Exhibit 10.2

 

Note: Information has been omitted from this agreement pursuant to a request for
confidential treatment, and such information has been separately filed with the
Securities and
Exchange Commission. The omitted information has been marked with a bracketed
asterisk (“[*]”).

 

Execution Version

 

OPERATING AGREEMENT

OF

FTH DFW PARTNERS LLC

 

THIS OPERATING AGREEMENT OF FTH DFW PARTNERS LLC (this “Agreement”) is entered
into as of May 10, 2016 (the “Effective Date”), by and between TEXAS HEALTH
RESOURCES, a Texas non-profit corporation (“THR”), and ADPT DFW HOLDINGS LLC
(“Adeptus”), each as members of FTH DFW PARTNERS LLC, a Texas limited liability
company (“Company”).

 

RECITALS

 

A.THR and Adeptus (sometimes collectively referred to as “Members” and
individually as a “Member”) formed Company for the purpose of developing,
owning, acquiring and/or operating freestanding emergency room facilities and
one or more general acute care hospital(s) in Collin, Dallas, Denton, Ellis,
Hood, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise counties in the State
of Texas.

 

B.By executing this Agreement, each Member hereby (i) ratifies the formation of
Company and the filing of the Certificate of Formation of Company, (ii) confirms
and agrees to such Member’s status as a member of Company, and (iii) continues
the existence of Company for the purposes hereinafter set forth, subject to the
terms and conditions hereof.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01 Definitions. For purposes of this Agreement, the following
additional defined terms shall be used:

 

“Act” means the Texas Limited Liability Company Act, as set forth in Texas
Business Organizations Code Sections 3-101, et seq., as amended from time to
time, and any successor to such Act.

 

“Additional Capital Contribution(s)” has the meaning set forth in Section
4.01(b).

 

“Adeptus” has the meaning set forth in the Preamble.

 

“Adeptus Chain Affiliate” means any Affiliate of Adeptus Parent that, directly
or indirectly through one or more Affiliates of Adeptus Parent controlled by
such Affiliate of Adeptus Parent, owns or holds an Ownership Percentage Interest
in Company (provided that

 

 

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

such Affiliate of Adeptus Parent is in the direct chain of ownership between
Adeptus Parent and Company).

 

“Adeptus Competitor” [*].

 

“Adeptus Hospital Facility” means any facility (excluding a free standing ER
facility) separately licensed as a general acute care hospital under the law of
the applicable location within the Restricted Area that is wholly-owned or
controlled by Adeptus Parent.

 

“Adeptus Management” means the senior management of Adeptus Parent, as
designated by Adeptus Parent.

 

“Adeptus Parent” means Adeptus Health Inc., a Delaware corporation.

 

“Adeptus Purchase Event” has the meaning set forth in Section 7.03.

 

“Adeptus Purchase Notice” has the meaning set forth in Section 7.03(b).

 

“Adeptus Purchase Option” has the meaning set forth in Section 7.03.

 

“Adeptus Put Events” has the meaning set forth in Section 7.05.

 

“Adeptus Put Notice” has the meaning set forth in Section 7.05(a).

 

“Adeptus Put Option” has the meaning set forth in Section 7.05.

 

“Affiliate” means, with respect to a specified Person, any Person that directly
or indirectly controls, is controlled by, or is under common control with, the
specified Person. As used in this definition, the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, any equity interest, or a membership interest in a non-
stock corporation, by contract, by power granted in bylaws or similar governing
documents or otherwise. Without limiting the foregoing, any ownership interest
greater than fifty percent (50%) for purposes hereof constitutes “control”.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Annual Budget” means the annual operating budget and capital expenditures
budget for Company and each Company Facility each Fiscal Year.

 

“Appraised Value” means the Fair Market Value of the subject interest in Company
as determined by an appraiser which, in all cases, shall (a) be based upon the
assumption that Company will be an ongoing concern, and (b) take into account
the anticipated changes in future revenue and expenses of Company and
Company-Owned Entities, including any anticipated changes in the future revenue
or expense of Company and Company-Owned Entities as a result of a Selling Member
no longer being an owner or sponsor of Company, such as (i) any

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

interruption in business and/or reimbursement of services, (ii) any modification
to or termination of managed care contracts or networks, and (iii) any change in
branding and any costs associated therewith. The Fair Market Value of the
subject interest in Company as determined by an appraiser (a) in the case
Adeptus is selling its subject interest in Company to THR, shall be increased by
the Unpaid Preferred Distribution and (b) in the case THR is selling its subject
interest in Company to Adeptus, shall be decreased, but not below zero dollars
($0.00), by the Unpaid Preferred Distribution.

 

“Average Annualized EBITDA” means [*].

 

“Bankruptcy Event” means, with respect to any Person, the occurrence of any one
or more of the following: (a) the Person is adjudicated as bankrupt or makes an
assignment for the benefit of its creditors; (b) the Person files a petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief under any Law or files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against such Person in a proceeding of such nature; (c) the
Person seeks, consents to, or acquiesces in the appointment of a trustee,
receiver, or liquidator of the Person or all or any substantial part of the
Person’s property; (d) the Person is unable to get dismissed, within one hundred
twenty (120) days after its commencement, any proceeding against the Person
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any Law; (e) the Person is unable to stay or
vacate, within ninety (90) days after its commencement, the appointment without
the Person’s consent or acquiescence of a trustee, receiver or liquidator of the
Person or of all or any substantial part of the Person’s property and if the
appointment is stayed as hereinabove provided, the appointment is not vacated
within ninety (90) days after the expiration of any such stay, or (f) the Person
is dissolved.

 

“Capital Account” has the meaning set forth in Section 4.05.

 

“Capital Call” has the meaning set forth in Section 4.01(b).

 

“Capital Call Notice” has the meaning set forth in Section 4.01(b).

 

“Capital Contribution” means either an Initial Capital Contribution or an
Additional Capital Contribution by a Member.

 

“Cash Contribution” has the meaning set forth in Section 5.06(a)(iii).

 

“Change of Control” as to a Person means (a) an event, or sequence of related
events, that result in any consolidation or merger of the Person with or into
any limited liability company, partnership, corporation or other entity, or any
other reorganization in which the owners having control of the Person
immediately prior to such consolidation, merger or reorganization own less than
fifty percent (50%) of the voting power of the surviving or successor entity
immediately after such consolidation, merger or reorganization; (b) any
transaction or series of related transactions to which the Person is a party in
which at least fifty

 

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percent (50%) of the Person’s outstanding voting power is transferred; (c) any
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Person; provided, however, that a Change of Control will not
include (i) any consolidation or merger effected exclusively to change the
domicile of the Person, (ii) any conversion of the Person to another state law
form of entity or (iii) normal turnover in the composition of a Person’s Board
in accordance with its governing documents.

 

“CMS” means the Centers for Medicare & Medicaid Services.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Facility” means each Hospital Facility and Freestanding ER Facility
owned or operated by Company or any Company-Owned Entity.

 

“Company-Owned Entity” means any Person owned, directly or indirectly, in whole
or in part, by Company.

 

“Competing Freestanding ER Facility” has the meaning set forth in Section 8.01.

 

“Competing Hospital Facility” has the meaning set forth in Section 8.01.

 

“Compliance Program” has the meaning set forth in Section 2.03(a)(iii).

 

“Computation Date” has the meaning set forth in Section 4.02(c)(i).

 

“Confidentiality and Trade Secret Rights” has the meaning set forth in Section
11.16.

 

“Conflicted Member” has the meaning set forth in Section 3.01(d).

 

“Conflicts of Interest Policy” means the conflicts of interest policy of
Company.

 

“Contributed ER Business” means the freestanding emergency room facilities and
hospital, and the business operations relating thereto, contributed by Adeptus
and one or more of its Affiliates in accordance with Section 4.01(a) hereof, as
more particularly described in the Initial Strategy Plan (as defined below) set
forth on Exhibit A; provided, for purposes of clarity, that the Contributed ER
Business shall not include any of the current assets (including without
limitation accounts receivable), or current liabilities (including without
limitation accounts payable), of the aforementioned facilities, hospital or
operations existing as of the Effective Date.

 

“Contributing Member” has the meaning set forth in Section 4.02.

 

“Contribution Loan” has the meaning set forth in Section 4.02.

 

“Covered Person” means any Member, officer of Company or any Company-Owned
Entity, any Person serving as a member of the Governing Board of Company, or any
Person serving as a director, officer or agent of a Company-Owned Entity at the
request of Company.

 

“Depreciation” means, for each Fiscal Year or other period, an amount equal to
the depreciation, amortization or other cost recovery deduction allowable and
recognized consistent

 

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with GAAP with respect to an asset for such Fiscal Year or other period;
provided,  however, that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year or other period, Depreciation shall be an amount that bears the same ratio
to such beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to such asset for
such Fiscal Year or other period bears to such beginning adjusted tax basis; and
provided,  further, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such Fiscal Year or other period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Tax Matters Member.

 

“Development Budget” means the development plan and budget for each Company
Facility that shall be established and recommended by Manager to the Governing
Board in connection with the decision to develop any Company Facility not
included in the Initial Strategy Plan, which plan and budget will include,
without limitation, the costs of developing and opening a Company Facility, the
costs of obtaining any required regulatory approvals, and any other development
fees payable to any party, construction and equipment costs and the estimated
initial working capital that will be needed to finance the start-up phase of
operations at such Company Facility.

 

“Disinterested Member” has the meaning set forth in Section 3.01(d).

 

“Distributable Funds” means all cash funds of Company, as the case may be, on
hand at the end of each quarter, less (a) provision for payment of all
outstanding and unpaid current cash obligations of Company at the end of such
quarter (including the management fee under the Management Agreement and any
amounts payable thereunder that are in dispute and payments due to THR under the
Support Agreement or the THR Trademark License Agreement including any amounts
payable thereunder that are in dispute), and (b) provision for adequate reserves
for reasonably anticipated cash and capital expenses and contingencies (which
may include debt service on Company indebtedness and fees payable under written
agreements with Affiliates) as determined by the Manager; provided, however,
proceeds from the disposition of all or substantially all of Company’s assets
shall not be included in Distributable Funds; and,  provided further, that
Manager’s determination of Distributable Funds shall be subject to the
imposition of additional requirements on Manager concerning the determination of
Distributable Funds by Unanimous Board Action.

 

“Distributed Funds” means, with respect to any measurement period, the amount of
funds distributed from Company to Adeptus pursuant to Section 5.06(a)(ii) of
this Agreement.

 

“EBITDA” means, with respect to the Company and the Company-Owned Entities on a
consolidated basis, for any period, an amount equal to the net income for such
period plus the following to the extent deducted in calculating such net income:
(i) interest charges for such period, (ii) the provision for federal, state,
local and foreign income taxes (including Texas franchise taxes) for such
period, and (iii) depreciation and amortization expenses for such period. To the
extent that GAAP requires that equipment leases or real estate leases be treated
as capital leases rather than operating leases, the total annual lease payment
amounts paid on such capitalized leases shall also be deducted from net income
in the determination of EBITDA. For

 

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purposes of this Agreement, as of any date the determination of EBITDA (and all
of its constituent parts) shall be determined in accordance with GAAP on a
consolidated basis.

 

“EBITDA Failure” has the meaning set forth in Section 7.02(a)(v).

 

“Effective Date” means the date first above written.

 

“Exercise Notice” has the meaning set forth in Section 7.06(b).

 

“Fair Market Value” of any property means the cash price at which a willing and
able seller would sell, and a willing and able buyer would buy, such property
(a) in an arm’s-length transaction, (b) assuming that such property was being
sold free of encumbrances and in a manner reasonably designed to solicit a broad
range of possible buyers, and (c) assuming that both the buyer and seller have
reasonable knowledge of relevant facts. For all purposes hereunder, Fair Market
Value shall be determined without application of any discount based on minority
or non-controlled position or on the illiquidity of the Member’s ownership
interest.

 

“Federal Health Care Program” means and includes the Medicare and Medicaid
programs, TRICARE, and any other federal health care program as defined in 42
U.S.C. § 1320a-7b(f), as amended from time to time.

 

“Financial Assistance and Emergency Medical Care Policies” means the THR
financial assistance and emergency care policies, including related applications
and notices, as such shall be amended from time to time by THR, which will be
adopted by Company subject to the terms of this Agreement. The existing THR
policies and related applications and notices are attached as Exhibit B to this
Agreement.

 

“First and Second Appraisers” has the meaning set forth in Section 7.07(c).

 

“First Officer Term” means the period commencing upon the Effective Date and
ending on December 31, 2017.

 

“Fiscal Year” means (a) the period commencing upon the formation of Company and
ending on December 31, 2016, (b) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, or (c) any portion of the
period described in clause (b) of this definition for which Company is required
to allocate Net Income or Net Loss and other items of Company income, gain, loss
or deduction pursuant to the Agreement.

 

“Freestanding ER Facility” means each emergency room facility or center owned or
operated by Company or any Company-Owned Entity and located at a separate
physical location from any Hospital Facility owned or operated by Company or any
Company-Owned Entity, whether separately licensed or included under any Hospital
Facility license held by Company, any Company-Owned Entity or a Member.

 

“GAAP” means generally accepted accounting principles.

 

“Governing Board” has the meaning set forth in Section 3.01(a).

 

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“Gross Asset Value” means, with respect to any asset, such asset’s adjusted
basis for federal income tax purposes, except as follows:

 

(a)the initial Gross Asset Value of any asset contributed by a Member to Company
shall be the gross Fair Market Value of such asset, as agreed to by the
contributing Member and the Governing Board;

 

(b)the Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross Fair Market Values, as determined by the Governing Board, as of
the following times: (i) the acquisition of an additional interest in Company by
any existing Member or additional Member in exchange for more than a de minimis
Capital Contribution; (ii) the distribution by Company to a Member of more than
a de minimis amount of Company assets as consideration for an interest in
Company; and (iii) the liquidation of Company within the meaning of Regulations
§1.704-1(b)(2)(ii)(g); provided,  however, that Gross Asset Values shall be
adjusted pursuant to clause (i) and clause (ii) of this sentence only if the
Governing Board reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members in
Company; and

 

(c)the Gross Asset Value of any Company asset distributed to any Member shall be
the gross Fair Market Value of such asset on the date of distribution, as
determined by the distributee Member and the Governing Board. If the Gross Asset
Value of an asset has been determined or adjusted pursuant to subsection (a) or
subsection (b) above, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Net Income and Net Loss.

 

“Hospital Facility” means any facility (excluding a Free Standing ER Facility)
separately licensed as a general acute care hospital under the law of the
applicable location within the Restricted Area that is owned or operated by
Company.

 

“Initial Capital Contribution(s)” has the meaning set forth in Section 4.01(a).

 

“Initial Strategy Plan” means the Initial Strategy Plan in the form attached as
Exhibit A, which the Members acknowledge has been reviewed and approved by the
Members and shall be diligently pursued and executed by Company, except as
otherwise determined by the Governing Board, as specifically noted on Exhibit A
and/or the Members in accordance with this Agreement.

 

“Initiating Member” has the meaning set forth in Section 7.06(b).

 

“IRC” means the Internal Revenue Code of 1986, as amended from time to time, or
any corresponding federal tax statute enacted after the date of this Agreement.

 

“Legal Impediment” has the meaning set forth in Section 9.02.

 

“Legal Impediment Negotiation Period” has the meaning set forth in Section 9.02.

 

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“Line of Credit Agreement” means the working capital Line of Credit Agreement
entered into by and between Company and Adeptus concurrently with the execution
and delivery of this Agreement, as modified or amended by the parties thereto
from time to time and adopted by the Governing Board in accordance with this
Agreement.

 

“Liquidating Trustee” has the meaning set forth in Section 5.09.

 

“Lobbying Activities” are those activities that would constitute propaganda, or
otherwise attempting, to influence legislation within the meaning of Section
501(c)(3) of the IRC.

 

“Losses” has the meaning set forth in Section 11.03.

 

“Major Decisions” has the meaning set forth in Section 3.01(b)(iv).

 

“Management Agreement” means the Management Services Agreement entered into by
and between Company and Manager concurrently with the execution and delivery of
this Agreement pursuant to which Manager provides day-to-day management services
for the Company Facilities, as such Agreement may be modified or amended by the
parties thereto from time to time and adopted by the Governing Board in
accordance with this Agreement.

 

“Manager” means Adeptus Health Management LLC, a Texas limited liability
company.

 

“Material Deadlock” means the Governing Board is unable, after commercially

reasonable efforts in good faith and at least two (2) duly held meetings of the
Governing Board, to approve or disapprove any proposed action requiring approval
of the Governing Board under this Agreement that, as a result of the deadlock
with respect to such proposed action, has had or could reasonably be expected to
have a material adverse effect on (a) the furtherance of the mission or the
achievement of the purposes of Company, (b) the financial performance of
Company, (c) the operations of Company Facilities, (d) the quality of services
rendered by Company Facilities, or (e) the due exercise by a Member of its
material rights hereunder.

 

“Medical Staff” has the meaning set forth in Section 10.01.

 

“Medical Staff Bylaws” has the meaning set forth in Section 10.01.

 

“Member(s)” has the meaning set forth in the Recitals.

 

“Net Income” or “Net Loss” means, for each fiscal period, an amount equal to
Company’s taxable income or loss, as the case may be, for such period determined
in accordance with Section 703(a) of the IRC (including for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(l) of the IRC), as adjusted as follows:

 

(a)any income of Company exempt from federal income tax and not otherwise taken
into account in computing Net Income or Net Loss pursuant to this definition
shall be added to such taxable income or loss;

 

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(b)any expenditures of Company described in §705(a)(2)(B) of the IRC (or treated
as expenditures described in §705(a)(2)(B) of the IRC pursuant to Regulations
§1.704-I(b)(2)(iv)(i) and not otherwise taken into account in computing Net
Income or Net Loss pursuant to this definition shall be subtracted from such
taxable income or loss;

 

(c)in the event the Gross Asset Value of any Company asset is adjusted in
accordance with subsection (b) or subsection (c) of the definition of “Gross
Asset Value” above, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing Net
Income or Net Loss;

 

(d)gain or loss resulting from any disposition of any asset of Company with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the asset disposed
of, notwithstanding that the adjusted tax basis of such asset differs from its
Gross Asset Value;

 

(e)in lieu of the depreciation, amortization and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be
taken into account Depreciation for such Fiscal Year or other period, computed
in accordance with the definition of “Depreciation” above; and

 

(f)notwithstanding any other provision of this definition, any items that are
specially allocated pursuant to this Agreement shall not be taken into account
in computing Net Income or Net Loss.

 

“Non-Contributing Member” has the meaning set forth in Section 4.02.

 

“Offeree Member” has the meaning set forth in Section 7.06(b).

 

“Officer” has the meaning set forth in Section 3.01(c)(i).

 

“Officer Term” has the meaning set forth in Section 3.01(c)(ii).

 

“OIG” means the Department of Health and Human Services Office of Inspector
General.

 

“Outstanding Advance” has the meaning set forth in Section 5.06(c).

 

“Ownership Percentage Interests” has the meaning set forth in Section 4.03.

 

“Person” means and includes any individual, profit or nonprofit corporation,
association, partnership (general, limited or limited liability), joint venture,
trust, estate, limited liability company or other legal entity or organization.

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

“Preferred Distribution” means an amount equal to $[*] that shall become due and
payable to Adeptus at the end of each calendar quarter from and after the
Effective Date, which amount represents [*] the Contributed ER Business as of
the Effective Date; provided that the first Preferred Distribution shall become
due and payable at the end of the calendar quarter immediately following the
Effective Date in the amount equal to the product of (a) $[*] and (b) a
fraction, the numerator of which is the actual number of days that will elapse
from the Effective Date to the end of the calendar quarter immediately following
the Effective Date, and the denominator of which is the total number of days in
the calendar quarter then ending. [*].

 

“Prime Rate” means that rate of interest equal to the United States prime
interest rate as published from time to time by The Wall Street Journal.

 

“Purchasing Member” has the meaning set forth in Section 7.07(a).

 

“Put-Call Notice” has the meaning set forth in Section 7.06(b).

 

“Put-Call Purchase Price” has the meaning set forth in Section 7.06(b).

 

“Quality Assessment Program” has the meaning set forth in Section 2.03(b).

 

“Reasonable Compensation” as applied to the value of services means the amount
that would ordinarily be paid for like services by like enterprises (whether
taxable or tax-exempt) under like circumstances, as determined in manner
consistent with the standards for determining reasonableness of compensation as
set forth in Section 162 of the IRC.

 

“Recapture Claim” means any claim of disallowance or recapture by CMS, OIG, any
State agency, or any other governmental or quasi-governmental authority with
respect to (a) charges or billings for health care program enrollees or
beneficiaries, (b) any alleged underpayment of any tax or assessment, (c) any
civil monetary penalty or state equivalent fine, (d) retroactive determination
of ineligibility for payment for DSH, UPL or any other stability or regulatory
payment, or (e) any adjustment due to audit results.

 

“Regulations” means the income tax regulations and temporary regulations
promulgated by the Internal Revenue Service, Department of Treasury, pursuant to
the IRC.

 

“Regulatory Allocations” has the meaning set forth in Section 5.10.

 

“Related Party Transaction” means any lease, contract or agreement or any other
transaction or arrangement involving payments or remuneration (a) between
Company and any Member or an Affiliate of a Member; or (b) between any
Company-Owned Entity and (i) any Member, (ii) any Affiliate of a Member, or
(iii) any other Person (other than Company) that owns or holds a membership or
other ownership interest in any Company-Owned Entity.

 

“Restricted Area” means Collin County, Texas, Dallas County, Texas, Denton
County, Texas, Ellis County, Texas, Hood County, Texas, Johnson County, Texas,
Kaufman County,

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Texas, Parker County, Texas, Rockwall County, Texas, Tarrant County, Texas and
Wise County, Texas.

 

“Selling Member” has the meaning set forth in Section 7.07(a).

 

“Support Agreement” means the Support Services Agreement entered into by and
between Company and THR concurrently with the execution and delivery of this
Agreement pursuant to which THR provides certain administrative and support
services for Company Facilities, as such Agreement may be modified or amended by
the parties thereto from time to time.

 

“Tax-Exempt Obligations” has the meaning set forth in Section 2.02(a).

 

“Tax-Exemption Impediment” means the existence, or operation of any term,
covenant, condition or provision of this Agreement or any Related Party
Transaction or any conduct of a Member that could (a) jeopardize the
classification of THR or any tax-exempt Affiliate of THR as a tax-exempt
organization and/or non-private foundation under Sections 501(c)(3) and 509(a)
of the IRC, (b) jeopardize the exemption from taxation of any bonds issued on
behalf of THR or any such Affiliates, (c) result in the imposition of
intermediate sanctions on the Members (or their shareholders, officers,
directors or trustees) pursuant to Section 4958 of the IRC, or (d) cause THR or
any tax-exempt Affiliate of THR to recognize material amounts of “unrelated
business taxable income” within the meaning of Section 511 of the IRC on income
allocations received by THR from Company, such materiality to take into account
all other THR income.

 

“Tax-Exemption Impediment Negotiation Period” has the meaning set forth in
Section 9.01.

 

“Third Appraiser” has the meaning set forth in Section 7.07(c).

 

“THR” has the meaning set forth in the Preamble.

 

“THR Competitor” means [*].

 

“THR Hospital Facility” means any facility (excluding a free standing ER
facility) separately licensed as a general acute care hospital under the law of
the applicable location within the Restricted Area that is wholly-owned or
controlled by THR.

 

“THR Indemnified Parties” has the meaning set forth in Section 11.03.

 

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“THR Management” means the senior management of THR, as designated by THR.

 

“THR Purchase Events” has the meaning set forth in Section 7.02.

 

“THR Purchase Notice” has the meaning set forth in Section 7.02(b).

 

“THR Purchase Option” has the meaning set forth in Section 7.02.

 

“THR Put Event” has the meaning set forth in Section 7.04.

 

“THR Put Notice” has the meaning set forth in Section 7.04(a).

 

“THR Put Option” has the meaning set forth in Section 7.04.

 

“THR Put Right” has the meaning set forth in Section 7.06(a).

 

“THR Reserved Decisions” has the meaning set forth in Section 3.01(b)(iii).

 

“THR Trademark License Agreement” means the Trademark License Agreement entered
into by and between THR and Company concurrently with the execution and delivery
of this Agreement pursuant to which THR, under specified conditions, licenses to
Company certain rights to use its name and trademark solely in connection with
the branding of Company Facilities, as such Agreement may be modified or amended
by the parties thereto from time to time.

 

“Three-Year Shortfall” has the meaning set forth in Section 7.03(a)(vii).

 

“Transfer” has the meaning set forth in Section 6.01.

 

“Unanimous Board Action” means the affirmative vote, consent or approval of all
of the members of the Governing Board.

 

“Unpaid Preferred Distribution” means, as of any date, an amount equal to the
aggregate Preferred Distribution that has become due and payable and not
previously paid; provided that any amount advanced to Adeptus pursuant to
Section 5.06(c) shall be treated as a Preferred Distribution that has been paid
to Adeptus; provided further,  however, that any such amount advanced to Adeptus
that becomes repaid to Company by Adeptus pursuant to Section 5.06(c) shall not
be treated as Preferred Distribution that has been paid to Adeptus; and,
 provided further, that on March 15 of each year, the following adjustments to
the outstanding Unpaid Preferred Distribution accumulated over the previous year
(and only for such previous year) shall be made: (a) if the aggregate Preferred
Distribution with respect to such year is greater than the EBITDA with respect
to such year, and the EBITDA with respect to such year is greater than
Distributed Funds with respect to such year, then the Unpaid Preferred
Distribution with respect to such year shall become an amount equal to EBITDA
with respect to such year minus Distributed Funds with respect to such year; or
(b) if the EBITDA with respect to such year is greater than the aggregate
Preferred Distribution with respect to such year, and the aggregate Preferred
Distribution with respect to such year is greater than the Distributed Funds
with respect to such year, then the Unpaid Preferred Distribution with respect
to such year shall become an

 

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amount equal to the aggregate Preferred Distribution with respect to such year
minus Distributed Funds with respect to such year; or (c) otherwise, the Unpaid
Preferred Distribution with respect to such year shall become zero.

 

Section 1.02 Usage Generally; Interpretation. Whenever the context may require,
any pronoun includes the corresponding masculine, feminine and neuter forms. All
references herein to Articles, Sections, subsections or paragraphs shall be
deemed to be references to Articles, Sections, subsections or paragraphs of this
Agreement unless the context otherwise requires.

 

ARTICLE II

FORMATION OF COMPANY

 

Section 2.01 Formation of Company. THR and Adeptus have formed Company as a
limited liability company pursuant to the Act for the purposes set forth in this
Agreement. Except as expressly provided to the contrary in this Agreement, the
rights and obligations of the Members and the administration and termination of
Company shall be governed by the Act. A Member’s interest in Company shall be
personal property for all purposes. All real and other property owned by Company
shall be deemed owned by Company as an entity, and none of the Members shall
have any ownership interest in such property.

 

Section 2.02 Purposes and Scope of Company.

 

(a) Purposes.  Subject to the provisions of this Agreement, the purposes of
Company are to expand access to and provide health care serves by developing,
owning, acquiring and/or operating such Hospital Facilities and Freestanding ER
Facilities as set forth in the Initial Strategy Plan, as modified and amended
from time to time in accordance with this Agreement, and such other Hospital
Facilities and Freestanding ER Facilities as may be approved by the Governing
Board and the Members from time to time in accordance with this Agreement, and,
in pursuance thereof, to engage in any and all lawful activities for which a
limited liability company may be organized under the Act including, without
limitation, the acquisition, improvement, sale, lease, mortgage, operation or
other use of or dealings with real, personal or mixed property. Notwithstanding
any provision to the contrary in this Agreement or the Act, the Management
Agreement, the Support Agreement or any other agreement related to Company, a
Company-Owned Entity, or any Company Facility, for so long as any Member (or any
Affiliate of any Member) is a Member and is tax-exempt under Section 501(c)(3)
of the IRC, Company shall be operated and managed in accordance with and in
furtherance of the provisions of this Section 2.02 and Section 2.03
(collectively, the “Tax-Exempt Obligations”). The Tax-Exempt Obligations shall
override any conflicting duty the members of the Governing Board or Members may
have to operate Company solely for the financial benefit of the Members;
provided, however, notwithstanding anything to the contrary contained herein,
that the Tax-Exempt Obligations shall not result in (i) Members being under a
duty to make Additional Capital Contributions to Company, (ii) Members or
Company being under a duty to modify or amend this Agreement or any of the
Related Party Transactions, except as and to the

 

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extent set forth in Section 9.01,  or (iii) a Member’s Ownership Percentage
Interest being subject to a purchase event contemplated in Article VII.

 

(b)Charitable Purposes.  Company and each Company Facility shall at all times be
operated and managed in a manner that furthers the charitable and community-
based healthcare purposes, mission, vision and values of THR by promoting health
and providing or expanding access to healthcare services to the community at
large. Specifically, and without limiting the generality of the foregoing,
Company and each Company Facility shall be operated and managed in a manner
that:

 

(i)provides a Medical Staff for Company Facilities that is open to any physician
who satisfies Medical Staff requirements related to professional requirements
and qualifications for membership and clinical privileges, subject to such
exclusive staffing and/or coverage arrangements as may be approved by the
Governing Board from time to time;

 

(ii)provides access to patient care services based on medical necessity, without
regard to characteristics such as a person’s race, religion, creed, national
origin, gender, age, sexual orientation, physical or mental disability, payor
source or ability to pay;

 

(iii)provides access to patient care services to individuals covered by
Medicare, Medicaid, TRICARE and other federal and state governmental payment
programs; and

 

(iv)will not, upon THR’s receipt of a written opinion from THR’s legal and/or
tax advisors or counsel, cause THR to act other than exclusively in furtherance
of its tax-exempt purposes, adversely affect its exempt status under Section
501(c)(3) of the IRC, cause THR to recognize “unrelated business taxable income”
within the meaning of Section 511 of the IRC with respect to its share of the
Net Income of Company, cause Company or any Company Facility to fail to comply
with Section 501(r) of the IRC, or cause the long-term debt of THR not to be
eligible for treatment as tax-exempt debt.

 

(c)Financial Assistance and Emergency Medical Care. As reasonably requested by
THR to comply with the requirements of Section 501(r) of the IRC, Company shall
at a minimum cause Manager to (i) conduct periodic community health needs
assessments for the communities served by Company; (ii) adopt and implement the
Financial Assistance and Emergency Medical Care Policies, and update such
Financial Assistance and Emergency Medical Care Policies as required to reflect
any changes in interpretations of law with respect to “hospital organizations”
and “hospital facilities” as defined in Section 501(r) of the IRC as are
required to maintain compliance with Section 501(r) of the IRC and other
relevant administrative guidance and to continue to meet the reasonable needs of
the communities served by Company; (iii) widely publicize the Community Health
Needs Assessment, Financial Assistance Policy, Financial Assistance Application,
and Plain Language Summary of the Financial Assistance Policy to patients and to
the communities served by Company in compliance with Section 501(r) of the IRC

 

14

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guidelines; (iv) make available financial assistance for medically necessary and
emergency medical care to individuals who are eligible for such assistance under
the standards set forth in the Financial Assistance and Emergency Medical Care
Policies; (v) provide reasonable and lawful levels of charity care consistent
with the Financial Assistance and Emergency Medical Care Policies; (vi) not
undertake any extraordinary collection actions without having first made
reasonable efforts to determine if the individual involved is eligible for
financial assistance under the Financial Assistance and Emergency Medical Care
Policies; and (vii) conduct billing practices in accordance with the IRC Section
501(r) regulations including limitations on charges to those patients who are
financial assistance eligible to no more than the calculated amounts generally
billed as such amount is defined in the regulations. Any amendments to the
Financial Assistance and Emergency Medical Care Policies shall be recommended by
THR and adopted by the Company in accordance with the terms of this Agreement.

 

(d)THR Mission, Vision, Values and The THR Promise. Company, each Company-Owned
Entity and each Company Facility shall be operated in a manner reasonably
consistent with THR’s Mission, Vision, Values and The THR Promise.

 

(e)Reasonable Compensation.  Company and each Company-Owned Entity shall follow
policies and procedures reasonably calculated to ensure that all transactions
involving payment for services including, without limitation, compensation paid
to Manager under the Management Agreement, amounts paid for emergency department
physician coverage services and reimbursement to Manager for compensation paid
to any personnel provided by Manager under the Management Agreement, are within
the range of Reasonable Compensation for the services involved and that all
transactions involving payment or property or the right to use property are
within the range of Fair Market Value for the property or right to use property
involved in the transaction and reasonably calculated to ensure that neither THR
nor Company or any Company-Owned Entity participates in an excess benefit
transaction as defined in Section 4958 of the IRC.

 

(f)Political and Lobbying Activities. In no event may Company or any
Company-Owned Entity make any direct or indirect financial contribution to, or
otherwise directly or indirectly endorse or oppose, any candidate for public
office, carry on any Lobbying Activities, or engage in any other activities to
an extent not permitted to be carried on by THR as an organization exempt from
federal income tax under Section 501(a) of the IRC because it is described in
Section 501(c)(3) of the IRC.

 

(g)Binding on Managers.  Manager shall be required to expressly agree to cause
Company to comply at all times with the provisions of Section 2.02 and
Section 2.03,  subject to the terms and conditions of the Management Agreement.

 

(h)Amendment. Any modification, deletion or repeal of any of the operating
covenants and principles described in Section 2.02 or Section 2.03 shall require
the express written approval of both Members.

 

15

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Section 2.03 Operating Policies and Procedures.

 

(a)Conflicts and Compliance Policies.  Members and the Governing Board shall
cause Company, each Company-Owned Entity and each Company Facility to:

 

(i)Be developed, formed, managed and/or operated in compliance with all
applicable legal and regulatory considerations;

 

(ii)Establish, continually maintain and comply with a Conflicts of Interest
Policy, as adopted by the Governing Board which will apply to the owners,
managers and key employees of Company and each Company- Owned Entity;

 

(iii)Establish and continually maintain a compliance program designed by Manager
to prevent, detect and correct non-compliance (the “Compliance Program”), which
program will be generally consistent with recognized standards for the industry
(including consideration of guidance provided by the Office of the Inspector
General, United States Department of Health and Human Services) and follow those
guidelines established by the THR Chief Compliance Officer and approved by the
Governing Board; and provide for at a minimum semi-annual billing compliance
audits and separate coding compliance audits and as requested by the Governing
Board, information security and HIPAA privacy audits, provided,  however, that
if a third party is performing a billing function, such third party soc-1 audit
report may be relied upon in lieu of the semi-annual billing compliance audits;

 

(iv)Submit the Compliance Program for review by both THR Management and Adeptus
Management and for self-assessment by the Governing Board at least annually to
ensure its continuous and effective operation and administration. The Chief
Compliance Officers for both Members shall be consulted on the method and
content of the Governing Board’s self-assessment process;

 

(v)Allow for audit of the Compliance Program by an audit firm engaged by either
Member or an appropriate audit firm mutually agreed to by the Governing Board;
and

 

(vi)Provide notice to the THR Chief Compliance Officer of any significant
compliance issues, privacy or information technology security breaches, or
non-routine regulatory/governmental audit or investigation.

 

(b)Quality of Care. Company and each Company-Owned Entity shall adopt, maintain
and apply protocols, guidelines, policies and procedures consistent with
performance and quality metrics used by THR, approved in advance by the
Governing Board (the “Quality Assessment Program”) that will:

 

(i)Provide for the delivery of patient care consistently and reliably at or
above the community standard for the industry and/or clinical service(s)
operated by Company and each Company-Owned Entity;

 

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(ii)Assure the operation and maintenance of a safe environment for the delivery
of patient care and all other services and functions attendant thereto,
including appropriate Medical Staff credentialing and peer review processes;

 

(iii)Promote positive outcomes in connection with the delivery of patient care;
and

 

(iv)Allow for the quantitative measurement and provide for ongoing monitoring by
the Governing Board and the Medical Staff of clinical quality based upon
recognized standards for the industry and/or clinical service(s) operated by
Company, and each Company-Owned Entity as applicable.

 

Section 2.04 Name. Company shall be known as FTH DFW PARTNERS LLC and the
business and affairs of Company and each Company-Owned Entity shall be conducted
under a name and brand that includes “Texas Health,” with the specific form of
such names and brands to be consistent with the terms and conditions of the THR
Trademark License Agreement and applicable law, and approved by the Governing
Board from time to time. THR hereby agrees that the Company and each
Company-Owned Facility shall have the right to conduct its business under the
name and brand that THR uses to conduct its hospital business or “Texas Health”,
as applicable, provided that such use is at all times conducted in accordance
with the terms and conditions of the THR Trademark License Agreement.

 

Section 2.05 Assumed Name Certificate. Members shall execute and file all
assumed or fictitious name certificates required by law to be filed in
connection with the formation of Company or the conduct of its business.

 

Section 2.06 Scope of Members’ Authority. Except as otherwise expressly and
specifically provided in this Agreement, no Member shall have any authority to
act for, or to assume any obligations or responsibility on behalf of, any other
Member, Company or any Company-Owned Entity.

 

Section 2.07 Registered Office; Principal Place of Business; Books and Records.
Company’s registered office shall be the registered office as set forth in the
Certificate of Formation of Company and Company’s principal office will be at
such place as the Governing Board shall designate. Company shall maintain its
books and records at its principal office. Company shall provide Members access
to its books and records at its principal office.

 

ARTICLE III

MANAGEMENT OF COMPANY

 

Section 3.01Management and Operations of Company.

 

(a)Management by Governing Board.  Subject to those matters for which the
approval of the Members is required by this Agreement or by the Act, the powers
of Company shall be exercised by or under the authority of, and the business and
affairs of Company shall be managed under the direction of, the board of
managers of Company (“Governing Board”) in accordance with the provisions of
this Section 3.01.

 

17

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(b)Governing Board and Members.

 

(i)Number; Appointment. The Governing Board shall consist of six (6) members,
three (3) of whom shall be appointed by THR and three (3) of whom shall be
appointed by Adeptus. The initial Adeptus Governing Board members shall be
Graham Cherrington, President and Chief Operating Officer, Don Adam, Chief
Corporate Development Officer, and David Pyle, Senior Vice President or
Operations, and the initial THR Governing Board members shall be Jeffery Canose,
M.D., Chief Operating Officer, John Mitchell, SVP Business Development and
Krystal Mims, SVP, Care Continuum & Collaboration. Each member of the Governing
Board shall serve at the pleasure of the Member that appointed such Governing
Board member and, upon the removal, resignation, unavailability or death of any
Governing Board member, a replacement Governing Board member shall be chosen by
such Member.

 

(ii)Quorum; Voting Power; Vote Required for Actions. A quorum of the Governing
Board shall consist of the presence in person or by telephone of at least two
(2) Governing Board member appointed by each Member; provided,  however, in the
event at least two (2) of the Governing Board members appointed by a given
Member are not present in person or by telephone at two (2) consecutive duly
scheduled or noticed meetings of the Governing Board, the presence of two (2)
Governing Board members appointed by such Member in person or by telephone shall
not be required to establish a quorum for the next duly scheduled or noticed
meeting of the Governing Board. If a quorum is present when a vote is taken,
each Governing Board member shall have voting power equal to the Ownership
Percentage Interest owned by the Member that appointed such Governing Board
member divided by the number of present Governing Board members appointed by
that Member. Subject to Section 3.01(b)(iii)-(v), all actions of the Governing
Board shall require approval (by vote or written consent) by Governing Board
members who have at least a majority of the voting power at a meeting of the
Governing Board.

 

(iii)Decisions Reserved to THR. Notwithstanding Section 3.01(b)(ii), any act may
be taken or sum expended or obligation incurred by Company, any Company-Owned
Entity or either Member with respect to a matter within the scope of any of the
decisions affecting Company and/or any Company-Owned Entity described below
(collectively, “THR Reserved Decisions”), if, and only if, such THR Reserved
Decision is approved by all of the members of the Governing Board appointed by
THR; provided that all THR Reserved Decisions must first be proposed and
presented by the members of the Governing Board appointed by Adeptus to the
members of the Governing Board appointed by THR for a vote on such matters,
without modifications; provided further that the Governing Board, Members,
Company and each Company- Owned Entity shall at all times comply with, and shall
cause Manager and each manager and officer of Company and each Company-Owned
Entity to comply with the provisions of Section 2.02 and Section 2.03 to carry
out those provisions. The THR Reserve Decisions shall be the following:

 

18

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(A)An act that would impact the THR Tax-Exempt Obligations;

 

(B)The modification or amendment of the Initial Strategy Plan or any proposed
action that is inconsistent with the Initial Strategy Plan, including a decision
to not develop or acquire any new Company Facility included in the Initial
Strategy Plan, and the approval of any new strategic or development plan for
Company;

 

(C)The approval of any Development Budget, or any significant changes to any
item in any existing Development Budget;

 

(D)The approval of Annual Budgets for each Fiscal Year for Company and each
Company Facility, and any significant changes to any item of income or
expenditure set forth in an Annual Budget; provided, however, expenditures for
ordinary course operations not exceeding five percent (5%) of the Operating
Annual Budget (in the aggregate) shall be permitted without further Company
approval; provided, further,  that Company may modify an Annual Budget from time
to time by written resolution approved by the Governing Board by Unanimous Board
Action, which modification shall then become the new authorization for
expenditures.

 

(iv)Major Decisions. Notwithstanding Section 3.01(b)(ii), no act shall be taken
or sum expended or obligation incurred by Company, any Company-Owned Entity or
either Member with respect to a matter within the scope of any of the major
decisions affecting Company and/or any Company-Owned Entity described below
(collectively, “Major Decisions”), unless such Major Decision has been approved
by the Governing Board by Unanimous Board Action or is otherwise specifically
contemplated by this Agreement, and provided further that the Governing Board,
Members, Company and each Company-Owned Entity shall at all times comply with,
and shall cause Manager and each manager and officer of Company and each
Company-Owned Entity to comply with the provisions of Section 2.02 and Section
2.03 to carry out those provisions. The Major Decisions shall be the following:

 

(A)The sale or exchange of any Company Facility or all or any significant
portion of the assets of Company or any Company-Owned Entity, or any merger or
consolidation of Company or Company-Owned Entity with or into any other entity;

 

(B)Changing the name of Company, any Company-Owned Entity or any Company
Facility;

 

(C)(1) any borrowing, guaranteeing any indebtedness or creating or granting any
lien or other encumbrance on any assets of Company or any Company-Owned Entity,
other than borrowings and the

 

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related liens or encumbrances (x) contemplated under any approved Annual Budget
or Development Budget or (y) of less than $100,000, and (2) except as otherwise
approved by Manager, any draw on the Line of Credit Agreement not required to
meet the capital needs of Company;

 

(D)Lending to any Person any of the funds of Company or any Company-Owned
Entity;

 

(E)Entering into, terminating, renewing or modifying any Related Party
Transaction;

 

(F)Removing, admitting or substituting any Members of Company or any
Company-Owned Entity;

 

(G)Any decision to dissolve Company or any Company- Owned Entity or to file a
petition requesting or consenting to an order for relief under the federal
bankruptcy laws, or other actions with respect to Company or any Company-Owned
Entity as a result of insolvency or the inability to pay debts generally as such
debts become due;

 

(H)Requiring Members to make Additional Capital Contributions to Company
including capital contributions, if any, required to fund the Initial Strategy
Plan;

 

(I)Appointment of jointly-recruited medical directors for Company, or any
Company Hospital Facility;

 

(J)Approval of and/or amendment to the Medical Staff Bylaws for Company, any
Company-Owned Entity or any Company Facility;

 

(K)Any decision to establish any new Company-Owned Entity not contemplated in
the Initial Strategy Plan or cause Company or any Company-Owned Entity to buy or
sell directly or indirectly any interest in any Person;

 

(L)The commencement, prosecution, settlement, compromise or dismissal of any
lawsuit or other judicial or administrative proceeding

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

(including any investigation) that is related, either directly or indirectly, to
Company or any Company-Owned Entity which has an amount in controversy or
settlement value of $[*] or more;

 

(M)Any decision related as to whether or not Company, any Company-Owned Entity
or any Company Facility shall participate in any Federal Health Care Program;
provided,  however, if at any time Company, any Company-Owned Entity or any
Company Facility is deemed ineligible for a Federal Health Care Program, then
Company shall take all actions necessary to operate lawfully without
participation;

 

(N)The entry by Company or any Company-Owned Entity into any new line of
business or business purpose other than as provided for or authorized pursuant
to this Agreement;

 

(O)The distribution of any assets of Company or any Company-Owned Entity other
than cash to Members;

 

(P)Approval of any material agreement for the provision of physician staffing
and/or coverage of any Company Facility including, without limitation, any
exclusive staffing and/or coverage arrangement as described in Section
2.02(b)(i), it being agreed that National Medical Professionals of Texas, PLLC
shall provide all physician staffing services relating to the provision of the
specialty of providing emergency medical treatment to patients of all Company
Facility emergency rooms.

 

(Q)Any amendment to the (1) Conflicts of Interest Policy, (2) Compliance
Program, (3) Quality Assessment Program, (4) Corporate Integrity Program, or (5)
Confidentiality and Trade Secret Rights;

 

(R)Any fee paid in exchange for a guarantee pursuant to Section 4.09;

 

(S)The development of any Company Facility under the Initial Strategy Plan if
the construction and non-leased equipment budget for such Company Facility
exceeds $[*] (exclusive of land acquisition costs which shall be subject to then
current market rates);

 

(T)Any determination that Company Facilities will not be owned by a third-party
financing source and leased to an Adeptus Affiliate and subleased to Company;

 

(U)Entering into a management services agreement or any other agreement similar
to the Management Agreement with respect to one (1) or more Company Facilities
with any Person other than Manager; and

 

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(V)Any amendment to the formation and governance documents of Company or any
Company-Owned Entity that would reasonably be anticipated to materially affect
the rights and obligations of any Member.

 

(v)Material Deadlock.  In the event of any Material Deadlock, Company shall
first attempt to resolve such Material Deadlock by submitting the matter to
Donald Adam, Chief Corporate Development Officer of Adeptus Parent and THR’s
designee for discussion and resolution. In the event that those individuals are
not able to resolve such Material Deadlock within fifteen (15) business days
after submission of the matter to them, then the Material Deadlock shall be
submitted to the Chief Executive Officers of Adeptus Parent and THR for
discussion and resolution. In the event the Chief Executive Officers are unable
to resolve such Material Deadlock within fifteen (15) business days, then
Company shall not take the action with respect to the matter over which the
members of the Governing Board are deadlocked; provided,  however, that (i) in
the event of a Material Deadlock with respect to any Annual Budget, the annual
operating budget previously approved by the Governing Board shall continue
unless and until a new Annual Budget is approved by the Governing Board in
accordance with this Agreement.

 

(vi)Governing Board Meetings.  Meetings of the Governing Board may be called by
any member of the Governing Board. A schedule of regular meetings shall be
established at the beginning of each Fiscal Year. Regularly scheduled meetings
shall not require any further advance notice. All other meetings shall be held
upon four (4) days’ notice by mail or seventy-two (72) hours’ notice delivered
personally or by telephone or email and simultaneously giving notice in
accordance with Section 11.01. A notice must specify the purpose of the
meetings. Notice of a special meeting need not be given to any member of the
Governing Board who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting, or
who attends the meeting without protesting, prior to its commencement, the lack
of notice to such member. All such waivers, consents and approvals shall be
filed with the Governing Board and made a part of the minutes of the meeting.
Meetings of the Governing Board shall be held at Adeptus’ corporate office in
Texas or THR’s corporate office in Texas on an alternating basis and shall be so
designated in the notice of the meeting or at such place as may be approved by
the Governing Board. One or more Governing Board members may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all Governing Board members participating in such meeting can hear
one another. Participation in a meeting in such manner constitutes a presence in
person at such meeting. Notwithstanding anything to the contrary set forth
herein, Manager shall have the right to participate in and propose the agenda
for Governing Board meetings.

 

(vii)Action Without Meeting. Any action required or permitted to be taken by the
Governing Board may be taken by the Governing

 

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Board members without a meeting if all Governing Board members eligible to vote
on such matter consent in writing to such action. All such actions by written
consent shall have the same force and effect as the requisite vote of the
Governing Board members at a duly called and held meeting.

 

(viii)Devotion of Time. No Governing Board member is obligated to devote all of
his or her time or business efforts to the affairs of Company. The Governing
Board members shall devote such time to Company’s business as they shall deem
appropriate for the operation of Company. Subject to compliance with the Act, or
except as otherwise specifically set forth in this Agreement, a Governing Board
member may have other business or vocational interests and may engage in other
activities in addition to those relating to Company. Neither Company nor any
Member shall have the right to share or participate in such other business
interests or activities of a Governing Board member based on their status as a
Governing Board member of Company. Nothing in this Section 3.01(b)(viii) is
intended to lessen the duties of a Member under Texas law or as set forth
elsewhere under this Agreement, including under Article VIII.

 

(ix)Reliance on Agents. In performing their duties, the Governing Board members
shall be entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, of attorneys,
accountants and other employees or agents of Company who the Governing Board
members reasonably believe to be reliable and competent in the matters
presented.

 

(c)Officers.

 

(i)Appointment. The Members shall each appoint two of the Governing Board
members as officers of Company (each an “Officer”), and delegate duties and
authority to such Officers. The election of Officers shall occur on a two (2)
year revolving basis whereby the President shall be elected by a Member and the
Vice-President shall be elected by the other Member. The Company’s Treasurer
shall always be appointed by Adeptus and the Company’s Secretary shall always be
appointed by THR. Upon expiration of the First Officer Term and each Officer
Term thereafter, a Member shall appoint that Officer not held by its appointed
Governing Board members during the previous Officer Term. If any Officer is
elected without an express statement of the duties and authority of such
Officer, the duties and authority of such Officer shall be the same as those
given to an equivalent officer of a Texas business corporation under the Texas
Business Organizations Code. For the First Officer Term, the Officers of Company
shall be: Graham Cherrington, President and David Pyle, Treasurer (elected by
Adeptus); and Jeff Canose, Vice President and Krystal Mims, Secretary (elected
by THR).

 

(ii)Term. Except for the First Officer Term, Officers shall serve for a two (2)
year term (each an “Officer Term”). If at any time an

 

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Officer resigns or is removed or replaced by their appointing Member, such
appointing Member shall appoint a replacement to serve for the remainder of such
Officer Term.

 

(iii)President. The President shall preside at all meetings of the Governing
Board and/or Members and shall have such other duties as may be prescribed from
time to time by the Governing Board. In the absence of the President, the Vice
President shall preside at Governing Board meetings.

 

(iv)Vice President. In the absence of the President or in the event of the
President’s inability or refusal to act, the Vice President will perform the
duties of the President, and when so acting, will have all the powers of and be
subject to all the restrictions upon the President. The Vice President will
perform such other duties and have such other powers as may be prescribed by the
Governing Board or the President.

 

(v)Secretary. The Secretary shall be responsible for recording the minutes of
all Governing Board and Member meetings. The Secretary shall have the
responsibility of authenticating records of Company and receiving notices
required to be sent to Secretary, and shall perform such other duties as the
Governing Board may from time to time prescribe.

 

(vi)Treasurer. The Treasurer shall have responsibility for Company’s funds and
securities, the financial and tax books and records of Company, the
disbursement, along with the authorized Officers, of the funds of Company, the
preparation and filing of Company’s tax and reporting forms, and such other
duties as may be incident to his or her office or as prescribed by the Governing
Board.

 

(vii)Other Officers. Other Officers may be elected or appointed by Unanimous
Board Action, and shall have such duties as may be prescribed from time to time
by Unanimous Board Action.

 

(viii)Devotion of Time. No Officer is obligated to devote all of his or her time
or business efforts to the affairs of Company. Officers shall devote such time
to Company business as the Governing Board deems appropriate for the operation
of Company. Subject to compliance with the Act, or except as otherwise
specifically set forth in this Agreement, an Officer may have other business or
vocational interests and may engage in other activities in addition to those
relating to Company. Neither Company nor any Member shall have the right to
share or participate in such other business interests or activities of an
Officer based on their status as an officer of Company. Nothing in this Section
3.01(c)(viii) is intended to lessen the duties of a Member under Texas law or as
set forth elsewhere under this Agreement, including under Article VIII.

 

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(d)Enforcement of Related Party Transactions. Notwithstanding anything to the
contrary in this Agreement, in the event of any actual or potential dispute
between Company and any Member or any Affiliate of any Member relating to any
Related Party Transaction, such Member (“Conflicted Member”) and the members of
the Governing Board appointed by such Conflicted Member shall not participate in
any vote, approval or decision with respect to such dispute, and the
non-conflicted Member (“Disinterested Member”) and the members of the Governing
Board designated by such Disinterested Member shall have, notwithstanding any
other provision of this Agreement, the sole and exclusive right, power and
authority to take action with respect to such matters, including, without
limitation, to initiate, prosecute and defend, in the name and on behalf of
Company or Company-Owned Entity, as applicable, any claim, suit, proceeding or
other legal action that Company or any Company-Owned Entity has or may have
against such Conflicted Member. For the purposes of any action or decisions
requiring the approval, vote or consent of the Governing Board or Members with
respect to any such dispute, claim, suit, proceeding or other legal action, the
affirmative approval, vote or consent of the members of the Governing Board
appointed by the Disinterested Member or the Disinterested Member, as
applicable, shall be sufficient to approve any such action or decision. For the
avoidance of doubt, this provision shall be subject to and shall not affect the
application of (i) the purchase events set forth in Article VII, or (ii) the
dispute resolution provisions set forth in Section 11.10.

 

(e)Member Activities. Members agree to use reasonable efforts to promote Company
Facilities and to encourage the use thereof by the public in the local medical
community in a manner consistent with applicable laws. Members acknowledge and
agree that nothing contained in this Agreement or in any materials, plans,
summaries or other tangible or intangible information prepared or communicated
in connection herewith shall require any Member or a Member’s Affiliates to
refer Persons to any Company Facility, Adeptus Hospital Facility, THR Hospital
Facility, or THR affiliated physicians for medical care or to induce other
Persons to make or receive such referrals.

 

(f)Indemnification of Covered Persons.

 

(i)The debts, obligations and liabilities of Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of Company, and neither the Members nor any Covered Person shall be
obligated personally for any such debt, obligation or liability of Company
solely by reason of being a Member or Covered Person; provided that this shall
not limit or preclude liability of a Covered Person who is a service provider to
Company in accordance with the terms of any applicable contract or other
applicable law.

 

(ii)No Covered Person shall be liable to Company or any Company-Owned Entity or
any other Covered Person for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Covered Person in good faith on
behalf of Company or any Company-Owned Entity and in a manner reasonably
believed to be within the authority of such Covered Person and in the interests
of Company. No Covered Person shall be

 

25

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liable for any act or omission or mistake of judgment unless the same (A)
constituted bad faith, gross negligence or willful misconduct, or (B) was in
breach of an express provision of this Agreement, subject to the provisions set
forth in the last clause of Section 3.01(f)(i).

 

(iii)Each Covered Person shall be entitled to be indemnified by Company for any
loss, damage or claim incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
Company or any Company-Owned Entity and in a manner reasonably believed to be
within the authority of such Covered Person and in the interests of Company;
provided,  however, that any indemnity permitted under this Section
3.01(f) shall be provided out of and to the extent of Company assets only, shall
be limited to the full extent allowed under the Act, shall not be available in
cases of gross negligence, fraud or willful misconduct on the part of the
Covered Person, and no Member shall have any personal liability on account of
this indemnity. To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any claim,
demand, action, suit or proceeding in respect of which such Covered Person is
entitled to be indemnified as provided in this Section 3.01(f) shall, from time
to time, be advanced by Company upon receipt by Company of an adequate
undertaking by or on behalf of the Covered Person to repay such amount if it
shall be determined that the Covered Person is not entitled to be indemnified
pursuant to this Section 3.01(f).

 

(g)Representation Regarding Civil Administrative or Criminal Matters.

 

(i)Adeptus hereby represents and warrants that neither it, Adeptus Parent, or
its Affiliates are currently the subject or party to any civil, criminal or
administrative action, suit, demand, claim, hearing, proceeding or investigation
pending, or to Adeptus knowledge, threatened against Adeptus that, or party to
any contractual obligation that, individually or in the aggregate, may impair or
delay the ability of Adeptus to enter into this Agreement and to perform its
obligations hereunder.

 

(ii)THR hereby represents and warrants that neither THR or its Affiliates are
currently the subject or party to any civil, criminal or administrative action,
suit, demand, claim, hearing, proceeding or investigation pending, or to THR
knowledge, threatened against THR that, or party to any contractual obligation
that, individually or in the aggregate, may impair or delay the ability of THR
to enter into this Agreement and to perform its obligations hereunder

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Section 3.02 Compensation of Members, Governing Board Members, Officers. Except
as may be expressly provided for herein or hereafter approved by the Members, no
payment will be made by Company or any Company-Owned Entity to any Member, any
member of the Governing Board or any Officer for the services of such Person.

 

Section 3.03 Contracts with Related Parties. Except as otherwise specified
herein, and except for the transactions contemplated in the Support Agreement,
Emergency Department Coverage Agreement, Trademark License Agreement and the
Management Agreement, Company shall not enter into any Related Party Transaction
unless such Related Party Transaction has been approved in accordance with this
Agreement. At any meeting of the Governing Board convened for the specific
purpose of discussing the performance of the Manager under the Management
Agreement or performance of Adeptus Affiliate under the Emergency Department
Coverage Agreement, representatives of Adeptus appointed to the Governing Board
by Adeptus shall have no vote as members of the Governing Board in respect of
any action desired to be taken with respect to such performance by the Governing
Board on behalf of Company. At any meeting of the Governing Board convened for
the specific purpose of discussing the performance of THR or a THR Affiliate
under the Support Agreement or the Trademark License Agreement, representatives
of THR appointed to the Governing Board by THR shall have no vote as members of
the Governing Board in respect of any action desired to be taken with respect to
such performance by the Governing Board on behalf of Company. To the extent the
Parties enter into a Related Party Transaction and that transaction entails
Billing and Collection Services such documentation shall be consistent and
sustainably similar in both substance and form to Section 1.3 of the Support
Agreement.

 

Section 3.04 Managed Care Contracting. [*] Such managed care contracting
services shall be provided by THR pursuant to the Support Agreement. [*]

 

Section 3.05 Utilization of Company Facilities. Manager will within the first
twelve months after the Effective Date, and periodically thereafter as
determined by the Governing Board, evaluate: (1) the appropriate level of
charges associated with the delivery of the Company’s services; (2) the
feasibility of using Company Facilities for the delivery of medical services to
patients whose care THR or a THR Affiliate are contracted to manage under a
contract with a payor, a governmental program (e.g. Medicare, Medicaid) or an
employer including the appropriate fees to be charged by Company for providing
services to such patients and (3) the feasibility of other alternative services
that may appropriately be provided in a Company Facility.

 

Section 3.06 Independent Activities. Subject to the covenants of the Members set
forth in Article VIII, (a) each Member may, notwithstanding the existence of
this Agreement or any fiduciary relationship created hereby, engage in whatever
activities it chooses, whether the same be competitive with Company or
otherwise, without having or incurring any obligation to offer any interest in
such activities to Company, any Member or otherwise, and (b) neither this
Agreement nor any activity undertaken pursuant hereto shall prevent any Member
from engaging in such activities or require a Member to permit Company or any
other Member to participate in any such activities and, as a material part of
the consideration for the execution hereof by the

 

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Members, each Member hereby waives, relinquishes and renounces any such right or
claim of participation.

 

ARTICLE IV

FINANCING

 

Section 4.01 Asset and Capital Contributions.

 

(a)Initial Capital Contributions and “Purchase Price.”  Exhibit C attached
hereto sets forth each Member’s initial capital contributions to Company, in the
amount and in the form shown opposite each such Member’s name thereon (“Initial
Capital Contribution(s)”), in exchange for the Member’s initial Ownership
Percentage Interest.

 

The Members acknowledge and agree that the transactions contemplated by this
Agreement were negotiated at arms-length and the values ascribed to the assets
included in the Member’s respective capital contributions represent fair market
value for the Ownership Interest Percentages and the other rights granted to
them respectively herein.

 

(b)Additional Capital Contributions.  The Governing Board may request that the
Members make additional capital contributions (“Additional Capital
Contribution(s)”) to Company which shall be in proportion to their respective
Ownership Percentage Interests, subject to approval by the Members in accordance
with Section 3.01(b)(iv). The Additional Capital Contributions of each Member
shall be made on the same terms and conditions unless otherwise agreed to by the
Members. If the Governing Board requests any Additional Capital Contributions to
Company pursuant to this Section 4.01(b) (a “Capital Call”), and such Capital
Call is approved by the Members in accordance with Section 3.01(b)(iv), then the
Governing Board shall deliver a written notice (“Capital Call Notice”) to each
Member stating:

 

(i)the aggregate amount of Additional Capital Contributions requested at such
time and the intended uses therefor;

 

(ii)the amount of the Additional Capital Contribution to be provided by each
Member, which amount shall be equal to (A) the aggregate amount of the Capital
Call made multiplied by (B) the Ownership Percentage Interest of such Member;

 

(iii)the due date for such Additional Capital Contributions, provided that
Members shall have at least fifteen (15) days from the date of the Capital Call
Notice to make such Additional Capital Contributions; and

 

(iv)wiring instructions for the wire transfer to Company’s bank account of cash
amounts of Additional Capital Contributions by such Members to Company.

 

All Additional Capital Contributions made by Members shall be made by wire
transfer of immediately available funds to the bank account designated by
Company in

 

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such Capital Call Notice prior to the close of business on the due date
specified in such Capital Call Notice.

 

(c)No Additional Required Contributions.  Except as set forth in this Section
4.01,  no Member shall have any right or obligation to make any capital
contribution to Company.

 

Section 4.02 Contribution Loans. In the event a Member (a “Non-Contributing
Member”) fails to make any required Additional Capital Contribution within the
time specified, the Governing Board shall give prompt notice of such failure to
the other Member (the “Contributing Member”), who shall have the right to
advance directly to Company all or any portion of the funds that were required
from the Non-Contributing Member, which shall be treated as a loan to the
Non-Contributing Member (the “Contribution Loan”).

 

(a)Withdrawal of Contribution. In the event the Contributing Member elects not
to advance the full amount of the additional funds required from the Non-
Contributing Member, the Contributing Member shall be under no obligation to
make Additional Capital Contributions until parity in capital accounts with the
Members’ respective Ownership Percentage Interests is restored and shall be
entitled to withdraw any Additional Capital Contributions previously made until
parity is achieved.

 

(b)Repayment through Distributions. In the event the Contributing Member elects
to make a Contribution Loan, then the Contribution Loan shall bear interest at
an annual rate equal to the Prime Rate, but in any event no more than the
highest rate permitted by law and, except as set forth in Section 4.02(c), shall
be repaid out of any subsequent distributions made pursuant to this Agreement to
which the Non-Contributing Member otherwise would be entitled, which amounts
shall be applied first to interest and then to principal, until the Contribution
Loan is paid in full. Repayment of any Member’s Contribution Loan shall be
secured by the Non-Contributing Member’s Ownership Percentage Interest, and the
Non-Contributing Member hereby grants a security interest in such Ownership
Percentage Interest to the Contributing Member who advanced such Contribution
Loan and hereby irrevocably appoints the Contributing Member, and any of its
agents, officers or employees, as the Non-Contributing Member’s
attorneys-in-fact with full power and authority to prepare and execute any
documents, instruments and agreements including, but not limited to, any note
evidencing the Contribution Loan, and such Uniform Commercial Code financing,
continuation statements, and other security agreements and instruments as may be
appropriate to perfect and continue such security interest in favor of such
Contributing Member.

 

(c)Remedies. In the event any Contribution Loan has not been repaid in full
within ninety (90) days after the date the Contribution Loan is made, then, in
addition to any other rights or remedies available to the Contributing Member at
law or in equity, at any time thereafter (prior to repayment in full of the
Contribution Loan) Contributing Member may elect to proceed under Section
4.02(c)(i).

 

(i)Upon thirty (30) days’ prior written notice to a Non- Contributing Member,
the Contributing Member may elect to treat the

 

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outstanding principal balance of the Contribution Loan as a contribution to
capital by the Contributing Member, and the Ownership Percentage Interest of
each Member shall thereupon be recalculated as of the date of such election (the
“Computation Date”), and shall be equal to a fraction, of which the numerator
shall be (A) the aggregate amount of such Member’s Capital Account as of the
Computation Date, but excluding any sums advanced for the account of such Member
as a Contribution Loan by a Contributing Member, plus (B) the amount of such
Member’s Contribution Loan to be converted by such Member to capital; and the
denominator shall be the aggregate amount of the Capital Accounts for all
Members as of the Computation Date, including the amount of any Contribution
Loan converted to capital. Accrued interest on any Contribution Loan shall be
payable as provided in Section 4.02(b) regardless of whether the Contribution
Loan is converted to capital through such time as the Contribution Loan is
converted to capital.

 

(ii)Until a Member has elected to proceed under Section 4.02(c)(i) or has
elected to pursue any other remedy available to it at law or in equity, such
Member’s Contribution Loan shall remain in place and shall bear interest and be
repaid as provided in Section 4.02(b).

 

(d)No Third-Party Rights.  The right of the Governing Board to require any
Additional Capital Contributions under the terms of this Agreement shall not be
construed as conferring any rights or benefits to or upon any party not a party
to this Agreement.

 

Section 4.03 Ownership Percentage Interests; Amendments to Exhibit B. Each
Member shall own and hold an interest in Company (expressed as a percentage of
all the interest in Company) as set forth opposite such Member’s name on Exhibit
B (the “Ownership Percentage Interests”). The Governing Board shall have the
authority to amend Exhibit B from time to time to update any Member’s
information and to reflect any changes in Ownership Percentage Interests in
accordance with this Agreement.

 

Section 4.04 No Right to Return of or Interest on Capital Contributions. Except
as otherwise expressly provided in this Agreement, no Member shall have the
right to withdraw its Capital Contribution or to demand or receive a return of
its Capital Contribution or any part thereof. To the extent that any Member
shall ever have the right to withdraw its Capital Contribution or to demand or
receive the return of its Capital Contribution or any part thereof, the other
Member shall not be personally liable or responsible for the return of such
Capital Contribution and any such return shall be made solely from the assets of
Company. No interest shall be paid by Company on any Capital Contributions to
Company.

 

Section 4.05 Capital Accounts. Company shall establish and maintain a separate
capital account (a “Capital Account”) for each Member in accordance with
Regulations Section 1.704-1(b)(2)(iv). Accordingly, a Member’s Capital Account
shall be increased by (a) the amount of money Member contributes to Company, (b)
the Fair Market Value of property Member contributes to Company (and that is
accepted upon approval of the Governing Board) (net of liabilities secured by
such contributed property that Company is considered to assume or

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take subject to under IRC Section 752), and (c) allocations to Member of Net
Income (or items thereof), including income and gain exempt from tax and gain as
computed for book purposes in accordance with Regulations Section
1.740-1(b)(2)(iv)(g), but excluding any gain separately computed for tax
purposes as described in Regulations Section 1.704-1(b)(4)(i). A Member’s
Capital Account shall be decreased by (a) the amount of money Company
distributes to Member, (b) the Fair Market Value of property Company distributes
to Member (net of any liabilities secured by such distributed property that
Member is considered to take subject to under IRC Section 752), (c) allocations
to Member of Company’s non-deductible, non-capital expenditures, and (d)
allocations to Member of Net Losses (or items thereof), including loss and
deduction as computed for book purposes in accordance with Regulations Section
1.704-1(b)(2)(iv)(g), but excluding non-deductible, non-capital expenditures and
loss and deduction separately computed for tax purposes as described in
Regulations Section 1.704-1(b)(4)(i). A Member’s Capital Account in all events
shall be adjusted in accordance with the additional rules set forth in
Regulations Section 1.704-1(b)(2)(iv). In the event a Member transfers all or
any portion of its interest in Company, the transferee shall succeed to the
individual Capital Account and Capital Account balance of the transferor to the
extent such individual Capital Account and Capital Account balance relate to the
transferred interest.

 

Section 4.06 Company Loans. A Member or an Affiliate thereof may, from time to
time and as deemed necessary by the Governing Board and agreed to by each
Member, lend additional working capital sufficient to enable Company to carry on
its business as contemplated by Section 2.02.  Any loan by a Member (or
Affiliate thereof) to Company will be made for Company’s working capital
purposes and will be evidenced by a promissory note and outstanding balances
will be subject to fair market rate interest. Repayment of any such loan shall
be (a) guaranteed by the non-lending Member proportionate to its Ownership
Percentage Interest (provided that the non-lending Member approves such loan),
and (b) to the extent permitted by law, secured by a first priority security
interest in the accounts receivable of Company and Company hereby grants a
security interest to such extent in such accounts receivable to the lending
Member and irrevocably appoints the lending Member and any of its agents,
officers or employees as its attorneys-in-fact with full power and authority to
prepare and execute any documents, instruments and agreements including, but not
limited to, any note evidencing such loan, and such Uniform Commercial Code
financing, continuation statements and other security agreements and instruments
as may be appropriate to perfect and continue such security interest in favor of
the lending Member. Any required monthly payments (including any past due
amounts) under any such loan, including the Line of Credit Agreement, shall be
made before any distributions of Distributable Funds are made to Members.

 

Section 4.07 Withdrawal or Reduction of Members’ Capital Contribution. No Member
shall have the right to withdraw from Company unless otherwise expressly
permitted herein, or withdraw all or part of such Member’s Capital Contributions
except as provided herein.

 

Section 4.08 Interest and Preferential Rights. Except as otherwise provided in
Section 4.02 and Section 4.06, no interest shall accrue on any Capital
Contributions and no Member shall have any preferential rights with respect to
distributions or upon dissolution of Company.

 

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Section 4.09 Guarantees. From time to time, when determined by the Governing
Board to be necessary or appropriate for any debt or capital financing or lease
of Company, a Company-Owned Entity or a Company Facility, the Governing Board
may request that the Members provide a guarantee or other security of such debt
or capital financing or lease pro rata in proportion to the Members’ Ownership
Percentage Interest. No Member shall be obligated to provide any such guarantee
or other security. In the event that any such Member or Members agree to provide
such guarantee or other security as requested by the Governing Board, Company
shall pay to such Member or Members a Fair Market Value fee, as determined by
mutual agreement of Company and the Member or Members providing such guarantee
or other security, as consideration for their provision of such guarantee or
other security.

 

ARTICLE V

ACCOUNTING AND DISTRIBUTIONS

 

Section 5.01 Ownership of Company. Except as otherwise expressly provided in
this Agreement, all economic, voting and other interests in Company shall be
owned and held by THR and Adeptus in accordance with their respective Ownership
Percentage Interests.

 

Section 5.02 Tax Status and Reports.

 

(a)Members agree that Company shall be classified as a partnership for United
States federal tax purposes, and the Members and Company agree that they shall
refrain from making any elections or filing any returns or reports that are
inconsistent with such classification unless and until the Members consent to a
change in the United States tax classification of Company.

 

(b)Any item which is stipulated to be an expense of Company under the terms of
this Agreement or which would be so treated in accordance with GAAP shall be
treated as an expense of Company for all purposes hereunder, whether or not such
item is deductible in computing Net Income for federal income tax purposes.

 

(c)Adeptus is hereby designated as the “Tax Matters Partner” in accordance with
IRC Section 6231(a)(7) and applicable Regulations. Each Member hereby approves
of such designations and agrees to execute, certify, acknowledge, deliver, swear
to, file and record at the appropriate public offices such documents as may be
deemed necessary or appropriate to evidence such approval. Except to the extent
set forth in this Section 5.02,  Adeptus is authorized, at Company’s sole costs
and expense, to represent Company and each Member in connection with all
examinations of Company’s affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Company’s funds for
professional services and costs connected therewith. In connection with any
examination of Company by any tax authorities, Adeptus shall retain on behalf of
Company and at Company’s sole cost and expense a nationally prominent
independent public accounting firm or legal counsel reasonably satisfactory to
THR to represent the interests of Company. Adeptus shall provide each member of
the Governing Board with prompt notice of the initiation of any tax examination
or proceeding and shall further provide each member of the Governing Board with
prompt, reasonable and continuous opportunity to review and provide comment with
respect to the subject matter of each

 

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such examination or proceeding. Adeptus shall have the right to settle any audit
or examination with the consent of the Governing Board or the Members and to
take any and all other actions on behalf of the Members or Company in connection
with any tax audit or examination or judicial review or proceeding to the extent
permitted by applicable law and regulations and in the event of any
administrative or judicial proceeding involving the tax treatment of any item.

 

Notwithstanding the foregoing provisions of Section 5.02 or any other provision
of this Agreement: (a) any material elections under the IRC or the Regulations
or the settlement of any material tax audit or examination shall require the
advance written approval of each of Adeptus and THR; and (b) THR shall, at its
own expense, have the right to participate in, and retain separate
representation for itself with respect to any matter subject to this Section
5.02.  The Governing Board may at any time designate a new Tax Matters Partner;
provided,  however, that only a Member may be designated as the Tax Matters
Partner of Company.

 

Section 5.03 General Allocation Rules. Except as otherwise provided in this
Agreement, all Net Income and Net Losses of Company shall be allocated in a
manner such that the Capital Account of each Member after giving effect to the
allocations set forth in Section 5.04 is, as nearly as possible, equal
(proportionately) to the distributions that would be made pursuant to Section
5.06 if Company were dissolved, its affairs wound up and its assets sold for
cash equal to their Gross Asset Value, all Company liabilities were satisfied
(limited with respect to each non-recourse liability to the Gross Asset Value of
the assets securing such liability) and the net assets of Company were
distributed in accordance with Section 5.06 to the Members immediately after
making such allocation. For federal and state income tax purposes, all
allocations of Net Income and Net Losses shall be made as of the end of each
calendar year.

 

Section 5.04 Overriding Allocation Rules.  Notwithstanding any other provision
herein:

 

(a)Any Member who unexpectedly receives an adjustment, allocation or
distribution described in subparagraphs (4), (5) or (6) of Section
1.704-1(b)(2)(ii)(d) of the Regulations, which adjustment, allocation or
distribution creates or increases a deficit balance in that Member’s adjusted
Capital Account, shall be allocated items of “book” income and gain in an amount
and manner sufficient to eliminate the deficit balance in that Member’s Capital
Account so created or increased as quickly as possible. This provision is
intended to be a “qualified income offset” in accordance with Section
1.704-1(b)(2)(ii)(d) of the Regulations and should be interpreted accordingly.

 

(b)No Net Loss or Company deductions for any Fiscal Year shall be allocated to
any Member to the extent such allocation would cause or increase a deficit
balance in a Member's Capital Account as of the end of a Fiscal Year determined,
solely for this purpose, by (i) crediting the Member's Capital Account with the
amount of any deficit balance in such Capital Account that the Member is
obligated to restore or is treated as obligated to restore pursuant to the
penultimate sentences of Regulations sections 1.704- 2(g)(1) and 1.704-2(i)(5),
and (ii) decreasing the Member’s Capital Account by the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6). The foregoing adjustments to the Members’ Capital
Accounts are

 

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intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

(c)If there is a net decrease in “partnership minimum gain” (within the meaning
of Regulations section 1.704-2(d)) for a Fiscal Year, there shall be allocated
to each Member items of income and gain for such Fiscal Year equal to that
Member's share of the net decrease in partnership minimum gain (within the
meaning of Regulations section 1.704-2(g)(2)), subject to the exceptions set
forth in Regulations section 1.704- 2(0(2), (3) and (5). If the application of
this minimum gain chargeback requirement would cause a distortion in the
economic arrangement among the Members, Company shall request a waiver of the
requirement pursuant to Regulations section 1.704-2(f)(4). This provision is
intended to be a “minimum gain chargeback” provision as described in Regulations
section 1.704-2(f) and shall be interpreted and applied in accordance with such
section.

 

(d)If there is a net decrease in “partner nonrecourse debt minimum gain” (within
the meaning of Regulations section 1.704-2(i)(3)) for a Fiscal Year, there shall
be allocated to each Member with a share of such “partner nonrecourse debt
minimum gain”(determined in accordance with Regulations section 1.704-2(i)(5))
as of the beginning of the Fiscal Year items of income and gain for such Fiscal
Year (and, if necessary, for subsequent Fiscal Years) equal to that Member's
share of the net decrease in partner nonrecourse debt minimum gain, subject to
the exceptions set forth in Regulations section 1.704-2(i)(4). If the
application of this minimum gain chargeback requirement would cause a distortion
in the economic arrangement among the Members, Company shall request a waiver of
the requirement pursuant to Regulations sections L704-2(f)(4) and 1.704-2(i)(4).
This provision is intended to be a “chargeback of partner nonrecourse debt
minimum gain” provision as described in Regulations section 1.704- 2(i)(4) and
shall be interpreted and applied in accordance with such section.

 

(e)Nonrecourse Deductions for any Fiscal Year shall be allocated to the Members
in such ratio as determined by the Governing Board to satisfy the safe harbor
requirements of the Regulations promulgated under Section 704(b) of the Code.
“Nonrecourse Deductions” for this purpose has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Fiscal Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).

 

(f)Any Partner Nonrecourse Deductions for any Allocation Period shall be
specially allocated to the Member who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations Sections
1.704-2(b)(4) and 1.704-2(i). “Partner Nonrecourse Deductions” for this purpose
has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount
of Partner Nonrecourse Deductions for a fiscal year shall be determined in
accordance with the rules of Regulations Section 1.704-2(i)(2).

 

Section 5.05 Other Allocation Rules. Notwithstanding any other provisions of
this Article V, Net Income, Net Loss and any item of income, gain, deduction,
loss, or credit of Company shall be allocated among Members under the following
rules to the extent applicable:

34

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(a)Except as otherwise permitted under Section 514(c)(9) of the IRC and
applicable Regulations, the allocation of items to THR may not result in THR
having a share of the overall income of Company for any Fiscal Year greater than
THR’s share of the overall loss of Company for the Fiscal Year for which THR’s
loss share will be the smallest.  This Section 5.05(a) is intended to satisfy
the “fractions rule” under Section 514(c)(9) of the IRC and it shall be
interpreted in all respects consistently with such rule.

 

(b)Except as the Governing Board otherwise determines after consulting
appropriate tax counsel, all allocations of all items to THR for all Fiscal
Years must be consistent with THR’s being allocated the same distributive share
of each item of income, gain, loss, deduction, credit, and basis, and such share
must remain the same during the entire period in which THR is a Member. This
Section 5.05(b) is intended to prevent Company from having “tax-exempt use
property” within the meaning of Section 168(h) of the IRC, unless the Governing
Board otherwise exercises its prerogative set forth in this Section 5.05(b).

 

Section 5.06 Distributions to Members.

 

(a)At the end of each quarter, the Manager shall distribute any Distributable
Funds in the following priority within thirty (30) days after the end of each
calendar quarter for which it has been determined by Manager that Distributable
Funds exist and should be distributed:

 

(i)First, to repay any loans made to Company by Members and then, only after all
such loans have been paid in full (unless any such payment is a prepayment of
principal and such prepayment is waived in whole or in part by the lending
Members);

 

(ii)Second, notwithstanding any provisions hereof to the contrary, and prior to
any other distributions made to, declared for or set aside for any Member except
as set forth above, to Adeptus in an amount equal to the sum of (A) the
Preferred Distribution for such calendar quarter then ending, plus (B) the
Unpaid Preferred Distribution, if any, which Unpaid Preferred Distribution shall
be cumulative from quarter-to-quarter and year-to-year, as provided herein, less
(C) the Outstanding Advance, if any;

 

(iii)Third, to repay the cash component of the Initial Capital Contribution
(“Cash Contribution”) of each Member, to each Member in equal amounts until
either or both Members’ Cash Contribution is repaid in full, and thereafter, if
necessary, solely to the other Member until its Cash Contribution is repaid in
full; and

 

(iv)Fourth, to the Members in accordance with the Members’ respective Ownership
Percentage Interests.

 

(b)Notwithstanding anything to the contrary contained herein, upon the
dissolution of Company, all distributions to be made to the Members in
connection with

 

35

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

the liquidation of Company shall be made in accordance with Section 5.09;
 provided, however, that prior to any such distributions being paid to the
Members in accordance with Section 5.09 as aforesaid, the Unpaid Preferred
Distribution shall first be paid in full to Adeptus.

 

(c)Notwithstanding anything to the contrary contained herein, at the end of each
month which is not also the end of a calendar quarter, Manager may advance to
Adeptus within thirty (30) days after the end of such month an amount which is
the lesser of (i) * determined by Manager in good faith and (ii) * (the sum of
all such advances for any calendar quarter, the “Outstanding Advance”);
provided,  however, that at the end of each calendar quarter, to the extent that
the Outstanding Advance exceeds the amount of Distributable Funds that would
have been paid to Adeptus in such calendar quarter under Section 5.06(a) hereof
if no advances had been made to Adeptus pursuant to this Section 5.06(c), then
Adeptus shall repay such excess to the Company within thirty (30) days.

 

Section 5.07 Accounting.

 

(a)The books of account of Company shall be kept and maintained at all times at
Company’s and/or Adeptus Parent’s principal office. The books of account shall
be maintained on an accrual basis in accordance with GAAP, consistently applied,
and shall show all items of income and expense.

 

(b)Manager shall cause to be prepared and furnished to each Member within thirty
(30) days from the last day of each month from January through November and
within fifteen (15) days after the end of December of each Fiscal Year, an
unaudited statement reflecting the operations of Company for such month and the
Fiscal Year to date, together with a balance sheet of Company as of the end of
such month and all other information reasonably requested by any Member. Manager
shall, at the expense of the Company, cause the Company’s financial statements
to be audited by a certified public accountant selected by the Manager and
approved by THR, such approval not to be unreasonably withheld, by no later than
ninety (90) days after the end of such Fiscal Year. Manager shall, at the
expense of Company, cause to be prepared all tax returns and statements, if any,
which must be filed on behalf of Company and shall, within one hundred twenty
(120) days after the close of each Fiscal Year, supply to Members all
information necessary for the preparation of Members’ respective federal income
tax returns.

 

(c)Each Member shall have the right, upon at least three (3) business days prior
notice and during normal business hours, to audit, examine and make copies of or
extracts from the books of account of Company at the offices of Company;
provided, however, that such Member shall ensure that it and any proposed
advisers it uses to review such information agree to use the information so
received solely with respect to such Member’s investment in Company and for no
other purpose whatsoever. Such inspection right may be exercised through any
agent or employee of such Member designated by it or by an independent public
accountant designated by such Member.

 

36

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Each Member shall bear all expenses incurred in any examination made by or for
such Member.

 

Section 5.08 Bank Accounts. Funds of Company shall be deposited in a Company
account or accounts established by Company with banking institutions designated
by the Governing Board.

 

Section 5.09 Liquidation. Company shall be dissolved and its affairs shall be
wound up upon (a) the written consent of the Members or (b) as otherwise herein
provided. Upon the dissolution of Company, the Person or Persons approved by the
Governing Board to carry out the winding up of Company (“Liquidating Trustee”)
shall promptly notify the Members of such dissolution. Upon dissolution of
Company, Liquidating Trustee shall immediately commence to wind up Company’s
affairs; provided,  however, that a reasonable time shall be allowed for the
orderly liquidation of the assets of Company and the satisfaction of liabilities
to creditors so as to enable the Members to minimize the normal losses attendant
upon liquidation. Members shall continue to share Net Income and Net Losses
during liquidation in the same proportions, as specified herein, as before
liquidation. Each Member shall be furnished with a statement prepared by
Company’s certified public accountants that shall set forth the assets and
liabilities of Company as of the date of dissolution. The proceeds of
liquidation shall be distributed, as realized, in the following order and
priority:

 

(a)to creditors of Company, including Members who are creditors in connection
with loans made by such Members to Company (to the extent otherwise permitted by
law), in satisfaction of the liabilities of Company (whether by payment or the
making of reasonable provision for payment thereof), other than liabilities for
distributions to Members;

 

(b)to the Members the remaining proceeds of liquidation in accordance with
Section 5.06(a).

 

Section 5.10 Intent of Allocations. Members understand and agree that the
allocation provisions of Section 5.04 (the “Regulatory Allocations”) are
intended to comply with certain requirements of Sections 1.704-1(b) and 1.704-2
of the Regulations. The Regulatory Allocations may not be consistent with the
manner in which the Members intend to allocate Net Income and Net Loss or make
Company distributions. Accordingly, notwithstanding the other provisions of this
Article V, but subject to the Regulatory Allocations, the Governing Board may
reallocate income, gain, deduction and loss as it reasonably determines to be
necessary or appropriate in order to eliminate the effect of the Regulatory
Allocations and thereby to cause the final Capital Account balances of Members
to be in the amounts (or as close thereto as possible) they would have been if
Net Income and Net Loss (and such other items of income, gain, deduction and
loss) had been allocated without reference to the Regulatory Allocations,
including reallocating the taxable income and taxable loss of Company for prior
open years (or items of gross income and deduction of Company for such years)
among Members to the extent it is not possible to achieve such result with
allocations of items of income (including gross income) and deduction for the
current year and future years.

 

37

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Section 5.11 Withholding Taxes. If Company is required to withhold any portion
of any amounts distributed, allocable or otherwise attributable to a Member of
Company by applicable law, Company may withhold such amounts and make such
payments to taxing authorities as are necessary to ensure compliance with such
applicable law. Any funds withheld by reason of this Section 5.11 shall
nonetheless be deemed to have been distributed to such Member in question for
purposes of this Article V and Article VII.  If Company does not withhold from
actual distributions any amounts it was required to withhold by applicable
Regulations, Company may, at its option, (a) require the Member to which the
withholding was credited to reimburse Company for withholding required by such
Regulations, including any interest, penalties or additions thereto; or (b)
reduce any subsequent distributions to such Member by such withholding,
interest, penalties or additions thereto. The obligation of a Member to
reimburse Company for such amounts shall continue after such Member transfers or
liquidates its interest in Company. Each Member agrees to furnish Company with
any representations and forms as shall reasonably be requested by Company to
assist in determining the extent of, and in fulfilling, any withholding
obligations it may have.

 

Section 5.12 Partnership Representative.

 

(a)The Tax Matters Partner shall serve as the designated “Partnership
Representative” within the meaning of Section 6223(a) of the Code in effect for
the first fiscal year beginning after December 31, 2017 and thereafter. If the
Tax Matters Partner is found to be ineligible to serve as Partnership
Representative, the Company shall promptly appoint a qualifying Person to serve
as the Partnership Representative. Such Person shall give prompt notice after
becoming aware thereof to each Member of any and all notices it receives from
the Internal Revenue Service in its capacity as “partnership representative”
concerning the Company (that have not previously been provided by the Internal
Revenue Service to such other Members directly), including any notice of audit,
any notice of action with respect to a revenue agent’s report, any notice of a
thirty (30) day appeal letter and any notice of a deficiency in tax concerning
the Company’s federal income tax return. The Partnership Representative shall
furnish each Member periodically with status reports regarding any negotiations
between the Internal Revenue Service and the Company, and each such Member, if
the Member so requests, may participate in such negotiation. The Partnership
Representative shall not enter into any settlement with any taxing authority
that would have a material adverse effect on a Member without obtaining the
prior written consent of the Member (such consent not to be unreasonably
withheld).

 

(b)The Members agree that the Partnership Representative shall have the right,
after discussion with the tax advisors of the Company, to elect out of the
application of Section 6221(a) (“Elect Out”) of the Code as in effect for its
first fiscal year beginning after December 31, 2017, and for each fiscal year
thereafter, if applicable. If the Elect Out is not available but the Partnership
Representative determines it would be in the best interest of both the Company
and its Members to Elect Out, the Members acknowledge that the Partnership
Representative shall have the right, after discussion with the tax advisors of
the Company, to elect the application of Section 6226 on behalf of the Company
as in effect for its first fiscal year beginning after December 31, 2017, in the
event that it receives a “notice of final partnership adjustment” that

 

38

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would otherwise permit the Internal Revenue Service to collect from the Company
a deficiency of tax, for each relevant year. This acknowledgement applies to
each Member whether or not it owns units in both the reviewed year and the year
of the Internal Revenue Service’s adjustment. If the Partnership Representative
opts to elect for the application of Section 6226 as provided herein, the
Members covenant to take into account and report to the Internal Revenue Service
any adjustment to their items for the reviewed year as notified to them by the
Company in a statement, in the manner provided in Section 6226(b) of the Code as
in effect for the Company’s first fiscal year beginning after December 31, 2017,
whether or not Members own any units in the year of the Company's statement. Any
Member failing to report its share of such adjustments on its tax return for its
taxable year including the date of the Company's statement as described
immediately above shall indemnify and hold harmless the Company against any tax,
interest and penalties collected by the Internal Revenue Service from the
Company as a result of the Member's inaction.

 

ARTICLE VI

TRANSFERS

 

Section 6.01 Transfers Prohibited. No Member may sell, transfer, assign or
otherwise encumber or permit or suffer any encumbrance of all or any part of its
interest in Company (any such transaction hereinafter referred to as a
“Transfer”), except: (a) a Transfer that is approved by Unanimous Board Action,
(b) a Transfer by either THR or Adeptus to one of its Affiliates (which
Affiliate must be fully able to perform hereunder to the same extent and with
the same security as the original Member, and must agree in writing fully to
perform hereunder), or (c) a Transfer by Adeptus to THR or by THR to Adeptus. In
addition, no Transfer of any interest in Company (i) may be made that would
require the prior approval of any regulatory agency, unless such approval has
been duly obtained, or (ii) shall be effective unless and until the transferee
agrees in writing to be bound by this Agreement. Any attempt to effect a
Transfer in violation of this Article VI shall be void. Notwithstanding anything
to the contrary in this Agreement (a) the pledge by Adeptus of any interest in
Company under and pursuant to any credit facilities or related documentation and
the enforcement of such pledge by the credit providers or any agent, assignees
or transferees shall, in each case, be permitted hereunder (including the
transfer of such interests in Company to any Person owned or controlled by or
for the benefit of such credit provider and the subsequent transfer by such
Person to a third party in connection with the exercise of remedies under such
credit facilities and related documentation (with such transferee receiving the
full rights held by the owner of such interests prior to such transfer)), (b)
such credit providers and their respective agents and successors and assigns are
intended third party beneficiaries of, and shall be entitled to enforce the
provisions of, this sentence and (c) this provision shall not be amended,
supplemented, amended and restated or otherwise modified or waived without the
prior written consent of such credit providers or their agents (an “Enforcement
Transfer”). If a THR Purchase Option may be elected because of a THR Purchase
Event under 7.02(a)(iii) and (a)(iv) resulting from an Enforcement Transfer,
then in order for such THR Purchase Option to be effective (notwithstanding
anything to the contrary contained in Section 7.02), THR shall provide a THR
Purchase Notice during the period of thirty (30) days after THR receives notice
of such Enforcement Transfer and a copy of the executed purchase agreement for
such Enforcement Transfer (it being understood that the consummation of such
Enforcement Transfer may be subject to customary conditions set forth in the
purchase

 

39

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

agreement including the expiration of such thirty (30) day period without
limitation THR giving notice of its intent to exercise such Purchase Right);
provided that in the case of Enforcement Transfer that is the transfer of
interests in the Company to a Person owned or controlled by or for the benefit
of the credit provider, then such thirty (30) day period shall include at least
five (5) days after such transfer is actually consummated.

 

ARTICLE VII

TERM AND TERMINATION

 

Section 7.01 Term. Company shall continue in existence for a term beginning on
the date hereof and continuing perpetually, until terminated and liquidated in
accordance with the provisions hereof.

 

Section 7.02 THR Purchase Option. Upon the occurrence of any of the events set
forth in Section 7.02(a) below (the “THR Purchase Events”), THR shall have the
right, but not the obligation, to purchase Adeptus’ Ownership Percentage
Interest for an amount equal to the Appraised Value of such Ownership Percentage
Interest as determined in accordance with Section 7.07 below (the “THR Purchase
Option”), upon the terms and subject to the conditions set forth in this Article
VII.

 

(a)THR Purchase Events.  The following shall constitute THR Purchase Events
under this Agreement:

 

[*]

 

(b)Notice. Upon the occurrence of a THR Purchase Event, Adeptus (or Adeptus’
legal representative) shall give written notice of the THR Purchase Event (the
“THR Purchase Notice”) to THR within ten (10) days after the occurrence of such
THR Purchase Event.

 

(c)Exercise of THR Purchase Option. Following the occurrence of a THR Purchase
Event, THR shall have ninety (90) days after the later of (i) the occurrence of
the THR Purchase Event, or (ii) the date of THR’s receipt of the THR Purchase
Notice in which to give notice of its election to exercise the THR Purchase
Option.

 

(d)Rights Non-Exclusive and Subject to Bankruptcy Matters.

 

(i)The rights of THR under this Section 7.02 shall not be the exclusive remedy
of THR, but shall be in addition to any other rights and remedies available to
THR at law or in equity including, without limitation, the right of THR or
Company to institute suit to collect any amounts owed to THR by Adeptus or to be
compensated for any damages resulting from any breach of this Agreement by
Adeptus.

 

40

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

(ii)In the case of a court ordered sale resulting from a Bankruptcy Event with
respect to Adeptus or any Adeptus Chain Affiliate, the Members intend that THR
will have a THR Purchase Option and Adeptus will not object to or contest any
such court order. All time periods and other provisions included in this
Agreement shall be subordinate to any contrary timelines or requirements
included in any bankruptcy laws, bankruptcy court procedures or any bankruptcy
court order and THR shall have no greater rights than as contemplated by any
such laws, procedures or orders.

 

Section 7.03 Adeptus Purchase Option. Upon the occurrence of any of the events
set forth in Section 7.03(a) (individually, an “Adeptus Purchase Event”),
Adeptus shall have the right, but not the obligation, to purchase THR’s
Ownership Percentage Interest for an amount equal to the Appraised Value of such
Ownership Percentage Interest as determined in accordance with Section 7.07
below (the “Adeptus Purchase Option”), upon the terms and subject to the
conditions set forth in this Article VII.

 

(a)Adeptus Purchase Events. The following shall constitute Adeptus Purchase
Events under this Agreement:

 

[*]

 

(b)Notice. Upon the occurrence of an Adeptus Purchase Event, THR (or THR’s legal
representative) shall give written notice of the Adeptus Purchase Event (the
“Adeptus Purchase Notice”) to Adeptus within ten (10) days after the occurrence
of such Adeptus Purchase Event.

 

(c)Exercise of Adeptus Purchase Option.  Following the occurrence of an Adeptus
Purchase Event, Adeptus shall have sixty (60) days from the later of (i) the
occurrence of the THR Purchase Event, or (ii) the date of Adeptus’ receipt of
the Adeptus Purchase Notice in which to give notice of its election to exercise
the Adeptus Purchase Option.

 

(d)Rights Non-Exclusive and Subject to Bankruptcy Matters.

 

(i)The rights of Adeptus under this Section 7.03 shall not be the exclusive
remedy of Adeptus, but shall be in addition to all other rights and remedies
available to Adeptus at law or in equity including, without limitation, the
right of Adeptus to institute suit to collect any amounts owed to Adeptus by THR
or to be compensated for any damages resulting from any breach of this Agreement
by THR.

 

(ii)In the case of a court ordered sale resulting from a Bankruptcy Event with
respect to THR, the Members intend that Adeptus will have an Adeptus Purchase
Option and THR will not object to or contest any such court order. All time
periods and other provisions included in this Agreement

 

41

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

shall be subordinate to any contrary timelines or requirements included in any
bankruptcy laws, bankruptcy court procedures or any bankruptcy court order and
Adeptus shall have no greater rights than as contemplated by any such laws,
procedures or orders.

 

Section 7.04 THR Put Option. [*]

 

(a)Notice. Upon the occurrence of a THR Put Event, Adeptus (or Adeptus’ legal
representative) shall give written notice of the THR Put Event (the “THR Put
Notice”) to THR within ten (10) days after the occurrence of such THR Put Event.

 

(b)Exercise of THR Put Option. Following the occurrence of a THR Put Event, THR
shall have ninety (90) days after the later of (i) the occurrence of the THR Put
Event, or (ii) the date of THR’s receipt of the THR Put Notice in which to give
notice of its election to exercise the THR Put Option.

 

(c)Rights Non-Exclusive. The rights of THR under this Section 7.04 shall not be
the exclusive remedy of THR, but shall be in addition to all other rights and
remedies available to THR at law or in equity including, without limitation, the
right of THR or Company to institute suit to collect any amounts owed to THR by
Adeptus or to be compensated for any damages resulting from any breach of this
Agreement by Adeptus.

 

Section 7.05 Adeptus Put Option. [*]

 

(a)Notice. Upon the occurrence of an Adeptus Put Event, THR (or THR’s legal
representative) shall give written notice of the Adeptus Put Event (the “Adeptus
Put Notice”) to Adeptus within ten (10) days after the occurrence of such
Adeptus Put Event.

 

(b)Exercise of Adeptus Put Option. Following the occurrence of an Adeptus Put
Event, Adeptus shall have sixty (60) days from the later of (i) the occurrence
of the Adeptus Put Event, or (ii) the date of Adeptus’ receipt of the Adeptus
Put Notice in which to give notice of its election to exercise the Adeptus Put
Option.

 

(c)Rights Non-Exclusive. The rights of Adeptus under this Section 7.05 shall not
be the exclusive remedy of Adeptus, but shall be in addition to all other rights
and remedies available to Adeptus at law or in equity, including without
limitation the right of Adeptus to institute suit to collect any amounts owed to
Adeptus by THR or to be compensated for any damages resulting from any breach of
this Agreement by THR.

 

Section 7.06 Legal and Tax-Exemption Impediment Purchase and Sale Rights.

 

(a)Tax Exemption Put Rights. In the event of a Tax Exemption Impediment that is
not remedied by mutual agreement of the Members in accordance with Section 9.01,

 

42

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subject to the rights of Adeptus pursuant to this Section 7.06(a), THR shall
have the right, but not the obligation, exercisable by written notice to Adeptus
within a period of thirty (30) days after the end of any Tax-Exemption
Impediment Negotiation Period, to cause Adeptus to purchase THR’s Ownership
Percentage Interest for an amount equal to the Appraised Value of such Ownership
Percentage Interest as determined in accordance with Section 7.07 below (the
“THR Put Right”).

 

(b)Legal Impediment Put/Call Rights. In the event of a Legal Impediment (that is
not a Tax-Exemption Impediment) that is not remedied by mutual agreement of the
Members in accordance with Section 9.02, each Member (“Initiating Member”) may,
within a period of thirty (30) days after the end of any Legal Impediment
Negotiation Period, initiate the put-call provisions of this Section 7.06(b) by
giving written notice (the “Put-Call Notice”) of such election to the other
Member (“Offeree Member”), which notice shall include the proposed price per
Ownership Percentage Interest (the “Put-Call Purchase Price”) at which
Initiating Member is willing to do both of the following: (i) sell all of the
Ownership Percentage Interests it owns to Offeree Member, or (ii) purchase all
of the Ownership Percentage Interests owned by Offeree Member. Offeree Member
shall have the option, exercisable within thirty (30) days after the receipt of
the Offeree Member’s Put-Call Notice, to give written notice (the “Exercise
Notice”) to Initiating Member of whether Offeree Member elects to (i) purchase
all of the Ownership Percentage Interests of Initiating Member, or (ii) have
Initiating Member purchase all of the Ownership Percentage Interests that
Offeree Member owns, in each case, for the Put-Call Purchase Price. If an
Exercise Notice is not duly given by Offeree Member prior to the end of the
thirty (30) day period referred to above, then, on such thirtieth (30th) day,
Offeree Member shall be deemed to have duly given an Exercise Notice electing to
have Initiating Member purchase all of the Ownership Percentage Interests owned
by Offeree Member at the Put-Call Purchase Price. Following the election or
deemed election of Offeree Member, Purchasing Member and Selling Member shall
take all actions reasonably necessary to cause the Closing of the purchase and
sale of the Selling Member’s Ownership Percentage Interests to occur upon the
terms and subject to the conditions set forth in Sections 7.07(c)-(e) below.

 

Section 7.07 Purchase Price.

 

(a)If THR exercises the THR Purchase Option pursuant to Section 7.02, the THR
Put Option pursuant to Section 7.04,  or the THR Put Right pursuant to
Section 7.06(a), or Adeptus exercises the Adeptus Purchase Option pursuant to
Section 7.03,  or the Adeptus Put Option pursuant to Section 7.05, the Member
acquiring the Ownership Percentage Interest of the other Member (“Purchasing
Member”) and the Member selling its Ownership Percentage Interest to the
Purchasing Member (“Selling Member”) shall meet and confer in good faith to
attempt to mutually agree upon a Fair Market Value.

 

(b)In the event the Members are unable to mutually agree upon a Fair Market
Value purchase price within twenty (20) business days after the exercise of the
purchase/put rights pursuant to this Article VII, as applicable, the purchase
price for such

 

43

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Ownership Percentage Interest shall be the Appraised Value of such Ownership
Percentage Interest as determined in accordance with Section 7.07(c).

 

(c)In order to determine the Appraised Value for purposes of subsection (b)
above, the Purchasing Member and Selling Member shall each designate an
appraiser who shall be a member in good standing of the American Society of
Appraisers and who shall have expertise in valuing health care businesses or
other qualified expert in health care business valuations (“First and Second
Appraisers”) by giving the other written notice thereof. If either party does
not so designate an appraiser with the aforementioned qualifications within
fifteen (15) days after a written request to do so is delivered to such party,
then the appointment of the First and/or Second Appraiser (as the case may be)
shall be made in the same manner as is hereinafter provided for the appointment
of a third appraiser, who shall have the same qualifications as referenced
herein (“Third Appraiser”) in a case where the First and Second Appraisers and
the parties themselves are unable to agree upon the Third Appraiser. The First
and Second Appraisers so designated or appointed shall meet within ten (10) days
after the Second Appraiser is appointed and, if within sixty (60) days after the
Second Appraiser is appointed the First and Second Appraisers do not agree upon
the appraised value to within a range of the higher appraised value being no
more than 10% greater than the lower appraised value (in which case the average
of the appraised values determined by the First and Second Appraiser shall be
the binding appraised value), they shall themselves appoint a Third Appraiser;
and in the event of their being unable to agree upon such appointment within ten
(10) days after the end of said sixty (60) day period, the Third Appraiser shall
be selected by the parties themselves if they can agree thereon within a further
period of fifteen (15) days. If the parties do not so agree, then either party,
on behalf of both, may request such appointment by the office of the American
Arbitration Association located nearest to Company’s principal office. In the
event of failure, refusal or inability of any appraiser to act, a new appraiser
with the aforesaid qualifications shall be appointed in his stead, which
appointment shall be made in the same manner as hereinbefore provided for the
appointment of the appraiser who fails, refuses or is unable to act. Each party
shall pay the fees and expenses of the original appraiser appointed by such
party or in whose stead such appraiser was appointed, and the fees and expenses
of the Third Appraiser shall be borne one-half by Selling Member and one-half by
Purchasing Member. The appraisers shall endeavor to reach their decision within
sixty (60) days after the appointment of the Third Appraiser; however, absent an
agreement the average of the appraised values determined by the First, Second
and Third Appraiser shall be the binding appraised value. After reaching their
decision, the appraisers shall give written notice thereof to the Members.

 

(d)Payment Terms; Other Terms. Selling Member shall be paid as determined by
Purchasing Member, at least fifty percent (50%) of the purchase price (net after
reduction for any obligations owed by Selling Member to Company), in cash and
the balance by non-negotiable promissory note by Purchasing Member to Selling
Member payable in five (5) approximately equal annual installments of principal
commencing twelve (12) months after the closing, together with interest at a
rate equal to the Prime Rate as of the date of the promissory note plus three
(3) percentage points provided that the entire purchase price will be payable in
cash unless the Purchasing

 

44

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Member is able to provide security for the promissory note in a form acceptable
to the Selling Member. No payment other than those specifically provided for
herein shall be due or payable with respect to the Ownership Percentage Interest
of Selling Member. Any debt due by Company or Purchasing Member to Selling
Member shall be payable according to its terms. The purchase and sale shall be
on terms substantially the same as are customary in similar transactions in
Texas and/or the nearest comparable jurisdiction.

 

(e)Timing of Closing. The closing of the purchase of Selling Member’s Ownership
Percentage Interest pursuant to this Article VII shall be held at the principal
office of Company within sixty (60) days following the determination of the
Appraised Value. At the closing, Purchasing Member shall pay, upon the terms
specified herein, the Appraised Value of such Ownership Percentage Interest to
Selling Member, after agreeing upon appropriate closing conditions.

 

(f)Guarantees/Transfer of Facility Leases. In the event THR is the Purchasing
Member, Adeptus shall make reasonable efforts to transfer and assign to Company
(or cause to be transferred and assigned to Company) any real property lease
and/or financing arrangements to which Adeptus or any Affiliate of Adeptus is a
party with respect to any Company Facility, and THR shall accept and assume any
guarantee and other obligations of Adeptus or any Affiliate of Adeptus under
such real property leases and/or financing arrangements. In all events, (i) the
Purchasing Member shall exercise their commercially reasonable efforts in good
faith to obtain the release of the Selling Member or Affiliate of Selling Member
from any guarantees provided by such Selling Member or Affiliate of Selling
Member for the benefit of Company or any Company-Owned Entity, and (ii) if the
Purchasing Member is unable to obtain the release of the Selling Member or
Affiliate of Selling Member, the Purchasing Member shall indemnify the Selling
Member or Affiliate of Selling Member for any loss, damage or claims arising
from any of the Selling Member’s or Affiliate of Selling Member’s ongoing
guarantees, contingent on fulfillment by the Selling Member of the other
obligations under the sale/purchase agreement.

 

(g)Transition of Company and Member Cooperation. A Selling Member shall
cooperate with regard to the change of ownership to assure, to the extent
reasonably feasible, that licenses, provider numbers, contracts (including
vendor and payor) and other necessary permits, registrations, etc. remain viable
following the change of ownership. Further, a Selling Member shall indemnify
Company and Purchasing Member, in proportion to its Ownership Percent Interest,
for any loss, damage or claim arising out of any Recapture Claim prior to the
closing of the purchase of Selling Member’s Ownership Percentage Interest.

 

Section 7.08 Operations of Company Pending Purchase.

 

(a)If the interest of one (1) Member is purchased pursuant to Article VII,
during the period beginning on the date of notice of termination and ending with
the closing of the purchase of Selling Member’s interests, the business and
operations of Company shall be conducted by Purchasing Member.

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

(b)In the event of a purchase of all of any Member’s interest in Company, (i)
Purchasing Member shall succeed to Selling Member’s right to appoint members of
the Governing Board pursuant to Section 3.01(b)(i), and (ii) Section 5.01 shall
be automatically amended to reflect the revised Ownership Percentage Interests
of the Members.

 

(c)Except as otherwise expressly set forth in this Agreement, the resignation,
bankruptcy or dissolution of a Member or the occurrence of any other event which
terminates the continued membership of a Member in Company shall not cause a
dissolution of Company and Company shall continue notwithstanding any such event
or occurrence.

 

Section 7.09 Winding Up Affairs on Dissolution. Company shall be dissolved and
its affairs wound up only upon the mutual agreement of the Members. Upon
dissolution of Company, Members or other persons required or permitted by law to
carry out the winding up of the affairs of Company shall (a) promptly notify all
Members of such dissolution, (b) wind up the affairs of Company, (c) prepare and
file all instruments or documents required by law to be filed to reflect the
dissolution of Company, and (d) after collecting the debts and obligations owed
to Company and after paying or providing for the payment of all liabilities and
obligations of Company, distribute the assets of Company in accordance with
Section 5.09.

 

Section 7.10 Waiver of Right to Partition and Decree of Dissolution. As a
material inducement to each Member to execute this Agreement, each Member
covenants and represents to the other Member that, during the period beginning
on the date of this Agreement, and as long as such Member or its heirs,
representatives, successors, transferees or assigns holds an Ownership
Percentage Interest, neither it nor its heirs, representatives, successors,
transferees or assigns, will attempt to make any partition whatever of the
assets of Company or any interest therein whether now owned or hereafter
acquired, and such Member waives all rights of partition provided by statute or
principles of law or equity, including partition in kind or partition by sale.
Members agree that irreparable damage would be done to the goodwill and
reputation of Company if any Member should bring an action in a court to
dissolve Company. Members agree that the Act and this Agreement provide fair and
just provision for payment and liquidation of the interest of any Member in
Company, and fair and just provision to prevent a Member from selling or
otherwise alienating its interest in Company. Accordingly, each Member hereby
waives and renounces its right to such a court decree of dissolution or to seek
the appointment by court of a liquidator or receiver for Company.

 

ARTICLE VIII

NON-COMPETITION COVENANTS

 

Section 8.01 Covenants of Adeptus. [*]

 

Section 8.02 Covenants of THR. [*]

 

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Section 8.03 Exceptions to Restrictive Covenants. Anything herein to the
contrary notwithstanding, the restrictions in Section 8.01 and Section
8.02 shall not apply to:

 

(a)any interest in a Competing Freestanding ER Facility that becomes associated
with a Member or any of its respective Affiliates as a result of a merger,
reorganization, joint operating agreement or other corporate relationship of the
Member as a whole with a third party (and excluding a specific acquisition of an
interest in such a Competing Freestanding ER Facility) after the Effective Date
of this Agreement where the third party has, as of the date of such transaction,
an interest in such Competing Freestanding ER Facility, provided that such
Member or such Member’s Affiliate, as applicable, shall use commercially
reasonable efforts to cause each such Competing Freestanding ER Facility (other
than one owned or operated by a nonprofit hospital acquired by or controlled by
THR provided that Adeptus is given a right of first refusal to manage such
Competing Freestanding ER Facility) to be offered to Company within ninety (90)
days of the effective date of such merger, reorganization or other corporate
relationship at the greater of the effective acquisition cost or the fair market
valuation of such Competing Freestanding ER Facility, and Company shall have the
right to purchase such facility from such Member or such Member’s Affiliate, as
applicable, for cash by accepting such offer within ninety (90) days after
written notice of the offer is given to Company;

 

(b)any interest in a Competing Freestanding ER Facility acquired by a Member or
such Member’s Affiliate, as applicable, after such interest has been offered as
set forth in Section 8.03(a) to Company and the representatives of the other
Member on the Governing Board do not approve the investment by Company in such
Competing Freestanding ER Facility within ninety (90) days after such interest
was offered to Company; or

 

(c)THR’s express written exceptions as set forth on Schedule 8.03(c) attached
hereto and made a part hereof.

 

Section 8.04 Remedy for Breach. If a Member or any of its Affiliates violates
such Member’s covenant set forth in Section 8.01 or Section 8.02 above, and such
violation is not cured within forty-five (45) days after notice is delivered
from the non-breaching Member to the breaching Member of such violation (or, if
the breaching Member makes diligent efforts to cure within forty-five (45) days
after notice is provided, then ninety (90) days after notice is delivered
without cure), the non-breaching Member shall be entitled to purchase the
defaulting Member’s interest in Company for a purchase price equal to the
defaulting Member’s capital account balance in Company as of the end of the
calendar month immediately preceding the date of purchase. Such purchase of the
defaulting Member’s interest in Company shall be consummated in accordance with
the procedures set forth in Section 7.07. Nothing herein shall limit the
availability of injunctive relief to prevent or enjoin any breach of this
Article VIII or any Member’s liability for monetary damages resulting from any
breach by such Member or its Affiliates of its obligations under this Article
VIII.

 

Section 8.05 Enforceability of Covenants. If any provision of this Article
VIII is declared unenforceable in any judicial proceeding due to an unreasonable
duration or covering

 

47

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too large a geographic area, then such provision shall still be enforceable for
such maximum period of time and within such geographic area as will make such
provision enforceable.

 

ARTICLE IX

JEOPARDY

 

Section 9.01 Tax-Exemption Impediment. If, upon THR’s receipt of a written
opinion from its tax advisor or legal counsel, THR identifies a Tax-Exemption
Impediment, then THR shall notify Adeptus in writing of the provision or action
which forms the basis for its concern. Upon Adeptus’ receipt of a notice from
THR pursuant to Section 11.01,  Members shall meet and confer in good faith as
soon as reasonably practicable after an actual or potential Tax- Exemption
Impediment is identified in order to discuss the reasonable alternatives and
solutions to resolve such Tax-Exemption Impediment in a manner that will (a)
allow THR and its Affiliates to retain their respective federal, state or local
tax-exempt status; (b) ensure that THR’s distributions from Company are not
subject to unrelated business income tax under IRC §511(a); and (c) allow THR
and its Affiliates to maintain compliance with requirements for and issue tax-
exempt bonds, certificates of participation or other tax-exempt financial
obligations. The Members shall negotiate in good faith with respect to
alternatives and solutions to resolve such Tax-Exemption Impediment, including
any modifications or amendments to this Agreement and/or the Related Party
Transactions that may be necessary or appropriate to resolve such Tax- Exemption
Impediment, and Adeptus will agree to any reasonable modifications or amendments
to this Agreement and/or the Related Party Transactions proposed by THR, and
such modifications or amendments shall be deemed reasonable if they (a) are
narrowly construed to remedy or eliminate only the Tax-Exemption Impediment at
issue and do not impair or restrict the rights of Adeptus and/or its Affiliates
under this Agreement or any Related Party Transaction any more than reasonably
necessary to remedy or eliminate such Tax-Exemption Impediment; (b) do not
involve any change to Ownership Percentage Interest of Adeptus, or the rights of
Adeptus with respect to the capital, profits, losses, distributions or
allocations of Company; and (c) do not involve any material change to the rights
of Adeptus with respect to the governance of Company. In the event that the
Members are unable to resolve a Tax-Exemption Impediment in accordance with this
Section 9.01 within sixty (60) days after an actual or potential Tax- Exemption
Impediment is identified (the “Tax-Exemption Impediment Negotiation Period”),
then, following the end of the Tax-Exemption Impediment Negotiation Period, THR
shall thereafter be entitled to exercise the THR Put Right pursuant to Section
7.06(a).

 

Section 9.02 Other Non-Compliance. In the event of (a) the adoption, amendment
or other modification of any federal, state or local law, regulation or
ordinance, (b) an interpretation of such a law, regulation or ordinance by a
governmental agency or court that outside counsel for THR opines in writing is
likely to be generally applicable for some significant period of time, or (c)
any recognized agency, authority or association in the medical or hospital
fields, or any federal, state or local government, agency, authority, commission
or other governmental body, notifies Adeptus, THR or their respective Affiliates
that the existence or operation of any term, covenant, condition or provision of
this Agreement or any Related Party Transaction, or the manner in which Company
or any Company Facility is operated (i) jeopardizes the licensure of any Company
Facility or any hospital or other facility owned or operated by THR, the
participation of any hospital or other facility owned or operated by THR (other
than a Company Facility) in Medicare or Medicaid or other governmental program,
the accreditation of any

 

48

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Company Facility or any hospital or other facility owned or operated by THR by
the Joint Commission on Accreditation of Healthcare Organizations or any other
state or nationally recognized organization, (ii) is in violation of any
statute, regulation or ordinance, or (iii) is otherwise illegal or unethical
conduct (each a “Legal Impediment”), then in any such event the Members shall
meet and confer in good faith as soon as reasonably practicable in order to
discuss the reasonable alternatives and solutions to resolve such Legal
Impediment. For the avoidance of doubt, neither a Company Facility’s failure to
obtain initial licensure nor the existence of a survey reflecting deficiencies
which can be responded to with a plan of correction shall be deemed a Legal
Impediment. The Members shall negotiate in good faith with respect to
alternatives and solutions to resolve such Legal Impediment, including any
modifications or amendments to this Agreement and/or the Related Party
Transactions that may be necessary or appropriate to resolve such Legal
Impediment, and each Member will agree to any reasonable modifications or
amendments to this Agreement and/or the Related Party Transactions proposed by
the other Member, and such modifications or amendments shall be deemed
reasonable if they (A) are narrowly construed to remedy or eliminate only the
Legal Impediment at issue and do not impair or restrict the rights of the other
Member and/or its Affiliates under this Agreement or any Related Party
Transaction any more than reasonably necessary to remedy or eliminate such Legal
Impediment; (B) do not involve any change to Ownership Percentage Interest of
either Member, or the rights of either Member with respect to the capital,
profits, losses, distributions or allocations of Company; and (C) do not involve
any material change to the rights of either Member with respect to the
governance of Company. In the event that the Members are unable to resolve a
Legal Impediment in accordance with this Section 9.02 within sixty (60) days
after an actual or potential Legal Impediment is identified (the “Legal
Impediment Negotiation Period”), then following the end of the Legal Impediment
Negotiation Period, each Member shall thereafter be entitled to exercise the
Legal Impediment Put/Call Right pursuant to Section 7.06(b).

 

ARTICLE X

MEDICAL STAFF

 

Section 10.01 General. The Governing Board shall appoint one or more organized
medical staffs (referred to herein collectively as the “Medical Staff”) for
Company and Company Facilities to operate in accordance with this Agreement and
the bylaws of the Medical Staff (the “Medical Staff Bylaws”) approved by the
Governing Board. The Medical Staff shall operate as an integral part of Company
and Company Facilities and, through its committees and officers, shall be
responsible for and accountable to the Governing Board for the quality of all
medical care provided to patients, the ethical conduct and professional practice
of its members, and the discharge of those duties and responsibilities delegated
to it by the Governing Board from time to time.

 

Section 10.02 Membership. The Governing Board shall consider the Medical Staff’s
recommendations, the needs of Company and Company Facilities, and the community,
and such additional criteria as are set forth in the Medical Staff Bylaws in
acting on applications for appointment to the Medical Staff. In granting and
defining the scope of clinical privileges to be exercised by each practitioner,
the Governing Board shall consider the Medical Staff’s recommendations, the
supporting information on which they are based, and such criteria as are set
forth in the Medical Staff Bylaws. No applicant shall be denied membership on
the basis of

 

49

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sex, race, creed, religion, color, or national origin, or on the basis of any
criteria unrelated to the delivery of quality patient care at Company
Facilities, to professional qualifications, compliance with law, or to the
purposes, needs and capabilities of Company or Company Facilities.

 

Section 10.03 Delegation of Authority to Medical Staff. The Governing Board
shall delegate to the Medical Staff reasonable authority for ensuring the
provision of an appropriate quality of professional care to the patients of
Company and Company Facilities. The Medical Staff shall conduct an ongoing
review and appraisal of the quality of professional care rendered in Company
Facilities and shall report such activities and their results to the Governing
Board.

 

(a)The Governing Board, in the exercise of its overall responsibility for the
business and affairs of Company, shall delegate to the Medical Staff the
responsibility and authority to process, investigate and evaluate all matters
relating to Medical Staff membership, clinical privileges and corrective action,
and shall require that the Medical Staff adopt and forward to the Governing
Board specific written recommendations with appropriate supporting documentation
that will allow the Governing Board to take informed action on any matter
recommended to it by the Medical Staff.

 

(b)Final action on all matters relating to Medical Staff membership, clinical
privileges and corrective action shall be taken by the Governing Board after
considering the Medical Staff recommendations; provided,  however, that the
Governing Board shall act in any event if the Medical Staff fails to adopt and
submit any such recommendation within the time periods set forth in the Medical
Staff Bylaws. Such Governing 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
recommendations.

 

Section 10.04 Rescission of Authority. The Governing Board shall have the right
to rescind at any time the delegation of any authority or procedures delegated
to the Medical Staff by the Medical Staff Bylaws or otherwise granted by or
pursuant to this Article X.

 

ARTICLE XI

GENERAL

 

Section 11.01 Notices. All notices, demands or requests provided for or
permitted to be given pursuant to this Agreement must be in writing and shall be
deemed to have been properly given or served by personal delivery, by depositing
the same in the United States mail, postpaid and registered or certified with
return receipt requested, by sending the same by a nationally recognized
overnight delivery service, or by electronic mail in "portable document format"
(".PDF") as follows:

 

If to THR:

Texas Health Resources

 

612 East Lamar Blvd., Suite 500

 

Arlington, Texas 76011

 

Attn: Krystal Mims

 

Email: KrystalMims@texashealth.org

 

 

with a copy to:

Texas Health Resources

 

50

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

 

 

 

612 East Lamar Blvd., Suite 900

 

Arlington, Texas 76011

 

Attn: Kenneth Kramer, General Counsel

 

Email: KennethKramer@texashealth.org

 

 

If to Adeptus:

Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn: Donald Adam, Chief Corporate Development Officer

 

Email: don.adam@adhc.com

 

 

with a copy to:

Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn: Timothy Mueller, General Counsel

 

Email: tim.mueller@adhc.com

 

All notices, demands and requests shall be effective and deemed served three (3)
days after being deposited in the United States mail or on the day after being
deposited with such overnight delivery service or being sent by electronic mail.

 

Section 11.02 Insurance. Company shall carry and maintain in force insurance
coverages for the activities of Company and Company-Owned Entities, and their
respective members, officers, directors, managers, general partners, employees
and agents to the extent required by applicable law, including the following:

 

(a)Commercial general liability insurance with a limit of not less $[*] per
occurrence and $[*] annual aggregate;

 

(b)Professional (malpractice) insurance with limits of liability of not less
than

$[*] per occurrence and $[*] annual aggregate; provided,  however, that all acts
or omissions during the term of this Agreement shall be “continually covered” on
an “occurrences” or equivalent basis by insurance. Members understand that the
provisions of this Section may necessitate that Company purchase, for the
benefit and at the cost of Company, “tail insurance” if its coverage lapses or
“nose insurance” and/or “tail insurance” if Company changes insurance carriers,
even after this Agreement has terminated;

 

(c)Business automobile liability insurance covering hired, owned and non- owned
vehicles with a per occurrence limit of not less than $[*];

 

(d)Workers’ compensation insurance and other insurance as required by statute in
the state in which the work will be performed; coverage will include employer’s
liability with a limit of not less than $[*];

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

(e)Employment practices liability insurance with a limit of $[*];

 

(f)Excess or umbrella liability providing a limit of $[*] above the commercial
general liability, auto liability, employer’s liability and professional
liability limits above;

 

(g)Directors and officers liability and reimbursement insurance (including but
not limited to coverage for general partners and managers and coverage for
anti-trust) with a limit of not less than $[*] per occurrence;

 

(h)Property insurance in an amount not less than the full replacement value of
the property of Company; and

 

(i)Network Security Liability and Privacy Liability including expenses
associated with data breach and notification costs, credit monitoring, call
center expenses, public relations expenses and legal costs, in an amount not
less than $[*] per occurrence and $[*] annual aggregate.

 

All insurance shall cover THR and Adeptus as additional insureds. The premiums
for such insurance shall be at a cost and expense to be borne by Company.

 

Section 11.03 Indemnification by Adeptus. Adeptus shall defend, indemnify, save
and hold harmless both (i) THR, its shareholders, members, directors, officers,
employees, agents and direct or indirect parents, Affiliates or subsidiary
entities (the “THR Indemnified Parties”), and (ii) Company, from and against any
and all claims, suits, disputes, judgments, losses, damages, liabilities, fines,
penalties, costs or expenses including costs of legal counsel and other costs of
defense (“Losses”), joint or several, which may be asserted against or incurred
by any THR Indemnified Party or Company related to Company Facilities occurring
prior to the Effective Date.

 

Section 11.04 Governing Laws and Venue. The Parties agree that this Agreement
shall be construed and enforced in accordance with the laws of the State of
Texas without regard to principles of conflicts of laws thereof, and Tarrant
County and the State of Texas shall be the venue for any litigation, mediation,
or other proceeding as between the parties that may be brought, or arise out of,
in connection with or by reason of this Agreement. The provisions of this
Section shall survive the expiration or other termination of this Agreement.

 

Section 11.05 Waiver of Trial by Jury. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE
RELATIONSHIP OF THE PARTIES HERETO BE TRIED BY A JURY. THIS WAIVER EXTENDS TO
ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE INCLUDING,
BUT NOT LIMITED TO, THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN,
COMMON LAW OR ANY APPLICABLE STATUTE OR REGULATIONS.

 

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EACH PARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS
RIGH TO DEMAND TRIAL BY JURY.

 

Section 11.06 Entire Agreement. This Agreement, together with the Management
Agreement, the Support Agreement, and the THR Trademark License Agreement
contains the entire agreement among the Members relative to the formation and
management of Company and shall replace and supersede all prior understandings
between and among the Members and Company as to the subject matter hereof.

 

Section 11.07 Amendments. This Agreement may only be amended by the written
approval of all Members.

 

Section 11.08 Waiver. No consent or waiver, express or implied, by Company or by
any Member to or of any breach or default by another Member in the performance
of its obligations hereunder shall be deemed or construed to be a consent or
waiver to or of any other breach or default in the performance by such other
Member of the same or any other obligations of such Member hereunder. Failure on
the part of Company or any Member to complain of any act or failure to act of
another Member or to declare the other Member in default, irrespective of how
long such failure continues, shall not constitute a waiver by Company or any
Member of its rights hereunder except to the extent that an unreasonable delay
after actual notice of the material facts causes actual prejudice to the other
Party.

 

Section 11.09 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance are held or agreed to be
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law,
so long as the essential benefits expected from this Agreement remain
enforceable.

 

Section 11.10 Dispute Resolution.

 

(a)In the event of a dispute under this Agreement or any Related Party
Transaction (including, without limitation, the Management Agreement, except in
the case of a dispute addressed by Section 5.2 of the Management Agreement),
prior to mediation or litigation, either Member may, by giving notice to the
other Member, convene a meeting to resolve the dispute between the chief
executive officers of THR and Adeptus Parent. If said chief executive officers
cannot resolve the dispute within thirty (30) days after such request for a
meeting is given, the matter may or shall be submitted to mediation, in
accordance with the procedures outlined below.

 

(b)The Members agree that, prior to filing a suit in court relating to this
Agreement, they will make a good faith attempt to resolve their differences by
non- binding mediation under the auspices of the American Health Lawyers
Association (“AHLA”). The Members will jointly notify AHLA of their intent to
use the mediation service, select a mediator from the AHLA roster, and mediate
pursuant to the terms of the AHLA’s Agreement to Mediate. The mediator may be a
Person who has provided services in the past (other than as an employee) to
either Member. If Adeptus and THR

 

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are unable to agree on a mediator, each of Adeptus and THR shall select a
mediator from the from the AHLA roster, which mediators in turn shall jointly
select a third mediator, which third mediator shall solely conduct the
mediation. Adeptus and THR shall in good faith mediate the dispute for thirty
(30) days. The thirty (30) day period may be extended by agreement of Adeptus
and THR.

 

(c)At all times during the dispute resolution process, Members agree to use
reasonable efforts to continue to operate Company’s business in the ordinary
course.

 

(d)All costs of mediation (exclusive of each parties’ legal fees and initial
selection of mediator in the event three mediators are chosen, which shall be
borne by the party that incurs them), shall be evenly divided and borne between
Adeptus and THR.

 

(e)This Section 11.10 shall not apply to any claims for injunctive relief
arising from or relating to Article VIII, as to which each Member shall retain
its rights to seek judicial relief.

 

Section 11.11 Attorneys’ Fees. In any action at law or equity to enforce any of
the provisions or rights under this Agreement, the substantially unsuccessful
party to such litigation, as determined by the court in a final judgment or
decree, shall pay the substantially successful party or parties all costs,
expenses and reasonable attorneys’ fees incurred therein by such party or
parties (including, without limitation, such costs, expenses and fees on any
appeals), and if such successful party shall recover judgment in any action or
proceeding, such costs, expenses and attorneys’ fees shall be included in and as
part of such award or judgment.

 

Section 11.12 Binding Agreement. Subject to the restrictions on transfers set
forth herein, this Agreement shall inure to the benefit of and be binding upon
the Members and their respective successors and permitted assigns. Whenever in
this instrument a reference to any party or Member is made, such reference shall
be deemed to include a reference to the Affiliates, successors and permitted
assigns of such party or Member.

 

Section 11.13 Assignment. No Member may assign this Agreement to any third party
except as permitted by Article VI of this Agreement in connection with a
permitted Transfer.

 

Section 11.14 Counterparts. This Agreement may be signed in any number of
counterparts and the signature or signatures of the undersigned may be delivered
by electronic mail in “portable document format” (“.PDF”), or by any other
electronic means intended to preserve the original graphic and pictorial
appearance of a document (each of which shall be deemed an original) and which
shall together constitute one and the same instrument.

 

Section 11.15 Interpretation of Agreement. The parties hereto acknowledge and
agree that this Agreement has been negotiated at arm’s length and between
parties equally sophisticated and knowledgeable in the matters dealt with in
this Agreement. Accordingly, any rule of law or legal decision that would
require interpretation of any ambiguities in this Agreement against the party
that has drafted it is not applicable and is waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the intent of
the parties as set forth in this Agreement.

 

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Section 11.16 Confidentiality, Trade Secrets. To ensure the protection of trade
secret and other business related confidential information belonging to THR and
Adeptus, THR and Adeptus shall perform all of the obligations and shall be
entitled to all of the rights set forth in Exhibit C attached hereto (the
“Confidentiality and Trade Secret Rights”).

 

Remainder of page intentionally left blank; signature page follows.

 

 

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IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first set forth above.

 

 

 

 

 

 

    

THR:

 

 

 

 

 

TEXAS HEALTH RESOURCES

 

 

 

 

 

 

 

 

By:

/s/ Barclay E. Berdan

 

 

Name: Barclay E. Berdan, FACHE

 

 

Its: Chief Executive Officer

 

 

 

 

 

 

 

 

ADEPTUS:

 

 

 

 

 

ADPT DFW HOLDINGS LLC

 

 

 

 

 

 

 

 

By:

/s/ Graham Cherrington

 

 

Name: Graham Cherrington

 

 

Its: President and Chief Operating Officer

 

 

 

Signature Page to Operating Agreement

--------------------------------------------------------------------------------

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Exhibit A

 

Initial Strategy Plan

 

The Members hereby acknowledge (i) their commitment to establish Company
Facilities outlined below in accordance with the terms of the Operating
Agreement, and (ii) that the terms of this initial strategy plan (this “Initial
Strategy Plan”) are the Members’ estimated projections for future Company
Facilities. All terms used in this Plan but not otherwise defined shall have the
meanings ascribed to them in the Operating Agreement of FTH DFW PARTNERS LLC.

 

Company Facilities

 

Company shall own and operate the Company Facilities. The Company Facilities
includes the [*] Freestanding ER Facilities and one Hospital Facility (First
Texas Hospital located in Carrollton, Texas) set forth below, with facilities
that are open prior to the Effective Date “bolded” and the anticipated opening
dates set forth in parentheticals for facilities not yet operational.

 

 

 

 

1.   Allen-Southeast

Suite 50

14. Lewisville

1836 E Bethany Dr.

Hickory Creek, TX

1596 W Main St.

Allen, TX 75002

75065

Lewisville, TX

2.   Arlington-Little Road

8.   Flower Mound

75067

4747 Little Road

2650 Flower

15. Little Elm

Arlington, TX

Mound Rd.

2800 Little Elm

76017

Flower Mound, TX

Pkwy.

3.   Arlington-Matlock

75028

Little Elm, TX

8020 Matlock Rd.

9.   Frisco-Eldorado Pkwy.

75068

Arlington, TX

5600 Eldorado

16. Mansfield

76002

Parkway

995 Walnut Creek

4.   Beach Western

Frisco, TX 75033

Dr.

Commons

10. Frisco-Preston Road

Mansfield, TX

4551 Western

5245 Preston Rd.

76063

Center Blvd.

Frisco, TX 75034

17. McKinney, TX

Fort Worth, TX

11. Frisco-Hwy 121

5000 W Eldorado

76137

16300 SH 121

Pkwy.

5.   Cedar Hill

Frisco, TX 75035

McKinney, TX

850 Hwy 67 N.

(9 room)

75070

Cedar Hill, TX

12. Garland-Shiloh

18. Mesquite

75104

7050 N Shiloh Rd.

3400 Gus

6.   Colleyville

Garland, TX 75044

Thomasson Rd.

5000 SH 121

13. Highland Village

Mesquite, TX

Colleyville, TX

3160 Justin Road

75150

76034

Highland Village,

19. Murphy

7.   Corinth

TX

211 E FM 544, Ste.

4600 FM2181,

75077

 

 

 

--------------------------------------------------------------------------------

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

401

Fort Worth, TX

(Under

Murphy, TX 75094

76137

Construction,

20. North Dallas Tollway

26. Wylie

Tentative Open

4535 Frankford Rd.

508 Hwy 78 South

05/16; 7-room)

Dallas, TX

Wylie, TX 75098

31. Mesquite, TX

21. North Ft. Worth

27. Haslet

1745 N. Beltline

2710 Western

13172 NW

Rd.

Center Blvd.

Highway 287

Mesquite, TX

Fort Worth, TX

Haslet, TX 76052

75150

76131

28. First Texas Hospital

(Under

22. North Richland Hills

1401 East Trinity

Construction,

6035 Precinct Line

Mills Road

Tentative Open

Rd.

Carrollton, Texas

06/16; 9-room)

North Richland

75006

32. Rowlett, TX

Hills, TX 76180

29. DeSoto, TX

3301 Lakeview

23. [*]

800 W. Beltline Rd

Parkway

24. Richardson

DeSoto, TX 75115

Rowlett, TX 75088

1291 W. Campbell

(Under

(Under

Rd.

Construction,

Construction,

Richardson, TX

Tentative Open

Tentative Open

75080

05/16; 9-room)

08/16; 7-room)

25. Watauga/North Ft.

30. Plano, TX

 

Worth

3960 Legacy Drive

[*]

5401 Basswood

Plano, TX 75023

 

Blvd.

 

 

 

[*]

 

Operation of Company Facilities

 

Company shall operate the Company Facilities such that (i) Company Facilities
will be located in the Restricted Area, (ii) the Freestanding ER Facilities will
operate as departments of First Texas Hospital located in Carrollton, Texas or
as departments of other licensed hospitals owned and operated by Company, and
(iii) all real property used by Company, including the land and buildings of
Company Facilities, will be owned by a third party capital source and leased to
an Affiliate of Adeptus and subleased to Company under fair market value terms
unless otherwise determined by a unanimous vote of the Governing Board. [*]

 

 

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Exhibit B

 

Financial Assistance and Emergency Medical Care Policies

 

 

 

 

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Picture 31 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Program

 

Owner (Title/Dept, Committee, or Council):

Effective Date:

Senior Vice President and Chief Revenue Officer

 

Approved By:

Last Reviewed Date: 5/22/2013

Page 1 of 10

 

 

1.0        Scope:

 

1.1Applicable Entities: This policy applies to Texas Health wholly controlled
tax- exempt hospitals.

 

1.2Applicable Departments: This policy applies to all departments.

 

2.0        Purpose:

 

To establish Eligibility Guidelines for granting charity care assistance to
patients who incur a significant financial burden as a result of receiving
Medically Necessary Care at a Texas Health hospital.

 

3.0        Policy:

 

3.1        Policy Statement: Individuals who do not have an ability to pay for
Medically Necessary Care will be fairly, consistently and objectively evaluated
for eligibility under the Texas Health Charity Care Program. The Texas Health
Charity Care Program will be administered under Eligibility Guidelines
consistent with federal and state laws for budgeting, determining and reporting
charity care. It is the intent of the Texas Health Charity Care Program to
provide community benefits through charity care in accordance with the
provisions of Texas Health & Safety Code Section 311.043-045.

 

3.2        Policy Guidance: Texas Health’s Charity Care Program is available for
qualifying individuals who are unable to pay for Medically Necessary Care. Texas
Health is dedicated to administering its Charity Care Program in a fair,
consistent and objective manner respecting the dignity of each patient served.
Texas Health’s Charity Care Program will be administered in a manner that seeks
to allocate charity resources in a manner that maximizes the benefit received by
the communities Texas Health serves. No patient will be denied financial
assistance because of their race, religion, or national origin or any other
basis which is prohibited by law. In implementing this Charity Care Program for
the benefit of the communities Texas Health serves, Texas Health will comply
with all applicable federal, state, and local laws, rules, and regulations.

 

Patients with family income at or below 200 percent of applicable federal
poverty guidelines or patients with family income above 200 percent of
applicable federal poverty guidelines who have significant unpaid medical bills
may be eligible for charity care if the patient lacks sufficient funds to pay
the out-of-pocket portion of their Hospital Bill.

 

 

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 2 of 10

 

 

A patient who is unable to pay his or her Hospital Bill is encouraged to apply
for charity care by completing a charity application. Hospital admission and
social service personnel, financial counselors, and chaplains; along with Texas
Health business office personnel, are familiar with the Texas Health Charity
Care Program and can answer questions relating to the program. All applications
will be reviewed and a determination made whether all or a portion of the
patient’s Hospital Bill qualifies for charity care assistance. It is the
responsibility of the patient to actively participate in the hospital’s
financial assistance screening process and to provide requested information on a
timely basis, including without limitations providing the hospital with
information concerning actual or potentially available health benefits coverage
(including available COBRA coverage, financial status (i.e. income, assets) and
any other information that is necessary for Texas Health to make a determination
regarding the patient’s financial and insured status. In certain situations,
Texas Health may be able to determine from financial and other information
provided by independent third party vendors, that a patient qualifies for
charity care even though a charity application has not been completed.

 

3.2.1     General:

 

a.          Communication Requirements – Any person seeking health care services
at a Texas Health hospital should be provided written information about the
Texas Health Charity Care Program as part of the admission process. Written
notices shall also be conspicuously posted in both English and Spanish in the
hospital’s general waiting area, emergency department and in such other
locations as the hospital deems likely to inform patients of the existence of
the Texas Health Charity Care Program. In addition, information describing the
Texas Health Charity Care Program shall be posted on the Texas Health website.
In addition, instructions on how to apply can be found on the reverse side of
each THR billing statement (in “plain language”). A final notice is sent to each
patient with a delinquent balance, explaining what could happen if they do not
make payment arrangements or supply accurate/complete charity eligibility
information. Patients are given 120 days to apply for charity before any type of
negative credit report is made by THR’s collection vendors.

 

b.          Patient Counseling – Admission, Business Office, Social Services
personnel, financial counselors and/or hospital chaplains should encourage
patients (who are at financial risk as a result of the amount they are expected
to owe “out-of-pocket”) to complete a Texas Health Charity Care Application. To
facilitate the charity process, it is preferred that financial screening occur
and Charity Care Applications be completed prior to discharge.  In no case will

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 3 of 10

 

 

screening for charity care eligibility take place prior to providing appropriate
emergency medical care in accordance with the requirements of the Emergency
Medical Treatment and Active Labor Act.

 

c.          Charity Request Initiated by Patient/Responsible Party – A Charity
Care Application must be provided to any person requesting charity care. Charity
care may only be granted if sufficient information is available to allow for a
determination that the patient satisfies the Eligibility Guidelines outlined in
Attachment I of this policy. Texas Health may utilize both information reported
on charity applications and information gathered from independent third party
sources to evaluate a patient’s eligibility for charity care.

 

d.          Request Initiated by Hospital Personnel on Patient’s Behalf – A
request for charity care may be submitted by Texas Health personnel (on behalf
of a patient or responsible party) who have knowledge of the patient’s financial
situation. All known facts surrounding the patient’s financial condition shall
be documented in requests initiated by Texas Health personnel.

 

e.          Follow-Up Collection Efforts – In general, no subsequent attempt
shall be made to collect charges from the patient or responsible party which
have been approved for adjustment under the Texas Health Charity Care Program
(subject to the rights of subrogation) except to the extent a patient or
responsible party receives a recovery from any third party or other source. A
charity adjustment shall not be construed as a waiver by Texas Health of its
ability to enforce a hospital lien for reimbursement of any amount owed by a
third party liability carrier on behalf of a patient. Charity adjustments may be
completely or partially reversed in the event of a recovery from a third-party
or other source.

 

f.          The following collection activities will occur during the first 100
days that a medical bill is outstanding to include:

 

·

Summary billing statements will be sent to the patient (Identifying: Total
Charges, Insurance Payments, Discounts, Patient Payments and the current
balance.)

 

·

Calls will be made to the patient using an outbound dialer system.

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 4 of 10

 

 

·

Collection letters will be sent to the patient by agencies under contract with
Texas Health.

 

g.          Actions that may be taken to obtain payment after a medical bill has
been outstanding for at least 100 days include:

 

·

Transfer of patient account to an outside collection agency. The collection
agency will attempt to obtain a response for at least 30 days after receiving
the account.

 

·

Placement of a past due comment on patient’s credit report no earlier than 30
days after receiving the account.

 

3.2.2     Approval and Reporting:

 

a.          Management – The Texas Health Senior Vice President and Chief
Revenue Officer is responsible for the oversight of the Texas Health Charity
Care Program. The Texas Health Vice President Revenue Cycle Operations is
responsible for the day-to-day management of the Texas Health Charity Program in
a manner consistent with this policy.

 

b.          Information Verification –The Texas Health Vice President Revenue
Cycle Operations shall establish procedures that specify which application
information is subject to verification. In no case, should the establishment of
verification procedures discriminate against any group of patients nor unduly
limit a patient’s access to charity care assistance.

 

c.          Manual Approval – Services Already Rendered – Texas Health’s
Business Office personnel shall review all available information and determine
the appropriate level of charity assistance in accordance with procedures
established by the Texas Health Vice President Revenue Cycle Operations. The
final approval for charity write-offs will be the responsibility of the Vice
President of Revenue Cycle Operations. Approval is delegated down to various
levels of management, corresponding with the size of the outstanding balance.
Approval for amounts greater than $25,000 will remain with the Vice President.

 

d.          Automated/Presumptive Charity Approval – In certain situations,
Texas Health can determine that a patient qualifies for charity care under this
policy through review and analysis of financial and other information provided
by an independent third party vendor. In these situations, a formal charity
application is not required. The

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 5 of 10

 

 

Texas Health review and analysis of available data will be complete within 30
days after the patient liability was established. If Texas Health cannot
determine that a patient qualifies for charity care through this review process
and a formal charity application has not been submitted, collection activities
will commence in accordance with normal Texas Health collection procedures.
Extraordinary collection efforts will not begin prior to 130 days after the
patient liability was established.

 

e.          Approval – Prior to Providing Services - Each Texas Health hospital
shall implement a review process to determine charity care eligibility in those
situations where a patient or physician seeks an eligibility determination in
advance of hospital services being provided. In those cases the entity president
or financial officer (or their designees) must approve the charity request. In
granting charity care to individual patients in non-emergent situations,
hospital personnel should consider the availability of alternative community
resources, continuity of care concerns and the potential financial impact on the
hospital’s ability to grant charity care assistance broadly to the community it
serves.

 

f.           Notification to Applicants – In general, all patients who apply for
charitable assistance will be notified within a reasonable time regarding the
status of their request.

 

·

Approved - The response to the patient will be sent via mail within 30 days.

 

·

Denied or Pended/Incomplete - The response to the patient will be sent by mail
within 30 days and will include instructions for the patient if they choose to
appeal any adverse decision. If the patient’s application was incomplete, THR’s
collections activities will be halted for 30 days. If the patient does not
supply the needed data, collections will resume in 30 days and the balance could
end up with a collection agency.

 

·

Presumptive/Automated Screening - Notification is not sent to patients who were
granted a charity discount based on the automated (presumptive) charity program.

 

g.          Appeals – An appeal of a denied Charity Care Application will be
considered if material changes in a patient’s circumstances are documented.
Changed circumstances may include, but are not limited to, a change in
employment, health, marital, or family

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 6 of 10

 

 

status. Appeals should be made to the Texas Health Business Office in accordance
with procedures established by the Texas Health Vice President Revenue Cycle
Operations.

 

h.          Reporting – All charity adjustments must be recorded in the books
and records of Texas Health on a monthly basis and a charity care log (which
sets forth by patient  information designated by the Texas Health Vice President
Revenue Cycle Operations) shall be maintained for each hospital. At a minimum,
the charity logs must contain the following information: patient’s name, gross
hospital charges, amount of payments received on the patient’s account, the
amount of charity adjustment, and the charity care classification (e.g.
Financially Indigent, Medically Indigent or other charity).

 

i.           Record Retention – Documentation sufficient to identify each
patient’s income, the amount owed by the patient, the review and approval
processes that were followed, and the patient’s status as Financially Indigent,
Medically Indigent, or other charity shall be maintained by the Texas Health
Business Office for the period required by the Texas Health Record Retention
policy.

 

4.0        Definitions:

 

4.1        Annual Income - If the patient is an adult, the term Annual Income
means the total gross Annual Income of the patient and any other responsible
party. If a patient is married Annual Income will also include the total gross
Annual Income of the patient’s spouse. If the patient is a minor, the term
Annual Income means the total gross Annual Income of the patient, the patient’s
mother, the patient’s father and any other responsible party.

 

4.2        Charity Care Application – A written request from the patient,
responsible party or other interested party for assistance under the Texas
Health Charity Care Program, which summarizes financial and other information
needed to determine eligibility. The content of the Charity Care Application
will be determined by the Texas Health Vice President Revenue Cycle Operations
or his/her designee.

 

4.3        Eligibility Guidelines - The financial criteria and procedures
established by this policy and described in Attachment I. The financial criteria
shall include income levels indexed to the federal poverty guidelines and means
testing; provided, however, that the financial criteria may not set the income
level for charity care lower than that required by Texas counties under Section
61.023 of the Indigent Health Care & Treatment Act or higher; in the case of the
financially indigent, than 200 percent of the federal poverty guidelines. The
federal poverty guidelines are published in the Federal Register in February of
each year and for

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 7 of 10

 

 

purposes of this policy will become effective the first day of the month
following the month of publication. The guidelines published by the Texas
Department of Health Services are found on their website.

 

4.4        Financially Indigent - An uninsured or underinsured patient whose
Annual Income is less than or equal to 200% of the applicable federal poverty
guidelines.

 

4.5        Hospital Bill - The amount owed by a patient after the application of
appropriate insurance discounts or discounts provided to uninsured patients
under Texas Health's Providing Discounted Pricing to Uninsured policy.

 

4.6        Medically Indigent - A person whose Hospital Bill exceeds a specified
percentage of the patient’s Annual Income, determined in accordance with the
Eligibility Guidelines detailed in Attachment I of this policy.

 

4.7        Medically Necessary Care – Shall in general mean non-elective
inpatient and outpatient acute hospital services that are reimbursable under the
Medicare and/or Medicaid programs.

 

4.8        Texas Health Charity Care Program - The program implemented by Texas
Health to provide financial assistance to patients who qualify as Financially
Indigent or Medically Indigent. The Eligibility Guidelines for charity
assistance are detailed in Attachment I of this policy.

 

5.0      Responsible Parties:

 

5.1        Texas Health Senior Vice President and Chief Revenue Officer:

·

Responsible for Oversight of the Texas Health Charity Care Program.

 

5.2        Texas Health Vice President Revenue Cycle Operations:

·

Responsible for day-to-day management of the Texas Health Charity Program.

 

5.3        Texas Health Business Office personnel:

·

Responsible for informing eligible patients the existence of the Texas Health
Charity Program.

 

·

Responsible for review of Charity Care Applications and determination of level
of charity assistance.

 

·

Responsible for notification to applicants of status of their request for
charity assistance and their right to appeal an adverse decision.

 

·

Responsible for the processing of appeals of denied Charity Care Applications.

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 8 of 10

 

 

·

Responsible for the retention of documentation relating to the determination of
charity status.

 

5.4        Texas Health’s Hospitals - All:

·

Responsible for informing eligible patients the existence of the Texas Health
Charity Program.

 

·

Responsible for implementing a review process to determine charity care
eligibility for patients in advance of hospital services and for notifying
patients of the determination that is made.

 

5.5        Entity Finance Officers:

·

Responsible for recording charity adjustments in the hospital books on a monthly
basis.

 

6.0        External References:

 

6.1Texas Health and Safety Code Section 311.043-045.

6.2EMTALA- Emergency Medical Treatment and Active Labor Act

6.3Indigent Health Care & Treatment Act Section 61.023 (income levels)

6.4Federal Register Poverty Guidelines

6.5Texas Department of Health Services Guidelines

 

7.0        Related Documentation and/or Attachments:

 

7.1Final Policy for Collection of Advanced Deposits

7.2Co-Payments and Co-Insurance Providing Discounted Pricing to Uninsured

7.3Attachment 1- Eligibility Guidelines

 

ATTACHMENT I - ELIGIBILITY GUIDELINES

 

The criteria noted in this Attachment I shall be strictly applied to determine
whether a patient is eligible for assistance under the Texas Health Charity Care
Program. Only adjustments relating to those patients meeting the criteria set
forth in this Attachment I shall be reported as charity in a hospital’s
statement of operations.

 

Financially Indigent - A patient with estimated Annual Income between 0% and
200% of the federal poverty guidelines shall be approved for charity assistance
provided the patient has insufficient funds and financial assets to pay his or
her Hospital Bill without incurring an undue financial hardship. In general, a
Financially Indigent patient will be eligible for charity in an amount equal to
the full balance of his or her Hospital Bill less the amount (if any) they are
deemed able to pay without incurring an undue financial hardship.

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 9 of 10

 

 

Medically Indigent - Patients with unpaid Hospital Bills that are equal to or
greater than the following specified percentages of the patient or responsible
party’s estimated Annual Income may be approved for a charity adjustment of up
to 100% of the unpaid balance in excess of the minimum patient responsible
amount indicated in the following table provided the patient has insufficient
funds and financial assets to pay his or her Hospital Bill without incurring an
undue financial hardship. The percentage of their annual income is also the same
percentage of their balance that is left remaining for the patient’s charity
co-pay. The remaining charity co-pay will be left on a single account and will
be calculated using the outstanding balances on the AR, from the last 90 days.

 

 

 

Annual Income Levels

Minimum Patient
Responsible Amount
(% of Annual Income)

2 to 2.5 Times Federal Poverty Limit

3%

2.5 to 3 Times Federal Poverty Limit

3.75%

3 to 3.5 Times Federal Poverty Limit

4.5%

3.5 to 4 Times Federal Poverty Limit

5.25%

4 to 4.5 Times Federal Poverty Limit

6%

4.5 to 5 Times Federal Poverty Limit

6.75%

5 to 6 Times Federal Poverty Limit

7.5%

6 to 7 Times Federal Poverty Limit

9%

7 to 8 Times Federal Poverty Limit

10.5%

8 to 9 Times Federal Poverty Limit

12%

Greater than 9 Times Federal Poverty Limit

13.5%

 

The amount above the “Minimum Patient Responsible Amount” (shown above)
represents the charity discount.

 

Example 1:       Patient with a family of four and an Annual Income of $80,000
(assume $80,000 is between 3.5 and 4 times the Federal Poverty Guidelines). The
patient has a Hospital Bill totaling $3,000 and liquid/available financial
assets totaling $500. Applying the table above, a patient’s Hospital Bill must
exceed $4,200 before a patient is eligible to be considered Medically Indigent.
Accordingly, the patient’s account will not qualify for charity assistance.

 

Example 2:      Same facts as Example 1 except that unpaid Hospital Bills total
$30,000. Applying the table above, a patient’s Hospital Bill must exceed $4,200
before the patient is eligible to be considered Medically Indigent. In this
example, the Hospital Bill exceeds the required $4,200 threshold so the

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 10 of 10

 

 

patient may be considered for charity care. The actual amount of charity
assistance granted is based upon the patient’s ability to pay. In this example,
the minimum patient responsible portion is $4,200 and the maximum potential
charitable write-off is $25,800. The exact amount of charity write-off will
depend upon an evaluation of the patient’s financial assets and resources.

 

Example 3:      Same facts as Example 1 except that unpaid Hospital Bills total
$30,000 and the patient’s financial assets total $100,000. Applying the table
above, a patient’s Hospital Bill must exceed $4,200 before the patient is
eligible to be considered Medically Indigent. In this example, the Hospital Bill
exceeds the required threshold so the patient may be considered for charity
care. The amount of charity assistance is based upon the patient’s assets and
resources. In this example, since the patient’s financial assets exceed the
patient’s Hospital Bill, no charity adjustment will be granted.

 

General Considerations for Financial and Medical Indigence

 

Discounts – The pricing offered to Uninsured Patients for general hospital
services prior to being approved under the Texas Health Charity Program will be
calculated by applying a 45% discount to the Hospital’s gross charges. Implanted
device charges billed under revenue codes 275, 276 or 278 will be discounted by
60% off the Hospital’s gross charges. See Discounted Pricing for Uninsured
Patients and Patients with Limited Insurance Benefits Policy.

 

Charity Applications – All patients seeking assistance under the Texas Health
Charity Program are encouraged to complete a Charity Application. A patient
whose Hospital Bill reflects gross charges of $75,000 or less may not be
classified as Medically Indigent unless a completed Charity Application is
received by Texas Health along with materials requested by Texas Health to
verify the income, assets and medical expense amounts reported therein. Texas
Health may grant charity care to all other patients if sufficient documentation
exists to determine a patient’s estimated Annual Income, family size and
financial condition. In the case of a patient with Annual Income in excess of
$75,000 who does not complete a Charity Application, the minimum patient
responsible amount shall be 33.0% of the outstanding Hospital Bill.

 

Determination of Financial Condition - The determination that there are
insufficient funds, for both financial and medical indigence, shall be made at
the time a patient’s account is reviewed based upon the patient’s existing
employment, financial, and family status. For purposes of this policy, assets
shall include cash, stocks, bonds and other financial assets that can be readily
converted to cash. In general, non-liquid assets and the patient/guarantor’s
speculative ability to generate future income shall not be considered in
determining whether or not sufficient funds exist to pay current medical bills.

 

Eligibility Determinations - Eligibility determinations shall be valid for the
longer of (1) the course of treatment (including medically necessary follow-up
care) associated with the patient’s

 

 

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Picture 33 [adpt20160630ex102be3cf3001.jpg]

 

Policy Name: Charity Care Policy

 

Page 11 of 10

 

 

hospitalization or (2) 90 days of the determination without the need for a
patient to complete an additional Charity Application unless the facts and
circumstances suggest that there may have been a material change in the
applicant’s financial condition and/or ability to pay.

 

Charity Care – Non-Emergent Situations - Charity Assistance under the Texas
Health Charity Care Program may be provided to patients with both emergent and
non-emergent conditions. Priority under the Texas Health Charity Care Program is
given to patients with emergent medical conditions. In reviewing applications
for Charity care assistance for non-emergent care, Texas Health will consider
the availability of other resources in the community that meet the applicant’s
needs, the ability of Texas Health hospitals to provide the proper continuum of
care and the impact of the specific request on the ability of Texas Health to
provide care to the broad community it serves.

 

Patient Cooperation - It is the responsibility of the patient to actively
participate in the hospital’s financial assistance screening process, to
authorize (if required) Texas Health to access available third party information
and to provide requested information on a timely basis, including without
limitations providing the hospital with information concerning actual or
potentially available health benefits coverage (including available COBRA
coverage), financial status (i.e. income, financial assets) and any other
information that is necessary for Texas Health to make a determination regarding
the patient’s financial and insured status. A patient’s failure to cooperate may
result in a denial of charity care.

 

Charity Care is the option of last resort for the patient needing assistance. If
funds are collected on the patient’s account prior to charity approval, they
will not be refunded to the payer.

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

Exhibit C

 

Initial Capital Contributions

 

 

 

 

Name and Address

Initial Capital
Contribution

Ownership
Percentage
Interest

Texas Health Resources
612 East Lamar Boulevard, Suite 1000
Arlington, Texas 76011

Intellectual property
rights licensed to
Company pursuant to
the THR Trademark
License Agreement

51%

ADPT DFW Holdings LLC
c/o Adeptus Health, LLC
2941 Lake Vista Drive
Lewisville, Texas 75067

Contributed ER
Business

49%

 

 

--------------------------------------------------------------------------------

 

 

Exhibit C

 

Confidentiality and Trade Secret Rights

 

 

 

 

--------------------------------------------------------------------------------

 

 

CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT

 

This Confidentiality and Non-Disclosure Agreement (this “Agreement”) is entered
into effective this 10th day of May, 2016 by and between FTH DFW Partners LLC,
(“Adeptus”), a Texas limited liability company, and TEXAS HEALTH RESOURCES
(“Company”), a Texas nonprofit corporation.

 

1.Adeptus and Company desire to exchange certain information for purposes of
exploring a potential business transaction relating to a joint venture created
for the purpose of developing, owning and operating freestanding emergency room
facilities and one or more general acute care hospitals in the Collin, Dallas,
Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise
counties in the State of Texas. Representatives (as that term is defined below)
of each party may be given access to various items of information which are
confidential and of a proprietary nature, including but not limited to
inventions, patents, patent applications, intellectual property, trade secrets,
formulas, processes, methods, customer information, know how, financial data and
any information that is not publicly known and derives value from not being
publicly known (the “Confidential Information”). The term “Confidential
Information” of a disclosing party (the “Disclosing Party”) does not include
information which (1) becomes generally available to the public other than as a
result of a disclosure by the party receiving the Confidential Information (the
“Receiving Party”) or its Representatives, or as a result of wrongful conduct of
any party, (2) was rightfully available to the Receiving Party on a non-
confidential basis prior to its disclosure by the Disclosing Party or its
Representatives, (3) rightfully becomes available to the Receiving Party on a
non-confidential basis and through proper means from a source other than the
Disclosing Party or its Representatives, provided that such source is not bound
by a confidentiality agreement with the Disclosing Party or its Representatives
or otherwise prohibited from transmitting the information to the Receiving Party
or its Representatives by a contractual, fiduciary or other legal obligation, or
(4) is independently developed by the Receiving Party without use of or
reference to the Confidential Information, as corroborated by contemporaneous
records and documents of the Receiving Party.

 

2.Each party hereby agrees that, except with the specific prior written consent
of the other

 

party or as expressly permitted by this Agreement, neither it nor its officers,
directors or employees (all of the foregoing are collectively referred to as
“Representatives”) shall at any time directly or indirectly (a) use any
Confidential Information of the other party for any purposes other than the
contemplated transaction referred to above, or (b) disseminate or disclose any
of such Confidential Information to any persons other than those employed by it
who are actively participating in the evaluation of the possible business
transaction or who otherwise need to know the Confidential Information for the
purpose of such evaluation. The term “person” includes without limitation any
individual, entity or organization.

 

3.Without limiting or affecting the restrictions and obligations of Section 2
above, each party agrees that it will undertake best efforts, and in no event
less than reasonable efforts, to ensure that the confidentiality of the other
party’s Confidential Information will be maintained, including advising its
Representatives of the confidential and proprietary nature of the Confidential
Information and, where necessary, appropriate or requested by the Disclosing
Party, requiring its Representatives to agree in writing to be bound by
confidentiality agreements similar in substance to this Agreement.

 

4.In the event that a party is requested pursuant to, or required by,
interrogatories, requests for production, subpoenas, or other similar legal
process to disclose any Confidential Information of the other party, such party
will provide the other party with prompt written notice of the request or
requirement to enable the other party (1) to seek an appropriate protective
order or remedy, (2) to consult with respect to steps to resist or narrow the
scope of such request or legal process, or (3) to waive compliance, in whole or
in part, with the terms of this Agreement. In the event that such protective
order

 

Page 1 of 4

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or other remedy is not obtained or a waiver is made by the other party, the
party required to make the disclosure may furnish that portion (and only that
portion) of the Confidential Information which, in the reasonable opinion of its
counsel, it is legally compelled to disclose and shall use best efforts to
ensure that all Confidential Information or other information that is so
disclosed will be accorded confidential treatment by the person to whom such
information is disclosed.

 

5.Neither this Agreement, the disclosure of Confidentiality Information by the
Disclosing Party to the Receiving Party, nor the publication of any Confidential
Information shall be construed to grant the Receiving Party either any implied
or express license or any rights to obtain any implied or express license to the
Confidential Information, any patents or other intellectual property rights
arising from or disclosed in the Confidential Information, or any other
information or technology. All Confidential Information provided hereunder is
provided “AS IS” and without any warranty, express, implied or otherwise,
regarding such Confidential Information’s accuracy or completeness. Neither
party nor any of its Representatives will have any liability to the other party
hereto or its Representatives relating to or resulting from the use of the
Confidential Information or from any inaccuracies therein or incompleteness
thereof.

 

6.Each party agrees that, promptly upon the written request of the other party,
it will return to the other all documents, notes, other writings or electronic
media containing Confidential Information of the other party then in its
possession, whether prepared by it or others, including all copies thereof. The
parties acknowledge and agree that each would be irreparably damaged and cannot
be made whole by monetary damages in the event of any breach by the other of any
provision of this Agreement. Accordingly, in the event of any such breach, the
non-breaching party shall be entitled, without the requirement of posting a bond
or other security, to seek injunctive relief, specific performance or any other
appropriate equitable remedy, in addition to any other remedies to which the
non-breaching party may be entitled at law. In the event of any litigation
arising out of this Agreement, the prevailing party shall be entitled to
reasonable attorney’s fees and expenses from the losing party, whether incurred
before or at trial, on appeal or in insolvency proceedings.

 

7.All notices and communications required or permitted shall be in writing and
addressed as set forth below either by personal delivery or by registered air
mail, or be telex or facsimile, and the date upon which such notice is so
personally delivered (or if the notice is given by registered air mail, or be
telex, or by facsimile, the date upon which it is received by the addressee)
shall be deemed to be the date of such notice irrespective of the date appearing
therein:

 

If to Adeptus:

 

Adeptus Health, Inc.

2941 Lake Vista Drive

Lewisville, TX 75067

Attn: Donald Adam, Chief Corporate Development Officer

Email: don.adam@adhc.com

 

With a copy to:

 

Adeptus Health, Inc.

2941 Lake Vista Drive

Lewisville, TX 75067

Attn: Timothy Mueller, General Counsel

Email: tim.mueller@adhc.com

 

Page 2 of 4

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If to Company:

 

Texas Health Resources

612 East Lamar Blvd., Suite 500

Arlington, Texas 76011

Attn: Krystal Mims

Email: KrystalMims@texashealth.org

 

With a copy to:

 

Texas Health Resources

612 East Lamar Blvd., Suite 900

Arlington, Texas 76011

Attn: Kenneth Kramer, General Counsel

Email: KennethKramer@texashealth.org

 

8.This Agreement may be signed in any number of counterparts and the signature
or signatures of the undersigned may be delivered by electronic mail in
"portable document format" (".PDF"), or by any other electronic means intended
to preserve the original graphic and pictorial appearance of a document (each of
which shall be deemed an original) and which shall together constitute one and
the same instrument.

 

9.This Agreement constitutes a complete statement of all of the arrangements and
understanding between the parties as of the date hereof with respect to all
Confidential Information and rights disclosed in or arising from the
Confidential Information, and supersedes all prior agreements and understandings
between them with respect thereto.

 

10.This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Texas (excluding conflict of laws). If any
provision of this Agreement shall be invalid, illegal or unenforceable, no other
provision shall be affected thereby. If any provision is found to be too broad
to be effective, such provision shall be limited and enforced to the extent
possible. This Agreement may not be modified or waived except in a writing
expressly setting forth the modification or waiver and signed by the party
against whom enforcement is sought. No failure or delay by a party in exercising
any right or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise preclude any other or further exercise of such right
or remedy or the exercise of any other right or remedy.

 

11.In the event the parties enter into a definitive written agreement regarding
the contemplated business transaction, then the confidentiality provisions of
such definitive written agreement shall control over the provisions of this
Agreement and this Agreement shall be of no further force or effect.

 

 

 

Page 3 of 4

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AGREED TO by the following as of the date first written above:

 

 

 

 

 

 

 

FTH DFW Partners LLC

    

TEXAS HEALTH RESOURCES,

a Texas limited liability company

 

a Texas nonprofit corporation

 

 

 

 

 

 

 

 

 

By:

/s/ Graham Cherrington

 

By:

/s/ Barclay E. Berdan

Name: Graham Cherrington

 

Name: Barclay E. Berdan, FACHE

Its: President and Chief Operating Officer

 

Its: Chief Executive Officer

 

 

Signature Page to Confidentiality and Non-Disclosure Agreement

--------------------------------------------------------------------------------

 

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Schedule 8.03(c)

 

THR wholly-owns and operates two (2) Freestanding ER Facilities in Burleson and
Willow Park. [*]

 

1.Texas Health Neighborhood Care and Wellness Center Burleson,

2.Texas Health Neighborhood Care and Wellness Center Willow Park [*]

 

 

 

--------------------------------------------------------------------------------

 

 

 

Note: Information has been omitted from this agreement pursuant to a request for
confidential treatment, and such information has been separately filed with the
Securities and
Exchange Commission. The omitted information has been marked with a bracketed
asterisk (“[*]”).

 

Execution Version

 

MANAGEMENT SERVICES AGREEMENT

 

THIS MANAGEMENT SERVICES AGREEMENT (this “Agreement”) is made and entered into
to be effective as of May 10, 2016 (the “Effective Date”), by and between FTH
DFW Partners LLC, a Texas limited liability company (“Company”), and Adeptus
Health Management LLC, a Texas limited liability company (“Manager”). Both
Company and Manager are collectively referred to as the “Parties” and
individually referred to as a “Party.”

 

This Agreement is made and entered into with reference to the following facts:

 

A.Company is a joint venture entity, co-owned by ADPT DFW Holdings LLC, a Texas
limited liability company (“Adeptus”) and Texas Health Resources, a Texas
non-profit corporation (“THR”), which is engaged in the business of owning and
operating the Company Facilities (as defined below) and furnishing freestanding
emergency department services and general hospital services at the Company
Facilities (collectively, the “Business”).

 

B.Company and Manager desire to enter into this Agreement to set forth the terms
and conditions upon which Manager will perform and provide, or arrange for the
performance and provision of, services to and for Company for the management and
administration of the Business and the Company Facilities.

 

NOW, THEREFORE, in consideration of the recitals, covenants, conditions
and  promises herein contained, the receipt and sufficiency of which
consideration are hereby acknowledged, Company and Manager do hereby agree as
follows:

 

ARTICLE 1

DEFINITIONS

 

“Acute Care Net Revenues” means Net Revenues that are attributable to acute care
hospitals.

 

“Adeptus” has the meaning set forth in the Preamble.

 

“Adeptus Chain Affiliate” means any Affiliate of Adeptus Parent that, directly
or indirectly through one or more Affiliates of Adeptus Parent controlled by
such Affiliate of Adeptus Parent, owns or holds an Ownership Percentage Interest
in Company (provided that such Affiliate of Adeptus Parent is in the direct
chain of ownership between Adeptus Parent and Company).

 

“Affiliate” means, with respect to a specified Person, any Person that directly
or indirectly controls, is controlled by, or is under common control with, the
specified Person. As used in this definition, the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, any equity interest, or a membership interest in a
non-stock corporation, by contract, by power granted in bylaws or similar
governing documents or otherwise. Without limiting the foregoing, any ownership
interest greater than fifty percent (50%) for purposes hereof constitutes
“control”.

 

“Agent” means, with respect to a Person, its officers, directors, service
providers, shareholders, members, partners, employees and independent
contractors and agents.

 

“Agreement” has the meaning set forth in the Preamble.

1

--------------------------------------------------------------------------------

 

 

 

“Annual Budget” means, as the case may be, the Capital Annual Budget and/or the
Operating Annual Budget (each respectively defined in Section 2.1(f)(i)).

 

“Anti-Kickback Statute” has the meaning set forth in Section 7.2(c).

 

“Applicable Laws” means all applicable provisions of laws, constitutions,
statutes, rules, regulations, ordinances, and orders of governmental entities
and all orders and decrees of courts, tribunals, and arbitrators and includes,
without limitation, all Health Care Laws, each as amended from time to time.

 

“Billing and Collection Services” has the meaning set forth in Section 2.2.

 

“Board” means the board of managers of the Company.

 

“Business” has the meaning set forth in the Recitals.

 

“Business Associate Agreement” has the meaning set forth in Section 2.10.

 

“Change of Control” as to a Person means (a) an event, or sequence of related
events, that result in any consolidation or merger of the Person with or into
any limited liability company, partnership, corporation or other entity, or any
other reorganization in which the owners having control of the Person
immediately prior to such consolidation, merger or reorganization own less than
fifty percent (50%) of the voting power of the surviving or successor entity
immediately after such consolidation, merger or reorganization; (b) any
transaction or series of related transactions to which the Person is a party in
which at least fifty percent (50%) of the Person’s outstanding voting power is
transferred; or (c) any sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Person; provided, however, that a Change
of Control will not include (i) any consolidation or merger effected exclusively
to change the domicile of the Person, (ii) any conversion of the Person to
another state law form of entity or (iii) normal turnover in the composition of
a Person’s Board in accordance with its governing documents.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Assets” has the meaning set forth in Section 5.5(b).

 

“Company Books and Records” has the meaning set forth in Section 2.1(j).

 

“Company Confidential Information” means any and all information of Company
relating to the Company or the Business, whether or not such information is
designated as being confidential or proprietary, but shall exclude any
information that Manager is able to demonstrate (a) was in the public domain
through no fault of Manager, its Agents or Affiliates when it was used or
disclosed by Manager; (b) was known by Manager prior to the time it was first
disclosed to or was first obtained by Manager or its Agents or Affiliates from
Company or pursuant to this Agreement; (c) was independently developed by
Manager or any of its Agents or Affiliates without the use of Company
Confidential Information or (d) was disclosed to or obtained by Manager or any
Agent or Affiliate thereof, from a Person that Manager or such Agent or
Affiliate did not know, and did not have reason to know, was subject to a
confidentiality or fiduciary obligation to Company. Without limiting the
foregoing, Company Confidential Information shall include financial information
related to Company and the Business.

 

“Company Expense Reimbursement” has the meaning set forth in Section 4.3.

 

2

--------------------------------------------------------------------------------

 

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

“Company Facilities” means each existing and future freestanding emergency
department, out- patient department and acute care hospital owned and/or
operated by Company or any Company-Owned Entity.

 

“Company Indemnified Party” has the meaning set forth in Section 6.4.

 

“Company-Owned Entity” means any Person owned, directly or indirectly, in whole
or in part, by Company.

 

“Company Policies and Procedures” means the policies and procedures of Company
as adopted or amended from time to time by the Board in accordance with the
Operating Agreement.

 

“Cure Period” has the meaning set forth in Section 5.2.

 

“Default” has the meaning set forth in Section 5.2.

 

“Disqualifying Event” means [*]

 

“Effective Date” has the meaning set forth in the Preamble.

 

“EHR” means electronic health record

 

“Expense Reimbursement” has the meaning set forth in Section 4.3.

 

“FAP Policies” has the meaning set forth in Section 2.1(g).

 

“Fraud and Abuse Statute” has the meaning set forth in Section 7.2(c).

 

“GAAP” means generally accepted accounting principles.

 

“Government Health Care Program” means and includes the Medicare and Medicaid
programs and any other federal health care program as defined in 42 U.S.C. §
1320a-7b(f), as amended from time to time.

 

“Health Care Laws” means all Applicable Laws regulating the financing, services,
reimbursement, payment, acquisition, construction, operation, maintenance or
management of a health care, facility, provider or payor including, without
limitation, (a) the Anti-Kickback Statute; (b) the Stark Law; (c) 31 U.S.C. §§
3729-3733, which is commonly referred to as the “Federal False Claims Act”;
(d)  Titles XVIII and XIX of the Social Security Act, implementing regulations
and program manuals; and (e)  HIPAA and any state-based laws governing the
privacy and security of medical information.

 

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
as amended by Subtitle D of the Health Information Technology for Economic and
Clinical Health Act which was part of

 

3

--------------------------------------------------------------------------------

 

 

the American Recovery and Reinvestment Act of 2009, as amended, and their
respective implementing regulations.

 

“Initial Strategy Plan” has the meaning set forth in Section 2.1(c).

 

“Initial Term” has the meaning set forth in Section 5.1.

 

“IRC” means the Internal Revenue Code of 1986, as amended from time to time, or
any corresponding federal tax statute enacted after the date of this Agreement.

 

“Losses” has the meaning set forth in Section 6.3.

 

“Management Fee” has the meaning set forth in Section 4.1.

 

“Management Services” has the meaning set forth in Section 2.1.

 

“Manager” has the meaning set forth in the Preamble.

 

“Manager Claim” has the meaning set forth in Section 6.3.

 

“Manager Confidential Information” shall mean any and all information of
Manager, whether or not such information is designated as being confidential or
proprietary, but shall exclude any information that Company is able to
demonstrate (a) was in the public domain through no fault of Company, its Agents
or its Affiliates when it was used or disclosed by Company; (b) was known by
Company prior to the time it was first disclosed to or was first obtained by
Company or its Agents or Affiliates from Manager or pursuant to this Agreement;
(c) was independently developed by Company or any of its Agents or Affiliates
without the use of Manager Confidential information; or (d) was disclosed to or
obtained by Company or any Agent or Affiliate thereof, from a Person that
Company or such Agent or Affiliate did not know, and did not have reason to
know, was subject to a confidentiality or fiduciary obligation to Manager.
Without limiting the generality of the foregoing, Manager Confidential
Information shall not include financial information related to Company.

 

“Manager Credit Agreement” means the Credit Agreement, dated as of October 6,
2015, among First Choice ER, LLC, Adeptus Health LLC, certain subsidiaries of
the foregoing, the lenders party thereto and Bank of America, N.A., as
Administrative Agent (as such agreement is amended, supplemented, amended and
restated, replaced, refinanced or otherwise modified).

 

“Manager Indemnified Party” has the meaning set forth in Section 6.3.

 

“Manager Personnel” has the meaning set forth in Section 4.2.

 

“Manager Personnel Reimbursement” has the meaning set forth in Section 4.2.

 

“Medicaid” means any state program pursuant to which healthcare providers are
paid or reimbursed for care given or goods afforded to categorically eligible or
income-eligible individuals and administered pursuant to a plan approved by CMS
under Title XIX of the Social Security Act, as amended.

 

“Medicare” means any medical program established under Title XVIII of the Social
Security Act, as amended, and administered by CMS.

 

“Net Revenues” means the accrued revenues during a particular calendar month
from any and all sources on account of services rendered or goods or products
provided at the Company Facilities during

 

4

--------------------------------------------------------------------------------

 

 

such month, net of contractual allowances (including administrative adjustments)
and bad debts (including charity expense), as determined in accordance with
GAAP; provided that Net Revenues shall be subject to adjustment and
reconciliation in the event of subsequent payor disallowances, audits, set- offs
or adjustments that are treated as prior period adjustments under GAAP rather
than included in the calculation of the relevant period’s net income. Any such
adjustment to Net Revenues shall be proposed by Manager, and approved by the
Board as set forth in Section 3.01(b) of the Operating Agreement.

 

“New Projects” has the meaning set forth in Section 2.1(f)(ii).

 

“Non Acute Care Net Revenues” means all Net Revenues that are not attributable
to acute care hospitals.

 

“Notice of Default” has the meaning set forth in Section 5.2.

 

“Operating Agreement” means the Operating Agreement dated as of the date hereof,
by and among Adeptus, THR and Company.

 

“Parties” and “Party” have the meaning set forth in the Preamble.

 

“Person” means and includes any individual, profit or nonprofit corporation,
association, partnership, joint venture, trust, estate, limited liability
company or other legal entity or organization.

 

“Personnel” has the meaning set forth in Section 2.1(h).

 

“PHI” has the meaning set forth in Section 7.2.

 

“Privacy and Security Policies” has the meaning set forth in Section 7.2(a).

 

“Privacy and Security Standards” has the meaning set forth in Section 7.2(d).

 

“Reasonable Compensation” as applied to the value of services shall mean the
amount that would ordinarily be paid for like services by like enterprises
(whether taxable or tax-exempt) under like circumstances in arms-length
transactions. IRC §162 standards shall apply in determining reasonableness of
compensation, taking into account the aggregate benefits provided to a Person
and the rate at which any deferred compensation accrues.

 

“Renewal Term” has the meaning set forth in Section 5.1.

 

“Restricted Area” means Collin County, Texas, Dallas County, Texas, Denton
County, Texas, Ellis County, Texas, Hood County, Texas, Johnson County, Texas,
Kaufman County, Texas, Parker County, Texas, Rockwall County, Texas, Tarrant
County, Texas and Wise County, Texas.

 

“Stark Law” has the meaning set forth in Section 7.2(b).

 

“Support Agreement” means the Support Services Agreement entered into by and
between Company and THR concurrently with the execution and delivery of this
Agreement pursuant to which THR provides certain administrative and support
services for Company Facilities, as such Agreement may be modified or amended by
the parties thereto from time to time.

 

“Term” has the meaning set forth in Section 5.1.

 

“Transition Period” has the meaning set forth in Section 5.5(c).

 

5

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

“Transition Services” has the meaning set forth in Section 5.5(c).

 

“THR” has the meaning set forth in the Recitals.

 

“THR Competitor” means [*]

 

“THR Trademark License Agreement” means the Trademark License Agreement dated as
of the date hereof, by and among THR and Company.

 

ARTICLE 2

OBLIGATIONS OF MANAGER

 

2.1Management Services. Subject to the terms and conditions of this Agreement,
the terms and conditions of the Operating Agreement, and the oversight and
direction by the Board, as well as Applicable Laws, Manager shall perform and
provide, or arrange for the performance and provision of, the items and services
described in this Article 2 and in Exhibit B (collectively, the “Management
Services”), for and to Company, Company-Owned Entities, Company Facilities, as
the case may be, and the Business.

 

2.1(a)     General.  Except as otherwise expressly set forth in this Agreement,
Manager shall manage and supervise the day-to-day operations of the Company
Facilities in accordance with Company Policies and Procedures.  In performing
the Management Services, Manager shall:

 

(i)           devote such time and talents to the management of the Business and
Company Facilities as may be necessary and appropriate to efficiently perform
the Management Services in accordance with this Agreement; Company;

 

(ii)         act in good faith and with reasonable diligence in the interests of
the

 

(iii)        manage and operate Company, the Business and each of the Company
Facilities in a manner consistent with the purposes of Company as set forth in
the Operating Agreement, including, without limitation, the tax exempt and
charitable purposes established therein;

 

(iv)        manage and operate Company, the Business and each of the Company
Facilities in all material respects in a manner consistent with all Applicable
Laws; and

 

(v)         cause Company to comply at all times with the provisions of Section
2.02 and Section 2.03 of the Operating Agreement, subject to the terms and
conditions of this Agreement.

 

2.1(b)     Company Operations. Manager shall implement all aspects of the
operation of Company and shall have the responsibility and commensurate
authority for all such activities. Manager shall recommend such rule,
regulation, policy or procedure as Manager deems reasonably necessary or
appropriate for a particular situation. Manager shall advise Company on all
material aspects of Company’s operations including, without limitation,
regulatory and contractual requirements, financial affairs, third party payment
programs, insurance requirements, human resources issues, management information
systems, marketing activities, building and facility issues, capital improvement
projects, Medical Staff appointment and relations issues, purchasing programs,
and all other aspects of Company’s operations. Manager shall review on an
on-going basis the cost-effectiveness and quality of services rendered to
patients at the Company Facilities, and shall make recommendations to Company
for

 

6

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

improved utilization. Manager shall advise and assist Company in securing and
retaining contracts in the name and for the account of Company with such
individuals or entities necessary for the proper and efficient functioning of
the Business; provided that Manager shall not be responsible for the management
and implementation of payor contracting services for the Company pursuant to the
Support Agreement, or any other matters under the Support Agreement.

 

2.1(c)     Development Services. Manager shall implement and oversee the
development and expansion of the Company Facilities in accordance with the
initial strategy plan attached to the Operating Agreement, as modified or
amended by Company from time to time (the “Initial Strategy Plan”).
Implementation shall include arranging for leases and/or loans necessary to
finance Company Facilities to the extent reasonably available, as well as
recommending to Company any capital contributions from the members of Company
necessary to implement the Initial Strategy Plan, subject to approval by the
Board and/or the Members (as defined in the Operating Agreement) in accordance
with the Operating Agreement.

 

2.1(d)     Business Services.  Manager shall provide and manage all business
functions and services related to the conduct of the Business during the Term.
Without limiting the generality of the preceding sentence, Manager shall perform
and provide, or arrange for the performance and provision of, the following
items and services to and for Company, each in accordance with applicable
Company Policies and Procedures:

 

[*]

 

2.1(e)     Financial Operations.   Manager shall provide and manage all
financial operation functions related to the conduct of the Business during the
Term. Without limiting the generality of the preceding sentence, Manager shall
perform and provide, or arrange for the performance and provision of, the
following items and services to and for Company:

 

(i)          Payment on behalf of Company of all operating expenses and
payables, including salaries and payroll taxes, to the vendors, contract
parties, Personnel and creditors incurred from and after the Effective Date of
this Agreement. Company shall promptly forward to Manager any applicable bills,
payables, invoices or other documents received by Company relating to operations
of the Business incurred during the Term of this Agreement;

 

(ii)         Provide, or cause to be provided, any and all payroll processing,
including processing of payroll taxes and filings as required by applicable law,
for the Personnel; and

 

(iii)        Payment on behalf of Company of all distributions to Members in
accordance with the Operating Agreement.

 

2.1(f)     Preparation of Annual Budget and Financial Reports.

 

(i)          Operating and Capital Annual Budgets.  By October 1st of each
fiscal year of Company, Manager shall submit to Company and to THR preliminary
estimates prepared in good faith of budgeted Net Revenue and bottom line net
income for the upcoming fiscal year of the Company. By January 31st of each
fiscal year of Company, Manager shall propose and submit to the Board of Company
for approval an Operating Annual Budget (each, an “Operating Annual Budget”), a
Capital Annual Budget (each, a “Capital Annual Budget”), and annual cash flow
projections for the Company and each Company Facility for such fiscal

 

7

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

year of Company, as well as any revisions thereto to reflect material changes
during Company’s then-current fiscal year. Such Operating Annual Budget shall
include the capital required to implement the development and expansion of the
Company Facilities in accordance with the Initial Strategy Plan as applicable
for the fiscal year in question. No longer than thirty days (30) days after the
Manager has proposed and submitted the Operating Annual Budget and Capital
Annual Budget for the Company fiscal year, Company shall either approve the
proposed Operating Annual Budget and Capital Annual Budget, or cause its Board
to take all necessary actions to approve short-term contingency budgets no later
than the final day of the first quarter of the Company’s fiscal year, which
budget shall cover the period until the final Operating Annual Budget and
Capital Annual Budget are developed with Manager and adopted by the Company’s
Board. Manager shall exercise commercially reasonable efforts to operate the
Company and each of the Company Facilities consistent with the Annual Budgets;
provided, however, overages not exceeding [*] in excess of the Operating Annual
Budget (in the aggregate) due to ordinary course expenditures for operations
shall be permitted without further Company approval; provided, further, Company
may modify an Annual Budget from time to time as provided in the Operating
Agreement, which modification shall then become the new authorization for
expenditures hereunder.

 

(ii)         New Projects.  Any operational or capital project, including
construction of any new Company Facility that was not anticipated in the Initial
Strategy Plan or applicable Operating Annual Budget or Capital Annual Budget
(along with such proposal or plan for the same, a “New Project”) shall be
brought to the Board for approval. The development plan and budget related to
Manager’s desire to pursue any New Project shall be presented by Manager to the
Board at least thirty (30) days prior to the anticipated date at which the Board
will approve the New Project. Each New Project proposal will include an
itemization of all expenditures to be made including, without limitation, the
costs of developing and opening the Company Facility, the costs of obtaining any
required regulatory approvals, and any other development fees payable to any
party, construction and equipment costs and the estimated initial working
capital that will be needed to finance the start-up phase of operations at such
Company Facility. The New Project proposal shall also set forth in reasonable
detail the development activities of the Members or their Affiliates of Company,
timelines for completion of such activities and the activities expected to be
undertaken by each Member or their Affiliates of Company to develop such Company
Facility. No more than thirty (30) days after receiving the New Project
proposal, Company shall either approve or reject the proposed New Project, or if
the Board determines it needs additional information in order to make a
decision, the decision shall be deferred until the information is furnished,
provided the Board shall use good faith efforts to review the information and
make decisions promptly. Manager shall have no authority to proceed with the
construction or implementation of any New Project until such New Project is
approved by the Board as set forth in Section 3.01(b) of the Operating
Agreement.

 

(iii)        Monthly Reports.  Manager shall, within thirty (30) days from the
last day of each month from January through November and within fifteen (15)
days after the end of December, submit to Company a month and year-to-date
report comprised of (1) an internally prepared summary balance sheet of the
Business as of the end of the calendar month, (2) a related statement of income
or operations (as the case may be), (3) a schedule of the

 

8

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number of patient visits at each Company Facility (and other information on
services reasonably required by Company) during the calendar month, (4) accounts
receivable aging pertaining to the accounts receivable generated in the
Business, identifying the age of all such outstanding accounts receivable, (5)
calculation of the Management Fee and Expense Reimbursement for such month, and
(6) a determination of the amount of Distributable Funds (as defined in the
Operating Agreement). Items (1), (2) and (3) in this Section shall also be
submitted to THR simultaneously with their submission to Company.

 

(iv)        Annual Audit and Tax Returns. Manager shall, at the expense of the
Company, cause the Company’s financial statements to be audited by a certified
public accountant selected by the Manager and approved by THR, such approval not
to be unreasonably withheld, by no later than ninety (90) days after the end of
such Fiscal Year. Within one hundred twenty (120) days after the end of each
fiscal year of Company, Manager shall supply to Members all financial
information possessed by Manager necessary for the timely preparation of
Members’ federal returns including, but not limited to, Forms K-1 and LLC 1065.

 

(v)          Financial Assistance Reporting. Manager shall make periodic reports
to Company and THR regarding the community benefit and financial assistance
activities of the Company Facilities, including, without limitation, the number
of FAP-eligible individuals, (as described below pursuant to Section 2.1(g)),
provided services by the Company Facilities.

 

(vi)        Other Reports. Manager shall prepare and deliver to the Board such
other reports as Manager and/or its Affiliates regularly prepares and delivers
to the senior management team of Adeptus (as defined in the Operating Agreement)
with respect to the health care facilities and services that Manager and/or its
Affiliates may from time-to-time own or manage as well as such other reports as
reasonably requested by the Board from time to time.

 

2.1(g)     FAP Policies.  Manager shall (i) conduct periodic community health
needs assessments for the communities served by Company; (ii) adopt and
implement the Company’s Financial Assistance and Emergency Medical Care Policies
(“FAP Policies”), and update such FAP Policies as required and requested by THR
to reflect any changes in interpretations of law with respect to “hospital
organizations” and “hospital facilities” as defined in Section 501(r) of the IRC
as are required to maintain compliance with Section 501(r) of the IRC and other
relevant administrative guidance and to continue to meet the reasonable needs of
the communities served by Company; (iii) widely publicize the FAP Policies to
patients and to the communities served by Company Hospital Facilities; (iv) make
available financial assistance for medically necessary and emergency medical
care to individuals who are eligible for such assistance under the standards set
forth in the FAP Policies; (v) provide reasonable and lawful levels of charity
care consistent with the FAP Policies; and (vi) not undertake any extraordinary
collection actions without having first made reasonable efforts to determine if
the individual involved is eligible for financial assistance under the FAP
Policies. Manager shall submit to THR for approval and adoption its FAP Policies
or amendments thereto.

 

2.1(h)     Personnel.  Manager shall provide, subcontract for the provision of,
or otherwise arrange for the employment or engagement by Company and/or any
Company-Owned Entity of a Chief Executive Officer, Chief Nursing Officer,
Controller, and all other personnel including, but not limited to, professional,
management, clerical, secretarial, bookkeeping and collection personnel
reasonably necessary for the development, operations or management of the
Business and the Company Hospital Facilities (“Personnel”). For the avoidance of
doubt, Personnel shall include all employees providing services exclusively for
the Company or Company Hospital Facilities, but shall not include any employees
of Manager, or contractors or subcontractors of Manager, who provide services
for other Affiliates of Manager or Persons under common control with Manager.
All Personnel shall be qualified,

 

9

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appropriately licensed, not excluded or suspended from participation in the
Medicare or Medicaid Program. Manager shall advise Company with respect to the
salaries and fringe benefits of all such Personnel and shall provide all payroll
administrative services related to same. Manager agrees not to discriminate
against such Personnel on the basis of race, religion, age, sex, disability,
national origin or other factors prohibited by law. The provision of Personnel,
the decision whether such Personnel shall be employed by or sub-contracted with
Manager, and the hiring and firing decisions with respect to such Personnel
(except as set forth in the next sentence) shall be within Manager’s sole
discretion, subject to any allocation of Personnel between Company and Manager
set forth in an applicable Operating Annual Budget. At initial engagement or
employment, Manager shall notify personnel employed or engaged by Company and/or
any Company-Owned Entity and such person shall affirm that they are an employee
of the Company, Manager or contracted party and are not an employee of Texas
Health Resources.

 

2.1(i)     Human Resources. In addition to the provision of Personnel, Manager
shall provide oversight to Company’s human resource department and assist in
implementing (1) management training and leadership development programs, and
(2) employee service programs, all based upon standard programs or tool kits of
Manager. Manager shall provide (1) oversight for health benefit and wage
services, and (2) employee background check support. Manager shall also provide
oversight and coordination of Company’s recruiting efforts, provided that
Manager, Company and THR shall collaborate to ensure that Company’s recruiting
efforts are implemented in a manner consistent with the recruiting efforts of
THR. Manager will coordinate with THR human resources personnel regarding the
design of the Company’s employee orientation and ongoing training programs with
the intention of including training elements relating to THR’s Mission, Vision,
Values and Promise as deemed reasonable and appropriate by Company, Manager and
THR.

 

2.1(j)     Company Books and Records. Manager shall maintain all files and
records relating to the operations and activities of Company, the Business and
the Company Facilities including, but not limited to, customary financial
records and patient files (collectively, the “Company Books and Records”).
Notwithstanding anything in this Agreement to the contrary, the preparation,
maintenance and administration of all Company Books and Records shall comply
with all Applicable Laws including, without limitation, HIPAA, and all Company
Books and Records shall be located so that they are readily accessible as and to
the extent necessary for patient care, consistent with ordinary records
management practices. Company records shall also be available to the Company’s
officers and Members, subject to applicable legal conditions thereon.

 

2.1(k)     Insurance/Risk Management. Manager shall retain professionals for
risk management services relating to the types of insurance required to be
maintained by Company as defined in the Operating Agreement for the operation of
the Business.

 

2.1(l)     Medical Staff/Credentialing. Manager shall assist in the sourcing of
physicians to become active members of the Medical Staff (as defined in the
Operating Agreement). Manager in coordination with Company and THR shall
recommend (a) the specialty areas for physician sourcing based upon needs of the
communities served by Company Facilities, and (b) the required criteria for
potential physician targets. Any cost incurred in the physician sourcing process
including, without limitation, income guarantees, signing bonuses, moving
expenses, travel expenses or other similar type expenses shall be an Expense
Reimbursement. Manager cannot assure the availability of appropriate physicians
or the employment of any physicians needed to satisfy the specialty needs of
Company Facilities or the community. Manager shall assist Company with primary
source verification in relation to the credentialing of healthcare professionals
on staff at Company Facilities in accordance with the bylaws of the Medical
Staff.

 

2.1(m)     Exchange of Information.  Manager shall coordinate with THR to
maintain policies and procedures, including information technology policies and
procedures, relating to the

 

10

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exchange of health care information for the purpose of providing seamless
healthcare services and customer relationship management among Company and
members of the THR provider network, to the extent permitted by Applicable Law.
Manager may grant THR access to patient-level information, which may be blinded
or redacted to comply with Applicable Law, provided that THR is subject to
confidentiality restrictions no less restrictive than under this Agreement.

 

2.1(n)     Management Services Detail. Further delineation of the services
described above is set forth in more detail on Exhibit B attached hereto and
made a part hereof.

 

2.2         Billing and Collection Services. Manager shall, during the Term of
this Agreement, provide for or arrange for the provision of those billing and
collection services set forth below (“Billing and Collection Services”):

 

2.2(a)     Manager under the Company’s billing and tax identification number
shall bill all federal, state, private and other third party payors and patients
for the Services performed under this Agreement by the Company or its providers.
Manager shall be responsible for collecting any and all payments for the
Services (the “Collections”), in accordance with industry best practice
standards, applicable laws, and payor requirements and depositing such
Collections into the Lockbox Account (as defined below). Notwithstanding the
foregoing, the defined term “Collections” shall expressly exclude any amounts
which are disgorged, overpaid or required to be returned to a private or
governmental payor. Company will utilize THR’s charge master for the purposes of
determining all amounts billed to patients starting on or before January 1,
2017.

 

2.2(b)     Manager shall maintain a lockbox account established in the name of
and maintained by the Company, or its affiliates at a bank (the “Lockbox Bank”)
to be mutually agreed upon by Manager and the Company ; provided that, the
initial Lockbox Bank shall be Bank of America, N.A. (the “Lockbox Account”).
Upon Manager’s receipt of any Collections, Manager shall immediately deposit
such Collections into the Lockbox Account. Manager shall not maintain any bank
account for deposits of Collections which are not a Lockbox Account for purposes
of this Agreement. Manager’s representative, (“Manager’s Representative”) shall
enter into an agreement with the Lockbox Bank to cause distributions of the
Lockbox Account to occur in Manager’s Representative’s sole discretion. While
nothing shall prevent Manager’s Representative from modifying or revoking such
instructions with the Lockbox Bank that holds the Lockbox Account, the Manager
shall be in material breach and default of this Agreement if Manager’s
Representative modifies or revokes the instructions and agreements contemplated
in this Agreement without approval of the Board. Manager’s Representative shall
have exclusive authority over, and access to, the Lockbox Account for the
purpose of making withdrawals and disbursements from same.

 

2.2(c)     This Section 2.2 shall survive the expiration or termination of this
Agreement.

 

2.3         Additional Services. In the event that Company wishes to obtain
services in addition to the Management Services, Manager shall discuss with
Company the options available to Company for obtaining such services, and the
related cost thereof and the applicable compensation if Manager were to perform
and provide, or arrange for the performance and provision of, those items or
services via Personnel. For the avoidance of doubt, in the event that Manager
and Company agree that Manager is to provide such items or services via
employees of Manager, or contractors or subcontractors of Manager, who provide
services for other Affiliates of Manager or Persons under common control with
Manager, then such additional services shall not be considered to be provided by
Personnel.

 

11

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2.4         General Limitations on Manager’s Authority.

 

2.4(a)Company, through its Board, shall exercise, throughout the Term, ultimate
authority, supervision, direction and control over the Business, policies,
operation and assets of Company, and shall retain the ultimate authority and
responsibility regarding the powers, duties and responsibilities vested in
Company by Applicable Laws including, without limitation, the responsibilities
related to (i) the quality of care at Company and compliance by Company with all
applicable federal, state and local laws including, without limitation,
compliance with federal and state laws relating to “fraud and abuse” by
hospitals and other healthcare providers and compliance with the Stark Law, (ii)
adopting, amending from time-to-time and enforcing rules, regulations,
resolutions and policies for governance of Company, (iii) approving annual
capital and operating budgets and cash flow projections for Company, and (iv)
otherwise exercising governance oversight of Company as described in the
Company’s Operating Agreement, unless otherwise expressly and exclusively
delegated to Manager. Nothing in this Agreement is intended to alter, weaken,
displace or modify Company’s responsibility for its direction and control as set
forth in Company’s corporate documents. Management Services related to
licensure, governmental approvals, provider numbers or similar items for the
operation of the Business shall be limited to administrative oversight.

 

2.4(b)     Manager shall not take any action that requires the prior approval
of, is reserved to the Board or the Members of Company under, is a Major
Decision under, or is a THR Reserved Decision under, the Operating Agreement or
Applicable Laws, without first ensuring that such action has been approved in
accordance with the Operating Agreement and/or such Applicable Laws.

 

2.4(c)     Manager shall not take any action that contravenes explicit Company
Policies and Procedures or any written directives issued by the Board.

 

2.4(d)     Manager shall not make expenditures not authorized in accordance with
Section 2.1(f).

 

2.5Retention of Authorities Required By Law. Nothing herein shall be deemed to
assign or delegate to Manager, and Company and/or THR as applicable shall
retain, all authorities that by law or regulation must be retained and exercised
by the licensed operator, or Medicare/Medicaid provider, or Joint Commission
accredited entity, of any applicable site or facility.

 

2.6Manager’s Professional Standard Obligation. In all conduct related to this
Agreement, Manager shall: (a) comply with all applicable law, (b) perform
diligently and in good faith as agent of the Company and in a manner to be in
the best interests of such Company, (c) perform at the higher of (i) customary
standards of competence used by an experienced professional manager of a
business of the same type as the Company; (ii) the standard of competence
Manager provides at other Freestanding ER Facilities or Hospital Facilities
owned, operated or controlled by Adeptus or its Affiliates or (iii) the specific
standards set forth herein, and (d) refrain from acting or purporting to act in
a manner that reasonably may create a false or misleading impression in third
parties that Manager is authorized to act as agent or service provider to
Company beyond the scope of the actual duties and responsibilities set forth
herein.

 

2.7Government and Public Relations. Recognizing that THR is a large employer and
provider of hospital and other services in Texas, Manager acknowledges and
agrees that it will consult in advance with THR and the Company before making
any material communication to governmental officials, or making any material
public statement about its services or the Company. This consultation obligation
shall not prevent Manager from meeting its legal or regulatory obligations.

 

12

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2.8Ownership of Revenues. Company, and not Manager, shall own all revenues,
income and monies billable or receivable or received arising from or related to
its operations; provided that this is not in derogation of the Company’s
obligation to pay Manager its fees as provided herein. In the event of
non-payment, Manager shall pursue its remedies under this Agreement and not by
means of withholding revenues from Company or deduction or set off or other
means of “self-help.”

 

2.9Force Majeure. Manager shall not be liable to Company for failure to perform
any of the Management Services, in the event of strikes, lockouts, calamities,
acts of God, unavailability of supplies over which Manager has no control or
other events over which Manager has no control for so long as such event impedes
full performance; provided that Manager shall promptly notify Company in writing
of any such occurrence; Manager shall nevertheless be obligated to use
commercially reasonable efforts to continue to perform to the extent that is
practicable despite such events; and Company shall have no obligation to pay the
Management Fee during any suspension of the Management Services due to any such
occurrence, except for a portion of such Management Fee that fairly reflects the
portion of performance that Manager does provide.

 

2.10HIPAA Compliance. In providing the Management Services hereunder the Parties
understand and agree that Manager will be a Business Associate of Company for
purposes of HIPAA. As such, Manager shall enter into and comply with the
Business Associate Agreement in substantially the same form as included in
Exhibit C (“Business Associate Agreement”).

 

2.11Rebates. If Manager purchases (whether in its own name, in the name of any
of its Affiliates or in the name of Company) pharmaceuticals, supplies or other
similar goods for use in the operation of the Business, Company shall be
entitled to all rebates and discounts received by Manager in connection with
such purchases.

 

2.12Limitations on Management Services. Except where noted that the Management
Services listed or described in any particular section are not subject to
limitation, Management Services shall include only those services specifically
identified in Article 2 of this Agreement. Without limiting the generality of
the foregoing, the Management Services shall not include and shall not be
construed as including any service, item, access or deliverable not specifically
identified herein, and shall specifically not include or be construed as
including such items as legal services, audit services (or the services of a
certified public accounting firm), expert witness services, cost report
preparation/oversight, data processing or information system software or
hardware, feasibility studies in connection with Company’s procurement of third
party financing, certificate of need applications related to major capital
projects, facility master planning, valuation on appraisal services,
architectural or engineering services, construction program management,
physician practice management, and costs associated with Company website
development or monthly hosting. Any modifications to the Management Services to
be provided by Manager to Company set forth in this Agreement must be confirmed
through a signed amendment to this Agreement or by a separate written agreement
signed by an authorized representative of each Party.

 

ARTICLE 3

OBLIGATIONS OF COMPANY

 

3.1Exclusive Arrangement. Company agrees that, during the Term, Manager and its
subcontractors shall be the sole and exclusive provider of Management Services
for and to Company or

 

13

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

any of its Company owned Affiliates. Notwithstanding the foregoing, Company
retains the right to obtain any services, systems, equipment or other items
within or outside the scope of Management Services, upon the determination by
the Board that such added services may be necessary to comply with Applicable
Laws or lawful obligations, or to comply with accreditation standards or the
requirements of government program participation, or to fulfill the fiduciary
obligations of the Board.

 

3.2Cooperation with Manager. Company will cooperate with Manager in the
provision of Management Services to Company. Company shall provide Manager with
all authorizations and documentation concerning Company operations reasonably
necessary for Manager to fulfill its obligations under this Agreement.

 

3.3Right to Inspection. Company agrees that Manager shall have the right at all
reasonable times to enter any Company Facility as may be necessary and advisable
in order for Manager to provide the Management Services pursuant to this
Agreement.

 

3.4Medical and Clinical Staff; Medical and Professional Matters. The Medical
Staff shall be organized and reasonably function according to its bylaws and the
laws and regulations of the State of Texas as they may be amended from time to
time. Company shall retain authority for approval of the bylaws of the Medical
Staff. All matters requiring professional medical judgments including, without
limitation, the evaluation of clinical competence, the supervision of clinical
performance, the provision of clinical training and the control of the
composition, qualifications and responsibilities of the Medical Staff, shall
remain the responsibility of Company, the Medical Staff and allied health
professionals. Manager shall have no responsibility whatsoever for such medical
judgments. Company and Medical Staff shall retain such roles and
responsibilities as are necessary to meet the accreditation requirements of any
accrediting body which has accredited the activities of Company, and shall bear
any responsibility for or any control over the clinical decisions, patient care,
quality outcomes, infection control, or any other clinical or quality matter at
Company.

 

ARTICLE 4

COMPENSATION AND PAYMENT OF OPERATING EXPENSES

 

4.1Management Fee. In consideration for due performance by Manager of the
Management Services to be provided by Manager to Company, Company shall pay a
fee to Manager (the “Management Fee”) equal to the sum of, for each fiscal year:
[*]. The Parties acknowledge that the Management Fee is consistent with and
reflects the fair market value of the Management Services agreed upon through
arms’ length negotiations. The Parties agree that no consideration or anything
else of value given or received under this Agreement is or will be paid for or
related to the volume or value of any patient referrals (direct or indirect) or
other business to or from Company, Manager or any of their respective
Affiliates.

 

For the avoidance of doubt, the Management Fee includes and covers the
Management Services listed in Exhibit B as “Included in the Management Fee,” but
excludes (a) the provision of Personnel described in Section 2.1(h), (b) the
cost of Manager Personnel allocated to Company (including as provided in Section
4.2), and (c) any costs and expenses not listed in Exhibit B as being “Included
in the Management Fee,” and these excluded items shall be separately paid for or
reimbursed by Company.

 

4.2Manager Personnel Reimbursement In addition to the Management Fee, Company
shall, for Personnel engaged and/or employed by Manager (collectively, “Manager
Personnel”) solely to perform services for Company, pay to Manager an amount
equal to the sum of (a) the salary or wages of the Manager Personnel as set
forth in an approved Operating Annual Budget, provided that the total

 

14

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compensation paid to each of the Manager Personnel is within the range of
Reasonable Compensation; plus (b) twenty-five percent (25%) of such salary or
hourly wage to reimburse Manager for applicable direct and indirect employee
benefit costs related to Manager Personnel including, without limitation any
premiums paid for health insurance, any contributions to retirement accounts,
any cash payments owed to employees upon termination of employment for accrued,
unused vacation and administrative support costs including, but not limited to,
human resources, payroll, legal, insurance and similar costs; plus (c) the
actual costs Manager incurs to provide all statutory benefits for which the
Manager Personnel are eligible as of the date hereof (including, without
limitation, payroll taxes, any unemployment insurance or workers’ compensation
insurance, ), as well as all reasonable costs and expenses related to its
provision of Manager Personnel, (collectively, the “Manager Personnel
Reimbursement”). Such amounts shall be included in the Operating Annual Budget
to the extent reasonably possible. As part of the Operating Annual Budget
process Manager shall provide the Board an estimate of the general composition
of Manager Personnel (can be done by number of full-time equivalents that will
provide given category of services rather than by the name of assigned
individuals) and an estimate of the Manager Personnel Reimbursement amount.

 

4.3Company Expense Reimbursement. Company shall reimburse Manager for the actual
and reasonable costs incurred by Manager in providing Management Services not
included in the Management Fee, which amounts shall be described generally and
forecasted in the applicable Operating Annual Budget (collectively, the “Company
Expense Reimbursement”  and, together with Manager Personnel Reimbursement and
Company Expense Reimbursement, “Expense Reimbursement”).

 

4.4Method of Payment and Calculation. Company shall pay to Manager the
Management Fee and Expense Reimbursement no later than the fifteenth (15th)
business day of the month after the month in which the Management Services were
provided. Upon execution of this Agreement, Company shall take all necessary
steps to initiate and authorize payment of the Management Fee and Expense
Reimbursement through automatic withdrawal from Company’s account, and wire
transfer each monthly installment to Manager’s account. All calculations under
this Article 4 shall be made on an accrual basis of accounting in accordance
with GAAP.

 

4.5Expense Reporting and Audit Rights. Manager shall provide such supporting
documentation and receipts as reasonably requested by Company or THR from time
to time evidencing the calculation of the Expense Reimbursement, and Company or
THR shall have a right during normal business hours to audit, examine and make
copies of or extracts from the books of account of Manager and/or any Affiliate
of Manager or other Person for which Manager is seeking or has received
reimbursement from Company; provided,  however, that Manager may require, as a
condition to such audit, examination and copying, that Company or THR execute
and deliver a form of confidentiality agreement pertaining to such activity in
favor of Manager and requiring that Company or THR, and its consultants and
advisors, use the information so received solely for the purposes of verifying
the accuracy and amounts of Expense Reimbursements and for no other purpose
whatsoever. Such inspection right may be exercised through any agent or employee
of Company or THR designated by it or by an independent certified public
accountant. Company or THR shall bear all expenses incurred in any examination
made by or for it pursuant to this Section 4.5.

 

15

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

ARTICLE 5

TERM OF AGREEMENT

 

5.1Term. This Agreement shall be effective for a period of [*] years from the
Effective Date (the “Initial Term”), and [*] (each a “Renewal Term” and,
together with the Initial Term, the “Term”) unless either Party provides a
written notice to the other Party, no less than one hundred eighty (180) days
prior to the expiration of the then-current Term.

 

5.2Termination by Company. If Manager fails substantially to perform any of its
material obligations under this Agreement (a “Default”), Company shall give
Manager a “Notice of Default.” The Notice of Default shall be in writing and set
forth the nature of the alleged Default. Any Notice of Default from Company must
be approved or authorized by the Board. Manager shall have sixty (60) days to
cure the Default, or such longer period as is reasonably necessary to cure such
Default if it is not curable within sixty (60) days, but in no event longer than
one hundred eighty (180) days (such applicable period, the “Cure Period”). If,
due to the nature of the Default, Manager is not reasonably capable, in the
reasonable opinion of Company, of curing the Default within the Cure Period,
Company shall have the right to submit the matter to an independent third-party
consultant with expertise in the field of the material obligation in question,
the identity of such consultant to be mutually agreed upon by the Parties in
good faith. If the consultant is unable to resolve or propose a resolution for
curing the Default within a reasonable period of time (in no event less than the
Cure Period), then Company may choose to terminate Manager’s status as manager
of Company under this Agreement, and Company shall seek, in accordance with the
terms of the Operating Agreement, a new entity to function as manager. Any
dispute regarding whether or not a Default has occurred on the part of Manager
or whether such Default is curable within the Cure Period shall be submitted
promptly to the consultant dispute resolution process described in this Section
5.2.

 

5.3Termination of Manager. Company may terminate this Agreement immediately upon
the occurrence of any of the following: (a) if at any time neither Adeptus nor
an Affiliate of Adeptus is a Member of Company as a result of the exercise of
the THR Purchase Option (as defined in the Operating Agreement) under the
Operating Agreement, (b) any Change of Control with respect to Manager in which
the acquiring Person is a THR Competitor; (c) the occurrence of any
Disqualifying Event with respect to Manager; or (d) in accordance with Section
9.8.

 

5.4Termination by Manager. Manager may terminate this Agreement immediately upon
the occurrence of any of the following: (a) THR, in its capacity as a Member, or
the THR-appointed members of the Board, take or approve any action or fail to
take or approve any action that causes Company to be in material breach of this
Agreement and such material breach is not cured to the reasonable satisfaction
of Manager within (i) sixty (60) days after written notice of such material
breach is provided to Company, or (ii) if the material breach is of a nature
that cannot be cured within such sixty (60) day period, one hundred eighty (180)
days after written notice of such material breach is provided to Company,
provided that THR, in its capacity as a Member, and the members of the Board
appointed by THR, have and continue to diligently work in good faith during such
extended cure period to cure such material breach; (b) the occurrence of any
Disqualifying Event with respect to Company, (c) the failure of Company to pay
Manager the Management Fee in accordance with Article IV, or (d) in accordance
with Section 9.8.

 

5.5Effect of Termination or Expiration. Upon any termination or expiration
without renewal of this Agreement for any reason, the following shall apply:

 

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5.5(a)         Transition of Employees. Manager acknowledges and agrees that,
upon any termination or expiration without renewal of this Agreement for any
reason, if the Manager or an Affiliate thereof is no longer a Member of Company,
(i) Company shall have the right, but not the obligation, to offer employment
to, or otherwise contract with, any and all Manager Personnel dedicated
exclusively or primarily to Company and/or the operation of the Company
Facilities; (ii) any such offer of employment or subsequent employment of or
contracting with such Manager Personnel shall not violate or be deemed to
violate any non-solicitation or other restriction relating to the employment of
or contracting with such Manager Personnel set forth in the Operating Agreement,
or agreements Manager may have with any Manager Personnel; and (iii) Manager
shall not, without the prior written consent of Company, directly or indirectly
(including without limitation through any Affiliate of Manager or any other
Person) encourage, induce, attempt to induce, solicit or attempt to solicit any
Personnel employed by or contracting with Company to leave his or her
employment, consulting or independent contractor relationship with Company or
any Company Affiliate. In any such instances, Manager shall cooperate in good
faith with Company to effectuate the transfer of employment and/or contracting
arrangements with such Manager Personnel to Company, and shall not, directly or
indirectly, impose any restrictions on such Manager Personnel that would
preclude or otherwise inhibit such Personnel from accepting employment or other
contracting arrangement with Company. Nothing in this Section 5.5(a) shall
require Manager to terminate any Manager Personnel or require such Personnel to
accept such employment or other contracting arrangement with Company.

 

5.5(b)         Return of Company Assets. Upon the expiration without renewal or
termination of this Agreement, Manager shall immediately return to Company any
and all assets or property of Company then in possession of Manager (“Company
Assets”); provided,  however, that in the event that Manager provides Transition
Services (as defined below) pursuant to Section 5.5(c) below, Manager shall not
be required to return to Company any such Company Assets that are necessary for
the provision of Transition Services until the end of the Transition Period (as
defined below), at which time Manager shall immediately return to Company any
and all remaining Company Assets of Company then held or retained by Manager.

 

5.5(c)         Transition Services. Upon any expiration without renewal or
termination of this Agreement for any reason, Manager shall, upon Company’s
request, for a period not to exceed one (1) year following the effective date of
expiration without renewal or termination of this Agreement (the “Transition
Period”), continue to provide some or all such Management Services as requested
by Company from time to time (the “Transition Services”), substantially upon the
terms and subject to the conditions set forth in this Agreement subject to such
fair and equitable modifications as to which the Parties may agree.
Notwithstanding the foregoing or any other provision of this Agreement, during
the Transition Period, Company shall pay to Manager an amount equal to the fair
market value of the Transition Services rendered by Manager, with fair market
value for this purpose determined by reference to arms’-length arrangements
between comparable health care service businesses and comparable healthcare
service business management companies in the relevant market or comparable
markets, but in no event shall such services be provided for an amount that is
less than Manager’s reasonable costs in providing such services.

 

5.5(d)         The provisions of this Section 5.5 shall survive the expiration
or termination of this Agreement.

 

5.6Notice of Termination to Manager’s Lender. Notwithstanding anything to the
contrary set forth in this Agreement, no termination by Company shall be
effective unless Company provides the administrative agent (or lead credit
provider) under the Manager Credit Agreement with (i) prior notice of such
termination and (ii) a period of 90 days from such notice to transfer the full
rights and obligations of the Manager hereunder to a replacement manager (a
“Transferee Manager”) in connection with an

 

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exercise of remedies under the Manager Credit Agreement and related agreements.
The Transferee Manager shall have a reasonable period of time to cure all
breaches of this Agreement in effect immediately prior to such transfer and any
such breaches that cannot be cured shall be waived by Company. The Transferee
Manager shall require the approval of THR, such approval not to be unreasonably
withheld.

 

ARTICLE 6

INSURANCE AND INDEMNIFICATION

 

6.1Company Insurance Coverage. Company shall maintain, throughout the Term, the
minimum insurance coverages required under the terms of the Operating Agreement.
All premiums or other costs shall be subject to Expense Reimbursement.

 

6.2Additional Insureds. Manager (and its Affiliates) shall be named as
additional insureds, with respect to services under this Agreement, under the
Company’s comprehensive general, professional, directors’ and officers’,
employment practice and umbrella/excess liability policies. Their rights to
invoke the protection of such policies shall be severable from and independent
of Company’s rights, and these policies shall not be terminable or non-renewable
except upon thirty (30) days prior written notice to Manager. If such coverage
is written on a claims-made form, following termination or of this Agreement,
Company (a) shall continue such coverage to survive with Manager and its
Affiliates as an additional insured for the period of the applicable statute of
limitations; or (b) shall provide an extended reporting endorsement (tail
coverage) covering Manager and its Affiliates for claims arising during the
Term, but not reported until after the termination or of this Agreement. Should
Company change insurance companies during the Term, Company shall maintain
coverage which includes claims incurred but not reported under the prior
coverage (prior acts coverage). No later than thirty (30) days following the
execution of this Agreement, and thirty (30) days following the end of each
policy year, Company shall provide Manager a copy of the endorsements naming
Manager and its Affiliates as additional insureds. It is the intention of the
Parties that such insurance shall protect Company, Manager and Manager’s
Affiliates and will be the primary insurance for such Parties for any and all
losses covered thereby, notwithstanding any insurance which may be maintained by
Manager or its Affiliates, covering any such loss. Company hereby waives any
right of contribution with respect to a loss covered under such policies (or
their deductibles) against Manager or its insurance carriers.

 

6.3Indemnification by Company. Company shall defend, indemnify, save and hold
harmless Manager, its shareholders, members, directors, officers, employees,
(including, without limitation, the Personnel) agents and direct or indirect
parents or subsidiary entities (“Manager Indemnified Party”) from and against
any and all judgments, losses, claims, damages, liabilities, fines, penalties,
costs and expenses (including reasonable attorneys’ fees and expenses paid or
incurred) (“Losses”), joint or several, which may be asserted against any
Manager Indemnified Party arising out of (a) any breach by Company of any
covenant or any representation or warranty in this Agreement, but excluding any
breach caused by any act or omission of Manager, Personnel, Adeptus acting in
its capacity as a Member or the members of the Board appointed by Adeptus, (b)
the negligent, reckless or intentionally wrongful acts or omissions of Company
or its Affiliates, but excluding any negligent, reckless or intentional acts or
omissions of Company caused by an act or omission of Manager, Adeptus in its
capacity as a Member or the members of the Board appointed by Adeptus, or (c)
Manager’s acts or omissions in the performance of its duties under this
Agreement, where such acts or omissions have been directed or specifically and
knowingly approved by the Board, but excluding any Claims arising from the
grossly negligent, reckless or intentionally wrongful acts or omissions of
Manager (“Manager Claim”).

 

6.4Indemnification by Manager. Manager shall defend, indemnify, save and hold
harmless Company, THR and their members, directors, officers, employees, agents,
direct or indirect parents or subsidiary entities (each, as applicable, a
“Company Indemnified Party”) from and against any and all

 

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Losses, joint or several, which may be asserted against any Company Indemnified
Party arising out of (a) any breach by Manager or any of its Affiliates of any
covenant or any representation or warranty in this Agreement, or (b) grossly
negligent, reckless or intentionally wrongful acts or omissions of Manager or
any of its Affiliates; but in each case excluding any Losses arising from and to
the extent of the negligent, grossly negligent, reckless or intentionally
wrongful acts or omissions of a Company Indemnified Party.

 

6.5Limitation of Liability. Neither Party, their employees, agents,
representatives and/or affiliates shall have any liability to the other Party
for any indirect, consequential, incidental, exemplary, special or punitive
damages or costs including, without limitation, lost profits, loss of good will
or loss of Company’s tax-exempt status or financing, even if such Party has been
advised, knew or should have known, of the possibility thereof. Notwithstanding
the foregoing, the Parties confirm that Manager has the right to seek and
recover any and all actual damages as may be recoverable under law or equity in
the event of an improper termination of the Agreement or other improper action
by Company, including, as applicable, loss of future payments of the Management
Fee or any portion thereof. The cumulative liability of Manager, its employees,
agents, representatives and/or affiliates to Company for any and all claims,
regardless of the form of action arising out of or relating in any way to this
Agreement, shall not exceed the total fees paid under Section 4.1 by Company to
Manager during the twelve (12) month period immediately prior to the date any
such claim was filed.

 

ARTICLE 7

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

7.1Each Party Representations and Warranties. Each Party represents and warrants
with respect to themselves, and to the other party, on and as of the Effective
Date as follows:

 

7.1(a)    Such party hereby represents and warrants that it or to its knowledge
any member, employee, officer, director, manager, contractor, owner or
Affiliate, neither has been (i) convicted of any offense related to health care
or related to the provision of services paid for by Medicare, Medicaid or
another federal health care program, nor (ii) excluded from participation in
Medicare or Medicaid or any other federal or state health care program.

 

7.1(b)    Such party is not a party to or bound by any agreement, arrangement,
covenant, obligation or restriction (i) that would be violated or breached by
its execution and delivery, of or its performance of, any of its respective
obligations under this Agreement or by the consummation of the transactions,
matters and relationships contemplated hereby, or (ii) that requires the consent
of any third party (governmental or other) to enter into or perform any of its
obligations under this Agreement.

 

7.1(c)    The execution, delivery and performance of this Agreement has been
duly authorized by all requisite corporate action. This Agreement has been duly
executed and delivered and is a legal, valid and binding obligation enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
conveyance or similar law, relating to or limiting creditors’ rights generally
or by equitable principles relating to enforceability (whether or not the issue
of enforceability is decided by a court of law or in equity).

 

7.1(d)    There is no civil, criminal or administrative action, suit, demand,
claim, hearing, proceeding or investigation pending, or to such party’s
knowledge, threatened against such party that, individually or in the aggregate,
would impair or delay the ability of such party to enter into this Agreement and
to perform its obligations hereunder.

 

7.2Compliance with Law. Each party shall, at all times, comply in all material
respects with:

 

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7.2(a)    all Company Policies and Procedures, including health information
privacy policies and procedures (the “Privacy and Security Policies”), in each
case as in effect from time to time;

 

7.2(b)    the disclosure requirements and self-referral prohibitions of the
Federal Ethics in Patient Referrals Act, 42 U.S.C. §1395nn (the “Stark Law”),
codified at 42 C.F.R., Part 411, Subpart J, and any applicable state
self-referral laws;

 

7.2(c)    the anti-fraud and abuse statute, 42 U.S.C. §1320a-7b(b) (the
“Anti-Kickback Statute” or “Fraud and Abuse Statute”) and any applicable state
anti-kickback laws;

 

7.2(d)    the privacy and security requirements set forth in HIPAA, codified at
45 C.F.R. Parts 160 and 164 (the “Privacy and Security Standards”) and any
applicable state patient privacy laws; and

 

7.2(e)    any other Applicable Laws.

 

Without limiting the foregoing, Manager acknowledges that this Agreement
requires Manager to have access to or to collect or create individually
identifiable health information (“PHI”) regarding patients at the Company
Facilities in order to carry out the Management Services hereunder on behalf of
Company, and that Manager’s use and disclosure of such PHI shall be subject to
the terms and conditions of the Business Associate Agreement. Notwithstanding
the delegation of specific duties to Manager hereunder, Company shall, in
accordance with federal and state laws and guidelines, retain ultimate authority
over the standards of, and procedures and practices for, the services provided
by the Company Facilities.

 

7.3Notifications. Manager recognizes and acknowledges the importance of adequate
communication and notifications to Company regarding the Management Services
provided hereunder. Manager agrees that it will, in a prompt and timely fashion,
bring to Company’s attention, in writing, any complaint, claim or dispute or
allegation of breach it may have against Company or the Company Facilities,
their agents, representatives, employees or contractors concerning the
Management Services or subject matter of this Agreement.

 

ARTICLE 8

CONFIDENTIAL INFORMATION AND ACCESS TO FACILITIES

 

8.1Manager Confidential Information. Unless specifically authorized in writing
by Manager, Company shall, and shall cause its Agents and Affiliates to keep
confidential and not disclose or make any use of, any Manager Confidential
Information, except as and to the extent required to enable Company to perform
its obligations hereunder, to conduct the Business, or as may otherwise be
required by law. At the effective date of termination of this Agreement (or if
later, the expiration date of Manager providing services), Company shall return
to Manager all Manager Confidential Information in the possession of Company or
any of Company’s Agents or Affiliates, including any and all copies, summaries
and compilations thereof, and whether in electronic or hard copy form. An
executive officer of Company must also certify in writing to Manager that
Company has returned (or if permitted by Manager with respect to all or any part
of such Manager Confidential Information, destroyed) all Manager Confidential
Information in its possession or in the possession of any of its Agents or
Affiliates. Notwithstanding the foregoing, subject to ongoing confidentiality
obligations, Company may retain such records and information as is required by
law, for routine electronic backup or archival, or to ensure patient care and
safety. All medical records shall remain property of Company.

 

8.2Company Confidential Information. Unless specifically authorized in writing
by Company, Manager shall, and shall cause its Agents and Affiliates to keep
confidential and not disclose or make any use of, any Company Confidential
Information, except as and to the extent required to enable

 

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Manager to perform its obligations under this Agreement (or if later, the
expiration date of Manager providing services), or as may otherwise be required
by Applicable Laws. At the termination of this Agreement, Manager shall return
to Company all Company Confidential Information in the possession of Manager or
any of Manager’s Agents or Affiliates, including any and all copies, summaries
and compilations thereof, and whether in electronic or hard copy form. An
executive officer of Manager must also certify in writing to Company that
Manager has returned (or if permitted by Company with respect to all or any part
of such Company Confidential Information, destroyed) all Company Confidential
Information in its possession or in the possession of any of its Agents or
Affiliates. Notwithstanding the foregoing, subject to ongoing confidentiality
obligations, Manager may retain a copy of any records which by law it must
retain or for routine electronic backup or archival.

 

8.3Government Access to Books and Records. Insofar as 42 U.S.C.  Section
1395x(v)(1)(I) is applicable to this Agreement, Manager will comply with the
following statutory requirements governing the maintenance of documentation to
verify the cost of the Management Services furnished under this Agreement:

 

8.3(a)    Until the expiration of four (4) years after the furnishing of the
Management Services under this Agreement, Manager will make available, upon
written request of the Secretary of the United States Department of Health and
Human Services, or upon request of the Comptroller General of the United States,
or any of their duly authorized representatives, this Agreement, and books,
documents, and records of Manager that are necessary to certify the nature and
extent of such costs; and

 

8.3(b)    If Manager carries out any of its obligations under this Agreement
through a subcontract, with a value or cost of ten thousand dollars ($10,000) or
more over a twelve (12) month period, with an organization related by common
ownership or control, such subcontract must contain a clause to the effect that,
until the expiration of four (4) years after the furnishing of the Management
Services under the subcontract, the related organization must make available,
upon written request of the Secretary of the United States Department of Health
and Human Services, or upon request of the Comptroller General of the United
States, or any of their duly authorized representatives, the subcontract, and
books, documents and records of such organization that are necessary to verify
the nature and extent of such costs.

 

8.3(c)    Nothing in this Section 8.3 will constitute the waiver of the
attorney-client or any similar privilege under Applicable Laws.

 

ARTICLE 9

MISCELLANEOUS

 

9.1Assignment. This Agreement shall be binding upon, and shall inure to the
benefit of, the Parties and their respective legal representatives, successors,
and permitted assigns. Neither Party may assign this Agreement nor any rights
hereunder, nor may it delegate any of its duties to be performed hereunder,
without the prior written consent of the other Party, other than as set forth in
Section 5.6.  The Change of Control of Manager to a THR Competitor shall be
deemed an assignment.

 

9.2Confidentiality of Agreement. The terms of this Agreement shall be maintained
in confidence by both Parties except where disclosure is required by Applicable
Laws or in performance hereof.

 

9.3Amendment. This Agreement may only be amended or modified by a written
instrument executed by both Parties.

 

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9.4Interpretation and Headings and Exhibits. The section, subsection and any
paragraph headings contained in this Agreement are for the purpose of
convenience only and are not intended to define or limit or affect, and shall
not be considered in connection with the interpretation or application of, any
of the terms or provisions of this Agreement. Unless otherwise indicated
elsewhere in this Agreement, (a) the term “or” shall not be exclusive, (b) the
term “including” shall mean “including, without limitation,” and (c) the terms
“hereof,” “herein” and “hereunder” and terms of similar import shall refer to
this Agreement as a whole and not to any particular Section or paragraph where
such term may be used. The recitals to and all Schedules and Exhibits to this
Agreement are fully incorporated into and are an integral part of this Agreement
as if set forth in this Agreement.

 

9.5Entire Agreement. This Agreement, including the Schedules and Exhibits
hereto, constitutes the entire agreement between the Parties pertaining to the
subject matter contained in it and supersedes all prior contemporaneous
agreements, representations and understandings, whether oral or written, of the
Parties with respect to such subject matter.

 

9.6Counterparts. This Agreement may be signed in any number of counterparts and
the signature or signatures of the undersigned may be delivered by electronic
mail in "portable document format" (".PDF"), or by any other electronic means
intended to preserve the original graphic and pictorial appearance of a document
(each of which shall be deemed an original) and which shall together constitute
one and the same instrument.

 

9.7Notices. All notices, requests, consents, approvals, demands, claims, waivers
and other communications under this Agreement must be in writing. Any notice,
request, consent, approval, demand, claim, waiver or other communication under
this Agreement shall be deemed duly given (a) when delivered personally to the
recipient; (b) one (1) business day after being sent to the recipient by
reputable overnight courier service (charges prepaid); (c) one (1) business day
after being sent to the recipient by electronic mail so long as the electronic
mail is followed by a notice given the next business day (which notice includes
a copy of the electronic mail) by one (1) of the preceding methods under (a),
(b) or (c); or (d) five (5) business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid, and
addressed to the intended recipient as set forth below:

 

To Manager:

Adeptus Health Management LLC

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn: Donald Adam,

 

Chief Corporate Development Officer

 

Email: don.adam@adhc.com

 

 

With a copy to:

Adeptus Health LLC

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn: Timothy Mueller, General Counsel

 

Email: tim.mueller@adhc.com

 

 

To Company:

FTH DFW Partners LLC

 

612 East Lamar Blvd., Suite 500

 

Arlington, Texas 76011

 

Attn:  Krystal Mims

 

Email: KrystalMims@texashealth.org

 

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With copies to:

Texas Health Resources

 

612 East Lamar Blvd., Suite 900

 

Arlington, Texas 76011

 

Attn: Kenneth Kramer, General Counsel

 

Email: KennethKramer@texashealth.org

 

Any Party may change the address to which notices, requests, consents,
approvals, demands, claims, waivers and other communications under this
Agreement must be delivered by giving the other Party notice in the manner set
forth in this Section 9.7. Such notice shall be effective on delivery, if hand
delivered, or three (3) days after dispatch in all other cases. A courtesy copy
of any notice required hereunder shall also be sent to each Party’s counsel at
such address as may be requested, but failure to do so shall not in any way
affect the rights, obligations and liabilities of the Parties hereto.

 

9.8Effect of Invalidity. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future Applicable Laws
effective during the Term, such provision shall be fully severable. This
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement that reasonably can be given effect apart
from the invalid or unenforceable provision shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of each
illegal, invalid or unenforceable provision there shall be added automatically
as part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable; provided that if the effect of such severance and substitution is
to deprive a Party substantially of its benefits hereunder, such Party may seek
to enforce its rights under Sections 5.2 and 5.3 of this Agreement. Each Party
waives any and all claims or contests it has, based on Applicable Laws proposed
or in effect as of the Effective Date, which would or could allow the Party to
challenge the existence, validity or enforceability of this Agreement.

 

9.9Governing Law and Venue. The Parties agree that this Agreement shall be
construed and enforced in accordance with the laws of the State of Texas without
regard to principles of conflicts of laws thereof, and Tarrant County and the
State of Texas shall be the venue for any litigation, mediation, or other
proceeding as between the parties that may be brought, or arise out of, in
connection with or by reason of this Agreement. The provisions of this Section
shall survive the expiration or other termination of this Agreement.

 

9.10Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIP OF
THE PARTIES HERETO BE TRIED BY A JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS
TO DEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE INCLUDING, BUT NOT LIMITED TO,
THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN, COMMON LAW OR ANY
APPLICABLE STATUTE OR REGULATIONS. EACH PARTY HERETO ACKNOWLEDGES THAT IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGH TO DEMAND TRIAL BY JURY.

 

9.11No Obligation to Make Referrals. The Parties acknowledge and agree that none
of the benefits granted the Parties under this Agreement is conditioned on any
requirement or expectation that the Parties make referrals to, be in a position
to make or influence referrals to, or otherwise generate business for the other
Party or for THR. The Parties further acknowledge that neither Party nor THR is

 

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restricted from referring any service to, or otherwise generating any business
for, any other entity of its choosing.

 

9.12Equitable Relief. Each Party acknowledges and agrees that the remedies at
law of the other Parties for any breach of Section 8.1 and 8.2 regarding
Confidentiality would be inadequate and agrees that in addition to any remedy at
law which it may have, the other Party may be granted temporary, preliminary and
permanent injunctive relief in any proceeding which may be brought to enforce
such provisions, without the necessity of posting a bond as security or proof of
actual damage. Each Party further acknowledges and agrees that any proceeding
brought pursuant to this Section 9.12 may be adjudicated in a court of competent
jurisdiction located in the County of Tarrant, Texas and that such court shall
have all the necessary authority to issue the injunctive relief described in
this Agreement.

 

9.13Relationship of the Parties. Except as otherwise expressly set forth in this
Agreement, for purposes of this Agreement it is acknowledged and agreed that
Company and Manager are at all times acting and performing hereunder as
independent contractors. Each Party shall be solely responsible for compliance
with all Applicable Laws pertaining to employment taxes, income withholding,
unemployment compensation contributions and other employment related statutes
regarding their respective employees, Agents and servants.

 

9.14Non-Assumption of Liabilities. Unless otherwise provided for under the terms
of this Agreement, all debts and liabilities to third parties, whether existing
or future, shall be the debts and liabilities of Company.

 

9.15Survival. Notwithstanding anything to the contrary contained in this
Agreement, the following provisions of this Agreement shall survive and remain
in full force and effect following the expiration or the termination, for any
reason, of this Agreement: (a) the respective rights and remedies of each Party
that may be enforced following a termination of this Agreement pursuant to the
applicable provisions of Article 5;  and (b) Article 8.

 

9.16Additional Documents and Acts. Each Party agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be reasonably requested by any other Party in order to better evidence
effectuate, carry out and perform all of the terms, provisions and conditions of
this Agreement and the transactions contemplated hereby.

 

9.17Dispute Resolution. In the event of a dispute under this Agreement, such
dispute shall be resolved in accordance with the procedures set forth in Section
11.10 of the Operating Agreement.

 

9.18Attorneys’ Fees. In any action at law or equity to enforce any of the
provisions or rights under this Agreement, the substantially unsuccessful Party,
if any, to such litigation, as determined by the court in a final judgment or
decree, shall pay the substantially successful Party all costs, expenses and
reasonable attorneys’ fees incurred therein by such Party (including, without
limitation, such costs, expenses and fees on any appeals), and if such
successful party shall recover judgment in any such proceeding, such costs,
expenses and attorneys’ fees shall be included in and as part of such award or
judgment.

 

[Remainder of page intentionally left blank; signature page follows.]

 

 

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IN WITNESS WHEREOF, the Parties or their duly authorized representatives have
executed and delivered this Agreement on and as of the Effective Date.

 

 

COMPANY

 

 

 

FTH DFW Partners LLC

 

 

 

 

 

By:

/s/ Graham Cherrington

 

Name: Graham Cherrington

 

Title: President and Chief Operating Officer

 

 

 

 

 

MANAGER

 

 

 

Adeptus Health Management LLC

 

 

 

 

 

By:

/s/ Graham Cherrington

 

Name: Graham Cherrington

 

Title: President and Chief Operating Officer

 

 

Signature Page to Management Services Agreement

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Exhibit A

 

Services Agreement for Emergency Department Coverage

 

See Attached.

 

 

 

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Exhibit B

 

MANAGEMENT SERVICES DETAIL

 

See attached.

 

[*]

 

 

2

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Exhibit C

 

BUSINESS ASSOCIATE AGREEMENT

 

This Business Associate Agreement (“Agreement”) is by and between FTH DFW
Partners LLC, a Texas limited liability company, a Texas non-profit corporation
(“Covered Entity”); and Adeptus Health Management LLC, a Texas limited liability
company (“Business Associate”).

 

RECITALS

 

WHEREAS, Covered Entity has a Services Agreement with Business Associate which
is effective May 10, 2016 (the “Underlying Agreement”) by which it has engaged
Business Associate to perform services or provide goods, or both;

 

WHEREAS, Covered Entity possesses Protected Health Information that is protected
under HIPAA and the HIPAA Regulations and state law including the Texas Medical
Records Privacy Act (MRPA), and is permitted to manage such information only in
accordance with HIPAA and the HIPAA Regulations and MRPA;

 

WHEREAS, Business Associate may receive such information from Covered Entity, or
create, receive, maintain or transmit such information on behalf of Covered
Entity, in order to perform certain of the services or provide certain of the
goods, or both;

 

WHEREAS, the parties desire to comply with health information privacy and
security protections subsequent to the enactment of the Health Information
Technology for Clinical and Economic Health Act, Subtitle D of the American
Recovery and Reinvestment Act of 2009 which has established new requirements for
compliance with HIPAA. In particular, the requirements provide that: (1) Covered
Entity give affected individuals notice of security breaches affecting their PHI
and Business Associate give notice to Covered Entity pursuant to the provisions
below (“Breach Notification Requirements”); (2) Business Associate comply with
the HIPAA security regulations (“BA Security Compliance”); and (3) additional
and/or revised provisions be included in Business Associate Agreement;

 

WHEREAS, Under HIPAA and HITECH, Covered Entity is required to enter into
protective agreements, generally known as “business associate agreements,” with
certain downstream entities that will be entrusted with HIPAA-protected health
information, including health information organizations or other persons that
provide data transmission services with respect to HIPAA-protected health
information and that require access on a routine basis;

 

WHEREAS, Health information is further protected by state law, including the
Texas Medical Records Privacy Act; and

 

WHEREAS, Covered Entity wishes to ensure that Business Associate will
appropriately safeguard Protected Health Information.

 

NOW THEREFORE, Covered Entity and Business Associate agree as follows:

 

1.Definitions. The parties agree that the following terms, when used in this
Agreement, shall have the following meanings, provided that the terms set forth
below shall be deemed to be modified to reflect any changes made to such terms
from time to time as defined in HIPAA and the HIPAA Regulations. All capitalized
terms used in this Agreement but not defined below shall have the meaning
assigned to them under the HIPAA Regulations.

 

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a.“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191.

 

b.“HIPAA Regulations” means the regulations promulgated under HIPAA by the
United States Department of Health and Human Services, including, but not
limited to, 45 C.F.R. Part 160 and 45 C.F.R. Part 164 subparts A and E (the
“Privacy Rule”) and the Security Standards as they may be amended from time to
time, 45 C.F.R. Parts 160, 162 and 164, Subpart C (the “Security Rule”).

 

c.“HITECH Act” means the provisions of Division A, Title XIII of the American
Recovery and Reinvestment Act of 2009 (“ARRA”), known as The Health Information
Technology for Economic and Clinical Health, Act 42 U.S.C. §3000 et. seq., and
implementing regulations and guidance.

 

d.“MRPA” means Texas Medical Records Privacy Act, as codified in Section 181 et
seq. of the Texas Health and Safety Code and as implemented through regulations
including the Standards Relating to the Electronic Exchange of Health
Information, codified at Title 1, Section 390.1 et seq. of the Texas
Administrative Code.

 

e.“Business Associate” means, with respect to a Covered Entity, a person who:

 

1)on behalf of such Covered Entity or of an Organized Health Care Arrangement
(as defined under the HIPAA Regulations) in which the Covered Entity
participates, but other than in the capacity of a member of the workplace of
such Covered Entity or arrangement, creates, receives, maintains, or transmits
PHI for a function or activity regulated by HIPAA, implementing Regulations or
MRPA including claims processing or administration, data analysis, processing or
administration, utilization review, quality assurance, patient safety activities
listed at 42 CFR 3.20, billing, benefit management, practice management, and
repricing; or

 

2)provides, other than in the capacity of a member of the workforce of such
Covered Entity, legal, actuarial, accounting, consulting, Data Aggregation,
management, administrative, accreditation, or financial services to or for such
Covered Entity, or to or for an Organized Health Care Arrangement in which the
Covered Entity participates, where the provision of the service involves the
disclosure of PHI from such Covered Entity or arrangement, or from another
Business Associate of such Covered Entity or arrangement, to the person.

 

f.“Individually Identifiable Health Information” means information that is a
subset of health information, including demographic information collected from
an individual, and;

 

1)is created or received by a health care provider, health plan, employer, or
health care clearinghouse; and

 

2)relates to past, present, or future physical or mental health or condition of
an individual; the provision of health care to an individual; or the past,
present, or future payment for the provision of health care to an individual;
and

 

a)         that identifies the individual; or

 

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b)         with  respect  to  which  there  is  a  reasonable  basis  to  believe  the
information can be used to identify the individual.

 

g.“Protected Health Information” or “PHI” means Individually Identifiable Health
Information that is transmitted by electronic media; maintained in any medium
described in the definition of the term electronic media in the HIPAA
Regulations; or transmitted or maintained in any other form or medium. Protected
Health Information excludes Individually Identifiable Health Information in
educational records covered by the Family Educational Right and Privacy Act, as
amended, 20 U.S.C. § 1232g; records described at 20 U.S.C. § 1232g(a)(4)(B)(iv);
and employment records held by a Covered Entity in its role as employer and
regarding a person who has been deceased more than 50 years.

 

h.“Data Aggregation” means, with respect to PHI created or received by Business
Associate in its capacity as the Business Associate of Covered Entity, the
combining of such PHI by Business Associate with the PHI received by Business
Associate in its capacity as a business associate of another covered entity, to
permit data analyses that relate to the health care operations of the respective
covered entities.

 

i.“Security Incident” means the attempted or successful unauthorized access,
use, disclosure, modification, or destruction of information or interference
with systems operations in an information system, but does not include minor
incidents that occur on a daily basis, such as scans, “pings”, or unsuccessful
random attempts to penetrate computer networks or servers maintained by Business
Associate.

 

j.“Unsecured PHI” means PHI that is not rendered unusable, unreadable, or
indecipherable to unauthorized individuals through the use of a technology or
methodology specified in the guidance issued under Section 13402(h)(2) of the
HITECH Act on the HHS web site.

 

k.“Breach” shall have the meaning given such term under 45 C.F.R. § 164.402 as
such regulation is revised from time to time.

 

2.           Permitted Uses and Disclosures.

 

a.Performance of Services. Except as otherwise permitted by this Agreement,
Business Associate may create, receive, maintain or transmit PHI on behalf of,
Covered Entity only in connection with the performance of the services
contracted for in the Underlying Agreement or as Required by Law (as that term
is defined by 45 CFR § 164.103).

 

b.Proper Management and Administration. Business Associate may use PHI received
by Business Associate in its capacity as Covered Entity’s Business Associate,
for the proper management and administration of Business Associate in connection
with the performance of services in the Underlying Agreement, as permitted by
this Agreement or as Required by Law (as that term is defined by 45 CFR §
164.103), and to carry out the legal responsibilities of Business Associate.
Business Associate may disclose Covered Entity’s PHI for such proper management
and administration of Business Associate and to carry out the legal
responsibilities of Business Associate. Any such disclosure of PHI shall only be
made if a Business Associate obtains reasonable assurances from the person to
whom the PHI is disclosed that: (1) the PHI 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 (2) Business Associate will be notified by such
person of any instances of which it becomes aware in which the confidentiality
of the PHI has been breached.

 

 

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c.Data Aggregation. Business Associate may use and disclose PHI received by
Business Associate in its capacity as Covered Entity’s Business Associate in
order to provide Data Aggregation services relating to Covered Entity’s health
care operations only with Covered Entity’s permission.

 

d.De-Identification. Business Associate may de-identify any and all PHI provided
that the de-identification conforms to the requirements of 45 C.F.R.
§164.514(b). De-identified information does not constitute PHI and is not
subject to the terms of this Addendum.

 

3.           Nondisclosure.

 

a.As Provided in Agreement. Business Associate shall not use or further disclose
Covered Entity’s PHI otherwise than as permitted or required by this Agreement
or as Required by Law (as that term is defined by 45 CFR § 164.103).

 

b.Disclosures Required By Law. Business Associate shall not, without prior
written consent of Covered Entity, disclose any PHI on the chance that such
disclosure is required by law without notifying, to the extent legally
permitted, Covered Entity so that the Covered Entity shall have an opportunity
to object to the disclosure and to seek appropriate relief. If Covered Entity
objects to such a disclosure, Business Associate, shall, to the extent
permissible by law, refrain from disclosing the PHI until Covered Entity has
exhausted all alternatives for relief. Business Associate shall take steps
consistent with the HIPAA Regulations to obtain reasonable assurances from
persons receiving PHI in accordance with Section 2(b) that such persons will
provide Covered Entity with similar notice and opportunity to object before
disclosing PHI when a disclosure is required by law.

 

c.Additional Restrictions.  If Covered Entity provides timely advanced notice to
Business Associate that Covered Entity has agreed to be bound by additional
restrictions on the uses or disclosures of Covered Entity’s PHI pursuant to
HIPAA or the HIPAA Regulations, Business Associate shall be bound by such
additional restrictions and shall not disclose Covered Entity’s PHI in violation
of such additional restrictions to the extent possible consistent with Business
Associate’s obligations set forth in the Underlying Agreement.

 

d.Remuneration. Business Associate shall not directly or indirectly receive
remuneration in exchange for disclosing PHI received from or on behalf of
Covered Entity except as permitted by HITECH Act § 13405, the MRPA, and any
implementing regulations that may be promulgated or revised from time to time.

 

e.Business Associate shall not use or disclose PHI in a manner that would
violate Subpart E of 45 C.F.R. part 164, or MRPA, if done by the Covered Entity
itself except as authorized under the section of this Agreement entitled
“Permitted Uses and Disclosures”.

 

4.LIMITED DATA SETS. COVERED ENTITY AND BUSINESS ASSOCIATE AGREE TO LIMIT, TO
THE EXTENT PRACTICAL AND EXCEPT AS PERMITTED BY 45 C.F.R. § 164.502(B)(2), ITS
USES, DISCLOSURES AND REQUESTS OF PHI UNDER THIS AGREEMENT TO A LIMITED DATA SET
(AS DEFINED IN 45 C.F.R. § 164.514(E)(2)) OR, IF NEEDED BY COVERED ENTITY OR
BUSINESS ASSOCIATE, TO THE MINIMUM NECESSARY PHI TO ACCOMPLISH THE INTENDED
PURPOSE OF SUCH USE, DISCLOSURE OR REQUEST. THIS PROVISION WILL CEASE TO APPLY
ON THE

 

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EFFECTIVE DATE OF GUIDANCE ISSUED BY THE SECRETARY OF HHS IN ACCORDANCE WITH
HITECH ACT § 13405(B)(1)(C).

 

5.           Additional Business Associate Obligations.

 

a.Safeguards.  Use appropriate safeguards and comply with Subpart C of 45 C.F.R.
164 with respect to electronic PHI to prevent use or disclosure of the PHI other
than as provided for by this Agreement.

 

b.To the extent the Business Associate is to carry out one or more of Covered
Entity‘s obligation(s) under Subpart E of 45 C.F.R. 164 (Privacy Rule) Business
Associate shall comply with the requirements of Subpart E that apply to the
Covered Entity in the performance of the obligations.

 

c.Business Associate’s Agents and Subcontractors.

 

1)Business Associate shall not disclose PHI to any agent or subcontractor of
Business Associate except in a manner consistent with the HIPAA Regulations.

 

2)Business Associate shall ensure that any agents and subcontractors to whom it
provides PHI agree to create, receive, maintain or transmit PHI on behalf of the
Business Associate under no less protective restrictions than those that apply
to Business Associate. Such agreement between Business Associate and
subcontractor or agent must be in writing and must comply with the terms of this
Agreement and the requirements outlined at 45 C.F.R. §164.504(e)(2); 45 C.F.R.
§164.502(e)(1)(ii); 45 C.F.R. §164.314; and 45 C.F.R. §164.308(b)(2).
Additionally, Business Associate shall ensure agents or subcontractors agree to
implement reasonable and appropriate safeguards to protect PHI.

 

3)If Business Associate knows of a pattern of activity or practice of its
subcontractor or agent that constitutes a material breach or violation of the
agent or subcontractor’s obligation under the contract or other arrangement, the
Business Associate must take steps to cure the breach and end the violation and
if such steps are not successful, must terminate the contract or arrangement if
feasible. If it is not feasible to terminate the contract, Business Associate
must promptly notify the Covered Entity.

 

4)Business Associate shall be fully responsible for any acts, failures or
omissions of the agent and subcontractor in providing the services as if they
were the Business Associate’s own acts, failures or omissions, to the extent
permitted by law.

 

d.Reporting. Business Associate shall, as soon as practicable but not more than
twenty (20) business days after becoming aware of any Security Incident or use
or disclosure of Covered Entity’s PHI in violation of this Agreement, report any
such use or disclosure to Covered Entity.

 

e.BREACH OF UNSECURED PHI. WITH THE EXCEPTION OF LAW ENFORCEMENT DELAYS THAT
SATISFY THE REQUIREMENTS UNDER 45 C.F.R. § 164.412 OR AS OTHERWISE REQUIRED BY
APPLICABLE STATE LAW, BUSINESS ASSOCIATE SHALL NOTIFY COVERED ENTITY IN WRITING
WITHOUT UNREASONABLE DELAY AND IN NO CASE LATER THAN SIXTY (60) CALENDAR DAYS
UPON DISCOVERY OF A BREACH OF UNSECURED PHI. SUCH NOTICE MUST INCLUDE, TO THE
EXTENT POSSIBLE, THE NAME OF EACH INDIVIDUAL WHOSE UNSECURED PHI HAS BEEN, OR IS
REASONABLY BELIEVED BY BUSINESS

 

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ASSOCIATE TO HAVE BEEN, ACCESSED, ACQUIRED, OR DISCLOSED DURING SUCH BREACH.
BUSINESS ASSOCIATE SHALL ALSO PROVIDE, TO THE  EXTENT POSSIBLE, COVERED ENTITY
WITH ANY OTHER AVAILABLE INFORMATION THAT COVERED ENTITY IS REQUIRED TO INCLUDE
IN ITS NOTIFICATION TO INDIVIDUALS UNDER 45 C.F.R. § 164.404(C) AT THE TIME OF
BUSINESS ASSOCIATE’S NOTIFICATION TO COVERED ENTITY OR PROMPTLY THEREAFTER AS
SUCH INFORMATION BECOMES AVAILABLE. FOR PURPOSES OF THIS AGREEMENT, A BREACH OF
UNSECURED PHI SHALL BE TREATED AS DISCOVERED BY BUSINESS ASSOCIATE AS OF THE
FIRST DAY ON WHICH SUCH BREACH IS KNOWN TO BUSINESS ASSOCIATE (INCLUDING ANY
PERSON, OTHER THAN THE INDIVIDUAL COMMITTING THE BREACH, WHO IS AN EMPLOYEE,
OFFICER, OR OTHER AGENT OF BUSINESS ASSOCIATE, AS DETERMINED IN ACCORDANCE WITH
THE FEDERAL COMMON LAW OF AGENCY) OR SHOULD REASONABLY HAVE BEEN KNOWN TO
BUSINESS ASSOCIATE FOLLOWING THE EXERCISE OF REASONABLE DILIGENCE.

 

f.Mitigation. Business Associate shall have procedures in place to mitigate, to
the maximum extent practicable, any deleterious effect from any Use or
Disclosure (as defined by 45

C.F.R. §160.103 or on behalf of Business Associate, or its agent or
subcontractor on behalf of Business Associate, of Covered Entity’s PHI in
violation of this Agreement or applicable law.

 

g.Sanctions. Business Associate shall have and apply appropriate sanctions
against any employee, subcontractor or agent who uses or discloses Covered
Entity’s PHI in violation of this Agreement or applicable law.

 

h.United States Department of Health and Human Services. Business Associate
shall make its internal practices, books and records that are not protected by
applicable legal privilege or work product protection relating to the use and
disclosure of PHI received from, or created or received by Business Associate on
behalf of, Covered Entity available to the Secretary of the United States
Department of Health and Human Services for purposes of determining Covered
Entity’s compliance with HIPAA and the HIPAA regulations, provided that Business
Associate shall promptly notify Covered Entity upon receipt by Business
Associate of any such request for access by the Secretary of the United States
Department of Health and Human Services.

 

i.Training. Business Associate shall provide such training in the privacy and
security of PHI to its Workforce (as that term is defined by 45 C.F.R. §
160.103) as is required for Business Associate’s compliance with HIPAA, HITECH,
and the MRPA.

 

6.           Obligation to Provide Access, Amendment and Accounting of PHI.

 

a.Access to PHI.  To the extent (if any) that Business Associate maintains a
Designated Record Set on behalf of Covered Entity, within twenty (20) days of a
written request by Covered Entity, Business Associate shall make available to
Covered Entity, in the manner designated by the Covered Entity, such information
as necessary to allow Covered Entity to meet its obligations under the HIPAA
Regulations to provide access to, and copies of, PHI in accordance with HIPAA
and the HIPAA Regulations and MRPA. In the event that any Individual requests
access to PHI directly from Business Associate, Business Associate shall notify
Covered Entity within five (5) business days that such request has been made.

 

b.Amendment of PHI.  To the extent (if any) that Business Associate maintains a
Designated Record Set on behalf of Covered Entity, within twenty (20) days of a
written request

 

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by Covered Entity, Business Associate shall make available to Covered Entity PHI
contained in a Designated Record Set held by Business Associate as Covered
Entity may require to fulfill Covered Entity’s obligations to amend PHI in
accordance with HIPAA and the HIPAA Regulations. In addition, Business Associate
shall, as directed by Covered Entity, incorporate any amendments to Covered
Entity’s PHI into copies of such information maintained by Business Associate.
In the event that any Individual requests amendment of PHI directly from
Business Associate, Business Associate shall forward such request to Covered
Entity within five (5) business days.

 

c.Accounting of Disclosures of PHI

 

1)Record of Disclosures. Business Associate shall maintain a record of all
disclosures of PHI received from, or created or received by Business Associate
on behalf of, Covered Entity, except for those disclosures identified in Section
6(c)(2) below, including the date of the disclosure, the name and, if known, the
address of the recipient of the PHI, a brief description of the PHI disclosed,
and the purpose of the disclosure which includes an explanation of the reason
for such disclosure. Business Associate shall make this record available to
Covered Entity within twenty (20) days of a written request by Covered Entity.
In the event that any Individual requests an accounting of disclosures of PHI
directly from Business Associate, Business Associate shall notify Covered Entity
within five (5) business days that such request has been made and provide
Covered Entity with record of disclosures within 20 days of Individual’s
request. If request from Individual comes directly to Covered Entity and Covered
Entity notifies Business Associate that it requires information from Business
Associate in order to respond to Individual, Business Associate shall make
available to Covered Entity such information as Covered Entity may require
within twenty (20) days from the time of request by Covered Entity.

 

2)Certain Disclosures Need Not Be Recorded.  The following disclosures need not
be recorded:

 

a)          disclosures to carry out Covered Entity’s treatment, payment and
health care operations as defined under the HIPAA Regulations. However, under
HITECH Act, because Covered Entity had acquired an electronic health record
system prior to January 1, 2009, any disclosures from these records to Business
Associate for the purpose of carrying out Covered Entity's treatment, payment
and health care operations, requires that Business Associate record any of its
disclosures of that information effective January 1, 2014, or as otherwise
required by regulations;

 

b)          disclosures to individuals of PHI about them as provided by the
HIPAA Regulations;

 

c)          disclosures for Covered Entity’s facility’s directory, to persons
involved in the individual’s care, or for other notification purposes as
provided by the HIPAA Regulations;

 

d)          disclosures for national security or intelligence purposes as
provided by the HIPAA Regulations;

 

 

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e)          disclosures to correctional institutions or law enforcement
officials as provided by the HIPAA Regulations;

 

f)          disclosures that occurred prior to the later of (i) the effective
date of this Agreement or (ii) the date that Covered Entity is required to
comply with HIPAA and the HIPAA Regulations;

 

g)          disclosures pursuant to an individual’s authorization in accordance
with HIPAA and the HIPAA Regulations; and

 

h)          any other disclosures excepted from the right to an accounting by
the HIPAA Regulations.

 

7.           Responsibilities of Covered Entity.

 

a.           Privacy Notice. Covered Entity shall provide Business Associate
with its notice of privacy practices required by 45 C.F.R. §164.520 and any
subsequent material revisions to that notice.

 

b.           Changes.  Covered Entity, as necessary, shall notify Business
Associate of:

 

a.           any changes in or revocation of permission by an Individual,
pursuant to 45 C.F.R. §164.526, concerning the use or disclosure of PHI, if such
changes or revocation affect Business Associate’s permitted or required uses and
disclosures;

 

b.           Any special material restrictions to the use or disclosure of PHI
to which Covered Entity has agreed, pursuant to 45 C.F.R. §164.522, that may
impact on the use and disclosure of PHI by Business Associate; and

 

c.           Any amendments to PHI to which Covered Entity has agreed under 45
C.F.R. §164.526 that relate to PHI upon which Business Associate relies to
perform services.

 

c.Authorizations. Covered Entity will obtain all consents and authorizations
necessary and/or required by law for Covered Entity and Business Associate to
fulfill their obligations under applicable law and this Agreement.

 

d.Accounting of PHI Disclosures. Covered Entity will include in individual
accountings requested under the HIPAA Regulations, including without limitation,
45 C.F.R. § 164.528, any disclosures by Business Associate.

 

e.Meet and Confer. Upon any suspected or actual Breach, unauthorized disclosure
of the PHI or breach of this Addendum, Covered Entity will meet and confer in
good faith with Business Associate before notifying affected individuals,
reporting to government agencies, and/or commencing any legal action.

 

f.Client Compliance. Covered Entity shall comply with HIPAA, the HITECH Act, and
HIPAA Regulations in obtaining services from Business Associate and providing
PHI to Business Associate under this Agreement. Further, Covered Entity shall
not request Business Associate use or disclose PHI in a manner that violates
applicable law, or would violate applicable law if done by Covered Entity.

 

 

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8.           Material Breach, Enforcement and Termination.

 

a.           Term. This Agreement shall become effective on the effective date
of the Underlying Agreement (the “Effective Date”) and shall continue unless or
until the Agreement is terminated in accordance with the provisions of this
Agreement, the Underlying Agreement between the parties terminates or the
Business Associate has completed performance of the services in the Underlying
Agreement, whichever is earlier.

 

b.           Termination. Either party may terminate this Agreement:

 

1)           immediately if the other party is named as a defendant in a
criminal proceeding for a violation of HIPAA or the HIPAA Regulations;

 

2)           immediately if a finding or stipulation that the other party has
violated any standard or requirement of HIPAA or other security or privacy laws
is made in any administrative or civil proceeding in which that party has been
joined; or completed performance of the services in the Underlying Agreement,
whichever is earlier.

 

3)           pursuant to Sections 8(c) or 9(b) of this Agreement.

 

c.           Remedies. Upon one party's knowledge of a material breach by the
other party, the non- breaching party shall either:

 

1)           provide an opportunity for the breaching party to cure the breach
and end the violation or terminate this Agreement and the Underlying Agreement
if the breaching party does not cure the breach or end the violation within
thirty (30) days; or

 

2)           immediately terminate this Agreement and the Underlying Agreement
if cure is not possible.

 

d.           Knowledge of Non-Compliance. Any non-compliance by a party with
this Agreement will automatically be considered a breach or violation of a
material term of this Agreement if the party knew or reasonably should have
known of such non-compliance and failed to immediately take reasonable steps to
cure the non-compliance.

 

e.           Injunctions. Covered Entity and Business Associate agree that any
violation of the provisions of this Agreement may cause irreparable harm to the
other party. Accordingly, in addition to any other remedies available to each
party at law or in equity, each party shall be entitled to seek an injunction or
other decree of specific performance with respect to any violation of this
Agreement or explicit threat thereof, without any bond or other security being
required and without the necessity of demonstrating actual damages.

 

f.           Indemnification. Business Associate shall indemnify, hold harmless
and defend Covered Entity from and against any and all direct claims, losses,
liabilities, costs and other direct expenses resulting solely from, or relating
solely to, the acts or omissions of Business Associate in connection with the
representations, duties, and obligations of Business Associate under this
Agreement. The parties agree that such indemnification shall exclude any and all
special, indirect, or consequential damages.

 

 

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9.           General Provisions.

 

a.           State Law. Nothing in this Agreement shall be construed to require
Business Associate to use or disclose PHI without written authorization from an
individual who is a subject of the PHI, or written authorization from any other
person, where such authorization would be required under state law for such use
or disclosure.

 

b.           Amendment.  Covered Entity and Business Associate agree to enter
into good faith negotiations to amend this Agreement to come into compliance
with changes in state and federal laws and regulations relating to the privacy,
security and confidentiality of PHI. Covered Entity may terminate this Agreement
upon thirty (30) days written notice in the event that Business Associate does
not promptly enter into an amendment that Covered Entity, in its reasonable
discretion, deems sufficient to ensure that Covered Entity and Business
Associate will be able to comply with such laws and regulations.

 

c.           No Third Party Beneficiaries. Nothing express or implied in this
Agreement is intended or shall be deemed to confer upon any person other than
Covered Entity, Business Associate, and their respective successors and assigns,
any rights, obligations, remedies or liabilities.

 

d.           Ambiguities.  The parties agree that any ambiguity in this
Agreement shall be resolved in favor of a meaning that complies and is
consistent with applicable law protecting the privacy, security and
confidentiality of PHI, including, but not limited to, MRPA, HIPAA, the HIPAA
Regulations, and the HITECH Act.

 

e.           Primacy. To the extent that any provision of this Agreement
conflict with the provisions of any other agreement or understanding between the
parties, this Agreement shall control.

 

f.           Destruction/Return of PHI. Business Associate agrees that, pursuant
to 45 C.F.R. § 164.504 (e) (2) (ii) (I), upon termination of this Agreement or
the Underlying Agreement, for whatever reason,

 

1)           it will return or destroy all PHI, if feasible, received from or
created or received by it on behalf of Covered Entity which Business Associate
maintains in any form, and retain no copies of such information which for
purposes of this Agreement shall mean all backup tapes. Prior to doing so,
Business Associate further agrees to recover any PHI in the possession of its
subcontractors or agents if feasible. An authorized representative of Business
Associate shall certify in writing to Covered Entity, within thirty (30) days
from the date of termination or other expiration of the Underlying Agreement,
that to the extent feasible all PHI has been returned or disposed of as provided
above and that Business Associate or its subcontractors or agents no longer
retain any such PHI in any form.

 

2)           If it is not feasible for Business Associate to return or destroy
said PHI, Business Associate will notify the Covered Entity in writing. The
notification shall include:

 

a)           a statement that the Business Associate has determined that it is
infeasible to return or destroy the PHI in its possession, and (ii) the specific
reasons for such determination; and

 

b)           Business Associate shall comply with Subpart C of 45 C.F.R. Part
164 (Security Rule) and extend any and all protections, limitations and
restrictions

 

--------------------------------------------------------------------------------

 

 

contained in this Agreement to Business Associate’s use and/or disclosure of any
PHI retained after the termination of this Agreement, and to limit any further
uses and/or disclosures to the purposes that make the return or destruction of
the PHI infeasible.

 

3)           If it is infeasible for Business Associate to obtain, from a
subcontractor or agent any PHI in the possession of the subcontractor or agent,
Business Associate must provide a written explanation to Covered Entity and
require the subcontractors and agents to agree to comply with Subpart C of 45
C.F.R. Part 164 (Security Rule) and extend any and all protections, limitations
and restrictions contained in this Agreement to the subcontractors’ and/or
agents’ use and/or disclosure of any PHI retained after the termination of this
Agreement, and to limit any further uses and/or disclosures to the purposes that
make the return or destruction of the PHI infeasible.

 

g.           Minimum Necessary. Business Associate will disclose to its
subcontractors, agents or other third parties, and request from Covered Entity,
only the minimum PHI necessary to perform or fulfill a specific function
required or permitted hereunder.

 

h.           No Offshore Work. In performing the functions, activities or
services for, or on behalf of Covered Entity, Business Associate shall not, and
shall not permit any of its agents or subcontractors who receive Covered
Entity’s Protected Health Information to transmit or make available any
Protected Health Information to any entity or individual outside the United
States without prior written consent of Covered Entity.

 

i.           Change in Law. Except as otherwise specified in law or this
Agreement, if a change in Texas state law or Health Information Technology for
Economic and Clinical Health Act or future law amending HIPAA provides for a
later effective date shall apply in this Agreement to incorporate that change.

 

j.           Integration.  This Agreement embodies and constitutes the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior oral or written agreements, commitments
and understandings pertaining to the subject matter hereof.

 

k.           Governing Law. This Agreement is governed by, and shall be
construed in accordance with, applicable federal law and the laws of the State
of Texas without regard to choice of law principles.

 

l.           Notices. Any notices to be given hereunder to a Party shall be made
via U.S. Mail or express courier to such Party’s address given below, and/or
(other than for the delivery of fees) via facsimile to the facsimile telephone
numbers listed below.

 

 

 

 

To Covered Entity:

FTH DFW Partners LLC

 

612 East Lamar Blvd., Suite 500

 

Arlington, Texas 76011 Attn: Krystal Mims

 

Email: KrystalMims@texashealth.org

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

With copies to:

Texas Health Resources

 

612 East Lamar Blvd., Suite 900

 

Arlington, Texas 76011

 

Attn: Kenneth Kramer, General Counsel

 

Email: KennethKramer@texashealth.org

 

 

To Business Associate:

Adeptus Health Management

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn:  Donald Adam,

 

Chief Corporate Development Officer

 

Email: don.adam@adhc.com

 

 

With a copy to:

Adeptus Health LLC

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn:  Timothy Mueller, General Counsel

 

Email: tim.mueller@adhc.com

 

 

Each Party named above may change its address and that of its representative for
notice by the giving of notice thereof in the manner herein above provided.

 

m.Privilege. Notwithstanding any other provision in this Agreement, this
Agreement shall not be deemed to be an agreement by Business Associate to
disclose information that is privileged, protected or confidential under
applicable law to the extent that such privilege, protection or confidentiality
(a) has not been waived or (b) is not superseded by applicable law.

 

n.Multiple Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. Facsimile and electronic (pdf)
signatures shall be treated as if they are original signatures.

 

 

[Remainder of page intentionally left blank; signature page follows.]

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be
effective as of the Effective Date of the Underlying Agreement.

 

 

 

 

 

 

 

Adeptus Health Management LLC

 

FTH DFW Partners LLC

 

 

 

 

 

 

 

 

By:

/s/ Graham Cherrington

    

By:

/s/ Graham Cherrington

Printed Name: Graham Cherrington

 

Printed Name: Graham Cherrington

Its: President and Chief Operating Officer

 

Its: President and Chief Operating Officer

 

 

 

Signature Page to Business Associate Agreement

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Note: Information has been omitted from this agreement pursuant to a request for

confidential treatment, and such information has been separately filed with the
Securities and

Exchange Commission. The omitted information has been marked with a bracketed
asterisk (“[*]”).

 

Execution Version

 

SUPPORT SERVICES AGREEMENT

 

THIS SUPPORT SERVICES AGREEMENT (this “Agreement”), is entered into by and
between FTH DFW Partners LLC, a Texas limited liability company (“Company”), and
Texas Health Resources, a Texas non-profit corporation (“THR”) as of May 10,
2016 (the “Effective Date”). THR and Company are sometimes referred to in this
Agreement individually as a “Party” or collectively as the “Parties.”
Capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to such terms in the Operating Agreement (the “Operating Agreement”) of
Company.

 

RECITALS

 

WHEREAS, THR arranges for the provision of medical care and treatment to
individuals residing in the State of Texas, and has significant experience
negotiating and managing payor contracting arrangements;

 

WHEREAS, Company was formed by Texas Health Resources, a Texas non-profit
corporation and ADPT DFW Holdings LLC, a Texas limited liability company for the
purposes of developing, owning, acquiring and/or operating freestanding
emergency room facilities and one or more general acute care hospital(s) in
Collin, Dallas, Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, Tarrant
and Wise counties in the State of Texas; and

 

WHEREAS, THR and Company desire to enter into this Agreement pursuant to which
THR will provide certain Support Services (as defined below) to Company, upon
the terms and subject to the conditions set forth in this Agreement.

 

AGREEMENT

 

NOW THEREFORE, the Parties agree as follows:

 

ARTICLE 1

SUPPORT SERVICES

 

1.1Managed Care Contracting Support Services.   THR shall, during the Term (as
defined in Section 2.1) of this Agreement, provide or arrange for the provision
of those managed care contracting services set forth in Exhibit 1.1 to Company
(“Managed Care Contracting Services”).

 

1.2Electronic Health Record Services.  [*]

 

1.3Additional Support Services.  THR shall, during the Term of this Agreement,

provide or arrange for the provision of such additional services and/or
personnel as mutually agreed upon by the Parties from time to time (“Additional
Support Services” and together with the Managed Care Contracting Services and
the EHR Services, “Support Services”).   The

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking.  Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Parties shall set forth, in a written addendum to this Agreement signed by the
Parties, the specific Additional Support Services to be provided by THR and the
Additional Support Services Fee (as defined below) payable by Company to THR for
the provision of such Additional Support Services. In performing the Support
Services, THR shall (a) devote such time and talents as may be necessary and
appropriate to efficiently perform the Support Services in accordance with this
Agreement, and (b) act in good faith with reasonable diligence.

 

1.4Support Services Fee.

 

(a) Company shall, during the Term of this Agreement, pay to THR an amount equal
[*] per year (the “Managed Care Contracting Services Fee”). Company shall pay
the Managed Care Contracting Services Fee to THR in twelve (12) equal monthly
installments, with each such monthly installment due and payable to THR on or
before the tenth (10th) day of each month during the Term of this Agreement.

 

(b) Company shall, during the Term of this Agreement, pay to THR the amounts
provided in the Subscription for Information Services Addendum for the EHR
Services (the “EHR Services Fee”) in amounts that in the aggregate will not
exceed the fees listed in Exhibit 1.2.  The fees included on Exhibit 1.2 do not
include any amounts associated with the conversion of any electronic information
from the Company’s existing electronic medical record, if any, and it is THR’s
assumption that no such data will be converted.

 

(c) Company shall, during the Term of this Agreement, pay to THR an amount equal
to the fee negotiated between the Parties which shall cover the actual direct
cost and expense incurred by THR in providing or arranging for the provision of
Additional Support Services (including salary and benefits, etc.) plus a
reasonable profit (the “Additional Support Services Fee” and, together with the
Managed Care Contracting Services Fee, the “Support Services Fee”). Company
shall pay the Additional Support Services Fee to THR on a monthly basis within
ten (10) business days after delivery by THR of an invoice that provides, in
reasonable detail, the calculation of the Additional Support Services Fee due
and payable for Additional Support Services provided by THR in the immediately
preceding month.

 

1.5Books and Records. All patient records, financial records, corporate records,
employee files, data (including current contracting information, eligibility,
enrollment, benefits, claims, provider information and prior authorization
files) and other such items relating to the business activities of Company
(collectively, “Company Records”) shall be the property of Company. THR shall
have a non-exclusive right to use all Company Records during the Term of this
Agreement in connection with the Support Services provided under this Agreement.

 

1.6Compliance with Laws.  The Parties shall comply, and shall cause their
respective personnel to comply, with all state and federal laws, rules and
regulations applicable to the Support Services and/or the Parties’ performance
of their respective obligations under this Agreement including, but not limited
to, (a) Texas Department of State Health Services policies and procedures, (b)
Centers for Medicare and Medicaid Services policies and procedures applicable to
the performance of the Support Services, and (c) any other Government Health
Care Program policies and procedures applicable to the performance of the
Support Services

2

--------------------------------------------------------------------------------

 

 

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking.  Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

and/or the Parties’ performance of their respective obligations under this
Agreement (collectively, “Laws”).

 

ARTICLE 2

TERM AND TERMINATION

 

2.1Term.  The term of this Agreement shall be from the Effective Date until the
date that is [*] years after the Effective Date (the “Initial Term”), unless
earlier terminated pursuant to this Article 2. Upon expiration, this Agreement
[*] (each a “Renewal Term,” and together with the Initial Term, the “Term”)
unless either Party provides written notice of its intent not to renew this
Agreement no less than one hundred eighty (180) days prior to the end of the
then- current Term.

 

2.2Termination by Company. Company shall have the right to terminate this
Agreement immediately upon the occurrence of any one or more of the following
events:

 

(a) Material breach of this Agreement by THR that is not cured to the reasonable
satisfaction of Company within thirty (30) days after Company provides written
notice of such breach to THR;

 

(b) THR or a THR Affiliate is no longer a member of Company;

 

(c) THR makes an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they mature, applies to any court for the
appointment of a trustee or receiver over its assets, or upon commencement of
any voluntary or involuntary proceedings under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation or other
similar law of any jurisdiction; or

 

(d) THR is excluded, debarred or suspended from participation in any Government
Health Care Program.

 

2.3Termination by THR.  THR shall have the right to terminate this Agreement
upon the occurrence of any one or more of the following events:

 

(a) Material breach of this Agreement by Company that is not cured to the
reasonable satisfaction of THR within thirty (30) days after THR provides
written notice of such breach to Company; provided, however, that an occasional
late payment due to accounting or banking error, or non-payment of any amount
over which there is a bona fide, good faith dispute, shall not be a basis for
termination of this Agreement;

 

(b) THR or a THR Affiliate is no longer a member of Company;

 

(c) Company makes an assignment for the benefit  of creditors, admits in writing
its inability to pay its debts as they mature, applies to any court for the
appointment of a trustee or receiver over its assets, or upon commencement of
any voluntary or involuntary

3

--------------------------------------------------------------------------------

 

 

proceedings under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, liquidation or other similar law of any
jurisdiction; or

 

(d) Company is excluded, debarred or suspended from participation in any
Government Health Care Program.

 

2.4Termination or Modification in the Event of Government Action.

 

(a) In the event of any Government Action (as defined below), the Parties shall,
within ten (10) days after one Party gives written notification of such
Government Action to the other Party, meet and confer and negotiate in good
faith to attempt to amend this Agreement in order to comply with the Government
Action.

 

(b) If the Parties, after good faith negotiations that shall not exceed thirty
(30) days, are unable to mutually agree upon the amendments necessary to comply
with the Government Action or, alternatively, if either Party determines in good
faith that compliance with the Government Action is impossible or infeasible,
either Party may terminate this Agreement effective ten (10) days after a
written notice of termination is given to the other Party.

 

(c) For the purposes of this Section, “Government Action” shall mean any Law
passed, adopted or implemented by any federal, state or local government or
legislative body or any private agency, or any decision, finding, interpretation
or action by any governmental or private agency, court or other third party
which, in the opinion of counsel to either Party, as a result or consequence, in
whole or in part, of the arrangement between the Parties set forth in this
Agreement, if or when implemented, could reasonably be expected to result in or
present a material risk of any one or more of the following: (i) revocation or
threat of revocation of the status of any license, certification or
accreditation granted to THR, any THR Affiliate, Company, or any Company
Affiliate; (ii) revocation or threat of revocation of the federal, state or
local tax-exempt status of THR or any THR Affiliate, or their respective tax-
exempt financial obligations; (iii) prohibit or restrict the ability of THR or
any THR Affiliate other than Company to issue tax-exempt bonds, certificates of
participation or other tax-exempt financial obligations; (iv) violation of or
threat of prosecution under 42 U.S.C. § 1320a-7b(b) (commonly referred to as the
Anti-Kickback Law), 42 U.S.C. § 1395nn (commonly referred to as the Stark Law)
or any comparable state law governing kickbacks, bribes, rebates or patient
referrals; (v) violation by either Party, or threat of prosecution of either
Party under, any applicable Laws; (vi) prohibit Company or any Company Affiliate
from submitting claims or materially reducing the reimbursement received by
Company or any Company Affiliate for services provided to patients of Company or
such Company Affiliate; or (vii) subject THR, any THR Affiliate, Company or any
Company Affiliate, or any of their respective officers, directors, employees or
agents, to civil action or criminal prosecution by any governmental authority or
other person or entity or the imposition of any sanction (including any excise
tax penalty under Internal Revenue Code § 4958), on the basis of their approval
of or participation in this Agreement or performing their respective obligations
under this Agreement.

 

2.5Effect of Expiration and Termination.

 

(a)          Upon any expiration or termination of this Agreement, subject to
Section 2.5(b) below, all rights and obligations of the Parties shall
immediately cease other than those

4

--------------------------------------------------------------------------------

 

 

rights or obligations which accrued prior to the effective date of such
expiration or termination, including Company’s obligation to pay the Support
Services Fee to THR for any Support Services and the EHR Services Fee for any
EHR Services rendered prior to the effective date of such expiration or
termination.

 

(b)          Upon any expiration without renewal or termination of this
Agreement for any reason, THR shall, upon Company’s request, for a period not to
exceed one (1) year following the effective date of expiration without renewal
or termination of this Agreement (the “Transition Period”), continue to provide
such EHR Services and such Additional Support Services as are reasonably
requested by Company and as are then being provided by THR as of the effective
date of such expiration without renewal or termination, substantially upon the
terms and subject to the conditions set forth in this Agreement subject to such
fair and equitable modifications as to which the Parties may agree.
Notwithstanding the foregoing or any other provision of this Agreement, Company
shall continue to pay to THR the EHR Services Fee and the Additional Support
Services Fee in accordance with this Agreement for any Additional Support
Services or EHR Services provided during the Transition Period.

 

(c)          This Section 2.5 shall survive the expiration or termination of
this Agreement.

 

ARTICLE 3

CONFIDENTIALITY

 

3.1Disclosure of Agreement.  Neither Party shall disclose any of the provisions
of this Agreement or any information of the other Party not generally known to
the public to any person or entity, other than its Affiliates, attorneys or
accountants or as may be required by Law, without the prior written consent of
the other Party, unless and only to the extent such information (a) was known by
the receiving party prior to the time it was first disclosed; (b) was
independently developed; or (c) was disclosed to or obtained from a third party
and not subject to a confidentiality or fiduciary obligation of confidentiality.
Each Party shall provide the other Party prompt written notice of any such
disclosure required by Law. Notwithstanding the foregoing, a Party may disclose
the provisions of this Agreement to any person or entity without the prior
written consent of the other Party to the extent such disclosure is requested or
required by (a) such Party’s contract or agreement; or (b) fiscal
intermediaries, public agencies or commissions with governmental powers and
duties related to disclosure of information that have the right to compel
disclosure of such information; provided that such Party shall provide the other
Party prompt written notice of any such disclosure required by Law.

 

3.2Business Associate Agreement. Concurrently with the execution of this
Agreement, Company and THR shall be deemed to have executed and delivered a
Business Associate Agreement in the form attached hereto as Exhibit 3.2.

 

ARTICLE 4

INSURANCE AND INDEMNIFICATION

 

4.1Company Insurance Coverage.  Company shall maintain, throughout the Term of
this Agreement, the minimum insurance coverages required under the terms of the
Operating Agreement.

 

5

--------------------------------------------------------------------------------

 

 

4.2Additional Insureds. THR (and its Affiliates) shall be named as additional
insureds, with respect to services under this Agreement, under the Company’s
comprehensive general, professional, directors’ and officers’, employment
practice and umbrella/excess liability policies. Their rights to invoke the
protection of such policies shall be severable from and independent of Company’s
rights, and these policies shall not be terminable or non-renewable except upon
thirty (30) days prior written notice to THR. If such coverage is written on a
claims-made form, following termination or of this Agreement, Company shall (a)
continue such coverage to survive with THR and its Affiliates as an additional
insured for the period of the applicable statute of limitations; or (b) shall
provide an extended reporting endorsement (tail coverage) covering THR and its
Affiliates for claims arising during the Term of this Agreement, but not
reported until after the termination or of this Agreement. Should Company change
insurance companies during the Term of this Agreement, Company shall maintain
coverage which includes claims incurred but not reported under the prior
coverage (prior acts coverage). No later than thirty (30) days following the
execution of this Agreement, and thirty (30) days following the end of each
policy year, Company shall provide THR a copy of the endorsements naming THR and
its Affiliates as additional insureds. It is the intention of the Parties that
such insurance shall protect Company, THR and THR’s Affiliates and will be the
primary insurance for such Parties for any and all losses covered thereby,
notwithstanding any insurance which may be maintained by THR or its Affiliates,
covering any such loss. Company hereby waives any right of contribution with
respect to a loss covered under such policies (or their deductibles) against THR
or its insurance carriers.

 

4.3Indemnification by Company.  Company shall defend, indemnify, save and hold
harmless THR, its shareholders, members, directors, officers, employees, agents
and direct or indirect parents or subsidiary entities (“THR Indemnified Party”)
from and against any and all judgments, losses, claims, damages, liabilities,
fines, penalties, costs and expenses (including reasonable attorneys’ fees and
expenses paid or incurred) (“Losses”), joint or several, which may be asserted
against any THR Indemnified Party arising out of (a) any breach by Company of
any covenant or any representation or warranty in this Agreement, but excluding
any breach caused by any act or omission of THR or the members of the Governing
Board appointed by THR, (b) the negligent, reckless or intentionally wrongful
acts or omissions of Company or its Affiliates, but excluding any negligent,
reckless or intentional acts or omissions of Company caused by an act or
omission of THR or the members of the Governing Board appointed by THR, or (c)
THR’s acts or omissions in the performance of its duties under this Agreement,
where such acts or omissions have been directed or approved by the Governing
Board, but excluding any Claims arising from the grossly negligent, reckless or
intentionally wrongful acts or omissions of THR.

 

4.4Indemnification by THR.  THR shall defend, indemnify, save and hold harmless
Company, its members, directors, officers, employees, agents, direct or indirect
parents or subsidiary entities (“Company Indemnified Party”) from and against
any and all Losses, joint or several, which may be asserted against any Company
Indemnified Party arising out of (a) any breach by THR or any of its Affiliates
of any covenant or any representation or warranty in this Agreement, or (b) the
negligent, reckless or intentionally wrongful acts or omissions of THR or any of
its Affiliates.

 

4.5Limitation of Liability. Neither Party, their employees, agents,
representatives and/or Affiliates, shall have any liability to the other Party
for any indirect, consequential,

6

--------------------------------------------------------------------------------

 

 

incidental, exemplary, special or punitive damages or costs including, without
limitation, lost profits, loss of good will or loss of tax-exempt status or
financing, even if such Party has been advised, knew or should have known, of
the possibility thereof. Notwithstanding the foregoing, the Parties confirm that
THR has the right to seek and recover any and all actual damages as may be
recoverable under law or equity in the event of an improper termination of the
Agreement or other improper action by Company, including, as applicable, loss of
future payments of the Managed Care Contracting, EHR Services Fee or the
Additional Support Services Fee or any portion thereof. The cumulative liability
of THR, its employees, agents, representatives and/or Affiliates to Company for
any and all claims, regardless of the form or action arising out of or relating
in any way to this Agreement, shall not exceed the total fees paid by Company
under Sections 1.4(a),  1.4(b) and 1.4(c) to THR during the twelve (12) month
period immediately prior to the date any such claim was filed.

 

ARTICLE 5

MISCELLANEOUS

 

5.1Assignment.  Except for an assignment or subcontract of THR to a THR
Affiliate, neither Party may assign or subcontract any of its rights, interests,
duties or obligations under this Agreement, including an assignment by operation
of law, without the prior written consent of the other Party, which consent may
be given or withheld in such Party’s sole discretion, and any attempted or
purported assignment in violation of this Section shall be null and void.
Subject to the foregoing, this Agreement shall be binding on and inure to the
benefit of their respective heirs, successors, assigns and representatives.

 

5.2Amendment.  This Agreement may only be amended or modified by a written
instrument executed by both Parties.

 

5.3Interpretation and Headings and Exhibits. The section, subsection and any
paragraph headings contained in this Agreement are for the purpose of
convenience only and are not intended to define or limit or affect, and shall
not be considered in connection with the interpretation or application of, any
of the terms or provisions of this Agreement. Unless otherwise indicated
elsewhere in this Agreement, (a) the term “or” shall not be exclusive, (b) the
term “including” shall mean “including, without limitation,” and (c) the terms
“hereof,” “herein” and “hereunder” and terms of similar import shall refer to
this Agreement as a whole and not to any particular Section or paragraph where
such term may be used. The recitals to and all Schedules and Exhibits to this
Agreement are fully incorporated into and are an integral part of this Agreement
as if set forth in this Agreement.

 

5.4Entire Agreement.  This Agreement, including the Schedules and Exhibits
hereto, constitutes the entire agreement between the Parties pertaining to the
subject matter contained in it and supersedes all prior contemporaneous
agreements, representations and understandings, whether oral or written, of the
Parties with respect to such subject matter.

 

5.5Counterparts.  This Agreement may be signed in any number of counterparts and
the signature or signatures of the undersigned may be delivered by electronic
mail in “portable document format” (“.PDF”), or by any other electronic means
intended to preserve the original graphic and pictorial appearance of a document
(each of which shall be deemed an original) and which shall together constitute
one and the same instrument.

 

7

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5.6Notices. All notices, requests, consents, approvals, demands, claims, waivers
and other communications under this Agreement must be in writing. Any notice,
request, consent, approval, demand, claim, waiver or other communication under
this Agreement shall be deemed duly given (a) when delivered personally to the
recipient; (b) one (1) business day after being sent to the recipient by
reputable overnight courier service (charges prepaid); (c) one (1) business day
after being sent to the recipient by electronic mail so long as the electronic
mail is followed by a notice given the next business day (which notice includes
a copy of the electronic mail) by one of the preceding methods under (a), (b) or
(c); or (d) five (5) business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid, and
addressed to the intended recipient as set forth below:

 

If to Company:

FTH DFW Partners LLC

 

c/o Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas  75067

 

Attn:  Donald Adam, Chief Corporate Development Officer

 

Email: don.adam@adhc.com

 

 

 

with a copy to: Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas  75067

 

Attn:  Timothy Mueller, General Counsel

 

Email: tim.mueller@adhc.com

 

 

If to THR:

Texas Health Resources

 

612 East Lamar Blvd., Suite 500

 

Arlington, Texas 76011

 

Attn:  Krystal Mims

 

Email: KrystalMims@texashealth.org

 

 

with a copy to:

Texas Health Resources

 

612 East Lamar Blvd., Suite 900

 

Arlington, Texas 76011

 

Attn: Kenneth Kramer, General Counsel

 

Email: KennethKramer@texashealth.org

 

Any Party may change the address to which notices, requests, consents,
approvals, demands, claims, waivers and other communications under this
Agreement must be delivered by giving the other Party notice in the manner set
forth in this Section 5.6.  Such notice shall be effective on delivery, if hand
delivered, or three (3) days after dispatch in all other cases. A courtesy copy
of any notice required hereunder shall also be sent to each Party’s counsel at
such address as may be requested, but failure to do so shall not in any way
affect the rights, obligations and liabilities of the Parties hereto.

 

5.7Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the Parties and their respective successors and assigns.

 

8

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5.8Relationship of the Parties. Except as otherwise expressly set forth in this
Agreement, for purposes of this Agreement it is acknowledged and agreed that the
Parties are at all times acting and performing hereunder as independent
contractors. Each Party shall be solely responsible for compliance with all
applicable Laws pertaining to employment taxes, income withholding, unemployment
compensation contributions and other employment related statutes regarding their
respective employees, agents and servants.

 

5.9Additional Documents and Acts.  Each Party agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be reasonably requested by any other Party in order to better evidence
effectuate, carry out and perform all of the terms, provisions and conditions of
this Agreement and the transactions contemplated hereby.

 

5.10Effect of Invalidity.  If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future applicable Laws
effective during the Term, such provision shall be fully severable. This
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of each illegal, invalid
or unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
Each Party waives any and all claims or contests it has, based on applicable
Laws proposed or in effect as of the Effective Date, which would or could allow
the Party to challenge the existence, validity or enforceability of this
Agreement.

 

5.11WAIVER OF JURY TRIAL – EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIP OF
THE PARTIES HERETO BE TRIED BY A JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS
TO DEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE INCLUDING, BUT NOT LIMITED TO,
THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN, COMMON LAW OR ANY
APPLICABLE STATUTE OR REGULATIONS. EACH PARTY HERETO ACKNOWLEDGES THAT IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGH TO DEMAND TRIAL BY JURY.

 

5.12Jurisdiction and Venue.  This Agreement shall be construed in accordance
with the laws of the State of Texas, without regard to the principles of
conflicts of laws thereof, and Tarrant County and the State of Texas shall be
the venue for any litigation, mediation, or other proceeding as between the
parties that may be brought, or arise out of, in connection with or by reason of
this Agreement. The provisions of this Section shall survive the expiration or
other termination of this Agreement.

 

5.13Dispute Resolution.  In the event of a dispute under this Agreement, such
dispute shall be resolved in accordance with the procedures set forth in Section
11.10 of the Operating Agreement.

 

9

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5.14Attorneys’ Fees.  In any action at law or equity to enforce any of the
provisions or rights under this Agreement, the unsuccessful Party to such
litigation, as determined by the court in a final judgment or decree, shall pay
the successful Party all costs, expenses and reasonable attorneys’ fees incurred
therein by such Party (including without limitation such costs, expenses and
fees on any appeals or in connection with any bankruptcy proceeding), and if
such successful party shall recover judgment in any such action or proceeding,
such costs, expenses and attorneys’ fees shall be included in and as part of
such award or judgment.

 

5.15Force Majeure. THR shall not be liable for nonperformance, defective
performance or late performance of any of its obligations under this Agreement
to the extent and for such periods of time as such nonperformance, defective
performance or late performance is due to reasons outside such Party’s control,
including acts of God, war (declared or undeclared), terrorism, action of any
governmental authority, civil disturbances, riots, revolutions, vandalism,
accidents, fire, floods, explosions, sabotage, nuclear incidents, lightning,
weather, earthquakes, storms, sinkholes, epidemics, failure of transportation
infrastructure, disruption of public utilities, supply chain interruptions,
information systems interruptions or failures, breakdown of machinery or strikes
(or similar nonperformance, defective performance or late performance of
employees, suppliers or subcontractors); provided, however, that in any such
event, THR shall use its good faith efforts to perform its duties and
obligations under this Agreement.

 

[Signature Page Follows; Remainder of Page Intentionally Left Blank]

 

 

10

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IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the
Effective Date.

 

TEXAS HEALTH RESOURCES

 

 

 

 

By:

/s/ Barclay E. Berdan

 

Name:

Barclay E. Berdan, FACHE

 

Its:

Chief Executive Officer

 

 

FTH DFW PARTNERS LLC

 

 

 

 

By:

/s/ Graham Cherrington

 

Name:

Graham Cherrington

 

Its:

President

 

 

 

Signature Page to Support Services Agreement

--------------------------------------------------------------------------------

 

 

 

Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Exhibit 1.1

 

MANAGED CARE CONTRACTING SERVICES

 

[*]

 

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

Exhibit 1.2

 

EHR SERVICES AND FEES

 

[*]

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Exhibit 3.2

 

BUSINESS ASSOCIATE AGREEMENT

 

This Business Associate Agreement (“Agreement”) is by and between FTH DFW
Partners LLC, a Texas limited liability company (“Covered Entity”); and Texas
Health Resources, a Texas non-profit corporation (“Business Associate”).

 

RECITALS

 

WHEREAS, Covered Entity has a Services Agreement with Business Associate which
is effective May 10, 2016 (the “Underlying Agreement”) by which it has engaged
Business Associate to perform services or provide goods, or both;

 

WHEREAS, Covered Entity possesses Protected Health Information that is protected
under HIPAA and the HIPAA Regulations and state law including the Texas Medical
Records Privacy Act (MRPA), and is permitted to manage such information only in
accordance with HIPAA and the HIPAA Regulations and MRPA;

 

WHEREAS, Business Associate may receive such information from Covered Entity, or
create, receive, maintain or transmit such information on behalf of Covered
Entity, in order to perform certain of the services or provide certain of the
goods, or both;

 

WHEREAS, the parties desire to comply with health information privacy and
security protections subsequent to the enactment of the Health Information
Technology for Clinical and Economic Health Act, Subtitle D of the American
Recovery and Reinvestment Act of 2009 which has established new requirements for
compliance with HIPAA. In particular, the requirements provide that: (1) Covered
Entity give affected individuals notice of security breaches affecting their PHI
and Business Associate give notice to Covered Entity pursuant to the provisions
below (“Breach Notification Requirements”); (2) Business Associate comply with
the HIPAA security regulations (“BA Security Compliance”); and (3) additional
and/or revised provisions be included in Business Associate Agreement;

 

WHEREAS, Under HIPAA and HITECH, Covered Entity is required to enter into
protective agreements, generally known as “business associate agreements,” with
certain downstream entities that will be entrusted with HIPAA-protected health
information, including health information organizations or other persons that
provide data transmission services with respect to HIPAA-protected health
information and that require access on a routine basis;

 

WHEREAS, Health information is further protected by state law, including the
Texas Medical Records Privacy Act; and

 

WHEREAS, Covered Entity wishes to ensure that Business Associate will
appropriately safeguard Protected Health Information.

 

NOW THEREFORE, Covered Entity and Business Associate agree as follows:

 

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1.           Definitions. The parties agree that the following terms, when used
in this Agreement, shall have the following meanings, provided that the terms
set forth below shall be deemed to be modified to reflect any changes made to
such terms from time to time as defined in HIPAA and the HIPAA Regulations. All
capitalized terms used in this Agreement but not defined below shall have the
meaning assigned to them under the HIPAA Regulations.

 

a.           “HIPAA” means the Health Insurance Portability and Accountability
Act of 1996, Public Law 104-191.

 

b.           “HIPAA Regulations” means the regulations promulgated under HIPAA
by the United States Department of Health and Human Services, including, but not
limited to, 45 C.F.R. Part 160 and 45 C.F.R. Part 164 subparts A and E (the
“Privacy Rule”) and the Security Standards as they may be amended from time to
time, 45 C.F.R. Parts 160, 162 and 164, Subpart C (the “Security Rule”).

 

c.           “HITECH Act” means the provisions of Division A, Title XIII of the
American Recovery and Reinvestment Act of 2009 (“ARRA”), known as The Health
Information Technology for Economic and Clinical Health, Act 42 U.S.C. §3000 et.
seq., and implementing regulations and guidance.

 

d.           “MRPA” means Texas Medical Records Privacy Act, as codified in
Section 181 et seq. of the Texas Health and Safety Code and as implemented
through regulations including the Standards Relating to the Electronic Exchange
of Health Information, codified at Title 1, Section 390.1 et seq. of the Texas
Administrative Code.

 

e.           “Business Associate” means, with respect to a Covered Entity, a
person who:

 

1)on behalf of such Covered Entity or of an Organized Health Care Arrangement
(as defined under the HIPAA Regulations) in which the Covered Entity
participates, but other than in the capacity of a member of the workplace of
such Covered Entity or arrangement, creates, receives, maintains, or transmits
PHI for a function or activity regulated by HIPAA, implementing Regulations or
MRPA including claims processing or administration, data analysis, processing or
administration, utilization review, quality assurance, patient safety activities
listed at 42 CFR 3.20, billing, benefit management, practice management, and
repricing; or

 

2)provides, other than in the capacity of a member of the workforce of such
Covered Entity, legal, actuarial, accounting, consulting, Data Aggregation,
management, administrative, accreditation, or financial services to or for such
Covered Entity, or to or for an Organized Health Care Arrangement in which the
Covered Entity participates, where the provision of the service involves the
disclosure of PHI from such Covered Entity or arrangement, or from another
Business Associate of such Covered Entity or arrangement, to the person.

 

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f.           “Individually Identifiable Health Information” means information
that is a subset of health information, including demographic information
collected from an individual, and;

 

1)is created or received by a health care provider, health plan, employer, or
health care clearinghouse; and

 

2)relates to past, present, or future physical or mental health or condition of
an individual; the provision of health care to an individual; or the past,
present, or future payment for the provision of health care to an individual;
and

 

a)           that identifies the individual; or

 

b)           with respect to which there is a reasonable basis to believe the
information can be used to identify the individual.

 

g.           “Protected Health Information” or “PHI” means Individually
Identifiable Health Information that is transmitted by electronic media;
maintained in any medium described in the definition of the term electronic
media in the HIPAA Regulations; or transmitted or maintained in any other form
or medium. Protected Health Information excludes Individually Identifiable
Health Information in educational records covered by the Family Educational
Right and Privacy Act, as amended, 20 U.S.C. § 1232g; records described at 20
U.S.C. § 1232g(a)(4)(B)(iv); and employment records held by a Covered Entity in
its role as employer and regarding a person who has been deceased more than 50
years.

 

h.           “Data Aggregation” means, with respect to PHI created or received
by Business Associate in its capacity as the Business Associate of Covered
Entity, the combining of such PHI by Business Associate with the PHI received by
Business Associate in its capacity as a business associate of another covered
entity, to permit data analyses that relate to the health care operations of the
respective covered entities.

 

i.           “Security Incident” means the attempted or successful unauthorized
access, use, disclosure, modification, or destruction of information or
interference with systems operations in an information system, but does not
include minor incidents that occur on a daily basis, such as scans, “pings”, or
unsuccessful random attempts to penetrate computer networks or servers
maintained by Business Associate.

 

j.           “Unsecured PHI” means PHI that is not rendered unusable,
unreadable, or indecipherable to unauthorized individuals through the use of a
technology or methodology specified in the guidance issued under Section
13402(h)(2) of the HITECH Act on the HHS web site.

 

k.           “Breach” shall have the meaning given such term under 45 C.F.R. §
164.402 as such regulation is revised from time to time.

 

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2.           Permitted Uses and Disclosures.

 

a.Performance of Services. Except as otherwise permitted by this Agreement,
Business Associate may create, receive, maintain or transmit PHI on behalf of,
Covered Entity only in connection with the performance of the services
contracted for in the Underlying Agreement or as Required by Law (as that term
is defined by 45 CFR § 164.103).

 

b.Proper Management and Administration. Business Associate may use PHI received
by Business Associate in its capacity as Covered Entity’s Business Associate,
for the proper management and administration of Business Associate in connection
with the performance of services in the Underlying Agreement, as permitted by
this Agreement or as Required by Law (as that term is defined by 45 CFR §
164.103), and to carry out the legal responsibilities of Business Associate.
Business Associate may disclose Covered Entity’s PHI for such proper management
and administration of Business Associate and to carry out the legal
responsibilities of Business Associate. Any such disclosure of PHI shall only be
made if a Business Associate obtains reasonable assurances from the person to
whom the PHI is disclosed that: (1) the PHI 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 (2) Business Associate will be notified by such
person of any instances of which it becomes aware in which the confidentiality
of the PHI has been breached.

 

c.Data Aggregation. Business Associate may use and disclose PHI received by
Business Associate in its capacity as Covered Entity’s Business Associate in
order to provide Data Aggregation services relating to Covered Entity’s health
care operations only with Covered Entity’s permission.

 

d.De-Identification. Business Associate may de-identify any and all PHI provided
that the de-identification conforms to the requirements of 45 C.F.R.
§164.514(b). De- identified information does not constitute PHI and is not
subject to the terms of this Addendum.

 

3.           Nondisclosure.

 

a.As Provided in Agreement. Business Associate shall not use or further disclose
Covered Entity’s PHI otherwise than as permitted or required by this Agreement
or as Required by Law (as that term is defined by 45 CFR § 164.103).

 

b.Disclosures Required By Law. Business Associate shall not, without prior
written consent of Covered Entity, disclose any PHI on the chance that such
disclosure is required by law without notifying, to the extent legally
permitted, Covered Entity so that the Covered Entity shall have an opportunity
to object to the disclosure and to seek appropriate relief. If Covered Entity
objects to such a disclosure, Business Associate, shall, to the extent
permissible by law, refrain from disclosing the PHI until Covered Entity has
exhausted all alternatives for relief. Business Associate shall take steps
consistent with the HIPAA Regulations to obtain reasonable assurances from
persons receiving PHI in accordance with Section 2(b) that such persons will
provide Covered

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Entity with similar notice and opportunity to object before disclosing PHI when
a disclosure is required by law.

 

c.Additional Restrictions.  If Covered Entity provides timely advanced notice to
Business Associate that Covered Entity has agreed to be bound by additional
restrictions on the uses or disclosures of Covered Entity’s PHI pursuant to
HIPAA or the HIPAA Regulations, Business Associate shall be bound by such
additional restrictions and shall not disclose Covered Entity’s PHI in violation
of such additional restrictions to the extent possible consistent with Business
Associate’s obligations set forth in the Underlying Agreement.

 

d.Remuneration. Business Associate shall not directly or indirectly receive
remuneration in exchange for disclosing PHI received from or on behalf of
Covered Entity except as permitted by HITECH Act § 13405, the MRPA, and any
implementing regulations that may be promulgated or revised from time to time.

 

e.Business Associate shall not use or disclose PHI in a manner that would
violate Subpart E of 45 C.F.R. part 164, or MRPA, if done by the Covered Entity
itself except as authorized under the section of this Agreement entitled
“Permitted Uses and Disclosures”.

 

4.Limited Data Sets. Covered Entity and Business Associate agree to limit, to
the extent practical and except as permitted by 45 C.F.R. § 164.502(b)(2), its
uses, disclosures and requests of PHI under this Agreement to a Limited Data Set
(as defined in 45 C.F.R. § 164.514(e)(2)) or, if needed by Covered Entity or
Business Associate, to the minimum necessary PHI to accomplish the intended
purpose of such use, disclosure or request. This provision will cease to apply
on the effective date of guidance issued by the Secretary of HHS in accordance
with HITECH Act § 13405(b)(1)(C).

 

5.           Additional Business Associate Obligations.

 

a.           Safeguards.  Use appropriate safeguards and comply with Subpart C
of 45 C.F.R. 164 with respect to electronic PHI to prevent use or disclosure of
the PHI other than as provided for by this Agreement.

 

b.           To the extent the Business Associate is to carry out one or more of
Covered Entity‘s obligation(s) under Subpart E of 45 C.F.R. 164 (Privacy Rule)
Business Associate shall comply with the requirements of Subpart E that apply to
the Covered Entity in the performance of the obligations.

 

c.           Business Associate’s Agents and Subcontractors.

 

1)          Business Associate shall not disclose PHI to any agent or
subcontractor of Business Associate except in a manner consistent with the HIPAA
Regulations.

 

2)          Business Associate shall ensure that any agents and subcontractors
to whom it provides PHI agree to create, receive, maintain or transmit PHI on
behalf of the Business Associate under no less protective restrictions than
those that

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apply to Business Associate. Such agreement between Business Associate and
subcontractor or agent must be in writing and must comply with the terms of this
Agreement and the requirements outlined at 45 C.F.R. §164.504(e)(2); 45 C.F.R.
§164.502(e)(1)(ii); 45 C.F.R. §164.314; and 45 C.F.R. §164.308(b) (2).
Additionally, Business Associate shall ensure agents or subcontractors agree to
implement reasonable and appropriate safeguards to protect PHI.

 

3)           If Business Associate knows of a pattern of activity or practice of
its subcontractor or agent that constitutes a material breach or violation of
the agent or subcontractor’s obligation under the contract or other arrangement,
the Business Associate must take steps to cure the breach and end the violation
and if such steps are not successful, must terminate the contract or arrangement
if feasible. If it is not feasible to terminate the contract, Business Associate
must promptly notify the Covered Entity.

 

4)           Business Associate shall be fully responsible for any acts,
failures or omissions of the agent and subcontractor in providing the services
as if they were the Business Associate’s own acts, failures or omissions, to the
extent permitted by law.

 

d.           Reporting. Business Associate shall, as soon as practicable but not
more than twenty (20) business days after becoming aware of any Security
Incident or use or disclosure of Covered Entity’s PHI in violation of this
Agreement, report any such use or disclosure to Covered Entity.

 

e.           Breach of Unsecured PHI. With the exception of law enforcement
delays that satisfy the requirements under 45 C.F.R. § 164.412 or as otherwise
required by applicable state law, Business Associate shall notify Covered Entity
in writing without unreasonable delay and in no case later than sixty (60)
calendar days upon discovery of a Breach of Unsecured PHI. Such notice must
include, to the extent possible, the name of each individual whose Unsecured PHI
has been, or is reasonably believed by Business Associate to have been,
accessed, acquired, or disclosed during such breach. Business Associate shall
also provide, to the extent possible, Covered Entity with any other available
information that Covered Entity is required to include in its notification to
individuals under 45 C.F.R. § 164.404(c) at the time of Business Associate’s
notification to Covered Entity or promptly thereafter as such information
becomes available. For purposes of this Agreement, a Breach of Unsecured PHI
shall be treated as discovered by Business Associate as of the first day on
which such breach is known to Business Associate (including any person, other
than the individual committing the breach, who is an employee, officer, or other
agent of Business Associate, as determined in accordance with the federal common
law of agency) or should reasonably have been known to Business Associate
following the exercise of reasonable diligence.

 

f.           Mitigation. Business Associate shall have procedures in place to
mitigate, to the maximum extent practicable, any deleterious effect from any Use
or Disclosure (as defined by 45 C.F.R. §160.103 or on behalf of Business
Associate, or its agent or

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subcontractor on behalf of Business Associate, of Covered Entity’s PHI in
violation of this Agreement or applicable law.

 

g.           Sanctions. Business Associate shall have and apply appropriate
sanctions against any employee, subcontractor or agent who uses or discloses
Covered Entity’s PHI in violation of this Agreement or applicable law.

 

h.           United States Department of Health and Human Services. Business
Associate shall make its internal practices, books and records that are not
protected by applicable legal privilege or work product protection relating to
the use and disclosure of PHI received from, or created or received by Business
Associate on behalf of, Covered Entity available to the Secretary of the United
States Department of Health and Human Services for purposes of determining
Covered Entity’s compliance with HIPAA and the HIPAA regulations, provided that
Business Associate shall promptly notify Covered Entity upon receipt by Business
Associate of any such request for access by the Secretary of the United States
Department of Health and Human Services.

 

i.           Training. Business Associate shall provide such training in the
privacy and security of PHI to its Workforce (as that term is defined by 45
C.F.R. § 160.103) as is required for Business Associate’s compliance with HIPAA,
HITECH, and the MRPA.

 

6.           Obligation to Provide Access, Amendment and Accounting of PHI.

 

a.           Access to PHI.  To the extent (if any) that Business Associate
maintains a Designated Record Set on behalf of Covered Entity, within twenty
(20) days of a written request by Covered Entity, Business Associate shall make
available to Covered Entity, in the manner designated by the Covered Entity,
such information as necessary to allow Covered Entity to meet its obligations
under the HIPAA Regulations to provide access to, and copies of, PHI in
accordance with HIPAA and the HIPAA Regulations and MRPA. In the event that any
Individual requests access to PHI directly from Business Associate, Business
Associate shall notify Covered Entity within five (5) business days that such
request has been made.

 

b.           Amendment of PHI.  To the extent (if any) that Business Associate
maintains a Designated Record Set on behalf of Covered Entity, within twenty
(20) days of a written request by Covered Entity, Business Associate shall make
available to Covered Entity PHI contained in a Designated Record Set held by
Business Associate as Covered Entity may require to fulfill Covered Entity’s
obligations to amend PHI in accordance with HIPAA and the HIPAA Regulations. In
addition, Business Associate shall, as directed by Covered Entity, incorporate
any amendments to Covered Entity’s PHI into copies of such information
maintained by Business Associate. In the event that any Individual requests
amendment of PHI directly from Business Associate, Business Associate shall
forward such request to Covered Entity within five (5) business days.

 

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c.           Accounting of Disclosures of PHI

 

1)           Record of Disclosures. Business Associate shall maintain a record
of all disclosures of PHI received from, or created or received by Business
Associate on behalf of, Covered Entity, except for those disclosures identified
in Section 6(c)(2) below, including the date of the disclosure, the name and, if
known, the address of the recipient of the PHI, a brief description of the PHI
disclosed, and the purpose of the disclosure which includes an explanation of
the reason for such disclosure. Business Associate shall make this record
available to Covered Entity within twenty (20) days of a written request by
Covered Entity. In the event that any Individual requests an accounting of
disclosures of PHI directly from Business Associate, Business Associate shall
notify Covered Entity within five (5) business days that such request has been
made and provide Covered Entity with record of disclosures within 20 days of
Individual’s request. If request from Individual comes directly to Covered
Entity and Covered Entity notifies Business Associate that it requires
information from Business Associate in order to respond to Individual, Business
Associate shall make available to Covered Entity such information as Covered
Entity may require within twenty (20) days from the time of request by Covered
Entity.

 

2)           Certain Disclosures Need Not Be Recorded.  The following
disclosures need not be recorded:

 

a)           disclosures to carry out Covered Entity’s treatment, payment and
health care operations as defined under the HIPAA Regulations. However, under
HITECH Act, because Covered Entity had acquired an electronic health record
system prior to January 1, 2009, any disclosures from these records to Business
Associate for the purpose of carrying out Covered Entity's treatment, payment
and health care operations, requires that Business Associate record any of its
disclosures of that information effective January 1, 2014, or as otherwise
required by regulations;

 

b)           disclosures to individuals of PHI about them as provided by the
HIPAA Regulations;

 

c)           disclosures for Covered Entity’s facility’s directory, to persons
involved in the individual’s care, or for other notification purposes as
provided by the HIPAA Regulations;

 

d)           disclosures for national security or intelligence purposes as
provided by the HIPAA Regulations;

 

e)           disclosures to correctional institutions or law enforcement
officials as provided by the HIPAA Regulations;

 

f)           disclosures that occurred prior to the later of (i) the effective
date of this Agreement or (ii) the date that Covered Entity is required  to
comply with HIPAA and the HIPAA Regulations;

 

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g)           disclosures pursuant to an individual’s authorization in accordance
with HIPAA and the HIPAA Regulations; and

 

h)           any other disclosures excepted from the right to an accounting by
the HIPAA Regulations.

 

7.           Responsibilities of Covered Entity.

 

a.           Privacy Notice. Covered Entity shall provide Business Associate
with its notice of privacy practices required by 45 C.F.R. §164.520 and any
subsequent material revisions to that notice.

 

b.           Changes. Covered Entity, as necessary, shall notify Business
Associate of:

 

a.           any changes in or revocation of permission by an Individual,
pursuant to 45 C.F.R. §164.526, concerning the use or disclosure of PHI, if such
changes or revocation affect Business Associate’s permitted or required uses and
disclosures;

 

b.           Any special material restrictions to the use or disclosure of PHI
to which Covered Entity has agreed, pursuant to 45 C.F.R. §164.522, that may
impact on the use and disclosure of PHI by Business Associate; and

 

c.           Any amendments to PHI to which Covered Entity has agreed under 45
C.F.R. §164.526 that relate to PHI upon which Business Associate relies to
perform services.

 

c.           Authorizations. Covered Entity will obtain all consents and
authorizations necessary and/or required by law for Covered Entity and Business
Associate to fulfill their obligations under applicable law and this Agreement.

 

d.           Accounting of PHI Disclosures. Covered Entity will include in
individual accountings requested under the HIPAA Regulations, including without
limitation, 45 C.F.R. § 164.528, any disclosures by Business Associate.

 

e.           Meet and Confer. Upon any suspected or actual Breach, unauthorized
disclosure of the PHI or breach of this Addendum, Covered Entity will meet and
confer in good faith with Business Associate before notifying affected
individuals, reporting to government agencies, and/or commencing any legal
action.

 

f.           Client Compliance. Covered Entity shall comply with HIPAA, the
HITECH Act, and HIPAA Regulations in obtaining services from Business Associate
and providing PHI to Business Associate under this Agreement. Further, Covered
Entity shall not request Business Associate use or disclose PHI in a manner that
violates applicable law, or would violate applicable law if done by Covered
Entity.

 

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8.           Material Breach, Enforcement and Termination.

 

a.           Term. This Agreement shall become effective on the effective date
of the Underlying Agreement (the “Effective Date”) and shall continue unless or
until the Agreement is terminated in accordance with the provisions of this
Agreement, the Underlying Agreement between the parties terminates or the
Business Associate has completed performance of the services in the Underlying
Agreement, whichever is earlier.

 

b.           Termination. Either party may terminate this Agreement:

 

1)           immediately if the other party is named as a defendant in a
criminal proceeding for a violation of HIPAA or the HIPAA Regulations;

 

2)           immediately if a finding or stipulation that the other party has
violated any standard or requirement of HIPAA or other security or privacy laws
is made in any administrative or civil proceeding in which that party has been
joined; or completed performance of the services in the Underlying Agreement,
whichever is earlier.

 

3)           pursuant to Sections 8(c) or 9(b) of this Agreement.

 

c.           Remedies. Upon one party's knowledge of a material breach by the
other party, the non-breaching party shall either:

 

1)           provide an opportunity for the breaching party to cure the breach
and end the violation or terminate this Agreement and the Underlying Agreement
if the breaching party does not cure the breach or end the violation within
thirty (30) days; or

 

2)           immediately terminate this Agreement and the Underlying Agreement
if cure is not possible.

 

d.           Knowledge of Non-Compliance. Any non-compliance by a party with
this Agreement will automatically be considered a breach or violation of a
material term of this Agreement if the party knew or reasonably should have
known of such non- compliance and failed to immediately take reasonable steps to
cure the non-compliance.

 

e.           Injunctions. Covered Entity and Business Associate agree that any
violation of the provisions of this Agreement may cause irreparable harm to the
other party. Accordingly, in addition to any other remedies available to each
party at law or in equity, each party shall be entitled to seek an injunction or
other decree of specific performance with respect to any violation of this
Agreement or explicit threat thereof, without any bond or other security being
required and without the necessity of demonstrating actual damages.

 

f.           Indemnification. Business Associate shall indemnify, hold harmless
and defend Covered Entity from and against any and all direct claims, losses,
liabilities, costs and

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other direct expenses resulting solely from, or relating solely to, the acts or
omissions of Business Associate in connection with the representations, duties,
and obligations of Business Associate under this Agreement. The parties agree
that such indemnification shall exclude any and all special, indirect, or
consequential damages.

 

9.           General Provisions.

 

a.           State Law. Nothing in this Agreement shall be construed to require
Business Associate to use or disclose PHI without written authorization from an
individual who is a subject of the PHI, or written authorization from any other
person, where such authorization would be required under state law for such use
or disclosure.

 

b.           Amendment.  Covered Entity and Business Associate agree to enter
into good faith negotiations to amend this Agreement to come into compliance
with changes in state and federal laws and regulations relating to the privacy,
security and confidentiality of PHI. Covered Entity may terminate this Agreement
upon thirty (30) days written notice in the event that Business Associate does
not promptly enter into an amendment that Covered Entity, in its reasonable
discretion, deems sufficient to ensure that Covered Entity and Business
Associate will be able to comply with such laws and regulations.

 

c.           No Third Party Beneficiaries. Nothing express or implied in this
Agreement is intended or shall be deemed to confer upon any person other than
Covered Entity, Business Associate, and their respective successors and assigns,
any rights, obligations, remedies or liabilities.

 

d.           Ambiguities.  The parties agree that any ambiguity in this
Agreement shall be resolved in favor of a meaning that complies and is
consistent with applicable law protecting the privacy, security and
confidentiality of PHI, including, but not limited to, MRPA, HIPAA, the HIPAA
Regulations, and the HITECH Act.

 

e.           Primacy. To the extent that any provision of this Agreement
conflict with the provisions of any other agreement or understanding between the
parties, this Agreement shall control.

 

f.           Destruction/Return of PHI. Business Associate agrees that, pursuant
to 45 C.F.R. § 164.504 (e) (2) (ii) (I), upon termination of this Agreement or
the Underlying Agreement, for whatever reason,

 

1)           it will return or destroy all PHI, if feasible, received from or
created or received by it on behalf of Covered Entity which Business Associate
maintains in any form, and retain no copies of such information which for
purposes of this Agreement shall mean all backup tapes. Prior to doing so,
Business Associate further agrees to recover any PHI in the possession of its
subcontractors or agents if feasible. An authorized representative of Business
Associate shall certify in writing to Covered Entity, within thirty (30) days
from the date of termination or other expiration of the Underlying Agreement,
that to the extent feasible all PHI

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has been returned or disposed of as provided above and that Business Associate
or its subcontractors or agents no longer retain any such PHI in any form.

 

2)           If it is not feasible for Business Associate to return or destroy
said PHI, Business Associate will notify the Covered Entity in writing. The
notification shall include:

 

a)           a statement that the Business Associate has determined that it is
infeasible to return or destroy the PHI in its possession, and (ii) the specific
reasons for such determination; and

 

b)           Business Associate shall comply with Subpart C of 45 C.F.R. Part
164 (Security Rule) and extend any and all protections, limitations and
restrictions contained in this Agreement to Business Associate’s use and/or
disclosure of any PHI retained after the termination of this Agreement, and to
limit any further uses and/or disclosures to the purposes that make the return
or destruction of the PHI infeasible.

 

3)           If it is infeasible for Business Associate to obtain, from a
subcontractor or agent any PHI in the possession of the subcontractor or agent,
Business Associate must provide a written explanation to Covered Entity and
require the subcontractors and agents to agree to comply with Subpart C of 45
C.F.R. Part 164 (Security Rule) and extend any and all protections, limitations
and restrictions contained in this Agreement to the subcontractors’ and/or
agents’ use and/or disclosure of any PHI retained after the termination of this
Agreement, and to limit any further uses and/or disclosures to the purposes that
make the return or destruction of the PHI infeasible.

 

g.           Minimum Necessary. Business Associate will disclose to its
subcontractors, agents or other third parties, and request from Covered Entity,
only the minimum PHI necessary to perform or fulfill a specific function
required or permitted hereunder.

 

h.           No Offshore Work. In performing the functions, activities or
services for, or on behalf of Covered Entity, Business Associate shall not, and
shall not permit any of its agents or subcontractors who receive Covered
Entity’s Protected Health Information to transmit or make available any
Protected Health Information to any entity or individual outside the United
States without prior written consent of Covered Entity.

 

i.           Change in Law. Except as otherwise specified in law or this
Agreement, if a change in Texas state law or Health Information Technology for
Economic and Clinical Health Act or future law amending HIPAA provides for a
later effective date shall apply in this Agreement to incorporate that change.

 

j.           Integration.  This Agreement embodies and constitutes the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior oral or written agreements, commitments
and understandings pertaining to the subject matter hereof.

 

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k.           Governing Law. This Agreement is governed by, and shall be
construed in accordance with, applicable federal law and the laws of the State
of Texas without regard to choice of law principles.

 

l.           Notices. Any notices to be given hereunder to a Party shall be made
via U.S. Mail or express courier to such Party’s address given below, and/or
(other than for the delivery of fees) via facsimile to the facsimile telephone
numbers listed below.

 

 

 

To Covered Entity:

FTH DFW Partners LLC

 

c/o Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn:  Donald Adam, Chief Corporate Development Officer

 

Email: don.adam@adhc.com

 

 

With a copy to:

Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas 75067

 

Attn: Timothy Mueller, General Counsel

 

Email: tim.mueller@adhc.com

 

 

To Business Associate:

Texas Health Resources

 

612 East Lamar Blvd., Suite 500

 

Arlington, Texas 76011

 

Attn:  Krystal Mims

 

Email: KrystalMims@texashealth.org

 

 

With a copy to:

Texas Health Resources

 

612 East Lamar Blvd., Suite 900

 

Arlington, Texas 76011

 

Attn: Kenneth Kramer, General Counsel

 

Email: KennethKramer@texashealth.org

 

Each Party named above may change its address and that of its representative for
notice by the giving of notice thereof in the manner herein above provided.

 

m.           Privilege. Notwithstanding any other provision in this Agreement,
this Agreement shall not be deemed to be an agreement by Business Associate to
disclose information that is privileged, protected or confidential under
applicable law to the extent that such privilege, protection or confidentiality
(a) has not been waived or (b) is not superseded by applicable law.

 

n.           Multiple Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument. Facsimile and electronic
(pdf) signatures shall be treated as if they are original signatures.

 

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[Remainder of page intentionally left blank; signature page follows.]

 

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be
effective as of the Effective Date of the Underlying Agreement.

 

 

 

 

 

 

Texas Health Resources

 

FTH DFW Partners LLC

 

 

 

By:

/s/ Barclay E. Berdan

    

By:

/s/ Graham Cherrington

Printed Name:

Barclay E. Berdan, FACHE

 

Printed Name:

Graham Cherrington

Its:

Chief Executive Officer

 

Its:

President

 

 

 

Signature Page to Business Associate Agreement

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Note: Information has been omitted from this agreement pursuant to a request for
confidential treatment, and such information has been separately filed with the
Securities and
Exchange Commission. The omitted information has been marked with a bracketed
asterisk (“[*]”).

 

Execution Version

 

TRADEMARK LICENSE AGREEMENT

 

THIS TRADEMARK LICENSE AGREEMENT (this “Agreement”) is made as of May 10, 2016
(the “Effective Date”), by and among Texas Health Resources, a Texas nonprofit
corporation (“THR”), as licensor, and FTH DFW PARTNERS LLC, a Texas limited
liability company (“Company”), and Company’s wholly owned subsidiaries (each, a
“Company Licensee” and collectively, “Company Licensees”), as licensee(s).

 

RECITALS

 

A.THR and Company are parties to that certain Operating Agreement of FTH DFW
PARTNERS LLC, dated as of the Effective Date (the “Operating Agreement”),
regarding the formation and operation of the Company.

 

B.THR owns the rights to certain trademarks as set forth in Schedule A and any
and all variations or modifications that may be approved in writing by THR
(“Licensed Trademarks”).

 

C.THR desires to license to Company Licensees, and Company Licensees desire to
license from THR, the Licensed Trademarks, upon the terms and subject to the
conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, and in further consideration
of the promises contained herein, the parties agree as follows:

 

ARTICLE I DEFINITIONS

 

Capitalized terms used in this Agreement have the meaning specified in this
Agreement, and when not so defined shall have the meaning set forth in the
Operating Agreement.

 

ARTICLE II LICENSE

 

2.1Grant of Trademark License.  Subject to the terms and conditions of this
Agreement, during the term of this Agreement, THR hereby grants to Company
Licensees a non- exclusive (subject to Section 2.6 below), non-transferable
(subject to Section 2.5 below), sublicensable (solely to approved Affiliates of
Company), fully-paid license to use the Licensed Trademarks solely in connection
with the operation, promotion, advertising and marketing of the hospital and
freestanding emergency room facilities as may be owned or operated by Company
Licensees from time to time (the “Company Facilities”).

 

2.2Approved Uses of Licensed Trademarks.   Subject to the other terms and
conditions of this Agreement, Company Licensees may use the Licensed Trademarks
in a manner consistent with THR’s branding standards, guidelines and related
templates and guidance as set forth in its trademark guidelines and as
reasonably amended or supplemented by THR

1

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from time to time (collectively, the “Trademark Use Guidelines”) and as provided
to Company Licensees in writing. Notwithstanding the foregoing, the Trademark
Use Guidelines, and any amendments or supplements thereto, shall be no more
restrictive on Company Licensees, and shall create no greater obligation on
Company Licensees, than Licensor applies to its own facilities and to its other
similarly situated licensees. THR shall promptly notify Company in writing of
any such amendments or supplements to the Trademark Use Guidelines, and Company
shall not be bound by such amendments or supplements unless and until such
amendments or supplements have been received by Company. Any use of the Licensed
Trademarks in a manner not consistent with the Trademark Use Guidelines shall be
subject to the prior written approval of THR, which approval may be granted,
withheld or conditioned by THR in its reasonable discretion. In the event of any
proposed use of the Licensed Trademarks in a manner not consistent with the
Trademark Use Guidelines, Company Licensees shall submit to THR samples or
copies of all proposed signage, advertising, promotional and display materials
created or developed bearing or referring to any Licensed Trademarks prior to
any use, distribution, publication or broadcast of such materials, and THR shall
respond to such request within ten (10) business days of its submission, and in
the case of rejection, THR will provide a written explanation of the grounds for
such rejection.  If THR fails to respond to such request within ten (10)
business days of the request’s submission, Company Licensee shall submit a final
notice to THR. If THR fails to respond to the final notice within five (5)
business days of the final notice’s submission, the proposed use of the Licensed
Trademarks shall be deemed approved.

 

2.3Trade Name. Upon approval by THR, during the term of this Agreement and
subject to the terms and conditions of this Agreement, THR hereby grants to
Company Licensees the right to use the names “Texas Health Resources”, “Texas
Health” and/or “THR” on a non- exclusive, basis as part of Company Licensees’
corporate name, trade names and/or d/b/a names, and any equivalents thereof.

 

2.4Domain Names and Social Media Sites.

 

(a)          THR retains sole authority to register, operate and exclusively own
any domain name, including any top level or other level domain name extension
(i.e. blank.sample.com) in any generic top level domain (gTLD) or country code
top level domain (ccTLD) existing now or launched during the term of this
Agreement, blog name and/or social media username, website or other platform
including, but not limited to, Facebook, Twitter and YouTube (“Social Media
Site(s)”), that consist of or incorporate the Licensed Trademarks, either alone
or combined with any other characters.

 

(b)          Company Licensees may not register, operate and/or own any domain
name, including any top level or other level domain name extension (i.e.
blank.sample.com) in any generic top level domain (gTLD) or country code top
level domain (ccTLD) existing now or launched during the term of this Agreement,
blog name and/or Social Media Site(s) that consist of or incorporate the
Licensed Trademarks, either alone or combined with any other characters, without
the express prior written consent of THR, which may be withheld in THR’s
reasonable discretion.

 

If prior to the Effective Date of this Agreement (or in the future without
permission), any Company Licensee has registered (or registers) a domain name,
including any top level or other level domain name extension (i.e.
blank.sample.com) in any generic top level domain (gTLD) or

2

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Confidential treatment has been requested with respect to information contained
within the [*]
marking. Such portions have been omitted from this filing and have been
separately filed
with the Securities and Exchange Commission.

 

country code top level domain (ccTLD) existing now or launched during the term
of this Agreement, blog name and/or Social Media Site that consists of or
incorporates the Licensed Trademarks, either alone or combined with any other
characters, such Company Licensee agrees to assign and transfer the domain name,
blog name and/or Social Media Site to THR and also agrees to complete the
necessary document(s), such as an assignment agreement or registrant name change
agreement, as may be necessary to facilitate the transfer.

 

2.5No Transfer or Assignment of Rights. Except as specifically provided in this
Agreement, the rights granted under this Agreement may not be sublicensed,
transferred or assigned, in whole or in part, whether by contract or operation
of law, to any other person or entity without the prior written consent of THR,
which consent shall not unreasonably be withheld.

 

2.6Reservation of Rights. There are no rights or licenses, express or implied,
other than those granted by this Agreement to any intellectual property owned or
controlled by THR. The rights granted pursuant to this Agreement are subject to
all pre-existing licenses and contracts made by THR and to all rights of third
parties to the Licensed Trademarks. THR expressly reserves the right to use
and/or further license the Licensed Trademarks anywhere, for any purpose;
provided, however, that THR shall not use, or grant third parties the right to
use, the Licensed Trademarks in connection with the operation, promotion,
advertising and marketing of any Competing Freestanding ER Facility (as defined
in the Operating Agreement).

 

2.7License Fee. During the term of this Agreement, except to the extent of
revocation in accordance with Section 5.4, Company shall pay THR a fee equal to
the sum of [*]. Company shall pay to THR such fee no later than the fifteenth
(15th) business day of each month. As used in this Section, “Net Revenue” means
the accrued revenues during a particular calendar month from any and all sources
on account of services rendered or goods or products provided at the Company
Facilities (excluding the Company Facilities subject to revocation in accordance
with Section 5.4) during such month, net of contractual allowances (including
administrative adjustments) and bad debts (including charity expense), as
determined in accordance with GAAP; provided that Net Revenues shall be subject
to adjustment and reconciliation in the event of subsequent payor disallowances,
audits, set-offs or adjustments that are treated as prior period adjustments
under GAAP rather than included in the calculation of the relevant period’s net
income. Any such adjustment to Net Revenues shall be proposed by Manager, and
approved by the Board as set forth in Section 3.01(b) of the Operating
Agreement.

 

ARTICLE III QUALITY CONTROL

 

3.1Quality Standards. Company Licensees acknowledge and agree that in order to
preserve the distinctiveness and goodwill of the Licensed Trademarks, THR must
have the right to ensure that all use of the Licensed Trademarks meet minimum
standards of quality. Accordingly, Company Licensees covenant and agree that any
and all services performed or rendered by Company and the Company Facilities
will be performed or rendered in accordance with all applicable laws and
regulations and in a manner consistent with the standards set forth in the
Trademark Use Guidelines.

 

3

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3.2Use of Licensed Trademarks. Company Licensees shall accurately depict the
Licensed Trademarks. Company Licensees shall not use the Licensed Trademarks in
any manner that would, directly or indirectly, dilute or otherwise tarnish or
diminish the goodwill or reputation of the Licensed Trademarks or THR. Company
Licensees may not use any partial versions of the Licensed Trademarks. Except as
otherwise specifically set forth in the Trademark Use Guidelines, Company
Licensees may not use the Licensed Trademarks in combination, juxtaposition or
conjunction with, or as part of, any other marks without the prior written
approval of THR, which approval may be given, conditioned or withheld by THR in
its sole and absolute discretion. It is anticipated that Company’s presentations
of the Licensed Trademarks in referring to the Company’s facilities will present
the THR mark and logo as prominent. Other branding materials (other than
Licensed Trademarks in referring to the Company’s facilities) may include a
separate line below containing the statement: “An Innovative Collaboration
between Texas Health Resources and Adeptus Health.”

 

3.3Compliance with Laws.  Company Licensees shall be solely responsible for
compliance with, and shall comply with, all applicable federal, state and local
laws, rules and regulations in connection with this Agreement, the Operating
Agreement and the operations and activities of Company and the Company
Facilities.

 

ARTICLE IV

OWNERSHIP, REGISTRATION AND ENFORCEMENT

 

4.1Ownership.   Company Licensees acknowledge and agree that, as between the
Company Licensees and THR, THR is the sole and exclusive owner of all rights,
title and interest in and to the Licensed Trademarks. Nothing contained in this
Agreement shall create, nor be construed as an assignment of, any right, title
or interest in or to the Licensed Trademarks to Company Licensees, other than
the license granted in Section 2.1 of this Agreement. As of the Effective Date,
THR represents and warrants that (a) it has the right to grant the license
hereunder without violating or breaching any duty or obligation to any other
person or party, (b) it is not aware of any claim, allegation or demand
contesting its rights to use the Licensed Trademarks or asserting that its use
of the Licensed Trademarks infringe upon or violate the rights of any person or
party, nor is there any reasonable basis for any such assertion, (c) the
Licensed Trademarks are valid and subsisting in the United States Patent and
Trademark Office, do not infringe on the intellectual property rights of any
third parties and are available for use in the United States and its territories
and that THR shall maintain the validity of the Licensed Trademarks, and (d) THR
has not been put on notice that the use by Company Licensees of the Licensed
Trademarks as specifically permitted herein will infringe the intellectual
property or other rights of any third party. Any and all rights, title and
interest in, to or under the Licensed Trademarks which may accrue to the benefit
of, or be acquired by, Company Licensees as a result of its exercise of the
rights and licenses granted pursuant to this Agreement including, but not
limited to, any goodwill in any trademark arising from or created in connection
with the use of the Licensed Trademarks, shall inure to the sole benefit of THR.
Company Licensees hereby agree to assign and do assign to THR any and all such
rights, title and interest.

 

4.2Additional Covenants.   Company Licensees shall not assert any claim of
ownership of, or any claim to, any goodwill or reputation associated with the
Licensed Trademarks, or any trademark that is confusingly similar to or dilutive
of the Licensed Trademarks, by reason of Company Licensees’ use thereof or
otherwise.  Company Licensees

4

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shall not, directly or indirectly, contest the validity or enforceability of the
Licensed Trademarks and any related marks nor dispute THR’s rights in the
Licensed Trademarks and any related marks, either during the term of this
Agreement or thereafter nor assist any third party in doing so.

 

4.3Registration.  Except for the permissions granted to Company Licensees under
Section 2.3 herein, registration or any other form of protection for the
Licensed Trademarks shall be obtained solely by THR in its name. Company shall,
at THR’s expense, furnish THR with all reasonably requested information
(including specimens and samples illustrative of the manner of use of the
Licensed Trademarks) and documentation (including the execution and delivery of
any and all true and correct affidavits, declarations, oaths and other
documentation prepared by THR) and shall take all such other actions as
reasonably requested by THR to assist THR in obtaining and maintaining such
protection. Upon Company’s reasonable request, THR will file the Licensed Marks
for the goods and services offered in connection with the Company Facilities at
the U.S. Patent & Trademark Office.

 

4.4Enforcement. Company Licensees shall take all reasonable steps and shall
provide such materials, cooperation, and assistance at THR’s expense as may be
reasonably required to assist THR in enforcing the Licensed Trademarks. Company
Licensees shall promptly notify THR of any actual or suspected infringement or
misuse of any Licensed Trademark by third parties of which Company Licensees
become aware. THR shall have the sole discretion to take action against such
infringers or misusers or suspected infringers or misusers. Company Licensees
shall not take any such action without the prior written approval of THR, and
any and all recoveries resulting from such actions shall be retained by THR.
Should THR bring a lawsuit under this Section, Company Licensees shall execute
all papers, testify on all matters and otherwise cooperate as reasonably
necessary and desirable for the duration of any such lawsuit, including being
joined as a party to the action.

 

ARTICLE V

TERM AND TERMINATION

 

5.1Term.  This Agreement shall commence on the Effective Date and continue in
full force and effect until THR ceases to be a member of Company, unless earlier
terminated in accordance with this Agreement.

 

5.2Termination by THR.  THR shall have the right to terminate this Agreement
with regard to a specific Company Licensee upon written notice to Company if any
of the following occur:

 

(a)          the Company Licensee uses the Licensed Trademarks in a manner
materially inconsistent with the Trademark Use Guidelines or otherwise
materially breaches the terms of Section 2.2 of this Agreement, and such
material misuse or breach is not remedied to the reasonable satisfaction of THR
within forty-five (45) days after written notice of such misuse or breach has
been provided to Company by THR; however, if the Company pursues a cure for such
misuse or breach in good faith, then the Company shall have an additional forty-
five (45) day period (after the expiration of the first forty-five (45) day cure
period) to cure such misuse or breach;

 

5

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(b)          the Company Licensee fails to materially satisfy the requirements
of Sections 2.02(b), 2.02(c), 2.02(d) or 2.03(b) of the Operating Agreement or
otherwise materially fails to satisfy any of its obligations under Article III
of this Agreement, and such failure is not materially remedied within forty-five
(45) days after written notice of such failure has been provided to Company by
THR; however, if the Company pursues a cure for such failure or breach in good
faith, then the Company shall have an additional forty-five (45) day period
(after the expiration of the first forty-five (45) day cure period) to cure such
failure or breach, or

 

(c)          the Company Licensee materially breaches or fails to materially
perform or abide by a covenant or provision of this Agreement and the Company
Licensee fails to materially remedy the breach or failure within forty-five (45)
days after written notice of such breach or failure has been provided to Company
by THR; however, if the Company pursues a cure for such breach or failure in
good faith, then the Company shall have an additional forty- five (45) day
period (after the expiration of the first forty-five (45) day cure period) to
cure such breach or failure.

 

(d)          Notwithstanding the cure periods in Sections 5.2(a), (b) and (c),
upon THR’s written notice to Company of the Company’s Licensee’s material breach
of this Agreement or material failure to satisfy the Trademark Use Guidelines or
inconsistent use of the Trademark Use Guidelines (together referred to as
“Trademark Noncompliance”), the Company Licensee shall use commercially
reasonable efforts to cure and mitigate such Trademark Noncompliance as soon as
reasonably possible so as not to permanently dilute or otherwise tarnish or
diminish the goodwill or reputation of the Licensed Trademarks or THR.

 

5.3Automatic Termination.  This Agreement shall terminate  immediately upon (a)
the dissolution of Company, (b) termination of the Operating Agreement, (c) the
exercise by Adeptus of the Adeptus Purchase Option (as defined in Section 7.03
of the Operating Agreement), (d) the exercise by THR of the THR Put Right (as
defined in Section 7.04 of the Operating Agreement), (e) the exercise of the
Legal Impediment Put/Call Rights (as defined in Section 7.06 of the Operating
Agreement), in which THR will be the Selling Member (as defined in the Operating
Agreement) as a result of the exercise of such Legal Impediment Put/Call Rights,
(f) Company makes an assignment for the benefit of creditors, admits in writing
its inability to pay its debts as they mature, applies to any court for the
appointment of a trustee or receiver over its assets, or upon commencement of
any voluntary or involuntary proceedings under an bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation or other
similar law of any jurisdiction, (g) Company or its Affiliates is excluded,
debarred or suspended from participation in any Government Health Care Program,
or (h) THR or THR Affiliate is no longer a member of Company (in any case, the
“Termination Trigger Event”); provided, however, that upon termination of this
Agreement in accordance with this Section 5.3, except in the case of clauses
(a), (b) or (g) of this Paragraph, any Company Licensee shall have the right to
continue to use the Licensed Trademarks in accordance with the terms hereof for
a transition period not to exceed the later of: (x) ninety (90) days after the
date of the Termination Trigger Event, or (y) the date upon which THR ceases to
be a Member (as defined in the Operating Agreement) of Company.

 

5.4Revocation of Use.  Notwithstanding any term or provision of this Agreement
to the contrary, at any time upon forty-five (45) days’ prior written notice by
THR, in the case of any uncured event described in Sections 5.2(a),  (b) or (c)
above, THR shall have the right, at its

6

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option, in lieu of the termination of this Agreement, to revoke the license
granted under this Agreement as to a particular Company Facility, or any
previously approved use of the Licensed Trademarks, without the need to
terminate the entire Agreement. In the event that THR revokes the license
granted under this Agreement pursuant to this Section 5.4, the provisions of
Section 5.5 below shall apply in connection with such revoked use.

 

5.5Effect of Expiration or Termination.  Subject to Section 5.3, upon expiration
or termination of this Agreement for any reason, Company Licensees shall as soon
as possible but in any event not more than 180 (one-hundred and eighty) days
have discontinued all use of the Licensed Trademarks and shall have destroyed
all materials bearing any Licensed Trademarks. For the avoidance of doubt,
subject to Section 5.3, all Company Licensees shall within 180 (one- hundred and
eighty) days have ceased using the Licensed Trademarks, and every variation,
portion and abbreviation of them, in every respect. Notwithstanding the
foregoing, upon expiration or termination of this Agreement for any reason,
Company and Company Licensees shall be permitted to use the Licensed Trademarks
in a strictly historical, non-trademark, fair use capacity to describe or refer
to its former or then-current affiliation with THR or its former license
concerning, or use of, the Licensed Trademarks.

 

ARTICLE VI WARRANTIES AND INDEMNIFICATION

 

6.1Indemnification by Company.  Company shall indemnify and hold THR, its
Affiliates, and their respective directors, officers, employees, members,
agents, and assignees (collectively, “THR Indemnitees”) harmless from, and shall
pay all losses, damages, fees, expenses, or costs (including reasonable
attorneys’ fees) incurred by them based upon, any third- party claim, demand,
suit or proceeding arising out of or relating to (a) any Company Licensee’s use
of the Licensed Trademarks, except as specifically permitted herein and as
otherwise permitted by THR, or (b) any material breach of this Agreement by
Company or any Company Licensee; provided, however, that in no event shall
Company be liable to THR or any other THR Indemnitee for any special, indirect,
incidental, punitive or consequential damages in any way arising of or in
connection with the use of the Licensed Trademarks regardless of legal theory
and however caused.

 

6.2Indemnification by THR.  THR shall indemnify and hold Company, Company
Licensees, and their respective directors, officers, employees, members, agents
and assignees (collectively, “Company Indemnitees”), harmless from, and shall
pay all losses, damages, fees, expenses or costs (including reasonable
attorney’s fees) incurred by them based upon any third- party claim, demand,
suit or proceeding arising out of or relating to use of the Licensed Trademarks
as permitted herein and as otherwise permitted by THR and any breach of the
representations and warranties of THR set forth in Section 4.1 of this
Agreement; provided, however, that, in no event shall THR be liable to Company,
any Company Licensee, or any other Company Indemnitee (a) for any damages
resulting from the use by Company or any Company Licensee of the Licensed
Trademarks except as specifically permitted herein and as otherwise permitted by
THR, or (b) for any special, indirect, incidental, punitive or consequential
damages in any way arising of or in connection with the use of the Licensed
Trademarks regardless of legal theory and however caused.

 

7

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ARTICLE VII

GENERAL

 

7.1Amendment.   This Agreement may be modified or amended only by mutual written
agreement of the parties. Any such modification or amendment must be in writing,
dated and signed by the parties, and explicitly indicate that such writing
modifies or amends this Agreement.

 

7.2Governing Laws and Venue. The Parties agree that this Agreement shall be
construed and enforced in accordance with the laws of the State of Texas without
regard to principles of conflicts of laws thereof, and Tarrant County and the
State of Texas shall be the venue for any litigation, mediation, or other
proceeding as between the parties that may be brought, or arise out of, in
connection with or by reason of this Agreement. The provisions of this Section
shall survive the expiration or other termination of this Agreement.

 

7.3Dispute Resolution.  In the event of any dispute relating to, arising out of
or in connection with the validity, interpretation or performance of this
Agreement (each, a “Dispute”), such Dispute shall be resolved in accordance with
Section 11.10 of the Operating Agreement. Notwithstanding anything to the
contrary in this Agreement or the Operating Agreement, because of the unique
nature of the Licensed Trademarks, THR shall have the unqualified right to seek
specific performance or any other form of injunctive relief or provisional
remedy from any state and federal court, pending, or in aid of, mediation, or
for purposes of enforcing its rights or any of the covenants or other
obligations of Company and/or Company Licensees under this Agreement. Company
and Company Licensees hereby consent to the jurisdiction of the above-named
courts and to venue therein, waive any and all rights under the Laws of any
other state to object to jurisdiction within the State of Texas.

 

7.4Survival.  Article V,  Article VI,  Section 7.3 and this Section 7.4 shall
survive the expiration or termination of this Agreement for any reason.

 

7.5No Waiver. No delay or failure to require performance of any provision of
this Agreement shall constitute a waiver of the performance of such provision or
any other instance. Any waiver granted by a party must be in writing, and shall
apply solely to the specific instance expressly stated. A waiver of any term or
condition of this Agreement shall not be construed as a waiver of any other
terms and conditions of this Agreement, nor shall any waiver constitute a
continuing waiver.

 

7.6Severability.  If any provision of this Agreement, in whole or in part, or
the application of any provision, in whole or in part, is determined to be
invalid or unenforceable by a court of competent jurisdiction, such provision,
or part of such provision, shall be severed from this Agreement. The invalidity
or unenforceability of any provision, or part of any provision, of this
Agreement shall have no effect on the remainder of this Agreement, which shall
continue in full force and effect.

 

7.7Further Assurances. Each party agrees to execute such other documents and
take all such actions as the other party may reasonably request to effect the
terms of this Agreement.

 

8

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7.8Notices. All notices or communications required or permitted under this
Agreement shall be given in writing and shall be delivered to the party to whom
notice is to be given either (a) by personal delivery (in which cases such
notice shall be deemed given on the date of delivery), (b) by next business day
courier service (e.g., Federal Express, UPS or other similar service) (in which
case such notice shall be deemed given on the business day following date of
deposit with the courier service), or (c) by United States first-class mail,
postage prepaid, registered or certified, return receipt requested (in which
case such notice shall be deemed given on the third (3rd) day following the date
of deposit with the United States Postal Service). Notice shall be delivered or
sent to the party’s address indicated on Schedule C or to such other address as
a party may, by written notice, designate to the other.

 

7.9Headings. The headings in this Agreement are intended solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.

 

7.10Counterparts. This Agreement may be signed in any number of counterparts and
the signature or signatures of the undersigned may be delivered by electronic
mail in "portable document format" (".PDF"), or by any other electronic means
intended to preserve the original graphic and pictorial appearance of a document
(each of which shall be deemed an original) and which shall together constitute
one and the same instrument.

 

7.11Attorneys’ Fees. In any action at law or equity to enforce any of the
provisions or rights under this Agreement, the substantially unsuccessful party
to such litigation, as determined by the court in a final judgment or decree,
shall pay the substantially successful party or parties all costs, expenses and
reasonable attorneys’ fees incurred therein by such party or parties (including,
without limitation, such costs, expenses and fees on any appeals), and if such
successful party shall recover judgment in any action or proceeding, such costs,
expenses and attorneys’ fees shall be included in and as part of such award or
judgment.

 

7.12Entire Agreement.  This Agreement, including Schedules hereto,  constitutes
the entire agreement between the Parties pertaining to the subject matter
contained in it and supersedes all prior contemporaneous agreements,
representations and understandings, whether oral or written, of the Parties with
respect to such subject matter.

 

7.13Waiver of Jury Trial – EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIP OF
THE PARTIES HERETO BE TRIED BY A JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS
TO DEMAND A TRIAL BY JURY ARISING FROM ANY SOURCE INCLUDING, BUT NOT LIMITED TO,
THE CONSTITUTION OF THE UNITED STATES OR ANY STATE THEREIN, COMMON LAW OR ANY
APPLICABLE STATUTE OR REGULATIONS. EACH PARTY HERETO ACKNOWLEDGES THAT IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGH TO DEMAND TRIAL BY JURY.

 

7.14Force Majeure.  THR shall not be liable for nonperformance, defective
performance or late performance of any of its obligations under this Agreement
to the extent and for such periods of time as such nonperformance, defective
performance or late performance is due to reasons outside such Party’s control,
including acts of God, war (declared or undeclared),

9

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terrorism, action of any governmental authority, civil disturbances, riots,
revolutions, vandalism, accidents, fire, floods, explosions, sabotage, nuclear
incidents, lightning, weather, earthquakes, storms, sinkholes, epidemics,
failure of transportation infrastructure, disruption of public utilities, supply
chain interruptions, information systems interruptions or failures, breakdown of
machinery or strikes (or similar nonperformance, defective performance or late
performance of employees, suppliers or subcontractors); provided, however, that
in any such event, THR shall use its good faith efforts to perform its duties
and obligations under this Agreement.

 

SIGNATURE PAGE AND SCHEDULES FOLLOW

 

 

10

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
Effective Date.

 

 

 

 

 

TEXAS HEALTH RESOURCES

 

 

 

 

 

 

By:

/s/ Barclay E. Berdan

 

Name:

Barclay E. Berdan, FACHE

 

Title:

Chief Executive Officer

 

 

 

 

 

 

FTH DFW PARTNERS LLC

 

 

 

 

By:

/s/ Graham Cherrington

 

Name:

Graham Cherrington

 

Title:

President and Chief Operating Officer

 

 

 

Signature Page to Trademark License Agreement

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The Licensed Trademarks are attached.

 

 

 

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Schedule A Texas Health Resources Logo Usage

 

 

 

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158-172 [adpt20160630ex102be3cf3003.gif]

Introduction Welcome In this comprehensive guide, you will find basic design
rules for Texas Health Resources’ logos, identity materials, including
stationery/business package, tagline, internal messaging, specialty items,
collateral materials and advertising. These guidelines will help ensure that
both you and Texas Health Resources are represented with the professionalism and
respect deserved and allow you to leverage the strength of Texas Health’s brand
identity. We ask you to do your part. This guide imparts the essence of our
graphic vision for the organization – a look and feel that communicates to our
patients, communities, vendors, and stakeholders who we are and what we hope to
achieve. Our goal, and the reason for this graphic standards guide, is to have
people think of Texas Health Resources as the authority in health care. Our
corporate identity helps us stand apart from competitors and supports the way we
want stakeholders to view us. The more consistent and repetitive our brand is,
the more equity and strength our brand will have. Therefore the result is that
brand recognition and retention will be much higher with our audiences. We
appreciate your commitment to uphold our brand and keep it strong.

 

 

 

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158-172 [adpt20160630ex102be3cf3004.gif]

Logo Usage Introduction Primary Logo This section is a reference tool providing
standards for usage of Texas Health Resources logos. Because the logo is the
fundamental element of all Texas Health brand identification, these standards
have been established to ensure consistency wherever and however it is
displayed. While this document contains guidance for basic applications of the
Texas Health logo, it cannot anticipate all possible uses. Any applications of
the Texas Health logo not directly addressed here - or applications that cause
usage questions to arise that are not answered here - will require prior
approval. Refer all logo and corporate identity issues to: Primary Logo with
Tagline Texas Health Brand Management Attn: Debbie Lindsey 612 E. Lamar Blvd.,
Suite 1000 Arlington, Texas 76011 682.236.6376 DebbieLindsey@TexasHealth.org Any
new logos should be developed by the Texas Health Resources Brand Management
Department. 1

 

 

 

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158-172 [adpt20160630ex102be3cf3005.gif]

Logo Usage Primary Logo System This is a custom logo. Do not try to recreate it,
reset the type, or change the size or relation of the symbol to the name. A
minimum area of isolation exists around the logo to give it prominence. Text,
headlines, and graphics must not violate this area. For additional instruction,
see page 6. Never separate the name from the symbol, see page 7. Entity NOTE:
Customized descenders on lower case “p” and “y” type. 2 P a n t one C o l ors L
o go u s e only L o go u s e only ANGRO EF BOLDANGRO EF LIGHT
AaBbCcDdEeFfGgHhIiJjKkLlMmNnAaBbCcDdEeFfGgHhIiJjKkLlMmNn
OoPpQqRrSsTtUuVvWwXxYyZz OoPpQqRrSsTtUuVvWwX xYyZz 0123456789 0123456789 Texas
Health Blue PMS 287 Texas Health G reen PMS 347

 

 

 

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158-172 [adpt20160630ex102be3cf3006.gif]

Logo Usage 2 - Color Use The colors green and blue were selected to convey
leadership, respect and dignity. Green stands for nature, growth, generosity and
understanding. The color brings comfort, relaxation and wellness. Blue
symbolizes calmness, stability and serenity, a symbol of truth, peace, faith and
security. Consistent application and precise production will identify and
reinforce strong public awareness for the Texas Health Resources’ brand. Symbol:
PMS 287 Blue PMS 347 Green Name: PMS 287 Blue Please Note: The logo must always
include the ® at the end of the word Resources for registration protection.
Rule: PMS 347 Green Tagline: PMS 347 Green The tagline must always include the
“SM” at the end for servicemark protection. 4 - Color Use The Texas Health logo
should be printed in the specified primary blue and green colors whenever
possible. In circumstances that cause it to be likewise, the logo may be printed
in all black, all primary blue or white on a dark background. Never print the
logo in all primary green color. 3 Primary Brand Colors Pantone CMYK (Print) RGB
(Display) Hex (Web) Texas Health Green PMS 347 U PMS 347 C C: 100 M : 0 Y : 86 K
: 3 R:0 G:161 B:96 #009543 Texas Health Blue PMS 287 U PMS 287 C C: 100 M : 68 Y
: 0 K : 12 R:0 G:83 B:155 #003798

 

 

 

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158-172 [adpt20160630ex102be3cf3007.gif]

Logo Usage 1 -Color Use If two colors are not available, a 1-color version can
be used. Use the 1-color version to print as solid black or Texas Health Blue
PMS 287 only. Texas Health Blue PMS 287 Solid Black 4

 

 

 

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158-172 [adpt20160630ex102be3cf3008.gif]

Logo Usage Preferred Size Size Restrictions 2.0” The preferred printed size for
the primary logo should be no less than 2” wide for the words “Texas Health”. Do
not use the logo smaller than the minimum size of 1.25” wide for the words
“Texas Health”. Minimum Size 1.0” Minimum area of isolation (space between logo
and words) 2x 2x minimum area of isolation Minimum Area of Isolation 2x A
minimum area of isolation, the space between logo and words, exists around the
logo. Text, headlines, and graphics must not violate this area. x 2x 5

 

 

 

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158-172 [adpt20160630ex102be3cf3009.gif]

Logo Usage Do not box logo Do not make the logo solid green PMS 347 for 1-color
use Incorrect Use Logo Examples Do not stretch logo in any way The logo should
not be altered in any way. Any new logo should be produced and stored by the
Texas Health Resources Brand Management Department. Please refer to the overall
standards throughout the guide when considering any form of reproduction of the
Texas Health logo. Do not outline the logo Do not use colored version of the
logo on black or colored backgrounds Never separate the name from the symbol Do
not greyscale logo. If used in black, use in solid black only. Do not use
unauthorized colors for logo Do not use gradients or textures in logo Do not
rearrange elements in the logo for printed materials Do not distort in any way 6

 

 

 

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158-172 [adpt20160630ex102be3cf3010.gif]

Logo Usage Negative Space Logo is not to be used in a box. (Examples shown here
are colored background references only.) When using the logo on black or colored
backgrounds, reverse out to white. Do not use a colored version of the logo on a
colored background. 7

 

 

 

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158-172 [adpt20160630ex102be3cf3011.gif]

Logo Usage Hospital Logos (Wholly Owned) Our corporate identity sets us apart
from the competition. The following logos represent each Texas Health hospital.
The words “Texas Health” proceed the family brand name followed by the
geographic locaton. Hospital logos must always include the mark and the words
“Texas Health” for trademark protection. Departments, services and business
units within Texas Health hospitals will not have a separate logo. For
guidelines for departments, services and business units addressed, go to the
Brand Center or Click Here. 8

 

 

 

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158-172 [adpt20160630ex102be3cf3012.gif]

Logo Usage Foundation Logo This is the approved Foundation logo. It represents
all entities across our system. 9

 

 

 

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158-172 [adpt20160630ex102be3cf3013.gif]

Logo Usage Other Logo Examples Here are a few examples of logos that are located
on the Brand Center. 10

 

 

 

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158-172 [adpt20160630ex102be3cf3014.gif]

Logo Usage Joint Venture Logos 11

 

 

 

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158-172 [adpt20160630ex102be3cf3015.gif]

Logo Usage Geographic Locations In circumstances where the Texas Health
Resources logo is used with all geographic locations, it should appear as shown.
Harris Methodist | Arlington Memorial | Presbyterian 12

 

 

 

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158-172 [adpt20160630ex102be3cf3016.gif]

Logo Usage 3X Tagline Use 1-3/8X X 3/8X The tagline for Texas Health Resources
is Healing Hands. Caring HeartsSM . This tagline expresses the essence of our
brand, our compassion to understand and respond to individual needs and respect
for human beings. 1/16X 5/8X 1/8X Do not alter proportions or spacing or add any
other elements when using the tagline with an approved Texas Health logo. The
tagline must always include the “SM” at the end for trademark protection. The
logo must always include the ® at the end of the word Resources for registration
protection. Caring Hearts can not be used by itself. It must be used with
“Healing Hands”, either in full tagline (with service mark) or as a phrase (e.g.
our healing hands and caring hearts). The tagline may or may not appear with the
logo. Logos with taglines are available on the Brand Center. 5/8X 1-3/8X X 3/8X
3/16X 1/2 X 5/8X 3X 5/8X 1/8X 13 L o g o u s e o n l y L o g o u s e o n l y Tag
Line and Department/Service/Business Unit Identifier ANGRO EF BOLDANGRO EF
LIGHTHUMANIST 970 BT C
AaBbCcDdEeFfGgHhIiJjKkLlMmNnAaBbCcDdEeFfGgHhIiJjKkLlMmNnAaBbCcDdEeFfGgHhIiJjKkLlMmNn
OoPpQqRrSsTtUuVvWwXxYyZz OoPpQqRrSsTtUuVvWwX xYyZzOoPpQqRrSsTtUuVvWwXxYyZz
0123456789 01234567890123456789 X 1/16X 5/8X 5/8X 5/8X SM Healing Hands. Caring
Hearts. 5/8X X 5/8X 5/8X 5/8X

 

 

 

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SCHEDULE B

 

TRADEMARK USE GUIDELINES

 

The Trademark Use Guidelines attached.

 

 

 

 

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174-201 [adpt20160630ex102be3cf3017.gif]

Advertising Standards 2015 Schedule B Updated 12/2014

 

 

 

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174-201 [adpt20160630ex102be3cf3018.gif]

Overview Marketing Strategy 3 Logos 4-6 This guide is a reference tool providing
standards for creating Texas Health Resources advertising materials for
2014-2016. These standards have been established to ensure consistency whenever
and however the materials are produced. While this document contains design
guidance for basic applications of graphic elements, it cannot anticipate all
possible uses. Questions about application of the Texas Health graphics not
directly addressed within this document should be directed to: 7-9 Color 10
Typography 10 Headline 11 Subhead 12 Body Copy 110 Leslie Street, Suite 200,
Dallas, Texas 75027 p 214.550.5552 f 214.594.7355 Carley King
carley@commercehouse.com 12 Legal Copy Green Bars 13 Layout Structure 14 Print
Ad Examples 14-18 Direct Mail Examples 19 Outdoor Examples 20-21 eBlast Examples
22 Photography 23-27 Review and Approval 28

 

 

 

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Marketing Strategy Making health care human again. The Texas Health Resources
brand message is centered around the notion that Texas Health Resources is
making health care human again. In every service offered, every technology
acquired, every procedure performed, Texas Health Resources is bringing humanity
back to health care for the beneﬁt of our patients. It’s about caring for the
person as much as the disease. It’s about being a positive force in transforming
health care and patients' lives. Since humanity encompasses a broad spectrum of
emotions, the tone of our advertising should as well, from empathetic to
progressive to witty to thought-provoking to humorous. But the advertising
should always communicate in a way that is straightforward, personable and
human, not clinical or business to business. The brand is built on three
pillars: • Compassion • Collaboration • Progress Every piece of communication
should reﬂect, in some combination, those three brand characteristics. 3

 

 

 

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174-201 [adpt20160630ex102be3cf3020.gif]

Texas Health Logo This is a custom logo. Do not try to recreate it, reset the
type, or change the size or relation of the symbol to the name. Never separate
the name from the symbol System Entity ONLY LOGOS CREATED BY THE TEXAS HEALTH
GRAPHICS DEPARTMENT MAY BE USED, AND NO OUTSIDE LOGO DEVELOPMENT OR MODIFICATION
IS PERMITTED UNDER COPYRIGHT LAW. 4

 

 

 

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174-201 [adpt20160630ex102be3cf3021.gif]

Texas Health Logo A minimum area of isolation exists around the logo to give it
prominence. Text, headlines, and graphics must not violate this area. Minimum
area of isolation (space between mark and words) 2x 2x minimum area of isolation
2x x 2x TEXT, HEADLINES, AND GRAPHICS MUST NOT VIOLATE THIS AREA. Preferred Size
Minimum Size 2.0” 1.0” Size Restrictions The preferred print size for the
primary logo should be no less than 2" wide for the words "Texas Health." Do not
use the logo smaller than the minimum size of 1" wide for the words "Texas
Health." 5

 

 

 

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174-201 [adpt20160630ex102be3cf3022.gif]

Texas Health Logo Our corporate identity sets us apart from the competition. The
following logos represent each Texas Health hospital. The words “Texas Health”
precede the family brand name followed by the geographic locaton. Hospital logos
must always include the ® and the words “Texas Health” for registration
protection. Departments, services and business units within Texas Health
hospitals will not have a separate logo. For guidelines on departments, services
and business units, go to the Brand Center. Main System Logo HOSPITAL LOCATIONS
(Wholly-owned) 6

 

 

 

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174-201 [adpt20160630ex102be3cf3023.gif]

Logo Color The Texas Health logo is printed in the following colors when used in
4-color and 1-color applications. If 4-colors are not available, a 1-color
version can be used. Use the 1-color version to print as 100 black or PMS 287
blue only. 2-Color and 4-Color process 1-Color 100% BLACK 347 287 287 C:100 Y:
86 M: 0 K: 3 C:100 Y: 0 M: 68 K: 12 When using the logo on black or colored
backgrounds, reverse out to white. Do not use a colored version of the logo on a
colored background. • Logo is not to be used in a box. Examples shown here are
background references only. 7

 

 

 

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174-201 [adpt20160630ex102be3cf3024.gif]

Logo Color The logo should not be altered in any way. Any new logo should be
produced and stored by the Texas Health Resources Graphics Department. Please
refer to the overall standards throughout the guide when considering any form of
reproduction of the Texas Health logo. • Do not use unauthorized colors for logo
• Do not stretch or distort the logo in any way • Do not place the logo in a box
• Do not use colored version of the logo on black or colored backgrounds • Never
separate the name from the symbol • Do not grayscale logo • Do not outline the
logo • Do not rearrange elements in the logo 8

 

 

 

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174-201 [adpt20160630ex102be3cf3025.gif]

Colors The Texas Health color palette for advertising materials consists of the
primary colors PMS 347 C (logo green) and PMS 287 C (logo blue) and the
complementary color PMS 361 C (secondary green). The colors were selected to
convey leadership, respect and dignity. The primary brand colors appear in the
logo and in various design elements throughout advertising. Consistent
application and precise production will maintain the integrity of the colors and
reinforce public awareness of the Texas Health brand. Primary Colors
Complementary Color Primary Green (Logo) PMS: 347 Secondary Green PMS: 361 C:
100 M: 0 Y: 86 K: 3 R: 0 G: 161 B: 96 HEX: #009543 C: 69 M: 0 Y: 100 K: 0 R: 84
G: 185 B: 72 HEX: #54b948 347 361 Primary Blue (Logo) PMS: 287 C: 100 M: 68 Y: 0
K: 12 R: 0 G: 83 B: 155 HEX: #003798 287 9

 

 

 

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174-201 [adpt20160630ex102be3cf3026.gif]

Typography Gotham Light ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz
0123456789{[(.,:;’”!?-+=/)]}@#$%&* Headlines Gotham Light, set in sentence-case.
Type size will be determined by space available. White example: 10 Well-Being

 

 

 

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174-201 [adpt20160630ex102be3cf3027.gif]

Typography Gotham Medium ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz
0123456789{[(.,:;’”!?-+=/)]}@#$%&* Subheads Gotham Medium, 2 points larger than
body copy (typically 12 point). Set in sentence-case for complete sentences;
non-complete sentences are set in title case. example: Advanced Women’s Care 287
Call-To-Actions and Contact Lock-Ups Gotham Medium, 1 point larger than body
copy (typically 11 point). Call-to-action lock-ups are set in title case. Should
be primary blue (PMS 287) in color. example: 1-877-THR-WELL |
TexasHealth.org/Breast 287 System Names Gotham Medium, 1 point smaller than body
copy (typically 9 point). System name lock-ups are set in title case. Should be
primary blue (PMS 287) in color. example: Arlington Memorial | Harris Methodist
| Presbyterian 287 11

 

 

 

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174-201 [adpt20160630ex102be3cf3028.gif]

Typography Gotham Book ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz
0123456789{[(.,:;’”!?-+=/)]}@#$%&* Body Copy Gotham Book. 10 point with 16
points of leading. Justiﬁed with the last line aligned left. No hanging
punctuation, hyphenation or widows. Color should be 100% black. 100% BLACK
example: Well-being is perhaps our best indicator of overall quality of life.
And your well-being score reﬂects how your life is going. But to know how you’re
doing, you have to get your score ﬁrst. Legal Copy Gotham Book, 6 point with 7
points of leading. Left-aligned with and below the body copy. Should be 0.125"
above the trim or just within the ad's live area. Single line is preferred.
Color should be 100% black. 100% BLACK example: Doctors on the medical staff
practice independently and are not employees or agents of the hospital or Texas
Health Resources. © 2014 12

 

 

 

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Green Bars C: 60 Y:100 M: 0 K: 0 Half x space between boxes Headline line 2
TRANSLUCENT 90% opacity Muscillo berita pre veres aute poritis dolorepror rerum
apeliti quis body copy di quosaniendam solges body copy sant, susyande llamuis
re voluptaspis iunt molo voluptaque body copy ent aruptiis dolut fugitae. body
copy Itatem Doctors on the medical staff practice independently and are not
employees or agents of the hospital or Texas Health Resources. © 2014 Headline
aligns with other items on the page like body copy and legal 13 x H e a dlin e

 

 

 

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174-201 [adpt20160630ex102be3cf3030.gif]

Layout Structure Green Bar C:60 M:0 Y:100 K:0 90% Opacity Headline White Copy
Gotham Light Subhead Gotham Medium 12 pt/16 pt PMS 287 C C: 100 M: 68 Y: 0 K: 12
Body Copy Gotham Book 10 pt/16 pt C: 0 M: 0 Y: 0 K: 100 Website and Phone Number
Gotham Medium 11 pt/16 pt PMS 287 C C: 100 M: 68 Y: 0 K: 12 System Names Gotham
Medium 9 pt/16 pt PMS 287 C C: 100 M: 68 Y: 0 K: 12 Legal Copy Gotham Book 6
pt/7 pt C: 0 M: 0 Y: 0 K: 100 Logo 14 Is it time to squeeze in your mammogram?
Digital Mammograms You know you should get a mammogram, but do you know when to
start? Is it at age 40 or 50? Should you start sooner? Or later? At Texas Health
Resources, we’re here to clear up the uncertainty, because when you should start
getting mammograms depends upon, well, you. We don’t just look at age, we look
at factors like family history, physical activity and lifestyle so you know when
the right time is for you and how often you should schedule them. And if you are
at risk, we offer comprehensive breast care from diagnostics to support. Let us
help you take the guesswork out of breast care. Go online to take the Breast
Cancer Risk Assessment and schedule your digital mammogram today. 1-877-THR-WELL
| TexasHealth.org/Breast Harris Methodist | Arlington Memorial | Presbyterian
Doctors on the medical staff practice independently and are not employees or
agents of the hospital or Texas Health Resources.. © 2014

 

 

 

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Examples of Usage - Print Ads What’s your well-being score? What’s your
well-being score? When it comes to your health, Texas Health Resources
understands it’s about more than just physical wellness. It’s about the whole
you – mind, body and spirit. Because when they all work together, they create a
happier, healthier you. And that’s why we’re pleased to offer the
Gallup-Healthways Well-Being 5™ - an online assessment that gives you a
well-being score. It’s the only assessment that looks at the whole you and
offers a big-picture perspective on how you’re doing. Go online today to
YourWellBeingScore.com and ﬁnd out how you’re doing. When it comes to your
health, Texas Health Resources understands it’s about more than just physical
wellness. It’s about the whole you – mind, body and spirit. Because when they
all work together, they create a happier, healthier you. And that’s why we’re
pleased to offer the Gallup-Healthways Well-Being 5™ - an online assessment that
gives you a well-being score. It’s the only assessment that looks at the whole
you and offers a big-picture perspective on how you’re doing. Go online today to
YourWellBeingScore.com and ﬁnd out how you’re doing. YourWellBeingScore.com
Harris Methodist | Arlington Memorial | Presbyterian YourWellBeingScore.com
Harris Methodist | Arlington Memorial | Presbyterian 15 What’s your well-being
score? When it comes to your health, Texas Health Resources understands it’s
about more than just physical wellness. It’s about the whole you – mind, body
and spirit. Because when they all work together, they create a happier,
healthier you. And that’s why we’re pleased to offer the Gallup-Healthways
Well-Being 5™ - an online assessment that gives you a well-being score. It’s the
only assessment that looks at the whole you and offers a big-picture perspective
on how you’re doing. Go online today to YourWellBeingScore.com and ﬁnd out how
you’re doing. YourWellBeingScore.com Harris Methodist | Arlington Memorial |
Presbyterian

 

 

 

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Examples of Usage - Print Ads step to improving your well-being today. Texas
Health Alliance is expanding so we can provide more to our growing community. By
adding more acute care beds and hiring more caregivers, we can offer more help
to more people. Our new cath lab will increase our cardiovascular capabilities.
And by expanding our capabilities, you now have even more technologically
advanced health care options closer to home. We are proud to be part of this
great community, and as long as it continues to grow, we promise to grow with
it. Our community is expanding. So are we. 1-877-THR-WELL
TexasHealth.org/Alliance Doctors on the medical staff practice independently and
are not employees or agents of the hospital. © 2015 16 Well-being is perhaps our
best indicator of overall quality of life. And your well-being score reﬂects how
your life is going. But to know how you’re doing, you have to get your score
ﬁrst. Go What’s your to YourWellBeingScore.com to take the assessment and the
ﬁrst well-being score? YourWellBeingScore.com Arlington Memorial | Harris
Methodist | Presbyterian

 

 

 

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Examples of Usage - Print Ads several North Texas professional and university
sports teams. 17 Athletes eat competitively too. Eating Heart Healthy for
Athletes In honor of February being American Heart Month, Texas Health
Presbyterian Hospital Denton is hosting Amy Goodson, sports nutritionist at the
Ben Hogan Sports Medicine Institute in Fort Worth, to speak about how proper
nutrition is essential to reach your full potential. Amy also serves as a
consultant for The lecture is free, and a light dinner will be served. Seating
is limited, so reserve your spot today. Wednesday, February 19, 6:30 p.m. Texas
Health Presbyterian Hospital Denton 3000 North I-35 Rio Grande Room - Main
hospital entrance To register, call 1-877-THR-WELL or visit
TexasHealth.org/Advances Doctors on the medical staff practice independently and
are not employees or agents of the hospital. © 2014 Advances in Medicine Lecture
Series Let’s have a heart to heart. Two of them, actually. In honor of American
Heart Month, join our speakers for a pair of heart-related discussions. Lectures
are free, and a light dinner will be served. Seating is limited, so reserve your
spot today. Irregular Heartbeats Wednesday, February 12, 6:00 p.m. Texas Health
Presbyterian Hospital Denton The Center for Women 207 N. Bonnie Brae Trinity
Room - 1st ﬂoor Speaker: Haris Naseem, M.D. An electrophysiologist on the
medical staff at Texas Health Denton’s recently updated and expanded Cardiac
Electrophysiology (EP) Lab, Dr. Naseem will speak about the latest diagnosis and
treatments for arrhythmias, also known as irregular heartbeats. Arrhythmia can
affect the heart’s ability to pump blood, making prompt diagnosis and treatment
critical. Eating Heart Healthy for Athletes Wednesday, February 19, 6:30 p.m.
Texas Health Presbyterian Hospital Denton 3000 North I-35 Rio Grande Room - Main
hospital entrance Speaker: Amy Goodson, MS, RD, CSSD, LD From competitive
athlete to weekend warrior, proper nutrition is essential to reach your full
potential. Guest speaker Amy Goodson, sports nutritionist at the Ben Hogan
Sports Medicine Institute in Fort Worth, serves as a consultant for several
North Texas professional and university sports teams. To register for either
lecture, call 1-877-THR-WELL or visit TexasHealth.org/Advances. Doctors on the
medical staff practice independently and are not employees or agents of the
hospital. © 2014

 

 

 

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Examples of Usage - Print Ads is joining Cleburne Family Medicine Associates as
the newest 18 Admirable veteran. Philanthropic traveler. Family practitioner.
Introducing Dr. Greg Rochfort Texas Health Harris Methodist Hospital Cleburne is
proud to welcome Greg Rochfort, MD, to the medical staff. Dr. Rochfort primary
care physician. He attended Loma Linda University School of Medicine and
completed his family practice residency at Naval Hospital Camp Pendleton. Dr.
Rochfort’s medical philosophy is to care for the whole patient to get them well
and keep them well. Outside the ofﬁce, Dr. Rochfort enjoys cycling, traveling
and going on medical missions. You can schedule an appointment with Dr. Rochfort
at Cleburne Family Medicine Associates. To make an appointment, call
817-556-4800. For more information, visit TexasHealth.org/FindAPhysician.
Cleburne Family Medicine Associates 220 North Ridgeway Drive Cleburne, TX 76033
Doctors on the medical staff practice independently and are not employees or
agents of the hospital. © 2014 Remember, just because you got a new hip doesn’t
mean it will actually make you hip. Comprehensive Orthopedic Services When it
comes to orthopedic services, Texas Health Arlington Memorial Hospital has you
covered. Specialists on our medical staff offer procedures that include total
hip and knee replacement, treatment of osteoarthritis, hand surgery for carpal
tunnel and more. Plus, our skilled rehabilitation staff and certiﬁed hand
therapists help you focus on your overall well-being throughout recovery. When
it comes to the health of your joints and bones, the place to be is ours. Let
Texas Health Arlington Memorial take care of your orthopedic needs.
1-877-THR-WELL | TexasHealth.org/Arlington-Ortho Doctors on the medical staff
practice independently and are not employees or agents of the hospital. © 2014

 

 

 

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Examples of Usage - Direct Mail Advances in Minimally Invasive Surgery Join Dr.
Dean Cione, surgeon on the medical staff at Texas Health Presbyterian Hospital
Plano, as he discusses the advancements and beneﬁts of minimally invasive
surgery. Texas Health Presbyterian Hospital Plano 6200 West Parker Road Plano,
TX 75093 NONPROFIT ORGANIZATION US POSTAGE PAID TEXAS HEALTH RESOURCES
Sometimes, the greatest innovations leave the tiniest marks. Wednesday, May 14
at 6:00 p.m. Texas Health Presbyterian Hospital Plano Bluebonnet Room Medical
Ofﬁce Building 2 6200 W. Parker Rd., Plano, TX 75093 Complimentary lecture,
light dinner provided. Advances in Medicine Lecture Series To register, call
1-877-THR-WELL or visit TexasHealth.org/Advances. 19 Doctors on the medical
staff practice independently and are not employees or agents of the hospital. ©
2014

 

 

 

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Examples of Usage - Outdoor All copy is Gotham Medium White copy and logo have
effect settings of: Outer Glow: Multiply Mode with 20% Opacity, technique set to
Softer with size of 1.5 in. Well-being impacts your life. And health. Brand logo
green ﬁeld Radial Gradient C: 60 Y:100 M: 0 K: 0 C: 70 Y:100 M: 0 K: 10 20

 

 

 

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Examples of Usage - Outdoor Logo Special versions of each individual hospital
logo have been designed to be used in billboard advertising only. The logo
should sit in the lower right corner and should be large enough to read from a
distance, often occupying one-third of the width of the advertisement. Only
logos created by the Texas Health Graphics Department may be used, and no
outside logo development or modiﬁcation is permitted under copyright law. Voted
“Best place to have a baby.” by DallasChild magazine readers All copy is Gotham
Medium White copy and logo have effect settings of: Outer Glow: Multiply Mode
with 20% Opacity, technique set to Softer with size of 1.5 in. Hospital Outdoor
logo green ﬁeld Radial Gradient C: 60 Y:100 M: 0 K: 0 C: 70 Y:100 M: 0 K: 10 21

 

 

 

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e-Biast We noticed you didn1finish taking the Gallup-Healthways Well-Being 5"'
Assessment People get busy, things come up, we undetstand. But learning your
welf-being score is important It's a simple way to measure howlife is really
going. So why not take the time to complete it now? At Texas Health Resources,
our goalis to improve your well-being. And that starts with finding your score.
1.Re-register at YourWeiiBeingScore.com with the sameinformat on you init ally
used. 2.Complete the assessment from where you lett off. 3.Get your well-being
score. Get restarted today at YourWeiiBeingScore.com. -Texas Health '\:17
Resources· We noticed you didn't finish taking the Gallup-Heatlhways Well-Being
5"' Assessment. People get busy, things come up, we understand. But learning
your well-being score is important. It's a simple way to measure how lifeis
really goni g.So why not take the time to completeit now? At Texas Health
Resources,our goalis to improve your well-being.And that starts with findni g
your score. 1. Re-register at YourWeiiBeingScore.com with the same information
you initially used. 2. Complete the assessment from where youl eft off. 3. Get
your well-being score. Get restarted today at YourWeiiBeingScore.com. Improve
the lives of those around you by improving youts, through the science of
well-being. Take the Gallup-Healthways WeiBeing 5TM online assessment and get
your well-being score today. lfs a simple way to measure how life is really
going,so you can take steps to improve it.Get your well-being score below, then
share the assessment with friends and family. Get started today at
YourWeiiBeingScore.com. €[1Texas Health '\:17 Resources· -:Tllexas Health
"-.\.!7 Resources· 22 community, We saved your work. You can still ..._.. get
your well-being assessment. ..._.... Examples of Usage -

 

 

 

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Photography Photography for Texas Health print ads should be light and bright so
as to convey a sense of hope and compassion. When present, caregivers should
appear engaged with their patients rather than looking directly at the camera.
Pictures of Texas Health caregivers should be portrayed with branded
identiﬁcation badges. Photography is limited to one image per ad and always
bleeds off the top and sides of the ad. Custom photography is preferred but
doesn’t always ﬁt with the ad’s concept. In instances where stock photography is
used, it should be adjusted to match the style of the custom photography. This
usually involves contrast and saturation adjustment and the addition of white
glow areas. Illustration is not allowed as the main subject matter but may be
used in moderation as informational graphics or accent elements. Custom Texas
Health Resources photography may only be accessed by employees of Texas Health
Resources, joint venture partners and outside agencies contracted by Texas
Health Resources and may not be used by any other organization. Once access is
granted, Texas Health Resources’ photography archive can be accessed online
through the Brand Center web page at https://brandcenter.texashealth.org. Once
logged in, select “Creative & Photographic Library” from the top menu bar. Then
select “Custom Photography” to browse the collection. If no appropriate image
can be found in the Texas Health Resources custom library or within the approved
stock photography sites, then a photograph can be commissioned as long as the
photographer is approved and the style of the photograph agrees with the
photography guidelines. If no photographer can be used, then an all-type ad
solution should be employed. If agencies oversee custom photography work for our
joint venture partners, we ask that the photography be forwarded to the Brand
Center for inclusion. To request access to the Texas Health Resources Brand
Center, contact: Texas Health Resources Graphics Group 8440 Walnut Hill Lane,
Suite 850 Dallas, TX 75231 p 214.345.4706 Debbie Lindsey,
DebbieLindsey@TexasHealth.org 23

 

 

 

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24 Custom Photography

 

 

 

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25 Custom Photography

 

 

 

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26 Custom Photography

 

 

 

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Photography 27 Stock

 

 

 

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Review and Approval All ads must be reviewed by Texas Health Resources Legal
Department or an attorney for the joint venture and approved by Texas Health
Resources Marketing Director Deena McAllister. One week is requested for review.
DeenaMcAllister@TexasHealth.org p 682-236-6978 28

 

 

 

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SCHEDULE C

 

NOTICES

 

 

 

THR:

Texas Health Resources

 

612 E. Lamar Blvd., Suite 500

 

Arlington, Texas  76011

 

Attention: Krystal Mims,

 

SVP Care Continuum and Collaboration

 

 

with a copy to (which shall

Texas Health Resources

not constitute notice):

 

 

612 East Lamar Blvd., Suite 900

 

Arlington, Texas 76011

 

Attn:  Kenneth Kramer, General Counsel

 

Email: KennethKramer@texashealth.org

 

 

Company:

Adeptus Health Inc.

 

2941 Lake Vista Drive

 

Lewisville, Texas  75067

 

Attn:  Donald Adam, Chief Corporate Development Officer

 

Email: don.adam@adhc.com

 

 

with a copy to (which shall

Adeptus Health Inc.

not constitute notice):

2941 Lake Vista Drive

 

Lewisville, Texas  75067

 

Attn:  Timothy Mueller, General Counsel

 

Email: tim.mueller@adhc.com

 

 

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