to the Hospital Lease, the Commission, Randolph Authority and Wedowee Authority agree that the Wedowee Hospital shall cease operations as a licensed hospital and shall not resume operations as a licensed hospital during anytime while the Hospital Lease shall be in effect and furthermore, the Parties shall determine those health care related activities and services conducted or provided in buildings or facilities owned or operated by the Randolph Authority or Wedowee Authority that shall be transferred to the Hospital or to the control of Tanner or Tanner Sub and those health care related activities and services that continue to be provided in buildings or facilities owned or operated by the Randolph Authority or Wedowee Authority; provided further after the date of this Agreement and while the Hospital Lease is in effect no new health care related activities and services shall be located, started or provided in buildings or facilities owned or operated by the Randolph Authority or Wedowee Authority without the prior written approval of Tanner, which such approval shall not be unreasonably withheld. 9. Physician Recruitment. Upon commencement of construction of the Hospital, Tanner or Tanner Sub, shall promote and pursue the enhancement of Wedowee Hospital s medical staff, and the Hospital s medical staff after construction of the Hospital is completed consistent with the needs identified in physician needs studies to be periodically (but at least once every five (5) years) performed. After execution of this Agreement, Tanner will promptly commission the first such physician needs study and will support medical staff development consistent with the results and findings of such study. 10. Local Use of Funds. Throughout the term of the Hospital Lease, Tanner Sub shall, after payment of any and all amounts due Tanner (including any amounts owed Tanner by the Wedowee Authority other than amounts owed prior to the beginning of the sales tax collection, if 14