Document:

Exhibit
10.1

 

October 1, 2003

 

Joel
Seligman

President
& CEO

Northern
Westchester Hospital Center

400
Main Street

Mt.
Kisco, New York

10549

 

Re:  Reimbursement of Interest Expense

 

Dear
Mr. Seligman,

 

In connection with First Consulting Group, Inc.’s (“FCG”) implementation
of the Meditech software system at Northern Westchester Hospital Center (the
“Hospital”), FCG will agree to reimburse the Hospital for actual interest
amounts owed if the Hospital draws working capital from a third party
commercial line of credit or other loan agreement due to an increase in the
number of days that its patient accounts receivable are outstanding (the “A/R
Days Outstanding”).  FCG’s offer to
reimburse such interest amounts is subject to the terms and conditions
contained in this letter agreement.

 

FCG will measure
the A/R Days Outstanding for the Hospital during the four (4) month period
immediately preceding the 1st day of the month in which the first
services under the IT Outsourcing Agreement (the “Agreement”) between FCG and
Healthstar Network, Inc. (dba Stellaris Health Network) (“Stellaris”)
occur.  During such four month period,
the maximum monthly A/R Days Outstanding for the Hospital will be the “Baseline
DO Threshold.”  During the Interest Payment Period (defined below), the
Hospital will continue to operate in accordance with its bad debt reserve and
“write off” policies for the calculation of A/R Days Outstanding in accordance
with its past customs and practices, but in any event the Hospital’s A/R Days
Outstanding will be calculated “net” of its bad debt reserves and its
contractual allowances.

 

FCG will only reimburse the Hospital’s actual interest charges (not to
exceed the prime rate, as reported in the Western Edition of the Wall Street
Journal on the Hospital’s borrowing date, plus 2.0%) incurred on incremental
borrowings under its credit facility up to the Maximum Principal Amount
(defined below) for a period of 120 days after the Commencement Date (defined
below) (the “Interest Payment Period”). 
The Hospital shall designate its Commencement Date, and such date must
be within 90 days after the “go live” date of the “Billing Accounts
Receivables” software systems in connection with the Meditech software
implementation by FCG (the “Commencement Date”).  FCG will only reimburse the Hospital’s interest charges on
principal amounts of indebtedness that have actually been drawn by the Hospital
during the Interest Payment Period, and then only based on a principal amount
determined by the difference between the A/R Days Outstanding for the previous
month-end less the Baseline DO Threshold (and only if such difference is a
positive number), multiplied by the Hospital’s average revenue per day (as
computed in the calculation of A/R Days Outstanding) during the 120 day period
prior to the Commencement Date.

 

The calculation in the preceding paragraph shall be conducted on the
Commencement Date and every 30 days thereafter during the Interest Payment
Period.  The principal amount against
which FCG will reimburse interest expenses will be adjusted as a result of the
monthly calculation; however, FCG will not reimburse any interest expense on
principal amounts that exceed the lesser of (i) $2,970,000 or (ii) the
Hospital’s average revenue per day (as computed in the calculation of A/R Days
Outstanding) during the 120 day period prior to the Commencement Date,
multiplied by 10.  Such maximum amount
is the “Maximum Principal Amount.”  .  For example, (assuming the Hospital makes a
draw on its credit facility, the Hospital does not repay any such amounts and
its average revenue per day is $250,000) if the Hospital’s Baseline DO is 72
days, its A/R Days Outstanding on the Commencement Date is 74 days, its A/R
Days Outstanding on the 30th day after the Commencement Date is 75 days, then
the maximum principal amount for which FCG would be obligated to pay the
Hospital’s actual interest charges for the first 30 days after the Commencement
Date is $500,000 and the maximum principal amount FCG for which FCG would be
obligated to pay the Hospital’s actual interest charges for the 30th-60th
days after the Commencement Date is $750,000.

 

Further, if the Hospital has repaid any draws under its credit facility
during the Interest Payment Period, then the principal amount against which FCG
is obligated to reimburse interest charges will be reduced by the amount that
the Hospital repaid to its lender. The Hospital will also be required to submit
evidence to FCG that it has drawn on its credit facility (including the
principal amount and applicable interest rate) and present FCG with an invoice
for the interest expense reimbursable under the terms of this letter
agreement.  Such invoices will be paid
with five business days of receipt.  The
Hospital also agrees to promptly inform FCG of any repayments to its lender
during the Interest Payment Period.

 

Except for FCG’s obligations that have accrued prior to the termination
date of this letter agreement, FCG’s obligations under this letter agreement
shall immediately cease upon the earlier to occur of the following: (i) the
termination of the Agreement by Stellaris or FCG for any reason, (ii) the 121st
day following the Commencement Date, (iii) Stellaris’ failure to timely pay all
undisputed fees associated with the Agreement that results in a material breach
of the Agreement, (iv) the dissolution or termination of Stellaris or the
Hospital as an operating business, (v) the insolvency of Stellaris or the
Hospital (determined if the entity is unable to pay its debts before they
become due or if the entity’s total liabilities exceed its total assets), (vi)
the appointment of a receiver for Stellaris or the Hospital’s business or
property or any assignment for the benefit of creditors, (vii) any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Stellaris or a Hospital, (viii) the commencement
of foreclosure or forfeiture proceedings by any creditor of Stellaris or the
Hospital, or by any governmental agency against any collateral securing any
loan or credit facility, (ix) Stellaris’ divestiture or sale of the Hospital.

 

 

If
Stellaris and the Hospital do not receive a Certificate of Need (if required)
for the Meditech software implementation by September 30, 2004, or
Stellaris terminates the Letter of Engagement with FCG to implement the
Meditech software system, then FCG’s obligations under this letter agreement
will immediately terminate and this letter agreement will be of no further
force or effect.

 

FCG also agrees to provide resources, to the extent mutually agreed, to
help reduce the Hospital’s A/R Days Outstanding prior to the Commencement Date
and during the Interest Payment Period. 
Such FCG assistance will provide value to the Hospital as they are
skilled professionals that generally provide consulting and operational
services for other FCG clients in the area of revenue cycle.

 

If
this letter agreement is acceptable to the Hospital, please acknowledge and
agree to these terms by countersigning below.

 

	
  Best
  regards,

  	
  Accept
  and Agree:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Luther
  Nussbaum

  	
  Name:

  
	
  Chief
  Executive Officer

  	
  Chief
  Executive Officer

  
				

 

2Exhibit 10.2

 

October 1, 2003

 

Keith
F. Safian

President
& CEO

Phelps
Memorial Hospital Center

701
North Broadway

Sleepy
Hollow, NY

10591

 

Re:  Reimbursement of Interest Expense

 

Dear
Mr. Safian,

 

In connection with First Consulting Group, Inc.’s (“FCG”) implementation
of the Meditech software system at Phelps Memorial Hospital Center (the
“Hospital”), FCG will agree to reimburse the Hospital for actual interest
amounts owed if the Hospital draws working capital from a third party
commercial line of credit or other loan agreement due to an increase in the
number of days that its patient accounts receivable are outstanding (the “A/R
Days Outstanding”).  FCG’s offer to
reimburse such interest amounts is subject to the terms and conditions
contained in this letter agreement.

 

FCG will measure the A/R Days Outstanding for the Hospital during the
four (4) month period immediately preceding the 1st day of the month
in which the first services under the IT Outsourcing Agreement (the
“Agreement”) between FCG and Healthstar Network, Inc. (dba Stellaris Health
Network) (“Stellaris”) occur.  During
such four month period, the maximum monthly A/R Days Outstanding for the
Hospital will be the “Baseline DO Threshold.” 
During the Interest Payment Period (defined below), the Hospital will
continue to operate in accordance with its bad debt reserve and “write off”
policies for the calculation of A/R Days Outstanding in accordance with its
past customs and practices, but in any event the Hospital’s A/R Days
Outstanding will be calculated “net” of its bad debt reserves and its
contractual allowances.

 

FCG will only reimburse the Hospital’s actual interest charges (not to
exceed the prime rate, as reported in the Western Edition of the Wall Street
Journal on the Hospital’s borrowing date, plus 2.0%) incurred on incremental
borrowings under its credit facility up to the Maximum Principal Amount
(defined below) for a period of 120 days after the Commencement Date (defined
below) (the “Interest Payment Period”). 
The Hospital shall designate its Commencement Date, and such date must
be within 90 days after the “go live” date of the “Billing Accounts
Receivables” software systems in connection with the Meditech software
implementation by FCG (the “Commencement Date”).  FCG will only reimburse the Hospital’s interest charges on
principal amounts of indebtedness that have actually been drawn by the Hospital
during the Interest Payment Period, and then only based on a principal amount
determined by the difference between the A/R Days Outstanding for the previous
month-end less the Baseline DO Threshold (and only if such difference is a
positive number), multiplied by the Hospital’s average revenue per day (as
computed in the calculation of A/R Days Outstanding) during the 120 day period
prior to the Commencement Date.

 

The calculation in the preceding paragraph shall be conducted on the
Commencement Date and every 30 days thereafter during the Interest Payment
Period.  The principal amount against
which FCG will reimburse interest expenses will be adjusted as a result of the
monthly calculation; however, FCG will not reimburse any interest expense on
principal amounts that exceed the lesser of (i) $2,904,000 or (ii) the
Hospital’s average revenue per day (as computed in the calculation of A/R Days
Outstanding) during the 120 day period prior to the Commencement Date,
multiplied by 10.  Such maximum amount
is the “Maximum Principal Amount.”  .  For example, (assuming the Hospital makes a
draw on its credit facility, the Hospital does not repay any such amounts and
its average revenue per day is $250,000) if the Hospital’s Baseline DO is 72
days, its A/R Days Outstanding on the Commencement Date is 74 days, its A/R
Days Outstanding on the 30th day after the Commencement Date is 75 days, then
the maximum principal amount for which FCG would be obligated to pay the
Hospital’s actual interest charges for the first 30 days after the Commencement
Date is $500,000 and the maximum principal amount FCG for which FCG would be
obligated to pay the Hospital’s actual interest charges for the 30th-60th
days after the Commencement Date is $750,000.

 

Further, if the Hospital has repaid any draws under its credit facility
during the Interest Payment Period, then the principal amount against which FCG
is obligated to reimburse interest charges will be reduced by the amount that
the Hospital repaid to its lender. The Hospital will also be required to submit
evidence to FCG that it has drawn on its credit facility (including the
principal amount and applicable interest rate) and present FCG with an invoice
for the interest expense reimbursable under the terms of this letter
agreement.  Such invoices will be paid
with five business days of receipt.  The
Hospital also agrees to promptly inform FCG of any repayments to its lender
during the Interest Payment Period.

 

Except for FCG’s obligations that have accrued prior to the termination
date of this letter agreement, FCG’s obligations under this letter agreement
shall immediately cease upon the earlier to occur of the following: (i) the
termination of the Agreement by Stellaris or FCG for any reason, (ii) the 121st
day following the Commencement Date, (iii) Stellaris’ failure to timely pay all
undisputed fees associated with the Agreement that results in a material breach
of the Agreement, (iv) the dissolution or termination of Stellaris or the
Hospital as an operating business, (v) the insolvency of Stellaris or the
Hospital (determined if the entity is unable to pay its debts before they
become due or if the entity’s total liabilities exceed its total assets), (vi)
the appointment of a receiver for Stellaris or the Hospital’s business or
property or any assignment for the benefit of creditors, (vii) any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Stellaris or a Hospital, (viii) the commencement
of foreclosure or forfeiture proceedings by any creditor of Stellaris or the
Hospital, or by any governmental agency against any collateral securing any
loan or credit facility, (ix) Stellaris’ divestiture or sale of the Hospital.

 

 

If Stellaris and the Hospital do not receive a Certificate of Need (if
required) for the Meditech software implementation by September 30, 2004,
or Stellaris terminates the Letter of Engagement with FCG to implement the
Meditech software system , then FCG’s obligations under this letter agreement
will immediately terminate and this letter agreement will be of no further
force or effect.

 

FCG also agrees to provide resources, to the extent mutually agreed, to
help reduce the Hospital’s A/R Days Outstanding prior to the Commencement Date
and during the Interest Payment Period. 
Such FCG assistance will provide value to the Hospital as they are skilled
professionals that generally provide consulting and operational services for
other FCG clients in the area of revenue cycle.

 

If
this letter agreement is acceptable to the Hospital, please acknowledge and
agree to these terms by countersigning below.

 

	
  Best
  regards,

  	
  Accept
  and Agree:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Luther
  Nussbaum

  	
  Name:

  
	
  Chief
  Executive Officer

  	
  Chief
  Executive Officer

  
				

 

2

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