PITT COUNTY
MEMORIAL HOSPITAL

Heritage Hospital

Agreement to change status...
          
This agreement between PCMH and Pitt County enabled the Hospital to convert its status to that of a private, non-profit corporation.

THIS binding Agreement to change the status of Pitt County Memorial Hospital from a Public Hospital to a Private Not For Profit Hospital under the provisions of N.C.G.S. 131E-8 is made this 1st day of June, 1998, by and between PITT COUNTY, a political subdivision of the State of North Carolina, hereinafter referred to as the "County" acting by and through its duly elected Board of County Commissioners, and PITT COUNTY MEMORIAL HOSPITAL, INC. a nonprofit corporation organized and existing under the provisions of Chapter 55A of the General Statutes of North Carolina, located in Greenville, North Carolina, hereinafter referred to as the "Corporation", is based upon the following objectives:

To maintain the viability of Pitt County Memorial Hospital to provide the highest
quality healthcare to the Citizens of Pitt County and the Region.

To maintain Pitt County Memorial Hospital as an open facility to provide care to
all patients regardless of ability to pay.

To maintain Pitt County Memorial Hospital as the academic medical teaching
Hospital for the East Carolina University School of Medicine pursuant to the terms of the
Affiliation Agreement.

To maintain local control.

To strive to maintain financial integrity of Pitt County Memorial Hospital at the
Highest bond rating achievable for similarly situated hospitals.

To provide appropriate compensation to the County for transfer of Pitt County
Memorial Hospital.

WITNESSETH

1. STATUS OF THE PARTIES

That the County is the owner and Lessor of various parcels of land, buildings, and all physical property known as Pitt County Memorial Hospital, hereinafter referred to as "Hospital" which is under long term lease to the Corporation, to operate a public general hospital.

2. PUBLIC NOTICE GIVEN

The County having received a request from the Corporation to change the status of the Hospital to provide it with the flexibility necessary to compete effectively in the changing healthcare market in the fulfillment of its mission to provide quality medical services to the citizens of a 29 county service region, and the County having thoroughly considered said request, has published public notice of the County Board's intention to complete a conveyance of the Hospital to the Corporation pursuant to N.C.G.S. 131E-8, now specifies the terms and conditions to be resolved for such a conveyance to proceed as follows:

3. COMMUNITY GENERAL HOSPITAL

That both parties agree that it is in the best interest of both the County and the Corporation to reorganize the Hospital under the provisions of N.C.G.S. 131E-8, and thereby change its status from a public not for profit Hospital to a private not for profit Hospital. The Corporation will own, maintain and operate the Hospital as a community general hospital serving all of the citizens of Pitt County, open to the general public, free of discrimination based upon race, creed, color, sex or national origin. As set forth in Sections 9 and 14 herein, this reorganization will be accomplished through the conveyance of all hospital-related property to the Corporation pursuant to a restricted deed.

4. ANNUAL PAYMENT IN LIEU OF TAXES
That the Corporation will agree to make annual payments in lieu of taxes to Pitt County. The first such payment will be in the amount of $1.2 Million payable on January 5, 1999. The Corporation will also make payments equivalent to the then current tax liability on real and its related personal property in Pitt County acquired after the date of this Agreement which had been previously taxed. Thereafter these payments will annually increase according to the inflation factor established by the Consumer Price Index, Bureau of Labor & Statistics, not to exceed 3.0 percent per year.

5. CONSIDERATION

The Corporation will pay to the County cash compensation in the amount of and in the manner specified as follows:

A. $15 Million at the time of conveyance;

B. $7.5 Million on the date of the first anniversary of the execution of this
agreement; and

C. $7.5 Million on the date of the second anniversary of the execution of this agreement.

6. INDIGENT CARE

That the Corporation will provide community general
hospital services to the citizens of Pitt County without regard to their ability to pay for those services, consistent with its historical practice and expenditures with regard to indigent care services. The Corporation's historical and current practice is to provide care to all Pitt County residents, regardless of their race, color, creed, social status, national origin or ability to pay. The parties further acknowledge that circumstances in health care which are beyond the Corporation's control may occur which may reduce the actual dollar amount that has heretofore previously been expended towards indigent care without any resulting reduction in the nature or scope of services provided. In the event such a change in circumstances occurs, but the Corporation has in no way discriminatorily limited the level of services to indigent patients, then the Corporation shall have fulfilled the requirements of this Section.


7. MEDICAID REIMBURSEMENT

That the Corporation will continue to Contribute $452,000 toward reimbursing the County for Medicaid payments made by the County for services provided to County residents at the Hospital. Beginning with the first anniversary of the execution of this agreement, the Corporation's contribution to the County shall be increased annually by the inflation factor established by the Consumer Price Index, Bureau of Labor & Statistics, not to exceed 3.0 percent per year.

8. NURSING PROGRAM

That the Corporation continue to maintain and fund at the current level the school nurse program, as presently constituted, for the Pitt County Board of Education as part of their mission to the community.

9. CONVEYANCE OF HOSPITAL PROPERTY

That the County, in consideration of the covenants and obligations of the Corporation as set out herein, will convey by Deed unto the Corporation and its successors, subject to this Agreement, and the restrictions and conditions set forth herein, all of that property known as Pitt County Memorial Hospital, described in Exhibit "A" attached hereto and incorporated herein by reference, together with the County owned personal property, fixtures, equipment and other assets, tangible or intangible, associated with the Hospital (collectively referred to herein as "Hospital"). Upon the conveyance, the agreement of lease between the County and the Corporation will terminate.

10. COVENANT ON INDEBTEDNESS

The Corporation covenants and agrees that it will not create or cause to be created any mortgage, deed of trust or similar encumbrance on the Hospital real property or any part thereof without the prior written approval of the Pitt County Board of Commissioners. The Corporation may incur other indebtedness which does not create a mortgage, deed or trust or other similar encumbrance on the existing Hospital complex real property so long as such indebtedness constitutes Permitted Indebtedness as defined in Exhibit B and incorporated herein by reference

11. DISPOSITION OF ASSETS

A. The Corporation agrees that it will not
sell, lease or otherwise dispose of real property constituting the Hospital without the prior written consent of the County; provided, however, that the Corporation may lease space in ancillary buildings which do not constitute a part of the central hospital facilities to third parties on a short term basis or to the ECU School of Medicine. The Corporation will not allow all or a substantial portion of the Hospital system to be managed (whether by contract or otherwise) by an entity not controlled by the Corporation. The Hospital may not be sold or merged without the written consent of the County. If such approval is given, all net proceeds from any sale or merger shall go to the County.

B. Except as otherwise limited above and by Section 13 below, the Corporation may
dispose of assets consistent with standard hospital financing practices and as permitted by
standards established by the Local Government Commission and North Carolina Medical Care Commission to enable the Hospital to have operating flexibility; provided however, that the Corporation shall not dispose of assets which would impair the functional utility of the Hospital or materially reduce the scope of services or mission of the Hospital within Pitt County. The standard measure of value of Assets which may be disposed of in any year shall not exceed 10% of the Corporation's unrestricted fund balance as shown on the Corporation's audited financial statements for its most recent fiscal year; provided, however, that the Corporation shall be entitled to transfer assets for fair market value, transfer assets to any controlled affiliate and otherwise dispose of assets in the ordinary course of business and obsolete equipment, without limitation. Disposition of assets exceeding these limitations will require written County Board approval.

C. In any sale of assets located inside and outside of Pitt County, all proceeds shall accrue to the benefit of the Corporation, its corporate parent, if any, or any controlled affiliate.

12. MAINTENANCE OF TAX EXEMPT STATUS

The Corporation shall Maintain its status as a nonprofit, tax-exempt, charitable organization under the provisions of Section 501(c) (3) of the Internal Revenue Code. The Corporation shall not be a private foundation under the provisions of Section 509(a) of the Internal Revenue Code.

13. MAINTENANCE OF FINANCIAL STRENGTH

The Corporation shall strive to maintain its current bond ratings or the highest bond ratings achievable for similarly situated hospitals and to maintain the financial viability and integrity of the Hospital. As a means to measure its compliance with this section, the Corporation agrees that it will maintain: 1) an annual long term debt service coverage ratio of 1.5 (calculated by dividing its income available for debt service for its most recent fiscal year by its actual long term debt service requirement for the same fiscal year) and 2) an annual cash cushion ratio of 1.4 (calculated by dividing its unrestricted cash and investments for its most recent fiscal year by its actual long term debt service requirement for the same fiscal year). Should the Corporation fail to maintain these ratios, the County shall be immediately notified. In addition a consultant shall immediately be hired by the Corporation to determine what steps are necessary to correct the financial condition which created the failure to meet these ratios and all necessary steps shall be taken by the Corporation to improve its financial performance in order to meet or exceed the required ratios. Failure to follow the consultant's recommendations shall create the right of the County to a discretionary reversion of the Hospital.

14. REVERSION OF HOSPITAL

Any failure by the Corporation to make payments to the County as specified in this Agreement, to maintain the historic level of indigent care consistent with historical practice and expenditures as described in Section 6, or if the Corporation should cease to operate the Hospital as a community general hospital open to the general public, or not be accredited or fail to have its accreditation reinstated within a period specified by the Joint Commission on Accreditation of Healthcare Organizations, or an equivalent accrediting organization or Agency, or should the Corporation dissolve without a successor nonprofit corporation approved by the Board of County Commissioners of Pitt County to carry out the terms and conditions of this conveyance, all ownership rights in the Hospital, including the buildings and land, together with the personal property and equipment associated with the Hospital, including replacements thereof, shall automatically revert to the County by power of termination for covenants, restrictions, and conditions broken.

15. PAYMENT OF OUTSTANDING BONDS

Prior to or simultaneously with the conveyance of the Hospital, the County shall receive certification from the North Carolina Local Government Commission that all outstanding county revenue bond issues for the construction, renovations or support of Pitt County Memorial Hospital, have been duly redeemed or defeased as required by the provisions of G.S. 131E-8. The Corporation shall be solely responsible for all costs associated with the defeasance and the payment of the outstanding bond indebtedness.

16. AFFILIATION WITH MEDICAL SDCHOOL

The Corporation shall maintain its affiliation with the East Carolina University School of Medicine, according to the Affiliation Agreement between the Medical School, the County and Corporation. The Hospital shall continue to serve as the primary academic teaching Hospital of the University.

17. COMPLIANCE REPORTS

The Corporation shall provide an annual audit to the County confirming its compliance with all of the terms and conditions of this Agreement, within one hundred fifty (150) days of the end of its fiscal years.

18. GOVERNANCE

A.The Corporation's affairs will be governed by a 20-
member board of trustees. The County will appoint 11 or 55% of the governing body of the Corporation (at least one of whom shall be a Pitt County physician). The UNC Board of Governors will appoint the remaining 9 seats or 45% of the governing body of the Corporation. Of these 9, one member will be appointed from a slate of four persons nominated by a nominating committee composed only of trustees appointed by UNC Board of Governors. Any current Trustee who is eligible for the reappointment shall remain eligible for reappointment. Neither the County nor UNC Board of Governors shall remove any of their appointed Trustees except for cause. Except in connection with the creation of a controlling parent corporation as described in Section 18(b) below, no further amendment to the Corporation'' Articles of Incorporation or bylaws relating to appointment and composition of its Board of Directors shall be made without the prior written consent of the County; provided however that the Trustees shall serve staggered 5 year terms, not to exceed two consecutive terms. A supermajority of 85% of the Trustees is required to approve certain extraordinary actions such as 1)sale or dissolution of the Corporation; 2)sale or transfer of assets in cash or in kind, including services to or for the benefit of the County except as otherwise required by this agreement; 3)the amendment of the Corporation's Articles of Incorporation or bylaws relating to appointment and composition of its Board of Directors with County consent; 4)the creation of a controlling parent corporation; and 5)the appointment or removal of corporate officers, including those currently serving without cause. Any executive committee with the power to act in place of the Board of Trustees and the Board of all affiliates of the Hospital shall reflect the same proportional representation as the Hospital Board. Prior to a Trustee's appointment or nomination to the Board, he or she shall be Required to accept in writing the obligation of independent fiduciary service in protecting and promoting the best interests of the Corporation notwithstanding any prior, current or future affiliation. No Trustee shall receive any monies for their service to the Hospital or to any of the affiliates while a member of the Board of Trustees of the Hospital.

B.The Corporation shall be permitted to create a controlling parent corporation. Upon any reorganization of the Corporation to provide for a controlling parent corporation, the governing board of that parent corporation shall be appointed utilizing to the extent mathematically possible the same percentages for board appointments or nominations by the various institutions as set forth above, regardless of whether this board is larger or smaller in actual size; provided however that the pool of individuals which may be appointed or nominated for appointment may only include existing or former members of the Corporation's board of trustees in order to ensure the service of experienced individuals.

19 DISCRETIONARY REVERSION

Violation of the governance provision set Forth in Section 18 or breaches of business and financial covenants contained in Sections 8,10,11,12 and 13 that have not been cured with a reasonable time frame will not result in an automatic reversion of the Hospital, but will result in the County's right to cause a reversion of the Hospital at its discretion.

20. OPEN MEETINGS

The Corporation shall continue to operate under the Open Meetings Act, with Board meeting open to the general public. The Board of Commissioners shall receive notice of all meetings of the Corporation and shall have access to all closed sessions upon their individual execution of a confidentiality agreement.

21 FEES AND EXPENSES

The Corporation will pay the County's expenses, including attorneys' fees, consultant fees and accounting fees, related to this Agreement and the negotiations preceding this Agreement.

22. INDEMNIFICATION

The Corporation shall indemnify and hold the
County harmless from any damages, expenses or losses resulting from all liabilities and obligations of any nature, which are attributable to the ownership or operation of the Hospital.

23 NOTICES

Any notices or other communication required to be given pursuant to this Agreement shall be in writing and shall be sent certified mail, return receipt requested to the parties as follows:

THE COUNTY Pitt County Board of Commissioners
Chairman and County Manager
1717 W. 5th Street
Greenville, NC 27834

THE CORPORATION Pitt County Memorial Hospital, Inc.
Chairman and Hospital President
2100 Stantonsburg Road
Greenville, NC 27834

24. ENTIRE AGREEMENT

This Agreement represents the entire agreement and understanding of the parties hereto and supersedes all prior or concurrent agreements, whether written or oral, in regard to the subject matter hereof.

25. BINDING AGREEMENT

This Agreement shall be binding upon the successors or assigns of the parties hereto upon execution; provided that, other than as may be required in connection with the creation of a controlling parent corporation in connection with Section 18(b), no assignment hereof by either party is permitted without the written consent of both parties.

26. RELATIONSHIP TO THE PARTIES

The relationship between the County and the Corporation is that of independent contractors, and neither shall be considered an agent or representative of the other for any purpose.

27. COMPLIANCE WITH TERMS

Failure to insist upon strict compliance with any part of the terms herein (by way of waiver or breach) by either party hereto shall not be deemed to be a continuous waiver in the event of any future breach or waiver of any condition hereunder.

29. FURTHER AGREEMENTS

The Corporation and the County agree to take such further action and to execute all documents, assignments and amendments to documents, including the deed to convey the Hospital, the Affiliation Agreement, the Corporation's Articles of Incorporation and Bylaws, as well as documents related to the defeasance of the outstanding county revenue bonds, necessary to effectuate the terms of this Agreement. The conveyance contemplated in this agreement and the obligations of the parties herein are subject to N.C.G.S. 131E-8.

IN TESTIMONY WHEREOF, the County has caused this Agreement to be executed on
Its behalf by the Chairman of the Board of Commissioners for Pitt County, attested by its Clerk, with its corporate seal hereto affixed, all on the day and year first above written and by authority duly given. The Corporation has caused this Agreement to be executed on its behalf by the Chairman of the Board of Trustees of Pitt County Memorial Hospital, attested by its Corporate Secretary, with its corporate seal hereto affixed for purposes of consenting to the terms, restrictions, covenants and conditions set forth here.

PITT COUNTY

SEAL OF PITT COUNTY
AFFIXED ON ORIGINAL
DOCUMENT. Kenneth K. Dews
Kenneth K. Dews, Chairman
ATTEST: Board of Commissioners

Susan J. Banks
Susan J. Banks
Clerk to the Board

SEAL OF PITT COUNTY MEMORIAL
HOSPITAL, INC. AFFIXED ON
ORIGINAL DOCUMENT.David S. Brody
Chairman Board of Trustees

ATTEST:

Walter E. Morehead
Corporate Secretary

EXHIBIT A

REAL PROPERTY DESCRIPTION

All of that property currently held by Pitt County as the recorded owner, constituting the existing Pitt County Memorial Hospital Complex located at 2100 Stantonsburg Road, Greenville, Pitt County, North Carolina, more particularly described as follows:

1. Approximately 56.5 acres of land, with improvements, of the 97.25 acres conveyed to
Pitt County, North Carolina , a body corporate and politic, by Novella Moye Williams,
Jesse Rountree Moye, Emily Moye Hadley, and Joseph S. Moye and wife, Elizabeth T.
Moye by deed dated August 18, 1971 and recorded in Deed Book I-40, Page 101 in the
Pitt County Registry, and as attached to the 1989 Lease Agreement between Pitt County
And Pitt County Memorial Hospital and as attached to the First Supplemental Lease
Agreement thereafter;

2. The real property underlying the Data Center of Pitt County Memorial Hospital located
on Beasley Drive and Emergency Drive in Greenville, North Carolina, said property
being Parcel l: Lots 1, 2, 3 & 4, Block H, Section III Professional Center and Parcel 2:
17 feet former right of way of Medical Drive as described in Deed Book 269, Page 116, as shown on a map of record in Map Book 28, Page 253 of the Pitt County Registry;

3. The real property with improvements, constituting the Pitt County Warehouse as shown
on a survey of record prepared by Rivers and Associates dated March 16, 1993, and recorded in Map Book 42, Page 167 of the Pitt County Registry, and as attached to the Second Supplemental Lease Agreement between Pitt County and Pitt County Memorial Hospital, Inc.;

4. The real property constituting the Pitt County Memorial Hospital O'Hagan Parking Lot
Containing approximately 2.9 acres as described in Deed Book 336, Page 80 and shown on a map of record in Map Book 40, Page 86 of the Pitt County Registry, and as attached to the Second Supplemental Lease Agreement between Pitt County and Pitt County Memorial Hospital, Inc.; and

5. All of the land currently held in the name of Pitt County which constitutes the Hospital
Parking Lot(s) including, but not limited to, all land which is described, in part, in Deed Book Q-33, Page 40 and Deed Book V-40, Page 674 of the Pitt County Registry.

EXHIBIT B

"Permitted Indebtedness" means:

A. Long-Term Indebtedness if, prior to the incurrence of such Long-Term Indebtedness there is delivered to the County:

1. An officer's certificate to the effect that (A) immediately after the incurrence of the
Proposed Long-Term Indebtedness, the aggregate principal amount of all Long-Term Indebtedness does not exceed 65% of Total Capitalization, and, based on the most recent period of 12 full consecutive months for which audited financial statements are available, the incurrence of the proposed Long-Term Indebtedness shall not reduce the Long-Term Debt Service Coverage Ratio to less than 1.10; or (B) the Long-Term Debt Service Coverage Ratio for the most recent period of 12 full consecutive calendar months preceding the date of delivery of such evidence for which financial statements are available, taking all outstanding Long-term Indebtedness and the proposed Long-Term Indebtedness into account, is not less than 1.20; or

2. A evidence demonstrating that the Long-Term Service Coverage Ratio for the
period mentioned in paragraph (a)(1)(B), excluding the proposed Long-term Indebtedness, is at least 1.10 and (b) an officer's certificate of the Corporation demonstrating that the forecasted Long-Term Debt Service Coverage Ratio for each of the two full Fiscal Years succeeding the date of completion of the facilities being financed with the proceeds of such proposed Long-Term Indebtedness (or, in the case of Long-term Indebtedness not financing capital improvements, for each of the two full Fiscal Years succeeding the date of incurrence of such Long-Term Indebtedness), taking all outstanding Long-term Indebtedness and the proposed Long-Term Indebtedness into account, is mot less than 1.20, as shown by forecasted financial statements for each such period, accompanied by a statement of the relevant assumptions upon which such forecasted financial statements are based; provided, however, that if an officer's certificate states that Governmental restrictions have been imposed which make it impossible for the coverage requirements of this subsection to be met, then such coverage requirements shall be reduced to the maximum coverage permitted by such Governmental restrictions but in no event less than 1.00; or

3. Without compliance with either of the tests mentioned in (1) and (2) above,
Additional Long-Term Indebtedness in an amount not to exceed 20% of Total Operating Revenues for the most recent Fiscal Year for which audited financial statements are available. The total amount of Long-Term Indebtedness incurred under this clause (3) and outstanding without compliance with one of the tests mentioned in (1) and (2) above may not in the aggregate exceed at any time 20% of Total Operating Revenues for the most recent Fiscal Year for which audited financial statements are available.

B. Indebtedness to complete a project already begun for which Indebtedness was
approved or permitted hereby without limitation provided there is an architect's estimate of the completion costs and a certificate of the Corporation (1) stating that such Indebtedness is being incurred.

C.Long-Term Indebtedness to refund any outstanding Long-Term Indebtedness if the Corporation shall have adopted a resolution finding that such refunding is in the best interest of the System.

D.Short-Term Indebtedness if immediately after the incurrence of such Indebtedness, the
unpaid principal balance of all such Short-Term Indebtedness to be incurred together with the unpaid principal balance of all Short-Term Indebtedness outstanding does not exceed 25% of the Total Operating Revenues for the most recent period of 12 full consecutive months for which financial statements are available.

E. Indebtedness having a term of 60 months or less issued in anticipation of financing of
capital improvements by the issuance of Long-Term Indebtedness, provided that, at the time such Indebtedness is incurred:

1. Evidence (which shall be accompanied by and based on an opinion of a banking or investment banking institution knowledgeable in health care finance) is present that the anticipated financing is reasonably expected to be completed within the next 60 months; and

2. The conditions described in (a)(1)(A) or (B) or (a)(2) are met with respect to such Indebtedness as if it were being repaid in substantially level annual debt service over a term of 20 years and bearing interest at an interest rate at which it would reasonably expect to borrow the same amount by issuing an obligation with the same term.

F. Balloon Long-Term Indebtedness with a term in excess of 60 months (if such
Indebtedness has a term of 60 months or less, the provisions of paragraph (e) hereof shall apply) provided at the time such Indebtedness is incurred any of the incurrence tests set forth in paragraph (a) can be met.

G. Variable Rate Indebtedness provided at the time such variable Rate Indebtedness is
incurred any of the incurrence tests set forth in paragraph (a) can be met.

H. Put Indebtedness provided at the time such Indebtedness is incurred (a) any of the
incurrence tests described in paragraph (a) can be met and (2) either (A) a binding commitment from a bank or other financial institution exists to provide financing sufficient to pay the purchase price or principal of such Put Indebtedness on any date on which the owner of such Put Indebtedness may demand payment thereof pursuant to the terms of such Put Indebtedness or (B) the Corporation has agreed to provide such financing itself and such Put Indebtedness has received the highest short-term rating from either Moody's or Standard & Poor's.

I. Interest Liability Swaps without limitation.

J. Non-Reco8ruse Indebtedness without limitation provided the Liens therefor are
permitted Liens.

K. Liability under a line of credit, letter of credit, standby bond purchase agreement or
similar credit enhancement or liquidity facility established in connection with any other Permitted Indebtedness.

L. Indebtedness secured by a lien on Accounts if immediately after the incurrence of such
Indebtedness, the amount of such Accounts pledged to secure Indebtedness issued under this paragraph (1) and then outstanding will not exceed the difference between (1) the Account Lien Amount and (2) 110% of the Book Value of Accounts sold in the current Fiscal Year; provided, however, (A) the determination of whether a disposition of Accounts is a sale or loan shall be made in accordance with generally accepted accounting principles and (B) any Indebtedness issued under this paragraph (1) shall also be considered Short-Term Indebtedness subject to the incurrence test set forth in paragraph (d).


All capitalized terms utilized in this Exhibit B shall have the meanings generally assigned thereto in a representative master trust indenture used in financings effected through The North Carolina Medical Care Commission.


Main l Documents l Photographs l Vignettes l Research Topics | Collection Contents | Contact

Laupus Library
The Brody School of Medicine at East Carolina University
600 Moye Boulevard
Greenville, North Carolina 27858-4354

P 252.744.2240 l F 252.744.2672

Return to History Collections
Contact Us