2014/11/17 RESOLUTION WHEREAS HARNETT HEALTH SYSTEM INC (HHS) HAS ENTERED INTO A MANAGEMENT SERVICES AGREEMENT NOV. 3, 2014 (MSA) W/CUMBERLAND COUNTY HOSPITAL SYSTEM INC DBA CAPE FEAR VALLEY HEALTH SYSTEMI
RESOLUTIONS
OF THE
BOARD OF COMMISSIONERS
OF HARNETT COUNTY NORTH CAROLINA
The undersigned hereby certifies that the following resolutions were adopted by the
Board of Commissioners of Harnett County, North Carolina ( "Board ") in a meeting duly
convened and with a quorum present on November 17, 2014.
WHEREAS, Harnett Health System, Inc. ( "HHS ") has adopted Amended and Restated
Articles of Incorporation ( "Articles ") that establish, among other things, the structure of a Board
of Trustees of HHS ( "Board ");
WHEREAS, HHS has entered into a Management Services Agreement dated November
3, 2014 ( "MSA ") with Cumberland County Hospital System, Inc. dba Cape Fear Valley Health
System ( "Cape Fear"), a copy of which is attached hereto as Exhibit A;
WHEREAS, pursuant to the MSA, HHS and Cape Fear have agreed, among other
things, to amend the Articles to provide a seat on the Board to a person nominated by Cape Fear,
a copy of the Amendment to the Amended and Restated Articles of Incorporation ( "Amended
Articles ") is attached hereto as Exhibit B;
WHEREAS, pursuant to the MSA, if Cape Fear elects to exercise its option, HHS
proposes to enter into certain agreements with Cape Fear to form a new entity ( "Newco ") in
which HHS shall own fifty one percent (51 %) and Cape Fear will own forty nine percent (49 %)
as set forth in more detail in Section 4.0 of the MSA;
WHEREAS, Harnett County, North Carolina ( "County ") and the City of Dunn, North
Carolina ( "City") each have an interest in the structure of the Board and an interest in the
operations of HHS;
WHEREAS, the adoption by the City of resolutions similar to the Resolutions set forth
herein is a condition of the effectiveness of the Resolutions set forth herein;
WHEREAS, the Amended Articles will be filed with the North Carolina Secretary of
State immediately following approval by the City and the County; and
WHEREAS, the terms of the Amended Articles and the terms and conditions of the
MSA are deemed by the Board to be in the best interest of the County.
NOW, THEREFORE, BE IT RESOLVED, the Board hereby authorizes, approves and
consents to the execution of the MSA and the Amended Articles and the filing of Amended
Articles with the North Carolina Secretary of State.
20502.229 - 843114 v1
RESOLVED FUTHER, that the Board hereby authorizes, approves and consents to the
formation of Newco for the purpose of transferring all of the tangible and intangible assets,
except the real property and improvements associated with Betsy Johnson Regional Hospital and
Central Harnett Hospital (and such other real property and related improvements owned by
HHS) ( "HHS Real Property"), to cause HHS and Newco to enter into a lease of the HHS Real
Property and to cause an ownership interest in Newco equal to 49% of Newco to be conveyed to
Cape Fear and to such other actions as required in accordance with the terms and conditions set
forth in the MSA.
RESOLVED FURTHER, that the County Manager be, and hereby is, authorized and
empowered, for and on behalf of Harnett County, to execute and deliver all such additional
documents and to take all such additional actions as he determines to be appropriate or necessary
in connection with the foregoing resolutions and the transactions contemplated thereby, the
appropriateness or necessity thereof to be conclusively evidenced by the execution and delivery
of such documents or the taking of such actions; and the County Manager be, and hereby is,
authorized and directed to execute on behalf of the County, any and all documents that are
deemed necessary or desirable to carry out the purposes of the foregoing resolutions.
RESOLVED FURTHER, that the foregoing resolutions be adopted and shall be filed
with the records of the County.
20502.229 - 843114 vt 2
The undersigned hereby certifies the foregoing to be a true, correct and complete copy of the
Resolutions adopted by the Board of Commissioners on November I'1, 2014.
This, the 11 day of November, 2014.
ATTEST:
20502.229- 843114 v1
Clerk = .
WWI,; De Miller
On of the Board of Commissioners
Exhibit A
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement") is made and effective as of November
3, 2014 (the "Effective Date ") by and between Harnett Health System, Inc. d/b/a Harnett Health System
("HHS ") and Cumberland County Hospital System, Inc. d/b /a Cape Fear Valley Health System
("CFVHS'� (collectively, the "Parties" or individually, a "Party")
RECITALS
WHEREAS, HHS owns and operates Betsy Johnson Memorial Hospital in Dunn, North Carolina
and its provider based location, Central Harnett Hospital, in Lillington, North Carolina (the "Hospital ")
and such other facilities practices and locations operated by HHS or its subsidiaries, including those
subsidiaries identified on Exhibit A attached hereto, under the d/b/a Harnett Health System or one of its
other doing business as names (each a "Facility," collectively with the Hospital, the "Health System ");
WHEREAS, HHS desires to retain CFVHS to provide certain management services for purposes
of managing the Health System;
WHEREAS, CFVHS has such management and operational expertise to assist HHS by providing
management services for inpatient and outpatient hospital services and associated health system services
and desires to accept responsibility for the provision of such management services for the Health System,
in accordance with the terms of this Agreement;
WHEREAS, HHS and CFVHS believe that it is in the best interest of quality patient care and the
effective, efficient administration and delivery of health care in Harnett County and the surrounding
region that this Agreement be entered into by the Parties;
WHEREAS, HHS believes that the Health System will benefit from the expertise and resources
that CFVHS can offer with respect to clinical, financial, managerial and technology functions;
WHEREAS, CFVHS has agreed to make available to HHS certain funds pursuant to that certain
Line of Credit Agreement, dated as of the date hereof, by and between the Parties in the amount of
$3,000,000 (the "Line of Credit D;
WHEREAS, HHS has agreed to issue an Obligation under its Master Trust Indenture (the'TIHS
MTI "), dated as of April 1, 2011, between HHS and U.S. Bank National Association, as trustee to secure
its obligations to CFVHS under the Line of Credit;
WHEREAS, HHS has agreed to promptly seek approval from the United States Department of
Agriculture ( "USDA ") to increase the line of credit by an additional $7,000,000 to a total of $10,000,000
(the "LOC Approval ") under terms and conditions substantially similar to those found in the Line of
Credit, including but not limited to including such additional amounts under the Obligation pursuant to
the HHS MTI; and
WHEREAS, CFVHS and HHS contemplate further transactions pursuant to which CFVHS and
HHS are anticipated to be the members of a newly formed North Carolina nonprofit corporation or limited
liability company ( "Newco'D, which will become the owner and operator of the Health System as further
outlined herein.
NOW THEREFORE, in consideration of the mutual promises contained herein and for other good
20502.229- 843114 v1
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties
hereto agree as follows:
SECTION 1. APPOINTMENT
(a) Appointment. HHS hereby engages CFVHS as the exclusive provider, for and on behalf
of HHS, to supervise and manage the day -today operations of the Hospital, the Facilities and the Health
System. The management services to be provided by CFVHS shall include those services more
specifically identified in Section 2 of this Agreement and Exhibit B attached hereto (the "Management
Services'). The Management Services shall be provided by CFVHS in a manner consistent with
Comparable Hospital Standards, HHS's Board of Directors ( "HHS Board'j, the appropriate accrediting
organizations, and the rules, regulations and bylaws of the Hospital. Whenever this Agreement contains a
reference to "Comparable Hospital Standards" or "Comparable Hospitals ", said reference shall require the
evaluation and consideration as a frame of reference or basis for comparison, selection or determination,
other Hospitals located in North Carolina counties which are operated for the benefit of the community
served by the Hospital, similar or comparable in size, or numbers of licensed beds, average patient census,
and average collected revenues.
(b) Charitable Purposes. CFVHS acknowledges that HHS conducts its operations in such a
manner as to provide significant public and charitable benefits to the community. CFVHS shall manage
the Health System consistent with such purposes.
(c) Authority.
(i) HHS and CFVHS acknowledge and agree that CFVHS has accepted the duty and
responsibility of supervising and managing the Health System for and on behalf of HHS. In
performing the Management Services, CFVHS shall be responsible for management of the Health
System consistent with the annual budget approved by HHS and the limitations of this
Agreement. CFVHS shall at all times throughout the Term of this Agreement manage the
Hospital, the Facilities and the Health System in accordance with all policies, standards and
procedures relating to the operation of the Health System that presently exist or as may from time
to time be established by HHS, in accordance with any regulatory requirements to which the
Hospital or the Facilities are bound, in accordance with all applicable laws, and in a manner that
furthers the charitable purposes of HHS. HHS shall remain ultimately responsible for compliance
with respect to all applicable provisions of federal, state and local laws, rules, regulations and
ordinances and standards of - accreditation, including but not limited to those regarding the
establishment and operation of health care facilities in North Carolina.
(ii) The HHS Board will retain control and direction of its assets and operations,
including the Health System, and this Agreement shall not constitute a delegation of any powers,
duties or responsibilities vested in the HHS Board. CFVHS shall consult with and obtain the
approval of the HHS Board (which approval shall not be unreasonably withheld) regarding the
matters of more than routine significance listed below:
(1) Strategic plans;
(2) The addition and deletion of clinical programs and services or any
material components thereof;
(3) Adopting and amending Medical Staff Bylaws and Rules and
Regulations, acting on recommendations for granting clinical privileges
and appointing and reappointing members of the Medical Staff and
20502.229- 843114 vt Exhibit A -5
reviewing quality improvement activities of the Medical Staff, including
without limitation, peer review and disciplinary activities, and acting on
Medical Staff recommendations in respect thereto;
(4) Participating in the appointment, retention and evaluation of the
Hospital's President;
(5) Receiving reports and acting on recommendations regarding quality
assurance and risk management activities;
(6) Marketing and public relations programs, as pat of and consistent with
the strategic plan;
(7) Significant Hospital policies and procedures developed by CFVHS;
(8) Appointing the independent auditors and legal counsel; and
(9) Incurring material indebtedness.
(d) Farce Majeure. Neither Party shall be obligated to perform any of its obligations
pursuant to this Agreement that it is prevented from performing by law, act of God, war, strike, labor
unrest, unavailability of supplies or services, or similar events beyond the Party's reasonable control, for
the period of time the applicable event continues, but not including any obligation it is prevented from
performing due to the Party's.own malfeasance or where non - performance is caused by the usual and
natural consequences, of external forces or where the intervening circumstances are specifically
contemplated. To the extent practicable, the Patty prevented from performing any obligations pursuant
to this subsection (c) shall provide notice to the other Party immediately upon the happening of such event
that prevents performance, including a list of the obligations the Party will be prevented from performing
and the anticipated timeframe in which the Party will be prevented from performing.
SECTION 2. MANAGEMENT SERVICES.Subject to the provisions of Section I of this
Agreement, CFVHS will render the management services set forth below and as further specified on
Exhibit B attached hereto:Responsibility for day -today operations and administration ofHHS, including
its facilities, personnel, and supplies;
(b) Preparation and development of HHS's annual operating and capital budgets, in
consultation with the HI{S Board, as well as all monthly, quarterly, and year-end financial reports, and
such other reports as may be requested by the Board from time to time;
(c) Management and administration of HHS's business office functions, including, but not
limited to, HHS's billing and collection activities, accounting and bookkeeping functions, and accounts
payable and purchasing activities;
(d) Subject to applicable laws, providing access to and managing utilization of CFVHS's
group purchasing organization, and other negotiated purchasing agreements and opportunities;
(e) Management and administration of HHS's managed care contracting process directly to
the extent permitted by law or via arranging for a third party to negotiate such agreements on HHS's
behalf,
(f) Development and administration of HHS's physician recruitment and retention activities
and
20502.229-843114 v1 Exhibit A -6
(g) Subject to applicable laws, providing and administering HHS's marketing and public
relations activities.
SECTION 3. ADDITIONAL CFVHS OBLIGATIONS.(a) Executive Positions- CFVHS
will employ and provide individuals to serve as HHS's President and Director of Finance as well as such
other key management employees as the Parties may mutually agree shall be employed by CFVHS
(collectively "Executive Staffing "), who will provide for the management of the day -to-day operations of
the Health System. The President will report to the HHS Board and to the Chief Executive Officer of
CFVHS. The Director of Finance will report to the President and the Chief Financial Officer of CFVHS.
The President will be appointed with the approval of the HHS Board, which approval shall not be
unreasonably withheld, and the HHS Board will designate such person as the President. At the time a
President is employed, CFVHS shall notify the HHS Board of the salary range which will be used by
CFVHS in determining the initial salary of the President. HHS Board shall have the right to review and
approve or not approve such salary range; provided that any such approval shall not be unreasonably
withheld. If HHS desires the removal from Hospital of the individual serving as President HHS shall
promptly notify CFVHS in writing. The Parties shall then negotiate the matter in good faith but if after
thirty (30) calendar days, the parties are unable to agree on the disposition of the President (i.e. whether to
remove President from Hospital or retain the President at Hospital), HHS shall give CFVHS thirty (30)
days' advance written notice of removal of the President. CFVHS, as employer of the President, may, at
any time, unilaterally and immediately remove the President from Hospital and dismiss President from its
employment. The President will supervise and direct the management and operations of the Hospital in
accordance with the terms of this Agreement. CFVHS shall monitor the performance of the President and
shall conduct a performance review on an annual basis, and shall allow the HHS Board to participate in
such review. In addition to the general management authority granted to the President hereunder, the
President shall:
a. Attend meetings of the HHS Board;
b. Serve as the liaison between CFVHS, the HHS Board and the Medical Staff;
C. Subject to the terms and provisions of this Agreement, execute on behalf of the
Health System such contracts, agreements, and evidence of indebtedness as are authorized from time to
time by the HHS Board;
d. Grant temporary and emergency clinical privileges to qualified practitioners
where appropriate, subject to and in accordance with the Hospital's Medical Staff bylaws, and exercise all
authority delegated by the HHS to the President with respect to Medical Staff matters; and
Perform any other duty or responsibility as directed or authorized by CFVHS in
this Agreement.
(b) Other Services. CFVHS and its affiliates may otherwise provide other administrative and
professional services to HHS ( "Additional Services"), which shall be separately reimbursable from the
fees set forth on Exhibit C attached hereto, which services and the amounts to be reimbursed to CFVHS
shall be agreed upon in advance in writing.
(c) Line of Credit. CFVHS shall provide HHS the Line of Credit, which shall be secured by
an Obligation issued under the HHS MTI. CFVHS shall enter into a second line of credit or an amended
and restated line of credit for an additional $7,000,000 under terms and conditions substantially similar to
the Line of Credit upon HHS obtaining the UDC Approved; provided however, that CFVHS shall not be
obligated to enter into the same until HHS has obtained the City of Dunn and County of Harnett consents
required under Sections 4.a. and 4.c. hereof.
20502.229- 843114 vt Exhibit A -7
(d) Service Level. CFVHS shall use good faith efforts (i) to maintain in full force at all times
during the tern of this Agreement on HHS's behalf all necessary licenses, certifications, permits, and
other approvals required by applicable local, state, and federal laws and regulations with respect to the
operations of the Hospital, if the failure to maintain such license, certification or perrnit would cause a
material adverse effect on the operations of the Hospital, (ii) to take reasonable steps necessary to cause
the Hospital to be properly accredited by the Joint Commission; (iii) to cause the Hospital to be certified
to participate in the Medicare program under Title XVIII of the Social Security Act, 42 U.S.C. § 1395k;
(iv) to cause the Hospital to remain a certified provider for Medicaid under regulations promulgated by
the Division of Medical Assistance pursuant to N.C. Gen. Stat. Section 108A, Article 2, Part 6 and Title
XD{ of the Social Security Act; and (v) to conduct operations at the Hospital at all times in material
compliance with the terms of such licenses, certificates, accreditation, permits, and approvals. CFVHS
shall provide HHS copies of any such licenses, certifications, accreditations, permits, or approvals upon
request and promptly notify HHS of any revocation or suspension of, or the imposition of any material
restriction to, any such licenses, certificates, accreditation, permits, or approvals, which would cane a
material adverse effect on the operations of the Hospital.
(e) Taxes. If applicable, CFVHS shall be responsible for the payment of all taxes,
assessments, license fees, and other charges assessed on any personal property owned by CFVHS relating
to the operation of the Hospital.
SECTION 4. OBLIGATIONS OF HHS.CFVHS Board Seat. Prior to the Effective Date,
HHS shall have approved the amended and restated articles and bylaws attached hereto at Exhibit D
pursuant to which CFVHS shall have the right to nominate and appoint one (1) of the six (6) HHS board
members (which board seat is currently elected by HHS) (the "CFVHS Board Seaf). Within thirty (30)
days of the Effective Date, HHS shall have obtained the written consent of City of Dunn and the County
of Harnett approving the same. HHS shall not amend or otherwise alter the Board composition during the
Term without the prior written consent of CFVHS. Provided however, upon termination of this
Agreement, the Board member appointed by CFVHS shall resign effective on the date of termination of
this Agreement and the right of CFVHS to nominate and appoint a Board member shall revert to HHS.
(b) Line of Credit HHS shall execute and deliver to CFVHS the Line of Credit Agreement,
together with the Obligation (as defined in the HHS MTI) under the HHS MTI securing its obligations to
CFVHS under the Line of Credit. HHS shall promptly obtain the LOC Approval and shall enter into a
second line of credit or an amended and restated line of credit for an additional $7,000,000 under terms
and conditions substantially similar to the Line of Credit.
(c) Right To Purchase Interesr in Newco. At any time during the Term of this Agreement,
CFVHS shall have the right but not the obligation to elect to enter into a transaction by which CFVHS
will obtain a forty nine percent (49 %) interest in the ownership and operation of Newco. Upon providing
such written notice (the `Notice Date "), the Parties shall promptly negotiate in good faith. the terms of
transactions documents (the "Definitive Agreements ") pursuant to which the Parties will proceed to the
closing (the "Closing Date ") of the transactions outlined below (collectively, the `Transactions ") and
Harnett shall promptly seek the written consent of the USDA to the Transactions:
(i) HHS shall transfer all of the tangible and intangible assets, except for the real
property associated with the Hospital and the Facilities, but including cash on hand, and certain of
its liabilities associated with the current operation of the Health System to Newco.
(ii) HHS shall enter into a Lease Agreement with Newco whereby HHS shall lease
the Hospital and the Facilities to Newco. Consideration for the Lease Agreement shall be paid by
Newco in an amount not less than the amount of HHS's payment obligations pursuant to the HHS
MTl, if any and any other payment obligations secured by the Facilities, if any. The payments
20502.229- 843114 v1 Exhibit A -8
shall be made by Newco in such amounts and on a schedule that are at least sufficient in amount
and timeliness to permit HHS to comply with the terms and conditions for payment and other
covenants of HHS under the HHS MTI and other payment obligations and covenants of HHS
secured by the Facilities.
(iii) HHS shall transfer to Newco all of its beneficial ownership and rights (including
without limitation, rights to manage or control the management) in and to each HHS subsidary
identified on Exhibit A pursuant to one or more documents of conveyance, and HHS shall cause
each such subsidary to amend its organizational documents to the extent necessary or appropriate
to carry out the foregoing terms and obligations.
(iv) CFVHS shall waive the Management Services Fees due and owing under this
Agreement for the period from the Effective Date until the earlier of (A) two (2) years from the
Effective Date or (B) the Closing Date of the Transactions, as described in detail in Exhibit C.
(v) CFVHS shall forgive the principal balance and any accrued interest thereon
outstanding on the Closing Date under the Line of Credit or any additional line of credit and/or
amended and restated line of credit entered into by the parties, which amounts shall be forgiven
by CFVHS effective as of the Closing Date.
(vi) HHS shall hold a fifty one percent (51 %) membership interest in Newco and
CFVHS shall hold a forty nine percent (49 %) membership interest in Newco. Neither Party shall
have the right to sell its membership interest, or any part thereof, in Newco without the prior
written consent of the other Party.
(vii) HHS and CFVHS shall each nominate and appoint Newco board members
consistent with their respective ownership percentage.
(viii) Subject to compliance with applicable laws, HHS shall grant CFVHS an option to
purchase such remaining portion of HHS's 51% membership interest as CFVHS elects to
purchase, at a price equal to the fair market value of such membership interest at the time of the
sale, as determined by an independent third party valuator.
(ix) Newco and CFVHS shall enter into a Management Services Agreement in a form
substantially similar to this Agreement pursuant to which CFVHS shall be responsible for the
day -to -day operation and management of Newco, subject at all times to the oversight and
governance of Newco's Board of Directors.
Within thirty (30) days of the Effective Date, HHS shall have obtained the written consent of City of
Dunn and the County of Harnett approving the terms of this Section 4.c., including but not limited to the
right of CFVHS to obtain a forty nine percent (49%) membership interest in Newco (the "Transaction
Consents ").
(d) Exclusivity of Negotiations. During the Term of this Agreement, CFVHS shall have the
exclusive right to negotiate with HHS concerning the Transactions or any transaction or series of
transactions similar to those described above pursuant to which HHS would sell, lease or transfer
ownership or control of the Health System or Hospitals in whole or in part. During the entire exclusive
negotiating period, HHS shall not enter into negotiations or an agreement with any person or entity,
including but not limited to any other hospitals, health systems, health care companies, physicians, health
maintenance organizations, insurance companies, management service organizations, or healthcare
networks without the express, prior written approval of CFVHS, nor shall HHS express an interest in such
a relationship as described herein to any third party without the express written consent of CFVHS.
205o2229 -e43i 14 vt Exhibit A -9
(e) Payment of Expenses and Liabilities of HMS. HHS shall be responsible for the payment
of all expenses and liabilities related to its operations (and CFVHS shall not be responsible for any such
expenses or liabilities), including the operations of the Hospital, including but not limited to:
(i) All real property and related facilities and equipment as reasonably necessary to
operate the Health System and for CFVHS to carry out its duties under this Agreement.
(ii) Hazard, liability, professional and other necessary insurance coverage for HHS
and its affiliates.
(iii) All debts and obligations of HHS related to the Health System consistent with the
terms of any loan, mortgage, lease, agreement or other instrument evidencing the debt or
obligation.
(iv) All staff necessary to operate the Health System other than the Executive
Staffing.
(v) All liabilities of HHS to any third party, including but not limited to vendors,
claims as a result of medical malpractice or claims for recoupment, offset, fines or penalties as a
result of HHS's operations or third party billings.
(f) Oversight of Operations. CFVHS shall consult with and obtain the approval of the HHS
Board, which approval shall not be unreasonably withheld, regarding the following matters:
(i) Determining and setting patient charges for the services provided by the Health
System; all of which charges shall be billed in the name of HHS to the appropriate third party
payers and state and federal agencies in compliance with all applicable laws and third party payor
billing requirements.
(ii) Approving any operating and capital budget prepared or developed by CFVHS.
(iii) Approving all appropriate policies and operating procedures for the Health
System.
(iv) Strategic plans.
(v) The addition and deletion of clinical programs and services or any material
components thereof.
(vi) Adopting and amending Medical Staff Bylaws and Rules and Regulations, acting
on recommendations for granting clinical privileges and appointing and reappointing members of
the Medical Staff and reviewing quality improvement activities of the Medical Staff, including
without limitation, peer review and disciplinary activities, and acting on Medical Staff
recommendations in respect thereto.
(vii) Participating in the appointment, retention and evaluation of the Hospital's
PresidenL
(viii) Receiving reports and acting on recommendations regarding quality assurance
and risk management activities.
20502.229 - 843114 vt Exhibit A -10
(ix) Marketing and public relations programs, as part of and consistent with the
strategic plan.
(x) Significant Hospital policies and procedures developed by CFVHS.
(xi) Appointing the independent auditors and legal counsel.
(xii) Incurring material indebtedness.
In addition to the costs and expenses specified in Section (e) above, all costs and expenses incurred with
respect to HHS's duties specified in Section (f) above will be borne by HHS.
(g) Licensure and Certification. HHS, with the assistance of CFVHS, shall obtain and
maintain in the name of HHS all certifications, licenses, permits, approvals, and other accreditations in
connection with the operation of the Hospital and the Facilities.
(h) Compliance. HHS shall maintain and follow a corporate compliance program.
(i) HAS License. HHS grants to CFVHS an exclusive license to use the names `Betsy
Johnson Hospital ", "Central Harnett Hospital ", "Hamett Health System ", and any other names or logos
used by HHS in conjunction with the Health System (the "HHS License ") during the term of this
Agreement. The HHS License shall immediately terminate in the event this Agreement expires or
terminates for any reason. In conjunction with its management of the Hospital and the Facilities, HHS
shall have the right, but not the obligation, to use the name "Cape Fear Valley Health System ", "Cape
Fear Valley", and any other names or logos developed by CFVHS in conjunction with CFVHS's system
operations and which are utilized by other hospitals affiliated with CFVHS (the "CFVHS License'). Any
use of such names shall he in CFVHS's sole discretion.
0) Payment of Fees under this Agreement. HHS shall pay in a timely manner the fees
associated with services rendered pursuant to Section 5 of this Agreement.
follows:
(k) Representations and Warranties of HHS. MS represents and warrants to CFVHS as
(i) HHS is a non -profit corporation created under N.C.G.S., Chapter 55A, which is
duly organized, validly existing, and in good standing under the laws of the State of North
Carolina and has all corporate power and authority to conduct the business of the Health System
as such business is now being conducted.
(u) HHS and its subsidiaries have taken all action necessary to authorize the
execution and delivery of this Agreement, and the consummation of the transactions contemplated
hereby. When executed and delivered by HHS, this Agreement shall constitute valid and binding
obligations of HHS and its subsidiaries, enforceable in accordance with their terms and
conditions. Neither the execution nor the delivery of this Agreement nor the consummation of the
transactions contemplated hereby, nor compliance with any of the terms and conditions hereof,
(A) will result in the breach by, will constitute a default under, or will conflict with, any of the
terms, conditions or provisions (1) of HHS's or its subsidiaries' articles of incorporation, bylaws,
or any other organizational or constitutive instrument of HHS or such subsidiaries, or (2) any
agreement, mortgage, order, judgment, permit, authorization, or instrument to which HHS or its
subsidiaries is a parry, or by which it is bound; or (B) will violate any applicable federal or state
law. Without limiting the foregoing, in particular, HHS represents and warrants that (C) effective
as the date hereof, HHS has terminated that certain Management Services Agreement with
20502.229- 843114 vt Exhibit A -I I
WakeMed, dated November 8, 2005, as amended, and HHS has (1) obtained WakeMed's consent
to the release of any and all rights (including any rights of first refusal) of WakeMed now or in
the future to the ownership and/or operation of the Health System or (2) otherwise lawfully
terminated the WakeMed Management Services Agreement and extinguished all rights (including
any rights of first refusal) of WakeMed now or in the future to the ownership and/or operation of
the Health System and (D) except for such outstanding consents as specifically identified in
Sections 4.a., 4.b. and 4.c. hereof, HHS has obtained the written consent of any state, county, or
local bodies (including but not limited to the County of Hamett and the City of Dunn) required to
authorize the execution and delivery of this Agreement, and the consummation of the transactions
contemplated hereby.
(iii) HHS is tax exempt under Section 501(c)(3) of the Internal Revenue Code and is
not a private foundation as described in Section 509(a) of the Code and such tax exemption has
not been modified or revoked.
(iv) Neither HHS nor its subsidiaries have incurred any liabilities or obligations of
any nature, whether accrued, absolute, contingent or otherwise, which are requited under GASE
to be reflected in the balance sheet of HHS and its subsidiaries or the notes thereto, except
liabilities or obligations incurred since the date of the financial statements in the ordinary course
of business and consistent with past practice.
SECTION 5. COMPENSATION
(a) Management Fee. In exchange for the rights and services provided hereunder, HHS shall
comply with the terms and covenants set forth herein and pay the fees as set forth in Exhibit C.
(b) Fair Marker Value. CFVHS and HHS acknowledge and agree that the compensation set
forth herein represents fair market value as a result of arms - length negotiation and does not take into
account the volume or value of any referrals or other business generated between the Parties. The
benefits hereunder do not require, are not payment for, and are not in any way contingent upon, the
referral (as that term is defined at 42 U.S.C. § 1395nn or 42 U.S.C. § 1320a -7b), admission, or any other
arrangement for the provision of any item or service offered by either Party to patients of the other Party
in any facility or health care operation controlled, managed, or operated by the Parties. This Agreement is
not intended to influence the judgment of any physician or other health care provider in choosing a
medical facility appropriate for the proper care of his or her patients. The Parties hereby support a
patient's right to select the medical facility of his her choice.
SECTION & TERM.Subject to Section 7 hereof, this Agreement shall commence on the
Effective Date and continue for a period of ten (10) years (the "Initial Term "). This Agreement will
automatically renew for additional one (1) year tetras (each, a "Renewal Term'; collectively with the
Initial Term, the "Term ") unless either Party terminates the Agreement by giving the other Party one
hundred eighty (180) days prior written notice prior to the end of the Initial Term or the then current
Renewal Term.
SECTION 7. TERMINATION.
(a) Termination by Either Party. This Agreement may be terminated by the other Party if
either Party:
(i) is unable to pay its debts generally as they become due;
20502.229 - 843114 v1 Exhibit A -12
(ii) has an order for relief entered in any case commenced by it under the federal
bankruptcy laws, as now or hereafter in effect;
(iij) commences a proceeding under any federal or state bankruptcy, insolvency,
reorganization or similar law, or has such a proceeding commenced against it and either has an
order of insolvency or reorganization entered against it or has the proceeding remain undismissed
and unstayed for ninety (90) days;
(iv) makes an assignment for the benefit of creditors;
(v) has a receiver or trustee appointed for it or for the whole or any substantial part of
its property; or
(vi) is excluded from participation in any governmental health care program.
(b) Termination for Cause. In the event of a material breach by either Party of any of its
covenants under this Agreement, the non - breaching Parry may terminate this Agreement if the breaching
Party fails to cure such breach within one hundred twenty (120) days of its receipt of written notice of
default(s).
(c) Termination by CFVHS. Notwithstanding any other provision of this Section 5, CFVHS
shall have the right to terminate this Agreement immediately upon:
(i) the failure of HHS to obtain the LOC Approval from the USDA within thirty (30)
days of the Effective Date;
(ii) the failure of HHS to obtain the written consent of City of Dunn and the County
of Harnett to the appointment of the CFVHS Board Seat within thirty (30) days of the Effective
Date;
(iii) the failure of HHS to obtain the Transaction Consents within thirty (30) days of
the Effective Date;
(iv) the occurrence of an "Event of Default" as that term is defined in the Line of
Credit or any additional line of credit and/or amended line of credit entered into by the parties; or
(v) the failure of HHS to obtain any required third party consent or approval,
including but not limited to the USDA, necessary to effectuate the Transactions within sixty (60)
days of the Notice Date.
(d) Termination Without Carne. After the first year of the Initial Term, CFVHS shall have
the right to terminate this Agreement without cause upon one hundred eighty (180) days prior written
notice to HHS.
(e) Conditions of Termination. Upon termination of this Agreement pursuant to this
Section, all obligations of CFVHS hereunder shall be deemed immediately terminated. CFVHS shall
cooperate with HHS and its representatives to ensure that records, documents, and other such materials
are appropriately returned to HHS in a format accessible to HHS. After the effective date of termination,
HHS shall compensate CFVHS on a reasonable hourly basis for CFVHS's assistance in completing any
services begun hereunder, if requested by HHS and as mutually agreed by the Parties, in transitioning
management back to HHS or to a third party. Any obligations of HHS to pay fees to CFVHS hereunder
that arose prior to the termination of this Agreement shall survive the termination of this Agreement, and
20502.229- 843114 v1 Exhibit A -13
HHS shall be fully responsible for all such fees. HHS shall pay all fees earned and accrued through the
date of termination of this Agreement to CFVHS in the manner specified in Exhibit C. If CFVHS used a
particular computer system or software in providing Services, CFVHS shall cooperate with HHS during
the management transition back to HHS or to a third party to make information from such system or
software available to HHS in an accessible format, provided however that, to the extent HHS or any third
party management company desires the electronic transfer of data or information from CFVHS, HHS
shall be responsible for any costs to CFVHS to effectuate such transfer in the format desired.
SECTION 8. RELATIONSHIP OF PARTIES.
(a) Nothing herein shall be construed as giving HHS control over, or the right to control, the
J udgment or actions of CFVHS or individuals performing services on behalf of CFVHS with respect to
the Management Services rendered hereunder, and CFVHS shall at all times act as and be deemed to be
an independent contractor, subject to the contractual conditions, obligations and limitations set forth
herein.
(b) This Agreement shall not be construed as creating a partnership or joint venture. Except
as explicitly set forth herein, neither Party shall hold itself out as or act as an agent of the other Party, nor
have the power to obligate the other Party with respect to third parties in any way; provided, however, that
the President and Vice President of Finance shall have such powers as shall be delegated to them by HHS.
(c) Subject to the contractual conditions, obligations and limitations set forth herein, CFVHS
shall not otherwise have control over or any right to control the governance of HHS and the HHS Board
of Directors, including but not limited to the independent actions of the HHS Board of Directors to adopt
and apply bylaws, oversee the medical staff of the Hospital and make all decisions related to credemialing
of providers at the Hospital and the Facilities.
SECTION 9. CONFIDENTIALITY.
(a) CFVHS, its agents and employees shall not, at any time, either alone or in association
with others, directly or indirectly, make or cause to be made any disclosure or other use not authorized by
HHS of any confidential information relating to HHS or its business, unless: (i) such disclosure is required
for CFVHS to discharge its duties under this Agreement; (ii) CFVHS is compelled by court order or other
compulsory process to disclose such information (provided that CFVHS will first make a reasonable
attempt to notify HHS of such court order or process, and will cooperate, within reason, in any efforts
HHS undertakes to resist such disclosure); or (iii) such information is or becomes, through no action of
CFVHS, disseminated or otherwise available in the public domain. CFVHS acknowledges and agrees that
all information provided by HHS to CFVHS pursuant to this Agreement, including, but not limited to all
information provided pursuant to Section 4 of this Agreement, shall be of a confidential and proprietary
nature and such information shall not be used by CFVHS to compete with HHS nor for any purpose other
than discharging its duties under this Agreement.
(b) HHS, its agents and employees shall not, at any time, either alone or in association with
others, directly or indirectly, make or cause to be made any disclosure or other use not authorized by
CFVHS of any confidential information related to CFVHS or its business, unless: (i) such disclosure is
required for HHS to discharge its duties under this Agreement; (ii) HHS is compelled by court order or
other compulsory process to disclose such information (provided that HHS will fast make a reasonable
attempt to notify CFVHS of such court order or process, and will cooperate, within reason, in any efforts
CFVHS undertakes to resist such disclosure); or (iii) such information is or becomes, through no action of
HHS or any person associated with HHS, disseminated or otherwise available in the public domain. MS
acknowledges and agrees that all information provided by CFVHS to HHS pursuant to this Agreement,
including, but not limited to all information provided pursuant to Sections 2 and 3 of this Agreement, shall
20502.229 - 843114 v Exhibit A -14
be of a confidential and proprietary nature and such information shall not be used by HHS to compete
with CFVHS nor for any purpose other than oversight of the Health System under this Agreement.
(c) This Section 9 shall survive termination or expiration of this Agreement for any reason or
no reason. In the event of any actual or threatened breach or violation of this Section 9, the disclosing
Party shall have full rights to seek injunctive relief, in addition to any other rights and remedies it may
have
SECTION 10. INSURANCE.
(a) CFVIIS's Liability Insurance. CFVHS agrees to obtain and maintain appropriate levels
of insurance (but not less than the commercially reasonable minimum levels) to insure against any claim
arising out of activities of CFVHS, its employees and/or its agents in the provision of the Management
Services herein. Such insurance may, at CFVHS's sole discretion, be pursuant to a commercial policy or a
properly trusteed self- insurance plan or similar program. CFVHS shall be solely responsible for the
payment of any and all premiums, retentions, deductibles ad/or claims with respect to its own policies.
(b) HHS's Liability Insurance. CFVHS agrees to obtain and maintain, on HHS's behalf and
its expense, appropriate levels of professional liability insurance (but not less than the commercially
reasonable minimum levels) to insure against any claim arising out of activities of HHS, its employees
and staff, whether leased, contracted or directly employed, or agents. Such insurance may, at HHS's sole
discretion, be pursuant to a commercial policy or a properly trusteed self - insurance plan or similar
program. HHS shall be solely responsible for the payment of any and all premiums, retentions,
deductibles and/or claims with respect to its own policies.
(c) Premises Liability Insurance. CFVHS agrees to obtain and maintain, on HHS's behalf
and at its expense, appropriate levels of general and premises liability insurance (but not less than the
commercially reasonable minimum levels) on the Hospital and the Facilities. CFVHS shall obtain and
maintain appropriate levels of property insurance covering its own property, and personal property of its
employees and agents brought to the Hospital and the Facilities.
(d) Employers Liability Insurance Each Party agrees to obtain and maintain appropriate
levels of employers liability insurance (but not less than the commercially reasonable minimum levels),
naming as appropriate the other Party as an additional insured. Further, each Party shall carry pertinent
workers compensation coverage meeting North Carolina requirements for its employees providing
services pursuant to this Agreement
(e) Other Insurance. CFVHS may also obtain on HHS's behalf additional types of
insurance that it determines are necessary and appropriate for the efficient and proper operation of the
Hospital, including but not limited to professional liability insurance covering the activities of the
management team and the operation of the Hospital, business interruption insurance, stop -loss insurance,
and directors and officers liability insurance.
(f) Certificates. Each Party hereto shall at the request of the other Party annually provide the
other with a certificate of insurance from its insurer, in compliance with the provisions of this Agreement,
and with a copy of the policy or other written proof of insurance reasonably satisfactory to the other Party.
Such certificates will name the other Party as a party entitled to at least thirty (30) days prior written
notice of any termination or modification of coverage. Upon reasonable request, each Party shall be
entitled to a copy of any changed policy or new policy or an extract thereof.
SECTION 11. INDEMNIFICATION.
20502.229- 843114 v1 Exhibit A -15
(a) No Assumed Liabilifies/Emplayment Liabilities. CFVHS shall neither assume nor
become liable for the payment or performance of any liabilities of HHS of any nature whatsoever,
whether related to or arising out of the operation of HHS or its facilities, including without limitation:
(i) Any liability based upon any act or omission of HHS or any of its representatives;
(ii) Any indebtedness of HHS or any of its representatives;
(iii) Any liabilities relating to any breach of contract, breach of warranty, tors
infringement, or violation of law by HHS or any of its representatives; or
(iv) Any liability for lawsuits, claims, or legal, administrative or arbitration
proceedings or investigations relating to HHS or any of its representatives, including but not
limited to claims for medical malpractice or claims for recoupment, offset, fines or penalties as a
result of HHS's operations or third party billings.
CFVHS may provide payroll and other related services to HHS with respect to staff employed by HHS.
However, the Parties agree that the payment of fees, salaries, and wages to all HHS staff (other than the
Executive Staffing), as well as any applicable payroll taxes and all other taxes now or hereafter applicable
with regard to HHS shall be the sole responsibility of HHS. The Parties agree that neither HHS nor any of
their employees or independent contractors have any claim under this Agreement or otherwise against
CFVHS for any health and welfare benefits, pension plan or retirement benefits, vacation, sick leave,
retirement, disability, or any other employee benefits of any type. All such benefits, if any, are the sole
responsibility of HHS, and HHS shall indemnify and hold harmless CFVHS, its directors, officers,
employees, and agents from and against any and all claims, liability, loss, damage, or expenses (including
reasonable attorney fees) arising from HHS's responsibilities under this Section 11(a).
(b) CFVHS Indemnification. CFVHS agrees that it shall indemnify hold harmless and
defend HHS, including HHS's officers, directors, employees, successors and assigns, for any and all
liability, claims, and costs of whatsoever kind and nature, including without limitation attorneys' fees,
arising from CFVHS's gross negligence and/or intentional misconduct in the performance of its duties
hereunder.
(c) HHS Indemnification. HHS agrees that it shall indemnify, hold harmless and defend
CFVHS, including CFVHS's officers, directors, employees, successors and assigns, for any and all
liability, claims, and costs of whatsoever kind and nature, including without limitation attorney's fees,
arising from or related to the ownership or operation of the Health System or any other asset, facility or
other operations of HHS, except as to any liability arising out of or resulting from the gross negligence or
intentional misconduct of CFVHS or any of its officers, agents or employees.
(d) Survival. The requirements of this Section 11 will survive the expiration or termination
of this Agreement.
SECTION 12. RECORDS. To the extent applicable, CFVHS agrees to make available to the
Secretary of the U.S. Department of Health and Human Services or to the U.S. Comptroller General, or to
any of their duly authorized representatives, until the expiration of four (4) years after the furnishing of
services pursuant to this Agreement, this Agreement and the books, documents and records of CFVHS
that are required to be made available by section 952 of P.L. 96499 to certify the nature and extent of the
costs deemed to be incurred by HHS under this Agreement. Further, if CFVHS tames out any of the
duties contemplated herein to be carried out by CFVHS though a subcontract with a related
organization(s) and the value or cost of such subcontract is Ten Thousand Dollars ($10,000) or more over
a twelve (12) month period, CFVHS shall cause such subcontract to contain a clause similar to this
20502.229- 843114 vi Exhibit A -16
Section 12. Nothing contained in this section shall be construed to constitute a waiver of the right of
privacy or confidentiality otherwise legally available to such person. Nothing constrained in this Section
14 shall be deemed as an agreement by any person that information required to be made available by
section 952 of P.L. 96 -499 shall be subject to disclosure under the Freedom of Information Act unless
otherwise expressly required by law.
SECTION 13. NOTICES. All notices, offers, acceptances, and other communications required
to be given hereunder shall be given by and be deemed given when delivered by personal delivery or by
telecopy or when deposited in U.S. lust -class mails addressed as follows:
If to CFVHS: Cumberland County Hospital System, Inc.
d/b /a Cape Fear Valley Health System
1638 Owen Drive
Fayetteville, NC 28302 -2000
ATM: Legal Department
If to HHS: Harnett Health System, Inc.
D/B /A Harnett Health System
800 Tilghman Drive
Dunn, North Carolina 28334
ATTN: Chairman of the Board of Trustees
With a copy to: Wyrick Robbins Yates & Penton, LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607
ATTN: Benjamin Thompson
or to such other address as the Party may designate in writing to the other Party from time to time
SECTION 14. COMPLETE AGREEMENT. This Agreement constitutes the entire
understanding among the Parties in respect of the subject matter of this Agreement This Agreement
supersedes all prior and contemporaneous understandings or agreements between the Parties in respect to
the subject matter of this Agreement This Agreement may at any time be amended in whole or part by
written instrument executed by each Party hereto.
SECTION 15. BENEFIT. This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, the legal representatives, successors in interest and assigns, respectively, of each such
Party. This Agreement is expressly intended by the Parties for the benefit of the Parties to this Agreement
and not for any other person. Nothing in this Agreement shall be construed to create any rights or benefits
in any third parties.
SECTION 16. ASSIGNMENT. Neither Parry may assign its rights or obligations under this
Agreement to any other person whatsoever without the prior written consent of the other Party.
Notwithstanding the prior sentence, (a) CFV14S may assign this Agreement, for performance, to any
affiliate controlled by, under common control with, or controlling CFVHS and (b) CFVHS may utilize
affiliates and/or independent contractors in the provision of the Management Services under this
Agreement without the prior written consent of HHS.
SECTION 17. WAIVER No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision whether or not similar. No waiver shall
constitute a continuing waiver by the Parry. No waiver shall be binding unless executed in writing by the
party making the waiver.
20502.229 - 843114 vt Exhibit A -17
SECTION 18. HIPAA. The Parties agree to abide by the terms of Exhibit E, attached hereto
and incorporated herein by this reference.
SECTION 19. CHANGES IN LAW. In the event there is a change in the applicable federal or
state statutes, rules, regulations, principles or interpretations that reasonably may render any of the
material terms of this Agreement unlawful or unenforceable, including any services rendered or
compensation to be paid hereunder, or if the continuation of this Agreement (or any provision hereof) may
reasonably render the relationship(s) amongst the Parties hereto illegal, either Party shall have the
immediate right to initiate the renegotiation of the affected term or terms of this Agreement, upon notice
to the other Party, to remedy such condition. The Parties shall thereafter negotiate using their best efforts
to restructure this Agreement so as to make the same lawful, and to the extent possible, to maintain the
economic benefits to each Party as contemplated hereunder. Should the Parties be unable to renegotiate
the term or terms so affected so as to bring it or them into compliance with the statute, rule, regulation,
principle or interpretation that rendered the same unlawful or unenforceable within fifteen (15) days of the
date on which notice of a desired renegotiation is given, then the Party providing such notice shall have
the right to terminate this Agreement upon an additional fifteen (15) days written or such shorter time as
maybe required by law.
SECTION 20. GOVEihNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
SECTION 21. MISCELLANEOUS. This Agreement may be executed in any number of
counterparts and each executed counterpart shall be taken considered as an original of this Agreement.
The captions contained in this Agreement are not part of the context hereof, but are merely labels to assist
in locating and reading the sections and subsections. The captions shall be ignored in construing this
Agreement. Each exhibit and schedule referred to in this Agreement is hereby incorporated by reference.
Should any provision or portion of this Agreement be held unenforceable or invalid for any reason, the
remaining provisions or portion of this Agreement shall continue in full force and effect.
SECTION 22. MUTUAL COVENANTS. The parties hereto covenant and agree, as follows:
(a) The Hospital will be managed, operated and maintained in a manner that will preserve the
tax- exempt, 501(c)(3) status of the System;
(b) The Hospital will provide care without regard to ability to pay; and
(c) The Hospital will operate primarily for the benefit of the community served by the
Hospital.
SECTION 23. EXCLUSIVITY /OPPORTUNrMS.
(a) Exclusivity. During the term of this Agreement, HHS agrees that CFVHS shall be the
exclusive provider of the management services to be provided at the Hospital from and after the Effective
Date of this Agreement. If HHS establishes, owns, or operates additional hospitals or other health care
facilities in addition to the Hospital after the Effective Date of this Agreement, CFVHS shall have the
right to be the exclusive provider of management services at any such additional facilities.
(b) Corporate Opportunities in Harnett County. The Parties agree that they will promptly
disclose to each other any opportunity to own (in whole or in part), lease, operate, manage or provide
financing to any hospital facility within Harnett County (an "Opportunity"). In the event of an
Opportunity, CFVHS will discuss such Opportunity with the HHS Board. The HHS Board will have
thirty (30) days to review and render a decision regarding such Opportunity. If the HHS Board either
20502.229 - 843114 v1 Exhibit A -18
Exhibit B
MANAGEMENT SERVICES
The following services shall be included (all to extent permitted by applicable law) as part of the
Management Services and provided by CFVHS as more fully described below:
• Supervision of the business office functions: accounting, patient billing, accounts payable,
purchasing, etc.
• Preparation of operating and capital budgets
• Preparation of monthly and annual financial reports
• Analysis of business office operations
• Preparation of monthly management reports, including such specific information as may be
reasonably requested by HHS from time to time
• Access to purchasing agreements with CFVHS's Group Purchasing Organization ( "GPO ") and other
locally negotiated purchasing agreements
• Managed care contracting consultation and negotiation directly to the extent permitted by law or via
arranging for third party to negotiate such agreements on HHS's behalf
• Development of a physician recruitment and retention plan
• Board of Directors education programs
Detailed Description of Management Services
Hospital Operations: CFVHS shall provide administrative oversight to all business, administrative and
executive functions of the Hospital, consistent with and subject to the policies, procedures and objectives
and periodic directives of the HHS Board of Directors, including but not limited to, the following:
1. Preparation of administrative and financial reports for presentation to the HHS Board of
Directors.
2. 1,Tegotiation of professional service contracts.
3. Preparation of reports for the Board of Directors and Medical and Allied Health Staff as
appropriate, including (1) general activities and performance within the Hospital and (2) federal
and state regulations and local developments that affect Health System operations.
4. Preparation of operating and capital budgets to HHS Board of Directors, as well as other
projections including but not limited to annual compensation plans (which include salaries,
bonuses, awards, benefits, changes in staffing, and other amenities) and presentation to HHS with
any changes in the financial forecast.
S. Purchase of approved and budgeted capital equipment, and unbudgeted purchases of capital
equipment consistent with HHS policies and procedures as approved by the HHS Board of
Directors, except in the event a patient emergency requires such expenditure, in which case
approval shall be sought as soon as practicable after such emergency.
6. Provide oversight and direction for the establishment of policies and operating procedures for the
Health System.
7. Assist HHS in determining qualifications and duties of the personnel to be regularly employed
through HHS.
8. Recommend and assist in the development of process improvement initiatives or focused studies
to impact the outcomes and provide the necessary support to understand the root causes of
outcomes that need improvement.
20502.229 - 843114 v1 Exhibit A -23
9. Arrange for the provision of utilities, building services, and supplies determined by it to be
necessary and appropriate for the proper and efficient operation of the Hospital, including, but not
limited to, all water, gas, heat, air conditioning, power, light, janitorial and maintenance services,
telephone services, laundry services, linen, printed stationery, forms, secretarial and transcription
services, nursing services, postage, duplication services, medical records services, office supplies,
and medical supplies needed by the Hospital. For the sake of clarity, HHS shall be the
contracting party with third party vendors providing such items and services and directly
responsible for all such costs and expenses.
10. Arrange for maintenance and repair of the Facilities and all the equipment, furniture, furnishings,
and personal property currently located at or used in connection with the Facilities and any new
equipment, which CFVHS determines to be necessary or appropriate for the efficient and proper
operation of the Hospital. For the sake of clarity, HHS shall be the contracting party with third
party vendors providing such items and services and directly responsible for all such costs and
expenses.
11. Assist HHS in determining whether to replace or dispose of any equipment pursuant to the capital
budgeting process. For the sake of clarity, HHS shall be the contracting patty with third party
vendors providing such items and services and directly responsible for all such costs and
expenses; likewise, any proceeds of such sale shall belong to HHS.
12. Supervise and manage the management information system utilized in the operations of the
Hospital.
Budgets. No later than thirty (30) days prior to the end of each Fiscal Year during the term of this
Agreement, CFVHS shall prepare and submit for approval by the HHS Board a capital expenditure, cash
flow, and operating budget (collectively, the "Budgets ") for the operation of the Hospital for the ensuing
Fiscal Year. Approval of the Budget by the HHS Board will not be unreasonably withheld or delayed.
For purposes of this Agreement, a "Fiscal Year" shall mean the period between October 1 of a calendar
year and September 30 of the following calendar year. CFVHS shall perform its duties hereunder in good
faith as provided in this Agreement so that the actual costs and expenses of the operation and maintenance
of the Hospital during the Fiscal Year shall be consistent with the Budgets (provided, however, that
nothing in this Agreement is intended, or shall be construed, to be a guarantee by CFVHS of any level of
revenues or collections). CFVHS shall inform the HHS Board of any significant variations from the
Budgets. The Parties acknowledge and agree that they do not intend to be subject to Combined Entity
Reporting on their respective financial statements. The Parties agree to take all reasonable actions to
prevent either CFVHS or HHS from being subject to Combined Entity Reporting.
Financial Management: CFVHS shall provide supervision of the business office functions such as
accounting, patient billing, medical information management, accounts payable and purchasing and will
be responsible for the preparation of the operating and capital budgets. CFVHS shall prepare a fee
schedule for all technical, ancillary, global and other fees and charges for all services rendered in the
Hospital. CFVHS shall provide monthly financial reports, including monthly revenues and expenses, and
shall provide an annual financial report to the HHS Board of Directors. CFVHS shall coordinate audit
activity with an independent public accoutring firm to be selected by the HHS Board of Directors.
Purchasing ASeements: To the extent permitted by law and CFVHS's GPO Agreement, CFVHS shall
provide access to CFVHS's purchasing agreements with CFVHS's GPO and other locally negotiated
purchasing agreements. CFVHS's Purchasing Department shall offer assistance in accessing both GPO
and locally negotiated purchasing agreements to afford HHS the opportunity to make an informed
decision regarding its willingness to access such agreements.
20502.229- 843114 vl Exhibit A -24
Managed Care Contracting Consultation: CFVHS shall provide evaluation, negotiation and execution of
managed care contracts with insurance companies, managed care organizations, employers, and other
payers, which may be handled directly to the extent permitted by law or via arranging for third party to
negotiate such agreements on HHS's behalf.
Legal. CFVHS shall recommend and HHS shall select and retain lawyers or a law firm to provide legal
services for legal issues related to the Health System and HHS Board. Legal services provided for the
Health System shall be an expense of HHS. Notwithstanding the foregoing legal services provided to
and for CFVHS from its counsel, related to CFVHS's negotiation of this arrangement and future
arrangements with HHS (including the Transactions), shall be at the sole cost and expense of CFVHS.
Compliance. CFVHS shall provide access to CFVHS compliance department and programs, including
compliance education and programing support/materials, establishment of annual compliance work plans;
HHS shall continue to maintain an independent compliance program, which will be responsible for
identification, review and resolution of HHS compliance matters.
Physician Recruitment: CFVHS shall develop a recruitment program to attract physicians to HHS's
service area and to retain physicians who already have privileges at the Hospital.
Board Education: CFVHS shall provide access to programs on the following topics:
• Health care trends and issues
• Board orientation and responsibilities
• Managed care
• Other program content as appropriate
Limitation on Services
Services not specifically described in this Exhibit B are not included as part of the Management Services
Fee (or the Executive Staffing Fee) and shall be paid for separately as an Additional Services Fee in
accordance with Section 3(b) of the Agreement.
20502.229- 843114 v1 Exhibit A -25
Exhibit C
FEES
1. Executive Staffing Fee:
HHS will pay on a pass - through basis all reasonable costs incurred by CFVHS associated with the
Executive Staffing, including reasonable salary and benefit costs and ordinary business expenses.
HHS also will reimburse CFVHS for all relocation expenses, severance expenses and interim
living expenses for such Executive Staffing, if any.
HHS shall not reimburse Executive Staffing for their daily travel to HHS. HHS shall not
reimburse any travel expenses of any other CFVHS employees except as approved in writing in
advance, limited to reasonable travel expenses for (i) travel to HHS and (ii) all CFVHS
employees (including Executive Staffing) for other travel and expenses on behalf of HHS.
2. Management Services Fee:
HHS will pay CFVHS a Management Services Fee for all other Management Services provided
hereunder as follows:
a. Base Management Fee
During the first two years of the Initial Term, HHS will pay CFVHS a Base Management
Fee equal to Three Hundred Thousand Dollars ($300,000) per year in exchange for the
Management Services. For each subsequent year of the Term, the Base Management Fee
shall be increased annually by three percent (3 %); provided however, the Parties shall
renegotiate the Management Fee in advance of the third year of the Term to insure that
such rate is consistent with then current market rates..
b. Incentive Management Fee
In addition to the Base Management Fee, CFVHS shall be eligible for an
additional Incentive Management Fee, which shall be equal to the Base
Management Fee multiplied by the Performance Metric percentage set forth
below.
ii. For any fiscal year (including the first year of the Initial Term) following a year
in which IMS experienced an operating loss in the prior fiscal year (as
determined by HHS's outside auditors), the Performance Metric percentage shall
be equal to:
20502.229- 843114 v1 Exhibit A -26
Incentive Performance -.
Incentive Percenta e
Operating
loss equal to or
greater than prior FY
0%
Operating
loss reduced by
33% or less
33%
Operating
loss reduced by
more than 33% up to 66%
66%
Operating
loss reduced by
more than 66%
100%
20502.229- 843114 v1 Exhibit A -26
in. For any fiscal year following a year in which HHS experienced an operating
profit in the prior fiscal year (as determined by HHS's outside auditors), the
Performance Metric percentage shall be equal to:
Incentive Performance = -.
Incentive Percentage
Gross margin
less than 0%
0%
Gross margin
0 to 1%
25%
Gross margin
1 to 2 %
50%
Gross margin
2 to 3%
75%
Gross margin
over 3%
100%
3. Additional Services Fee:
Unless expressly set forth in writing herein or pursuant to a separate written agreement between
the Parties, all other Additional Services shall be provided to HHS by CFVHS at actual cost plus
10 %. Any such Additional Services not subject to a separate written agreement shall be agreed to
in advance by the Chair of the Board of Directors of HHS.
4. Waiver of Fees:
Notwithstanding the above provisions, in conjunction with the rights granted to CFVHS under
Section 4.c. of this Agreement and solely if the Parties enter into the Definitive Agreements and
effectuate the Transactions contemplated in Section 4.c. hereof, the Parties have agreed that no
Management Services Fees will be due and owing for the period from the Effective Date until the
earlier of (a) two (2) years from the Effective Date or (b) the Closing Date of the Transactions
(each as defined in Section 4.c.).
5. Payment Terms:
All amounts due and owing under this Exhibit C shall be payable on or before the fifteenth (151)
day of each month for service provided in the immediately preceding month; provided however,
that:
a. CFVHS will permit HHS to defer payment of the Management Services Fees for the first
two (2) years of the Initial Tern in anticipation that such Fees may be waived as set forth
above in Paragraph 4 of this Exhibit C.
b. If the Closing Date does not occur within two (2) year of the Effective Date, IBIS shall
immediately make payment for the first two (2) years' Management Services Fees and
Executive Staffing Fees and shall begin paying such fees going forward as set forth
above; provided however, CFVHS may elect to permit HHS to defer payment of the same
for a longer period in its discretion. The failure to timely collect such fees shall not be
deemed a waiver of the right to payment hereunder.
c. The Executive Staffing Fees shall not be deferred or waived and shall be due and owing as
set forth above.
d. If this Agreement expires or is terminated for any reason other than as a result of the
closing of the Transactions contemplated under the Definitive Agreements, then to the
extent CFVHS has permitted HHS to defer any Fees under this Paragraph or otherwise all
such unpaid fees for all periods shall be due and owing immediately upon such expiration
20502.229 - 843114 v1 Exhibit A -27
or termination.
20502.229 -843114 v1 Exhibit A -28
Exhibit D
AMENDED AND RESTATED ARTICLES & BYLAWS
[see attached]
D -1
20502.229 - 843114 vi Exhibit A -29
ARTICLES OF AMENDMENT OF THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION
OF
HARNETT HEALTH SYSTEM, INC.
The undersigned nonprofit corporation organized pursuant to Chapter 55A of the General
Statutes of North Carolina hereby submits these • Articles of Amendment of Harnett Health
System, Inc. a North Carolina non -profit corporation ( "Corporation "), pursuant to Section
55A -10 -01 of the North Carolina General Statutes for the purpose of amending its Articles of
Incorporation:
The name of the corporation is Harnett Health System, Inc.
2. Article 7 of the Articles of Incorporation is hereby deleted in its entirety and amended to
read as follows:
"7. The number, manner, election or appointment and qualification and the term of
Trustees shall be as set forth in the Bylaws and as set forth herein below:
The Board of Trustees ( "Board's shall have thirteen (13) members, with seven (7)
members being appointed (the "Appointed Members ") by the Harnett County
Board of Commissioners (the "County") from nominees submitted by the Board.
The Appointed Members shall include one (1) person from each of the five (5)
County Commissioner Districts, and the remaining two (2) Appointed Members
shall be residents of the Harnett County. The County may reject any or all of the
nominees that are submitted by the Board and require the Board to submit
additional nominees. Five (5) members of the Board (the "Elected Members'l
shall be elected by the Board. One '(1) Trustee (the " CFVHS Appointed
Trustees ") shall be appointed by the Cumberland County Hospital System, Inc.
dba Cape Fear Valley Health System Board of Directors (the " CFVHS Board'.
The CFVHS Appointed Trustee shall serve three (3) year terms. The first CFVHS
Appointed Trustee to be appointed shall fill the seat previously held by an Elected
Member and the initial term of such CFVHS Appointed Trustee shall be the
duration of the remaining term of that Elected Trustee replaced by the CFVHS
Appointed Trustee. Notwithstanding any other provision set forth herein, no
amendment to these Articles may be made that amends the Board structure in any
way that removes CFVHS's right to appoint a Trustee to the Board or otherwise
dilutes CFVHS's governance rights under this Section 7 without the prior written
consent of CFVHS. Board members shall be appointed for three (3) year terms,
with the terns of the initial Board members to be staggered."
3. The Amendment set forth in these Articles of Amendment was adopted on October
2014, by a noa r mous vote of the Board of Trustees and approval of the members was not
required because the Corporation has no voting members.
4. These Articles will become effective upon filing.
20502.229-843114 v1 Exhibit A -30
This the _ day of 2014.
HARNETT HEALTH SYSTEM, INC.
� � c
By: - ax�j,
Name: Ronald W. Maddox
Title: Chairman of the Board of Trustees
20502.229- 843774 vt Exhibit A -31
HARNETT HEALTH SYSTEM, INC.
800 Tilghman Drive
Dunn, Nortb Carolina 28334
THIRD AMENDED AND RESTATED BYLAWS
Approved:
February, 1983
Amended:
February, 1984
Amended:
February 1986
Amended:
May, 1988
Approved:
June, 1988 \
Approved:
July, 1991
Revised:
September, 1991
Amended:
February, 1995
Amended:
January, 1998
Amended:
September, 2000
Amended:
August 25, 2003
Amended:
November 24, 2003
Amended:
November 27, 2006
Amended and Restated:
May 5, 2011
Amended and Restated:
April 10, 2012
Amended and Restated:
October E2014
20502.229 - 843114 v1 Exhibit A -32
HARNETT HEALTH SYSTEM, INC.
800 Tilghman Drive
Dunn, North Carolina
THIRD AMENDED AND RESTATED BYLAWS
PREAMBLE
Harnett Health System, Inc. (the "Corporation') is a North Carolina nonprofit corporation
organized and existing under the North Carolina Nonprofit Corporation Act. The Corporation
operates Betsy Johnson Regional Hospital, a community hospital located in Dunn, Hamett
County, North Carolina (the "Hospital") and may, in the future, operate new hospitals including
one in Lillington, North Carolina (the "New Hospital "). The Corporation's primary purpose is to
provide comprehensive, quality patient care, to facilitate the educational process in medicine and
allied health, and to provide equitable health care services to the total community served. The
Corporation is governed by a Board of Trustees.
20502.229-843114 vt Exhibit A -33
DEFE41TIONS
The following words and terms shall have the following meanings, unless some other meaning is
plainly intended or unless otherwise required by the context:
1. ADOPTION DATE means May 5, 2011, the date the first Amended and Restated Bylaws
were approved and became effective.
2. AMENDED AND RESTATED ADOPTION DATE means October _ 2014, the date
the Third Amended and Restated Bylaws were approved and became effective.
3. BOARD OF TRUSTEES or BOARD means the governing body of Harnett Health
System, Inc.
4. CFVHS means Cumberland County Hospital System, Inc. d/b /a Cape Fear Valley Health
System.
5. CORPORATION' means Harnett Health System, Inc.
6. EXECUTIVE COMMITTEE means the Executive Committee of the Board of Trustees.
7. EX OFFICIO means service as a member of a committee or board by virtue of an office
or position held and, unless otherwise expressly provided, means with voting rights.
S. HOSPITAL means Betsy Johnson Regional Hospital.
9. MEDICAL REVIEW COMMITTEE means a committee created by the Medical Staff, by
the Board, or a committee operating under the Hospital's Performance Improvement
Plan, that is formed for the purpose of evaluating the quality, cost of, or necessity for
hospitalization or health care, including Medical Staff credentialing.
10. MEDICAL STAFF means the formal organization of all licensed physicians and dentists
who are privileged to admit or attend patients in the Hospital.
11, NEW HOSPITAL means a new hospital to be developed in Lillingtou, North Carolina
and operated by the Corporation.
12. PRESIDENT means the President and CEO of the Corporation.
13. TRUSTEE or TRUSTEES means one or more members of the Board of Trustees.
20502.229 - 843114 vt Exhibit A -34
1.1
1.2
ARTICLE I.
BOARD OF TRUSTEES
POWERS AND RESPONSIBILITIES
The corporate powers of the Corporation are vested in and are exercised by or under the
authority of the Board of Trustees, and the business and affairs of the Corporation are
managed under the direction of the Board of Trustees.
GENERAL PROVISIONS REGARDING THE BOARD OF TRUSTEES.
1.2 -1 Number and Qualifications.
The Board of Trustees consists of thirteen (13) Trustees, each of whom must be at least
twenty-one (21) years of age. The Trustees are selected for membership based on
(i) their willingness to accept responsibility for governing the Corporation, (ii) their
availability to participate actively in Board activities, (iii) their experience in nonprofit
organizations and community activities, and (iv) whether their respective areas of
interest, experience and knowledge meet the needs of the Board. Members of the
Medical Staff are eligible to serve as Trustees. It is the intention of the Corporation that
the Board membership should include at least one physician who is a member of the
Medical Staff. The President of the Corporation and the Chief of the Medical Staff shall
serve as advisors to. the Board, but shall not have the right to vote on matters presented to
the Board.
1.2 -2 Appointed Trustees: Elected Trustees: Term; Term Limits.
The thirteen (13) members of the Board of Trustees shall include seven (7) Harnett
County Appointed Trustees (defined below), five (5) Elected Trustees (defined below);
and one (1) CFVHS Appointed Trustee.
(a)
Harnett County Appointed Trustees
(1) Number; Residency Requirements. Seven (7) Trustees (the "Appointed
Trustees'l shall be appointed by the Board of Commissioners of Harnett County
(the "County Board') from a list of nominees provided by the Board of Trustees,
as provided in this Section 1.2 -2(a). The Appointed Trustees serving on the
Board of Trustees shall at all times include (i) at least one (1) resident of each of
the five (5) County Commissioner Districts of Harnett County and (ii) two (2)
other persons who are residents of Harnett County.
(2) List of Nominees: Appointment Process. At least ninety (90) days prior to
the annual meeting of the Board of Trustees, the Board of Trustees shall submit to
the County Board a list of nominees to fill seats of those Appointed Trustees
whose terms will expire at such upcoming annual meeting ( "Outgoing Appointed
Trustees "). Such list of nominees will include individuals meeting the residency
requirements set forth in Section 1.2 -2(a) and the other eligibility requirements in
Section 1.2 -1. The County Board may reject some or all of the nominees
20502.229 - 843114 v1 Exhibit A -35
submitted and require the Board of Trustees to submit additional nominees by
providing written notice to the Board of Trustees within thirty (30) days of the
County Board's receipt of the initial nominee list. The Board of Trustees shall
submit additional nominees to the County Board within thirty (30) days from the
date of the written notice from the County Board and the County Board shall
respond to the Board of Trustees within thirty (30) days each time nominees are
submitted and/or rejected. From the list of nominees, the County Board shall
select Appointed Trustees to fill seats of the Outgoing Appointed Trustees. The
County Board shall provide written notice of the selection of such Appointed
Trustees to the Board of Trustees on or before the date of the annual meeting of
the Board of Trustees.
(3) Staggered Terms: First Slate After Adoption Date. The Appointed
Trustees shall serve three (3) year terms, except as set forth in this Section 1.2-
2(a)(3). Among the first slate of Appointed Trustees after the Adoption Date (the
"First Slate of Appointed Trustees'), three (3) such Appointed Trustees shall
serve a three (3) year term, two (2) such Appointed Trustees shall serve a two (2)
year term and two (2) such Appointed Trustees shall serve a one (1) year term.
The Board of Trustees shall designate the classification and the respective terms
of the First Slate of Appointed Trustees.
(b) Elected Trustees
(1) ' Number. Five (5) Trustees (the "Elected Trustees') shall be elected by the
Board of Trustees at the annual meeting except the First Slate of Elected Trustees
shall be appointed pursuant to Section 12 -2(d).
(2) List of Nominees. Prior to the annual meeting of the Board of Trustees,
the Executive Committee of the Board of Trustees shall submit to the Board of
Trustees one or more nominees to fill seats of those Elected Trustees whose terms
will expire at such upcoming annual meeting ("Outgoing Elected Trustees ").
Such nominees must meet the eligibility requirements set forth in Section 1.2 -1.
From the list of nominees, the Board of Trustees shall elect Elected Trustees to
fill seats of the Outgoing Elected Trustees.
(3) Staggered Terms: First Slate After Adoption Date. The Elected Trustees
shall serve three (3) year terms, except as set forth in this Section 1.2- 2(b)(3).
Among the first slate of Elected Trustees after the Adoption Date (the "First Slate
of Elected Trustees "), two (2) such Elected Trustees shall serve a three (3) year
term, two (2) such Elected Trustees shall serve a two (2) year term and two (2)
such Elected Trustees shall serve a one ( 1) year term. The Board of Trustees shall
designate the classification and the respective terms of the First Slate of Elected
Trustees.
(c) CFVHS Appointed Trustee.
205D2.229-843114 vt Exhibit A -36
Trustees, unless a greater number is required by law, the Articles of
Incorporation, as amended, or a Bylaw adopted by the Board of Trustees.
(b) A Trustee who is present at a meeting of the Board of Trustees at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless his contrary vote is recorded or his dissent is otherwise entered in the
minutes of the meeting or unless he shall file his written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right of
dissent shall not apply to a Trustee who voted in favor of such action. A Trustee
may abstain from voting only on a matter with respect to which the Trustee has a
conflict of interest.
1.3 -7 Attendance at Meetings
Any member absent for three (3) consecutive Board meetings without good cause shall
be considered to have resigned. Good cause shall be any reason for which absence is
excused by the Chair of the Board. A Trustee or a committee member may participate in
a meeting of the Board or a committee of the Board by means of a conference telephone
or similar communications device which allows all persons participating in the meeting to
hear each other simultaneously, and such participation in the meeting shall be deemed
presence in person at such meeting.
1.3 -8 Action Without Meeting.
Action required or permitted to be taken at a meeting of the Board of Trustees may be
taken without a meeting if all members of the Board approve the action. The action must
be evidenced by one or more written consents signed by each Trustee before or after such
action, describing the action taken, and included in the minutes or filed with the corporate
records. The consent of any Trustee pursuant hereto may be in writing or in electronic
form and may be delivered to the corporation by hand, certified or registered mail, return
receipt requested, regular trail, nationally recognized courier or delivery service or, if in
electronic form, by electronic mail or other electronic means. Such action will become
effective when the last director signs the consent, unless the consent specifies a different
date.
1.4 COMPENSATION
Trustees shall serve without compensation, provided that Trustees may be reimbursed for
expenses incurred on behalf of the Corporation.
ARTICLE H.
OFFICERS OF THE CORPORATION
2.1 NUMBER AND APPOINTMENT
20502.224843114 v1 Exhibit A -40
The officers of the Corporation shall consist of a Chair, a Vice Chair, a President, a
Secretary, a Treasurer and such Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers as the Board of Trustees may authorize. All officers shall
be elected by the Board of Trustees.
2.2 TERMS OF OFFICE
The Chair, the Vice Chair, the Secretary and the Treasurer shall hold office for a period
of one (1) year and until their successors have been duly elected and qualified.
Notwithstanding the foregoing, the officers elected as of the date of the Adoption Date
shall serve for the period beginning on the Adoption Date and their one (1) year term
shall be deemed to have commenced on the date of the first annual meeting of the Board
of Trustees and shall expire on the following annual meeting of the Board of Trustees.
The President and each Vice President Assistant Secretary and Assistant Treasurer shall
be an employee of the Corporation or of CFVHS, and shall hold office until his or her
death, resignation, removal or the termination of his or her employment
2.3 RESIGNATION AND REMOVAL
Any officer may resign at any time by giving written notice to the Chair or to the
Secretary. Such resignation shall take effect on the date of receipt or at any later time
specified in said notice. Any elected or appointed officer may be removed at any time by
the Board of Trustees, with or without cause, by a majority vote of the Trustees them in
office; provided, however, that such removal shall be without prejudice to the contract
rights, if any of the person so removed.
2.4 CHAIR
The Chair shall preside at all meetings of the Board and of the Executive Committee.
Unless otherwise specified, the Chair shall be an ex officio member, with full voting
rights, of all Board committees. The Chair shall perform all duties incident to the office
of Chair and such other duties as may be prescribed by the Board from time to time.
2.5 VICE CHAIR
The Vice Chair shall perform such duties as may be assigned to him by the Board of
Trustees or the Chair. In the absence of the Chair or in the event of his disability,
inability, or refusal to act, the Vice Chair shall perform the Duties of the Chair with the
full powers of, and subject to the restrictions of the office of Chair.
2.6 PRESIDENT
The President is the chief executive officer of the Corporation and, subject to the control
of the Board, shall supervise and control the business and affairs of the Corporation. The
President shall perform all duties incident to the office of President and such other duties
as may be prescribed by the Board from time to time. The President shall be an ex
officio, non - voting member of all committees created by or pursuant to these Bylaws,
except as may otherwise be determined by the Board. The President may from time to
20502.229- 843114 vt Exhibit A -41
time designate in writing other officers of the Corporation to attend meetings of
committees of the Corporation Board.
2.7 VICE PRESIDENTS
In the absence of the President or in the event of the death, or inability to act, of the
President, the Vice Presidents, in the order designated by the President, shall perform the
duties of the President, and shall perform such other duties as from time to time may be
assigned to such Vice- President by the President or by the Board.
2.8 SECRETARY
The Secretary shall provide for the keeping of minutes of all meetings of the Board and
Board Committees and shall assure that such minutes are filed with the records of the
Corporation. He shall give or cause to be given appropriate notices in accordance with
these Bylaws or as required by law, and shall act as custodian of all corporate records and
reports and of the corporate seal, assuring that it is affixed, when required by law, to
documents executed on behalf of the Corporation. The Secretary shall also keep or cause
to be kept a roster showing the names of the current members of the Board of Trustees
and their addresses, and their attendance at special, regular or annual meetings of the
Board of Trustees. He shall perform all duties incident to the office and such other duties
as may be assigned, from time to time, by the President or by the Board.
2.9 ASSISTANT SECRETARIES
The Assistant Secretaries shall, in the absence or disability of the Secretary and in the
order designated by the President, have the duties and powers of the Secretary and shall
have such other duties as from time to time may be assigned to them by the President or
by the Board.
2.10 TREASURER
The Treasurer shall keep or cause to be kept correct and accurate accounts of the
properties and financial transactions of the Corporation and in general perform all duties
incident to the office and such other duties as may be assigned, from time to time, by the
President or the Board. The Treasurer shall keep or cause to be kept a record of all
financial transactions of the Corporation, which shall always be open to inspection by the
Board, and shall provide periodic reports to the Board on the financial condition of the
Corporation. The Treasurer shall serve as the Chair of the Finance Committee of the
Board.
2.11 ASSIST ANT TREASURERS
The Assistant Treasurers shall, in the absence or disability of the Treasurer and in the
order designated by the President, have the duties and powers of the Treasurer and shall
have such other duties as from time to time may be assigned to each of them by the
President or by the Board.
20502.229 - 843114 V1 Exhibit A -42
ARTICLE M.
COMMITTEES
3.1 GENERAL PROVISIONS
3.1 -1 Creation and Abolishment
Committees of the Board may be created pursuant to these Bylaws and may be abolished
by amendment to these Bylaws. Committees may also be created and abolished by
resolution adopted by a majority of the Trustees; provided that committees created
pursuant to these Bylaws, or by amendment hereto, may not be abolished by Board
resolution. Special and Ad Hoc Committees may be created and abolished by the Chair.
The Chair shall promptly inform the Board of any Special or Ad Hoc Committee created
or abolished by the Chair. The provisions in these Bylaws that govern meetings, action
without meetings, notice and quorum and voting requirements of the Board of Trustees
apply to committees established by the Board.
3.1 -2 Functions.
Committees shall have and perform the functions set forth in these Bylaws or in any
resolution of the Board. Committees created by the Chair shall have and perform the
functions specified by the Chair.
3.1 -3 Anpointments
Except as otherwise provided in these Bylaws or by Board resolution, committee
members shall be appointed by the Chair. Non -Board members are eligible to serve as
full voting members of Board committees, except the Executive Committee. Unless
otherwise provided, the Chair shall designate the chair and vice-chair of each committee,
who shall each be a Trustee. Except as set forth in Section 3.1-4, each committee
member shall hold office for a period of one year and until a successor is appointed or
elected and qualified.
3.1-4 Resignation and Removal; Vacancies.
A committee member may resign at any time by giving written notice to the Chair or to
the chair of the committee. Such resignation shall be effective on the date specified in
the resignation or upon receipt, if no date is specified. The Chair, subject to the approval
of the Board, may remove any member of a committee for any reason A vacancy shall be
filled for the unexpired portion of the term in the same manner as the original
appointment or election.
3.1 -5 Meetings.
Meetings of a committee may be called by the Chair, the chair of the committee or a
majority of the Trustee members of the committee, pursuant to notice delivered
personally or by any usual means of communication, including, but not limited to, mail,
telex, facsimile, telephone, electronic mail or other form of electronic communication
20502.22"43114 v1 Exhibit A -43
reasonably designed to inform the members of the time and place of the meeting. The
attendance by a committee member at a meeting shall constitute a waiver of notice,
unless the member attends for the express purpose of objecting to the meeting. A
majority of the members of a committee, not counting the Chair, shall constitute a
quorum for the transaction of business. The decision of a majority of the committee
members at a meeting at which a quorum is present shall be the decision of the
committee. Committees shall keep minutes and shall make recommendations and reports
to the Board-
3.1-6 Meeting Attendance.
Each committee member is expected to attend all meetings of all committees of which he
or she is a voting member. The Board may remove from a committee any committee
member who fails to attend two consecutive regular committee meetings per year and
fails to show good cause when requested by the Chair. A committee member may
participate in a meeting by or through the use of any means of communication by which
all committee members participating in the meeting may simultaneously hear each other
during the meeting. A committee member participating in a meeting by any such means
of communication is deemed to be present in person at the meeting.
3.2 STANDING COMMITTEES
3.2 -1_ - Designation of Standing Committees. _..
The Standing Committees of the Board are:
(1) Executive Committee
(2) Finance Committee
(3) Medical Care Review Committee
(4) Human Resources Committee
32 -2 Executive Committee.
The Executive Committee shall consist of the Chair, the Vice Chair, the Secretary and the
Treasurer. The Executive Committee shall meet not less often than six (6) times each
calendar year. The Executive Committee shall have power to transact all regular business
of the Hospital and, if applicable, the New Hospital, during the period between meetings
of the Board of Trustees, subject to any prior limitation imposed by the Board of
Trustees, and with the understanding that all matters of major importance will be reported
to the Board of Trustees. The Executive Committee shall perform such other functions as
are from time -to -time assigned by the Board. In addition to the foregoing functions, the
Executive Committee shall have the following functions:
(1) The Executive Committee shall function as the Audit Committee and shall
recommend to the Board the engagement of independent accountants to perform
an annual audit of the books and records of the Corporation and to prepare annual
financial statements. The Executive Committee, as the Audit Committee, shall
have the responsibility of reviewing the audited financial statements with the
20502.229 - 843114 v1 Exhibit A-44
independent accountants prior to recommending final approval to the Board of
Trustees. The purpose of such a review is to determine that the independent
accountants are satisfied with the disclosure and content of the audited financial
statements and to obtain sufficient information from the independent accountants
to facilitate analysis of the audited financial statements submitted to the entire
Board of Trustees. The Executive Committee shall also appraise the effectiveness
of the audit effort and focus on those areas where either the Committee or the
independent accountant believes special emphasis is desirable. The Committee
shall determine through discussions with the independent accountants that no
restrictions were placed by management on the scope of the examination or its
implementation. The Committee shall inquire into the effectiveness of the
Corporation's management of financial and accounting functions, through
discussions with the independent accountants and appropriate officers of the
Corporation. The Committee shall review reports prepared by the independent
accountants discussing weaknesses in internal control, organizational structure
and operating and containing recommendations to improve such weaknesses; and
(2) The Executive Committee shall function as the Nomination and Governance
Committee. The functions of the Nominating and Governance Committee are to
(i) identify and recommend to the Board individuals qualified to become Trustees;
(ii) assist the Board in conducting periodic evaluations of the performance of the
Board of Trustees and Board committees; (iii) conduct periodic reviews of the
Articles of Incorporation and Bylaws of the Corporation and make
recommendations to the Board regarding any changes identified as a result of
such reviews; and (iv) perform such other functions as are from time -to -time
assigned by the Board.
3.2 -3 Finance Committee.
The Finance Committee shall consist of the Chair, three other members of the Board of
Trustees and such others as are appointed by the Chair. The Finance Committee shall
meet not less often than six (6) times each calendar year. At least one member of the
Finance Committee shall be a person recognized as an expert in financial matters. The
Vice President of Finance shall be an ex officio, non - voting member of the Finance
Committee. The Finance Committee shall be responsible for supervising the
management of all funds of the Hospital and, if applicable, the New Hospital. It shall
arrange for all funds to be properly deposited and invested. The Finance Committee shall
cause to be prepared, and shall submit to the Board of Trustees for approval, an annual
operating budget and capital budgets showing expected receipts, income and expenses for
the ensuing fiscal year. The Finance Committee shall also examine periodic financial
reports, including audited and unaudited financial statements, and shall perform such
other functions as are from time -to -time assigned by the Board.
32 -4 Medical Care Review Committee.
The membership of the Medical Care Review Committee shall be established pursuant to
the provisions of the Hospital's Performance Improvement Plan, and any amendments
20502.229 - x43114 v1 Exhibit A -45
thereto, as shall be, from time- to-time, approved by the Board. The Medical Care
Review Committee is a Medical Review Committee, as defined by North Carolina Law
and by these Bylaws. The Medical Care Review Committee shall meet not less often
than six (6) times each calendar year.
The functions of the Medical Care Review Committee are (i) to review Hospital safety,
quality improvement, risk management activities and Medical Staff performance
improvement activities and to make reports and recommendations to the Board regarding
such activities, (ii) to receive and consider reports and recommendations from the
Medical Staff, (iii) to make recommendations to the Board concerning Medical Staff
membership, credentialing, privilege delineation and corrective action matters, and to
perform such other functions as are from time -to -time assigned by the Board.
3.2 -5 Human Resources Committee.
The Human Resources Committee shall consist of the' Chair, two other members of the
Board of Trustees and such others as are appointed by the Chair. The Human Resources
Committee shall meet at least quarterly. The functions of the Human Resources
Committee are to develop and establish board compensation philosophies for
management and staff, provide oversight to executive compensation and bonuses, review
and monitor employee satisfaction programs and outcomes, become educated about
trends in board oversight for Human Resources, and establish and recommend to the
board strategic human resources initiatives. Annually, the Human Resource Committee
shall make recommendations to the board pertaining to methodologies assuring safety,
adequacy and competency of staffing.
ARTICLE IV.
MEDICAL STAFF
4.1 ORGANIZATION
The Board of Tnistees, recognizing its responsibilities with respect to the competency of
professionals practicing within the Hospital, has caused the physicians and dentists
granted privileges to practice in the Hospital to organize their activities into a Medical
Staff in conformity with Medical Staff Bylaws approved by the Board of Trustees.
42 BYLAWS, RULES AND REGULATIONS OF THE MEDICAL STAFF
(a) The Medical Staff has developed and submitted to the Board of Trustees for
approval Bylaws, Rules and Regulations. These Bylaws, Rules and Regulations
shall be reviewed and updated as necessary and all revisions shall be forwarded to
the Board of Trustees for ultimate approval. The Medical Staff Bylaws, Rules
and Regulations and any amendments thereto or revisions thereof shall be
effective upon Board approval.
(b) The purpose of the Medical Staff is to provide a structure within which the
Medical Staff may account to the Board for the quality of all professional services
rendered within the Hospital by individuals privileged to render such services.
20502.229 - 843114 v1 Exhibit A-46
The Medical Staff Bylaws additionally provide a structure for communication
between the Medical Staff, Administration and the Board.
(c) Each member of the Medical Staff shall have appropriate authority and
responsibility for the care of his patients subject to limitations contained in these
Bylaws and in the Medical Staff Bylaws, Rules and Regulations as approved by
the Board of Trustees.
4.3 MEDICAL STAFF MEMBERSHIP AND CLIMCAL PRIVILEGES
4.3 -1 Action by the Board.
Final action on all matters relating to Medical Staff membership, credentialing,
delineation of clinical privileges and corrective action shall be taken by the Board. The
Board has delegated to the Medical Staff the responsibility and authority to investigate
and evaluate all matters relating to Medical Staff membership, credentialing, delineation
of clinical privileges, peer review and corrective action, and the Medical Staff makes
recommendations thereon to the Board, through the Medical Care Review Committee. In
taking final action, the Board shall consider Medical Staff recommendations submitted
pursuant to Section 4.3.2; provided, that the Board shall act in any event if the Medical
Staff fails to adopt and submit any such recommendation within the time period required
by the Medical Staff Bylaws. Such Board action without a Medical Staff
recommendation shall. be based on-the same kind-of documented investigation-and-
evaluation of current ability, judgment and character as is required for Medical Staff
membership, credentialing, privileging, peer review and corrective action
recommendations.
4.3 -2 Medical Staff Recommendations.
The Medical Staff adopts and submits to the Board, through the Medical Care Review
Committee, specific written recommendations on all matters relating to Medical Staff
membership, credentialing, delineation of clinical privileges, peer review and corrective
action. The Medical Staff supports and documents its recommendations in a manner that
will allow the Medical Care Review Committee and the Board to take informed action.
4.3 -3 Criteria for Board Action.
In acting on matters relating to Medical Staff membership, credentialing, delineation of
clinical privileges, peer review and corrective action, the Medical Can: Review
Committee and the Board shall consider the Medical Staff recommendations and
supporting information, the needs of the Hospital and the community, and the criteria set
forth in the Medical Staff Bylaws.
4.3-4 Terms and Conditions of Membership and Clinical Privileges.
The terms and conditions of Medical Staff membership and the exercise of clinical
privileges are specified in the Medical Staff Bylaws. Medical staff membership and
20502.229 - 843114 v1 Exhibit A -47
clinical privileges may not be limited or denied on the basis of sex, race, creed, color,
religion or national origin.
4.3 -5 Procedures.
The procedures and mechanisms to be followed by the Medical Staff in acting on matters
of Medical Staff membership, credentialing, clinical privileges, peer review and
corrective action, are specified in the Medical Staff Bylaws.
Any recommendation of the Medical Staff or action taken by the Board which is adverse
to a Practitioner shall entitle the Practitioner to a hearing in accordance with the hearing
procedure set forth in the Medical Staff Bylaws. (The term '.'adverse" shall have the
meaning assigned to it in the Medical Staff Bylaws).
ARTICLE V.
QUALITY OF PATIENT CARE
5.1 BOARD RESPONSIBILITY
The Board, after considering the recommendations of administration (including the
nursing staff), the Medical Care Review Committee, the Medical Staff, and other
professiorials providing patient cafe services, has required administration and the Medical
Staff to perform specific review and evaluation activities to measure, assess, and improve
the overall quality and efficiency of clinical and patient care services. The Board,
through the President, shall provide whatever administrative assistance is reasonably
necessary to support and facilitate the efficient accomplishment of these review and
evaluation activities.
5.2 ACCOUNTABILITY OF ADMINISTRATION, THE MEDICAL STAFF AND OTHER
PROFESSIONALS
The Board shall bold the Medical Staff accountable for the effective performance of the
functions set forth in the Medical Staff Bylaws, including without limitation, the
credentialing, performance improvement, peer review, utilization review and continuing
medical education functions. The Board shall hold administration accountable for
developing, implementing, carrying -out and monitoring a performance improvement
plan. Administration shall develop, implement and monitor a system to periodically
assess the ability of each clinical employee to meet the performance expectations of his
orjob.
5.3 DOCUMENTATION
The Board shall require administration and the Medical Staff to document and report to
the Board, through the Medical Care Review Committee, a summary of all findings and
recommendations arising out of the activities described in Sections 5.1 and 5.2. All such
findings and recommendations shall be in writing, signed by the persons responsible for
20502.229 - 843114 vt Exhibit A -48
conducting the activities, and supported and accompanied by reliable documentation.
The Medical Care Review Committee and the Board shall receive, consider and act as
each deems appropriate on such findings and recommendations.
ARTICLE VI.
GENERAL PROVISIONS
6.1 CONFLICTS OF INTEREST
6.1 -1 Disclosure of Potential Conflicts
Any Trustee, officer, employee, or member of a committee of the Board having a direct
or indirect interest in, or having a close relative with a direct or indirect interest in, a
contract, transaction or other matter presented to the Board or a committee of the Board
for discussion, authorization, approval or ratification shall give prompt, full and hank
disclosure of such interest to the Board or committee prior to consideration of such
contract or transaction. (For the purposes of this Section 6.1 -1, the term "close relative"
means a person's spouse, child, sibling or parent.)
6.1 -2 Determination if Conflict of Interest Exists.
The body to which such disclosure is made shall thereupon determine, by majority vote,
whether a conflict of interest exists or can reasonably be found to exist.
6.1 -3 Consideration of Alternatives
If a conflict of interest is determined to exist, the Board or the Committee shall attempt to
identify and pursue alternatives to the proposed contract or transaction, including the
consideration of other contractors, which would not involve a conflict of interest Only if
the Board or the Committee determines that it is unable to obtain a more advantageous
alternative and that, despite the conflict of interest, the originally proposed contract or
transaction is in the Corporation's best interest, may the originally proposed contract or
transaction be approved by the Board or favorably recommended to the Board by the
Committee. Notwithstanding the foregoing sentence, however, the Board may not
approve, and the Corporation may not undertake, a transaction or contract which is in
violation ofN.C.G.S. §55A -8 -31.
6.1-4 Person With Conflict on Interest Shall Not Participate.
The person with the potential conflict of interest shall not be present during nor
participate in the discussions or deliberations, nor vote on, or use personal influence with
respect to, the determination of whether a conflict of interest exists or, if a conflict of
interest is found to exist, with respect to the contract or transaction in question or any
alternatives being considered Such person also may not be counted in determining the
existence of a quorum at any meeting where the contract or transaction or alternatives are
under discussion or being voted upon, and shall not be present, unless requested by the
Chair or a majority of the Board, during any closed session discussions with respect to
the contracts, transactions or alternatives under consideration.
20502129- 843114 v1 Exhibit A -49
6.1 -5 Minutes
The minutes of all meetings relating to the determination of a conflict of interest and the
contract or transaction and alternatives under consideration shall reflect the disclosure
made, the vote or votes thereon and, where applicable, any abstention from voting and
participation, and whether a quorum was present.
6.1 -6 Procedures for Identifying Conflicts of Interest.
The Board shall adopt procedures for identifying actual, apparent and potential conflicts
of interest. Such procedures shall include a requirement for filing annual conflict of
interest disclosure statements with the Secretary.
6.2 INDEMNIFICATION
The Corporation shall have the power to indemnify any present or former Trustee,
officer, employee or agent, or any Medical Staff member engaged in Corporation
business through service on committees of the Corporation Board or committees of the
Medical Staff, or otherwise, or any person who may have served at the request of the
Corporation as a Trustee, director or officer of another corporation, partnership, joint
venture, director or other enterprise (hereinafter, the "Official', against liabilities and
reasonable litigation expenses (including attorneys, fees) incurred by the Official in
connection with any action, suit or proceeding in which the Official is made or threatened
to be made a party by reason of being or having been an Official, except in relation to
matters as to which the Official shall' be finally adjudged in such action, suit or
proceeding to have acted in bad faith or to have been liable or guilty by reason of willful
misconduct in the performance of the Official's duties. Such indemnification shall not be
deemed exclusive of any other rights to which the Official may be entitled under the
Resolution, these Bylaws or any agreement, vote of the Corporation Board or the
Executive Committee, insurance purchased by the Corporation, North Carolina General
Statutes or otherwise.
6.3 OTHER ORGANIZATIONS
The Board has authorized and approved the formation of the Betsy Johnson Regional
Hospital Auxiliary and the Betsy Johnson Regional Hospital Foundation and may
authorize the formation of other organizations to assist in the fulfillment of the purposes
of the Corporation. The Articles of Incorporation, if any, Bylaws, rules and regulations
and amendments thereto of each such organization shall be subject to Board approval and
shall not be inconsistent with these Bylaws or the standing rules of the Board.
6.4 CORPORATE SEAL
The Corporation Board shall provide for a corporate seal in such form and with such
inscription as it shall determine.
6.5 WAIVER OF NOTICE
20502.229-843114 vt Exhibit A -50
Whenever any notice is required to be given under the provisions of any applicable law,
the Resolution or these Bylaws, a waiver thereof in writing signed by the person entitled
to such notice, whether before or after the time stated therein, shall be deemed equivalent
to the giving of such notice where such waiver is permitted by law. All such waivers
shall be filed with the corporate records, or be made a part of the minutes of the relevant
meeting.
6.6 PROCEDURE
The Board and Committees of the Board may adopt rules of procedure which shall not be
inconsistent with these Bylaws.
6.7 FISCAL YEAR
The fiscal year of the Corporation shall begin on October 1 of each year and end on
September 30 of the following year.
6.8 CONSTRUCTION OF TERMS AND HEADINGS
Words used in these Bylaws shall be read as the singular or plural, as the context
requires. The captions or headings in these Bylaws are for convenience only and are not
intended to limit or define the scope or effect of any provision of these Bylaws.
ARTICLE VII.
AMENDMENT TO BYLAWS AND ARTICLES OF INCORPORATION
Subject to such approval as may be required in the Articles of Incorporation or these Bylaws, as
to either as amended, by any person or persons other than the Board of Trustees, and to the
extent permitted by law, these Bylaws and the Articles of Incorporation may be amended or
repealed and new Bylaws and amended Articles of Incorporation may be adopted by the
affirmative vote of a majority of the Trustees at a meeting at which a quorum is present to
consider such amendment, upon five (5) days' notice of the meeting, delivered personally or by
any usual means of communication, including, but not limited to, mail, telex, facsimile,
telephone, electronic mail or other form of electronic communication, which notice shall state
that the purpose of the meeting is to consider a proposed amendment and which shall contain,
attach a copy of, or state the nature of, the proposed amendment.
20502.229- 843114 v1 Exhibit A -51
CERTIFICATION
The undersigned, being the Secretary of Harnett Health Systern, Inc. (the "Corporation"), hereby
certifies that the foregoing document, consisting of twenty (20) pages, is a true, correct and
complete copy of the Thud Amended and Restated Bylaws of the Corporation, which were
initially adopted by the Board of Trustees of the Corporation in February 1983, and were last
amended and restated in their entirety by the Board of Trustees of the Corporation effective on
October �o , 2014.
This the 3D `" day of October 2014.
(SEAL) Secretary
20502.229- 843114 V1 Exhibit A -52
Enbibit E
IIBAA BUSINESS ASSOCIATE AGREEMENT
D -2
20502.229 -a431 14 vi Exhibit A -53
BUSINESS ASSOCIATE AGREEMENT
This Business Associate Addendum (the "Addendum'J, dated as of November 3, 2014,
supplements and is made a part of the Agreement (as defined below) by and between Harnett Health
System, Inc. d/b /a Hamett Health System ( "Covered Entity") and Cumberland County Hospital System,
Inc. d/b /a Cape Fear Valley Health System (`Business Associate'). Individually Covered Entity and
Business Associate may be referred to as a "Party" or collectively as the "Parties."
WHEREAS, Sections 261 through 264 of the federal Health Insurance Portability and
Accountability Act of 1996 ( "HIPAA "), Public Iaw 104 -191, (mown as "the Administrative
Simplification provisions," direct the Department of Health and Human Services to develop standards to
protect the security, confidentiality and integrity of health information;. and
WHEREAS, pursuant to the Administrative Simplification provisions, the Secretary of Health
and Human Services has issued regulations implementing the Administrative Simplification provisions at
Subpart A of 45 CFR Part 160 and Subparts A and E of 45 CFR Part 164 (the " HIPAA Privacy Rule");
and
WHEREAS, the Parties have entered into a Management Services Agreement (the "Agreement")
whereby Covered Entity may share Protected Health Information with Business Associate in furtherance
of its responsibilities under the Agreement and Business Associate may be considered a `Business
Associate" of Covered Entity as defined in the HIPAA Privacy Rule; and
WFO3LEAS, the Parties wish to comply with the requirements of Subpart C of the Security
Standards for the protection of electronic Protected Health Information ( "PHP1 (the " HIPAA Security
Rule ") at 45 CFR Section 164.314 and Subpart A of 45 CFR Part 160 and Subpart D of 45 CFR Part 164
(the `Breach Notification Rule," together-with the-HIPAA-Privacy- Role- and-the H1PAA Security Rule;
the " HIPAA Rules'); and
WHEREAS, Business Associate will comply with the requirements of all applicable provisions of
the Health information Technology for Economic and Clinical Health Act, see 42 U.S.C. §§ 17921 -54
(the � "HITECH Act"), and all applicable regulations that are currently in effect or that may be
implemented in the future; and
THEREFORE, in consideration of the Parties' continuing obligations under the Agreement,
compliance with HIPAA, the HTIECH Act and the WAA Rules, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree to the
provisions of this Addendum in order to address the requirements of the HITECH Act and the HIPAA
Rules and to protect the interests of the Parties.
DEFINITIONS
Except as otherwise defined herein, any and all terms used but not defined in this Addendum
shall have the definitions set forth in the HTAA Rules. In the event of an inconsistency between the
provisions of the Addendum and mandatory provisions of the HIPAA Rules, as amended, the HIPAA
Rules shall control. Where provisions of the Addendum are different than in the H PAA Rules, but are
nonetheless permitted by the HIPAA Rules, the provisions of this Addendum shall contmL
Business Associate acknowledges and agrees that all Protected Health Information that is created,
received, maintained or transmitted by Covered Entity and disclosed or made available in any form,
including paper record, oral communication, audio recording, and electronic display by Covered Entity or
its operating units to Business Associate or is created, received, maintained or transmitted by Business
Associate on Covered Entity's behalf shall be subject to this Addendum.
20502.229- 843114 vt Exhibit A -54
B. CONFMENTIALrI -Y REOTJMEMENTS
(A) Business Associate acknowledges that it is directly subject to HIPAA, as amended by the
HFITCH Act, and the HIPAA Rules, including enforcement and penalty provisions, as
they may be amended from time to time. Business Associate agrees to abide by the
applicable provisions of the HIPAA Rules and the HMCH Act when acting in its
capacity as a Business Associate under this Addendum, including:
W to use or disclose any Protected Health Information solely: (1) for meeting its
obligations as set forth in the Agreement or any other agreements between the
Parties evidencing their business relationship, and (2) as required by applicable
law, rule or regulation or as otherwise permitted under this Addendum or the
Agreement (if consistent with this Addendum and the HIPAA Rules); and -
(ii) at termination of this Addendum, the Agreement (or any similar documentation
of the business relationship of the Parties), or upon request of Covered Entity,
whichever occurs first, if feasible, Business Associate will return or destroy all
Protected Health Information created, received, maintained, or transmitted by
Business Associate on behalf of Covered Entity, or any agents or subcontractors
of Covered Entity, that Business Associate still maintains in any form and retain
no copies of such infomation, or if such return or destruction is not feasible,
Business Associate will extend the protections of this .Addendum to the
information and limit further uses and disclosures to those purposes that make the
return or destruction of the information not feasible. The obligations of Business
-- Associate urider.this Section shall survive termination of the F-ddendum —ate -'—
(iii) to ensure that its agents or subcontractors that create, receive, maintain, or
transmit Protected Health Information on behalf of Business Associate agree to
the same restrictions and conditions that apply to Business Associate with respect
to such information. Business Associate shall enter into written agreements with
any subcontractors, and the terms of such agreements shall incorporate the
applicable requirements of, and otherwise comply with, HIPAA, the HrrECH
Act, the HIPAA Rules and this Addendum, including without limitation, Section
W(B) below; and
(iv) to the extent Business Associate is to carry out any of Covered Entity's
obligations under the WAA Privacy Rule, Business Associate shall comply
with the requirements of the HB'AA Privacy Rule that apply to Covered Entity in
the performance of such obligation; and
(v) to make uses and disclosures and requests for Protected Health Information
consistent with Covered Entity's minimum necessary polices and procedures;
and
(vi) to re5ain from using or disclosing Protected Health Information in a manner that
would violate the HIPAA Rules if done by Covered Entity; and
(B) Notwithstanding the prohibitions set forth in this Addendum, Business Associate may use
and disclose Protected Health Information as follows:
W if necessary, for the proper management and administration of Business
Associate or to carry out the legal responsibilities of Business Associate,
provided that as to any such disclosure, the following requirements are met
20502.229 - 843114 v7 Exhibit A -55
(a) the disclosure is required by law, or
(b) Business Associate obtains reasonable assurances from the person to
whom the information is disclosed that it will be held confidentially and
used or further disclosed only as required by law or for the purpose for
which it was disclosed to the person, and the person notifies Business
Associate of any instances of which it is aware in which the
confidentiality of the information has been breached within fifteen (15)
days;
(h) for data aggregation services, if to be provided by Business Associate for the
health care operations of Covered Entity pursuant to any agreements between the
Parties evidencing their business relationship. For purposes of this Addendum,
data aggregation services means the combining of Protected Health Information
by Business Associate with the protected health information received by
Business Associate in its capacity as a business associate of other covered
entities, to permit data analyses that relate to the health care operations of the
respective coveted entities.
(C) Business Associate will implement appropriate safeguards, including without limitation
compliance with the HIPAA Security Rule with respect to electronic Protected Health
Information, to prevent use or disclosure of Protected Health Information other than as
permitted in the Addendum. The Secretary of Health and Human Services shall have the
right to audit Business Associate's internal practices, books and records to ensure
compliance with the terms of the HTAA Privacy Rule. Business Associate shall report
---to Covered-Entity. any-ase ofdisclosi of Protected' Health 'Information w tc-is hof.a _
compliance with the terms of this Addendum of which it becomes aware within thirty
(30) days. In addition, Business Associate agrees to mitigate, to the extent practicable,
any harmful effect that is known to Business Associate of a use or disclosure of Protected
Health Information by Business Associate in violation of the requirements of this
Addendum.
(D) Business Associate agrees to notify Covered Entity of any Breach of Unsecured Protected
Health Information, as required by Section 17932(b) of the HrrECH Act and the Breach
Notification Rule, within fifteen (15) days of the Business Associate's discovery of the
Breach. The Breach shall be "discovered" when Business Associate knew or reasonably
should have known the Breach occurred. Business Associate and Covered Entity
acknowledge that it is the Coveted Entity's responsibility to ensure that individuals
affected by the Breach are notified in accordance with the requirements in the HMCH
Act and the Breach Notification Rule. Business Associate shall identify each individual
whose unsecured Protected Health Information has been, or is reasonably believed to
have been, accessed, acquired or disclosed as a result of the Breach, and provide such
information to Covered Entity as is necessary to meet the data breach notification
requirements under the HITECH Act and Breach Notification Rule within twenty (20)
calendar days after the discovery of the Breach.
(E) Unless an exception applies, as set forth at 42 U.S.C. § 17935(dx2), in no event may
Business Associate directly or indirectly receive remuneration in exchange for any
Protected Health Information of an Individual unless the Covered Entity obtains from the
Individual a valid authorization that includes a specification of whether the Protected
Health Information can be further exchanged for remuneration by the entity receiving
Protected Health Information of that Individual - This prohibition does not apply to
remuneration Business Associate receives from the Covered Entity for activities that the
Business Associate undertakes on behalf of and at the specific request of the Covered
Entity pursuant to this Addendum.
20502.229-843114 v7 Exhibit A -56
(F) Covered Entity shall not request Business Associate to use or disclose Protected Health
Information in any manner that would not be permissible under the HIPAA Privacy Rule
if done by Covered Entity, except for any purposes of the Business Associate's use or
disclosure of Protected Health Information for data aggregation, management and
administration, and legal responsibilities of the Business Associate-
(G) Covered Entity shall notify Business Associate of any limitation(s) in the notice of
privacy practices of Covered Entity under 45 CFR 164.520, to the extent that such
limitation may affect Business Associate's use or disclosure of Protected Health
Information.
(ii) Covered Entity shall notify Business Associate of any changes in, or revocation o1; the
permission by an individual to use or disclose his or her Protected Health Information, to
the extent that such changes may affect Business Associate's use or disclosure of
Protected Health Information_
(1) Covered Entity shall notify Business Associate of any restriction on the use or disclosure
of Protected Health Information that Covered Entity has agreed to or is required to abide
by under 45 CFR 164522, to the extent that such restriction may affect Business
Associate's use or disclosure of Protected Health Information.
III. SECURITY REOUIREMEM
(A) Business Associate shall implement administrative, physical, and technical safeguards
that reasonably and appropriately_ protect the cgnf[dentiality, integrity, and availability of
any electronic Protected. Health Information that it creates,-receives, maintains, or - -
transmits on behalf of Covered Entity in accordance with Section 17931(a) of the
HITECH Act and the HIPAA Security Rule.
(B) Business Associate shall ensure that any agent or subcontractor to whom Business
Associate provides Protected Health Information shall agree to implement administrative,
physical, and technical safeguards that reasonably and appropriately protect the
confidentiality, integrity, and availability of the electronic Protected Health Information
that the agent or subcontractor creates, receives, maintains or transmits on behalf of the
Business Associate.
(C) Business Associate shall report, and. shall ensure that its agents and subcontractors
provided with Protected Health Information report, to Covered Entity any Security
Incident, including any attempted or successful unauthorized access, use, disclosure,
modification, or destruction of Protected Health Information or interference with system
operations in the information system which is being used to create, receive, maintain or
transmit Protected Health Information.
IV. AVAB.ABIIJTY OF PHI
To the extent applicable, Business Associate agrees to make available Protected Health
Information to the extent and in the manner required by Section 164.524 of the HIPAA Privacy Rule. To
the .extent applicable, Business Associate agrees to make Protected Health Information available for
amendment and incorporate any amendments to Protected Health Information in accordance with the
requirements Section 164.526 of the HIPAA Privacy Rule. In addition, Business Associate agrees to
make Protected Health Information available for purposes of accounting of disclosure, as required by
Section 164.528 of the HIPAA Privacy Rule and Section 17935(c) of the HIl'ECH Act
20502.229- 843114 v1 Exhibit A -57
V. TERM
The Term of this Addendum shall be effective as of the effective date of the Agreement, and shall
terminate when the Agreement terminates or as provided in Section VI of this Addendum, whichever is
sooner.
VI. TERMINATION
Notwithstanding anything in this Addendum to the contrary, Covered Entity shall have the right
to terminate this Addendum and the Agreement immediately if Covered Entity determines that Business
Associate has violated any material term of this Addendum and is unable to cure said violation within
thirty (30) days of being notified of said violation by Covered Entity.
VII. INDEMNIFICATION
Each Party shall indemnify and hold the other harmless fivm and against all claims, liabilities,
judgments, fines, assessments, penalties, awards, or other expenses, of any land or nature whatsoever,
including, without limitations, attorneys' fees, expert witness fees; and costs of investigation, litigation or
dispute resolution, relating to or arising out of any breach or alleged breach of this Addendum, or any
Breach, by that Party or its subcontractors or agents.
VIII. MISCELLANEOUS
_ .. _ ... The- Parties, to. this Addendum do..not intend .to_ create any.. rights -in_any- _third_.parties —The--- ..._
obligations of Business Associate under this Section shall survive the expiration, termination, or
cancellation of this Addendum, the Agreement and/or the business relationship of the Parties, and shall
continue to bind Business Associate, its agents, employees, contractors, successors, and assigns as set
forth herein.
A reference in this Addendum to a section in the HIPAA Rules means the section as in effect or
as amended. Any ambiguity in this Addendum shall be interpreted to permit compliance with the HIPAA
Rules.
This Addendum may be amended or modified only in a writing signed by the Parties. No Party
may assign its respective rights and obligations under this Addendum without the prior written consent of
the other Party. None of the provisions of this Addendum are intended to create, nor will they be deemed
to create any relationship between the Parties other than that of independent patties contracting with each
other solely for the purposes of effecting the provisions of this Addendum and any other agreements
between the Parties evidencing their business relationship. This Addendum will be governed by the laws
of the State of Nortb Carolina- No change, waiver or discharge of any liability or obligation hereunder on
any one or more occasions shall be deemed a waiver of performance of any continuing or other
obligation, or shall prohibit enforcement of any obligation, on any other occasion.
The Parties agree that in the event that any documentation created as part of the Agmemeut,
including but not limited to the Agreement, contains provisions relating to the use or disclosure of
Protected Health Information which are more restrictive than the provisions of this Addendum, the
provisions of the more restrictive documentation will control. The provisions of this Addendum are
intended to establish the minimum requirements regarding Business Associate's use and disclosure of
Protected Health Information.
In the event that any provision of this Addendum is held by a court of competent jurisdiction to
be invalid or unenforceable, the remainder of the provisions of this Addendum will remain in full force
and effect In addition, in the event a Party believes in good faith that any provision of this Addendum
20502.229- 843114 v1 Exhibit A -58
fails to comply with the then - current requirements of the H[PAA Rules, such Party shall notify the other
Party in writing. For a period of up to thirty days, the Parties shall address in good faith such concern and
amend the terms of this Addendum, if necessary to bring it into compliance. If, after such thirty -day
period, the Addendum fails to comply with the IiIPAA Rules, then either Party has the right to terminate
this Addendum and the Agreement upon written notice to the other Party.
20502.229- 843114 V1 Exhibit A -59
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date set forth
below with the signatures of the respective authorized officials of Covered Entity and Business Associate.
Cumberland County Hospital System, Inc
d/b /a Cape Fear Valley Health System
(Business Associate)
By:
Michael Nagowski
Title: Chief Executive Officer
Date:
Harnett Health System, Inc
d/b /a Harnett Health System
(Covered Entity)
By: C! (✓
Name: 4L W . /KA
Title: Ct1 A i M A*)
Date:
20502.229 - 843114 v1 Exhibit A -60
Exhibit B
ARTICLES OF AMENDMENT OF THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION
OF
HARNETT HEALTH SYSTEM, INC.
The undersigned nonprofit corporation organized pursuant to Chapter 55A of the General
Statutes of North Carolina hereby submits these Articles of Amendment of Harnett Health
System, Inc. a North Carolina non -profit corporation ("Corporation "), pursuant to Section
55A -10 -01 of the North Carolina General Statutes for the purpose of amending its Amended and
Restated Articles of Incorporation:
1. The name of the corporation is Harnett Health System, Inc.
2. Article 7 of the Amended and Restated Articles of Incorporation is hereby deleted in its
entirety and amended to read as follows:
"7. The number, manner, election or appointment and qualification and the term of
Trustees shall be as set forth in the Bylaws and as set forth herein below:
The Board of Trustees (`Board') shall have thirteen (13) members, with seven (7)
members being appointed (the "Appointed Members'l by the Harnett County
Board of Commissioners (the "County's from nominees submitted by the Board.
The Appointed Members shall include one (1) person from each of the five (5)
County Commissioner Districts, and the remaining two (2) Appointed Members
shall be residents of the Harnett County. The County may reject any or all of the
nominees that are submitted by the Board and require the Board to subm t
additional nominees. Five (5) members of the Board (the "Elected Members ")
shall be elected by the Board. One (1) Trustee (the "CFVHS Appointed
Trustees') shall be appointed by the Cumberland County Hospital System, Inc.
dba Cape Fear Valley Health System Board of Directors (the "CFVHS Board').
The CFVHS Appointed Trustee shall serve three (3) year terms. The first CFVHS
Appointed Trustee to be appointed shall fill the seat previously held by an Elected
Member and the initial term of such CFVHS Appointed Trustee shall be the
duration of the remaining term of that Elected Trustee replaced by the CFVHS
Appointed Trustee. Notwithstanding any other provision set forth herein, no
amendment to these Articles may be made that amends the Board structure in any
way that removes CFVHS's right to appoint a Trustee to the Board or otherwise
dilutes CFVHS's governance rights under this Section 7 without the prior written
consent of CFVHS. Board members shall be appointed for three (3) year terms,
with the terms of the initial Board members to be staggered."
3. The Amendment set forth in these Articles of Amendment was adopted on October 30,
2014, by a unanimous vote of the Board of Trustees and approval of the members was not
required because the Corporation has no voting members.
4. - These Articles will become effective upon filing.
20502.22M43114 vi Exhibit B -1
This the3& day of tx-'fo t7D2- , 2014.
HARNETT HEALTH SYSTEM, INC.
By: Ott ( .
Name: Ronald W. Maddox
Title: Chairman of the Board of Trustees
20502.229 - 843114 vt Exhibit B -2