IN THE COURT OF COMMON PLEAS CUYAHOGA COUNTY, OHIO EDWARD GRAHAM CASE NO. 1286 Chase Avenue Lakewood, Ohio 44107 JUDGE MARGUERITE HARKNESS 1585 Riverside Drive Lakewood, Ohio 44107 VERIFIED COMPLAINT FOR TAXPAYERS SUIT WILLIAM GRULICH BREACH OF CONTRACT 1596 Onondaga Avenue (THIRD PARTY Lakewood, Ohio 44107 BREACH OF FIDUCIARY DUTY BREACH OF EXPRESS TRUST DEBORAH MECKES BREACH OF CONSTRUCTIVE TRUST 1596 Onondaga Avenue DECLARATORY JUDGMENT Lakewood, Ohio 44107 INJUNCTION (TRO PERMANENT), WRIT OF MANDAMUS AMY DILZELL AN ACCOUNTING. 1276 French Avenue UNJU ST ENRICHMENT. Lakewood, Ohio 44107 PROMISSORY ESTOPPEL. and FRAUD. AND CONSPIRACY CITY OF LAKEWOOD, (Jury Demand Endorsed Hereon) ex rel. EDWARD GRAHAM Plaintiffs (Monetary Relief Requested) V. CITY OF LAKEWOOD c/o Its Law Director Kevin Butler Lakewood City Hall 12650 Detroit Avenue Lakewood, Ohio 44107 MAYOR MICHAEL SUMMERS 1456 Wilbert Road Lakewood, Ohio 44107 THE CLEVELAND CLINIC FOUNDATION (Ohio Entity No. 95560) c/o Its Statutory Agent CT Corporation System 1300 E. 9th Street STATE OF OHIOCleveland, Ohio 44114 I DELOS COSGROVE, MD. Chief Executive Of?cer President of CCF 34115 Fairmount Blvd. Hunting Valley, Ohio 44022 LAKEWOOD HOSPITAL ASSOCIATION (Ohio Entity No. 691247) c/o Its Statutory Agent CT Corporation System 1300 E. 9th Street Cleveland, Ohio 44114 THOMAS GABLE Chairman of Lakewood Hospital Association 21765 Gatehouse Lane Rocky River, Ohio 44116 LAKEWOOD HOSPITAL FOUNDATION, INC. (Ohio Entity No. 253349) c/o Its Statutory Agent Kenneth Haber 14601 Detroit Avenue, Suite 240 Lakewood, Ohio 44107 KENNETH HABER President of Lakewood Hospital Foundation, Inc. 17897 Lake Road Lakewood, Ohio 44107 SUBSIDIUM HEALTHCARE, LLC (Georgia Entity No. 4040230) c/o Its Statutory Agent CT Corporation System 1201 Peachtree Street NE Atlanta, Georgia 30361 and THE OHIO ATTORNEY GENERAL MIKE 30 E. Broad Street, 14?" Floor Columbus, Ohio 43215 Defendants The above Plaintiffs, through undersigned counsel Morganstern, MacAdams DeVito Co., L.P.A., set forth their complaint against all the Defendants, jointly and severally, as follows: PARTIES, JURISDICTION, AND VENUE 1. Plaintiffs Edward Graham, Marguerite Harkness, William Grulich, Deborah Meckes, and Amy Dilzell are all residents and taxpayers of the City of Lakewood, reside at their above home addresses within Cuyahoga County, and shall collectively be referred to as the ?Plaintiffs? or ?Taxpayers? within this Complaint. Plaintiffs also bring this action on behalf of the employees of Lakewood Hospital through Amy Dilzell, an employee and representative of this protected class. Plaintiffs also bring this action as petitioners, in the name of the state, and veri?ed by the af?davit of Relator Edward Graham. 2. Defendant City of Lakewood (?City?) is a municipal corporation bound by its Second Amended Charter, the Ohio Revised Code R.C. 733.59 for taxpayers suits, and Ohio common law. The City's current Law Director is Mr. Kevin Butler. The City's current elected o?icial as Mayor is Defendant Michael Summers who resides at his above home address within Cuyahoga County. The Defendants City and its Mayor Michael Summers will be collectively referred to as ?City? in this Complaint. The City has over 52,000 residents and is the third largest municipality in Cuyahoga County behind only Cleveland and Parma. 3. The Cleveland Clinic Foundation (Ohio Entity No. 95560) is a non-pro?t, tax- exempt, Ohio corporation which provides medical and hospital care throughout Cuyahoga County and primarily from its main campus facility located at 9500 Euclid Avenue, Mail Code NA4, Cleveland, Ohio 44195. CCF currently has Defendant Delos ?Toby? Cosgrove, MD. as its Chief Executive Of?cer and President, who resides at 34115 Fairmount Boulevard, Hunting Valley, Ohio 44022 in Cuyahoga County. The Defendants CCF and its CEO and President Delos Cosgrove, M.D. will collectively be referred to as in this Complaint. Defendant Lakewood Hospital Association (Ohio Entity No. 691247) is a non- pro?t corporation which primarily conducts its hospital management operations from 14519 Detroit Road, Lakewood, Ohio 44107. LHA currently has Defendant Thomas Gable as its Chairman, who resides at 21765 Gatehouse Lane, Rocky River, Ohio 44116 in Cuyahoga County. The Defendants LHA and its Chairman Thomas Gable will collectively be referred to as in this Complaint. Defendant Lakewood Hospital Foundation, Inc. (Ohio Entity No. 253349) is a non-pro?t charitable trust corporation which primarily conducts its business to support Lakewood Hospital from 14601 Detroit Avenue, Suite 240, Lakewood, Ohio 44107 in Cuyahoga County. LHF currently has Defendant Kenneth Haber as its President. The Defendants LHF and its President Kenneth Haber will collectively be referred to as in this Complaint. Defendant Subsidium Healthcare, LLC (Georgia Entity No. 4040230) (?Subsidium?) is a for-pro?t entity incorporated in the State of Georgia, has its principal office address at 200 Corporate Road, Lafayette, Louisiana 70508, and provides consultation services in Cuyahoga County to certain of the above named Defendants regarding Lakewood Hospital, including CCF and LHA. Defendant Mike DeWine is the Attorney General for the State of Ohio and his office is located in Franklin County, Ohio. He has been made a party to the Complaint pursuant to RC. 109.25 for purposes of noti?cation where the terms of a charitable trust are being construed, the charitable trust may be terminated or its assets distributed, the charitable trust is departing from the object or purpose intended, and the public's interest in public assets will be affected. 8. Jurisdiction is appropriate in the State of Ohio because all individual Defendants are Ohio residents and all corporate and/or municipal Defendants are Ohio entities or conducted activity in Ohio; this matter involves the Ohio Revised Code statutory causes of action for taxpayers suits (R.C. 733.59), declaratory judgment (RC. 2721.03), mandamus (RC. 2731.02), and the remaining civil claims pursuant to RC. 2305.01. 9. Venue is proper in Cuyahoga County pursuant to Civil Rule of Procedure because it is the county in which the individual Defendants reside; the county in which the corporate Defendants and/0r municipal Defendant has its principal place of business; the county in which the Defendants conducted activity that gave rise to the claim for relief; the county in which a public of?cer maintains his or her principal of?ce; the county in which the property is situated and is the subject of this action; and the county in which all or part of the claim for relief arose. STATEMENT OF FACTS Gross l\1i_smanage_ment of Lakewood Hosnital 10. Taxpayers are concerned citizens who live in the City and are required to ?le the within Complaint to maintain the City-owned Lakewood Hospital's inpatient, acute care, and medical/surgical health care services for residents, employees, and the public bene?t. The Defendants? nonfeasance, malfeasance, misfeasance, and negligence have all but destroyed the valuable community asset of Lakewood Hospital. The City is also failing to enforce valuable contractual rights and remedies regarding (A) a thirty (30) year land, hospital building, and medical equipment lease (?Lease?) and (B) a thirty (30) year medical services contract through a De?nitive Agreement for the operation of Lakewood Hospital by LHA (the sole member being CCF) and CCF through the year 2026. This matter also involves over $30 million of non-pro?t donations to the charitable trust LHF intended to assist in the continued operation of Lakewood Hospital for indigent and insured City residents' inpatient, acute care, and medical/surgical health care needs. Lakewood Hospital is an invaluable community asset to Taxpayers and all City residents providing high quality, accessible, and cost effective health care services and the largest economic stimulus providing jobs, Spending, and taxes estimated at over $294 million per year. 11. CCF, LHA, LHF, and the City leadership continue to tell their story that changes in health care have resulted in declining patient volumes and are causing Lakewood Hospital's demise?all the while CCF's wholly-owned Fairview Hospital shows annual revenues well in excess of $50 million and CCF's new $143 million Avon Hospital rises from the ground 12 miles further to the west on Cleveland Clinic Boulevard. 12. The ?nancial crisis currently being endured by Lakewood Hospital is very simply, and nothing more than, a carefully and purposefully ?created reality? manufactured by CCF for the sole purpose of pursuing its strategic plan to close Lakewood Hospital and build the Xanadu called Avon Hospital to the detriment of the Taxpayers (residents and employees), City, LHA, LHF, and the public. 100 Years of Service to the Communigj 13. Founded by Dr. C. Lee Graber, Lakewood Hospital opened its doors on Detroit Avenue in the ?rst ring suburb of Lakewood, Ohio in 1907. It was the ?rst hospital opened in the Cleveland suburbs. During the Great Depression in 1930, the City took ownership of Lakewood Hospital as the residents of the City sought to ensure access to public health and jobs for the employees. (Ex. 1, City Ordinances 907.01 to 907.03). In 1956 LHF was 14. 15. established to encourage and raise funds exclusively for Lakewood Hospital?s continued operation as an inpatient and acute care medical/surgical hospital. In 1987 LHA was established as a private, non-pro?t, tax-exempt corporation to lease and operate Lakewood Hospital, including the land, hospital building, and medical equipment. (Ex. 1, City Ordinance Chapter 907 and Ordinance 63-86, passed January 5, 1987). In 1987 Lakewood Hospital changed its status from a public hospital being operated by the City to leasing Lakewood Hospital to the non-pro?t LHA to manage and operate upon the land, hospital building, and medical equipment for the Taxpayers, employees, and public bene?t. Lakewood Hospital has served the City for more than 100 years as an invaluable public asset, serving any and all residents? health needs (taxpayers and non- taxpayers alike) with the goal of providing the highest quality of care, regardless of the patient's ability to pay. Lakewood Hospital is also the largest employer in the City and 1,100 employees are protected by the Second Amended Charter of Lakewood because of their vital necessity to the economic well-being of the City. (Ex. 2, Second Amended City Charter Article XV, Section 4). Lakewood Hospital is of equal importance as the City?s other public services such as the police department, ?re department, EMS, and public education system. The City?s Second Amended Charter at Article XV. sets forth the leasing requirements between the City as lessor and LHA as lessee. Article XV of the City?s Second Amended Charter provides in Section 4: ?Each lease entered into pursuant to this Section shall place the control, operation and management of the hospital in the lessee and shall include such terms and provisions as Council reasonably believes necessary to provide for the health and welfare of the residents of the City. [and] the protection of the 16. emplovees of the hospital . (Id) (Emphasis added). The intended bene?ciaries of the Lease are Taxpayers, residents, and Lakewood Hospital employees. Further, City Ordinance Chapter 907.01 provides: ?Council hereby declares it necessary and conducive to the public health and general welfare to establish a municipal hospital bf the City to be known as The Lakewood HOSpital of Lakewood. Ohio . (Ex. 1, City Ordinance, Chapter 907) (Emphasis added). City Ordinance Chapter 907.03 also provides: ?Council hereby declares it necessary and conducive to the public health and general welfare to establish and it hereby does establish a municipal hospital of the City to be known as The Lakewood Hospital.? The public is also an intended bene?ciary of Lakewood Hospital. Beginning of the End 17. 18. In 1996 CCF became the sole member of LHA through the DA, which amended LHA's Code of Regulations and amended the existing lease between the City and LHA. (Ex. 3, DA). Sitting on Board of Trustees were and still are eX-of?cio members of the City?s government. The Mayor and two City council members, currently serving as LHA Board Members, are the liaisons between the City and the LHA and obligated to protect the City?s interests. (City Ordinance 63-86, Section 5). The LHA and CCF entered into the DA in which, under Section 2.1.3, CCF has the right to assume management of the day-to-day operations of Lakewood Hospital. (Ex. 3, DA, p. 8). In 1996 the City authorized an Amended and Restated Lease (?Lease?) with LHA and CCF. (Ex. 4, Ordinance 51-96). Since 1996 Lakewood Hospital has been recognized as a Cleveland Clinic Hospital, although City?owned. The City?s Lease with LHA and CCF has a term of 30 years, ending in 2026, and CCF is bound by the terms of the Lease through the DA. (Ex.3, DA, p. 7) (EX. 5, Lease, p. 2). Hence, in 1996, CCF made a long? 19. 20. term commitment to the City, LHA, LHF, and Taxpayers to provide the highest quality health care services and employment with Lakewood Hospital at the centerpiece of that commitment. Section 14.1 of the Lease provides: ?Upon the expiration of the Lease leg or the termination of this Lease, the Lessee and covenants and agrees to surrender the Leased Premises to the City . together with all appurtenances thereto and all assets and obligations of the Lessee including movable equipment, furnishings and other personal property in or on the Leased Premises, in as good condition as prevailed at the time the Lessee was put in ?ill possession thereof; provided that, there is excepted from the foregoing covenants, agreements and obligations, any loss by ?re or other casualty covered by insurance, ordinary wear and tear, obsolescence, removals and replacements in accordance herewith, and acts of God . (Ex. 5, Lease, p. 50) (Emphasis added). CCF committed in the Recitals of the Lease that LHA and CCF would ?continue to provide health care services in accordance with this Lease to residents of the City without regard to their ability to pay.? (Ex. 5, Lease, p. 3). Moreover, LHA and CCF are ?to continue to provide residents of the City from facilities located within the City acute care medical/surgical services (including for children and adolescents), obstetrical/gynecological services, 24-hour-a-day emergency room providing trauma services, intensive care services and rescue squad/paramedic services as required by this Lease.? (Id) (Emphasis added). Section 6.2(a) of the Lease provides that and covenants and agrees that the suitability taken as a whole of the Leased Premises to provide the Required Services will not be impaired.? (Ex, 5, Lease, p. 23). The Lease de?nes Required Services as obstetrical/gynecological services, (ii) 24-hour-a-day emergency room providing trauma 21. 22. 23. services, rescue squad/paramedic services, (iv) intensive care services and acute care medical/surgical services (including, without limitation, care for children and adolescents) . (Ex. 5, Lease, p. 11). Section 9.11(b) of the Lease provides that and covenants that it shall . faithfully and ef?ciently administer, operate and maintain as Hospital Facilities so much of the Leased Premises as from time to time are Hospital Facilities rendering the Required Services . to patients who are residents of the City and all members of the general public.? (Ex. 5, Lease, p. 35) (Emphasis added). Further, Section 9.11(c) provides that LHA agrees to ?open to the public all meetings of its Governing board to assure full disclosure of the operations of except when the Governing Board by motion adOpted by it determines that public discussion or action of the Governing Board would be detrimental to the interests of the patients of the welfare of the residents of the City or The DA between LHA and CCF incorporates by reference the Lease and provides the City the right to enforce the Lease duties against CCF. (Ex. 3, DA Section 1.2, p. 5). Further, the DA requires that CCF operate Lakewood Hospital ?in a ?scally prudent manner, consistent with Lakewood's charitable purpose and Lakewood's obligations under the lease . . . in order to preserve the operation of Lakewood as a going concern, as de?ned under generally accepted accounting principles.? (Ex. 3, DA Section 1.1.4, p. 5) (Emphasis added). From 1997 to 2008 Lakewood Hospital enjoyed great success under the operation and management of CCF, oversight of LHA, and with the help of funding from LHF. In 2002, Lakewood Hospital expanded and opened a renovated emergency room. From 2008 through 2014, over $84.3 million has been used for providing indigent care, 10 providing services to those residents who cannot afford to pay for health care services provided by Lakewood Hospital. As recently as ?ve years ago, $2.5 million was spent to open a state?of-the?art cardiac catheterization lab at Lakewood Hospital. Additionally, a review of the Ernst Young, L.L.P. audits of Lakewood Hospital?s ?nancial statements1 reveals that it has been given a clean audit opinion year after year, even throughout and after the most recent economic recession. Strategic Plan to Close Lakewood Hospital 24. Lakewood Hospital began to see a ?nancial stagnation or decline as annual patient 25. 26. admissions dropped from roughly 12,300 to 8,400 during a ?ve-year period from 2008 to 2012, a roughly 32% decrease. However, the net patient service revenue from 2008 to 2012 only declined by 12.5%. The smaller decrease in net patient service revenue is due, in part, to an expanded Medicaid coverage in Ohio. In fact, Lakewood Hospital's Earnings Before Interest, Depreciation, and Amortization from 2011 through 2014 have all been positive and total $23,240,000. On February 11, 2010, the LHA Board?s Executive Committee adopted a plan that in part af?rmed Lakewood Hospital?s stz'on for Tomorrow plan, which was a multi-year strategic plan adopted in 2008 by the LHA Board and alleged to better meet the changing needs of the City community. CCF's proposal to LHA would make Lakewood Hospital a center of excellence in four (4) medical specialities ?centers of excellence?) in exchange for transferring pediatric and trauma medical services to other CCF wholly- owned hOSpitals in close proximity. In a letter from CCF to then City Mayor Ed Fitzgerald, CCF wrote: ?Lakewood Hospital is committed to the Lakewood community and will continue to maintain its status as the See and links for Lakewood Hospital Association Audited Financial Statements. 11 27. 28. city?s major employer. . The Plan will address the sustainability of Lakewood Hospital, while simultaneously making available the ?nest services typically provided by hospitals in communities similar to Lakewood.? (Ex. 6, CCF Letter Committing to Community and Lakewood Hospital, April 6, 2010) (Emphasis added). However, the April 6, 2010, letter also provided: ?We believe our pediatric patients will be best served just 3.5 miles away at Fairview Hospital for. inpatient care.? This is a breach of the DA and Lease required services at Lakewood Hospital for Taxpayers and the public. In a letter to Kevin Butler, then the president of City council, former president of Fairview and Lakewood Hospitals Jan Murphy included representations made by LHA and CCF in response to City council questions, which included: ?We remain committed to the Lakewood community and to the patients who entrust us each and every day to provide the best care possible to them.? (Ex. 7, CCF to City Letter Responding to Council Questions Regarding Lakewood Hospital, May 24, 2010). CCF also made oral representations on May 24, 2010, to the LHA Task Force regarding the City's rights to these new centers of excellence yy?gul having to amend the existing Lease. Based upon the above three (3) and other CCF promises and representations, on June 10, 2010, the City passed Resolution No. 8429-10 supporting and Vision for Tomorrow plan and its focus on centers of excellence at Lakewood Hospital. The resolution provides that the City and CCF both aspire and commit to provide appropriate services suitable for the City community and to maintain the near- and Iona-term viability of Lakewood Hosnital. Moreover, the resolution promised City residents, through their elected of?cials, assurances of continued active participation in key decisions impacting the plan and Lakewood Hospital for the duration of the Lease. Under this plan, the City, LHA, and CCF all agreed to change some Lakewood Hospital services to adapt to an 12 allegedly evolving health care industry and market to meet the needs of City residents. The City?s position on this plan was to protect residents? interests and to have a viable Lakewood Hospital for the duration of the Lease until 2026. At the time the plan was devised, the City and representatives of LHA and CCF all stressed the importance of their strong commitment to the community and long-term viability of Lakewood Hospital for residents? health care needs and economic bene?t to the City. The Slow Demise at the Hands of CCF 29. 30. With the dawn of new plans to help Lakewood Hospital adapt to alleged changes in health care, a series of events contrary to the best interests of Lakewood Hospital occurred, consisting of the slashing of vital Lakewood Hospital medical services, questionable ?nancial practices, and the disappearance of full and transparent communication between LHA, CCF, LHF, and the City community. Upon information and belief, certain of Lakewood Hospital medical services, pursuant to CCF's strategic plan, were gradually and purposefully diminished to nothing, reports of Lakewood Hospital turning away patients or sending them to other CCF wholly-owned hospitals emerged, and regional private ambulatory and public EMS services reportedly had been directed to transport patients to Fairview Hospital instead of Lakewood Hospital. While all of this has occurred, CCF and LHA have stuck to their story that these actions have resulted from Lakewood Hospital?s declining business because of the market and healthcare reform, and not due to the actions of the Defendants. In stark reality, Lakewood Hospital?s lack of ?nancial stability, because of declining patient volumes and worsening ?nancial picture, is a ?created reality? manufactured by CCF for the sole purpose of pursuing its self-serving strategic plan to support its wholly-owned hospitals, including its new Avon Hospital and existing Fairview Hospital and Lutheran Hospital. 13 31. 32. Further, a proper accounting and disgorgement of improper expenses by CCF Administrative Services) results in a pro?tably operating Lakewood Hospital. Between 2005 and today, CCF has already terminated completely removed or reduced to an immaterial amount) services offered by Lakewood Hospital with or without contractually required notice to the City. Many of these terminated or transferred Fairview Hospital and Lutheran Hospital) services are expressly referenced in Section 1.2, De?nitions of the Lease [as] the ?Required Services.? Upon information and belief, these terminated or transferred services include: 1) coronary intervention; (2) care of acute heart attack; (3) electro physiology and complex pacemakers; (4) pediatrics; (5) trauma; (6) pain management clinic; (7) inpatient (8) 21 skilled nursing beds were sold; (9) preadmission testing; (10) The Grace Hospital (11) orthopedics; (turning away patients now saying they will close it soon); (13) gastro- intestinal lab; (14) thoracic surgery (lungs); (15) interventional radiology; (16) neurology program; (17) physician precerti?cation program; (18) oncology; (19) no frozen section in pathology; (20) open heart surgery; and (21) interventional cardiology (stents). By terminating these services, CCF has been able to pursue its strategy of crippling Lakewood Hospital to the point that CCF would have leverage when bargaining with the City to close Lakewood Hospital, prematurely exit its DA and Lease obligations, and build a new hospital in Avon, Ohio of which CCF will have complete ownership and control. Simply put, CCF does not want to be stuck in the DA and Lease with Lakewood Hospital, including its many duties and ?nancial obligations to the City, because Lakewood Hospital simply does not ?t into long-term corporate strategy. Moreover, CCF does not want to give up this territory in the City and allow a competitor to enter this market and steal away market share from CCF. By diluting City assets to 14 33. 34. hurt Lakewood Hospital and convincing the LHA and LHF that it is in the City?s best interest to hand ownership of this real estate (and other Lakewood Hospital land at 850 Columbia Road in Westlake, Ohio) over to CCF, CCF is employing a scheme to maintain a regional monopoly or oligopoly at little to no cost to itself. Despite these many medical services being terminated or transferred, CCF and LHA have repeatedly made assurances to the City that CCF was committed to making Lakewood Hospital operational, sustainable, and pro?table until the end of the Lease in 2026. There is no reason to close and demolish Lakewood Hospital. Numerous facility upgrades made in recent past, including an atrium, orthopedic unit, rehab unit, emergency room, intensive care unit, cardiovascular care unit, radiology department, and geriatric have positioned it to be viable with effective management and operation. Contrary to reality, CCF is on a public relations campaign to convince City leadership and its residents that Lakewood Hospital is no longer Viable?all the while CCF's wholly- owned Fairview Hospital and Lutheran Hospital ?ourish and its new Avon Hospital is rising like a phoenix 12 miles west on Cleveland Clinic Boulevard. Upon information and belief, CCF has also embarked on a public relations campaign to undermine Taxpayers and all other individuals who oppose the closing of Lakewood Hospital because it violates contract terms, City Ordinances, and the economic facts. Moreover, there has been an unexplained increase in ?administrative services? expenses by CCF in the operation of Lakewood Hospital from $14,864,000 in 2008 to over $23 million in each year 2011 through 2014. This is money charged to Lakewood Hospital and paid to CCF, diluting Lakewood Hospital?s balance sheet and operating statement. CCF's 64% increase in administrative services fees, terminating services, and redirecting patients to its wholly-owned facilities is unjusti?able. The fact that CCF has failed to 15 provide a detailed accounting and explanation for these increased expenses, as compared to Lakewood Hospital's only 20% decrease in net patient service revenues $148,236,000 in 2008 to $118,127,000 in 2014), is very disingenuous. From 2008 through 2014, CCF has billed and collected from LHA administrative services fees of $146,270,000 without any itemization or explanation. A proper accounting, adjustment, and disgorgemcnt of those mysterious charges by CCF would demonstrate Lakewood Hospital is ?nancially viable and even pro?table. Plan for Market Domination 35. In November 2012 the LHA Board of Trustees agreed to establish a Select Committee, which was charged to identify and recommend a quali?ed, independent health care consultant for the purpose of evaluating strategic options and identifying the best strategy to consider for planning Lakewood Hospital?s future. Initially, a budget of $200,000 was set aside by LHA to cover the fees and expenses of the consultant. 36. In 2013 the Select Committee formed by LHA and the City engaged the medical consultant Subsidium to assist in planning for the future of Lakewood Hospital. Subsidium received proposals from two hospitals, CCF and MetroHealth (in consultation with Premier Physicians) for the purpose of selecting a future partnership with the City to maintain and ensure a sustainable and viable Lakewood Hospital. 37. LHA's Request for Proposal sent to bidders provided in part: ?The following criteria re?ect the minimum elements that the Hospital considers essential to this Transaction. . Proposal must set forth the Respondent?s operational plan and strategic vision for the HOSpital following the completion of the Transaction, including the Respondent?s overall plan to meet the condition that the Hospital continue to be operated as an acute care hospital . (Emphasis added). 16 38. 39. 40. In 2015 Subsidium released its overview report concerning the future of Lakewood Hospital and outlined its considerations of and MetroHealth?s proposals. Page 65 of that overview indicates that the CCF proposal will build a family health center closing Lakewood Hospital and inpatient services whereas the MetroHealth proposal planned to keep Lakewood Hosnital, including inpatient care. In other words, proposal failed to meet Subsidium?s minimum requirements outlined in the RFP whereas MetroHealth?s proposal agreed to meet those requirements. However, page 52 of the Subsidium overview falsely states that Metro and Premier expressed interest in Lakewood, but all expressed interest in outpatient services only.? That is far from accurate. MetroHealth agreed to maintain inpatient care, acute care, abide by the existing Lease terms and DA conditions currently obligating CCF's operation of Lakewood Hospital to the City and LHA. At a con?dential special meeting of the LHA Board on January 14, 2015, Subsidium discussed and assisted in the re?nement of proposal to the RFP. Not surprisingly, Subsidium then selected proposal, despite the fact that it did n_ot meet the minimum elements to maintain inpatient medical care at an acute care hospital. Subsidium's recommendation put CCF in the position to control City-owned property, close and demolish Lakewood HOSpital?at LHA's expense?and open a family health center, which would not include inpatient services, but rather would refer patients to other CCF wholly-owned hospitals outside of the City, and prohibit any other health care provider from providing medical services on the Lease property?in simple terms, is a ?non-compete.? Page 14 of Subsidium?s overview provides that ?the [Lakewood H]ospital facilities would require major upgrades, costing approximately $100 million. . Is this the best 17 41. 42. use of your money for a healthier Lakewood?? Despite this statement, Subsidium was ultimately paid at least $500,000 rather than the originally budgeted $200,000. In essence, Subsidium was overpaid, using money that could have been invested in Lakewood Hospital, so that the consultant could help CCF write its own bid, which Subsidium later accepted as the best option for the City. The City has maintained that the MetroHealth proposal did not succeed because MetroHealth withdrew its bid. In reality, MetroHealth ?withdrew its bid? because it became clear that the City and LHA were ignoring them and had already cut a deal with CCF. Subsidium?s overview further provides on page 61: ?We don?t currently have a de?nitive legal opinion about whether CCF would remain obligated to fund any operating losses and negative cash flow throughout the remainder of the lease.? However, per Section 2.1.1 of the DA, CCF is obligated at least to fund LHA in order to maintain a cash-to-debt ratio of 1:1 until the year 2026. (EX. 3, DA, p. 7). Subsidium estimates the potential obligations of CCF to the City to cover operating losses until 2026 to be $214 million, which does not include the $3 billion economic impact of maintaining the 1,100 employees of Lakewood Hospital. CCF admits to the negative economic impact on the City in the Letter of Intent by stating it will request the City of Avon to share taxes from its new Avon Hospital with the City. It is important to note that CCF has commenced construction on a new $143 million hospital to open in Avon in 2016, which it will wholly-own and operate. There are 1,000 people per square mile in Avon as compared to 9,000 people per square mile in Lakewood. CCF admits that future loss of Lakewood Hospital patient volumes will occur due to diversion to its Avon Hospital. Subsidium?s report overview con?rms this fact. One potential threat to Lakewood Hospital, as emphasized on page 9 of 18 43. 44. Subsidium?s overview, is that the ?[n]ew Avon hospital will likely cannibalize signi?cant inpatient volumes from [Lakewood Hospital].? Moreover, page 57 of that overview reads: ?[r]evenue loss from Avon is based on estimates of changes in physician referral patterns.? These statements demonstrate that CCF is responsible for any decline in Lakewood Hospital patient volumes and that the motivation for proposed closing of Lakewood Hospital is to refer patients to other hospitals, such as its new Wholly- owned Avon Hospital. These facts demonstrate CCF's self-dealing to support its wholly- owned hospital facilities (including Fairview and Lutheran Hospitals now and Avon Hospital in 2016) to the detriment of CCF's obligations to the City, LHA, Taxpayers, and employees. Due to lack of oversight by LHA and City trustees, and after winning over Subsidium and the City with its proposal in a lopsided contest, CCF had the traction it needed to proceed with its plans of eliminating inpatient services and closing Lakewood Hospital. On January 14, 2015, CCF issued a Letter of Intent to the City proposing this transition. Both the LOI and Subsidium?s overview provide that the Mayor shall publicly support this transition with CCF. The Mayor and City council trustees of LHA have fully supported Subsidium?s recommendations and plans. They have done so despite the City?s best interests, the Mayor and ?duciary duties to the City, the outcry of the citizens, and contractual obligations of the DA and Lease that ensure Lakewood Hospital's ?nancial viability and operation through 2026 at CCF's expense for the public's bene?t. Section 3.11 of the LHA Code of Regulations, as amended and then adopted as an exhibit to the DA, provides tha Trustee having a con?ict of interest or con?ict of 19 45. 46. 47. 48. responsibility on any matter involving and any other business entity or person shall disclose such con?ict and shall refrain from voting on such matter.? Article Five of Articles of Incorporation also provides that substantial part of the activities of shall be the carrying on of propaganda, or otherwise attempting to in?uence legislation . The LOI violates Code of Regulations and Articles of Incorporation prohibition by requiring the Mayor to support the closure of Lakewood Hospital. Under Article Section 3 of Lakewood?s Second Amended Charter, it reads: ?This Section shall not prohibit the Mayor, members of Council and the directors of departments and other of?cials or employees of the City from serving as a member or an of?cial in any other nonpro?t corporation where their service is in the capacity of representing the City.? City Ordinance 63-86 also requires the Mayor and Council members in the LHA Board to serve ?in their official capacity . . . and instructed to represent the city and its interests . . while on the LHA Board. The Mayor, Council members, and the City have failed their constituents by not representing the City and enforcing the DA and Lease rights, but rather by favoring the CCF, LHA, and LHF proposal to close Lakewood Hospital. The Mayor and Council members are also improperly ignoring City Ordinances requiring the operation of Lakewood Hospital for the ?health and welfare of the people of this City and by enhancing the availability, ef?ciency and the economy of [Lakewood] hospital facilities and the services rendered . . . The LOI also pr0poses terms and conditions that waste Lakewood Hospital's assets to the detriment of the City and Taxpayers, but rather provide huge bene?ts only to CCF. For example, the LOI at Section II.E. proposes to sell the Lakewood Hospital land and 20 building known as 850 Columbia Road to CCF for $8.2 million, without any appraisal or competitive bidding. However, the Cuyahoga County Fiscal Of?ce has valued the land and building at $13,726,200. CCF would be improperly obtaining City assets $5.5 million WELL BELOW fair market value. 49. The LOI contains other provisions harmful to the City and Taxpayers, all of which violate CCF's existing promises and obligations under the DA and Lease. For example, the LOI requires that LHA (with LHF funds) ?will bear all costs of terminating and winding down its patient and other operations and all costs of demolition to prepare the land for construction? by CCF and then sell at least 2.5 acres of the land to CCF. However, the City, LHA, and LHF should not be subsidizing CCF's proposed demolition for new construction because it violates City Ordinances and Articles of Incorporation requiring money to be used to hospital operations, n_ot wind down and demolish Lakewood Hospital. Summary 50. The nature of this case can be summed up by the following facts. First, CCF, the sole member of LHA, wants to close Lakewood Hospital in breach of its DA and Lease with the City and LHA. Second, CCF has been terminating or redirecting high margin medical services for years with the intended effect of crippling Lakewood Hospital?s ?nancial viability and moving these services to its wholly-owned hospitals Fairview Hospital, Lutheran Hospital, and Avon Hospital). Third, CCF wants ownership of the City-owned Lakewood Hospital property at below fair market value and to box?out competitors to maintain a regional market monopoly. Fourth, it is clear that CCF values only paying patients ?rst and truly does not believe in its motto that every life deserves world-class care. CCF has instead pursued the course of ?corporatizing? health care, 21 51. 52. behaving as a for-pro?t capital predator masquerading as a non-pro?t health care system. CCF's recent public documents admit to an EBIDA of $965,919,000 and over $467 million in operatingipro?t for 2014.2 Fifth, CCF is breaching its promises in the DA and breaching its duties in the Lease to operate Lakewood Hospital through 2026 as a full service acute care community hospital and ensure the ?nancial viability of inpatient medical care and jobs for Taxpayers and the public through the term of the Lease in 2026. Sixth, CCF is breaching the Lease in not surrendering Lakewood Hospital and all of its assets in good condition as a going concern per Section 14.1 of the Lease. (Ex. 5, Lease, p. 50). The DA and Lease have created an unusual and complex business love triangle among CCF, LHA, and the City with LHA at the center between two competing interests that were supposed to share power and work together for the intended bene?ciaries Taxpayers, employees, and City residents). The DA and Lease created an express and constructive trust with CCF and LHA as trustees for the Taxpayers, employees, and public as intended bene?ciaries. Under these agreements and in their respective of?cial capacities, the City has failed to adequately represent the best interests of the City and the general public by enforcing its rights to maintain Lakewood Hospital as an acute care community hospital in good working order and to prohibit the closure of Lakewood Hospital. Finally, on April 10, 2015, John Vacha wrote an article published in the Plain Dealer titled ?Clinic Forcing Urban Sprawl by Closing Lakewood Hospital, Opening Avon Site.? Vacha wrote, regarding CCF's Opening of the new Avon Hospital in a more af?uent neighborhood while closing Lakewood Hospital in a poorer community: ?Of course, only 3 -and-14.pdf 22 53. 54. 55. 56. 57. those from upper income brackets will be able to afford the move, leaving behind an inner-ring suburb that much closer to poverty.? CCF views the City market as unpro?table not merely because inpatient care is declining, which evidence would suggest is a result of own actions, but also because the level of poverty is increasing in the City which means more patients cannot afford to pay for most health care services offered by Lakewood Hospital, which is supposed to be a non-pro?t hospital. This begs the questiOn: does CCF truly believe that every life deserves world class care? Apparently, NO in the City of Lakewood, but YES in the City of Avon. CAUSES OF ACTION COUNT 1 TAXPAYERS SUIT COUNT 1A STATUTORY CLAIM PURSUANT TO R.C. 733.59 Plaintiffs incorporate all of the above paragraphs as if fully restated herein. The City has engaged in a series of improper activities that constitute abuse of corporate powers regarding the execution or performance of contracts related to Lakewood Hospital and the existing contractual rights the City established through the DA and Lease governing LHA and CCF's requirement to operate Lakewood Hospital's medical facility for the Taxpayers, employees, and public's bene?t through the year 2026. Plaintiffs are residents and taxpayers of the City of Lakewood, Cuyahoga County, Ohio (?City?) at all relevant times. City is a municipal corporation organized and existing as a city under the laws of the State of Ohio, including R.C. 733.56 through 733.61. Pursuant to RC. 733.5 9, Plaintiffs bring the within action as taxpayers of the City in their own name, on behalf of the City, its residents, and employees of Lakewood Hospital. This taxpayer action is brought to enforce a right of action on behalf of and for the benefit of the public regarding the DA and Lease authorized by the City?s various 23 58. 59. 60. 61. 62. 63. Ordinances (Ex. 1) and the Second Amended Charter of Lakewood (Ex. 2). Pursuant to R.C. 733.59, Plaintiffs have deposited with the Cuyahoga Clerk of Court payment of the required court costs for ?ling and an additional $100 as the security for this proceeding. Taxpayers request that this amount be suf?cient and according to law or that the security requirement of RC. 733.59 be waived by the Court. Fisher v. City of Cleveland, 109 Ohio St.3d 33, 2006-Ohio-1827, 845 500, 1111 44-45 and Badgett v. Mullen, 177 Ohio App. 3d 27, 2008-Ohio-2373, 893 870, 59-62. Pursuant to RC. 733.59, Plaintiffs, through undersigned counsel, gave written notice and request as Taxpayers to the City, through its Law Director Kevin Butler, to take certain actions and pursue an injunction to enjoin abuses of corporate power, speci?c performance regarding express rights and public duties stated in the Lease between the City and LHA and the DA between LHA and CCF, which reaf?rrned the City's rights under the Lease and obligated CCF to the Lease terms; and a writ of mandamus to compel the City of?cials to perform their duties and obligations to establish and maintain Lakewood Hospital's operation, as expressly required by City Ordinance No. 907.03 and City Ordinance No. 5196, to prevent irreparable harm. The April 14, 2015, Taxpayers demand letter is attached hereto and incorporated herein as Exhibit 8 to the Complaint. The City, through its Law Director Kevin Butler, responded on May 1, 2015, and refused to pursue a taxpayers suit for any of the relief requested by the Plaintiffs. The City's written refusal to prevent the abuse of corporate power and enforce its express rights is attached hereto and incorporated herein as Exhibit 9 to the Complaint. Under the authority of Article XV of the Second Amended Charter of Lakewood and through adoption of Ordinance No. 907.03 of the Codi?ed Ordinances, the City's Council 24 64. 65. has declared ?it necessary and conducive to the public health and general welfare to establish and it hereby does establish a municipal hospital of the city to be known as the Lakewood Hospital.? (Ex. 2, Second Amended City Charter, Article XV) (Ex. 1, City Ordinance, Chapter 907). As authorized by Ordinance No. 51-96, the City and LHA entered into the Lease provided for in the DA between LHA and CCF pertaining to the operation of Lakewood Hospital for the intended bene?t of the Taxpayers, employees, and the public. (Ex. 4, Ordinance No. 51-96, December 17, 1996). The obligations and duties under the DA and Lease, as authorized by Ordinance No. 51- 96, have been and are currently being evaded and/or violated. This includes, but is not limited to the following: Lakewood Hospital facilities are not being maintained; medical services have been signi?cantly diminished or eliminated; LHA (in conjunction with its sole member CCF) has assented to the referral and diversion of patients to other hospital facilities wholly-owned and Operated by CCF, which has undermined the ?nancial viability of Lakewood Hospital; LHA, CCF, and LHF have entered into a LOI to close Lakewood Hospital for inpatient and acute medical care and prohibit competitive bidding while the LOI is in place and a second de?nitive agreement is being drafted; the LOI and proposed second de?nitive agreement is facially de?cient and legally invalid because it fails to provide inpatient hospital care for an acute medical/surgical care hospital as required by the DA and Lease; the LOI and proposed second de?nitive agreement also violate RFP, through Subsidium, for maintaining and operating Lakewood Hospital with inpatient care, as a minimum requirement and as set forth in the 2014 RFP on behalf of LHA and the City; wasting of City assets through the sale of land and buildings $5.5 million well below fair market value, without any appraisal or competitive 25 66. 67. bidding process; and other nonfeasance, misfeasance, malfeasance, and negligence regarding various other duties and obligations under the Lease and DA, including over $11 million in future rent payments and ensuring a cash-to-debt ratio of 1:1 through the year 2026, when Lakewood Hospital is required to be returned to the City as a going concern. Taxpayers demand relief under RC. 733.56 for a temporary and permanent injunction to enjoin the abuses of corporate powers by the City and prohibit the execution or performance of any resolution or contract in contravention of the existing DA and Lease, which requires maintaining Lakewood Hospital operations for the bene?t of the Taxpayers, employees, and the public through LHA and CCF until the year 2026. Pursuant to RC. 733.57, Taxpayers seek the speci?c performance pursuant to the Lease between the City and LHA dated December 23, 1996, and as authorized by Ordinance No. 51-96 and the DA by and between LHA and CCF dated December 17, 1996, which includes, but is not limited to: maintaining Lakewood Hospital's required services until the conclusion of the Lease terms in the year 2026; providing of indigent health care, which has been over $84.3 million since 2008; CCF's obligation to maintain a cash-to- debt ratio of 1:1 through 2026, which has been estimated to be in the present value sum of approximately $214 million; paying rent from 2017 through 2026, which would total $11,500,000; providing of an itemization and accounting of any and all administrative services expenses from 1996 to the present; disgorgement of any improper or excessive administration expenses or other charges; and Taxpayers reserve the right to enforce additional rights and obligations by the City upon LHA and CCF to operate Lakewood Hospital, according to various agreements and City laws that have been enacted and 26 68. 69. 70. 71. 72. authorized for the intended bene?ciaries the Taxpayers, Lakewood Hospital employees, and for the public's bene?t of health and general welfare. Pursuant to RC. 733.58, Taxpayers seek a writ of mandamus to compel the City to perform their official duties according to the Second Amended Charter of Lakewood and various City Ordinances to ensure the preservation and operation of Lakewood Hospital for the bene?t of the public, employees, and Taxpayers through the minimum thirty (30) year Lease term to 2026 with LHA and CCF and conditions of the DA to maintain and then return Lakewood Hospital to the City and conditions of the DA to maintain and then return Lakewood Hospital to the City. Pursuant to RC. 733.61 and Section 13.5 of the Lease, Taxpayers seek all costs and reasonable attorney fees for having to commence this matter and further request attorney fees according to any and all common law and equitable principles to provide compensation for protecting the public bene?t of Lakewood Hospital through this Complaint. COUNT 1 TAXPAYERS SUIT COUNT 1B MUNICIPAL CLAIM PURSUNANT TO CITY CHARTER Plaintiffs incorporate all of the above paragraphs as if fully restated herein. The City has engaged in a series of improper activities that constitute abuse of corporate powers regarding the execution or performance of contracts related to Lakewood Hospital and the existing contractual rights the City established through the DA and Lease governing LHA and requirement to operate Lakewood HOSpital?s medical facility for the Taxpayers, employees, and public?s benefit through the year 2026. Plaintiffs are residents and taxpayers of the City at all relevant times. City is a municipal corporation organized and existing as a city under the laws of the State of Ohio and the 27 73. 74. 75. 76. Second Amended Charter of Lakewood, including Article VII, Section through Article VII Section of the Second Amended Charter of Lakewood provides: ?In case the Director of Law, upon request of any taxpayer of the City, fails to make any application provided for in [Sections through such taxpayer may institute suit or proceedings for such purpose in his own name 0 behalf of the City. No such suit or proceeding shall be entertained by any court until the request of the Director of Law shall first have been made in writing, nor until the taxpayer shall have given security for the costs of the proceeding.? Pursuant to the Second Amended Charter of Lakewood Article VII Section Plaintiffs bring the within action as taxpayers of the City in their own name, on behalf of the City, its residents, and Lakewood Hospital employees. This Taxpayer action is brought to enforce a right of action on behalf of and for the benefit of the public regarding the DA and Lease authorized by the Second Amended Charter of Lakewood and various City Ordinances. Pursuant to the Second Amended Charter of Lakewood, Article VII, Section Plaintiffs have deposited with the Cuyahoga Clerk of Court payment of the required court costs for filing and an additional $100 as security for this proceeding. Taxpayers request that this amount be sufficient and according to law or that the security requirement of Section be waived by the Court. Pursuant to the Second Amended Charter of Lakewood, Plaintiffs, through undersigned counsel, gave written notice and request as Taxpayers to the City, through its Law Director Kevin Butler, to take certain actions and pursue an injunction to enjoin abuses of corporate power, specific performance regarding express rights and public duties stated in the Lease between the City and LHA and the DA between LHA and CCF, which 28 77. 78. 79. 80. 81. 82. reaffirmed the City?s rights under the Lease and obligated CCF to the Lease terms; and a writ of mandamus to compel the City officials to perform their duties and obligations to establish and maintain Lakewood Hospital?s operation, as expressly required by City Ordinance No. 907.03 and City Ordinance No. 51-96, to prevent irreparable harm. The April 14, 2015, Taxpayers demand letter is attached hereto and incorporated herein as Exhibit 8 to the Complaint. The City, through its Law Director Kevin Butler, responded on May 1, 2015, and refused to pursue a taxpayers suit for any of the relief requested by the Plaintiffs. The City?s written refusal to prevent the abuse of corporate power and enforce its express rights is attached hereto and incorporated herein as Exhibit 9 to the Complaint. Under the authority of Article XV of the Second Amended Charter of Lakewood and through adoption of Ordinance No. 907.03 of the Codified Ordinances, the City?s Council has declared ?it necessary and conducive to the public health and general welfare to establish and it hereby does establish a municipal hospital of the city to be known as the Lakewood Hospital.? (Ex. 2, Second Amended City Charter, Article XV) (Ex. 1, City Ordinance, Chapter 907). As authorized by Ordinance No. 51-96, the City and LHA entered into the Lease provided for in the DA between LHA and CCF pertaining to the operation of Lakewood Hospital for the intended benefit of the Taxpayers, employees, and the public through the year 2026. (Ex. 4, Ordinance No. 51?96, December 19, 1996). The obligations and duties under the DA and Lease, as authorized by Ordinance No. 51- 96, have been and are currently being evaded and/or violated. This includes, but is not limited to the following: Lakewood Hospital facilities are not being maintained; medical services have been significantly diminished or eliminated; LHA (in conjunction with its 29 83. sole member CCF) has assented to the referral and diversion of patients to other hospital facilities wholly-owned and operated by CCF, which has undermined the financial viability of Lakewood Hospital; LHA, CCF, and LHF have entered into a LOI to close Lakewood Hospital for inpatient care and acute medical care and prohibit competitive bidding while the LOI is in place and a second definitive agreement is being drafted; the LOI and proposed second definitive agreement is facially deficient and legally invalid because it fails to provide inpatient hospital care for an acute medical/surgical care hospital as required by the DA and Lease; the LOI and proposed second definitive agreement also violate the LHA RFP, through Subsidium, for maintaining and operating Lakewood Hospital with inpatient care, as a minimum requirement and as set forth in the 2014 RFP on behalf of LHA and the City; wasting of City assets through the sale of land and buildings $5.5 million well below fair market value, mm; any appraisal or competitive bidding process; and other nonfeasance, misfeasance, malfeasance, and negligence regarding various other duties and obligations under the DA and Lease, including over $11 million in future rent payments and ensuring a cash-to-debt ratio of 1:1 through the year 2026, when Lakewood Hospital is required to be returned to the City as a going concern. Taxpayers demand relief under the Second Amended Charter of Lakewood Article VII Section for a temporary and permanent injunction to enjoin the abuses of corporate powers by the City and prohibit the execution or performance of any resolution or contract in contravention of the existing DA and Lease, which requires maintaining Lakewood Hospital operations for the benefit of the Taxpayers through LHA and CCF through the year 2026. Article VII Section of the Second Amended Charter of Lakewood provides: ?The Director of Law shall apply, in the name of the City to a court 30 84. 85. of competent jurisdiction for an order of injunction to restrain the misapplication of funds of the City, or the abuse of its corporate powers, or the execution or performance of any contract made in behalf of the City in contravention of law, or which was procured by fraud or corruption.? Pursuant to the Second Amended Charter of Lakewood Article VII Section Taxpayers seek the specific performance pursuant to the Lease between the City and LHA dated December 23, 1996, and as authorized by Ordinance No. 51-96 and the DA by and between LHA and CCF dated December 17, 1996, which includes, but is not limited to: maintaining Lakewood Hospital services until the conclusion of the Lease terms in the year 2026; providing of indigent health care, which has been over $84.3 million since 2008; obligation to maintain a cash-to-debt ratio of 1:1 through 2026, which has been estimated to be in the present value sum of approximately $214 million; paying rent from 2017 through 2026, which would total $11,500,000; providing of an itemization and accounting of any and all administrative services expenses from 1996 to the present; and Taxpayers reserve the right to enforce additional rights and obligations by the City upon LHA and CCF to operate Lakewood Hospital, according to various agreements and City laws that have been enacted and authorized for the intended beneficiaries the Taxpayers and for the public?s benefit. The Second Amended Charter of Lakewood Article VII Section provides: ?When an obligation or contract made on behalf of the City granting a right or easement, or creating a public duty, is being evaded or violated, the Director of Law shall likewise apply for the forfeiture or the specific performance thereof as the nature of the case requires.? Pursuant to the Second Amended Charter of Lakewood Article VII Section Taxpayers seek a writ of mandamus to compel the City to perform their official duties 31 86. 87. 88. 89. 90. according to the Second Amended Charter of Lakewood and various City Ordinances to ensure the preservation and operation of Lakewood Hospital for the benefit of the public, employees, and Taxpayers through the minimum thirty (30) year Lease term to 2026 with LHA and CCF. The Second Amended Charter of Lakewood Article VII Section provides: ?In case any officer, board or commission fails to perform any duty required by law, the Director of Law shall apply to a court of competent jurisdiction for a writ of mandamus to compel the performance of such duty.? Pursuant to Section 13.5 of the Lease, Taxpayers seek all costs and reasonable attorney fees for having to commence this matter and further request attorney fees according to any and all common law and equitable principles to provide compensation for protecting the public benefit of Lakewood Hospital through this Complaint. COUNT 1 TAXPAYERS SUIT COUNT 1C COMMON LAW CLAIM Plaintiffs incorporate all of the above paragraphs as if fully restated herein. The City has engaged in a Series of improper activities that constitute abuse of corporate powers regarding the execution or performance of contracts related to Lakewood Hospital and the existing contractual rights the City established through the DA and Lease governing LHA and requirement to operate Lakewood Hospital?s medical facility for the Taxpayers and the public?s benefit until the year 2026. Plaintiffs are residents and taxpayers of the City at all relevant times. City is a municipal corporation organized and existing as a city under the laws of the State of Ohio. Pursuant to the common law of the State of Ohio, Plaintiffs bring the within action as taxpayers of the City in their own name, on behalf of the City and its residents. Bonnell v. 32 91. 92. 93. 94. 95. 96. East Liverpool City School Dist. Bd. of Edn., 2006 WL 1851717 at 11 32 and Citizens for a Better Portsmouth v. Sydnor (1991), 61 Ohio St.3d 49, 572 649. This taxpayer action is brought to enforce a right of action on behalf of and for the benefit of the public regarding the DA and Lease authorized by the City Charter and various City Ordinances. Pursuant to the common law of the State of Ohio, Plaintiffs, through undersigned counsel, gave written notice and request as Taxpayers to the City, through its Law Director Kevin Butler, to take certain actions and pursue an injunction to enjoin abuses of corporate power, specific performance regarding express rights and public duties stated in the Lease between the City and LHA and the DA between LHA and CCF, which reaffirmed the City?s rights under the Lease and obligated CCF to the Lease terms; and a writ of mandamus to compel the City officials to perform their duties and obligations to establish and maintain Lakewood Hospital?s operation, as expressly required by City Ordinance No. 907.03 and City Ordinance No. 51-96, to prevent irreparable harm. The April 14, 2015, Taxpayers demand letter is attached hereto and incorporated herein as Exhibit 8 to the Complaint. The City, through its Law Director Kevin Butler, responded on May 1, 2015, and refused to pursue a taxpayers suit for any of the relief requested by the Plaintiffs. The City?s written refusal to prevent the abuse of corporate power and enforce its express rights is attached hereto and incorporated herein as Exhibit 9 to the Complaint. Under the authority of Article XV of the Second Amended Charter of Lakewood and through adoption of Ordinance No. 907.03 of the Codified Ordinances, the City?s Council has declared ?it necessary and conducive to the public health and general welfare to establish and it hereby does establish a municipal hospital of the city to be known as the 33 97. 98. Lakewood Hospital.? (Ex. 2, Second Amended City Charter, Article XV) (Ex. 1, City Ordinance, Chapter 907). As authorized by Ordinance No. 51-96, the City and LHA entered into the Lease provided for in the DA between LHA and CCF pertaining to the operation of- Lakewood Hospital for the intended benefit of the Taxpayers, employees, and the public. (Ex. 4, Ordinance No. 51-96, December 19, 1996). The obligations and duties under the DA and Lease, as authorized by Ordinance No. 51- 96, have been and are currently being evaded and/or violated. This includes, but is not limited to the following: Lakewood Hospital facilities are not being maintained; medical services have been significantly diminished or eliminated; LHA (in conjunction with its sole member CCF) has assented to the referral and diversion of patients to other hospital facilities wholly-owned and operated by CCF, which has undermined the financial viability of Lakewood Hospital; LHA, CCF, and LHF have entered into a LOI to close Lakewood Hospital for inpatient and acute medical care and prohibit competitive bidding while the LOI is in place and a second definitive agreement is being drafted; the LOI and proposed second definitive agreement is facially deficient and legally invalid because it fails to provide inpatient hospital care for an acute medical/surgical care hospital as required by the DA and Lease; the LOI and proposed second definitive agreement also violate the LHA RFP through Subsidium, for maintaining and operating Lakewood Hospital with inpatient care, as a minimum requirement and as set forth in the 2014 RFP on behalf of LHA and the City; wasting of City assets through the sale of land and buildings for $5.5 million well below fair market value, without any appraisal or competitive bidding process; and other nonfeasance, misfeasance, malfeasance, and negligence regarding various other duties and obligations under the DA and Lease, 34 99. 100. 101. including over $11 million of future rent payments and ensuring a cash-to-debt ratio of 1:1 through the year 2026, when Lakewood Hospital is required to be returned to the City as a going concern. Taxpayers demand relief under the common law of the State of Ohio for a temporary and permanent injunction to enjoin the abuses of corporate powers by the City and prohibit the execution or performance of any resolution or contract in contravention of the existing DA and Lease, which requires maintaining Lakewood Hospital operations for the benefit of the Taxpayers through LHA and CCF through the year 2026. Pursuant to the common law of the State of Ohio, Taxpayers seek the specific performance pursuant to the Lease between the City and LHA dated December 23, 1996, and as authorized by Ordinance No. 51?96 and the DA by and between LHA and CCF dated December 17, 1996, which includes, but is not limited to: maintaining Lakewood Hospital services until the conclusion of the Lease terms in the year 2026; providing indigent health care, which has been over $84.3 million since 2008; obligations to maintain a cash-to-debt ratio of 1:1 through 2026, which has been estimated to be in the sum of approximately $214 million; paying rent from 2017 through 2026, which would total $11,500,000; providing of an itemization and accounting of any and all administrative services expenses from 1996 to the present; and Taxpayers reserve the right to enforce additional rights and obligations by the City upon LHA and CCF to operate Lakewood Hospital, according to various agreements and City laws that have been enacted and authorized for the intended beneficiaries the Taxpayers, employees, and for the public?s benefit. Pursuant to the common law of the State of Ohio, Taxpayers seek a writ of mandamus to compel the City to perform their official duties according to the Second Amended Charter 35 102. 103. 104. 105. 106. of Lakewood and various City Ordinances to ensure the preservation and operation of Lakewood Hospital for the benefit of the public and Taxpayers through the minimum thirty (30) year Lease term to 2026 with LHA and CCF. Pursuant to the common law of the State of Ohio and Section 13.5 of the Lease, Taxpayers seek all costs for having to commence this matter according to any and all common law and equitable principles to provide compensation for protecting the public benefit of Lakewood Hospital through this Complaint. COUNT 2 BREACH OF CONTRACT THIRD PARTY 1 Plaintiffs incorporate all of the above paragraphs as if fully restated herein. Promises have been made by Defendants LHA and CCF in the Lease, the purpose of the Lease is) to continue health care services to residents of the City and develop new programs. (Ex. 5, Lease, p. 1). Moreover, similar promises have been made by Defendants LHA and CCF in the DA the purpose of the DA is) to find ways to best serve the health care needs of the residents of the communities served by CCF and the City. (Ex. 3, DA, p. 1). Such promises and purposes have not been fulfilled by LHA and CCF to the City. The Taxpayers were not parties to the DA or the Lease, but were identified in said agreements as the parties to whom the benefit of Lakewood Hospital services were to be rendered, including Lakewood Hospital's employees. The Taxpayers are intended third?party beneficiaries to the DA and the Lease, and these Taxpayers have also used the services of Lakewood Hospital and one is an employee of Lakewood Hospital. 36 107. 108. 109. 110. 111. 112. 113. LHA and CCF have contractual duties and obligations to the City to provide inpatient and outpatient services to City residents and the community in general, cut administrative costs and fund any deficits, provide indigent care, perform maintenance on the building and equipment; and sustain current Lakewood Hospital services offered for the promotion of health and wellness from within the City through the year 2026. These duties and obligations have not been fulfilled. The Taxpayers made demand upon the City trustees of the LHA Board Mayor and two council persons sitting as ex-officio) to return Lakewood Hospital to its original capacity, with all required medical services and equipment, in accordance with obligations under DA and Lease, and enforce the Lease duties through its term of 2026. LHA and CCF refused to return Lakewood Hospital to its agreed upon medical services, citing national market trends as the reason why Lakewood Hospital?s business has declined and being in denial of the fact that CCF purposely has been draining Lakewood Hospital of its assets and divertng them to other CCF wholly?owned hospitals outside of the City for the purpose of closing and razing Lakewood Hospital and building the new Avon Hospital. These breaches of contract have caused damage and injury to the intended third-party beneficiaries, Taxpayers, and employees, which are continuing and irreparable. The Taxpayers have made demand upon the City that LHA and CCF fulfill their contractual obligations or else be in breach of the DA and Lease agreements. The Taxpayers stand ready, willing, and able to accept return of title and possession of Lakewood Hospital assets and pursue monetary damages to operate Lakewood Hospital. The Court should order LHA and CCF to specifically perform the DA and Lease by rejuvenating the terminated, diminished, and diverted medical services to Lakewood 37 114. 115. 116. 117. 118. 119. Hospital and requiring continual operation through the Lease term of 2026, including deferred maintenance. Money damages should also be awarded for the damage and depreciation to Lakewood Hospital assets already caused by LHA and CCF from 1996 to the present, including the excessive administrative services expenses, deferred maintenance due, reduced patient revenues, etc. The Taxpayers are also entitled to monetary damages equal to the amount of tax dollars lost due to reduced employment by the City?s largest employer economic impact), lost rental income, lost indigent care services, fair market value of Lakewood Hospital?s building, medical equipment, and the 850 Columbia Road land and building, which has been estimated at over $3 billion, and negative economic impact, if specific performance is not ordered. Additionally, the Lease provides for the payment of attorney fees and costs for breaches. A trust by operation of law has arisen against LHA and CCF because they, by commission of a wrong and against equity and good conscience, have caused Lakewood Hospital to lose money due to the cutting of required services under the Lease, not using raised funds to treat indigent patients, and diverting patients and thus money to other CCF wholly?owned hospitals, the benefit of which they ought not, in equity and good conscience, hold and enjoy otherwise LHA and CCF will be unjustly enriched. The Lakewood Hospital assets are therefore held by LHA and CCF in constructive trust for the Taxpayers pending their return by order of specific performance. The Court should order title to and possession of Lakewood Hospital assets be transferred to the City and the Taxpayers pursuant to the mandates of the DA and Lease and declare a 38 120. 121. 122. constructive trust over Lakewood Hospital assets for all times the assets have been unlawfully diverted or withheld by CCF. COUNT 3 BREACH OF FIDUCIARY DUTY Plaintiffs incorporate all of the above paragraphs as if fully restated herein. A fiduciary relationship by and between LHA and CCF with the Taxpayers as beneficiaries has arisen and remains with respect to Lakewood Hospital assets as a result of the above described agreements, trusts, and special relationships where a special trust and confidence has been reposed and is understood to exist by both LHA and CCF to the Taxpayers and Lakewood Hospital employees. LHA and CCF owe heightened duties of care, loyalty, full disclosure of information, impartiality, con?ict and self-dealing avoidance, and other heightened responsibilities to the Taxpayers, employees, and the City community. LHA and CCF have intentionally, or at least recklessly, failed to observe those duties by certain of their actions, including, but not limited to: a. cutting inpatient and acute medical/surgical care and other required health care services under the Lease and b. manipulating financial statements, costs, expenses, and revenues for Lakewood Hospital to provide a pretext for the closure of inpatient and acute medical care services at Lakewood Hospital and closure of its use as an inpatient and acute surgical medical care hospital; c. manipulating facility use away from Lakewood Hospital to other CCF wholly-owned hospitals outside of the City including, but not limited to, Fairview Hospital, Lutheran Hospital, and Avon Hospital; (I. failng to provide the City and Taxpayers requested information related to Lakewood Hospital assets and their use; e. failing to disclose con?icts of interest and failing to abstain from voting on matters where a con?ict of interest existed; 39 123. 124. 125. 126. f. removing certain Lakewood Hospital assets from the Lakewood Hospital grounds in favor of other CCF wholly-owned hospitals; and g. utilizing the above mentioned methods to enrich LHA and CCF at the expense of the City and Taxpayers. Additionally, a fiduciary relationship by and between LHF and the Taxpayers has arisen and remains with respect to Lakewood Hospital assets as a result of the LHF Articles of Incorporation, trusts, and special relationships where a special trust and confidence has been reposed and is understood to exist by both LHF and the Taxpayers. LHF owes heightened duties of care, loyalty, full disclosure of information, impartiality, con?ict and self-dealing avoidance, and other heightened responsibilities to the Taxpayers and the City community. LHF has intentionally, or at least recklessly, failed to observe those duties by certain of their actions including, but not limited to: a. LHF putting Lakewood Hospital assets further at risk by Ken Haber?s signing of LOI to wind down and raze the facility; b. failing to disclose con?icts of interest and failing to abstain from voting on matters where a con?ict of interest existed, i.e. Ken Haber, the president of the LHF Board of Trustees also sits on Board of Trustees and is the LHA Board?s chair of the finance and audit committee; Mr. Haber signed and c. agreeing in the LOI to use LHF assets in direct contravention of the purpose and intended use of the charitable funds to maintain and operate Lakewood Hospital. The breach of these fiduciary duties has proximately caused injury to Lakewood Hospital assets, the City, Taxpayers, residents, employees, and the general public that LHA and CCF represent in the community. The Defendants? breach of their fiduciary duties have been conducted with malice and/or reckless disregard of the rights and interests of the trust beneficiary, i.e. the Taxpayers, 40 127. 128. 129. 130. 131. employees, the City, and the people it represents in the community, all to the damage of the City, the residents, Taxpayers, and employees it represents. COUNT 4 BREACH OF EXPRESS TRUST Plaintiffs incorporate all of the above paragraphs as if fully restated herein. The City had and has capacity to create a trust. While it owned Lakewood HoSpital assets and operated Lakewood Hospital, the City caused the assets to be operated for the charitable purposes of maintaining a hospital for the promotion of health and welfare of the City and surrounding communities and for other charitable purposes, the achievement of which were beneficial to the City and general public. The Lease and LHA Articles of Incorporation, along with the facts, circumstances, and relationships of parties surrounding the transfer under lease of substantial Lakewood HOSpital assets by the City to LHA manifested and established a clear intention by the City to create and did create an express charitable trust under RC. 109.23 with LHA (including CCF), acting as trustee(s) and in whom title to Lakewood Hospital assets as the trust res was vested for the benefit of the City, Taxpayers, employees, and residents of this community area. The City acted as the settlor of the trust. Its overriding intention was for the charitable purposes for which Lakewood HOSpital itself was created; namely, the provision and maintenance of community hospital services for the Taxpayer, employees, and residents within the City. The City intended the community and Taxpayers to benefit from and affiliation with Lakewood Hospital, their use of Lakewood Hospital in the continued operation of it as an inpatient and acute medical care hospital, using the 41' 132. 133. 134. 135. 136. 137. economic efficiencies, brand?name, capital funds, and experience CCF promised to bring to its relationship with the City and LHA. In reliance on the promise of these benefits to the City and the manifestation of a trust and attendant fiduciary duties, the City leased the substantial Lakewood Hospital assets in trust to LHA and CCF. LHA and CCF have duties as trustees and lessees of Lakewood Hospital assets to operate and use them as a hOSpital for the benefit of the City for the City community and Lakewood Hospital employees. The facts and circumstances described above create a fiduciary relationship with respect to Lakewood Hospital assets arising under the law of Ohio as a result of a manifestation of intention to create a charitable trust, and subjects LHA and CCF to fiduciary duties to deal with Lakewood Hospital assets within Ohio for the charitable purposes of operating a community inpatient and acute medical care hospital located in the City and otherwise following the requirements of the trust so created, including the 1,100 employees. The express trust so created is a charitable trust under Ohio law and is so afforded the benefit of the liberal principles of equity jurisprudence under Ohio law. While LHA and CCF are the trustees of the trust, they are not the intended beneficiaries of the express trust. As shown above, the City reserved to the Taxpayers, employees, and residents, by and through itself, the beneficial interest of Lakewood Hospital assets and did not transfer to LHA and CCF full or sole beneficial ownership rights. The trust has not merged because there are diverse identities of trustees and beneficiaries. Failing the purposes for which Lakewood Hospital assets were leased in trust to LHA and CCF and upon the conditions as expressly stated, LHA and CCF were and are required to return possession of Lakewood Hospital assets to the City pursuant to the terms of the 42 138. 139. 140. 141. 142. DA, Lease, Articles of Incorporation, Ohio trust law, and other applicable Ohio common and statutory law. LHA and CCF are in breach of trust for, among other things, failing and refusing to return possession of Lakewood Hospital assets to the City as they are required to do under the DA, Lease, Articles of Incorporation, Ohio trust law, and other applicable Ohio law because the condition precedents as above stated have occurred. LHA and CCF are in further breach of the express trust by their actions meant to prevent the City from making productive use, as agreed upon, of Lakewood Hospital assets on behalf of the City community, including, but not limited to, their failure to disclose pertinent information related to Lakewood Hospital assets necessary for the City to market Lakewood Hospital assets to another health care organization capable of operating Lakewood Hospital MetroHealth). At the same time CCF has been fortifying its competitive position in the City, all as previously described, to the detriment of the beneficiary of the express trust, the City, Taxpayers, employees, and residents. LHA and CCF are further in breach of the express trust for violations of their fiduciary duties owed to the City community, Taxpayers, and employees by and through the City as stated in COUNT 3 of this Complaint. LHA and destruction of Lakewood Hospital?s assets and provided services and intended closure and razing of Lakewood Hospital, their withholding of Lakewood Hospital assets related thereto, while at the same time fortifying their competitive position in the City, has caused depreciation, waste, and damage to Lakewood Hospital assets and has otherwise damaged the City, its Taxpayers, employees, and residents. Said actions of LHA and CCF were and are in con?ict with the interests of the City, were and are not in good faith, were and are meant for the sole benefit of CCF to the exclusion 43 143. 144. 145. 146. 147. and detriment of the City, Taxpayers, employees, and residents and said breach was and is intentional and conducted with malice and/or reckless disregard for the rights and interests of the City, Taxpayers, employees, and the people in the City community. The Taxpayers are entitled to all remedies available under RC. 5810 and Ohio Common Law in order to be made whole. COUNT 5 BREACH OF CONSTRUCTIVE TRUST Plaintiffs incorporate all of the above paragraphs as if fully restated herein. The constructive trust sought as one of the remedies for breach of contract above is a charitable trust under Ohio law and is so afforded the benefit of the liberal principles of equity jurisprudence under Ohio law. LHA and CCF are in breach of trust, as trustees of the constructive trust, for failing and refusing to return possession of Lakewood Hospital assets to the City as they are required to do under the DA, Lease, Articles of Incorporation, Ohio trust law, and other applicable Ohio common and statutory law. LHA and CCF are in further breach of the constructive trust by their actions meant to prevent the City from making full productive use of Lakewood Hospital assets as originally agreed on behalf of the City community, including, but not limited to, their failure to disclose pertinent information related to Lakewood Hospital assets necessary for the City to market Lakewood Hospital assets to another health care organization capable of operating a hospital MetroHealth). At the same time CCF has been fortifying its competitive position in the City, all as previously described, and to the detriment of the beneficiary of the constructive trust, the City, Taxpayers, employees, and residents. 44 148. 149. 150. 151. 152. 153. 154. LHA and CCF are further in breach of the constructive trust for violations of their fiduciary duties owed to the City community by and through the City as stated in COUNT 3 of this Complaint. LHA and destruction of Lakewood Hospital?s assets and provided services and intended closure and razing of Lakewood Hospital, their withholding of Lakewood Hospital assets related thereto, while at the same time fortifyng their competitive position in the City, has caused depreciation, waste, and damage to Lakewood Hospital assets and has otherwise damaged the City, Taxpayers, employees, and residents. Said actions of LHA and CCF were and are not in good faith, were and are meant for the sole benefit of CCF to the exclusion and detriment of the City, Taxpayers, employees, and its residents and said breach of the constructive trust intentional and conducted with malice and/or reckless disregard of the rights of the City, Taxpayers, employees, and the people in the City community. The Taxpayers are entitled to all remedies available under RC. 5810 and Ohio Common Law in order to be made whole. COUNT 6 DECARATORY JUDGMENT Plaintiffs incorporate all of the above paragraphs as if fully restated herein. To the extent required for full and complete relief, the Taxpayers hereby request the Court to declare certain legal rights and relations that are contested between the parties to this litigation. The Taxpayers contend that there is an express and/0r constructive trust that has been created by the facts, circumstances, relationships, and/or the DA and Lease all as alleged above in the Complaint. 45 155. 156. 157. 158. 159. 160. 161. The City, CCF, LHA, and LHF have contended in public statements that it is in the City?s best interests to institute a plan, which is and will continue to endanger public assets and the express and/or constructive trust(s). The above referenced disputes are actual controversies, the resolution of which will confer certain rights or status upon the litigants in this case. Speedy relief is required because LHA and CCF continue to use most of Lakewood Hospital assets in a manner that is not for the benefit of the City and are not using Lakewood Hospital assets in the agreed?upon operation of a hospital for the City and surrounding areas. The Taxpayers and residents of the City, and in particular, indigent residents or residents who cannot afford transportation, do not have available to them convenient hospital services. Additionally, as time passes by, Lakewood Hospital assets continue to depreciate and waste making it ever more difficult for the City to use the same on behalf of the community as a full service hospital and retain employees to avoid irreparable economic harm. The controversy is justiciable and ripe for a determination. The controversy directly involves certain matters for which declaratory judgments have been statutorily authorized to decide including, but not limited to, the direction of trustees to do or abstain from doing any particular act in their fiduciary capacity and to determine any question arising in the administration of a trust including the determination of the construction of such trusts by express contract terms. The Taxpayers hereby request the Court to declare the existence of the express trust and/or constructive trust and declare the rights and obligations of the parties to the trusts as alleged above, including, but not limited to, the right of the City and Taxpayers to 46 162. 163. 164. 165. receive the information and records related to Lakewood Hospital assets necessary to enable it to market the same to another healthcare organization interested in operating Lakewood Hospital assets under lease in a full service hospital upon Lakewood Hospital grounds; require LHA and CCF to abide by the terms and conditions of the DA and Lease contract terms to operate Lakewood Hospital with inpatient and acute surgical/medical health care through 2026; and return Lakewood Hospital as a going concern with all Required Services a_n_d_ with a cash?to?debt ratio of 1:1 now and at the Lease termination in 2026, after providing all required maintenance, operation, and covering any losses. COUNT 7 INJUNCTION (TEMPORARY AND PERMANENT) Plaintiffs incorporate all of the above paragraphs as if fully restated herein. Taxpayers are entitled to an injunction to prohibit the City in its official capacity and as ex-officio trustees of the LHA from entering into agreements with LHA and CCF to terminate or redirect required services at Lakewood Hospital, to restore such services, and to refrain from any further discussions with CCF in planning to close and raze Lakewood Hospital. Further, Taxpayers are entitled to an injunction to prohibit LHA and CCF from terminating or redirecting required services at Lakewood HOSpital, to restore such services, to refrain from diverting Lakewood Hospital patients and potential patients to other CCF wholly-owned hospitals outside of the City, and to refrain from any further plans to close and raze Lakewood Hospital in favor of building a new, lesser outpatient family health center with fewer employees. In requesting a preliminary injunction and in conjunction with the facts herein, Taxpayers have shown that there is a substantial likelihood that they will prevail on the merits, that they will suffer irreparable injury if the injunction is not granted, that no third parties will 47 166. 167. 168. 169. 170. be unjustifiably harmed if the injunction is granted (contrarily, any third parties would benefit from the injunction), and that the public interest, i.e. the interest of City Taxpayers and residents who are or have been patients at Lakewood Hospital and City employees of Lakewood Hospital, will be served by the injunction. Proctor Gamble Co. v. Stoneham (2000), 140 Ohio App.3d 260, 267, 747 268. COUNT 8 WRIT OF MANDAMUS Plaintiffs incorporate all of the above paragraphs as if fully restated herein. Pursuant to RC. 2731.01, Taxpayers seek a writ of mandamus compelling the City to take action and enforce its rights, duties, and obligations in the best interests of the City, its Taxpayers, residents, employees, and the public by abiding by the Second Amended Charter of Lakewood, City Ordinances, the Ohio Revised Code, Ohio common law, and pursuing its rights under the DA and Lease. Further, pursuant to RC. 2731.01, Taxpayers seek a writ of mandamus enjoining LHA, LHF, and CCF from anticipatorily breaching the DA, Lease, and and respective Articles of Incorporation and ensuring the ongoing operation and maintenance of Lakewood Hospital through the term of the Lease ending in 2026, in full compliance with the DA, Lease, and all applicable laws for the benefit of the City, Taxpayers, residents, employees, and the public. COUNT 9 AN ACCOUNTING Plaintiffs incorporate all of the above paragraphs as if fully restated herein. Taxpayers are entitled to a full accounting and disclosure from CCF and LHA of all administrative expenses and other damages from 1996 to the present by CCF pursuant to the DA, Lease, and Ohio common law. 48 171. 172. 173. 174. 175. 176. 177. Taxpayers seek a Court order requiring CCF and LHA to produce said accounting according to law and for the public's bene?t. Taxpayers also seek disgorgement of any excessive or unnecessary expenses charged by CCF to Lakewood Hospital. COUNT 10 UNJU ST ENRICHMENT Plaintiffs incorporate all of the above paragraphs as if fully restated herein. The City (1) conferred a benefit oniLHA and (2) LHA and CCF have knowledge of such benefit; and (3) LHA and CCF have retained the benefit of Lakewood Hospital assets and will continue to do so until there is nothing left under circumstances where it would be unjust to do so without payment for or return of all or substantially all Lakewood Hospital assets. Taxpayers seek equitable and monetary relief requiring CCF and LHA to return all Lakewood Hospital assets to the City and to pay all damages for the negligent and/or intended enrichment through the termination and redirection of patients to CCF wholly- owned hospitals from 1996 to the present. COUNT 11 PROMISSORY ESTOPPEL Plaintiffs incorporate all of the above paragraphs as if fully restated herein. As set forth and specified above, LHA and CCF repeatedly made firm and specific promises to the City and Taxpayers about providing high quality, sustainable inpatient and acute health care services at Lakewood Hospital for the benefit and general health and welfare of the Taxpayers, employees, and the City community through the duration of the Lease. The City relied on those promises by leasing Lakewood Hospital and all related property to LHA and CCF. The City?s reliance upon and promises 49 178. 179. 180. 181. 182. was reasonable, substantial, and to its detriment. LHA and CCF were fully aware of the City?s reliance upon their promises. In 2010, when CCF began to develop its Vision for Tomorrow plan, it represented to the City that it was transitioning into other health care services in order to adapt to allegedly changing market trends, but that the sustainability and viability of Lakewood Hospital?s inpatient and acute medical care services was of utmost importance to LHA and CCF and would remain intact. (Ex. 6, April 6, 2010, CCF letter to City). CCF repeated these promises in a letter to then Council President Kevin Butler. (Ex. 7, May 24, 2010, Letter). Just five years later, LHA and CCF proved that these promises are empty by diverting Lakewood Hospital patients to other CCF wholly-owned facilities outside of the City, cutting and diminishing required inpatient and acute medical care services, and planning for the closure and razing of Lakewood Hospital to pave the way for a CCF wholly-- owned outpatient family health center, benefiting CCF and no one else. LHA and CCF have breached their promises as a result of which the City, its community, and Taxpayers have suffered compensatory damages far in excess of $400 million for which LHA and CCF are liable. COUNT 1; FRAUD Plaintiffs incorporate all of the above paragraphs as if fully restated herein. CCF and LHA made representations and, where there was a duty to disclose, concealed facts, which were material to the transaction at hand. CCF and LHA made representations and concealed facts falsely, with knowledge of their falsity, or with such utter disregard and recklessness as to whether they were true or false that knowledge may be inferred, and with the intent of misleading the City into relying upon them. The City made justi?able reliance upon those representations and concealments, resulting in injury to the 50 183. 184. 185. City proximately caused by the reliance. See Williams v. Aema Fin. Co. (1998), 83 Ohio St.3d 464, 475, 700 859. At a May 24, 2010, LHA Board meeting, Senior General Counsel of regional hospitals, Michael Meehan, stated that the Hospital Administration did not believe that it was necessary to amend the Lease or to provide additional documentation granting the City new enforceable rights because the DA and Lease already provided protections for the City from changing the nature of Lakewood Hospital from that envisioned by the documents. Further, CCF represented to the LHA Board and the City as part of its Vision for Tomorrow plan that in return for eliminating certain of the Required Services under the Lease, such as inpatient pediatrics and trauma, CCF would replace those services with its four (4) centers of clinical excellence, including: (1) neurosciences, (2) orthopedics, (3) diabetes, and (4) geriatrics. In reality, CCF has not added all four of these centers of excellence, or added them then later terminated these services after the City already relied upon promises for the future sustainability and Viability of Lakewood Hospital. Now, CCF wants to forego all Required Services and its four centers of clinical excellence in favor of closing and razing Lakewood Hospital altogether. In justifying its termination of required services, supposedly adding its four centers of clinical excellence, and ultimately closing Lakewood Hospital, CCF has pinned blame on national health care market trends and the fundamental change in the way health care is delivered to patients. However, CCF concealed the fact that it has been diverting patients and services to other CCF wholly-owned hospitals, such as Lutheran Hospital, Fairview Hospital, and Avon Hospital, which are all outside of the City. Moreover, CCF claims Lakewood Hospital is unpro?table the way it is currently (hence how CCF is convincing 51 186. 187. 188. 189. others it is the best option to close Lakewood Hospital), yet if CCF had not increased its mysterious administrative services expenses drastically over the past six years while paying exorbitant amounts to Subsidium, Lakewood Hospital would actually show a net pro?t. As as direct and proximate result of Defendants? actions, Plaintiffs are entitled to compensatory and exemplary damages, including the payment of reasonable attorney fees, litigation expenses, and costs. COUNT 13 CONSPIRACY Plaintiffs incorporate all of the above paragraphs as if fully restated herein. An agreement or malicious combination was made among LHA, CCF, and Subsidium in the form of bid rigging, causing injury to the City, its Taxpayers, employees, residents, and the property of Lakewood Hospital. CCF and Subsidium worked together to favor proposal over MetroHealth?s proposal, even though proposal did not meet the minimum requirements of RFP, about which LHA never did anything to cure the deficiency. Further, there was an unlawful act independent from the conspiracy itself to close Lakewood Hospital, including but not limited to fraud and tortious interference. See Dixon v. Huntington Natl. Bank (2014), 2014 WL 4656798 at Agic v. Natl. Union Fire Ins. Co. of Pittsburgh (2014), 2014 WL 4748436 at Syed v. Poulos (2013), 2013 WL 6857979 at 1] 14; Ghaster v. Rocky River (2013), 2013 WL 6730925 at US. Bank v. Amir (2012), 2012 WL 2355620 at 1] 39. An agreement or malicious combination was made among CCF, LHA, and LHF in violating and interfering with the DA, Lease, respective articles of incorporation, City Ordinances, and the Second Amended Charter of Lakewood. These violations and interferences of contract and law constitute unlawful acts independent from the 52 conspiracy itself to strip Lakewood Hospital of its assets and ultimately close and raze Lakewood Hospital, resulting in injury to the City, its Taxpayers and residents, and City? owned property. 190. As a direct and proximate result of Defendants' civil conspiracy, all Defendants are jointly and severally liable for compensatory and exemplary damages, including reasonable attorney fees, litigation expenses, and costs. WHEREFORE, Plaintiffs demand judgment against Defendants, jointly and severally on all applicable monetary causes of action, in the amount in excess of $400,000,000.00, plus reasonable attorney fees, litigation expenses, and costs. Plaintiffs also demand judgment against Defendants, jointly and severally on applicable causes of action, exemplary damages to be determined by a jury, plus reasonable attorney fees, litigation expenses, and costs. Plaintiffs ?irther demand all other relief that the Court deems just and equitable and in order to make the Plaintiffs whole in this matter, including but not limited to, speci?c performance, injunctive relief, declaratory judgment, and mandamus. Respectfully submitted, Christopher De sz?o Christopher M. DeVito (0047118) Morganstern, MacAdams DeVito C0., L.P.A. 623 West Saint Clair Avenue Cleveland, OH 441 13 -1204 216-687-1212 or 216-621-4244 Office 216-621-2951 Facsimile ChrisMDeVito@2mail.eom Attorney for Plaintiffs 53 MAKE A trial by jury with the maximum number of jurors permitted under Ohio law is hereby requested on all applicable causes of action. Respectfully submitted, Christopher De Vito Christopher M. DeVito INSTRUCTIONS FOR SERVICE The Plaintiffs hereby request and instruct the Clerk of Court of Cuyahoga County, pursuant to Civil Rule 4, to serve via certi?ed mail, return receipt requested (or other approved forms of delivery), the enclosed Complaint (With Jury Demand Endorsed Hereon) (Monetary Relief Requested) upon the Defendants at the addresses identi?ed in the caption of the Complaint. NOTE TO CLERK: If the exhibits are too voluminous to attach with the electronic ?ling, then they will be ?led immediately after the Complaint is accepted by the Clerk's o?ice. Respectfully submitted, Christopher De Vito Christopher M. DeVito (0047118) Morganstern, MaeAdams DeVito Co., L.P.A. 623 West Saint Clair Avenue Cleveland, OH 44113-1204 216-687-1212 or 216-621-4244 Of?ce 216-621-2951 Facsimile ChrisMDeVito@gmail.com Attorney for Plaintiffs 54 STATE OF OHIO I SS: AFFIDAVIT VERIFYING COMPLAINT COUNTY OF CUYAHOGA FOR MANDAMUS AND TAXPAYERS SUIT 1, Edward Graham, having been duly cautioned of the penalties of perjury and competent to testify from my own personal knowledge state as follows: 1. I am one of the plaintiffs and taxpayer in the within Complaint ?led in Cuyahoga Common Pleas Court. 2. The facts set forth in the foregoing veri?ed complaint for mandamus, taxpayers suit, and other claims are true and correct to the best of my knowledge, information, and belief. 3. Appended hereto as Complaint Exhibits 1 through 9 are true and exact copies of the City of Lakewood (?City?) Ordinances, Second Amended Charter, De?nitive Agreement Amended and Restated Lease (?Lease?), and various public records involving communications to and from the City with Cleveland Clinic Foundation and Taxpayers. 4. A writ for mandamus, with or without notice to Defendants, is warranted to prevent further, irreparable harm and command the City's performance of acts, required by law pursuant to the DA and Lease, resulting from its of?ce, station, and public trust involving Lakewood Hospital's inpatient acute/surgical medical services and employees. FURTHER AFFIANT SAYETH NAUGHT. an Edward Graham TR SWORN TO BEFORE ME, and subscribed in my presence, this 2 7 day of May,, Notafy Public Verifying Complaint.Graham.docx Attorney-ath NOTARY pursue STATE OF onm My commissmn has no expiration Pursuant to 0.23.1410; 2015. CHAPTER 907 Lakewood Hospital NOTE: Ordinance 63?86, passed January 5, 1987, approved the transfer of the operation, management and assets of Lakewood Hospital from the Board of Trustees of Lakewood HOSpital to Lakewood Hospital Association, authorizing the execution and delivery of a lease between the City of Lakewood and Lakewood Hospital Association, and approving and authorizing related matters. Copies of Ordinance 63-86 may be obtained, at cost, from the Clerk of Council. 9117 .1111 REAL ESTATE LAKEWOOD HOSPITAL. Council hereby declares it necessary and conducive to the public health and general welfare to establish a municipal hospital of the City to be known as The Lakewood Hospital of Lakewood, Ohio, and hereby authorizes the Mayor to take all necessary steps to acquire by gift, in the name of the City, the real estate of The Lakewood Public Hospital Company described as follows: Parcel 1. Situated in the City of Lakewood, County of Cuyahoga and State of Ohio and known as being part of original Rockport Township Section No. 22, and bounded and described as follows: Beginning at the intersection of the westerly line of land conveyed to Joseph Hall, by deed recorded in Volume 31, page 686 of Cuyahoga County Records, with the southerly line of Detroit Street, thence southerly along said westerly line, 200 feet; thence westerly parallel with Detroit Street, 100 feet; thence northerly parallel with the westerly line of land so conveyed to Hall, 200 feet to the southerly line of Detroit Street; thence easterly along the southerly line of Detroit Street, 100 feet to the place of beginning, be the same more or less, but subject to all legal highways. Parcel 2. Situated in the City of Lakewood, County of Cuyahoga and State of Ohio, and known as being part of original Rockport Township Section No. 22, and bounded and described as follows: Beginning on the southerly line of Detroit Avenue at the northwesterly corner of land conveyed to Lee Graber by Adam J. Knopf and Nellie Knopf, husband and wife, by deed recorded in Volume 1116, page 267 of Cuyahoga County Records; thence southerly along the westerly line of land so conveyed to Graber, 155 feet to the northeasterly corner of Sublot No. 132 of the ?Belle Avenue Allotment? as shown by the recorded plat in Volume 41 of Maps, page 23, of Cuyahoga County Records; thence westerly along the northerly line of such Sublot No. 132, about 74-1 6/ 100 feet to the easterly line of Belle Avenue; thence northerly along such easterly line of Belle Avenue, about 148?3 7/ 1 00 feet to the southerly line of Detroit Avenue; thence easterly along said southerly line of Detroit Avenue about 75?9/ 100 feet to the place of beginning, be the same more or less but subject to all legal highways. Parcel 3. Situated in the City of Lakewood, County of Cuyahoga and State of Ohio, and known as being all of Sublots Nos. 129, 130, 131 and 132 in the Belle Avenue Allotment of part of original Rockport Township Section No. 22, as shown by the recorded plat in Volume 41, page 23, of Cuyahoga County Records of Maps. The Mayor is also authorized to take all necessary steps to acquire by gift, in the name of the City, the equipment and personal property of such Company used and useful in connection with the operation of the hospital of such Company, and to take all necessary steps within a reasonable time for the acceptance by the City of such property. Documents pertaining to the title shall be approved by the Director of Law. (Ord. 3136. Passed 9-2-30.) 9417.112 TSSUANCE AND SALE OF BONDS TO PURCHASE REAL ESTATE, Upon the transfer of all of the property, real and personal, of The Lakewood Public Hospital Company to the City and acceptance thereof, Council shall by ordinance establish a municipal hospital to be known as The Lakewood Hospital, for the purpose of using and maintaining the property so transferred to the City until other suitable hospital facilities are provided by the City as determined by Council. For such purpose, in accordance with the general laws and as authorized by the electors of the City, Council may issue and sell bonds in such amounts as may be necessary for the procuring of the necessary real estate and the erection, furnishing and equipping of such Hospital or other Hospital facilities which may be provided by the City at any location selected by the duly authorized of?cials of the City. (0rd. 3136. Passed 9-2-30.) 9907,03 Council hereby declares it necessary and conducive to the public health and general welfare to establish and it hereby does establish a municipal hospital of the City to be known as The Lakewood Hospital. (0rd. 3160. Passed l2~1n30.) 907.041 CLERK (OE BUARD (DE TRUSTEES, The Board of Trustees of Lakewood Hospital shall appoint a Clerk, who shall perform such duties as are prescribed by the Board and who shall receive such compensation as is established by the Board, which compensation shall be subject to approval of Council. (0rd. 26-68. Passed 5?6-68. 907005 PAYMENT (DE HOSPTTAL 0E SUPPLTESG All receipts of the City Hospital shall be paid to the Director of Finance at such times and in such manner as he shall direct, and a complete record of all transactions in connection with the operation, control and management of the HOSpital shall be kept in such form as Council, the Director of Finance or State authorities may require. All requisitions for supplies necessary in connection with the operation and maintenance of the hospital shall be made by the Board of Trustees or its duly authorized of?cers to the Director of Public Works of the City, who shall purchase such supplies and make all contracts in the name of the City, when duly authorized by Council, in the manner provided by the City Charter and the laws of Ohio. (0rd. 3160. Passed 12-1-30.) 907006 DTSBURSEMENT EUNDS, The disbursement of funds in connection with the City Hospital shall be made by ordinances adopted by Council appropriating such funds for the purposes set forth in the appropriation ordinances, and upon vouchers approved by the Director of Public Works. (0rd. 3160. Passed 124?30.) 907,07 SETTLEMENT (OE ACCQUNTS RY BDARD (OE TRUSTEES, The Board of Trustees of The Lakewood Hospital are hereby authorized, on behalf of the City, to adjust, compromise and settle such accounts for services rendered by The Lakewood Hospital and in such manner and amount as the Board of Trustees shall deem best within its discretion. However, the Board of Trustees shall take into consideration the circumstances, including the collectibility by court action or otherwise, of any and all such accounts. (0rd. 4095. Passed 907.08 REDUCED RATES TD) AND STAEE The Board of Trustees of Lakewood Hospital, as part of the compensation of employees and members of the staff, is hereby authorized to grant free or reduced rate service to any hospital employee or any member of the staff, where need for such hospital service in Lakewood Hospital is occasioned by services rendered by such person to the City, and all such services and charges shall be subject to the approval of the Board of Trustees. Where the injury or illness is such as to authorize a claim to be made to the Industrial Commission of Ohio, such claim for hospital services shall be presented to the Industrial Commission of Ohio and a charge made accordingly. (0rd. 3288. Passed 4?4?32.) 9617.89 (UHF NGNRESHDIENTS. The Mayor, as President of the Board of Trustees of Lakewood Hospital, is hereby authorized to enter into a contract with other municipalities for the admission of eligible indigent persons, residents of such other municipalities, to the privileges of Lakewood Hospital upon the request of some official of such other municipality duly authorized by Council to enter into a contract and request such hospital service, and to agree for and on behalf of such other municipality to pay for all such services so rendered upon the request of such authorized of?cial. All such services shall be charged for at the rate established for such services. (0rd. 3212. Passed 9?7.1? LAKEWGDD Council hereby incorporates into Council records the procedure for the appointment and nomination by Council of members of the Governing Board of the Lakewood Hospital Association, a nonpro?t hospital agency, as follows: Two members of Council shall be representatives of the City and members ex officio of the Governing Board, with all the privileges and emoluments of such membership, including voting rights. The members of Council to be members of the Governing Board shall be selected by Council by a majority vote of all of its members with, if more than one political party is represented in Council, one from each of the two political parties having the largest and second largest number of representatives on Council as of January 2 of the year in which the two-year term commences. Those initially selected shall serve until December 31, 1987, or in each case until that person ceases to be a member of Council, whichever is earlier. If a member of the Governing Board so selected by Council ceases to be a member of Council prior to the expiration of his or her term, the vacancy in the Governing Board created thereby 7 shall be filled for the unexpired term by Council in the same manner as the original appointment. Council shall nominate two persons to serve as members of the Governing Board. The persons so nominated shall be considered by the Governing Board in its capacity as members of the Lakewood Hospital Association. The Governing Board may, but need not, elect one or more of the nominees as members cf the Governing Board and shall request that Council nominate additional names for the position not filled. The term of the members elected pursuant to this subsection shall be five years, except that of the persons initially selected pursuant to this subsection, one nominated by Council shall serve until December 31, 1988, and the other until December 31, 1990. Thereafter, Council shall deliver the names of persons nominated pursuant to this subsection to the Lakewood Hospital Association prior to November 1 in the year in which the term of the incumbent appointed pursuant to this subsection will expire. If a member of the Governing Board selected pursuant to this subsection ceases to be a member prior to the expiration of his or her term, the vacancy in the Governing Board created thereby shall be filled for the unexpired term in the same manner as for the original appointment. Council shall nominate three members of the Governing Board to be appointed as representatives of community organizations. The term of members of the Governing Board selected pursuant to this subsection shall be five years, except that the terms of the initial members shall expire on December 31, 1988, December 31, 1989, and December 31, 1990. The terms of the initial members shall be determined by lot. The persons so nominated shall be considered by the Governing Board in its capacity as members of the Lakewood Hospital Association. The Governing Board may, but need not, elect one or more of the nominees as members of the Governing Board and shall request that Council nominate additional persons for any position not ?lled. If any person selected pursuant to this subsection should cease to be a member of the Governing Board prior to the expiration of that person's term, such vacancy shall be ?lled in the same manner as provided herein for the original appointment. No member of the Governing Board, except those identi?ed in subsection hereof, shall hold any public of?ce or employment other than as a member of the State militia or a reserve component of the Armed Forces of the United States. (Res. 6150-87. Passed 6-15-87.) ARTICLE XV. - LAKEWOOD HOSPITAL SECTION ll. BOARD OE TRUSTEES. Council may by ordinance establish a municipal hospital and for such purpose may, in accordance with general law, issue and sell bonds in such amounts as may be necessary for the procuring of the necessary real estate and the erection, furnishing, equipping and maintaining said hospital or for the purpose and acquisition of any existing hospital and its furnishings and equipment . Any such hospital shall be operated, controlled and managed by a Board of Trustees censisting of eighteen members, including the Mayor, who shall serve as President of the Board, the Commissioner of Health, and the member of Council who serves as Chairperson of Council's Hospital Committee. The additional fifteen Trustees shall be appointed by the Mayor with the approval of Council. No fewer than eight of such additional Trustees shall be resident electors of the City. Members of the Board of Trustees shall receive no compensation for their services as members of the Board. SECTION 2. TERM OF BOARD MEMBERS. The term of of?ce of the appointed members of the Board shall be five years. Three members shall be appointed each year fOr a full term of ?ve years. A majority of the acting members of the Board shall constitute a quorum. The Mayor shall file any vacancies on the Board with the approval of Council. SECTION 3. DUTIES AND POWERS OF THE BOARD. (A) The Board of Trustees shall have control and management of such hospital and shall establish such rules for its government and the admission of persons to its privileges as it deems expedient, and shall annually appoint the professional staff as determined by approved hospital administration. The Board shall also employ an administrator, department heads, and such assistants, nurses, physicians and surgeons and such other employees as said Board deems necessary, and ?x their compensation, which compensation shall, however, be subject to the approval of Council. (B) The Board shall have control over all improvements to, work for, or repairs to said hospital as well as the purchase of all necessary supplies, material or equipment for said hospital. All work done for the repair or improvement of said hospital shall be made either by direct employment of labor and the necessary supplies and materials or by contract . The Board shall by resolution determine by which method any improvement shall be made. All such contracts shall be executed in the name of the City by the Hospital Administrator only after approval by the Board. (C) All such contracts entailing expenditures by the City in excess of a certain dollar amount shall be awarded to the lowest and best bidder after approval by the Board and after competitive bidding, unless competitive bidding is determined by Council not to be required. Council may specify such certain dollar amount, prescribe the procedures for competitive bidding, and determine the circumstances, if any, under which competitive bidding shall not be required. (D) Until Council takes those actions required by Division (C) of this Section, the general law shall govern with respect to the dollar amounts in excess of which competitive bidding shall be required; the procedures for competitive bidding; and the circumstances under which competitive bidding shall not be required. All contracts subject to competitive bidding under this Division shall be awarded to the lowest and best bidder after approval by the Board. SECTION 4. LEASE ALTERNATIVE. Notwithstanding any other provision ofthis Charter, including, without limitation, those ofthis Article, Council, by ordinance duly passed by the affirmative vote of at least five (5) of its members, may lease, pursuant to a lease approved by the Board of Trustees, real and personal property and transfer the non-capital assets of the municipal hospital established pursuant to Section 1 of this Article, all as identified in such ordinance, to a nonsectarian Ohio nonprofit corporation organized for charitable purposes. Such power to lease may be exercised by Council from time to time, provided that the term of each such lease shall not exceed thirty (3 0) years, with the right in the lessee to renew for a like period of years. Each lease entered into pursuant to this Section shall place the control, operation and management of the hospital in the lessee and shall include such terms and provisions as Council reasonably believes necessary to provide for the health and welfare of the residents of the City, the protection of the employees of the hospital and may require the lessee under such lease to include in its governing body, representatives of the City. Control, operation and management of such hospital during any period it is not under lease shall be provided pursuant to Sections 1 through i of this Article. During the terms of any lease pursuant to this Section, no provision ofthis Charter shall be applicable to the lessee. EXHIBIT 3 candidates thus nominated shall appear on a nonpartisan judicial ballot in the regular municipal election. There shall not be a primary election in regard to judicial candidates. (Amended 11-5?02) ARTICLE XX. INITIATIVE SECTION 1. RIGHT TO INITIATIVE. Any proposed ordinance may be submitted to Council by a petition signed by qualified electors equal in number to at least ?ve percent of the total votes cast for the of?ce of Mayor at the last preceding regular municipal election at which a Mayor was elected. SECTION 2. FORM OF PETITION. Petitions submitting proposed ordinances to Council shall be ?led with the Clerk of Council. Signatures to such petition need not all be appended to one paper, but all petition papers circulated with respect to any proposed ordinance shall be uniform in character and shall contain the proposed ordinance in full and there shall appear thereon the names and addresses of at least ?ve electors who shall be of?cially regarded as ?ling the petition and shall constitute a committee of the petitioners for the purposes hereinafter set forth. SECTION 3. SIGNATURES TO PETITION. Each signer of a petition shall sign his or her name in ink or indelible pencil, and shall place on the petition paper, after his or her name, his or her place of residence by street and number. To each petition paper there shall be attached an af?davit by the circulator thereof stating the number of signers to such part of the petition and that each signature appended to the paper is the genuine signature of the person whose name it purports to be, and was made in the presence of the af?ant. SECTION 4. FILING OF PETITION. All papers comprising a petition shall be assembled and ?led with the Clerk of Council as one instrument. Within twenty (20) days after the ?ling of a petition the Clerk shall ascertain whether it is signed by the required number of quali?ed electors. Upon the completion of the Clerk?s examination, the Clerk shall endorse upon the petition a certi?cate of the result thereof. SECTION 5. ADDITIONAL SIGNATURES. If the Clerk?s certi?cate shows that the petition contains insuf?cient valid signatures in its support, the Clerk shall at once notify each member of the committee described in Section 2 of this Article by depositing the same in the United States mail with postage prepaid. In the event the initial petition contained prima?facie suf?cient signatures, additional signatures of quali?ed electors, signed in the manner required in Section 3 hereof, appended to petitions in form as previously ?led, may, within ?fteen (15) days from the date of the notification to the committee, be ?led with the Clerk. Within ten (10) days after the ?ling of such further signatures, the Clerk shall examine them and attach thereto 41 a certi?cate of the result. If still insuf?cient, or if no further petitions have been ?led, the Clerk shall ?le the petition in the Cler ?s of?ce and shall notify, in the manner herein provided, each member of the committee of that fact. The ?nal ?nding of the insuf?ciency of a petition shall not prejudice the ?ling of a new petition for the same purpose. SECTION 6. HEARING BY COUNCIL COMMITTEE. When the certi?cate of the Clerk shows the petition and supplemental petition, if any, to be suf?cient, the Clerk shall submit the proposed ordinance to Council at its next regular meeting and Council shall at once read and refer the same to an appropriate committee, which may be the committee of the whole. Provisions shall be made for at least one public hearing upon the proposed ordinance before the committee to which it is referred. Thereafter the committee shall report the proposed ordinance to Council with its recommendation thereon, not later than the third regular meeting of Council following that at which the proposed ordinance was submitted to Council by the Clerk. SECTION 7. ACTION BY COUNCIL. Upon receiving the proposed ordinance from the committee Council shall at once proceed to consider it and shall take ?nal action thereon within thirty (30) days from the date of such committee report. SECTION 8. POWER OF COUNCIL. If Council rejects the proposed ordinance or passes it in a form different from that set forth in the petition, the committee of the petitioners may, as hereinafter provided, require that it be submitted to a vote of the electors in its original form, or that it be submitted to a vote of the electors with any proposed change, addition or amendment, which was presented in writing either at a public hearing before the committee to which such proposed ordinance was referred, or during the consideration thereof by Council. SECTION 9. SUPPLEMENTAL PETITION. When an ordinance proposed by petition is to be submitted to a vote of the electors, the committee of the petitioners shall certify that fact and the proposed ordinance to the Clerk of Council within thirty (30) days after ?nal action on such proposed ordinance by Council and shall also ?le with the Clerk a supplemental petition asking that the proposed ordinance be submitted to popular vote signed by that number of quali?ed electors which when added to the number of electors who signed the original petition provided for in Sections 1 and 5 of this Article will equal ?fteen percent of the total votes cast, for the of?ce of Mayor, at the last preceding regular municipal election at which a Mayor was elected. Such supplemental petitions shall be in the form, signed in the same manner and veri?ed by the circulator all as required of original petitions. The suf?ciency of any such supplemental petition shall be determined, and it may be further supported, in the manner provided for original petitions for proposing ordinances to Council. SECTION 10. SUBMISSION TO ELECT ORS. (A) When the certi?cate of the Clerk shows the petition and supplemental petition, if any, to be suf?cient, the Clerk shall certify the fact to Council at its next regular 42 meeting. If a primary, regular municipal or general election is to be held not more than six (6) months or less than thirty (30) days after the receipt of the Clerk?s certi?cate by Council, such preposed ordinance shall then be submitted to a vote of the electors. If no such election is to be held Within that time, Council may provide for submitting the proposed ordinance to the electors at a special election. If no other provision is made as to the time of submitting a proposed ordinance to a vote of the electors, it shall be submitted at the next primary, regular municipal or general election. (B) If a majority of the quali?ed electors voting on any such proposed ordinance shall vote in favor thereof, it shall thereupon become an ordinance of the City. (C) If the provisions of two or more ordinances adopted or approved at the same election con?ict, the provisions of the ordinance receiving the highest af?rmative vote shall prevail. SECTION 11. BALLOT FORM. The ballots used when voting upon any such proposed ordinance shall state the title of the ordinance to be voted on and below it the two propositions ?For the Ordinance? and ?Against the Ordinance?. SECTION 12. REPEALING ORDINANCES. Pr0posed ordinances for repealing any existing ordinance or ordinances in whole or in part may be submitted to Council as provided in this Section. SECTION 13. PUBLICATION, AMENDMENT OR REPEAL. Ordinances adopted as provided in this Section shall be published and may be amended or repealed by Council as the case of other ordinances. ARTICLE XXI. REFERENDUM SECTION 1. RIGHT TO REFERENDUM. If at any time Within forty (40) days after the passage of any ordinance or the adoption of any resolution by Council, the expiration of the time within which it may be disapproved by the Mayor, or its passage or adaption notwithstanding the disapproval by the Mayor, as the case may be, a petition signed by quali?ed electors equal in number to at least ?fteen percent of the total votes cast for the of?ce of Mayor at the last preceding regular municipal election at which a Mayor was elected is ?led with the Clerk of Council requesting such ordinance or resolution be repealed or be submitted to a vote of the electors, such ordinance or resolution shall not become operative until the steps set forth in this Article have been taken. SECTION 2. FORM OF PETITION. 43 1, DEFINITIVE AGREEMENT BY AND BETWEEN LAKEWOOD HOSPITAL ASSOCIATION EXHIBIT 7 3 17:15 6? .. .4 3.21119 ARTICLE I. 0F LAKEWOOD AND THE CCF HEALTH . . . . . . . . . . . SECTION 1.1 Amendment of Articles of Incorporation and Code of Reguh?omoflnkewood . . . . . 2 SECTION12 . . . . . . . . . . . . . 5 SECTION 1.3 Officers and 'I?rustetzs of Lakewood; Members . . 5 SECTION 1.4 Lakewood Medical Staff . . . . . . . . . . . . . . . . . . . . . . 6 SECTION Employees of Inloewood . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.6 Integrated Delivery Sys?ems Development and Managed . Care Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.7 {?eeing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.8 City LeaseSECTION 1.9 Participation on CCF's Board of TrusteesARTICLE 2. POST-CLOSWG COMMITMENTS . . . . .. . .. . . . . . . . . . . . . 7 SECTIONZJ . . . . . . . .. 7 SECTION 2.2 Maintenance of InsuranceARTICLE 3. REPRESENTATIONS AND WARRANTIES OF LAKEWOOD . . 10 SECTION 3.1 Organization. Quali?cation and Corporate PowerSECTION 3.2' Af?liatesSECTIONSB NoBreaehSECTION 3.4 Title to PropertiesSECTION 3.5 Compliance With LawSECTION 3.6 Loaeehold IntezestsSECTION 3.7 Corporate Struemre . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 3.3 ValiditySECTION 3.9 Financial Statements13' SECTION 3.10 Absence of Undisclosed LiabilitiesSECTION 3.11 Events Subsequent to the Date of the Lakewood Audited FinancialStatenIents..14 SECTION 3.12 Outstanding DebtSECTION 3.13 Litiga?onand InvostigationsSECTION 3.14 TaxesSECTION 3.15 Labor RelationsSECTION-3.16 Insurance coverage . . . . . . . . . . . . . . . . . . . . . . . .- . . 16 SECTION 3.17 Contracts and Other CommitmentsSECTION 3.18 Other ApprovalsSECTION 3.19 Cost Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 3.20 Medicare and Medicaid Certi?cation; AccreditationTLEOO - a. - SECTION 3.21 Employee Bene?t PlansSECTION 3.22 Hill-Burton loanSECTION 3.23 Environmental LiabilitiesARTICLE. 4. REPRESENTATIONS AND WARRANTIES-19. SECTION 4.1 Organization, Quali?cation 8: Corporate PowerSECTION 4SECTION 4.3 ValiditySECTION 4.41 Compliance With LawSECTION 4.5 Finaneial StatementsSECTION 4.6 Events subsequent to the Date of the CCF Audited Financial Statements.-.. . .. . . . . 21 SECTION 4.8 TaxExempt SiamSECTION 4.9 Medicare and Medicaid Certi?cation; AccreditationARTICLE 5. CONDITIONS TO THE OBLIGATIONS SECTION 5.1 Opinion of Counsel for Lakewood . . . . . . . . . . . . . . . . 22 SECTION .5 .2 Representations and Wmn?es to be True and Correct . . . 23 SECTION 5.3 Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 5.4 Bond Tiustee Consent . . . . . . . . . . . . . . . . . . . . . .. . 23 Performanoe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 5.6 AlIPmoeetIings to be Satisfactory . . . . . . . . . . . . . . . . 23 SECTION 5 .7 Abseneeof Material Adverse Change . . . . . . . . . . ., . . . 24 SECTION 5.8 ApproVals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24- SECTION 5.9 Supporting Documents . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 5.10 Due DiligenceARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF LAKEWOOD . . . . 25 SECTION 6-1? Opinion of Counsel for CCF . . . . . . . . . . . . . . . . . . . . 25 SECTION 6.2 Representations and Warranties to be True and Cortect. . . . 26 SECTION 6.3 PerformanceSECTION 6.4 AliPtooeedings tube Sitis ton . . . . . . . . . . . . . . . . 26 SECTION 6.5 Absence of Material Adverse Change . . . . . . . . . . . . . . 26 SECTION6.6 Approvals . . . . . . . . . . . . . . . . . . . .. 26 SECTION 6.7 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 . SECTION 6.8- Membership in Cleveland Health Network . . . . . . . . . . . . 27 ARTICLE 7. INTERIM COVENANTS OF LAKEWOOD BETWEEN THE DATE OF THIS AGREEMENT AND THE CLOSING DATE . . . 27 SECTION 7.1 Maintenance of Prop?rties and Business . SECTION 7.2 Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ii wee: ARTICLE 8. ARTICLE 9. ARTICLE 10. ARTICLE II. SECTION 7.3 SECTION 7 .4 Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 7 .5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . 28 INTERIM COVENANTS OF CCF BETWEEN THE DATE SECTION 8.1 Announoemenhs . . . . . . . . . . . . . . . . . . . . . . . . . . -. 28 SECTIONSJ AeoesstoInforinationSECTION 8.3 Natice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 8.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . - SECTION 9.1 Confidentiality ofBusiness Information . . . . . . . . . . . . 29 SECTION 9.2 Con?dentiality of this Agreement . . . . . . . . . . . . . . . . 30 SECTION 9.3 Negotiations . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . 30 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 10.1 Termination Prior to Closing . . . . . . . . . . . . . . . . . . 30 10.2 Termination After ClosingSECTION-10.3 ApprOVaIbyBoardofTrustees . . . . 31* SECTION 10.4 of Attorneyrin FactSECTION 10.5 Continuation of Certain Sections..32. SECTION 11.1 Resolution of Certain Di5putes . . . . . . . . . . . . . . . . . . 32 MISCELLANEOUS . . . . . . . . ..- . . . . . . . . . . . . . . . . . . 33 SECTION 12.1 De?nitions . . . . . . . . . . . . . . . . . . . . . -. . . . . . . 33 SECTION 12.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 123 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 330110?; 12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 12.6 Enforoeebility and Severability . . . . . . . . . . . . . .- . . '35 SECTION 1237 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 12,8 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 SECTION 12.9 Assignment SECTION 12.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 12.11 Survival of Representations and Warranties36~ SECTION 12.12 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 12.13 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 12.14 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 12.15 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . -. . 36 SECTION 12.16 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 36 Access to Information . . . . . . . . . . . . . . . . . . . . . . . 23 DEFINITIVE AGREEMENT THIS 9mm AGREEMENT (the "Agreement'9. dated as of this ?dayof 1996, is entered into by and between The Cleveland Clinic Foundation, an Ohio not- for-profit oor?oration and Lakewood Hospital Association, an Ohio not-for-prof?lt corporation ("Lakewood"). . CCFand [allowood srehealthcaresyst?tns which provide hospital and health care services to residents of the greater Cleveland area and the surrounding regions, both, directly and? through their various subsidiaries and related wmpanies; and WHEREAS, GOP and Inlmwood share aeommon vision of how best to serve the health care needs of the residents of the communities served by GOP and Lakewood; and . based upon mutual study of demographic, economic, and medical trends, and evaluation of options tobettel: serve their communities in light of these trends, (ICE and Lakewood believe that the integration of lakewood and the CCF health care system will: ll) assure the availability of high quality, technologically advanced clinical services and professional practitioners 'in a more cost-e??ective and clinically ef?cient manner than either organization can achieve on its own; (ii) enhance recruitment and development of resources for new programs and services; maintain and enhance medical services for the underserved andlor underprivileged; and (iv) loner the cost of care through the avoidance of - inef?cient investments in omensive toolmology and facilities, combining clinical programs, reducing the costs of administering health services, better deploying existing resources antleapacity, ?nd other measures. WHEREAS, as a result or the integratibn of CCF and Lakewood, con and Lakewood will work toge?ier to improve access to healthcare services through development of: 6) enhanced physician recmitment; (ii) a primnry care network in strategic areas; quality improvement systems; 1-9 (iv) geographical distribution of hospitals to nicer managed care requirements; intproved attractiveness for managed care contracting; and (VD a competitiVe quality provider system in northeast Ohio. . WHEREAS, the parties agree that the following principles will guide the integration of Lakewood and the CCF health care system: lake-wood will become an active participant in the Ar-integrated delivery system established by OCR and shall participate in managed care strategy; 00? will will havetheauthority to'maintain and support the mission which cmrently de?nes the operations of Lakewood; GOP and [akewood Will work towards creating an integrated delivery system while maintaining the separate corporate identity of Iakewood; (iv) the integration of Lakewood and the can health care system trill Lbe.accomplished in.-a. manner,.to.protect the private practice of medicine and preserve Lakewood?s ability to detenninc the cemposition of its medical staff; the integration will have as its goal to bene?t the commonity through the protection; expansion and Support of community front line phydician practices; and (vi) CCF and Lakewood will work together to expand the quality of care and access to care in the lakewood Service Area through the deveIOpment of community family health centers. NOW THEREFDRE, in consideration of these premises and the mutual and dependent promises hereinafter set forth, the parties hereto hereby agree as follows: . .1. . INTEGRATION OF LAKEWOOD AND THE 001" HEALTH SYSTEM 1.1 Amen of of on 'on ?e going? of ~I?ewootl. As of the Closing (as hereinafter defined), Lakewood shall cause the Articles of. Incorporation and the Code of Regulations of Lakewood to be amended substantially in the forms of edules 1 1 attached hereto and in accordance with eh ands?t?lge Code-of Regulationste privileges, duties and obligations, if any, of a member of a nonpro?t corporation provided by -2- and. shall have all ofwthe rights-i; ltllil 13 II '3 "33.1 Chapter 1702 of the Ohio Revised Code, and any amendmonts thereto or corresponding provisions of any future law, and all other rights of a member under Ohio statutory or case law, and, as set forth herein, subject to the rights of the City of Lakewood (the ?City?? provided in the lease referred to in section 1.8, below, and as limited or expanded inihis Article 1. 1.1.1 The following corporate to be taken hythe Lakewood Board of ?I?rhstecs shall require the approval of the Member (but may not be exercised independently by 7 the Member) as set forth in the Code of Regulations: 1.1.1.1 Changes to Lakewood?s Articles Of Incorporation and Code of Regulations. - - 1.1.1.2 Any merger, consolidation or other af?liation of lakewood with any other entity or the sale of all or substantially all of the assets- of LakeWoorl or a dissolution or material change in the operationsor purpose of Lakewood. . 1.1.1.3 Any management contract; lease or similar centract between LakeWobd and any outside entity involving a Signi?cant portion of the assets or operations of Lakewood. 1.1.1.4 Appointment of iakewood?s auditors. 1.1.1.5 Any unhudgeted'cnpital projects in excess of $500,000 or such greater amount as the Member may 13mm time to time Specify in writing, or any project requiring a certi?cate of neat. 1.1.1.6 Lakewood?s incurrence, assumption or guarantee of any indebtedness, capital expendimrcs, or disposal of assets, in excess of $500,000 or such greater amount as the Member may from time to time specify in writing. 1.1.1.7 Inkewood?s annual operating and capital budgets. 1.1.1.8 lakewood shall establish strategic plans consistent with the overall strategic direction and plan of CCF Health System. . - - 1.1.1.9 Iakewood?s strategic and ?nancial plans, including the implementation of new or elimination of existing services offered at Lakewood. For purposes of Section ?141.13, the tetra "services" includes the types of services available at Lakewood at the closing? of this Agreement, including, but not limited to Obstetrics/Gynecology,- Pediatrics, Entergency Medicine Services, Pathology, Medicine and Surgery._ The term ?services? dees'not include the magnitude or level of service, such as hours of service, or the manner {including changes in technology) by Which the types of services are provided; provided, however, that the change in magnitude or levels of services does not, as a practical matter result in the signi?cant reduction in such service so as to be an effective elimination of such Service. -3- (I- ?Fl ?113:. on a. 1G 1.1.1.10 Coordination of ?nancial management programs With such programs utilized by CCF. 1.1.2 The following corporate actions shall be exercised by the Member as, set forth in the Code of Regulations: 1.1.2.1 of the chief executive officer of lakewood; . provided, however, that such individual also must he by [akewood?s- Board of Trustees. 1.1.2.2 Termination of the chief executive officer after consulta?On with .lakewood?s Board of Trustees; provided, howevcr, that Lakewood?s Board-of Trustees shall have the right to terminate the chief .executiVe of?cer after consultation with the Member; and provided, ?irther that CCF hereby its Chief Executive Of?cer as the officer having the authority to exercise the right granted in this subsection 1.1.2.2. 1.1.2.3 Review of all managed care contracts at any point in tithe and provide speci?c requirements-with regard to the terms thereof or whether or not to renew such agreement, at the time of renewal of such agreements. 1.1.2.4 .The right to cause lakewood to sell or factor its accounts receivables, provided, however, that such right shall only arise at such time or times when Lakewood?s accounts receivables exceeds, as measured by days in receivable, the median accounts receivable for Northeast Ohio hospitals by thirty percent as published by the Greater Hospital Association National median accounts receivable data may he used if information regarding Northeast Ohio hospital data are not available from GCHA or such other reliable source. 1.1.3 The Member shall have certain rights with respect to the election of the Lakewood Board of Except as otherwise provided in Section LL11, below, with respect to the members, of LakeWood's Board of Trustees inimediately following the Closing, the Code of Regulations shall proVidc that the trustew shall be elected in accordance with the. .following; r. . 7 - 1.1.3.1 The City shall select three truStess, which selection shall not be subject to an},r right of approval by the Member, so long as the lease, referred to in Section 1.8, below, remains in effect; 1.1.3.2 The City shall nominate an additional seven trustees, subject?rst to the approval of the Lakewood Board of Trustees and men to the ratification by the Member, which rati?cation shall be acted upon by the Member?s. Board of Trustees or Executive Committee of the Board of Trustees, so long as the lease, referred to in Section 1.8, below, remains in effect; ,grs-Lrs 1.1.3.3 The Member-shall elect three hostess, which selection shall not be subject to any right of approval by the City or any other body; 1.1.3.4 The Immediate Past President of InkeWood?s Medical Staff shall bee trustee; and A - 1.1.3.5 The remaiidng nine trustees shall be selectedin accordance with the nomination process in existence prior to the Closing, uhleSs the code of Regulations is changed as permitted by. Section 1.1.1.1, above, provided, bower, that at all tithes during the term of Agreement, the [omitting shall be nominated by a'eommittec of Lakewood?s Board of and ?rst approved by the 'Inkewood Board of- and then to the-rati?cation by the Member, which rati?cation shall be acted upon by the Member?s Board of Trustees or Executive Committee of the Board of 'I?rustees, so long as the lease, referred to in Section 1.8, below, remains in effect. - Notwithstanding the foregoing, exoept with regard to the trustees selected undersemion 1. 1.3.3, the Member shall not battle the right to remove any of the trustees or fill vacancies, except consismnt With. the rati?cation right set forth above for the election of Vacancies shall be ?lled in the same manner as provided for above with respect to the trustee's original 'appointrnent. The Board of Trustees or lakewood shall otherwise. retain the right he remove (other than trustees selected under Section 1.1.3.3, or as some?. provided in the Lease). 1.1.4 All the rights set forth in this Section 1.1 shall be exercised, by CCF in a ?scally prudent manner, consistent with lakewood?s charitable purpose and Lakewood?s obligations under the lease, referred to in Section 1.8, below, in order to preserve the operations of lakewood as ageing concern, as de?ned under generally "accepted accounting principles- 1.1.5 Except as otherwise provided in this Article 1, Lakewood?s Board of Trustees shall retain the rights, privileges, duties and obligations of trustees provided by Chapter 1702 of- the Ohio Revised Code, and any amendments thereto or corresponding provisions of any future law, and all other rights and obligations of trustees under Ohio or case law. SECTION 1.2 W. The City shall have the rights set forth in the lease referred to in Section 1.8, below and annexed hereto as Exhibit 1.8 (the "Lease?). SECTIONLB a ens-of Lair wa? (2 mmitt . 1.3.1 The agree that immediately after the Closing, those individuals on Schedule 1.3A, attached hereto and incorporated herein, shall be the members of lakewood?s Board of 'I?rustees. The parties further agree that immediately after the. Closing, Lakewood?s Board of Trustees shall elect those individuals listed on Schedule 1.3B, attached hereto and incorporated herein, to the of?ce listed apposite such individual?s name and that -5- ig?-as. Board of Trustees shall elect those individuals listed on WC, attached hereto and incorporated herein, to the committees on Thereafter, the members of the Lakewood Board of Trustees andthe committees shall-he selected in accordance with the Code of Regulations of subij to the City?s rights under the lease. 1.3.2 The Board. of Mines shall have the full authority provided under Ohio law for the management of lakewood, subject to. the rights of the Member set forth in Sections 1.1 and 2.1.3, rights of the City as set forth in the [ease referred to in Soc?on 1.8, helOw. The Board of Trusteesshall manage the operations of Iakewo0d in a ?scally responsible manner, cementum Lakewood?s charitable purpose and obligations under the base, so that shall be as a going concern, as defined under generally accepted accounting principles. SECTION 1.4? W. All current members of the [altewood Medical Staff (the 'Medical Staff") shall continue to have the same rights and privileges as members of the Staff sis?such physician had prior to the Closing; proVided, however, that the consummation of the transactions contemplated by this Agreement willvnot the - ability of the Lakewood Board of Trustees to grant, withhold or suspend Medical Staff membership or clinical privileges in accordance with the terms and provisihns of the Medical Staff Bylavirs. Lakewood shall establish Medical Staff development and recruionent'plans I consistent with overall strategic direction of CCF Health System. SECTION 1.5 All persons employed by Lakewood at the time of .the Closing shall remain employees of Iakewood after the Closing in positions similar to thoseheld by them prior to the Closing; provided, however, that the consummation of the transactions contemplated by this Agreement shall not limit in any way the ability of Lakewood to terminate or otherwise govern the employment of all employees in a manner consistent with Lakewood?s normal personnel policies and procedures. SECTION 1.6 [ole?nth Delivgy Slams Develo. on;th and magm- Care Contra?? g. The parties agree that one of the goals of the integration of [ahewqod and the CCF health care system is the development of a regional health care system. lakewooti will he an active participant in such regional health care system. GOP and its Af?liates shall'use best efforts to permit Inkewood to become .a member of the Cleveland Health Network as of the execution of this Agreement and to maintain Lakewood as a member of the Cleveland Health Newark during the term of this Agreement. The development of this regitmal health care system will allow Iakewood and CCF to improve the quality of health care services offered to residents of the regional area and to improve access to such health tare services. The parties . also agree that the integration of Lakewood and the CCF health system also will enable the parties to develop and implement a continuing health care system and to evolve or expand the health care services currently being provided by Lakewood. gosing. The closing of the transactions contemplated by this on SECTION Agreement (the "Closing"). shall take place at . -5- Ip-a .2 $753? wait:- I?m SI did 1996 at 7 or at such other location, date, and time as may be agreed upon by the parties (the "Closing Date"). 1.8 . Lakewood andthe City?shallemer inboanew rear and personal property lease.(the 'Iease?), on terms and conditions acceptable to the City, Lakewood and CCF, whichprovidgs for-dieleaseofthereal .. . oily. 12:the form of Exhibit 1.8.- The rentpayableunder? neblease shallbeagreed why lakewoodand och.? cop shall have the right to anyaad all defaults of such lease. If 3.5x). and desires to renew such lease,- CCF shall have the ant-to Section 10.2.2. - . o; get-van? 1 8'1 Notwithstanding any royisions in this to the contrary is {F?im? #351 ?ti-,CCF shall amend its SECTION 1COde of Regulations to provide that Inkewoodsshall have therightm elect-the Chairman of the Inkewoo?d Board'of Thisteos to the Board of Trustees of CCF. ARTICLE 2. POST-CLOSING amourst Queenie and nights of CCF. From and other the Closing Date, SECTION 2.1 the parties agree as follows: Such ratio shall be determined based on the annual audited ?nancial Agni seemed'at Lakewood. Cash shall ineludeall cash in any neonate-mined for any purpose, whether or not such purpose is limited to a?speei?e use: provided, however, that cash shall not include: cash on deposit for any employee welfare plan maintained by Lakewood which represents: funds contributed by employees, (ii) funds contributed to such employee welfare plan which represent employer matching funds. which Inkewood is legally obligated to contribute, or funds representing the vested portion of such plan; or funds generated from Medical Staff dues. Cash shall also include marketable securities. Cash shall also include the proceeds of any disposition of accounts receivable, whether or not such disposition is at the direction of GOP, as provided in Section 1.1.2.4, above, provided that such proceeds shall only count towards cash. for the amount received for accounts receivable that exceed by thirty percent as measured in days in receivable, the median accounts receivable referenced in Section 1.1.2.4. Debt shall include, but not be limited to. revolving ll: working capital loans, debt incurred as a result of a pledge of accounts receivables, long term debt, and current installments of long term debt; provided, however, that debt shall not include debt which has not _been approved in accordance. with and to the extent required by Settles 1.1.1-6. In some City of Lakewoodunderpthe Lease Agreement shall, be included as debt only ifnnpaid inthe year thepaynient isdue. If, as a result of such audit; it is determined that does not meet such ratio, shall suf?cient funds to to meet such ratio. Further, if Inkewood?s cash to debt ratio return to CCF fi?y peieent of such-exoeSS cash until all shall have been repaid to CCF;-provided, however, dint-my. advances not repaid to atsuch as the lease,referred- to-in Section 1.8-, above, shall be forgiven A 2.1.1.1 In determining the availability of cash, for a period of two years after the Cissing, such domination shall be made without any reduction in cash which may be used to satisfy liabilities of Lakewood for matters which were not disclosed under Article 3. For-purposes of liabilities which are not disclosed under-Article include? thosez liabilities which, while not ?material? as de?ned below, are nevertheless not disclosed to CCF. 2.1.2 Capital expenditures by Iakewood (which are anticipated to be provided from Lakewood?s cash generation and net liquid assets) Within the Lakewood Service Area, will average $5 million per year over a rolling ten year period for the invesnnent in or replacement of physical plant, the acquisition of equipment. and the implementation of new programs; provided, however, that at least an average of $3 million is expended annually over a rolling three year period. Of the average $5 million per year over a rolling ten year period and of the average $3 million per year over a rolling tines year period, at least seventy-five persent (?75 96) - of such average minimum capital expendiulres shall be made in the City of Ialnewood. All capital expendimres in excess of $500,000 for a particular item shall require a business plan approved by CCF. Cash which may be set aside for such expenditures unless and until actually spent shall be included in determining whether the requirements set forth in Section 2. 1.1? have been ful?lled or whether CCF is required to advance funds to permit lakewobd to meet the ratio set forth therein; provided, however, that such cash, which has been set aside, shall not he treated as a capital expendimre under this Section 2.1.2 unless and until it has been actually spent. 2.1.3 if cash generation from Lakewood operations and iIIVestmonts aver-ages less than $3 million per year in any consecutive rolling) three year time period (the ?Period of as reported in the audited ?nancial statement entitled ?Statements of Cash Flows", or CCF is required to advance funds which tomlmin the $3 33 (A ELY-iiW-?rb?v. \r exigent-?ve. subject to the authority of ii new . l? nil-ii Such management I De?ciency. 's maintains! the Inkewood Beard of Trustees. Notwithstanding the prior sentence, during the period in which CCF provides the management of the day-to-day operations of LailreWood, can shall have the right to appoint a new CEO and Ialoewood Board of lipstees shall not have the tight to te or approve the CBO as provided in Section 1.1.2.2 of this Went. For example, Lakewood?s "generation in 19.94 and 1995 was Snell determination shall be made without regard to any cash contributed by CGF hereunder. rights shall exist for a period of three years from the end of the Period of 2.14 can shall provide Lakewood with funds (wineet'eny obligation to repay) in an aggregate amount of $10 million to assist Iakewood in the development; or improvement of. some or all of the programs and facilities listed on Exhibit 2.1.4A, attached hereto; provided, however, that sensory-five percent (75 of such expendihnes shall be made or facilities located within the City of Inkewood. Such funds shall he committed and provided over afive year from'Closing, inaeoordancc with a? plan to he agreed'toby the CCF and lakewood, which plan may thereafter beamended from to time by agreement of CCF and Lakewood; provided, however, that any plan or amendment thereto will provide for the funds to be psed in the development or iniprovement of programs or facilities located within the Lakewood Service Area. i 2.1.5 CCF shall use its best efforts to ensue that its lo ed ph ioians who ractice in the Lakenr'ood Service Area, ?e CCF .Wett?ake satellite, pm? egos . ewootl, subject to the soft pritr?e'ges a 3.5 app any paroct?ar physician. Purther,-CCF and Inkewood Shall .ose- their respective beet efforts to ensure that lakewood shall participate, including proportionate management and Board governance (propordopate as to participation and investment), in the regional system established ?by CCF as part of its strategic plan. If Lakestr?ood participates in the western regional system, the corporate managennant and governance of?ces of the western regional system will be located at a physical location other than any physical location generally identi?ed andlor associated. with any of the participants; (ii) lakewood and GOP af?liated and employed physicians practicing in the Lakewood Service Area shall participate, including proportionate management and Board governance (proportiOHatc as to participation invesnnent) in the physician-hospital o. it established for the western- region tiy CCF. to the extent that such physicians indiVidually meet any participation adopted by such organization; and CCF primary care physicians maintain privileges at Iakewood are encouraged to utilize all inpatient and outpatient services of CCF Health Care System facilities in the western region. 2.1.6 onn?request by Lakewood, shall work together with Lakewood to establish the joint operation of specialty servicepjg Lakewood, all of which specialty service modi?cation. shall be With the overall strategic plan and budget which shall be as established by CCF. 2.1.7 Upon request by Lakewood, to establish and operate medlealeducational programs with lakewond as a residency site. 2.1-4; Upon request by Lakewood, Con and Lakewood will jointly establish programs a. to improve administrative ef?ciency and cost reduction and other olinicalladniinisn'ative services to which the parties agree. 2.1.9 At any time, CCF may cause the Board of ?Trustees of Lakewood to take all action for the audio: redemption of any or all of its then outstanding tax exempt debt obligations; provided, however, that the cost of such defeasanee andlor redemption, including the payment of principal thereunder, shall be borne by CCF. SECTION 2.2 a. From and after Closing, Lakewood - operation and maintenance of the hospital facilities of such type and 'in such amounts as are normally carried by hospital facilities or health care facilities of similar type and size, and against such risks as are customarily insured against in connection with hespital operations and hotpital facilities or health care facilities of stroller type and site, and will at outlines carry and to maintain or cause to be carried and maintained, and will pay or?caose to be paid timely .. premiums with ?nancially sound and reputable insurers. Notwithstanding the forgoing; Lakesvood will at least thetxpes of insurance listhin Exhibit 2.2. REPRESENTATIONS AND WARRANTIES on LAKEWOOD - Lakewood represents and warrants to CCF that, as of the date of this Agreement and except as set ferth in the Schedules: g; SECTION 3.1 Organizag?on; gam' cation and Comte Easter. 3.1.1 I Lakewood and each Affiliate (as hereinafter de?ned in Section 3.2) is duly incorporated, validly existing, and in good under the laws of the State of Ohio? Lakewood amt each Af?liate has the corporate power and authority to own and hold its respective properties and to carry on its respective business as now conducted. 3.1.2 The trustees, directors ando'f?eers of lake-wood and each Af?liate, a true and complete list of whom is set forth on ?edgling, have been duly and properly elected and all actions of Board of Trustees or Board of Directors of Lakewood and each Af?liate required for the consummation of the transactiom contemplated by this Agreement thereby requiring Board of Trustee or Board of Director approval hove been taken pursuant to proper and valid Board approvals. Lakewood and each Af?liate has previously made available to CCF for review complete and correct copies of minutes of. all meetings of the members or -10.. is; t; p. atzd shareholders of Lakewood and each Affiliate and copies of minutes of all meetings of the Board of Trustees or Board of Directors of lakewood and each Af?liate. SECTION 3.2 mes. 3.2.1 W24 identi?es each Af?liate of IAketvood and the percent ownership or.voting control by Lakewood of such Affiliate. There are no Lakewood Af?liatesother than those identi?ed on M. For purposes of- this Agreement, the term""Affilia_te' means an entity which is controlled by, controls, or is under common control with Inhewotid, and shall also include Lakewood Health Care Foundation and Hospital Admission Physician Services, Inc. "Control" of an entity shall mean possession of more than ?fty percent. of'the voting inth in the controlled entity. Except as. disclosed on Scam ole 3.2.1, lakede does not own of record or bene?cially, directly or indirectly, any shares of capital stock or securities convertible into capital stodgor hold the membership right cf any other corporation or have any participating interest in any premiership, joint venone, limited company or otlier business enterprise; or (ii) control, directly or indirectly, any other entity. 3.2.2 Withrespect to Lakewood?s membership interest in Surgery Center West, LLC, a company formed for the purpose of operating an ambulatory surgery center in Westlaloe, Qbio ("Surgery Center"), Iakewood is not requi'redroo provide any services, monies or make any capital contributions to the Surgery Center other than the comments and contributions described in Schednle 3,23; hereof. To Lakewood?s knowledge, the'Snrgery Center is being operated in accordance with applicable law in all" material respects; (ii) there is no pending or threatened claim, suit or action against the Surgery Center that. Would have a material adverse effect On the Singer Center; the ?nancial statements of Surgery center for the period ended November 30, 1996 fairly present in all material respects the'?nancia] condition and results of operations of Surgery Center and there has nomaterial change in such ;financial condition; and (iv) the sale of membership interests in the surgery Center to physicians as provided for under the terms of the Operating Agreement are in complianoewith federal securities law and any other applicable law in all material respects. Neither lakewood not any Af?liate possesses any ownership, membership or other voting interest in the [altos/nod Hospital Foundation ("Hospital Fotmdation??) or. Medical Care Foundation ("Wat Shore") and, except as disclosed ,in W, is obligated to provide any monies or other services to the Hospital Foundation or West Shore.' Except as disclosed in Schedule 3.1.3, Lakewood and its Af?liates are not responsible for and are not gimmntors of any obligations of Surgery center, Hospital Foundation or West Shore. SECTION 3.3 No Breach. The execution, delivery and performance by lakewood of Agreement and related agreements contomplated herein do not and will not contravene or. con?ict with the respective Articles of Incorporation or respective Codes of Regulations (as contemplated by Section 1.1) of Lakewood or any of the A?iliates; (ii) contravene, violate, or conflict with. any material law, regulation, judgment, order or decree applicable to Lakewood or any of the Affiliates; or constitute a default under or give rise -11- '33? shite as? xii? H. We: 3 3:3) is 1-. a a" to any right to tenninate any material agreement, contract or other instrument binding upon Lakewood or any of the A?iliates, or any material license, permit or other similar audrorization held by lakewood or?any'of the Af?liates. SECTION 3.4 i Except as disclosed in Schedule 3.4, Lakewood and the Af?liates have no title to any of the real property and equipment used inthe operatio??ortc their respective businesses, as such real property and equipment is leased from the City. 7 SECTION 3.5 To the knowledge of Lakewood. Lakewood and each of the A?iliates has complied with and is complying With allapplicable laws, roles; regulatitins, and ordinances (including Medicare and Medicaid laws, hand and abuse - and Stark laws) and has obtainedall material state, federal, special {or local gavel-Mental authorizations, licenses, certificates (including Certi?cates of Need) or permits (the required to conduct their respective businesses, as such businesses are presently being continued, the failure or absence of ?which' wotdd have a material adverse on the businesses of Lakewood and the Af?liates on a consolidated basis. Mommies a list and brief description of all Permits, including time granted or derived from governmental sources. issued or granted to Lakewood and each of the To the knowledge of Lakewood, persons . . who provide professional services under agreements with any of Lakewood or the Af?liateshave not been excluded from the Medicare program or any state health care program under 42 U.S.C. 1320-7 and Lakewood is not aware. of any pending or threatened exclusion action against such professional persons. 3.6 mm. Except as disclosed in seasons 3.6, all of the material real and personal property used by lakewood in connection with their respective businesses are leased. from the City. Such lease with the City is a valid and subsisting agreement without any default by- lakewood, and,- to the knowledge of. Lakewood, without any default - thereunder- by' the City; No event and is continuing which, with due notice or lapse of time or both, would constitute a default or event of default by lakewood under such existing lease with the City. SECTION 33 We. .. uncensored: The current members of Lakewood are Iakewood?s Board of Trustees. Lakewood?s Board of Trustees is self?perpetuating, subject to the right of the City to elect ten members of the Board of Trustees. Except as set forth in Schedule 3.7, each of the Af?liates is a confer-pro?t corporation without any capital stock and lakewood is the sole member of each such Affiliate. SECTION 3.8 Validity. Lakewood has the full corporate power and authority to eXecute and deliver this Agreement and all other agreements and documents necessary to consummate the contemplated non?ction and all corpcirate action of lakewood necessary for such execution and delivery and the performance thereof has been duly taken. This Agreement does, and all agreements related to the contemplated transaction when duly executed and delivered by Lakewood and by the other parties thereto will, constitute the legal, valid, and -12- . pun-n . r. ., (it crediwrs generally. binding obligation of lakewood enforceable in accordanCe with their terms, subject as to enforcement of remedies to the discretion of courts in awarding countable relief and to applicable reorganization, insolvency, moratorium and similar laws affecting the rights of SECTION 3.9 mm. Lakewood has furnished to CCF the audited financial statements of" Lakewood as of December 31,. 1993, 1994 and 1995, including the balance sheet and the related statements ofrevenue and expenses, cash flows and changes in general fund balances of Lakewood for the years then ended, with an tmqnali?ed mport thereon from Marwick, LLP, independent certified pnblic amounting, (the "Lakewood Audited including any managementletters the internal operations of lakewood with respect to snob ?scal year that have been delivered to Lakewwd, (ii) unaudited ?nancial statements of lakewood?s Affiliate-s as of December 31, 1993, 1994 and 1995, including the balance sheet and the related statements of revenue and expenses, cash flows and changes in general fund balances of {akewood for the years then ended (the "Af?liates Unaudited seems?), and (if) ._fmanoial statements. of lakewood and its Af?liateslfor the periods from January 1, 1996, to September 30, 1996, and will such unaudited interim ?nancial Statements for the periods through the month ending insmediately prior to the Closing Date (Collectively - to as the "Manned Unaudited Statements?) (the Lakede Auditor! Financial Statements, theAf?liateS Unaudited Financial Statements and the Lakesmod Unaudited Financial Statements are sometimes referred to herein collectively as the ?Lakewood Financial Statements"). The [akewood Statements have been (or .will be when prepared in accordance with generally accepted accounting principles consistently applied (except, in the case of the Lakewood and Af?liates Unaudited Financial Statements, for the absence of footnotes and year end adjusnnents) and fairly present in all material respects the ?nancial position of Lakewood and its Af?liates and the results of operations and changes. in financial position as of the dates and for the periods speci?ed. Except as set forth in the Lakewood Financial Statements, neither Iakewood nor any of its Af?liates on a consolidated basis has incurred any material liability other. than in the ordinary course, of business. Since DeCemb?er 31, 1995, there has been no material change in the assets, liabilities or ?nancial condition of lakewood or its Affiliates, on a consolidated basis, from that re?ected in the most recent Lakewood Audited Financial Statements, except for changes in the ordinary course of business and mosistent? with past practice which, in the aggregate, have not been matet'ially adverse to the business, prospects, ?nancial condition, operations, property, or affairs of Lakewood or its Af?liates, on a consolidated basis; and (ii) none of the business, prospects, ?nancial condition, operations, property, or affairs, of Iakewood or its Af?liate3, on a consolidated basis, has been materially adversely affected by any occurrence or development, individually or in the aggregate, whether or not insured against. SECTION 3.19 None of Lakewood or the Af?liates, on a consolidated basis, has any material liability of any nature (Whether absolute, accrued, contingent or otherwise) including, without limitation, liabilities to Medicare, and other third party payers, or liabilities for federal, state, local or foreign taxes or liabilities -13- 5 vial-gm} to customers 0r suppliers, other than. liabilities for which full provision has been made on the Financial Statements referred to in Section 3.9; end lit} enter material liabilities arising since the date of the Lakewood Audited Statements and prior to the Clasng Date. in the ordinary course of. Business and consistent with past- practice which are not inconsistent with the representations, warranties and covenants of [akewood or any other: provision of Agreement or related agreements and meats. SECTIONSJI 7 . I, he Em gram . Except asdisclosetl chem 3.11, sincethe date the Audited Financial Statements, none of or the Af?liates has; 6} any stock, bond or other. corporate security er created any membership interest; (ii! borrowed any am on at or incurred or become subject to any liability (absolute; accrued or contingent), except current liabilities incurred, and liabilities under contracts entered into in the ordmary' course of or satis?ed any lien or cachinbrancc or menrred? or paid any obligation or (absolute. or contingent). than shown on the Audited FinancialStatcments and content liabilitics incurred since the datecf the Lakewood Audited Financial Staterttents and re?ected on the lakewood Unaudited Financial Statements in the ordinary course of business; (iv) declared or made any payment or to members or. shareholders on purchased or? redeemed any membership onshore stools-or other .ur'll security; mortgaged, pleaged or subjected to lien any of its assets, tangible or intangible, . . . other than liens which arise by opentionoflaw, liens of cot-rent real .pmpertyr not yet due and payable or liens on assets pursuant to purchase money security interests the ordinary course of business; (vi) sold, assigned or h?artsferred any of its tangible ascets or cancelled any debt or claim, except in the ordinary course of business; (vii) slithered any material, uninsured loss of property or waived any material right whether or not inthe ordinary course ?of business; made any change in. of?cer compensation, other than regularly scheduled inch consistent with an existing compensation program and past practices; (in) made any material change in the manner of business or operations including any change accounting principles and practices; entered into any transactionexcept in the ordinary course of business or as otherwise hereby; or (xi) entered into any commitment (contingent or othertvise) to do any of the foregoing. SECTION 3.12 W, There exists no default under the pm?sions of any evidencing any indebtedness of Lakewood or any 'of the Af?liates, or- otherwise of any agreement relating thereto. Except as disclosed in Sch?ule 3,12, none of hkeWood or the Af?liates has made any outstanding loans or advances to any person and is not obligated to make any such loans or advances other than advances to employees for expenses incurred on behalf of Lakewood or its Af?liates in the ordinary course of business. SECTION 3.13 W. To the knowledge oflnkewoodand its Affiliates, and except as disclosed on W, there is no: action, suit, claim, proceeding, or investigation pending or threatened. against lakewood or the Af?liates by any private party or any federal, state, municipal, or other governmental department, commission, board, bureau, agency or insh'unmntality, domestic or foreign, which if decided adversely to -14? o; ah. fix? 3} lakewood or the Affiliates would have a material adverse effect on Lakewood"s ?nancial condition or results of operations on aymnsol-idated basis; (ii) arbitration to Lakewood or. the pending udder collective bargaining agreements in otherwise; or mammal- or or, lakewood-orthe Af?liates (including, widtout limitation, any enquiry as some quali?cation. of iakewood or the Affiliates to hold or receive any license or permit). None of Lakewood or-the Af?liates is in default With respect to any order, writ, injunction, or decree known to or served upon it of any court or of any federal, state, municipal, or other governmental department, commission, hoard, bureau, agency, or mournentality, domestic'or' SECTION 3.14 3am, . 39149.1 on of itself the ?led all federal, state, eounty and local tax room, including, without limitation, income, sales, single business, payroll, premium, and personal property tax remrns, requiredto be ?led by. it and such l?BtumS have been duly prepared and filotland were true, correct, and oomplete; Except as disclosed in all mites due-by reason of the operations conducted by Lakede and the Af?liates have been paid, without limitation, all. taxes which Lakewood and the Affiliates are obligated to withhold?tom accounts owing to employees, creditors, and third parties. Except as in ell such roses for which any such party lies. become. obligatedpmsuant in elections mode in accordance with generally accepted principles lave been reserves have been established for all taxes accrued but not yet payable. The federal inoome tax returns of Lakewood and the Af?liates have never been audited by the Internal Revenue Service, except as disclosed in There is no tax lien, whether imposed by any federal, state, county or lecal authority outstanding against the assets, properties or businesses of lakewood .or the Af?liates. None of lakewood or the'Af?l?iates have executed at ?led any consent or agreement to mend the period for assessment or mimosa of?ony snob taxes- 3-.14.2 Iakewood is exempt from Federal inoome tax pursuant to. Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the ?Tax Code?), and Lakewood is a, "1105mm" within, the meaning of Section of the Tax Code. Lakewood is not aware of any proceeding?, pending or threatened, or of any existing circumstances, which could reasonably be anticipated to result in the loss or revocation of the aforementioned exemption held by lakewood. SECTION 3.15 Labor Relations. Each of Lakewood and the Af?liates has complied in all material respects with all applicable laws relating to the employment of its employees, including provisions relating 130 wa'gm, hours, equal opportunity, collective bargaining, and the payment of Social Security and other taxes, the failure of Which will not ham: 3 material adverse effect on the businesses of Lakewood or the Af?liates, on a consolidated basis, and no employee or former employee has ?led any pending claim nor has Lakewood or any Af?liate been noti?ed to the contrary, None of Lakewood or any Af?liate has entered into -15- any collective bargaining agreement and none of Lakewood or any Af?liate has received notice - that any of their respective cinpioyees are represented by a collectiye agent. SECTION 3.16 . - sets- forms. complete and cancel list of all policies? in force with and the A??iliates and identi?esthe insurer, type and amount of coverage for each, and the anniversary date for each. 3.17 - lists all material-written agreements and all material oral understandings but not limited to, all material provider contracts, materiel group. hospital and medical agreements, material management agreements, material leases and matetial seivices contracts to which Lakt?Wood the Affiliates are subject on the date hereof. Each such contract or commitment is a valid and binding obligation of lakewood and the Affiliates, art-applicable, and to their knowledge, the other parties thereto. enforceable in accordance wid'l its (subject to. bankruptcy, insolyency, reorganization, moratorium, and other laws, rights - generally and except-for limitations upon the availability of equitable remedies, including speci?c performance). Except as disclosed on W, none of the contemplated by this Agreement creates in any-party to such contracts and commitments the right to revise the terms of, to terminate, to accelerate any- obligation of or any?Af?liate, (isomer-wise- declare that such connects or commitments have been breached. None of Lakewood or any [Af?liate is awarelof any defaults, and none of Lakewood or any Af?lht?- has any reason to believe that a defanlt may occur by Lakewoodor any Af?liate or any other party to the material contracts and commitments to which lakewood and the Af?liates may become a party (by assignment, transfer by operation of levy, succession, or otherwise). SECTION 3.18 ?lial?AHME- TO the knowledge of Lakewood and the Affiliates, open Laloewood's and the ??liate?s receipt of written approval for the transactions contemplated born the applicable federal. aud state regulatory bodies, all consents, approvals, quali?cations, orders or authorizations of, or ?lings with, any goiternmental authority, any court or other governmental third party, required in connection with Lakenond?s. valid, execution, delivery, or performance of Agreement, or the consummation of any transaction contemplated by this Agreement, shall have been duly made and obtained and shall be effective on and as of the Closing Date. SECTION 3.19 cm. The and Medicaid cost reports of Lakewood were filed when due. Except for disputes between Lakenrood and the intermediary Which concern the payment of an individual claim (as opposed to such disputes concerning the right of lake-mood to receive Medicare or Medicaid reimbursement generally or to participate in the Medicare or Medicaid programs), there is no dispute between lakewood and any governmental audtorities or the Medicare ?scal intermediary regarding such cost reports, other than with resraect to adjusnnents thereto made in the ordinary course of business which do not. involVe amounts in excess of $300,000 in the aggregate. Lakewood is not subject to any pending, but unassessed Medicare or Medicaid claim payment adjustments, except to the eittent Lakewood has established adequate reserves for such adjustments. Lest? ., - Jig SECTION 3.20 and ed caid Cert en ditati . . 3.20.1 To the extent applicable to their of lakewocd and the Af?liates has not and doesmeet, without material exception, the conditions for participation in the Medicare and Medicaid programs, and, to the kuowledge of lakes-road, there is no pending or threatened proceeding or investigation under such programs involving lakewood or the Af?liates. . 33M fully 133' Join on Accreditation of'HealtheaIe Organizations To the knowledge of Lakewood, there is no pending or? threamned investigation of Inkemood by JCAHO which investigatirm is net otherwise conducted in the ordinary course of business. - SECTION 3.21 For purposes of this Agreement, the term ?Employee Plan." includes any-pension, retirement, savings, disability, medical, dental or other health plan, life insurance (including any individual lifei?insnrance policy as to which lakeWood Or any Af?liate makes premium payments whether or' net any 1 of tenement or the is the owner, bene?ciary or both of such policy) or other death bene?t plan, pro?t sharing, deferred compensation, stock option, bonus or other incentive plan, vacation'bene?t plan,- severance plan or other. employee bene?t plan or arrangement (whether written or arising from" Whom), anye?mmoyee pennion bene?tplan G?Pension Plan?) as de?ned in Section 3(2) of the Employee Retirement Income Security of 1914, as; amended and any employee welfare bene?t plan as de?ned in Section 3(1) of ERISA whether a: not any of the foregoing whether mitten or oral. 3.21.1 There are. no Employee Plans, other than ?iose in W, to which Lakewood or any Af?liate is a party or by which lakewood or any Affiliate (or any of its rights, properties or assets) is bound or (ii) with reaps-act to which iakewood or any Af?liate has made payments, contributions orcommiunents or may otherwise have any liability (including any such plan or-arrangement? formerly maintained by Lakewood or any Af?liate. . 3.21.2 Except as disclosed in Schedule-3.2 no Pension Plan is a "de?ned bene?t plan? as defined in Section 3(35) of ERISA or a "mold?employer plan? as defined in Section 400101) of ERISA. 3.21.3 Except as disclosed in Schedule 3.21, to Lakewood?s knowledge, each Employee Plan, the administrator and ?duciariesfof each Employee Plan, and Lakewood and the Af?liates have at all complied with the applicable requirements of ERISA, as it relates to them, including, but not limited to, the fiduciary responsibilities imposed by Part 4 of Title 1, Subtitle of ERISA, and any other applicable law (including regulations and rulings. thereunder) governing each Employee Plan, including, without limitation, Sections 4030)) and 457 of the Tax (lode, and each Employee Plan has at all times been properly administered. in -17- 35' . 3L up (we? . Tw- nit-o a ?bag-?32] 3km?. 51? uni-3% 3.. accordance with all such regenements of law, and in accordance With its terms and the terms of any applicable collective bargaining agreement to the extent consistent with all such requirements of law with respectto all of the foregoing inthis Sentence, the failure of which will not have a material effect on the businesses of?Lalnewood and the Af?liates on a consolidated basis. To the knoWledge of Lakewood no lawman: to, or by, any persbn or governmental entity'have been filed or_are pending and no crate of facts or contemplated eyent could beireasonably likely to give fee to any such lawsuit or complaint with respect to any Employee Plan. Without limiting the foregoing and except as disclosed in Schedule 3,21; the following are true, with respect to each Employee Plan: 3-2193; be ?led on a timer basis each and every return, report. statement, notice, declaration and other amen: required by any government agency; federal, state and local (including, without limitation, the Internal Revenue Service and the Department of Labor), with respect to each Employee. Pian. - 3.21.44 Except as disclosed in with respect to each Employee Plan, there has not occurred, nor is any person or entity contracmally bound to enter into, any transaction giving rise to any tax or liability under Section 4975- of' the Tax Code or Section 406 or Section 5026) of ERISA for which an bx?mption is not available. 3.21.5 7 lakewood has made available to CCF true and correct copies of all financial statements, if any, and annual reports on Form 5500 for each Employee Plan and, except as disclosed in Schednle 3.21, no change which has a material adverse effect to the ?nancial condition of LakewOod' and?the Af?liates or any Employee Plan has counted with respect to the ?nancial condition or funding of the Eniployee Plans since the date of such, ?nancial statements. 3.21.6 Inkewood and the Af?liates have in all material respects complied with the requirements, to the extent applicable, of the Consolidawd Omnibus Budget Reconciliation Act of 1985 with respect to the continuation of emplOyer-provided health bene?ts following a event" which would otherwise terminate such bene?ts, asprovided in Section 4980B(f) of the Tax Code and applicable regulations and Internal Revenue Service rulings, notices, and other pronouncements. 3.21.7 Excopt as disclosed in W, there is no agreement or other promise, written or oral, of Lakewood or any of the Af?liates, to the effect that any Employee Plan may not be terminated at Lakenrood?s or the Af?liate?s discretion at any time, subject to any applicable provisions of ERISA, the Tax Code and any regulations promulgated thereunder. SECTION 3.22 Hill-Burth Loan. None of Lakewood or the Af?liates has any outstanding obligation to repay any loans, grants, or loan guarantees, or to provide -13- uncompensated care in consideration thereof, pursuant to the Hill-BurninAct (42 291a, st seq?J. SECTION 3.23 . 3.23.1' With regard any of LakeWtJod?s and properties, lakmvood has knowledge of no facts ?le use, storage. treatment, transportation, manufacture,'_ tar-disposal of Hazardous or Penolenm Products in violation of Environmental Laws, the violation of which would have a' material adverse effect on the businesses of and the Affiliates. one consolidated basis. . 3.23.2 To the knowledge oflakewood, no pendingclaims havebeenmade against Lakew'ood or the Af?liates, no closently outstanding citations or notiCes'haveheen issued against Lakewood or the and none of Lakewood or the-Af?liates-has any obligation or liability, matured or not matured, absolute or contingent, assessed or massessed, which. in the. case of'any of the. foregoing haye been or areimposed by. reason of or based upon any provision of any Environmental Laws. 7 3.23.3 As used inthis Section 3.23, "Environmental Laws" shall, mean any and; all federal, state, local, or municipal laws, rules, orders, reg'ulatidm, statutes, ordinances, codes, decrees, .or requirements of any 7 federal, state, municipal, or other goiternmental deparunent, commission, board. bureau, agency,- or or other court nominates, in case whethetof the United States. or foreign, resenting-t relating to, or imposing liability or standards of eonduct concerning any Hazardous Material or Petroleum Products or environmental protection, as now or may at any. time hereafter be. in effect. together, in each case, with any amendment thereto, and the regulations adopted and publications promulgated thereunder and all; substitutions thereof. 3.23.4 As used in this Section 3.23, ?Hazardous Materials" shall mean any hazardous materials, hazardous wastes, infectious medical wastes, hazardous or toxic substations, nebestos, asbestos '?bers, friable asbestos, any or. constiments of the foregoing, de?ned or regulated as such in or under any Environmental law. 3.23.5 As used in this Section 3.23, "Petroleum Products? shall mean gasoline, diesel fuel, motor oil, waste or used oil, heating oil, kerosene, and any other petroleum pdeucts. ARTICLE 4- - REPRESENTATIONS AND WARRANTIES or con CCF represents and warrants to Lakewood as follows: n. 'i 113.: or we . CCF isduly incorporated, validly existing and in good standing under the laws of the State of Ohio. CCF -19, at :e ?b def: A 4? has the corporate power and authority to own and hold'its pmperties and to carry on its business as now SECTION 4-2 NM. The mention, delivery and performance. by CCF of this Agreement related agreemb'nt?ontempiated herein do not and will not inhumane or con?ict with of incorporation or (ledge-at . of to violate, or con?ict any material law, regulation, judgmdent, order or decree applicable to or a default under or give rise to any right to terminate any material agreement, contract or other instrument binding upon CCF, or any material-lime; permit or other similar authorization held. by CCF. SECTION 4.3 m. has the full corporate power and authority to execute and deliver this Agreement and all other agreements and documents necessary to consummate the centemplatedh'ansaetions and all carpal-ate action of OCR necessary for such execution delivery and the performance thereof will, by the Closing Date, hare been duly taken; This Agreementand all agreements related to this been duly executed and delivered by GOP and, when duly executed by dreamer patties thereto, oomtinlte the legal, valid. and binding obligation of 001' enforceable in accordance with their terms, subject as to enforcement of remedies to the discretion of courts in awarding equitable relief and to. applicable bankruptcy, reorganization, imolveney, moratorium and similar laws affecting the rights of To the translates of (1.91mi! 11? CCF 01? this Agreement,- and the performance of its obligations hereunder. .tlo'es not .reriuire any action or consent [of any party other than CCF pursuant to any contract. agreenmnt or other undertaking of CCF, or pursuant to any order or decree to which GOP is a party or to which its properties or assets are subject. 7 SECTION 4.4 . Cm Home ?rm Low. To the knowledge of CCF, CCF has the lawful authority and all material state, federal, special or local governmental authorizations, licenses or permits required to conduct its business as such business is presently being conducted the absence of which would not have a material adverse effect on the business of CCF. SECTION 4.5 Financial ?taternen . CCF has furnished to Lakewood the audited ?nancial statements of CCF as of December 31, 1993., 1994' and 1995, including the balance sheet and the related statements of revenue and expenses, cash ?ows and changes in general fund balances of CCF for the years then ended, with an annuali?ed report thereon from YWle independent publi?? (the Financial Statements"), including any management letters regarding the internal operations of GOP with respect to such ?scal year that have been delineted to CCF and (ii) unaudited interim ?nancial statements of CCF for the periods horn January 1, 1996, to March?3l, 1996, and will ?nish such unaudited interim financial statements for the periods through the month ending immediately prior to the Closing Date (collectively referred to as the Unaudited Financial Statements") (the CCF Audited Statements and the CCF Unaudited Financial Statements are. sometimes referred to herein collectively as the Financial Statements"). "Hie. CCF Financial Statements have been (or will be when delivered) -20- ss- prepared in accordance with generally- accepted accounting principles consistently applied insects year end and'fairly present in all material respects the ?nancial position of CCF and theresmts, of for speci?ed. Except as in Financial Statements, CCF has not inclu'red any liability other the ordinary course of business. Since December-'31, 1995, except - no ohangein the assets, liabilities or oondinonos CCF from- intbe- CCF "Audited Financial Statement, except for clin'nges in ?ierordinaxy'oourse ofbusiuess and consistent with pastme Which, in the aggregate, have not-been materially-comet: to the bigness, prospects, ?nancial condition, opemtions, property, 0: of and (ii) none of the business, prospects, financial condition, operations, property, or affairs of CCF has been materially adversely affected by any occurrence 01' development, individually or in the aggregate, whether or not insured against. SECIIQN 4.6 cu Sill) "Vtto ate . We, on) ExceptStatements, CCF has not any "liability of?atiy nature which. would haven material adverse effeCt on ?nancial condition or results of operations on a consolidated basis, and CCF lies not: issued - any stock, bond or other, corporate security or created any membership interest; (ii) borrowed any amount?or incuxred or become subject to any liability (absolute, accrued or contingent), excepti'conrentlinbilities incurred, liabilities under contracts entered into in the ordinary course of'bttsiness; unsatis?ed any lien or encumbrance or incurred or paid any obligation onllabilitylabsolute, accrued or centingent) other than current liabilities shown on the CCF Audited 'inancial Statements and current since the date of the CCF Audited Financial Statements andre?ected on the COP Unaudited. Financial Statements in the ordinary course of business; (iv) declared or made any payment or- distribution to members or shareholders or purchased or redeemed any membership or share of its capital stock or other security; mortgaged, pledged or subjected to lien any of its assets, tangible or intangible, other than liens which arise by Operation of law, liens of current real property taxes not yet due and payable or liens on assets pursuant to purchase money security interests inclined in the ?2de? of bnsi?ess; (Vi) sold. assigned 9.17 any of its lensiblc assets or cancelled any debtor claim, exce inthe~ordinarycourse of business: (vii) suffered any material, uninsured loss of property or waived any material right whether or not in the. ordinary course of business; made any change in of?cer compensation; {is} made any matezial change in the manner of business or Operations including any change in accounting principles and practices; (it) entered into any msaction except in the ordinary course of business or as otherwise contemle hereby; or (xi) entered into any commitment (contingent or otherwise) to do any of the foregoing, any of which would have a material concise effect on ?nancial Condition or- results of operation on a consolidated basis. SECTION 4.7 a a . To the knowledge of CCF, and except as disclosed on ?chedule 4,7, there is no:. action, suit, claim, proceeding, or investigation pending or, threatened against CCF by any private party or any federal, state, -21- :h - than municipal, or other governmental department, commission, board, bureau, agency or domestic or foreign. adversely to. GOP would. havoemateriai adverse effect on condition or results of operations on aeonsolidated basis; (ii) arbitrationproceeding to (ICE pending under collective agreements or otherwise; or governmenml or professional inquiry pending or or affecting COP (including, without limitation, as- to CCF- orgthe to hold or receive any license or permit), which if decided adversely-m1 CCF would have a material adverse effect on ?nancial condition or results _of on a comelidatedbasis. GOP is not in default withrespect to any order, writ, inij or decree known to or served upon it of any court or of any federal, state, mimicipal, or - other . governmental department, comn?ssioo, board, bureau, agency, or instrumentality, domestic or foreign. SECTION 4.8 CCF is exempt from Federal income tax person to Section 501(c)("topic!" of Section of the Tax is not antareof any proceeding, or threatened, or of any existing sitcomstances, which anticipated to. result in the loss or reVocation of the aforementioned exemption held by CCF. Meg. Ed icaid eL??ca?gn; Aeerndm' on. 4.9.1 To the extent applicable to its businesses, CCF?has met and does meet, without material exception, the conditions for participation in the. Medicare and Medicaid SECTION 4.9 program, and, to the knowledge of (ICE, there is no pending or threatened proceeding or investigation under such program involving CCF, which if decided adversely to GOP would have a material adverse effect on ?nancial condition or results of operations on a consolidated basis. 4.9.2 CCF is fully accredited by the Joint Commission on Accreditation of Healthcare Organizations To the knowledge of CCF, there is no pending or threatened inVestigation by JCAHO which investigation is not otherwise conducted in the ordinary course of business. ARTICLE 5. CONDITIONS TO THE OBLIGATIONS 0F CCF- The obligations of GOP to consummate this Agreement and any other transaction contemplated by this Agreement are, at its option, subject to the satisfaction, on or before the Closing Date, of the following conditions: - SECTION 5.1 We. can on have receian from counsel for Lakecrood an Opinion, dated as of the" Closing Date, in formand substance satis- factory to it and its counsel, to the effect that: -22- E5 5.1.1 Inkewood is Validly existing, and in gear! standing; under the laws of the State of ohio; (ii) has been determined by the Internal noose to be. snoop; from federal income tax under Section 501(3) of the Tax Code, as an organisation (and not a private foundation) as de?ned in, section 509(a) of the Tax Code, within the of SectiOn of the Tax Code; there have not been-brought to not attention any changes in the Internal Service?s position or thelfacts on which Lakewood?s emmp?on is' based which are liker to result in Such exemption or status being jeopardized; is duly quali?ed to transact business in the State of Ohio; and (it) has the corporate poWet? to own and hold its properties and to carry On its business as now conducted. Laleewood has the corporate power and authority to execute, deliver, and perform its obligations tinder this Agreement and the'Lease. contemplated'herem All regulatory approvals for Iakewood to perform fully the transactions contemplated herein have been obtained. 5.1.2 Lakewood has the full corporate power and authority to execute, deliver, perfornr grgreetnent, upon the requisite approvals ?hereof, all corporate action of Lakeniood necessary for such execution, and performance will have been duly taken. This Agreement and the have been only Broom! de?ned by constitute the legal, valid, and binding obligation of Inkewood enforceable in accordance with their terms (subject as to enforcement of remedies to the discretion of the courts. in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium, and similnrlaws affecting the rights of creditors generally). stamens-,2 a . - representations and Warranties made Lakewood contained inArticle 3 shall be into, complete, and correct in all respects oar-and as of the Closing Date with the some effect as though such representations and warranties had been made on and as of such date, and an of?cer of Lakewood shall have certi?ed to. Snell effect to CCF in Writing; sec-Iron 5.3 Lease 'Ag?ment. The City and Lakewood shall enter into the Leases; referred to Seeded 1,8, above. SECTION 5.4 Bond Trustee Cement. Bond trustee for the holders of bonds for which Lakewood is the have consented to the cansactions contemplated herein, to the extent necessary. seamen 5.5 mm Lakewood shall have performed and complied in all material respects with all agreements contemplated herein that are required to be performed or complied with by Inkewood prior to or at the Closing Date. SECTION 5?6 I W. All (MPGram and Other proceedings to be taken by Lakewood in connection with the transactions contemplated hereby. and all documents incident thereto shall be reasonably satisfactory in form and substance to CCF and its counsel, and CCF and its counsel shall have received all such counterpart originals or certi?ed or other cepies of such documents as they reasonany may request. 23 - SECTION 5.7- once of I in! dverse . There shall have been no material adverse change, since the of the most recent Elmo; Statements, in the business, assets, ?nancial condition, or operations? of. Ialnewood or- any Af?liate. or any other event that would, with the passage of time or othetwise, affect in?any material respec' use accura? cy of any Ofrthe and warrantz? 'es? of [akewood Frior to Closing, Lakewood shall have notified GOP in writing of any event of which its of?cers have. knowledge that occurred, or was reasonably; likely to occur, and which was reasonably lilcely to {adult in a matetial Worse change in the intuitions, assets, ?nancial condition, or operations of Iakewood or any Af?liate and of any other event that wordd, with the passage of time or otherwise, impair or otherwise in any meetial respect the accuracy of any of the representations and warranties of Lakewood contained herein on and es of the Closing Date. i SECTION 5.8 Approvals. All necessaty corporate and regulatory approvals for the In this esteemth shall havebeen obtained; includes, but not limited tot approval of the Ohio Deparnnent of Health to the changeof membei?ship; and (ii) the approval of the Departmentof Justice Bedan ?Keane Communion for passage of the appropriate waiting period) pursuant to the Hart-Scott-Rodino Antitrust ImprovementAct 'of 1976. The Beard of Trustees of Lakewood shall have the transactions. contamplated hereby. SECTION 5.9 W. and its counsel shall have received copies of the following documents: curiae I 3 n. 5.9.1 The Articles of Incozpor'ation of Lakewood and each Af?liate, certi?ed thirty (30) days of the Closing by the Secretary of the State for the State of Ohio; 5.9.2 A certi?cate _of the Secretary of State for the State of Ohio dated within thirty (30) days of the Closing as to the due incorporation and-good standing of Lakewood and each and listing all documents of Lakewood and'each Af?liate on ?le with said Secretary; and 5.9.3 The Code of Regulations of Lakewood and. eachAf??ate, 5.9.4 A certi?cate of the Secretary or an Assistant Secretaiy' of Lakewood dated as of the Closing. Date and that attached thereto is a trueand complete copy of the Articles of Incorporation and the Code of Regulations of Lakewood, as. amended and as in effect on the date of- such certi?cation; (ii) that attached thereto is a true and complete cany- of all resolutions adepted by the Board of Trustees of Lakewood authorizing the execution, delivery, and performance of this Agreement and all transactions contemplated by this Agreement and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; that'the Articles of Incorporation have not been amended since the date of the last amendment referred to in. the certi?cate delivered pursuant to Section 5.9.2 above; and (iv) to the incumbency and specimen signature -24- of each of?cer of Lakewood executing this Agreement and a certi?cation by another of?cer of as to the incarnbency and signature of the officer signing the referred to. in; this Section 5.9.2. 7 - 7 5.9.5 .A certi?cate of an Of?cer of each of the Af?liates dated as of the Closing Date and certifying: (ii that-attached is a- true- and complete copy-at: the Articles of- lncor'polation and Code of Regulations of such entity in effect as of the date of such certi?cation; and (ii) that Articles of Incorporation and Code of Regulations have not been amended since the date of the last. amendment referred to in the certificate delivered pursuant to Section 5.9.2 abbve. A 5.9.5 Such additional supporting documents and other information with respect to the operations and affairs of Lakewood as CCF or its counsel reasonany may request. SEQTIQN 5.10 Due Dii once. CCF shall have completed, and the results shall be to its reasonable sassncaasj?ai?tsapi?abu?sms, and legal due algae mate of Lakewood and the. Af?liates, including, but not limited to, an analysis. of any antitrust implications of the contemplated transactions. if CCF does not terminate the Agreement on or before October 15, 1996 because of this condition, the condition shall be deemed to be waived; annexe 6. commons T0 {ran onucarrons on LAKEWOOD The obligations of lakewood to this Agreement and any other transaction contemplated by this Agreement are, at its option, subject to the satisfaction, on or before the Closing Date, of the folloWing conditions: SECTION 45,; 99mm gr, owner can. Lakewoodshallhave received from counsel for CCF an opinion, dated as of the Closing Date, in form and substance satisfactory to it and its counsel, to the effect that: 6.1.1 CCF is validly existing, and in good standing under the laws of the State of Ohio; (it) has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Tax Code and as an organization (and. not a private feundation) as de?ned in Section 509(3) of the Tax Code; there have not been brought to our attention any changes in the Internal Rovenue Service?s position or the facts on which exemption is based which are likely to result in such exemption or status being jeopardized; is duly quali?ed to transact business in the State of Ohio; and (iv) duly empowered and authorized to own and hold its properties and to carry on its business as now conducted. has the corporate power and authority to execute, deliver, and perform its obligations under this Agreement and the lease contemplated herein. All regulatory approvals necessary for GOP to perform fully the transactions contemplated herein have been obtained. -25.. - 6.1.2 CCF has the full legal power and authority to . execute, deliver, and. perform this Agreement and, upon the requisite approvals thereof, alleorpcrate action of notessary for such execution, delivery, and pel?formance will have been duly taken. This Agreement?has been duly eXecutcd and delivered by CCF and constimtes the legal, valid, and binding obligation of CCP enforceable in accordance with their terms (subject as to enforcement of remedies to the discretion of the courts in awarding equitable relief and to applicable bankruptcy, reorganization, insoIVency, moratorium, and similar laws affecting the rights of centrally},- SECTION 6.2. We. The. representations and-warranties made by CCF contained in Article 4 shall be true, complete, and correct in all material respects on and as of the. Closing Date with tiresome effect as though such representations and warranties had been made on and as of such date, and of?cers of (ICE shall have certi?ed to such effect to Lakewood in writing. SECTION 6.3 can shall have performed and complied in. all material respects with all agreements contemplated herein that tire required to be performed or complied with by CCF prior to or at the Closing Date. SECTTON 6-4 - All corpora?? and other proceedings to be taken by CCF in connection with the transactions contemplated hereby and 7 all documents incident thereto shall be reasonably satisfactory in form and substance to and its counsel, and Iakewood and its. course! shall have received all . counterpart Originals or "certi?ed or other copies of such documents as they reasonably may v- . request. snorioN 6There shall have been no material adverse change, since the date of the most recent CCF Audited Financial Statement, in the business; assets, ?nancial- conditlon, or operatiom of CCF or any other event that would, with the pri?ssage of time or otherwise impair or otherwise affect in any material respect, the accuracy of any of therepresentations and warranties of CCF. Prior to Closing, 66F Shall have noti?ed Lakewood in writing of any material event of which its of?cers have torow1ed?ge that or was reasonably likely to occur, and which was reasonably likely to result in a material adverse change in the business, assetsh?nancial condition; or operations and of any other event that would, with the passage of time or otherwise, impair or otherwise affect, in any material respect, the accuracy of any of the representations and warranties of CCF contained herein on and as of the Closing Date. SECTION 6.6 Atom. All necessary corporate and regulatory approvals for the transactions contemplated by this Agreement shall have been obtained, including, but. not limited to: approval of the Ohio Department of Health to the change of membership; and (ii) the approval of the Department of Justice and Federal Trade Commission pursuant to the Hart-Scott-Rodino Antitrust Irnprovcrnent Act of 1976. The Board of Trustees of CCF shall have approved the transactions contemplated hereby. - 26 - ?39' SECTION 6.7 231ng on. Lakewood shall have completed, and the results shall be to men reasonable sans a business, ?nancial, and legal due diligence sales: of CCF, including, but not limited'no; an analysis of any antitrust implications of the transactions. If Inkewooddoes not termimte the Agreemenlson {yr-before. October, 15, 1996 because of this condition, the condition shall be deemedto be waived. SECTION 6.8. Lakewood shall be a member of foe Cleveland Health Network prior to or on the Closing Date. ARTICLE 7. INTERIM COVENANTS LAKEWOOD . DATE 9F Lakewood covenants to GOP that fof the period between. the date of this. Agreement and the Closing Date: - SECTION 7.1 MW. Lakewood shall use its feasonable best efforts 'to conduct [akeWood?s business so as to mannain the properties and business 'of Lakewood and to preserve the business organization and the goodwill of customers and. suppliessof Lakewood. Except as otherwise herein proVided, without the prior written consent of CCF, which consent shall not be unreasonably mmheld or delayed, Inkewood shall ?gm not: . . 7.1.1 Declare or pay any distributions of its assets to any member; 7.1.2 Amend its Articles of Incorporation or Code of Regulations encept as otherwise provided by this Agreement; 7.1.3 Make any material ohange in its business, including any changes. in accounting principles and practices or make any capital expenditures indiViduaIly in eonSs of $2.5 million or in escess of $5 million in the aggregate 7.1.4 Execute, renew or extend?anyr lease obligations which. individually or in the aggregate are greater than $2.5 million per year; 7.1.5 Acqlxire any other material business or interest therein; 7. 1.6 Increase the compensation of any n'ussoe, of?cer, or employee other than regulme scheduled increases oonsistent'with an existing compensation program and past Pm?ces; -27- 7.1.7 Mortgage,- sell, or lease any of its material assets: except as angler Section 8.1.1 above other than in the ordinary course of business and consistent with past practices; - - I 7.1.3 Incur any indebtetlness or make any loans, which individually or in the aggregate are greater than 7.1.9 Enter-intoanymaterial agreeinent orrenew any material agreement except as is consistent with past practices; or 7.1.10 A Agree to do any of the foregoing. SECTION 7.2 W. lakewood will not, without prior consultation with CCF, any to the public concoming the connections contemplated by this Agreement. SECTION 7.3 Access. tom rotation. Prior to. Closing, shall permit CCF and its counsel, accountants, and other representatives reasonable access during normal business hours to all preperties, books, contracts, commitments, and records_.of Lakewood and the Af?liatcs reasonably necessary for due diligence review and Lakewood shall furnish such statements (f'mancial and otherwise), records; documents, and-Aothecinfortnation concerning tho'opcrations of Lakewood and the Af?liates as CCF and reasonably request from time to time. To the extent reasonably reoriented by Lakewood shall request its accountants, attorneys, and other representatives to cooperate with the representatives of CCF . in connection With the right of access granted herein. - SECTION 7.4 W. Lakewood shall givo notice. to CCF of the occurrence of any event, or the failure of any event to occur that results in a material breach of any representation or Warranty of Iakewood or a failure by Lakewood to comply with any material cement, condition or assassin: cashless. herein SECTION 75 WW. [akeWOod will useitsreasonahleefforts. to obtain all licenses, consents or other appt?otrals' acquired to be obtained by it" from any appropriate governmental agency or authority or other person in connection with the consummation of the transactions contemplated by this Agreement. Annals; s. menu COVENANTS on can BETWEEN Ton nA-In on THIS AGREEMENT AND THE CLOSING DATE SECTION 8.1 W. CCF will not, without prior consultation with Lakewood, make any announcement to the public concerning- the cansactions contemplated by this Agreeman J23, SECTION 8.2 Prior to Closing, Lakewood and its Counsel, accountants, and other representatives access during normal business hours to all properties, hooks, contracts, commiunents, and of GOP, roasonably necessary for L'akeumod?s due diligence irwbw or GOP and CCF shall furnish such statements, records, reportti, documents and enter information as [chowoodfand its counsel reasonably request froin thee to time. To the extent reasonany requested by Iakewood, CCF shall request its counsel, accountants, and other representatives to cooperate with the representatives of Iakewood inconuection with the rights. of access greeted herein; SECTION 3.3 CCF will give notice to Lakewood 9f the occurrence of any errant or failure of. any escorts. ?rst results material breach or any representation or warranty of CCF or a failure by CCF to comply with any material covenant, condition or agreement contained herein. SECTION 8.4 . (2015" will use its best efforts to obtain all licenses, consents and other approvals required to be obtained from any appropriate governmental agency or authority or other person in connection with the consummation of the Uansactions contemplated by this Agreement. 7 Anatolia 9. JOINT COVENANTS OF THE PART-tics SECTION 9.1 _an?dgn_ti any: of Busing Informing? n. The parties heretofore have received and hereafter may receive various ?nancial and other information concerning their respective activities, businesses, assets, and properties. The parties agree that:' 9.1.1 all such information thus received by the parties shall not at any .titne, or, in any way or manner, be utilized by the parties for their respective advantage or disclosed by the parties to others: forany .-purposc- whatsoever; 9.1.2 the parties shall take all reasonable measures to assure that no employee or agent under their respective control shall at any time use or disclose any information described in this Section; and 9.1.3 this Section. shall not apply to; any such in?armation that was known to the parties prior to its disclosure to the parties in accordance with this Section or was, is, or becomes generally available to the public other than by disclosure by the parties or any of their respec?ve employees or agents in violation of this Section; or (ii) l?gally compelled disclosure of any such information,; provided, however, that prior to such latter disclosure, the party proposing to make, such disclosure as a. result Of such. legal. PIOCQSS shall. 31.6 other Party with reasonable notice prior to disclosure to allow such other party to contest such disclosure or otherwise obtain any limitations on such disclosure from the applicable tribunal. -29- 9-2 . .7 . ?ll-a Theexistencc, terms and contents of this Agreement and its?Sehedules and Exhibits and?the nature and slams of the transactions described hereinand eaten are con?dential. Withoot the prior written consent of the ether parties, no party will to" any person, other than to its respective 'mm, officers, employeesj-af?liaflcs, such confidential information unless. in the written opinion of counsel to the party seeking to moon: disclosure, such a disclosure is required. by applicable corporation or securities laws, the Hart?Scott-Rodino Actions: Inlprovement Act of. 1976? or any other federal or . state governmental authority, or as required by the City of Lakewood invconnection with its approval of the Lease. The and content of any announcements, press releases, or other public Statements concerning theitransactlons contemplated by this Agreement will and be determined by, the mutual agreement and consent of the parties. section as termination the A reement (the "Interim ii :and only With each other regarding the subject matter 7 so of thisAgreement; provided, however, that'this Section 9.3 shall not be construed eta-limiting the ability of GOP, in any way, to discuss or for-idle integration of other health care providers or practitioners, including hospitals and/or physicians, into the CCF health care system. Lakewood and any of?cer, director or controlling person thereof will not solicit any competing proposals for the integration, consolidation or acquisition of Lakewood by any other person or entity during the Interim-Period. Further, any proposal which. is received from any of?cer, director or controlling person of Lalcesvood, or any af?liate thereof, whether or not solicited by Lakewood shall be rejected during the Interim Period, accordance with this Section 9.3. - . 9.3.2 Inkewood acknowledge and agree that a remedy at law for any breach or threatened breach of the provisions. of Section" 9.3 hereof would be inadeduateand, therefore, that CCF shall be entitled to injunctive relief in addition to any other available and remedies in cases of any such breach or threatened breach; provided, however, that nothing contained herein shall beconstrued as prohibiting CCF from pursuing any other rights and remedies available for such breach or threatened breach. I. ARTICLE .10. TERMMATION SECTION 10.1 {germination Brio: to Closing. This Agreement may be terminated prior to Closing by mutual consent of the parties or by CCF or Lakewood by notice to the other Pally: -30- tit-Vii: l: 10.1.1 in the event that any of the conditions precedent to the performance of the obligations of the party- giving ?such notice shall not have been ?tlfilled and cannot be fulfilled on or prior. to the Closing Date and shall not have been waived by such party, or ifa default shall another-party in the observance or in the due andtiruely performance of any of the covenants and agreements herein contained that cannot be cured on or prior to the Closing Date andsh?all 110: have been waived by the party giving such notice; pro?ded,? however, that nothing herein shall be construed as permitting a party to terminate when the party has been in default such that CCF may not terminate if CCF is - in default and Lakewood may not tenniuate if Iakewood is in default; 10.1.2 7 at either CCF's or Lakewood?s option, hi the event of the instimtion of litigation or proceedings against CCF or Lakewood, which constitutes a serious threat to enjoin, hinder or delay or'to obtain damages or other relief in connection with this Agreement or the transactions herein or diatom; or 1.0.1.3 if any. consents or- approvals which. are. necessary to the consummation of thetransaotions contemplated by this Agreement or the continuing business properties or prospects of the entity resulting from the consummation of the nansactions contemplated by this Agreement shall have been refused or withdrawn by any governmental authority having jurisdiction, including, but not limited to, the Department (if-Justice, the Federal Trade Commission or the Ohio Department of Health. 10.1.4 if the Closing does not occur within ninety (90) days of the date of- execution of this Agreement (the ?Abandonment Date"); provided; hoWever, that if the Closing is delayed heyond ninety (90) days from the execution date of this Agreement solely by virtue of any delay in obtaining regulatory approvals, the Abandonment one shall be extended until. have been obtainedror denied: provided further, however. or Lakewood shall have the option of terminating this Agreement after one hundred eighty (180) days after the date of execution of this Agreement. SECTION 10.3 Approval by Boga of Trustees. Any termination pursuant to Section 10.1 or 10.2 shall ?rst be approved by the Board of Trustees of the party seeking termination, to the extent that such appraisal is required for such action. - .31- i" SECTION. 10.4 Agnew ent of Attorney in End. in the event of a termination out of Sectiou102, and (ICE thereafter fails or refines to approve a change to the Articles _of Incorporation andlor Code of Regulations necessary to terminate its rights as the Member, the President of Lath or such other o?icer or agent of [akewocd- as-mny be appointed by the Board of shall be deemed to bethe attorneyrrin. solely to exercise . power as the Member, to approve any monuments to the Articles - of Incorporation and/or Code of Regulations necessary to torminate, rights as the sole. Member. Such attorney in fact shall have no other authority, express. or to act on of GOP, except with regard to voting to approve any such necessary amendments. SECTION 10.5 Upon termination of this Agreement, as provided in this Article 10, neither. party shall have any further obligation to the other party (other than any obligation due as a result of any action at law or equity which either party may have against the other in the event of a termination arising from any breach of this Agreement), except that the provisions of Article 9 of this Agreement shall survive the termination. ARTICIE 11. DISPUTES Shorten 11.1 Resolution Qf?Ceggjg Digging. 11.1.1 A matter shall not be deemed a Dispute until one party (the "Declaring Party?) declares, by the deliver of mitten notice (the. "Notice? to the other party that there exists a Dispute. The notice shall specify the cause of the Dispute and the action that the Declaring Party deems necessary to resolve the Dispute. In the event-the Dispute is not resolved_within thirty (30) days of the date of the Notice, the matter shall be resolved in accordance with the following precednres, except as otherwise provided in Section 11.1.4, below. 11.1.2 At any time prior to the commencement of arbitration or otherwise during the pendency of any Disgiute, either party may request that the matter he submitted for. discussion and resolution, if possible, by the Chief Executive of parties.- Notwithstanding this provision, the procedures, including tirne limits, set forth herein shall continue to apply. 11.1.3 At any time prior to the commencement of arbitration or otherwise during the pendency of a? Dispute, either party may request that the matter he submitted for discussion and resolution, if possible, by a committee comprised of the Chief Executive Officer of Lak?wood, the Chief Executive Of?cer of CCF, the Mayor of the City of Lakewood, a member of the Board of Trustees of Lakeurood selected in accordance with Section 1.1.3.3, and two members of the Board of Trustees of lakewood selected in accordance with Section 1. 1.3.5. -32- 11.1.4 Except as otherwise provided in SectiOn 11.1.4, below, an Disputes, to the extent otherwise not resolved by informal action of the parties, or by voluntary mediation, shall he settled by arbitration in Cleveland, Ohio, 'or in such other location as mummy agreed to by the parties, in?accordance with the then current miles of the American Arbitration Association. Any demand for arbitration must be madewithin thirty (30) days of the occurrence of the arbitration issue by the Declaring Pam. 'An arbitration issue shall be deemed to have occurred upon. the'date that the Declaring Party provides written notice to the other party that an arbitration issue exists. The parties shall seEct'one arbitrator to hear the conuoversy. If the parties are unable to agree on an arbitrator, each party shall each select one arbitrator and the two arbitrators shall a third arbitrator who shall hear the connoyersy. The decision of the arbitrator shall be consisteItt with the. terms of this_Agreemenb including the parties? intent as expressed herein, and shall be binding-upon all parties; provided, however, that the decision of the arbitrator may not have the effect of causing either partyto expend any funds 7 as a result thereof. The expenses of the arbitration shall be borne jointly by the parties. . 11.1.5 I Notwithstandingthe foregoing, the requirement of resolving a Dispute by arbitration shall not apply to any Dispute in which the remedy or relief sought by the Declaring Party includes the payment of money. ARTICLE 12. MISCELLANEOUS SECTION 12.1 ?nitions. 12.1.1 For the purposes of this Agreement, the word shall ?be de?ned as natural knowledge. - 12.1.2. For purposes of this Agreement, the word "material" shall mean having an affect on the business, Operations, prospects or condition of Lakewood, or having an affect on the properties or assets used by Inkewood in its bu?siness or operations, which has an enonomic effect of million, singly, or $5 million, in the aggregate. a? :?To 211?.? sei? SECTION 12.2 Mending-gigs. This Agreement may not be ?ooded or modi?ed without the written consent of the parties hereto. SECTION 12.3 waiver. Failure to insist upon strict compliance with any of the terms, covenants, or conditions of this Agreement at any one time shall not be deemed a waiver of such term, covenant, or condition at any other time nor shall any waiver or 'relinquishment of any right or potter herein at any time be deemed a waiver or reiinquishment of the same or any other right or power at any other time. 12.4 Meg. All notices, payments, or other communications required or permitted hereunder shall be in writing and delivered by personal delivery, mail, overnight courier or teleeopier and shall be deemed to have been duly given, if by personal delivery, when . -. 33 received; if by mail, when mailed by registered or certi?ed mail, postageprepaid, and realm receipt requested;- or if by overnight courier or telecopier, when acumen to such courier or?sent by teleeopier (provided That the party giving the notice has con?uua?on of such delivery or 7 sending), and addressed as follows (or at Such other addresseeas designated by theparties from time to time): . . 12.4.1 If to Lakewood: Lakeviood Hospital Association 14519 Benoit Avenue Lakewood, Ohio 44107 Attn:' Mr. Jules Bouthillet A President and Chief EXecutive Of?cer with a copy to: Lakewood Hospital Association 14519 Detroit Avenue Lakewood, Ohio 4410? Am: General Counsel and Christopher T. SWift, Esquire Baker Hostetler 3200'Nationai City Center 4e 1900 East 9th Sweet Cleveland, Ohio 44114 and Sara J. Fagni?i Director of Law City of Inkewood 12650 Detroit Avenue . Lakewood,- Ohio 44107 12.4.2 If to CCF: . Cleveland Clinic Foundation 9500 Euclid Avenu'e Cleveland, Ohio 44195 Attn: Frank L. Lordeman Chief Operating Of?cer -34- nay and David W. Rowan, Esquire . General Counsel CleVeland. Clinic Foundation 9500 Euclid Avenue Cleveland, Ohio 44195 with a copy to: Steven B. Epstein, Esquire Robert D. Rolf; Bshnire Epshein Becker 6: Green, RC. 1227 25th Street, N.W. Washington, no. 20037 12.5 W. This Agreement may he executed in any number of counterparts, each of which shall be deemed an original, but all of which? together shall one and the same instrument. SECTION 12.6 MW. In the eventany provision ofthis Agreement or petition thereof is found to be wholly or partially invalid, illegal, or unenforceable in any praceeding; men be deemed to be modified or restricted to ?le-extent and in the manner necessary to render the same valid and enfdro?able, or shall be deemed excisedfromthisAgreement, as ?iecesemayreqtnre, andthis Agreemnwallbeoonsn'ned and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modi?ed or resh'iched or as if such provision'had not been originally incorpomoecl herein, as the-case may be. SECTION 12.7 W. This Agreement shall be construed in accordance with the Ian's of the State of Ohio. SECTION 12.8 A f??es. The titles of the sections have been inserted as a matter of convenience and "reference only and shall not control or affect the meaning or construction of this Agreement. - SECTION 12.9 This Agreement shall not be assignable. or delegated by any party without the prior written consent of the other party. SECTION 12.10 i pony hereto will pay its! own expenses in connection with the transactiom contemplated hereby, whether or not such transactions shall be consummated. w35w oz?: w511.37. ga??h 3 %nm? 34/ SECTION 12.11 MW A?xepresentenons and warranties made herein or in any other agreeinentt certi?cate, or instrument delivered to any party pursuant to or in-.eonnection with this Agreement shall Stevive the execution and delivery of this Agreement for a period of two years from the date of (Timing, All statements contained in any certificate or other instrument delivered by (ICE or Lakewood hereunder or in connection herewidt shall be deemed to constitute representations and warranties made entity. Such representations and warranties shall survive until the time speci?ed herein in ?sh force and effect notwithstanding any investigation by the party relying upon them. 12.12. grotto rage. Each party hereto will indemnify and hold the others harmless against and in respect of any claim for brokerage or other commissions relative to this Agreement in to the transactions contemplated hereby, based in any my on agreements, arrangements, or understandings made or claimed to have been made by such party with any third party. 7 SECTION 12.13 All representations, covenants, and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the bene?t of the respective successors and assigns of the parties hereto whether so expressed or not. SECTION 12.14 32111811135. Ali remedies for breach of this Agmement shall be cumulative. - SECTION p.15 W. Except: as speci?cally provided herein, this Agreement does not and is not intended to create any rights in any person or entity which is not a party to this Agreement. SECTION 12.16 Entire Am, out. This Agreement, including the Schedules hereto, constitutes the sole and entire agreement and understanding of the parties with respect to the subject matter hereof. All Schedules hereto are meorporated herein by reference. IN WITNESS WBEREOF, the parties hereto have duly enecuted this'DefmitiVe Agreement this Of Oat; other .1996. - THE CLEVELAND CLINIC FOUNDATION LAKEWOOD HOSPITAL ASSOCIATION By: M?/x ByWIZIg/e?w?g/z Floyd D. Loop, H.D. Chief Executive Officer Tit-13: and Chairman, Board of Governors Title: . I152 - STATEMENT PER CIV.R. SELECTED EXHIBITS, ATTACHMENTS, AND SCHEDULES TO THE CONTRACT HAVE BEEN INTENTIONALLY OMITTED BECAUSE ALREADY A PUBLIC DOCUMENT, TOO VOLUMINOUS, AND NOT NECESSARY TO COMMENCE THIS ACTION. PLEASE SUBSTITUTE FOR ORDINANCE NO. 51?96 SUBMITTED WITH THIS DOCKET $?lghN?kL BEEN PLACED ON READING REFERRED, TO COMMITTEE OF THE WHOLE 11/18/96; 2nd READING ON 12/2/96. - 51-96 BY: Bosnia, Corrigan, Flannery, George, Roth, Seelie, Smith - AN ORDINANCE, authorizing the amendment and restatement of a Lease dated June 26, 1987, by and between the City of Lakewood, Ohio as Lessor, and Lakewood Hospital Association, a non-sectarian Ohio non-pro?t corporation organized for charitable purposes as Lessee, and authorizing the execution and delivery of an amended and restated Lease between the City and LI-IA, to pennit an af?liation between LHA and The Cleveland Clinic Foundation and authorizing andapproving related matters. MEREAS, the City of Lakewood owns certain real and personal property comprising hospital facilities and property located in the City, which are managed and operated by the Lakewood Hospital Assooiation pursuant to a Lease dated June 26, 1987, under the authority of Article XX, Section 4 of the Amended Charter of the City of Lakewood; and WHEREAS, there have been, and continue to be, signi?cantchanges in the health care industry, including changes in?the method and amounts of payments to hospitals and physicians for health care services, increased competition for patients among hospitals and alternative health care delivery systems, reductions in patients days and revenues due to utilizationreview pressures, aggressive e?'o'rts by business coalitions to limit hospital costs and obtain price discounts and increases in the aged population; and WHEREAS, in today?s economy and changing health care environment, community hospitals are particularly vulnerable due to limitations on their ability to compete with larger hospital networks and other private health care delivery systems for patient revenues; and WHEREAS, community hospitals in Ohio and across the nation have determined that it is in the best interest of their institutions to af?liate with a larger hospital network so as to obtain the ?exibility and ?nancial support necessary to compete in the current and' expected future economic conditions of the health care industry; and WHEREAS, the LHA Board of Trustees has examined the potential options for the future of Lakewood Hospital and has determined that an af?liation with The Cleveland Clinic Foundation will provide LHA with greater resources and more ?exibility to gain ?nancial and competitive advantages necessary to continue and thrive as both a health care provider and major employer in the City of Lakewood; and WHEREAS, LHA has requested that the City approve and enter into an amended and restated Leasesothat may meetthe conditions of its entering into a De?nitive Agreement with and WHEREAS, this Council hasdetermined that it is in the best interests of the residents and taxpayers of the City of Lakewood, and LHA and its patients, that the current Lease dated June 26, 1987 be amended by agreement of the parties, and that an amended and restated Lease be entered into by and between Lakewood Hospital Association and the City of Lakewood on the terms and conditions, and in substantially the form attached hereto as Exhibit as approved by the Director of Law, and in accordance with Chapter 140 of the Ohio Revised Code; and WHEREAS, the amended and restated Lease will require LHA to continue to pay the principal of and any premium and interest on the City's outstanding bonds under the Trust lndenture dated March 15, 1983, and the First Supplemental Trust lndenturc dated June 15, 1989, between the City and National City Bank as Trustee, and will require LHA to make other additional payments. including a new Additional Payment to the City; therefore, EHIBI BE IT ORDAINED BY COUNCIL OF THE CITY OF LAKEWOOD, OHIO, TWO- THIRDS OF THE MEMBERS THEREOF VOTING Section 1; The current Lease dated June 26, 1987, by and between the City of Lakewood and Lakewood Hospital Association will be amended and replaced by an amended and restated Lease on the termsand conditions, and in sribstantially the form attached hereto as Exhibit?A,? and as approved of Law. 7 Section 2. In consideration of the payments to be made by Lakewood Hospital Association under the terms of the Lease, and the covenants and other obligations contained therein, this Council authorizes and approves the amendment and restatement of the Lease dated June 26, 1987, and the execution and delivery of an amended and restated Lease, in substantially the form attached hereto as Exhibit and as approved by the Director of Law, with such changes, if any, which are approved by the of?cers of this City executing the Lease, permitted by the Bond Indentures, consistent with law and this Ordinance, in the best interest of this City and ma form approved by the DirectOr of Law. Section; The Mayor, President of Council and Director of Finance are hereby authorized and directed to execute the Lease on behalf of the City of Lakewood, and to execute such other documents and take such other actions as are necessary and appropriate to give effect to the amended and restated Lease. The Lease maybe signed upon the passage of this Ordinance, placed into escrow upon terms and conditions approved by the Director of Law and shall become effective upon the closing of the De?nitive Agreement by and between the Lakewood Hospital Association and The Cleveland Clinic Foundation, Section 4. It is found and determined that all formal actions of this Council concerning and relating to the passage of this Ordinance were adopted in an open meeting of this Council, and that all such deliberations, of this Council and any of its committees that resulted in such formal actions, were in'ineet'ingsopen tothepublic, inr?coitipliancenwith all legal requirements. Adopted: \lo 805% President - er Approved: - ayor AMENDED AND RESTATED LEASE I by and between CITY OF LAKEWOOD, OHIO. AND LAKEWOOD HOSPITAL ASSOCIATION THIS AMENDED AND RESTATED LEASE dated as of December 23, 1996 (the "Lease"), is made by and between the City of Lakewood, Ohio (the "City"), a municipal corporation and political subdivision in and of the State, and duly organized and validly existing under the laws of the State and Lakewood Hospital Association (the "Lessee"), a nonpro?t hospital agency, as de?ned in Section 140.01, Ohio Revised Code, now having its principal of?ce in Lakewood, Ohio and the Operator of the healthcare facility known as Lakewood Hospital (the "Hospital"). Since 1987 major changes have occurred in the method by which many individuals ensure theirability to afford hospital care and in the selection of acute care providers by entities paying the costs of hospitalization and other costs; and Entities paying the costs of hospitalization currently are insisting on a single contract providing for acute hospital care for all of its insureds or members in a large geographic area which has caused individual hospitals to enter into af?liations and other arrangements to meet the demands of those entities paying hospitalization costs; and . The Lessee needs to af?liate the Hospital with other heapitals to provide in a single contract a large geographic coverage of hospital care and for that purpose proposes to af?liate with The Cleveland Clinic Foundation and the Cleveland Health Network and in order to effect that af?liation needs to enter into a revised lease with the City in order to accommodate that af?liation; STATEMENT OF INTENT PURPOSE The purpose of this Lease is to continue the services and traditions of the Hospital. - The Lease will continue to relieve the City of any obligations or necessity of providing tax monies to subsidize the operation of the Hospital. 7 Because of the af?liation with CCF that will be made possible by the Lease, the Lessee will be able to compete on a fair and equal basis with other hospital systems, enter business relationships necessary to insure its ?nancial well-being, establish the mass necessary to secure managed care contracts, continue healthcare services to residents of the City and deveIOp new programs. . EXHIBIT 5 PARTIES TO AGREEMENT The City is the lessor under this Lease. 'The Lessee is Lakewood. Hospital Association, a non-pro?t corporation organized for the charitable purpose of operating the Hospital and its related health care facilities and services. GOVERNING BODY The Hospital will, subject to certain matters reserved to the member of the Lessee, be governed by the Lessee?s Board of Trustees ("Governing Board"). The Governing Board Will be composed of twenty-three members consisting of the Mayor of the City; two members of the Council of the City (representing the political parties with the largest and second largest number of representatives in Council) selected by Council; three representatives of community organizations of the City nominated by the Council of the City and elected by the Governing Board with the election rati?ed by the Member; four members, two of whom are nominated by the Mayor and two by the Council and elected by the Governing Board with the election rati?ed by the Member; three members elected by the Member; nine members nominated and elected by the Governing Board with the election rati?ed by the Member; and the immediate past President of the Medical Staff of the Hospital. The Governing Board will elect its own Chairperson and Vice Chairperson. LEASE: TERM: RENT AND ADDITIONAL PAYMENTS This agreement is a lease of the real and personal property for the operation of the Hospital from the City to the Lessee and continues the transfer from the City to the Lessee of all liabilities, debts, monies, accounts and inventories of the Hospital. . with the parties agreeing that the Lessee has an option to ten this Lease for a dt?ttonal?tenn of thirty years commencing at the expiration of the original thirty-year term of this Lease. At the end of- the termof this Lease or of the additional term if theLessee exercises its option, the Lessee shall retire or make provision for retiring all of the Lessee?s indebtedness and pay or cause to be paid all of its liabilities and shall relinquish the real and personal property of the Hospital and all monies, accounts and inventories then held by the lessee to the City. The Lessee agrees to pay, in each year, the amount necessary, to retire the revenue bonds of the City issued to pay for improvement of the Hospital, which payments if those bonds remain outstanding to their ?nal maturity, will aggregate $53,082,649, and to assume all other obligations of the City relating to the Hospital, and to pay as Additional Payments the amounts in each year set forth for the respective year in Schedule 1 hereto. flan-h.? shrapnel: size. I line established'by the Com ces Um ed States Department of Heath and Human Services or any successor thereto or, if there is no successor, by the then community services standards used by hospitals servicing comparable communities. OPERATION AND .SERIWCES OF THE HOSPITAL En: The Lessee agrees that so much of the Hospital as is Operated as in-patient acute care . facilities will be Operated in compliance with the standards of the Joint Commission on Accreditation of Healthcare Organizations. The Lessee agrees that its operations will be conducted without discrimination as to race, sex, creed, color, age or national origin. The Lessee recognizes the .need for positive employee relations and agrees to continue fair and just employment polmtes. An equitable private pension bene?t has been made available: to employees not participating in the Public Employees Retirement System, . i . This Statement of Intent does not purport to be complete andis. subject in all respects to Articles I to XIV, both inclusive, and is-?quali?ed in its entiretyby reference to the terms and provisions of those Articles. The language contained in said Articles I shall control and be determinative of the interpretation of this Lease and this Statement of Intent. THAT In consideration of the premises and the mutual covenants hereinafter contained, and in order for the City to carry out this Lease, the parties hereto covenant, agree and bind themselves as follows; provided that no covenant, agreement or obligatiOn of the City under this Lease shall be a general debt on the City?s part, but shall be payable solely out of the rentals, revenues and other income, charges and moneys realized from the use, lease, sale or other disposition of the Lensed Premises, the sale of the Bonds and any'insurance and condemnation awards as herein provided: . ARTICLE I DEFINITIONS, DETERMINATIONS AND REPRESENTATIONS 'Section 1.1. Use of De?ned Terms. In addition to the words and terms de?ned elsewhere in this Lease, the words and terms set forth in Section 1.2 hereof have the meanings set forth therein, unless the context or use indicates a different meaning or intent. Those de?nitions are applicable equally to both the singular and plural forms of any of the words and terms de?ned herein. Any words .or terms not de?ned. and used herein speci?cally as defined words or terms have the meanings assigned to. them in the Indenture. . Section 1.2. De?nitions. "Accountant" means a recognized ?rm of independent certi?ed public accountants, of good repute licensed by, or permitted to practice in, the State, retained by the Lessee and designated by the Authorized Lessee Representative, which ?rm shall not have any interest, direct or indirect, in either the Lessee or the Issuer and shall not have a partner, member, director, of?ceror who is a member, director, trustee,? officer or employee of either the Lessee or the Issuer. "Act" means the Charter of the City, Chapter 140, Ohio Revised Code, as amended, and other applicable provisions of the laws of the State. "Additional Payments" means the amounts required in Section 3.2 hereof to be paid as Additional Payments. - "Af?liated Corporation" means any corporation, trust, association, person or entity directly or indirectly Controlledby the Le55ee, including, without limitation, by a majority of its trustees, or by any other entity which is itself Controlled directly or. indirectly by the Lessee or any Af?liated Corporation, or jointly by a combination thereof. "Authorized Lessee Representative? means the person designated by the chief executive of?cer of the Lessee which shall be evidenced to the Trustees and City by a certi?cate signed by the chief executive of?cer of the Lessee. Such certi?cate may designate an alternate or alternates who shall have the same authority, duties and powers as the Authorized Lessee Representative. "Basic Rent" means the. amounts necessary to make the deposits required by the Indentures and Section 3.1(a) of this Lease to be made to the Special Funds, and (ii) any other amounts required by Section 3.1 hereof to be paid on or prior to the respeCtive Rental Payment Dates during the Lease Term. -. "Bond" and "Ben means the revenue bonds of the City authorized, authenticated and issued under the Indentures, which may be designated either bonds or notes. "Bondholder", "holder" and "holder of Bonds", and "holder" means the person in whose name a registered Bond is registered on the'Bond Register, or any person who is the bearer of a coupon Bond which is not registered as to principal or the principal of which is registered to bearer, and "bolder" when used with reference to acoupon means the bearer of the coupon. "Bond Service Charges" means the principal of and premium, if any, and interest on the Bonds payable at any time or during any period. "Business Day" means any day other than a Saturday or a Sunday or any day on which the Tmstees'are required, authorized or not prohibited by law (including executive orders) to close and are closed. - means The Cleveland Clinic Foundation, a nonpro?t corporation organized under the laws of the State. "Charter" means the amended charter of the City adepted at an election held November 5, 1957 as heretofore and hereafter amended. "City" means the City of Lakewood, Ohio, a municipal corporation and political subdivision in and of the State. "Code" means the Internal Revenue Code of 1986, as amended, and successors thereto. References to the Code include, without limitation, relevant regulations, temporary regulations and proposed regulations thereunder and under the Internal Revenue Code of 1954, as amended, and any successor provisions to those regulations, temporary regulations or proposed regulations. - "Community Organizations" means religious congregations or organizations representing spiritual leaders of religious organizations, organizations restricting membership to persons age 60' or older or whose activities are directed toward persons age 60 or, older and organizations directing their activities to civic, educational or philanthropic endeavors for the bene?t of the City or its residents. - "Control" means the power to direct the management and. policies of a corporation, trust, association, person or entity, directly or indirectly, whether through voting power for the election of all or a majority of the members, trustees, directors or officers, ownership of voting. securities, or rights by privilege of membership, by contract or otherwise. - "Convenience Activities" means patient or employee convenience activities, such as, without limitation, gift sheps, snack shops, barber and beauty sheps, doctors?, dentists?, and podiatrists? accommodations, ?ower shops, . travel agencies, banks, counselling services, pharmaceutical sales and services, telephone centers, retail sales of health care related items and services, living accommodations for persons providing Services within, or for persons who are visitors to, Hospital Facilities Operated by the Lessee and residential properties acquired for future expansion of Hospital Facilities. 7 Council means the Council of the City. De?nitive Agreement" means the De?nitive Agreement dated as of December 19, 1996 between CCF and the Lessee. - '"Event of Default" means any one or more of the Events of Default described in Section 13.1 hereof. "Executive" means the Mayor of the City or, in that of?cer?s absence or unavailability, the acting Mayor as provrded in the Charter. "Existing Facilities means the structures, improvements, equipment, ?trnishings and other real, personal and mixed real and personal preperty located on the Leased Real Premises on the date of the commencement of the Lease Term, which structures are more fully described in Exhibit hereto. "FirSt Supplemental Senior Indenture" means the First Supplemental Trust Indenture dated as of June 15, 1989 by and between the Senior Trustee and the City, amending and supplementing the Senior-Indenture. . "First Supplemental Senior Ordinance" means Ordinance No. 32~89 of the City passed by the Council on June 5, 1989. f'Fiscal Officer? means the Director of Finance of the City, or in that of?cer?s absence or unavailability, the personperfonning the functions of that of?ce. "Fiscal Year" means a period of twelve consecutive months commencing on the ?rst day of January of any year and ending on the last day of December of the same year, both inclusive; or such other consecutive twelve-month period as may hereafter be established as the ?scal year of the Lessee for budgeting and accounting purposes to be evidenced, for purposes a certi?cate of the Authorized-Lessee Representative ?led with the Trustee and the iscal tcer. "Governing Board" means the Board of Trustees of the Lessee as?constituted at the relevant time. "Governmental Restrictions" means federal or State or other applicable governmental laws or regulations affecting the Leased Premises and placing restrictions and limitations on the rates, fees and charges to be fixed, charged and collected by the Lessee; provided, however, that no change in law or regulation shall be deemed applicable by reason of this definition if such change would in any way constitute an impairment of the rights of the City, a Holder, the Lessee or the Trustees underthis Lease. "Gross Revenues means. all present and futurevrevenue of the Lessee from whatever source derived, including without limitation, all . cash, accounts, chattel paper, instruments, documents, ?money and general intangibles, including without limitation, contract rights and rights to payment (1) for goods and properties sold 'or leased or for services rendered, (ii) under agreements respecting insurance, Medicare, Medicaid or Blue Cross, and under other arrangements with governmental units, agencies and instrumentalities, prepaid health Organizations and other Persons, from any insurance or eminent domain award or agreement in lieu of an award resulting from eminent domain proceedings and awards on warranties, income from, and revenues realized upon the liquidation, sale, maturity . or redemption of securities or on behalf of the Lessee, . . proceeds of those items constituting Gross Revenues to which reference is made in clauses and above, and . . gifts, grants, bequests, contributions and donations, including without limitation, the unrestricted income and pro?ts therefrom. "Guaranty" means the Guaranty and Security Agreement dated as of June 15, 1989 between the Lessee and the Senior Trustee. "Hospital Facilities means hospital facilities as de?ned in Section 140.01, Ohio - Revised Code. "Hospital Funds" means all moneys, accounts receivable and instruments, and all proceeds received therefrom, held or hereafter received by the Hospital Trustees or the Fiscal Of?cer and comprising funds received from or as a result of the operation or ownership of the Leased Premises but does not include moneys, accounts receivable and instruments-,and all proceeds therefrom, held or hereafter received by the Lessee unless and until they are delivered by the Lessee to the Hospital Trustees or the Fiscal Of?cer. "Hospital Specialty Services" means services relatedto the operation of Hospital Facilities, including without limitation, services in connection with the practice of pathology, pediatrics, radiology, physical medicine, anesthesiology, electro-cardiology, physical therapy, behavior therapy and emergency room operations, data, long term care, subacute care,, skilled nursing facilities, long term ho'spital and word processing Operations, and pharmaceutical, optical, other health care related sales and services and also including without limitation, space and equipment for the practice of medicine, dentistry, podiatry or other health related services. - "Hospital Trustees means the Board of Trustees of Lakewood Hospital created by the Charter. "Improvements" means any future additions, extensions, improvements, equipment, machinery or other facilities, including land and rights in land, to, of or for the Leased Premises and any other facilities acquired, constructed and operated by the Lessee and any other interest of the Lessee in a facility in which the Lessee has a ?nancial or Operating interest, which under generally accepted accounting principles are required to be capitalized. "Indebtedness" shall mean, without duplication, all indebtedness of the Lessee for borrowed moneys or which has been incurred orassumed in connection with the acquisition of Property by the Lessee, (ii) all indebtedness, no matter how created, secured by Property of the Le3see, whether or not such indebtedness is assumed by any Person, provided, that non-recourse indebtedness shall be deemed Indebtedness only to the extent of the value of the Preperty securing same, the liability of the Lessee under any lease (otherthan this Lease) of real or personal property which is pr0perly capitalized on the balance sheet of the Lessee in accordance with generally accepted accounting principles, and (iv) any guaranty by the Lessee of indebtedness of any other Person for borrowed moneys or which has been incurred or assumed by such Person in connection with the acquisition of Preperty or the leasing of real or personal - prOperty which is properly capitalized on the balance sheet of such Person in accordance with generally accepted accounting principles; provided that there shall be excluded from the definition of Indebtedness this Lease and any Obligation of the Lessee which is secured by an irrevocable extension of credit of, or is subject to any agreement to purchase such obligation from the holder thereof by, a Person and that there shall. be included as Indebtedness the obligation. which would be incurred pursuant to the reimbursement agreement executed and delivered in connection with such irrevocable extension of credit or purchaseagreement if such credit were drawn upon completely or such purchase were fully effected and the advance made under the reimbursement agreement were to be repaid in accordance with the terms of such reimbursement agreement, and any such Indebtedness shall be deemed to basic been incurred at the time such reimbursement agreement is executed and delivered; and provided further there shall be excluded from this de?nition of Indebtedness any debt of the Lessee created by operation of Section 2.1.1 of the Definitive Agreement or Section 3.2(a) of this Lease. "Indentures" means collectively the Trust Indentures dated as of March 15 and November 1, 1983 among the City, the HOSpital Trustees and the Trustees, as supplemented and amended from time to time in accordance with the provisions thereof. "Intangible Assets" means all contracts and contract'rights (including particularly contracts, agreements, contract rights and agreement rights, between the City and the State with -7- respect to Medicaid, the City and third-party insurers of City?s patients. and City and the United States of America with respect to Medicare and all other equiyalent insurance programs, or any state or federal program substituted in lieu thereof),- general intangibles and documents,- whici are associated with the City's ownership and the Hospital Trustee-'5? operation of the Leased Facilities. . "Interest Rate for Advances" means the greater of the rate of ten percent per annum or (ii) a rate which is one percent per annum in excess of interest rate then announced publicly by the SeniorTrustee, in its lending capacny as a financial institution, as its prime or base rate. . "Lease?l means this Lease, as duly amended or supplemented from time to time in accordance with the terms hereof and of the Senior Indenture, "lease Term-i means the period commencing with the delivery of this Lease and ending on the Termination Date. - . "Leased Premises means, collectively, the Leased Real Premises, Existing Facilities, any Improvements and all appurtenances thereto and thereof, and all substitutions or replacements therefor, whether now existing leased, used or Operated by, the Lessee in connection ram and located, within the City .mciudtng all ?Hospital Facilities its de?ned in the Indentures- less such Property as may from tune to tune be disposed of by the Lessee. - - "Leased Real Premises? means the interests in real estatedescribed in Exhibit A hereto which ExhibitA is incorporated herein as if the same were fully set forth harem with any substimtionsor additions made thereto, but less any removals made therefrom, from time to time in the manner and to the extent?provided herein'and in 7 "Lessee" means Lakewood Hospital Association, an'Ohio nonprofit corporation and a nonpro?t hospital agency, as de?ned in Section 1:10.01, Ohio Revised Codcrand is lawful successors, incluing without limitation, any surviving, resulting or transferee corporation or entity, as provided in Sections 9.3 and 9.4 hereof: The term Lessee. does not include any for pit for pro?t corporation which Controls, is Controlled-by or is under common Control W: ssce. - . - . "Management Contract" means an agreement with a partnership or corporation which is not an Affiliated Corporation or is not the Member or a partnership or corporation. controlling the Member or, on November 1, 1996, controlled by the-Member to provide substantially all of the executive management-of the Leased Premises. . . 'Membe-r?mcans CCF or any Permitted Af?liate designated by CCF as the Member pursuant to the De?nitive Agreement or in the event that CCF or 'the designated Permitted Af?liate resigns or otherwise ceases to be the Member and a Permitted Af?liate is not concurrently designated by CCF as the Member or (ii) if .the Definitive Agreement should terminate and the failure or refusal contemplated by Section 10.4 thereof occurs, then the Governing Board. . "Notice Address" means: As to the City: City of Lakewood, Ohio Lakewood City Hall 12650 Detroit Avenue Lakewood, Ohio 44107 I Attention: Director of Finance with a copy to the attention of each of the Mayer, the Director of Law and the Clerk of Council As to the Lessee: Lakewood Hospital Association 14519 Detroit Avenue Lakewood, Ohio 44107 7 Attention: Chief Legal Of?cer As to the Senior Trustee: National City Bank 1900 East Sixth Street Cleveland, Ohio 44114 Attention; Corporate Trust Administration As to the Subordinated KeyBank National. Association A Trustee: Key Tower, .127 Public Square Cleveland, Ohio 44114 Attention: Corporate Trust Department As to the Member: The Cleveland Clinic Foundation - 9500 Euclid Avenue . Cleveland, Ohio 44195-5108 Attention: Chief Executive Of?cer with a copy to: General Counsel The Cleveland Clinic Foundation 9500 Euclid Avenue 7 7. . Cleveland, Ohio 44195-5108 or a different address as to which notice is given pursuant to Section 14.2 hereof. . "Operator" means the City or the Lessee, whichever is the operator of the Leased Premises at the relevant nme. "Original Lease" means the lease between the City and the Lessee dated as .of June 26, 1987 and recorded in Volume 87-4264, Page 17 of Cuyahoga County, Ohio Lease Records as amended by the First Amendment of Lease dated as of June 15, 1989 and recorded in Volume 89-3550, Page 8 of Cuyahoga County, Ohio Real Property Records. "Outstanding Bonds" or "Bonds then outstanding" means, as of the applicable date, all Bonds which have been authenticated and delivered, or are then being delivered, under the Indentures except: Bonds cancelled by the respective Trustee or surrendered to the respective Trustee for cancellation pursuant to the Indenture,? -9- (ii) Bonds or portions thereof deemed to have been paid and discharged in accordanCe with Article of the Indentures, Bonds not deemed to be outstanding under the provisions of Section 1 of the Senior Ordinance and of the Subordinated Ordinance, and (iv) Bonds in lieu of which other Bonds shall have been authenticated and delivered under Article II of the Indenturcs. "Permitted Affiliate" means any corporation, partnership, trust or entity which, directly or indirectly, owns or controls or (ii) with which CCF is commonly owned or controlled. For purposes hereof, "own or control" shall mean owning in excess of ?fty percent of the voting securities or having the right to elect or appoint more than fifty percent of the trustees or directors; or (ii) to receive more than fifty percent of the net earnings; or to receive more than ?fty percent of the net assets upon dissolution. "Permitted Encumbrances? means, as of any particular time, statutory rights of the United States of America under42 U.S.C. ?29l at. and similar- rights under other .federal and state statutes, (ii) the lien and charge of the lndentures and any lease of the Leased Premises not disapproved bythe Trustees or authorized by the?Indentures and not requiring prior consent of the Senior Trustee, including this Lease and any leases from the City existing as of the date 0f delivery of this Lease, liens securing indebtedness for the payment, redemption or satisfaction of which, moneys (or Eligible Investments) in the necessary amount shall have been "deposited in trust with-a trustee or other holder of such indebtedness, (iv) utility, access and other easements and rights of way, restrictions, reservations and exceptions which an architect or engineer certi?es will not materially interfere with or impair the operations being conducted in the Leased Premises or as may be insured over with adequate title insurance, or rights-of way permitting the Leased Premises access, to other facilities owned or controlled by the City or the Lessee, any liens for ad valorem taxes, special assessments or other governmental charges not then delinquent or if delinquent being contested as provided in Section 5.16 of the Senior Indenture and in the Subordinated 'Indenture?; (vi) mechanic?s, laborerv?s, materialman?s, supplier?s, or vendor?s lien or right to a purchase money security interest in respect thereof if payment is not yet due and payable under the contract in question, or if such lien is contested in good faith, (vii) any lien which secures Secured Hospital Debt for which the Trustee has received an Of?cer?s Certi?cate stating that the test for permitted Secured Hospital Debt has been met, liens arising by reason of good faith deposits in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal. bonds and deposits of security for the payment of taxes or assessments or other similar charges, (ix) any lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency?or any body created or approved by law or governmental regulation for any purpose at any time as required. by lawor governmental regulation (A) as a condition to the transaction of any business or the exercise of any privilege or license, or (B) to enable the Operator to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers? compensation, unemployment insurance, olduage pensions or other social security, or to share in the privileges or benefits required for companies participating in such arrangements, any judgment lien or notice of pending action, so long as the finality of such judgment or the pending action is being contested and execution thereon is stayed or the period for responsive pleading has not elapsed or provision for payment of the judgment has been made in accordance with applicable law or by the deposit of cash or eligible investments with the Trustee or a commercial bank or trust company acceptable to the Trustee, (xi) existing liens, provided they are net: renewed or extended on more stringent terms, (xii) liens resulting from governmental regulations on the use of Property, liens securing Hospital Debt permitted under the Senior Indenture, (xiv) liens on Property arising from the rights of -10- third party payors for recoupment of amounts paid to the Operator, (xv) liens on Property acquired by the Operator if the assumption of the Hospital Debt secured by such lien is additional Hospital Debt permitted under the Senior Indenture and if an Of?cer?s Certificate is delivered to the Trustee certifying that (A) suchlien and the Hospital Debt secured thereby were created and incurred by a person Other than the Operator prior to'acquisition'of such Property by the Operator, (B) such lien was created prior to the decision of the Operatorto acquire the Property and was not created for the purpose of enabling the Operator to avoid the limitations of the Senior Indenture on creation of liens on Property, and (C) the lien attaches solely'to the Preperty and does not extend by its terms to other PrOperty of the Operator, and (xvi) such minor defects, irregularities, encumbrances, utility, access and other easements and rights of way, restrictions, reservations, exceptions and clouds on title as normally exist with respect to properties similar in character to the Leased Premises and as do not in the opinion of - Independent Counsel, in the aggregate materially impair the property affected thereby for the purpose for which it is or will be held by the City. 7 ?Rental Payment Date" means the ?fteenth day of each month. "Required Services" means obstetrical/ gynecological services, (ii) 24- hour a day emergency room providing trauma services, rescue squad/paramedic services, (iv)_intensive care services and acute care'rnedical/surgical services (including, without limitation, care for children and adolescents), of the nature then generally, provided by a community hospital in communities comparable to the City; or such services as may result from amendments to this de?nition pursuant to Section 9.16 hereof. The term "Required Services" does not include the magnitude or level of service, such as hours of service,- or' the manner (including changes in technology) by which the types of services are provided; provided, hen/ever, that the change in magnitude or levels of services does not, as a practical matter, result in the signi?cant reduction in such service so] as to be an effective elimination of 'such service. "Senior Indenture" means the Trust Indenture dated as of March 15,1983 between the City and the Senior Trustee, as-supplemented and amended by the First Supplemental Senior Indenture, as such may be amended or supplemented from time to time in accordance with the provisions thereof. . . "Senior Ordinance" means Ordinance No. 8483 of the City passed by the Council on February 26, 1983. - "Senior Trustee" means National City Bank, Cleveland, Ohio and any successor thereto as trustee under the Semor Indenture; 7 "Special Funds" means, collectively, the funds 0r accounts permitted by, established under, or identified in the Indentures. "State" means the State of Ohio. "Subordinated Indenture' means the Trust lndenture dated as of November 1, 1983 between the City and the Subordinated Trustee. - "Subordinated Ordinance" means Ordinance No. 106?83 of the'City passed by the Council on October 17, 1983. "Subordinated Trustee" means Mellon Bank, F.S.B., successor trustee to KeyBank National Association, Cleveland, Ohio (formerly known as Sortiety National Bank and successor by merger to Central National Bank of Cleveland) and any successor thereto as trustee under the Subordinated Indenture. .11- "Termination Date" means the later of (1) January 2, 2027, or (ii) January 2, 2057 if extended by the Lessee exercising its option pursuant to Section 2.5 hereof, subject to earlier termination of this Lease by the Lessee pursuant to Section 12.1, and by the City pursuant to Sections 13.2 and 13.4 hereof subject to reinstatement under Section 13.2 or 13.8 hereof. "Total Operating Revenues" means total patient revenue less provision for uncollectible accounts, charity cases and any contractual adjustments, plus other operating revenues. . "Trustees" means collectively the Senior Trustee and the Subordinated Trustee. "Unassigned Rights" means all of the rights of the City to receive Additional Payments under Section 3.2 hereof, (ii) to 'be held harmless and indemni?ed under Section 9.9 hereof, to be insured'under insurance policies and/or plans required under Section 6.4 hereof, (iv) to receive prior notice of any proposed sublease, right to use or assignment of the Leased Premises or Management Contract under Section 11.1 hereof and to prevent the effectuatiOn thereof. pursuant .to that Section, to receive prior notice of and prevent the effectuation of the termination of services pursuant to Section 9.16 hereof, (vi) to exercise the remedies available to the City under Section 13.2 hereof, (vii) to be reimbursed for attorneys? fees and expenses under Section 13.5 hereof, to accept the surrender by the Lessee of the Leased Premises upon termination of this Lease under Section 14.1 hereof, (ix) to receive notices, determine whether to provide requested approvals and terminate this Lease under Section 14.15 hereof and to execute amendments hereto under Section 14.6 hereof. Section 1.3. Certain Words used Herein; References; and Headings. Any reference herein to the City, the Hospital Trustees, the Executive, the Council, the Fiscal Of?cer, any members or of?cers of the City, the Council or the Hospital Trustees, or other public boards, cummissions, departments, institutions, agencies, bodies -or entities, or members or of?cers thereof, includes those succeeding to their functions, duties or responsibilities pursuant to or by operation of law or performing their functions lanully. . Any reference to a section or provision of the Censtitution of the State or the Charter, a section, provision or chapter- of the Ohio Revised Code, federal or State laws, or regulations governing Medicare or Medicaid includes that section, provision or chapter, or those laws or regulations, as amended, modi?ed, revised, supplemented or superseded from time to time; provided, however, that no amendment, modi?cation, revision, supplementation or supersession of the Constitution, laws of the State or the Chatter shall' be deemed to be applicable by reason of this Section, if that applicability would constitute in any way an impairment of the rights or obligations of the Bondholders, the City, the Lessee or the Trustees under this Lease. . 7 Words of any gender include the correlative words of any other gender. Unless the context indicates otherwise, words importing the singular number include the plural number, and vice versa. The terms "hereof", "herein", "hereby", "hereto'fland "hereunder", and similar terms, refer to this Lease; and the term "hereafter" means after, and the term "heretofore" means before, the date of delivery of this Lease. Section 1.4. Status and Authority of City. The City represents and warrants that it has been duly organized and is validly existing under the laws of the State and that it has authority (by virtue of the Act and the Charter, to enter into this Lease and (ii) pursuant to Section 5.13 of the Indenture to enter into this Lease. Section 1.5. Public Pumose for Lease. TheCouncil has found and determined and confirms hereby that this Lease of the Leased Premises to Lessee will promote the public -127. fm\_ purposes as stated in Section 140.02, Ohio Revised Code, and that the City will be duly benefitted thereby. . I Section 1.6. Quali?cation of Lessee. The City has found and determined and con?rms hereby that the Lessee is a nonpro?t hospital agency, as de?ned in Section 140.01, Ohio Revised Code, which has authority to lease and operate the Leased Premises as a facility open to the public, providing Required Services without regard to race, sex, creed, color or national origin. (End of Article I) -13- Leased Premises ARTICLE II LEASED TERM OF PURPOSE Section 2.1. Leased Premises and Possession. In consideration of the Basic Rent, Additional Payments and other amounts for which provision is made herein, and of the covenants, agreements and obligations, and in reliance upon the representations and warranties, of a the Lessee herein, the City covenants and agrees to lease, and hereby leases, the Leased Premises to the Lessee, and the Lessee hereby leases the Leased Premises from the City, subject to the provisions of this Lease and the Permitted Encumbrances, TO HAVE AND TO HOLD the Leased Premises unto the Lessee for the Lease Term. - Possession of the Leased Premises shall be delivered and accepted upon the commencement of the Lease Term. Seetion 2.2., Purpose. During the Lease Term, the Lessee, as between itself and the City, has sole and exclusive charge of the operation, maintenance, management, use, occupancy, and repair of the Leased Premises (unless there is an Event of Default and th Lessee has been excluded from possessio the Leased Premises hereunder), and the . . ., without by reason of race, sex, creed, color or nations origin; - .. subject to compliance with the requirements of this Lease, nothing in this Section or in this Lisase is intended to prevent the Lessee from entering into af?liations with other healthcare providers, insurers, or reimbursers and as part of such af?liation ceding to others the right to control or direct activities of the Lessee or to take control of the Lessee in specified circumstances. is g; Section 2.3. Assumption of Liabilities. Leesee has assumed and, except for future Bond Service Charges, paid all existing obligations and liabilities of the City and the Hospital Trustees whether ?xed or contingent, known or unknown, associated with or arising out of the City?s ownership of the Leased Premises and the Hospital :I'rustees? pnor peration of the ,3 g, a? is $1166 Section 2.4. Assignment of Intangible Asseg and Hospital Funds, In consideration of the promises and agreements made by the Lessee to the City in the Original Lease, for the purpose of paying a portion of the costs of Hospital Facilities, the costs of the management, operation, occupancy, use, maintenance, and repair of the Leased Premises, and the costs of programs, projects, activities and services useful to, connected with, supplementing, er Otherwise related to the health care services provided and to be provided by Lessee and by the operation of the based Premises, the City did assign to Lessee all of the City?s respective right, title and interest in and to the Intangible Assets, all moneys, accounts receivable, warranties and instruments comprising Hospital Funds and all proceeds realized therefrom and inventory, supplies, materials, consumables and other property owned, accrued, held or received in connection with the Leased Premises priorto the Leased Premises initial leasing to the Lessee. All moneys, accounts, receivables and instruments which?are held in trust or restricted to a particular purpose by the donor, shall be used, to the extent permitted by law, by the Lmsee for the restricted purposes set forth in the instruments creating the trust or providing donations. .- 14? It? Section 2.5. Extension of Lease. The City and the Lessee agree that the Lessee has an option to extend the Lease Term of this Lease for a period of thirty years following January 2, 2027 by providing to the City a notice in writing of- the exercise of the option to so extend the Lease Term which notice shall be given not earlier than January 1, 2021 and not later than December 1, 2024. Exercise by the Lessee of its option to eXtend the Lease Term shall be irrevocable. (End bf Article 11) -15- ARTICLE RENT AND ADDITIONAL PAYMENTS ?Section 3.1. Basic Rent. The Lessee covenants and agrees that on behalf of the City, and as its payment of part of the Basic Rent due the City hereunder, the Lessee will pay directly to the Senior Trustee and the Subordinated Trustee, respectively,lfor the account of the City, the moneys which as to amount and time of payment will satisfy therequirements of Section 16 of the Senior Ordinance and Section 8 of the Subordinated Ordinance. 7 The Lessee further covenants and agrees that it will deposit with the appropriate Trustee all other moneys required to be deposited by the Indentures and will timely perform each and every obligation, duty andright of the City under the Indentures. Except for any interest which may arise hereafter with respect to moneys pursuant to Sections 4.02 of the Indentures, the Lessee and the City each acknowledges that, except as otherwise provided in the lndentures, neither the Lessee nor the City has any interest in any of the funds created by the Indentures or any moneys deposited therein and that such funds and moneys shall be in the custody of and held by the Trusteesfor the benefit of the Bondholders. . Section 3.2. Additional Payments; Subject to the pledge made in and the security interest granted by the Guaranty and after making the payments required by Section 3.1 hereof, the Lessee covenants and agrees to make Additional Payments as follows: To the City on March 31, June 30 and September 30 in each year, commencing March 31, 1997, the amount shown opposite the date and year of payment in Schedule 1 hereto, provided that if the Closing Date (as de?ned in the De?nitive Agreement) Occurs afterMarch 31, 1997- then the amounts shovm on Schedule 1 to have'been paid prior to the Closing Date shall bepaid on the Closing Date, provided further, that if the City should inipose or levy on the Lessee an ad valorem, income, franchise or business excise or tax, then the Additional Payment to be made in a year shall be reduced by an amount equal to the amount of such excise or tax paid by the Lessee and received in that year by the City, whether paid to it directly or paid to the State or a taxing unit thereof. Such reduction shall, to the extent possible, be applied equally against each of the? payments required to be made in- that year. . - To the Member or the Trustees, "as the case may be, regardless of Whether an Event of Default has occurred hereunder, payment for or reimbursement or prepayment (if any and all reasonable costs, expenses and liabilities: incurred or paid by the City, the Member or the Trustees, as the case may be, in satisfaction of any obligations of the Lessee hereunder or of the City, the Member or the Lessee under the Indentures not performed by the Lessee in accordance with the provisions hereof or thereof, (ii) incurred as a result of a request by the Lessee or a requirement of this Lease or the Indentures, or -15- incurred in the defense of any action or proceeding with respect to the Leased Premises or enforcing this Lease or arising out of or based upon any document related to the issuance of the Bonds. To the extent such costs and eXpenses are not paid out of the proceeds of the Bonds: - . the fees and other costs incurred for services of the Trustees, paying agents and Bond registrars; (ii) I all .costs incurred in connection with the required purchase or 7 redemption of Bonds to the extent moneys in a fund created by the Indentures - are not available therefor; 7 the fees and other costs incurred for Services of such engineers, arChitects, attorneys, consultants and independent accountants as are employed to make e?xaminatibns, render opinions and prepare reports required under the Indentures; (iv) amounts advanced by the Trustees under authority of the Indentures and which the City otherwise would be obligated to repay. The City and the Lessee agree that the obligation of the Lessee to make payments under this Section 3.2 is not secured by a security interest in the Gross Revenues and does not constitute or cause this Lease to constitute Indebtedness. In the event the Lessee shall fail to make any payment as required by thisLease, the payment so in default shallcontinue as an obligation of the Lessee until the amount in default shall have been fully paid; provided, however, that nothing in this Section shall require the Lessee to pay costs and expenses" {mentioned in subparagraph above, so long as the validity in the reasonableness thereof shall be contested in good faith unless the appropriate Trustee shall receive an opinion of Independent Counsel that such contest jeopardizes the interest of the Lessee or the City in the Leased Premises or the rights or interest of the Holders or Trustee under the applicable Indenture, in which event the Lessee shall make such payment or take such action as causes such Opinion to be withdrawn. - All costs, expenses,-liabilities, fees and charges described in this Section, together with interest thereon at the Interest Rate for Advances from the date payment is requested of the Lessee, shall be paid by the Lessee on demand.? In any action brought to collect those Additional Payments, the City, a Trustee, the other paying agent or the Bond registrarpas the case may be, shall be entitled to the recovery of the Additional Payments,'except as limited by law or judicial order or decision. . Section 3.3. Place of Payments. The Basic Rent shall be paid to the appropriate Trustee at?its corporate trust of?ce for the account of the City and shall be deposited in the appropriate Special Fund for which intended. Additional Payments payable under Section 3 hereof shall be paid to the City at the Notice Address. Other Additional Payments shall be paid directly to the party to which they are due. Section 3.4. Obligations Absolute and Unconditional. The obligations of the Lessee to pay Basic Rent, Additional Payments and any other amounts payable under this Lease and to observe? and perform its covenants, agreements and obligations provided in this Lease are absolute and unconditional. The Lessee hereby covenants and agrees to make any payments required of it hereunder from any moneys legally available to the Lessee in the manner and at the times provided in this Lease; . -17- Until the Termination Date, the Lessee will not suspend, reduce or discontinue payment of any Basic Rent, Additional Payments or any other amounts payable under this Lease; will observe and perform all of its covenants, agreements and obligations under this Lease; will make all payments of principal of and premium, if any, and interest on all of its obligations; and . 7 - except upon exercise of the Lessee?s termination options as provided herein, will not terminate this Lease for any cause including without limitation, any acts or circumstances which may constitute failure of consideration, (ii) destruction of or damage to the Leased Premises or other properties Owned or operated by the Lessee, commercial frustration of purpose, (iv) any change in tax or other laws or administrative rulings of, or administrative actions by or under' authority of, the United States of America or the State, the inaccuracy of any representation or warranty made by the City herein, or'(vi) any failure of the City or either Trustee to observe or perform any covenant, agreement or other obligation, whether expressed or implied, or. any duty, liability or- obligation arising out of or connected with this Lease, the Indenrures, or the Bonds. At the Le53ee?s own cost and expense, in its own name and on its own behalf or, to the extent lawful, in the name and on behalf of the City,-the Lessee may prosecute or defend any action-or proceeding or take any other action involving third persons which, the lassee deems tobe reasonably necessary to secure or protect its rights of possession, occupancy and use hereunder. In that event, the City covenants and agrees to cooperate ?tlly with the Lessee, but at the Lessee?s expense, and (ii) if the Lesseeshall so request, to take all action necessary to effect the substitution of the Lessee for the City in that action or proceeding. section 3.5. Rent Abatement. If at any time, the Indentures shall have been defeased pursuant to their previsions under circumstances not resulting? in termination of this Lease, provision satisfactory to the, City and the Trustees shall have been made for paying all Additional Payments, and all other amounts, payable under the Lense, due or to, become due through the-date on which the last of the Bonds is then scheduled, to be retired or redeemed, and there is no Event of Default hereunder, the Lessee shall be entitled to use and occupy the Leased Premises from that time to the Termination Date so long as the Lessee makes payment of the Additional Payment during that interval required to be paid by Section 3.2(a) hereof but without payment of any Basic Rent, but Otherwise on the terms and conditions hereof. No other circumstance pursuant to any provision of this Lease shall abate the payment of Basic Rent in any way.? Section 3.6. Security Interest in Lessee?s Gross Revenues. The Gross Revenues may be used by the Lessee for any lawful purpose of the Lessee,- except theLessee covenants, agrees and acknowledges. that it will not grant a security interest in all present and future Gross Revenues, which security interest isa ?rst priority security interest unless it shall concurrently grant to the Senior Trustee a security interest which is on a parity security interest proposed to be granted. .18- Section 3.7. Rates and Charges. So long as any Bonds are outstanding; the Lessee covenants and agrees to comply with the provisions of Sections 5.02'of the Senior Indenture and of the Subordinated Indenrure as if the wordv"lssuer" used therein referred to the Lessee. ?Section 3.8. Prepayment of Basic Rent and Additional Payments; Moneys for Purchase or Optional Redemption. There is reserved expressly to the Lessee the right, and the Lessee is authorized and permitted, at any time it "may choose, to prepay all or any part of the Basic Rent relating to the Senior Bonds, Additional Payments and other amounts payable under the Lease, or to deliver to the Senior Trustee moneys suf?cient to cause. the senior Bonds to be deemed paid and discharged pursuant to Article IX of the Senior Indenture following which the Lessee, shall have the right to prepay in whole or in part the Basic Rent relating to the - Subordinated Bonds. a Section 3.9. Past Due Basic Rent, Additional Payments and Other Amounts, In the event that the Lessee should fail to make any payment of Basic Rent, Additional Payments or other amounts payable under the the payment in default shall continue as an obligation of the Lessee until the amount in default shall have been paid fully, (ii) during the default period, the amount in'default shall bear interest at the Interest Rate for AdvanCes, and that interest shall be payable on demand and shall constitute Additional Payments hereunder. In any action brought to collect those Additional Payments, the City shall be?entitled to the recovery of the Additional Payments, except as limited bylaw or judicial order or decision. Section 3.10. Redemption of Bonds. On delivery to the Senior Trustee, or if the Senior Indenture has been deemed paid and discharged, to the Subordinated moneys for redemption of all or part of the Senior Bonds, or if- the SeniOr Bonds are deemed paid and discharged, of all or part of the Subordinated Bonds, then at the written request of, the Lessee, the City will take forthwith all steps required of the City under the applicable redemption provisions of the Senior Indenture, and after defeasancethereof the Subordinated Indenture, to effect redemption of all or part of the then Senior Bonds or? Subordinated Bonds, as the case may be, on the redemption date on which that redemption is to be made. (End or Article ARTICLE 1v CONSTRUCTION ?Section 4.1. Acquisition, Construction and Equipping. The Lessee covenants that any acquisition, construction-or installation of Improvements and any furnishing, renovating, remodeling, improving and equipping of the Leased Premises shall be in conformity with law and all requirements of all governmental authorities having jurisdiction thereover, and that it will complete any such acquisition, construction, furnishing, renovation, remodeling, improvement and equipping with an expedition practicable; provided, however, that nothing in this Article authorizes or permits any activitywhich Would violate the provisions of the State?s health planning law and any Certi?cate of Need issued to Lessee pursuant thereto. Exceptas provided by Section 4.3 of this Lease, any Improvements which are realproperty or mixed real and personal property shall become a part ?of the Leased Premises and are leased by this Lease. Section 4.2. Remedies Against Contractors, and Sureties. In the event of any action taken by the Lessee against any contractor, subcontraCtor or surety in connection with Improvements, the City as landlord covenants and agrees to cooperate fully with the Lessee. . . Section 4.3. Installation of Personal Propem by Lesgem From time to time, in their sole discretion and at their own expense, the Lessee or any ,sublessee of the Lessee may install personal property on the Leased Premises, including without limitation, personal property 7 which becomes in whole or in part a ?xture when installed. Subject to Section 14.1 hereof, all personal property so installed, except substitute or replacement personal property, shall be ., preperty of the Lessee, except property of any sublessee of the Lessee which shall remain the sole property of the sublessee, in which the City and the Trustees shall have no interest, and may be? removed by the owner thereof at any time. The City shall execute such documents as are reasonably necessary to evidence that such personal property is the property of the Lessee or the Sublessee. Nothing contained herein shall prevent the Lessee or any of its sublessees from purchasing personal property under a conditional sale, installment purchase or lease sale contract, or subject to a vendor?s lien or security agreement, as security ?for the unpaid portion of the purchase price thereof; provided, however, that no lien or security interest shall attach to any part of the Leased Premises. or the Gross Revenues. Section 4.4. Movable Furnishings, Equipment and Other Person; 1 Propertv. The. Lessee covenants and agrees to obtain and maintain within the Leased Prermses all movable furnishings, equipment and other personal property, in addition to movable furnishings, equipmentand other personal pr0perty made available by City, essential to the then operation of the Leased-Premises, subject to the rights of removal Specified in Sections 4.3 and 6.2 hereof. The Lessee further covenants and agrees to replace any worn out or obsolete movable furnishings, equipment or other personal property used by the Lessee in connection with the administration, operation and maintenance of the Leased Premises with movable furnishings, equipment or other personal property of comparable operating capacity and for the same purpose or use, unless in the determination of the Lessee the worn out or obsolete movable furnishings, equipment or other personal property are no longer essential to the then operation of the Leased Premises. The Lessee covenants and agrees that any movable furnishings, equipment or other personal property constituting part of the Leased Premises and necessary for the then operation of the Leased Premises and the provision of the then Required Services will not be removed or relocated without securing a replacement therefor, except in compliance with Sections 4.3 and -20- 6.2 hereof or unless it is worn out or obsolete. Any moneys realized from any disposition made pursuant to this Section shall be used by' the Lessee solely for acquisition of movable furnishings, equipment or other personal property used as part of or for the Leased Premises. (End of Article IV) -21- ARTICLE SPECIAL INVESTMENTS Section 3.1. Depreciation Reserve Fund. Lessee covenants and agrees to abide by and perform any requirements of Section mm of the Senior Ordinance as originally enacted as long as those requirements remain in effect. The Lessee may request disbursements in the name and on behalf of the City from the Depreciation Reserve Fundrfor'the purposes and in the manner set forth in Section 16 of the Senior Ordinance; . Section 5.2. Investment of Fund Moneys. Money held for the credit of all Special Funds shall, to the extent practicable, be continuously invested and reinvested by the Trustees in Eligible Investments and the request or direction of the Authorized Lessee Representative in connection therewith shall be deemed to be the request or direction of the Fiscal Of?cer. Section 5.3. Covenantas to Arbitrage. The City and the Lessee each covenant and agree hereby that it will restrict the use of the proceeds Of the Bonds. in the manner and to the extent, if any, which is necessary,- after taking into aceount reasonable expectations at the time of the delivery of and payment for the Bonds, so thatthe Bonds .will not constitute arbitrage bonds under Section 148 of. the Code, or any successor to that Section. (End of Article V) -22- ARTICLE VI MAINTENANCE, MODIFICATIONS, TAXES AND, INSURANCE Section 6.1. Maintenance andModifications of Leased Premises bv Lessee. The Lessee, at its expense, during the Lease Term shall at its own mm keep and maintain or cause to be kept and maintained the Leased Premises, including all appurtenances thereto and any personal property therein or thereon, in good repair and in good'operating condition to .provide'the Required Services. replacing any. part orparts thereof which may becomeworn out or damaged by Other suitable property provided that nothing herein is intended to require the installation of preperty, which is not useful or economically feasible, and maintain the suitability of the Leased Premises as a health care facility. Upon the expiration of the Lease Term or termination of this Lease, the Lessee shall Surrender the then LeasedPremises and appurtenances thereto and all movable equipment, furnishings and other personal property which then comprise the Leased Premises to the City in as good repair as prevailed at the time the Lessee was put in full possession thereof, loss by fire or other casualty covered by insurance, Ordinary wear and tear, obsolescence, removal and replacements and acts of God excepted, subjeCt to the provisions of the second following paragraph and of Sections 4.3, 4.4 and 6.2 of this Lease, and-shall transfer to the City all of the Intangible Assets used in the operation of the Leased Premises which are of the same nature as the In ,gible Assets transferred by the City .to the Lessee in 1987. - - - The Lessee shall have the? privilege of remodeling the Leased Premises or making additions, modi?cations, removals and improvements thereto, including the Leased Real Premises, from tinte to time as it, in its discretion, may deem to be desirable for its uses and purposes, provided that such remodeling, additions, modi?cations, removals or improvements do net diminish the value of the Leased Premises or its utility in providing the Required Services. The cost of such remodeling, additions, modifications, removals and improvements shall be paid by the Lessee'and to the extent the same are ?xturesshall be. the. property of the and be included under the terms of this Lease as part of the Lt?msed Premises. tion 6.2. Substitution or Removal of Portions The Lessee shall, consistent with Sections an ase, have the privt age in time to time of substituting or replacing perSOnal property or ?xtures comprising a part of the Leased Premises for any-portions of the Leased Premises, provided that the personal property or ?xtures so substituted or replaced shall not impair the value of the Leased Premises or its utility in providing the Required Services or adversely affect the exemption from federal income tax of interest on the .Bonds. Any such substituted or replaced property or ?xtures shall become the property of the City, subject to any permitted security interest therein, and be included under the terms of this Lease. All buildings, structures, improvements, machinery, equipment and other property which shall be constructed, placed or installed in or upon the Leased Premises as an addition to or as a substitute for or in renewal'or replacement thereof, shall become a part of the Leased Premises and be included under the terms of this LeasePate-r!- In any. instance where the Lessee in its sole discretion determines that any items of equipment constituting Leased Premises have become inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary, the Lessee may remove such items of such equipment from the Leased Premises and sell, trade-in, exchange or otherwise dispose of them (as a whole or in part). provided that the Lessee substitutes and installs in the Leased Premises (subject to the provisions of the next sentence of this Section) other equipment having comparable utility (but not necessarily having the same function) in the operation of the Leased-Premises and provided further that such removal and substitution shall not impair the Operating viability of the Leased Premises. The Lessee shall not be required to install other equipment in substitution for -23- any equipment removed pursuant to thepreceding sentence if, in the reasonable opinion of management of the Lessee, such SUbStlIUthIl IS not necessary to preserve the Operating viability of the Leased Premises. The Lessee shall have the right to have any land, improvement or other interest in real property Constituting a portion of the Leased Premises which is not essential to the operation of the Leased Premises released from the de?nition of Leased Premises and the provisions of this Lease and the Indenture. The Executive and Fiscal Of?cer on behalf of the City and the Trustees shall join in any such release upon the written request of the Lessee therefor. Section 6.3. Taxes, Other Governmental Charges and Utilig; Charges. The Lessee covenants and agrees to ful?ll the obligation of the City under Section 5.16 of the Senior Indenture. . Section_6.4. Insurance. The Lessee covenants and agrees to ful?ll the obligations of the City ?under Sections 5.06 and 5.07 of the Senior Indenture and to perform pursuant to those Sections as if the Word "Issuer" uSed therein referred to the?Lessee. On expiration or termination of the Senior Indenture, the Lessee agrees-to maintain the insurance coverage required-by said Sections 5.06 and 5.07 and to perform pursuant to such sections as if such sections continued in existenCe except that the word "Trustee" used in such sections shall read as "City". Section 6.5. Payment by Gig; or Trustee. If the Lessee, or the Member on behalf of the Lessee, fails to perform any obligation of the City under the Senior Indenture or the Subordinated Indenture, then in addition to any other right Or remedy of the City or either Tmstee, the City or the applicable Trustee may advance funds to pay any required charges, although the City and the applicable Trustee shall not-be obligated to do so. Any funds so advanced, together with interest thereon at the Interest Rate for-Advances from the date of advancement, shall constitute Additional Payments and shall be?paid'by the Lessee, ?Or the Member on behalf of the Lessee, on demand. In any action brought to collect those Additional Payments, the City and the applicable Trustee, as the case may be, shall be entitled to the recovery of the Additional Payments, except as limited by law or judicial order or decision. (End of Article VI) -24- ARTICLE VII DAMAGE, DESTRUCTION AND CONDEMNATION Section 7.1. Damage and Destruction. In the eventthe Existing Facilities along with any Improvements are damaged to the extent or destroyed, both as described in Section 5.11 of the Senior Indenture, the Lessee may request the City recall the Bonds for redemption asyprovided? in that Section and if the City does not within thirty (30) days of the receipt of such request commence the proceedings for redemption of the Bonds the Lessee may cancel this Lease pursuant to Section 12.1 hereof. . Section;7.2. Eminent Domain. In the event all or a portion of the'Leased Premises is taken or damaged by the exercise of the power of eminent domain as described in Section 5.10 of the Senior Indenture, the Lessee may request the City to. call the Bonds for redemption as provided in that Section and if the City does not within thirty (30) days of the receipt of such request commence the proceedings for redemption of the Bonds the Lessee may cancel this Lease pursuant to Section" 12.1 hereof or, subject to the Trustees having moneys suf?cient to effect such redemption, may take on behalf of the City those actions necessary to be taken by the City under the Indentures to accomplish such redemption and such actions when taken shall' be the actions'of the City. 7 Section 7.3. Damages to Destruction of and Condemnation of Lessee-Owned Prepertv. The Lessee, each of its sublessees and the Member shall be entitled to any Net Proceeds paid for damages to, destruction of or takings of their own property. 7 (End of Article VII) -25- ARTICLE AND OTHER LIENS ?Section 8.1. Maintenance of ownership and No Other Liens. Except as permitted by this Lease, the Lessee covenants and agrees that it will not sell or otherwise dispose of, all or any part of the Leased Premises, or create a lien against the Le?ssee?s or City?s interest therein or- directly or indirectly create or suffer to be created or to remain any. mortgage, lien, encumbrance or charge'upon, pledge of, security interest in or conditional sale or other title retention agreement with respect to the Leased Premises, or the. interest of the City or of either Trustee in, the Special Funds. or the Net Hospital Receipts, Basic Rent, Additional Payments, or any part thereof, other than Permitted Encurnbrances. . Section 8.2. Mechanics? Liens. Lessee covenants?and agrees that it will, perform the obligations of the City under Section 5.12 of the Senior Indenture as if the word "Issuer" used therein referred to' the Lessee. (End of Article ARTICLE IX CERTAIN REPRESENTATIONS, WARRANTIES. COVENANTS AND AGREEMENTS . Section 9.1. Certain Representations, Warranties, Covenants and Agreements of Citv. The City represents and warrants that: I . It is a municipal corporation and political subdivision in and of the State, duly organized and validly existing under the laws of the State. It is not in violation of or conflict with any provision of the laws of the State which would impair its ability to observe and perform its covenants, agreements and obligations under the Indentures and-this Lease. It has, and with respect to the Indentures had at the time of execution of the lndentures, full power and authority to eXecute, deliver, observe and perform the Indentures and this Lease and all other instruments anddocuments executed and delivered by the City in connection with the Bonds and (ii) to enter into, observe and perform the transactions contemplated in the Indentures and this Lease and those other instruments and documents. It has duly authorized the execution, delivery, observance and performance of the Indentures and this Lease and the issuance and delivery of the Bonds issued pursuant to the Indentures. It will. not issue, any additional Bonds pursuant to the Indentures unless requested in Writing to do so by the Lessee. The City covenants and agrees that it will do all things in its power required of it to maintain its existence or to assure the assumption of its obligations under the Indentures and this Lease by any successor public body. Section 9.2. Certain. Representations, Warranties, Covenants and Agreements of Lessee. The Lessee represents and warrants that. . The Lessee is a nonprofit corporation duly organized and validly existing under the laws of the State, no part of the net earnings of which inure or may inure law?illy? to the bene?t. of any member or private individual, (ii) is in good standing under the laws of the State, is duly qualified to transact its business as now and as intended to be transacted by it, and to lease the Leased Premises, (iv) has duly accomplished all conditionsnecessary to be accomplished by it prior to the execution and delivery of this Lease and is not in violation of or in con?ict with any provision'of the laws of the State which would impair its ability to observe and perform its Covenants, agreements and obligations under. this Lease and all other instruments given to secure the Bonds issued pursuant to the Indentures. >f The Lessee has full power and authority to own or lease, as applicable, and operate its facilities?, including without limitation, the Leased Premises, (ii) to execute, deliver, observe and perform-this Lease and all other instruments and documents executed and delivered to_satisfy conditions and provisions of the Indentures and the Bonds issued pursuant to the Indentures, to enter into, observe and perform the transactions contemplated in this Lease and those other instruments and documents. The Lessee has duly authorized the execution, delivery, observance and performance of this Lease and those Other instruments and -27- documents. That execution, delivery, observance and performance do not contravene any provision of law applicable to the Lessee or the Lessee?s Articles of Incorporation or Code of Regulations, and do not contravene or constitute a default under any indenture, agreement or undertaking to which the Lessee is a party or by ?whic-h it or its property is or may be bounda?l? his Lease and those other. instruments and documents have been duly authorized by proper action and have been duly executed and delivered by the Lessee.? All necessary steps have been taken by the Lessee to constitute this Lettse and those other instruments and documents valid and binding obligations of the Lessee. The Lessee?s Articles of Incorporation and Cede of Regulations, and its operations conform to those acceptable and required for: (1) the Lessee?s exemption from the payment of income taxes under the Code as a nonpro?t organization; and- (2) the Lessee to be duly constituted and empovrered as an Ohio nonpro?t corporation, organized for charitable hospital purposes and eligible to be a lessee under Sections 140.03 and 140.05, Ohio Revised Code. The Lessee is, as of the date of the delivery of this Lease, an Organization which is described in Section 501(c)(3) of the Code, (ii) which is exempt from the payment of federal income taxes under Section 501(a') of the Code and which is eligible to be a lessee under Sections 140.03 and 140.05, Ohio Revised Code. The status of the Lesseeas an organization described in Section 501(c)(3) and its exemption under Section 501(a) have been confirmed by a letter dated May 19, 1987, from the Internal Revenite Service, and the Lessee?s status as not being a private foundation as de?ned in Section 509(a), has been con?rmed by a letter dated May 19, .1987, from the Internal Revenue Service; Those letters have not been modi?ed, limited or revoked,-and no audit or other proceeding with respect to those statuses or that exemption is pending'or to the knowledge of Lessee threatened. The Lessee is a 501(c)(3) organization with respect to the Operations of the Leased Premises within the meaning of Section 145 of the Code. The Lessee covenants and agrees that, at all times during the Lease Term: So long as it is the Lessee hereunder, .it will remain a nonpro?t corporation duly organized, validly existing in good standing, and quali?ed to transact its business and to own its properties, in the State, The Lessee will maintain corporate power andl'authority to own or lease, as applicable, and Operate its facilities, including without limitation, the Leased Premises, and (ii) to observe and perform this Lease and all other instrumentsand documents executed and delivered by the Lessee to satisfy conditions and provisions of the 'Bonds issued pursuant to the Indentures and to enter into, observe and perform the transactions contemplated in or permitted by this Loase and those other instruments and documents. The Lessee?s Articles of Incorporation, its Code of Regulations, and its operations will conform to those acceptable and required as described in subparagraph above. - The Lessee will take all appropriate measures to assure that it retains the characteristics, status and exemption described in subparagraph above and not to affect adversely the exemption from federal income tax of interest on the Bonds. -28 M?m? The Lessee will not perform any acts or enter into any agreements which will affect adversely the characteristics, status and exemption so described and will not use, carry on or permit to be carried on in the Leased Premises any trade or business that would adversely affect those characteristics, status and exemption. The Governing Board shall appoint a Community Advisory Committee consisting of representatives of Community organizations. The Governing Board shall provide in its Code of Regulations for the Community Advisory Committee. times: (ii) (3) Its Articles of Incorporation and Code of Regulations rwill require at all The Member will be the sole member of the Lessee and the Lessee or the Governing Board will be the member of any Af?liated Corporation requiring a member; The Governing Board shall consist of 23 members who shall serve without compensation and for a term as hereafter specified commencing on January 1, except as hereafter provided. Except-for members of the Governing Board elected pursuant to subparagraph (4) hereof, the Governing Board may adopt rules providing for removal from the Governing?BOard of any member of the Governing Board whose absence from the number of meetings of the Governing Board speci?ed in such rules is notexcused by the Governing Board. (1) The Executive and two members of Council shall be representatives of the City and members ex of?cio of the Governing Board with all the privileges and emoluments of such membership including voting rights. - The members of Council to be members of the Governing - Board shall be selected by Council by a majority vote of all of its members with, if more than one political party ?is represented in Council, one from each of the two political parties having the largest and second largest number of representatives on Council as of January 2 of the year in which the two year term cemmences and those initially selected shall serve until December '31, 1997' or .ineach case until that person ceases to be a, member of Council, whichever is earlier. In the event a member of the Governing Board so selected by Councillceases to be a member of Council prior to expiration of his term, the vacancy in the Governing Board created thereby ?shall be ?lled for the unexpired term by Council in the same manner as the original appointment. - (2) The Council and the Executive shall each nominate two persons to serve as members of the Governing Board. The persons so nominated shall be considered ?rst by the Governing Board and if approved by the Governing Board submitted for consideration for ratification by the Member in its capacity as the member of the Lessee, and theMember may, but need net, ratify the approval of one or more of the nominees approved by the Governing -29- (3) (4) . members Board as members of the. Governing Board. If the Governing Board or the Member does not approve or ratify the approval of a nominee, it shall request the nominator of any nominee not approved or rati?ed to nominate additional names for the position not ?lled. The term of the members elected pursuant to this paragraph shall be ?ve years except that of the persons initially selected pursuant to this paragraph, one nominated by the Mayor shall serve until December 31, 1997 and the other until December 31, 2001 and one nominated by the Council shall serve until December 31, 1998 and the other until December 31, .2000. Thereafter the Council and the Executiveshall deliver the names of persons nominated pursuant to this paragraph to the Lessee and the Member prior to November 1 in the'year in which the term of the incumbent appointed pursuant to this paragraph will expire. In the event a member of the Governing Board selected pursuant to this paragraph ceases to be a member prior to the expiration of his term, the vacancy in the Governing Board created thereby shall be filled for the unexpired term in the same manner as for the original appointment. The Council shall nominate three members of the Governing Board to be appointed .as- representatives of Comnmnity Organizations. The term of members of the Governing? Board selected pursuant to this paragraph shall be five: years except that the terms of the initial shall expire on December 31, 1998, December 31, 1999 and December 31, 2000. The terms of theinitial members shall be determined by lot. The persons so nominated shall be considered ?rst by the Governing Board and if approved by the Governing Board submitted for censideration of rati?cation by the -Member in its capacity as the member of the Lessee which Member may, but need not, ratify the approval of one or more of the nominees as members of the Governing Board. If the Governing Board or the Member does not approve or ratify the approval of a nominee, it shall request the Co'uncil: to nominate additional persons for any position not ?lled. In the event any person selected pursuant to this paragraph should cease to be a member of - the Governing Board prior to the expiration of that. person?s term, such vacancy shall be ?lled in the same manner as provided herein for the original appointment. The Member in its'capacity as the member of the Lessee shall elect three members of the Governing Body which election shall be conclusive and not subject to any other approval or designation. The term of members of the Governing Board elected pursuant to this paragraph shall be ?ve years exceptthat the terms of the initial members shall expire on December 31. 1998, December 31, 2000 and December 31, 2001. In the event any person -30- (5) (6) (7) (8) selected pursuant to this paragraph should cease to be a member prior to the expiration of the term, the vacancy shall be ?lled for the unexpired term in the same manner as for the original appointment. The other initial members of the Governing Board shall be the immediate past'President of the Medical Staff of Lakewood Hospital, who shall have all the privileges and emoluments of such membership including voting rights, and (ii) nine (9) members who 'shall be appointed by the Governing Board of the Lessee of which nine (9) members, two (2). shall serve until December 31, 1997, three (3) until December 31, 1998, two (2) until December 31, 1999 and two (2) until December 31, 2000. With respect to those persons appointed and rati?ed pursuant to clause (ii) of the immediately preceding sentence, such terms of the initial members shall be determined by lot, the persons so appointed shall be submitted for consideration of rati?cation by the Member in its, capacity as . the member of the Lessee which Member may, but need not, ratify the'appointment of one or more of the persons approved by the Governing Board as members of the Governing Board and shall request the then Governing Board to approve additional persons for anyposition nor ?lled, and (2) their direct or indirect successors shall serve for a term of five years commencing on January 1 and any vacancies occurring in the Governing Board by reason of death, illness, resignation, removal from the area, non- attendance at meetings or the expiration of a term of the member of the Governing Board appointed pursuant to this paragraph shall be ?lled in the same manner as provided herein for the original appointment. The immediate past President of the Medical Staff shall serve until he shall cease to be the immediate past President and his. successor has accepted membership on the Governing Board. - - No person shall have been elected as a member of the Governing Board pursuant to subparagraphs and ?o?f'th'is paragraph '(jl'until rati?cation by the Member has occurred. . A member of the Governing Board who is not ex of?cio and whose term has expired but whose successor has not been elected shall continue to serve as a member of the Governing Board until his or her successor has been elected. The members of the Governing Board at the ?rst meeting in each year shall select a chairman and vice chairman of the Governing Board who shall be members thereof, 'and a secretary and treasurer who need not be members. - - -31- (9) No member of the Governing Board except those identi?ed in' paragraph 1 shall hold any public office or employment other than as a member of the state militia or a reserve component, of the armed forces of the United States of America. A member of the Governing Board having alconflict of interest or con?ict of responsibility on any matter involving the Lessee and any other business entity or person shall disclose such con?ict and shall refrain from voting on such matter. A member of the Governing Board shall not be considered to have a con?ict of interest or a conflict of responsibility and shall not be required to refrain from voting on any matter merely because of such member?s position as a public of?cial or because such member is also a trustee or director of any direct or indirect subsidiary or sister entity of the Lessee or is a trustee, director, officer or employee of the Member or any related entity. No member of the Governing Board shall use his or her position as such member for his or her own direct or indirect financial gain. (It) .It will not take any action that would adversely affect the exemption from federal income taxation'of interest paid on the Bonds. (1) It will perform all of the covenants, agreements and obligations of the City and the Hospital Trustees under the Indentures and all ?other. instruments and documents executed and delivered by the City and the Hospital Trustees in connection with the issuance of the Bonds pursuant to the Indenrures. The Lessee covenants not to incur any additional Indebtedness except. as permitted pursuant to Section 14 of the First Supplemental Senior Ordinance, so. long as the Senior Indenture remains outstanding. Upon termination or expiration of the Senior Indenture, Lessee covenants and agrees to continue to abide by the financial tests set forth in Section 14- of the First Supplemental Senior Ordinance until a memorandum of restrictions with respect to Indebtedness is filed with the Council and there shall not have been effectivewithin Sixty (60) days of such filing an ordinance of the-City passed by majority vote of the Council disapproving such memorandum. Secrion-9.3. Lessee to Maintain Corporate gistence. The Lessee covenants and agrees that during the Lease Term it will maintain such corporate existence as will not adversely affect the tax-exempt status of interest on the Bonds, its ability to be lessee under this Lease and perform its duties and obligations hereunder and qualify for payment by third party payers for services provided by it on the Leased Premises; provided that the Lessee may merge with or into or transfer substantially all of its assets to another nonpro?t corporation if the surviving or receiving corporation shall assume in writing all of the obligations of the Lessee under this Lease, including by way of example but not limitation, those of Section.9.2(j) of this Lease. Any transaCtion entered into by the Lessee which violates this Section shall, to the extent permitted by law, be null and void. . Section 9.4. Audits and Certi?cates of No Defaults. The Lessee covenants and agrees that it will keep true and pr0per books of records and accounts in which full and correct entries will be made of all of its business transactions, all in accordance with generally accepted accounting principles applicable to corporations such as the Lessee. The Lessee further covenants that after the close of each Fiscal Year it will cause an audit to be made by the Accountant of the books and accounts of the Lessee for -32- such Fiscal Year. Lessee consents to the Trustee making available to the Accountant all of the books and records in the possession of the Trustee pertaining to the Leased Premises.? Within 150 days after the end of each Fiscal Year, the Lessee shall ?le, or shall cause to be ?led, with the Trustee, the City. and any corporation which controls Lessee, and shall mail, or cause to be mailed to Standard Poor?s Ratings Group and Moody?s Investors Service a copy of its audited ?nancial statements for such? Fiscal Year, accOmpanied by the. report thereon of the Accountant prepared in accordance with generally accepted accounting principles, and the Accountant?s "opinion on the material presented and (ii) a certificate of the Authorized Lessee Representative statingthat to the best of his/her knowledge, the Lessee and the Member are in compliance with all material terms and conditions of this Lease and the Definitive Agreement. The audit shall be conducted and the report rendered in accordance with generally accepted auditing standards. i The Lessee shall ?le or cause to be ?led with City on or before April 30, July 31, October 31 and January 31 of each year an unaudited quarterly ?nancial statement. The Lessee further covenants that it will cause any additional reports or audits relating to the Leased Premises to be made as required by law and that upon request it will furnish, or cause to be furnished, to the Trustees financial reports covering the matters required by this Section and such other information the Leased Premises as the Trustees reasonably mayvrequest. In addition, the Lessee shall furnish to the Trustees, within 150 days after the end of each Fiscal Year, a certi?cate signed by the'Authorized Lessee Representative which shall state that, to the best of his knowledge, there is no default existing under any of the provisions of the Indentures or this Lease. The Lessee covenants and agrees to perform the Obligations imposed on the City by Section 5.17 of the Senior Indenture and Section 5.03 of the'Subordinated Indenture as if the reference therein to the Issuer referred to the Lessee. Section 9.5. Lessee?s Approval of Indentures. The Indentures have been delivered to theLessee for examination, and the Lessee'ac'knowledges, by, execution of this Lease, that it has examined the Indentures. The Lessee approves and accepts all- rights of the Trustee and the Bondholders and all duties and obligations of the City which are contemplated in the Indentures to- be rights of the Trustee and the Bondholders and duties and obligations of the City. - The Lessee covenants and agrees to be bound by those rights and to observe and perform those duties and obligations. The Essee acknowledges that its rights under this Lease are subordinate to the Indentures. -- Section 9.6. No Representation or Warranty of Conditign gr Suitability. The Lessee and the City agree that the title to the Leased Premises, is satisfactory, and the Lessee agrees that all defects, irregularities, encumbrances or clouds on title do not impair the Lessee?s use or Occupancy or the value of the Leased Premises. :The City makes no representation or warranty, either express or implied, as to the suitability or utility of the Leased Premises for the Lessee?s purposes or needs, (ii) the earning capacity of the Leased Premises, or the condition of the Leased Premises. Section 9.7. Quiet Enjoyment. The City covenants and agrees that it will not take any action, other than pursuant to Article of this Lease, to prevent the Lessee from holding and enjoying the Leased Premises peaceably and quietly for the Lease Term. The City covenants and agrees further that it will, at the Lessee?s request and eitpense, defend theLessee?s possession and enjoyment of the Leased Premises during the Lease -33- Term against all parties or will permit the Lessee, in its own name and on its own behalf, or to the extent lawful, in the City?s name and on its behalf, to defend that possession and enjoyment, - Section 9.8. Right of Access. The Lessee covenants and agrees that, subject to reasonable ?security regulations and to reasonable requirements as to notice, the City and the Trustee and their or either of their duly authorized agents, will have the right at all reasonable times to enter upon, examine and inspect the Leased Premises, although the City and the Trustee do not have the obligation to do so. 7 . section 9.9. Indemni?cation. The Lessee releases the? City from, (ii) covenants and agrees that the City will not be liable for, and covenants and agrees to indemnify the City against all liabilities, claims, costs, losses and eXpenses- imposed upon or asserted against the City on account of any loss or damage to preperty, or injury to, death of or loss by any person, that may be occasioned by any cause whatsoever pertaining to the acquisition, construction, improvement, equipping, maintenance, operation or use of the Leased Premises or occurring otherwise in or about the Leased Premises; any breach or default on the part of the Lessee in the observance or performance of any covenant, agreement or obligation of the Lessee under the Lease or arising from the acquisition, construction, improvement, equipping, maintenance, operation or use of the Leased PremiSes, or from any act or failure f9 act by the Lessee or any of its agents, contractors,- servants, employees or icensees; . ownership or lease of any interest in the Leased Premises; and any action, claim or proceeding brought in connection with any of the foregoing; -- provided, however, that indemni?cation under this Section shall not extend to damages resulting from intentional acts of the City which are not related to its capacity as the issuer of. the Bonds. The Lessee covenants and agrees to indemnify the Trustees for and to hold the Trustees harmless against all liabilities, claims, costs, losses and expenses incurred without negligence or'bad faith on the part of the Trustees on account of any action taken 'or omitted to be taken by the Trustees in accordance with the terms of this Lease, the Indentures or the Bonds, or at the request of or with the consent of the Lessee, including without limitation, the cests and expenses of the Trustees in defending itself against any action, claim or proceeding in connection with any of the foregoing. In case any action, claim or proceeding is brought or asserted against the City or a Trustee in respect of which indemnification may be sought hereunder, the City or the Trustee, as the case may be, shall give notice thereof to the Lessee. Upon receipt of that notice, the Lessee shall have the obligationvand the right to assume the defense of the action, claim or proceeding; provided that failure of the City or the Trustee to give that notice shall not relieve the Lessee from any of its covenants, agreements or obligations under this Section unless that failure prejudices. the defense by the Lessee of the action, claim or proceeding. At its own expense, an indemni?ed party may employ separatecounsel and may participate in the defense. The Lessee shall not be liable for any settlement made without'its consent.? . The release and indemni?cation set forth in this Section are intended to and shall include the indemnification of all affected of?cials, directors, officers and employees of the City and the Trustees, respectively. The release and indemni?cation are intended to and shall be -34- enforceable by the City and the Trustees, respectively, to the full extent permitted by law. All amounts payable under this Section, together with interest thereon at the Interest Rate for Advances from the date of payment by the indemnified Person, shall constitute Additional Payments and shall be paid by the Lessee on demand by the indemni?ed Person. In any action brought to? collect those Additional Payments, the indemnified Person shall be entitled to the recovery of the Additional Payments, except as limited by law or, judicial order or decision. Section 9.10. Compliance with App. licable Law and?Insurance Requirements. The Lessee covenants and agrees to comply with all Legal Requirements, as de?ned below, during, the Lease Term at its sole cost and expense. At its own expense, the Lessee 'will procure, maintain and comply (or cause complianCe) with all permits, licenses and other authorizations required for the Leased Premises. The Lessee may contest any Legal Requirement, at the Lessee?s expense and in its own name and on its own behalf, by any means in good faith, and may postpone compliance therewith pending the completion of the contest; provided that the Lessee shall deliver to the Trusteesan opinion of counsel satisfactory to the Senior Trustee to the effect that the Leased Premises, or any part thereof, will not be subject to imminent loss or'forfeiture. As used in this Section, the term "Legal Requirements? means all laws, statutes, codes, acts, ordinances, resolutions, orders, final judgments. and decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of all governments, departments, boards, courts, authorities, agencies, of?cials and officers, foreseen or unforeseen, ordinary or extraordinary, which are applicable now or may be applicable at any time hereafter to the Lessee, to the Leased Premises, or any part thereof, to any use or condition of the Leased Premises, or any part thereof, or to health care providers or hosPitals generally. Section 9.1 Lease Term, operate so much of the Leased Premises as are eligible therefor in compliance with the standards of the Joint Commission on Accreditation of He?althcare Organizations or any substitute organization which is nationally recognized as performing the functions now performed by such Commission. administer, operate, maintain, repair, occup in accordance ?with the terms of this Lease; 0' t5 Premises as from time to time are Hospital Facili and related services and care, at all tintes as act 5? lief idiscnm' ination as to race, sex, creed color oraat'ia?at?dng?in; a 5m in site"?ai?iiabte and'as professtonal opinion?detennmes the continue to provide the Required Services within the City and to utilize the Leased Premises as a healthcare facility subject to discontinuance pursuant to Section 9.16 of this Lease. -35- continue the provisiOn of rescue squad and paramedic services as described in Exhibit hereto. . provide employment policies which are fairand just to all parties and promote positive employer~employee relations. undertake a pension plan for its employees not eligible for or desirous of participating in the Public Employees Retirement System which is equitable for the employees and the Lessee. continue to provide the Required Services within the City and other offered healthcare services to residentsof theCity without regard to their ability to pay based on eligibility guidelines established by the Community Services Administration. of the United States Department of Health and Human Services or any successor thereto or, if there is no successor, then conununity services standards used by hospitals servicing comparable comniunities. maintain as one of its objectives providing high quality, affordable healthcare services with rates and charges consistent with comparable facilities in Cuyahoga County. 0' assume and comply with any ?requirements imposed on the City by Section 291(i), Title 42, USCA, as amended, as aresult of acceptance by the City of so?called Hill Burton grants-in?aid. - Section 9.12. Quali?cation for Third Pm Payments. The Lessee shall at all times, unless a Consultant shall determine that it is in the best interest of the lessee and holders of the Bonds not to maintain such status, use its best efforts to establish and maintain the status of the Lessee as eligible for payment or reimbursement under Medicare, Medicaid, and signi?cant third party payers and any other successor programs,- or any other federal or State programs substituted in lieu thereof or supplementary thereto. For purposes of this Section a third party payor shall be considered signi?cant if it provides more than 15 percent off the Total Revenue for the Fiscal Year as shown on the most recent audited ?nancial statements available pursuant to Section 9.4 hereof. - Section 9.13. Pension Policies. Lessee acknowledges that employees of the City employed in the Leased Premises are members of the Public Employees Retirement System of the State. Lessee agrees that it shall continue to pay the employer?s contribution to the Public Employees Retirement System for each such employee so long as such employee is eligible and desires to continue to make and does make that employee?s contribution to that System. An equitable private pension bene?t will be made available to-ernployees not eligible for or desirous of participating in the Public Employees Section 9.1.4. Extent of Provisions Regarding Legsee; No Personal Liability. No representation, warranty, covenant, agreement, obligation or-stipulation contained the Lease, Indenture or other instruments or documents in connection therewith or with the Bonds shall be deemed to constitute a representation, warranty, covenant, agreement, obligation or stipulation of any present or future trustee, member, of?cer, agent or employee of the Lessee in an individual capacity, and to the extent authorized and permitted by applicable law, no of?cial executing or approving the Lessee?s participation in the Lease or'the- issuance of the Bonds shall be liable personally under the Lease or on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof. - Section 9.15. Lessee Not to Affect Adversely Tax-Exempt Status of Interest. For the bene?t of the City, the Trustees and the holders of the Series 1983 Bonds, the Lessee hereby -35- represents and warrants that it has not taken or omitted to take,. or permitted to be taken on its behalf, and covenants and agrees that it willrnot take or omit to take, or permit to be taken on its behalf, any .action which, if taken or omitted, would affect adversely the exemption from federal income taxation of the interest on the Bonds. - - . The Lessee covenants and agrees further that it will take, or require to be taken, any acts which maybe required of it from time to time under applicable law or regulation to continue the exemption from federal income taxation 'of the interest on the Bonds. The provisions of the Tax Compliance Agreement, as defined in the First Supplemental Senior Ordinance, are herein incorporated by reference as if fully set forth herein. Section 9.16. Change in Required Services. The Lessee agrees that it will maintain the Required Services within the City and that it will not terminate any Required Service within the City unless it shall ?rst have noti?ed'the City. of its intent to terminate a Required Service, the date of the proposed termination, 'which shall not be earlier than the sixtieth day following Such notice, and. the reasons for the, proposed termination. Such termination may be effected on or after the proposed termination date so long'as there shall not have become effective an ordinance of the Clty'directing the, Lessee not to terminate the Required Service which was the subject of the notice. (End Arnhem - 37'- . ARTICLE RELEASE OF PORTIONS OF LEASED REAL PROPERTY Section 10.1. Release of Leased .Real Property. In addition to Section the parties hereto reserve the right, at any time and from time to time, to amend-this Lease to effect the release of and removal from this Lease and the leasehold estate created hereby. . Section 10.2. E0 Abatement or Diminution of Basic Rent. No release, grant or conveyance effected under any of the provisions of this Lease shall entitle the Lessee to any abatement or diminution of the Basic Rent, Additional Payments or other amounts payable, or in any covenant, agreement or obligation of the Lessee, under this Lease, Section 10.3; Granting Easements. At any time, the City, acting through its Fiscal Officer and without further authorization of its Council, and the Lessee may grant or release, as the case may be, with or without consideration, .those easements, licenses, rights-of-way (including without limitation, the dedication of public highways), party wall rights and rights of lateral support and other rights or privileges in the nature of easements with respect to the Leased Premises which may be lawful and reasonably required in connection with the proper and ef?cient use and operation of the Leased Premises or of adjacent properties. (End of Article X) -33- ARTICLE XI ASSIGNMENT, SUBLEASING AND Section 11.1. Subleasing, Assignment and Right to Use. No Sublease, right to ?useor assignment of the Leased Premises, or any portionjthereof, shall be effective unless the instrument granting such sublease, assignment or right to use is ?led with the City and within sixty (60) days following that ?ling, there shall not have become effective an ordinance of the City directing the Lessee not to sublease, grant the right to use or assign such facilities provided that prohibition shall not apply to any sublease, right to use or assignment: in effect on the date of delivery hereof or any extension of those subleases, grants or assignments, if a cupy of, or a writing describing fully, the sublease, grant or assignment has been provided to the Trustee and the City prior to the delivery date hereof; to facilitate the provision of Hospital Spocialty Services or Convenience Activities or the sublease, grant-or assigmnent is to the Member, at Permitted Affiliate or an Af?liated Corporation. Notwithstanding the-immediately preceding paragraph, no Management Contract of the Existing Facilities and no subleaSe, right to use or assignment of the facilities located on ParCel No. 1 of the Leased Real Premises which together with the then existing Subleases, rights-to-use and assignments of the facilities located on Parcel No. 101? the Leased Premises, sublease, grant the right to use, assign or subject to Management:- Contract an area of the facilities'on Parcel No. '1 which in the most recent Fiscal'Year for which audited financial statements are available pursuant to Section 9.4 hereof produced more than 74% of the Toral Revenue for that Fiscal Year as shown on those audited ?nancial statements provided by such facilities, shall become effective unless the instrument of such Management Contract, sublease, right to use or ,assi'gmnent is ?led with the City and within sixty (60) days following that filing, there shall not have become effective an ordinance of the City directing the Lessee not to contract for management, Sublease, grant the right to use or assign such facilities.? Lessee shall provide the City quarterly a report detailing and updating any assignment or subleasing activity with respect to this Lease. If any Bonds are outstanding, all of the following conditions must be satisfied in order to proceed pursuant to this Section 11.1: . No assignment (other than pursuant to Section 9.4 hereof), sublease or grant shall relieve theLessee from primary liability-for any of its covenants, agreements or obligations under this Lease, and 'in the event of that assignment, sublease or grant, the Lessee shall continue to remain primarily liablefor the payment of the Basic Rent, Additional Payments and other ambunts payable, and for the observanceand""performan?e' of all of its covenants, agreements and obligations, under this Lease. Any assignment, lease or grant may provide for the use, operation, maintenance, modi?cation and replacement of the Leased Premises, or any part thereof, by the assignee, sublessee or grantee; provided that (I) the use, operation, maintenance, modi?cation or replacement shall be in accordance with this Lease, (2) the Lessee shall obtain or retain all rights and interests necessary or advisable to permit it to observe and perform all of its covenants, agreements and obligations under this Lease, and (3) any assignee shall assume the obligations of the Lessee, to the extent of the interest assigned, to pay Basic Rent, Additional Payments and other amounts payable, and to observe and perform the Lessee?s covenants, agreements and obligations, under this Lease. -39- KM . Prior toythe delivery thereof, the Lessee shall furnish or cause to be furnished to the Trustees at true and complete copy of each assignment, sublease or grant, as the case may be, together with any instrument or document of - assumption. . No assignment, sublease or grant shall impair materially the usefulness or operation of the Leased Premises. Any Sublease, grant Of right to use or leasehold mortgage pursuantto this Section 11.1. must comply with the following: - (A) each assignment, sublease and grant'oi' right to' use shall be subject to thetertns of this Lease, (B) no assignment, subleaSe or grant of right to use shall relieve the Lessee of any of its covenants, agreements or obligations under this Lease, and . (C) noassignment, sublease, grant of right to. use or leasehold mortgage shall adversely affect the exclusion from gross income of the - holder of interest paid on the Bonds. .7 Any assignment, sublease or grant by the lessee in violation of this section shall, to the extent permitted by law, be null and void. . Section-11.2.1 Assignment by Citv.- As security for payment of Bond Service Charges and in accordance with applicable law and the Indenture, the City, acting through its Fiscal Of?cer and without any further action of its Council, may assign to the Trusteethe City?s rights under and interests in, and may pledge any moneys receivable under, the Lease or from the lease or other use, disposition or's'ale of the Leased Premises. Section 1.1.3. Restrictions on Transfer and Encumbrance of Leased Premises by Cirv. Except as provided otherwise in this Lease, the City covenants and agrees that it will not sell, assign, transfer, convey, lease 'or otherwise dispose of its interests in the Leased Premises, or any part thereof, during the Lease Term other than to the Lessee or to the Member or a related entity, 7 create-or suffer to be created any lien or encumbrance on the Leased Premises, or any part thereof, except liens or encumbrances for taxes, governmental charges and spec1al assessments, or - make any pledge or assignment of or create any lien or encumbrance, upon the rents, revenues and receipts derived from the sale, assignment, transfer, conveyance, lease or other diSposition of its interests in the Leased Premises, or any part thereof. (End nof Article X1) -40- ARTICLE-1X11 TERMINATION OF AND SUBSTITUTION FOR LEASE Section 12.1. Option to Terminate Lease Prior to Panent of Bonds. - The Le33ee is granted hereby the'option to terminate this Lease if; as provided in Sections 7.1 and 7.2 hereof, it requests the City to redeem all of the Bonds issued pursuant to the Indentures pursuant to Section 7(g) of the Senior Bond Ordinance and Section 5(e) of the Subordinated Bond Ordinance providing for redemption of those Bonds in the case of certain catastrophic events and the City has not commenced .within' thirty (30) daysrof the receipt of such request the proceedings to call such Bonds for. redemption and with such redemption. Sections 12.2. Termination of Lease and Dissolution. . Subject to Section 14.1, on or after expiration of the Lease Term or termination of thileease, the Lessee may dissolve and if it dissolves, after payment of all its obligations, shall transfer all of its then assets to the City? or to another nonpro?t corporation organized for the purpose of Operating the Hospital provided that such transfer shall not have adverse federal income tax consequences. 7 (End of Article XII) .41- ARTICLE EVENTS OF DEFAULT AND REMEDIES Section 13.1. Events of Default. The-following shall be "Events of Default" under this Lease: . - (1) Failure by the Lessee to pay any Basic Rent required to be paid hereunder on or prior to the applicable Rental Payment Date, and continuance of that failure for ?ve days. - I (2) Failure by the Lessee to pay any Additional Payment on its due date required to be paid under Section 3.2(a) hereof, andcontinuance of that failure for five days. Except as noted in subparagraph below explicitly with reference to this subparagraph, failure by the Lessee to administer, maintain and operate the Leased Premises and provide the Required Services Within the City without regard to race, creed, color or national origin. Except upon an event of Force Majeure (as provided below) or as provided below in this subparagraph, failure by the Lessee to obServe or perform any covenant, agreement or obligation on its part to be observed or performed under the Lease, other than as referred to in subparagraphs or of this Section, for a period of sixty-(60) days after Written notice, by registered or certi?ed mail, to the Lessee by the City or the Senior Trustee of that failure requesting that it be remedied, unless the Senior Trustee agrees in writing to an extension of that sixty (60) day period prior to its expiration; provided, however, that if the Lessee shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be reasonably completed within a period of sixty (60) days, that period shall be increased to any extent which shall be necessary to enable the Lessee to complete the curative action diligently unless there shall have become effective an ordinance of the City passed by a majority vote of the Council denying such extension provided that the eXtension shall expire only upon ten (10) days notice to Le$see of such denial; and provided ?irther that if the observance and performance of any covenant, agreement or obligation to which reference is made in subparagraph or in this subparagraph shall be prevented bythe application of Governmental Restrictions, federal or State wage, price or economic stabilization controls, cost containment requirements, restrictions on rates, charges or revenues of the Lessee,federal or State environmental laws or regulations or regulations or policies? anpesed'by third party payment agencies ,(if governmental in the case of subparagraph and whether govermnentalvor private in the case of this subparagraph and the Lessee shall have complied in full with its covenants, agreements and obligations set forth in Section 3.7 hereof, the inability to observe or perform that covenant, agreement or obligation shall not constitute an Event of Default. Abandonment by the Lessee of the Leased Premises, or of any substantial part thereof, or of the operations thereon contemplated herein, and continuance of that abandonment for a period of thirty (30) days after written notice to the Lessee by the City or the Trustee of the abandonment. . Dissolution or liquidation of the Lessee or failure by the Lessee to lift any execution, garnishment or attachment-of such consequence that it will impair the Lessee?s ability to carry out its covenants, agreements and -42- obligations under the Lease. The term "dissolution or liquidation of the Lessee", as used in this subparagraph, shall not be construed to include the cessation of the corporate eXistence of the Lessee resulting either from a merger or consolidation - of the Lessee into or with another person, or from a dissolution or liquidation of the Lessee following a transfer of all or substantially allof its assets as an entirety, in accordance With Section 9.3 hereof. The Lessee shall: become insolvent or the subject of insolvency proceedings; or (ii) be unable, or admit in writing its inability, .to pay its debts as .they mature; or make anassignment for the bene?t of creditors or to an agent authorized to liquidate any substantial amount of its property; or (iv) ?le a petition or other pleading seeking reorganization, composition, readjustment, or liquidation of assets, or requesting similar relief; or apply to a court for the appointment of a receiver. for any of its assets; or (vi) have a receiver or liquidator appointed for any of its assets (with or without the consent of the Lessee) and such receiver shall not be discharged within ninety (90) consecutive days after hisappointment; or (vii) become" the subject of an "order for relief" within the meaning of the United States Bankruptcy Code; or ?le an answer to a creditor?s petition admitting the material allegations thereof for liquidation, reorganization,- readjustment or composition or to effect a plan or other arrangement with creditors or fail to have such petition dismissed within sixty (60) consecutive days after the same is ?led against the Lessee. Loss under the Code of the tax-exempt status for the interest paid on the Bondsas a result- of any action of the Lessee. Acceleration of payment under any indebtedness or other obligation of the Le35ee or under any agreement, instrumcnt or document evidencing, securing or relating to that indebtedness or obligation, after the expiration of any applicable grace period and not waived; provided that the foregoing shall constitute an Event of Default under this Lease only if the accelerated indebtedness or obligations exceed in the. aggregate one percent ofgthe Lessee?s Total Operating Revenues as shown in Lessee?s most recently available audited ?nancial statement and only if the indebtedness or obligations are owed or payable to other than the Member or an-entity related to the Member; and provided further that . (1) after written notice by? the Lessee to the City and the Senior Trustee of the Lessee?s intention to do so, the Lessee may contest the - validity or the amount of any acceleration at its own expense and in its own name and on its ownbehalfor, "t0" the" entent lawful, in the "name behalf of the City, by appropriate-proceedings duly and timely instituted in good faith and diligently prosecuted,and (2) in the event of a'contest, the Lessee may permit any accelerated indebtedness, or the amount thereof, so contested to remain unpaid during the period of the contest, and any appeal therefrom without that circumstance constituting an'Event of Default under this subparagraph, if the Lessee delivers to the Senior Trustee or the City an opinion of counsel to the effect that by nonpayment thereof, the liens and priority of the Indenmres, this Lease, or the interests of the City and the Lessee in the Leased Premises will not be affected materially, and the Leased Premises, or any part thereof, will not be subject to imminent loss or forfeiture, and -43- . during the period when any amount so contested remains unpaid, the Lessee sets asrde on its books adequate reserves with respect thereto. Failure by the Lessee to comply with the provisions of Section 6.4 hereof after five business days notice of such failure. The occurrence of an Event of Default under the Guaranty and Security Agreement or the Tax Compliance Agreement, bOth as de?ned in the First Supplemental Senior Indenture. - - 0 event described in subparagraphs and of the preceding paragraph shall constitute an Event of Default hereunder if,'by reason of an event of Force Majeure, the Lessee is unable- inwhole? or in part to carry out the covenants, agreements and obligations to which subparagraph applies, other than the covenants, agreements and obligations on the part of the Lessee to carry insurance and to pay Principal and Interest Requirements, Additional Payments and other amounts payable under the Lease, or to which subparagraph applies. The Lessee . will give notice to the Senior Trustee or the City of any event of Force Majeure and will use its best efforts to remedy that event with all reasonable dispatch; provided that the Lessee will not be required to settle strikes, lockouts or other by acceding to the demands of any opposing Person, when in the Lessee?s judgment, that course would be unfavorable to it. 7 As used herein, "Force Majeure" means acts of God; ?res; epidemics; landslides; floods; strikes; lockouts or other induStrial disturbances; acts of public enemies; acts or orders of any kind of any governmental authority; insurrections; riots; civil disturbances; arrests; explosions;- breakage or malfunctions of or accidents to machinery, transmission pipes or canals; partial or entire failures of utilities; shortages of labor, materials, supplies or transportation; lightning, earthquakes, hurricanes, tornadoes, storms or droughts; or any. cause or event not reasonably within the control of the Lessee.- 7 The declaration of an Event of Default and the exercise of remedies upon the declaration shall be subject to any applicable limitations of federal bankruptcy law affecting or precluding the declaration or exercise during the pendency of or immediately following any bankruptcy, liquidation or reorganization proceedings.- . - . Section 13.2. Remedies on Default. Whenever any Event of Default under Section 13.1 of this Lease shall have occurred and be?_continuing, after?rst giving the Member and the Lessee notice of the remedial step'proposed to be taken at least seven (7) Business Days prior to taking the remedial step, any one or more of the following remedial steps may be taken; provided that in no event shall the City be obligated to take any step which in its Opinion will or might 'cause it to expend time or money or otherwise to incur liability, unless and until the City has been furnished a satisfactory indemnity bond at no cost or expense to it: The Senior Trustee may, and if acceleration of maturity of the Bonds is declared pursuant to Section 7.02 of the Senior Indenture, the Senior Trustee shall, declare all installments of Basic Rent, Additional Payments and other amounts payable under this Lease for the remainder. of the Lease Term to be immediately due and payable, whereupon those installments of Basic Rent, Additional Payments and other amounts shall become due and payable immediately. In accordance with applicable law, the'Senior Trustee, orupon ten (10) days? written notice and with the prior written consentof the Senior Trustee, the City or its designee, may: -44- enter and take. possession of the Leased Premises, or any appropriate part thereof, Without terminating this Lease, . (ii) complete any Improvement, if it is not then completed, holding the Lessee liable for completion costs, if any, not reimbursed to the City- or Trustees from the proceeds of the Bonds or otherwise, collect rentals and enforce all other remedies of the Lessee under any leases of, or assignments or grants of rights to use or occupy, the Leased Premises, or anypart thereof, but without being deemed to have affirmed the leases, assignments or grants, and - (iv) enter into new leases, assignments and grants on any terms which the City or Senior Trustee may deem to be suitable for the Leased Premises, or any part-thereof, which leases, assignments and grants shall not be terminated or affected if the Lessee cures the Event of Default. Rentals and other amounts payable under the leases, assignments and grants described in and (iv) of the preceding sentence may be applied by the City or Senior Trustee to any costs 7 of administration, operation, repair or maintenance of the Leased Premises, or any part thereof, as the City or Senior - Trustee may reasonably deem useful, and the remaining balance shall be applied to theBasic Rent, Additional Payments and other amounts payable, or to become payable, under this Lease in the order of priority to be determined by the City or Senior Trustee in accordance with this Lease. Any balance of the rents and other amounts remaining thereafter shall be paid to the Lessee by the City'or senior Trustee in accordance with this Lease, and the City or Senior Trustee may hold the Lessee liable for the difference between those rents and other amounts and the Basic Rent, Additional Payments and other amounts payable under this Lease. - The City and the Trustees may have, access'to, inspect, examine and make copies of the Lessee?s books, records, accounts, financial and other data, and income and other tax returns, In accordance with applicable law, all Gross Revenues shall become payable immediately to the-Senior Trustee, or inthe event no Bonds are then outstanding, to the City, and the Senior Trustee or the City, as applicable, may take whatever steps it deems necessary to notify payors of the Gross Revenues of the Senior Trustee?s or the City?s right thereafter to receive payments of Gross Revenues directly. . - The Senior Trustee or the City if no Bonds are outstanding may exercise any and all and any combination of remedies available to it under the Indenture and this Lease. The City and the Senior Trustee may take whatever action at law or in equity may appear necessary, or desirable to collect the Basic Rent, Additional Payments and other amounts then payable, or to become payable, under this Lease, or to enforce the observance and performance of anycovenant, agreement or obligation of the Lessee under this Lease. Any amounts collected as, or applicable to, Basic Rent pursuant. to any action taken under this Section shall be paid to the Trustees and shall be applied in accordance with the provisions hereof and of the Indentures, or (ii) if the Bonds and coupons have been paid and discharged in accordance with the Indenturestshallbe paid as provided in Section 5.14 of the Senior Indenture for transfers of amounts remaining 1n the Special Funds as de?ned in the Senior Indenture. Before any or the foregoing remedies may be exercised by'the Senior Trustee or theCity in connection with an Event of Default under subparagraphfb) of Section 13.1, the Council shall give written notice to the Lessee, with the prior written consent of the Senior Trustee, that the Council believes that an Event of- Default under that subparagraph may have occurred, specifying the charges or circumstances constituting the alleged Event of Default in suf?cient detail that the Lessee will be advised folly of the nature of the charges made against it and will be able to prepare an adequate response thereto. The notice shall fix a date, time and place for a hearing, which shall be at the expense of the Lessee, before a hearing officer who shall be a member of the American Arbitration Association or any organization which is nationally recognized as performing the functions now performed by- the Association who is knowledgeable concerning health care facilities reasonably comparable in size and type to the Leased Premises, who shall be mutually acceptable to the Lessee and the Council. The hearing shall be on the issue of whether an Event of Default has occurred. That date shall not be sooner than ?fteen (15) days following the giving of that notice. - At the date, time and place specified in the notice, unless the Council shall have withdrawn the notice, the Lessee shall be heard on the charges specified'in the notice, shall be Confronted with the evidence of the alleged Event of Default, shall have the right to examine and to cross-examine witnesses and may introduce any Other evidence and testimony with respect to the alleged Event of Default which. the Lossee' desires. After the hearing is concluded, the hearing of?cer shall consider whether an Event of Default has occurred and shall report his findings or determinations to the? Council and the Lessee. If the hearing _-of?cer determines that an Event of Default has occurred, the Council may give notice of that determination to the Lessee and the Trustee'and of its intention to terminate this Lease as of a date not earlier than the ?fteenth day following the giving of the notice. If on the date specified for termination, the determination'shall not have been enjoined, annulled or otherwise suspended by anyjudicial authority or suSpended or waived by the Council, this Lease shall be terminated. . . The provisions of Section 13.2(a) are subject to the ?thher limitation that a rescission by: the Trustees _of any declaration of acceleration of maturity of Bonds pursuant to the Indentnres' will constitute a rescission and annulment of any corresponding declaration of acceleration made pursuant to Section 132(3) and a waiver of the consequences of that declaration and of the Event of Default with respect to which that declaration has been made; provided that no Waiver, rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right Section 13.3. No Remedy Exclusive. Unless provided otherwise herein explicitly, no right, power or remedy conferred upon or reserved to the City or the Trustees in this Lease is intended to be exclusive of any other available right, power or remedy, but each right, power and remedy shall be cumulative and shall be in addition to every other right, power and. remedy available under this Lease or the. Indentures ?or existing now or hereafter at law, in equity, by statute or otherwise, butonly to the extent necesSary for the protection and'bene?t of the City, the Trustees and holders of the Bonds. The exercise, the beginning of the exercise, or the partial exercise by the City 'or the Trustees of any one or more rights, powers or remedies shall not preclude the simultaneous or later exercise by the City or the Trustees of any or all other rights, powers or remedies. No delay or omission in the exercise of any right, power or remedy accruing upon'any Event of Default shall impair any other right, power or remedy or shall be construed to be a waiver of the Event of Default, but any right, power or remedy may be exercised from time to time and as often as may be deemed expedient; In order to entitle the -46- Section 13.8. Reinstatement. Notwithstanding any termination of this Lease or the exercise of any other right, power or remedy, in accordance with the provisions of Section 13.2, if within sixty (60.) days following the occurrence of an Event of Default and prior to the date of termination of this Lease pursuant to the penultimate paragraph of Section 13.2 hereof or the entry of a judgment in a court of law or equityfor enforcement hereof after an opportunity for the Lessee to be heard and subject to the Indenture, the Lessee may City or the Tru5tees to exercise any right, power or remedy reserved to it in this Article, it shall not be necessary to give any notice, other than as may be required expressly herein. Section 13.4. Accession to Other Rights of Lessee and Termination of Other Rights of lessee. In the Event of Defaultreferred to in Section 13.1 hereof, and if rights under paragraph of Section 13.2 hereof are exercised and to the extent permitted by law, the Lessee hereby grants to the City, the Senior Trustee, or receiver or other then operator of theLeased Premises, the full right and authority to take possession, use and operate all additional lands and facilities, as the case may be, adjacent to or related to the Leased Premises, together with such further lands and facilities as the Lessee may then have the right to use in connection with the Leased Premises, as they then exist, and are Operated. If the ?rights under paragraph of Seetion 13.2 hereof are exercised, Lessee does hereby, without necessity for '?arther act by Lessee or the Senior Trustee and to the extent permitted by law, assign, release, grant or convey, as may be appropriate, to the City, Senior Trustee or to their (or the City?s if there are no outstanding Bonds) designee or assignee, all right, title and interest of the Lessee in all of such other lands and facilities which the Lessee then holds for use in connection with the Leased Premises and in such latter case, Lessee shall, upon request of the City, Senior Trustee or their (or, the City?s if there are'no outstanding Bonds) designee or assignee, give such instrument of assignment, release, grant orconveyance as may reasonably be requested to better evidence such assignment, release, grant or conveyance. Secti Agreement to Pav Attornevs? Fees and Expenses. ti,in If any attorneys? fees or other expenses are not so reimbursed, the amount thereof, together with interest thereon at the Interest Rate for. Advances from the date of incurrence by the City or the Trustees, shall constitute Additional Payments, and shall be paid by the Lessee on demand. In any action brought to ?collectthose Additional Payments, the City or the Trustees, as the case may be, shall be entitled to the recovery of those Additional Payments, except as limited by law or by judicial order or decision. Section 13.6. No Additional Waiver Implied by One Waiver. In the event that any covenant, agreement or other obligatth under this Lease or the Indentures should be breached by either the Lessee or the City and the breach should be waived thereafter by the Lessee, the City or the Senior Trustee, as the case may be, the waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other or any subsequent breach thereunder. No failure by the City or the Senior Trustee to insist upon the strict observance or perfot-mance by the Lessee of any covenant, agreement or obligation under this Lease, and no failure to exercise any right, power or remedy consequent upon a breach thereof, shall. constitute a waiver of any right to strict'observance or performance or a waiver of any breach. No eXpress waiver shall be deemed to apply to any other breach or existing or subsequent right to remedy the failure by the Lessee to observe or perform any covenant, agreement or obligation under this Lease. - enter upon the Leased Premises, or any part thereof, for that purpose, and - take any action which, in the Opinion of the Member, the City or the Senior Trustee, as the case may be, may be necessary or appropriate therefor. All payments so made by the Member, the City or the Senior Trustee and all costs, fees and expenses (including without limitation, to the extent permitted by law, attorneys? fees and expenses) incurred in connection therewith or in connection with the making of that payment or the observance or performance of that, covenant, agreement or obligation by the Member, the City or the Senior Trustee, together with interest thereon at the Interest Rate for Advances from the date of payment or incurrence, shall constitute Additional Payments and shall be paid by the Lessee on demand. In any action brought to collect those Additional Payments, the Member, the City or the Trustees, as the case may be, shall be entitled to the recovery of the Additional Payments, except as limited by law or judicial order or decision. Section" 13.10. Notice of Default.? The Lessee will notify the Member, the City and the Senior Trustee immediately if the Lessee becomes aware of the occurrence of any Event of Default or any Default which is not cured within the time provided in this Lease. Section 13.11. Provision Subiect to Applicable Law. All rights, powers and remedies provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable law and are intended to be limited to the extent necessary so that they will not render this Lease invalid, unenforceable or not entitled to be recorded, registered or ?led under any applicable law. (End of Article -49 A. - ARTICLE XIV MISCELLANEOUS Section 14.1. Surrender of Leased Premises. Upon the expiration of the Lease Term or the termination of this Lease, the Lessee covenants and agrees to surrender the Leased Premises to the City peaceably and together with all appurtenances thereto and all assets and obligations of the Lessee including movable equipment, furnishings and other personal property in or on the Leased Premises, in as good condition as prevailed at the time the Lessee was put in full possession thereof; provided that, there is excepted from the foregoing covenants, agreements and obligations, any loss by ?re or other casualty covered by insurance, Ordinary wear and tear, obsolescence, removals and replacements in accordance herewith, and acts of God and provided further that the foregoing covenants, agreements and obligations are subject to the rights of reinstatement pursuant to Section 13.8 hereof. Concurrently with that surrender the Lessee will execute and deliver to the City such quit claim deeds, bills of sales and other instruments as will convey or transfer to the City the interests of the Lessee in the Leased Premises. Section 14.2. Notices. All notices, certi?cates, requeSts or other communications hereunder shall be given? sufficiently and shall be deemed tolhave been given when mailed by registered or certi?ed mail, postage prepaid, addressedtothe appropriate Notice Address. A duplicate copy of each notice, certi?cate, request or other communication given hereunder to the City, the Lessee or a Trustee shall also be given to the others and to the Member. The Lessee, the City, the Member and a Trustee, by notice given hereunder, may designate any . further or different addresses to which subsequent notices, certi?cates, requests or other communications shall be sent. Section 14.3. Net Lease. This Lease shall be deemed and construed to be a "net lease". The Lessee shall pay absolutely net, during the Lease Term, the Basic Rent, Additional Payments and all other amounts payable under this Lease, free of any deductions, and without abatement or set-off, other than those for which provision is made expressly therein. - Section 14.4. Extent of Provisions Regarding Ci?; Obsemance and Performance of Provisions. The City retains such rights and interests as will permit the City to perform its obligations under the Indentures. Each duty of the City and of its of?cers and employees undertaken under the Indentures and the Bonds is a duty enjoined speci?cally by law pursuant to Section 140.060), Ohio Revised Code, upon the City and each .of those of?cers and employees having authority thereunder or by provision of law to perform that duty, resulting from an. of?ce", trust or station, within the meaning of Section 2731.01, Ohio Revised Code, providing forenforcement by. writ of mandamus. - All representations, warranties, covenants, agreements and obligations of the City under this Lease shall be effective to the extent authorized and permitted by applicable law. None of those representations,- warranties, covenants, agreements or obligations shall be deemed to be a representation, warranty, covenant, agreement or obligation of any present or future member, of?cer, agent or employee of the City in other than his or her of?cial capacity. Neither the members of the Council nor any official executing this Lease or the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof or by reason of the representations, warranties, covenants, agreements or obligations of the City under the Indenture or the Bonds. Section 14.5. Binding Effect. This Lease shall inure to the bene?t of and shall be binding upon the City, the Lessee and their respective permitted successors and assigns, subject, however, to the speci?c provisions hereof. .50- Seetion 14.6. Amendments, Changes and Modi?cations. Except as provided Otherwise in this LeaSe, this base may be amended, changed, modi?ed, altered or deleted by me Lessee and the City without the consent of or notice to the Tmstees or any other person provided that any such amendment, change, modi?cation, alteration or deletion shall. be authorized by ordinance passed by at least a two-thirds affirmative vote of the Council. Any amendment pursuant to this Section most comply with Sections 3.01 and 8.02.1 of the Senior Indenture.- 7 Section 14.7. Ettecution countemarts. This Lease may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same lease. Section 14.8. Severe bilig.? In caSe any section or provision of this Lease, or any covenant, agreement, obligation or action, or part thereof, made, assumed, entered into or taken, or any application thereof, is held to be illegal or invalid for any reason, that illegality or invalidityshall not affectt-he remainder hereof or thereof, any other section or provision hereof, or any other covenant, agreement, obligation or action, or part thereof, made, assumed, entered into or taken, all of which shall be construed and enforced as if the illegal or invalid portion were not contained herein or therein, . . the illegality or invalidity of any application hereof or thereof 'shall not affect any legal and valid application hereof or thereof, and. each section, provision, covenant, agreement, obligation or actiOn, or part thereof, shall be deemed to be effective, Operative, made, assumed,- entered into or taken in the manner and to the hall extent permitted. by law. Section 14.9. Captions. The captions and headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Lease. . - Section 14.10. Governing Law. Lease shall governed by and construed in accordance with the laws of the State. . Section 14.11. Survival of Representations and Wamties. All representations and warranties of the Lessee and the City herein shall survive the execution and delivery of this LeaseSection 14.12. Action by the Lgssee. The City agrees that the Lessee or the Memberm?ay take on behalf 'of the City any action under the ,Indentures required of or by City thereunder in order to comply with the Indentures or avoid a default or an event of default thereunder and (ii) the Member may perform any act, obligation or responsibility of the Lessee under this Lease and such performance shall be deemed to be performance by the Lessee. Section 14.13. Relative Position of this Lease and me Indenture. The rights and options granted to the Lessee in this Lease are subjecttothe rights and remedies granted by the lndentures, to the Trustees on behalf of the Bondholders and, so long as Bonds are outstanding within the meaning of the Indentures,=to the extent that the covenants and agreements made by City in the Indentures with reSpect to the construction, operation and maintenance of the Leased Premises and the security of the Bondholders and applicable to the operation of the Leased Premises are greater than the covenants and agreements made by-Lessee in this Lease, the provisions of the Indentures shall control and the Lessee agrees tobe bound thereby. -51- Section 14.14. Trustees. When all Bonds are no longer Outstanding under the lndentures, all references to the Senior. Trustee, Subordinated Trustee and Trustees shall be deemed eliminated from this Lease and any apprOVal herein required of the Senior Trustee, the Subordinated Trustee or the Trustees shall be eliminated from this Lease. Section 14.15. Matters Relating to De?nitive Agreement. The Lessee has entered into a De?nitive Agreement with the Member and the Lessee agrees that it will enforce its rights against the Member given to it in Article 2 of that De?nitive Agreement and in the event that the Member should fail to observe its obligation to the Lessee under that Article 2, the Lessee shall notify the City of that failure. The Lessee acknowledges and agrees that the City may utilize any legally available remedy, including, without limitation, injunctive relief, to compel the Lessee to enforce its rights and entitlements under Article 2 of the Definitive Agreement. ThefLessee further agrees that it will not agree to any amendment or modi?cation of the De?nitive Agreement that amends, modi?es, alters or clari?es the rights and entitlements of the Lessee under Article 2 of the Definitive Agreement in any manner which, in. the reasonable judgment of the City, diminishes or impairs any such right or entitlement, and that the Lessee will not waive any refusal or failure by any other party to the Definitive Agreement to ful?ll its duties or obligations under Article 2 thereof, unless the Lessee shall first have noti?ed the City of its intent to agree to such amendment or modi?cation or to grant such waiver, the proposed effective date of such amendment, modi?cation-or waiver (which shall not be earlier than the seventieth (70th) day following such noti?cation) and (ii) the reasons for agreeing to or granting such amendment, modi?cation or waiver. Such amendment or modi?cation may be entered into or such waiver grantedron or after the proposed effective date, so-lbng as there shall not have become-effective'within sixty (60) days after such noti?cation an ordinance or resolution of the City directing the Lessee not to enter into such amendment or modi?cation or grant the waiver which was the subject of the noti?cation. . Without limiting the generality of the foregoing, the Le58ee agrees that it will not terminate or purport to terminate the De?nitive Agreement or permit CCF to terminate or purport to terminate the De?nitive Agreement, in both cases pursuant to Section 10.2 of the De?nitive Agreement, without the of the City evidenced by an ordinance or resolution of the'City. In the event that the Lessee or CCF terminates or purports to terminate the Def?mitive Agreement without the prior approval of the City, then, in addition to any other rights and remedies that the City may have pursuant to this Lease with respect thereto,_the City shall have the right (but shall not be obligated) to terminate this Lease subject to the rights of the holders of the outstanding Bonds (as long as such Bonds remain outstanding). - If the City terminates the Lease under this paragraph, the termination will become effectiVe on the last day of the one hundred twentieth (120th) month following the effective date of the termination of the Definitive Agreement unless the effective date of the termination of the Definitive Agreement occurs prior to December 31, 2002 in which event the termination Will become effective on December 31, 2012. - The Lessee agrees that it will not assign or purport to assign its rights under the Definitive Agreement nor permitthe Member to assign or purport to assign its rights pursuant to Section 12.9 of the De?nitive Agreement unless the proposed assignee is both a non-pro?t corporation and,-in the case of an assignment by the Member, is a Permitted Af?liate, and unless the Lessee shall ?rst have noti?ed the City of its intent to make such an assignment or to permit such assignment, the proposed effective date of such assignment (which shall not be earlier than the sixtieth (60th) day following such noti?cation), (ii) whether, in the case of a proposed assignment by the Member, the entity to which the Member seeks to assign its rights is a Permitted Af?liate as herein de?ned and is a non-pro?t corporation, and the reasons for making or permitting such an assignment. Such assignment may be entered into on or after the proposed effective date, so long as there shall not have become effective an ordinance or resolution of the City directing the Lessee net to. enter into such an assignment or permit the assignment which was the subject of the noti?cation. - Section 14.16. Assumption of Obligations of Operator, In furtherance of Section 2.3 hereof,? without limiting the generality thereof, the Lessee speci?cally assumes and agrees to perform all the obligations of the Operator set forth in- the Indenture and this Lease. (End of Article (Balance-of page intentionally left blank) -53.. IN WITNESS WHEREOF, this Lease has been duly executed and delivered for and in the name and on behalf of each of the City and the Lessee by their duly authorized of?cers as of the date rhereinbefore written. - Signed and acknowledged as to CITY OF LAKEWOOD, OHIO, as Lessor the City in the presence of: By; I K: Printed na e. 3.39:4 S. .9de Maggi; . .And by: Lb?u Lt. "Fatwa President of Council em And by: Printed name? 25654st ?3 ??gm Director of Finance (Witnesses as to all) I Signed and acknowledged as to LAKEWOOD HOSPITAL ASSOCIATION, the Lessee in the presence of: . as Lessee mg?si 6:994th - . resident i 44.. V'And inn/4w Enter! name?: wad->er Mew? ?4-"4g (Witnesses as to both) @giegaL?qrm and substance of the instruii?m is herebjapproved. '1 f' By: 2' - l/Z?Ji?t/ \t /'D1rector/ f?LaW City of Lake oodJOhio, -54- STATE OF OHIO SS: COUNTY OF CUYAHOGA On this 23rd day of December, 1996, before me, a Notary Public in and for the foregoing County and State, personally appeared Madeline A. Cain, JoAnn Boscia and Yvette M. Ittu, Mayor, President of Council and Director of Finance, respectively, of the City of Lakewood, Ohio, a municipal corporation and political subdivision in and of the State, who acknoWledged their execution of the as those Of?cers of that City for and in the name and on behalf of that City and by authority of its Council; and that the execution of that instrument: is their Voluntary act and deed as those of?cers on. behalf of that City and the voluntary act and deed of that City. IN WITNESS WHEREOF, I have hereuntopsubscribed my "nameWaHd af?xed my of?cial seal on the day and year aforesaid. H. . fl . (SEAL) at, . . .NOtjm! Public ii $232112. zinger "x tte?tairrnueu. - state Cdautumn-1n -ammt-.ton Section 147.03 Ruc- STATE OF OHIO SS: COUNTY OF CUYAHOGA - On this 23rd day of December, 1996,'before me, a Notary Public in and for said County and State, personally appeared Jules W. Bouthillet and William R. Gorton, President and Chief Executive Of?cer and Chairman of the Board, respectiVely, of Lakewood Hospital Association, who acknowledged the execution of the foregoing instrument as said of?cers of said corporation on behalf of said corporation and by authority thereof, and that the same is their voluntary'act and deed as said of?cers on behalf, of said corporation, and the voluntary and corporate act and deed of said corporation. . IN WITNESS I have hereunto subscribed my name and af?xed my official seal on the day and year aforesaid. - (SEAL) Fwoqian.) I commission has no expirzi?ien data. 7 Section 34:37.53 .15. This instrument was prepared by: Richar . Desmond, Esq; Squire, Sanders Dempsey L.L.P. 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 -55- FISCAL CERTIFICATE The undersigned, ?scal of?cer of the City under the foregoing Lease, hereby certi?es that the moneys required to meet the obligations of the City during the year 1996 under the foregoing Lease have been appropriated lawfully by the Councrl of the City for that purpose, are in the appropriate funds or in the process of collection to of an appropriate fund, free from any previous encumbrances. This certi?cate is given in compliance With Sections 5705.41 and 5705.44, Ohio Revised Code; DatediDtitmc/? as? 9-3, 1996 i Director of Finance City of Lakewood, Ohio -55- CONSENT OF TRUSTEE National City Bank, as trustee under the Trust Indenture (the "Indenture") dated as of March 15, 1983 among it, the Board of Trustees of Lakewood Hospital; Ohio (the "HOspital Trustees") and the City of Lakewood, Ohio (the ?City"), acknowledges that it has received an executed counterpart of the preceding Lease and hereby consents pursuant to Secuon of the Senior Indenture, to entry by the City into the foregoing Lease with Lakewood Hospttal Association, as lessee. -57- NATIONAL CITY Trustee 1 ?liq: HunkTitle; .VICE Peseta-tam Attest: ?5 Title: Ff P. (1191231211 SENIOR VICE PRESIDENT STATEMENT PER CIV.R. SELECTED EXHIBITS, ATTACHMENTS, AND SCHEDULES TO THE CONTRACT HAVE BEEN INTENTIONALLY OMITTED BECAUSE ALREADY A PUBLIC DOCUMENT, TOO VOLUMINOUS, AND NOT NECESSARY TO COMMENCE THIS ACTION. Lakewood Hospital 3 Cleveland Clinic hospital April 6, 2010 City of Lakewood c/o The Honorable Edward FitzGerald, Esq. 12650 Detroit Avenue Lakewood, Ohio 44107 Dear Mayor FitzGerald: Lakewood Hospital (the committed to the Lakewood community and will continueto maintain 7 status as tilt; city?s mend. sills netted-i131 1,4300 Clinic-health srstem 1__etsptey??standem the City of Lakewood aiit'd:fcotitribtt'te nearly $900,000 in the-aggregatemutually in pai?tpil taxes ?Mite City Of'Laketvobd-ivwitPiali Civic" hid-ii tliaft'will sirengthen. and elevate the level oi?eareibr their in Lakewood community andiallcommunities iveSet've, On February 1 l, 2010, the Board of Trustees of Lakewood Hospital Association held a Special Meeting to discuss an exciting strategic direction for Lakewood Hospital and to receive the recommendation ofa Special Committee of the Board that had been established to review an independent third party?s report on the same subject. After considerable discussion, the Board of Trustees unanimously voted to approve and implement a bold comprehensive plan (the "Plan?) to advance Lakewood Hospital?s Vision for amormw. The Plan will address the sustainability of Lakewood Hospital, while simultaneously making available the ?nest services typically provided by hospitals in communities similar to Lakewood. The Plan further aiigns Lakewood Hospital with Cleveland Clinic services to create a health delivery system for today?s and tomorrow?s community health needs. The agreements between the City ol~ Lakewood and Ll-lA unite the City, the Hospital, and the Cleveland Clinic in a relationship of mutual commitment to serve the community. These agreements, including the Lease (the not only bind us together but recognize that hospital services evolve and change over time. In the spirit of our partnership, we write this letter to describe our Plan, which involves many components. One of the Plan?s components involves transitioning the Hospital?s trauma service and inpatient pediatrics service to a sister hospital, liairvicw Hospital, and affects the Lease as described below. _.Tlteit_ransition willenableius toexpandesiSIing; uservicesand transferee?: clinical Services to Lakewood letteris intended to tell you, members-of City Council, others in City administration, and our community about the Board?s Plan and why we believe the Plan constitutes a comprehensive framework that will improve Lakewood Hospital?s ability to serve the Lakewood population. Process Behind the Plan Before reviewing the Plan, we would like to describe the dedication and involvement that was given by the Lakewood community members of our Board, the members of Lakewood Hospital?s Medical Staff, and others in formulating the Plan. The Board?s Executive Committee, at a meeting on November 5, 2009, established a Special Committee (the ?Committee?) to review and assess this Plan. Utilizing all available resources, an operational and strategic assessment was conducted which included interviews of more than 40 key Hospital leaders. The Committee had 1 members and included representation from the Board?s Executive Committee, Finance Committee, and Medical Staff. The Committee met several times and, with the assistance of management, thoroughly discussed and reviewed the Plan. At its last meeting, the Committee recormnended approval of the Plan to the Full Board, which adopted it on February I l, 20l0. The Plan in part af?rmed Lakewood Hospital?s Piston/hr plan, which is a multi-year strategic plan shaped to better meet the changing needs of the Lakewood community that was adopted by the Board in 2008. 145l9 Detroit Avenue 1 Lakewood. OH 44l07 Pltoner2l6-321?4200 Positioning Lakewood Hospital for the Future Lakewood Hospital?s Vision for Tomorrow and the Plan positions and strengthens our services around four centers of clinical excellence Neurosciences, Orthopedics, Diabetes and Geriatrics; ensures the highest level of care for our patients; creates improved coordination of care on the West Side; and positions the Hospital for long-term stability. Lakewood Hospital and Fairview Hospital have long served overlapping areas, and as you know we recently announced a uni?ed leadership structure involving the two hospitals. This structure better positions us to provide the highest level of care in Lakewood and the communities we serve; ensures care is provided in the right setting; creates better coordination of services throughout our health system; and strengthens both hospitals? ?nancial outlooks. Inpatient Pediatrics We believe focusing our care for children at Lakewood Hospital on outpatient services and emergency care meets the changing needs of patients using our services. In developing the Plan, we found that inpatient pediatrics was under?utilized at Lakewood Hospital. Last year, for example, we averaged one to two patients daily on a 12-bed unit. This trend is not unique to Lakewood Hospital; nationally pediatric subspecialty care is becoming increasingly concentrated in large regional children?s hospitals. In fact, ?nding one major pediatric center serving an entire metro market, or in some cases an entire state, is not unusual. (A 2004 Survey of Pediatricians, backed by American Hospital Association annual survey, 1992-2004, found a 50% decline in pediatric bed space.) We believe our pediatric patients will be best served just 3.5 miles away at Fairview HoSpital for inpatient care. Fairview Hospital provides full pediatric resources and services, as well as pediatric subspecialty care not currently offered at Lakewood Hospital, to meet the needs of children. The relocation of inpatient pediatric services, moreover, provides needed facility space for acute rehabilitation and geriatric services as contemplated by other components of the Plan. Trauma We will continue to provide full-service 24-hour emergency care at Lakewood Hospital for patients of all ages with all types of illnesses and injuries. However, Lakewood Hospital has experienced a decline in the number of trauma cases. To clarify, a trauma is a very serious injury or shock to the body, from violence or an accident that requires inunediate and highly specialized care. In fact, out of the 34,301 total emergency patients seen at the Hospital last year, more than 99% were not trauma-related. In 2009, we treated 25 trauma patients at Lakewood Hospital. We believe the right approach for patients in this region is to take them to the best trauma center for their care. We are privileged to have two trauma centers (Level I Metro Health and Level II Fairview Hospital just 3.5 miles away) in close proximity to the City of Lakewood. Nationally, research has shown that combining trauma centers increases patient volumes resulting in better outcomes for patients. In addition, consolidation of trauma centers saves money by eliminating duplication of expensive resources. [Journal of the American Medical Association UAMA), 2001; 28511164417] - results indicated that a strong association exists between trauma center volume and outcomes, with signi?cant improvements in mortality and length of stay; Journal of the American Medical Association MAMA), Vol. 289, No. 12, Mar. 26, 2003 the concentration of the most severely injured patients in a limited number of specialty care facilities Level I or II trauma centers) will increaSe patient volumes and experience at these centers and thus improve patient outcomes] We take pride in the acereditations we?ve earned that support our emergency services in chest pain certi?cation and stroke accreditation, and we plan to continue to maintain these exceptional services at Lakewood Hospital. Expansion of Services In 2008, Cleveland Clinic expanded and extended the care and services of its Neurological Institute to Lakewood Hospital. This represented a signi?cant investment in Lakewood Hospital by Cleveland Clinic. The Neurological Institute provides patients on the West Side with access to a multi-disciplinary team of specialists who provide a broad spectrum of neurOIOgical care, including medical and surgical treatment for stroke and neurosurgery. Our outpatient services facilities and inpatient neurological intensive care unit were improved with capital investments totaling $3.3 million over the last two years. Cleveland Clinic continues to extend Neurological Institute offerings at Lakewood Hospital. In 2009, we brought 10 Cleveland Clinic Neurological Institute specialists to Lakewood in a variety of specialties, including Headache! Pain; Neurorehabilitation/ Spasticity Management; Vascular Neurology/ Stroke; Movement Disorders; Multiple Sclerosis; Adult and Pediatric Epilepsy; and Neuromuscular Medicine to complement our community physician staff members. Additional physician recruitment is planned in 2010. According to the World Health Organization, neurological diseases, ranging from epilepsy to stroke to headache, represent the largest and fastest growing unmet medical need: a??ecting more than i billion people worldwide. It is anticipated that as the population continues to age, this number will continue to rise. We recently began alignment of inpatient acute rehabilitation from Cleveland Clinic?s other West Side hospitals to Lakewood Hospital, enabling the Hospital to serve as the hub for this needed service in this market, complementing Lakewood?s centers of excellence in neuroscience and orthopedics. Inpatient rehabilitation will bring a signi?cant ?nancial bene?t to the Hospital and will provide intensive physical and occupational therapy so patients can return home to activities of daily living as quickly as possible. As part of our Plan, we are excited about patient referrals from Cleveland Clinic facilities coming to Lakewood Hospital. We continue to make great strides in orthopedics, including opening a new, $3.2 million ld-bed orthopedic unit with private rooms. We have developed strong relationships in Lorain County with the Cleveland Clinic facilities and physicians which have resulted in bringing orthopedic surgeries that were previously performed in non-Cleveland Clinic hospitals to Lakewood Hospital. We also continue to implement strategies to strengthen our geriatric services by broadening our geographic reach through our relationship with medical directors and af?liated physicians caring for patients in assisted living and/or long-term care facilities. This aging patient population bene?ts ?'om our expanded SeniorCare program offerings, which has long been a strong foothold for Lakewood Hospital. We are expanding our reach beyond Cuyahoga County to care for these patients. Finally, we have engaged in discussions to align West Side diabetes programs with the goal to develop a regional center at the Hospital in conjunction with the Cleveland Clinic Endocrine Institute. Reviewing the Lease Provisions As you can see, the vast majority of the Plan builds upon or adds to the services provided and services we are expanding, but as we indicated above one component of the Plan involves transitioning Lakewood Hospital?s trauma service and inpatient pediatric service to Fairview Hospital, which we plan to do on or after June 15, 2010. Below are details regarding the provisions of the Lease, which we believe are important to acknowledge. The Lease was developed over 25 years ago in a spirit of collaboration, energy, and trust among the participants. The Lease provides that LHA is required to provide certain services within the City of Lakewood during the entire 30-year term of the Lease. The de?nition of those services requires that provide hospital services ?of the nature then generally provided by a community hospital in communities comparable to the City [of Lakewoodl.? The Lease ?mher provides that LHA must continue to provide such services within the City, that it will not terminate them unless it ?rst gives notice to the City (which LEA is doing with this letter), and the City does not object to the service changes. The Lease was intended to be a living document that would contemplate emerging scienti?c technologies, medical breakdtroughs, and evolving service levels. What may have been a service generally provided by a community hospital in the past may not hold for the future. While trauma and inpatient pediatrics may have been standard services for community hospitals when the Lease commenced, they are no longer, and the language of the Lease supports viewing such services in real time, not locked in the past. Further, the LHA Board of Trustees recognized a responsibility, in this changing healthcare environment, to maintain its governance oversight over the services transitioned to assure that access, value and quality are continued. Continued Commitment to Lakewood Over the past three years, we have invested $24.4 million into Lakewood Hospital for a variety of projects that support the Vision for Tomorrow plan, including major renovations in Orthopedics, intensive care units, the Neurological Institute, as well as signi?cant infrastructure improvoments. We remain committed to investing in facilities and programs at Lakewood Hospital. Meeting the Community?s Changing Health Needs This community is fortunate to have both Lakewood Hospital and Fairview Hospital 50 close together, and it?s our reSponsibility to determine how we can optimize the care, value and services we provide on the West Side to meet the evolving needs of those who entrust us with their care - both today and in the future. We believe you will agree that our Plan will ensure that the services Lakewood Hospital provides will continue to meet community health needs, re?ect the changing needs of the Lakewood residents, and more deeply align Lakewood Hospital with Cleveland Clinic services to create a health delivery system for today?s and tomorrow?s community health needs. Sincerely, Mousab Tabbaa, MD. Chairman of the Board of Trustees Lakewood Heepital Association Fred DeCirandis . President and CEO . Cleveland Clinic Regional Hospitals Mae Janice Murphy President Lakewood Hospital and Fairview Hospital cc: Members of City Council of Lakewood, Ohio City of Lakewood, Ohio, Attention: Director of Finance (via certi?ed mail, return receipt requested) City of Lakewood. Ohio, Attention: Mayor (via certi?ed mail, retum receipt requested) City of Lakewood, Ohio, Attention: Director of Law (via certi?ed mail, return receipt requested) City of Lakewood, Ohio, Attention: Clerk of Council (via certified mail, retum receipt requested) Lakewood Hospital Association, Attention: Michael J. Mcehan, Esq. (via certi?ed mail, return receipt requested) National City Bank. Attention: Corporate Trust Administration (via certi?ed mail, return receipt requested) KeyBank National Association, Attention: Corporate Trust Dept. (via certi?ed mail, return receipt requested) The Cleveland Clinic Foundation, Attention: Delos M. Cosgrove, MD. (via certi?ed mail, return receipt requested) The Cleveland Clinic Foundation, Attention: David W. Rowan, Esq. (via certified mail, return receipt requested) :3 Ciovoiood CREE Janice o. P?urpi?ay, FACHE President. Fainiiew 3: Lakewood Hospitais May 24, 2010 Kevin Butler President, Lakewood City Council 12650 Detroit Avenue; Lakewood, OH 44107 Dear Council Pr?sident B?Utier; Attached piease ?nd responses to the questions as posed by the Committee of the Whoie. i look forward to continued dialogue this evening Thank you for the opportunity to continue this important dialogue Respectiveiy. Janice G. ML:th President Fairview 8: Lakewood Hospitais EXHIBIT Faisv?ew Hospitai i 1818?! Lenoir: Avenue Sieveka OH i Lakewood i?Eospiiaif 1451.9 Beiroit Meme i Lakewood?i?f 4416? Responses from Lakewood Hospital to Kevin Butler: Lakewood City Council We have responded below to the questions presented by the members of City Council. We appreciate the depth of City Council's review process and the insight and thought shown by these questions. We remain committed to the Lakewood community and to the patients. who entrust us each and every day to provide the best care possible to them. We take this responsibility very seriously and we appreciate the long-standing relationship between the City of Lakewood, the Lakewood Hospital Association, the Lakewood Board of Trustees and Cleveland Clinic. We look forward to continuing to work to create a healthcare delivery system that advances Centers of EXcellence and provides services that match the changing needs of the community, while taking steps to position Lakewood Hospital for viability and sustainability. What are the intentions of the Clinic? is this a temporary move to buy time? Our intentions are described in the Notice letter dated April 6, 2010, addressed to- the Cityof Lakewood- The Lakewood Hospital Association and its Board have worked very carefully and diligently with the Clinic to create a plan which we believe provides the best service to meetthe needs of this community. As stated in the Notice letter dated April 6, 2010, ?The Plan will address the sustainability of Lakewood Hospital, while simultaneously making available the ?nest services typically provided by hospitals in communities similar to Lakewood. The Plan further aligns Lakewood Hospital with Cleveland Clinic services to create a health delivery system tor today?s and tomorrow?s community health needs.? ?Over the past three years. we have invested $244 million into Lakewood Hospital for a variety of projects that support the Vision for Tomorrow plan, including major renovations in Orthopedics. intensive care units, the Neurological institute, as well as signi?cant infrastructure improvements.? What have been total, thus far? stamp eating, re peregrine term of As stated in our Notice letter dated April 6, 2010: ?Lakewood Hospital (the "Hospital?)' is committed to the Lakewood community and will continue to maintain its status as the city?s major employer. We?re proud of the fact that nearly 1,300 Cleveland Clinic health system employees reside in the City of Lakewood and contribute nearly $900,000 in the aggregate annually in payroll taxes to the City of Lakewood-? I Lakewood Hospital is supported by both regional staff and corporate staff, which are not represented in these numbers, but who continuaily provide valuable services and resources for the bene?t of Lakewood Hospital and its patients. The following is the number offull-time equivalent Lakewood Hospital employees 2006 (2006) 1,144; (2007') ?l ,150; (20023? .148; (2009)t ,098; (2010)1 ,078. What is the viability of the hospital new? Lakewood Hospital continues to maintain its status as the city?s major employer. Currently, its finances are challenged. The Hospital was not in compliance with a bond covenant for the last two years, but its balance sheet remains strong. We believe. the Vision Plan, unanimously supported by the Board, positions the Hospital for future sustainability. The Vision Plan is more than just transitioning services, which have been a ?nancial drain due to staf?ng needs in these areas, as well as low volumes. The Plan involves establishing Centers of Excellence and bringing in key services, which not only meet the changing needs of this community, but support the viability of Lakewood Hospital. As stated in the Notice letter: ?One of the Plan?s components involves transitioning the Hospital?s trauma service and inpatient pediatrics service to a sister hospital. Fairvievvr The transition will enable us to expand existing services and transfer new clinical services to Lakewood Hospital.? ?Lakewood Hospital and Fairview Hospital have long served ovedapping areas, and as you know we recently announced a uni?ed leadership structure involving the two hospitals. This structure better positions us to provide the highest level of care in Lakewood and the communities we serve; ensures care is provided in the right setting; creates. better coordination of sentioes throughout our health system; and strengthens hut-h hospitals' ?nancial outlooks.? What is. the risk of keeping the hospital the same? As indicated above, the Heepitai?s ?nances are challenged. Health care delivery continuously evolves. As stated in the Notice letter". ?The Lease was intended to be a living document that would contemplate emerging scienti?c technologies, medical breakthroughs and evolving service levels. What may have been a service generally provided by a community hospital in the past may not hold for the future. While trauma and inpatient pediatrics may have been standard services for community hospitals when the Lease commenced, they are no longeri and the language of the Lease supports viewing such services in real time, not locked in the past- Further, the Li?lA Board of Trustees recognized a responsibility, in this changing healthcare environment, to maintain its governance oversight over the services transitioned to assure that access, value and quality are continued? Are there alternatives to this plan? a extensive strategic planning proceSs which has been ongbing since 2005. Additionaliy, the plan was reviewed and updated by a national expert strategic consultant at the direction of the board in 2009. The. plan we recommend. moving toward with is based on a deliberate and As stated in the Notice ?led April 6, 2010: . ?The Board?s Execmive Committee, at a meeting on November 5, 2009, established a Special Committee (the ?Committee?) to review and assess this Plan- Utilizing all available resources, an operational and strategic assessment nias conducted which included interviews of more than 40- key Hospital leaders. The Committee had 1 1 members and included representation from the Board?s Executive Committee, Finance Committee, and Medical Staff. The Committee met several times and, with the assistance of management. thoroughly discussed and reviewed the; Plan. At its last meeting, the Committee recommended - approual of the Plan to the full Board, which adopted it on February 11, 2010. The Plan in part af?rmed Lakewood Hospitai's Vision for Tomorrow plan, which is a multi-year strategic plan shaped to better meet the changing needs of the Lakewood community that was adopted by the Board in 2008.? What guarantees does the Gigg?gef that the services to be augmented wit! remain so? As stated in our Notice letter: ?Lakewood Hospital is committed. to this community and will continue to maintain its status as the city?s major employer." The Beard, which includes signi?cant community representation, on continue to monitor and adjust services to meet the community?s changing needs. The 23 positions on the Hospital Board include ?1 0 positions that are either elected city of?cials from the City of Lakewood or their appointees. As stated in the Notice April 6, 2010: . ?Lakewood Hospital?s Vision for Tomorrow and the Plan positions and strengthens our services around fourcenters of clinical excellenCe Neurosciences, Orthopedics, Diabetes and Geriatrics; ensures the highest level of care for our patients; creates improved coordination of care on the West Side; and positions the Hospital for long?tam stability.? ?This community is fortunate to have both Lakewood Hospital and Fairview Hospital so close together, and it?s our responsibility to determine how we can optimize the care, value and services we provide on the West Side to meet the evolving needs of those who entrust us with their care both today and in the future. We believe you will agree that our Plan will ensure that the services Lakewood Hespital provides will continue to meet community health needs, re?ect the changing needs of the Lakewood residents, and more deeply align Lakewood Hospital with Cleveland Clinic services to create a health delivery system for today?s and tomorrow?s Community health needs.? Will the Clinic consider amending the de?nition or ?ireguired services? in the lease to ensure the city is protected from sudden changes in the future? The Notice presented to the City is based on a speci?c provision of the lease established in 1997. We do not believe it is necessary to amend the lease to accomplish these changes or to protect the city from sudden changes. The lease enables such changes as needed to answer the changing health care needs of the commUnity, subject to a minimum 60-day review process and potential objection by City Council. As we stated in ourNotice letter, ?[tjhe Lease was intended to be a living document that would contemplate emerging scienti?c technologies, medical breakthroughs, and evolving service levels- What may have been a service generally provided by a community hospital in the past may not hold for the future. While trauma and inpatient pediatrics may have been standard services ,for communityhospitals when the lease commenced, they are no longer, and the language of the lease supports vieiiving such Services in real time, not locked in the past.? Additionally, it important to note that amending the lease Could delay implementation of critical components of the plan that need to be implemented during 2010.. Will the Clinic consider acceptina Councii?s approve! subject to the existence of other practices at the hospital in the tutors? We do not believe an approval subject to future events is wise. The lease contemplates a; potential objection by Council but not an approval, much less a contingent approval. A contingent approval could be construed as a constructive objection and may raise unanswerable legal questions that could jeopardiZe timing and cause delay. We believe that continuing the best method to ensure optimum service levels to address community need and organizational viability is a responsibility vested in the Lakewood Hospital Board of Trustees, the majority of whom are members of the Lakewood community- How does Lakewood Hospital fit into the strategic plan f9; the Clinic? Considerable discussion was afforded to this topic in the Notice Letter to the City dated April 6, 2310- The relationship with the Cleveland Clinic was an integral consideration during the Lakewood Vision for Tomorrow development. It was imperative to develop the Lakewood plan in conjunction with the overall Cleveland 4 Clinic strategic plan. As such, Lakewood Hospital is envisioned as the West Side center for neurological, diabetes, geriatric and rehabilitation services. Some speci?c examples from the Notice are included below. ?The agreements. between the City of Lakewood and LHA unite the City, the Hospital and the Cleveland Clinic in a relationship of mutual commitment to serve the community. These agreements, including the Lease (the lease}, not only bind us together bot recognize that hospital services evolve and change over ?In 2008, Cleveland Clinic expanded and extended the care and services of its Neurological institute to Lakewood Hospital. This represented a significant investment in Lakewood Hoopital by Cleveland Clinic. The Neurological institute provides patients on the West Side with access to a multi- disciplinary team of specialists who provide a broad spectrum of neurological care including medical and surgical treatment for stroke and neurosurgery. Our outpatient services facilities and inpatient neurological intensive care unit were improved with capital investments totaling $33 million over the last Mo years.? ?We recently began alignment of inpatient acute rehabilitation from Cleveland Clinic?s other West Side hospitals to Lakewood Hospital, enabling the Hospital to serve as the hub for this needed service in this market, complementing Lakewood?s centers of excellence in neuroscience and orthopedics. inpatient rehabilitation will bring a signi?cant ?nancial bene?t to the Hospital and will provide intensive physical and occupational therapy so patients can return home to activities of dailyI living as quickly as possible. As part of our Plan, we are excited about patient referrals from Cleveland Clinic facilities coming to Lakewood Hospital. We continue to make great strides in orthopedics, including opening a new, $3.2 million 16-bed orthopedic unit with private rooms. We have developed strong relationships in Lorain County with the Cleveland Clinic facilities and physicians which have resulted in hringing orthopedic surgeries that were previously performed in nonsCleveland Clinic hospitals to Lakewood Hospital.? ?We have engagedin discussions to align West Side diabetes programs With the goal to develop a regional center at the Hospital in conjunction with the Cleveland Clinic Endocrine institute.? ?this believe you will agree that our Plan ensure that the senrices Lakewood Hospital provides will continue to meet community health needs, re?ect the changing needs of the Lakewood residents, and more deeply align Lakewood Hospital with Cleveland Clinic services to create a health delivery system for today?s and tomorrow's community health needs.? Where does Lakewood stand comnared' to Faimiew witth that strategicplan rig ht setting; creates better coordination of Services throughout the health system; and strengthens both hospita'ls? ?nanciai outlooks.? In addition the Lakewood Hospital Board will maintain governance oner?sight over the Services transitioned between the hospitals, as stated in the Notice letter: 'healthcare environment, to maintain its governance oversight over the services transitioned to assure that access, value and quality are continued What has been the ?nanciai history since the inception of the lease? Up until two years ago, the Hospital met the ?nancial perfonnance requirements. The recent ?nancial history of the Hospital, like that of many other hospitals in similar mes as a result of the geographic demographics, has seen a decrease in its vin decrease in population 19805 to ~50,000 currently). Additionally, due to the declining economy, the Hospital has experienced an increase in care for the uninsured and changing patterns of practise. As stated in our Notice letter dated Aprii 6, 201a: ?in. developing the Plan, are found that inpatient pediatrics was at Lakewood Hospitai.. Last yea r, for example, we averaged one to M0: patients daily on .a 12?bed unit- This trend is not unique to Lakewood Hospital; nationaliy pediatric subspecialty care is becoming increasingly concentrated in iarge regional children?s hospitals. In fact, ?nding one major pediatric center serving an entire metro market, or in some cases an entire state, is not unusual. 2004 Survey of Pediatricians, backed by American Hospital Association annuai survey, 1992?2004, found a 50% decline in pediatric bed space)? :?Lakewood Hospital has experienced a decline in the number of trauma cases, To clarify, a trauma is a very serious iniury- or shock to the body, from violence or an accident that requires immediate and highly specialized care. ln fact, out of the 34,801 total emergency patients seen at the Hospital last year, more than 99% were not trauma-related. in 2009, we treated. 25 trauma patients at. Lakewood Hospital. We believe the right approach for patients in this region is to take them to the best trauma center for their care. We are privileged to have two trauma centers (Level l? Metro Health and. Level ll Fairview Hospital just 3.5 miles away) in close proximity to the City of Lakewood, Nationally, research has shown thatcombining trauma centers increases patient volumes resulting in better obtcornes for patients In addition, consolidation of trauma centers saves money by eliminating duplication of expensive resources. [Journal of the American Medical Association (JAMA), 2001; 285:1 164-1 171 results indicated that a strong association exists between trauma center volume and outcomes, with signi?cant improvements in mortality and length of stay; Journal of the American Medical Association Vol. 289, No. 12, Mar. 26, 2003 the concentration of the most severely injured patients in a limited number of specialty care facilities Level 1 or ll trauma centers) will increase patient volumes and experience at these centers and thus improve patient outcomes? are odce send patients to Lakewood? We were proud of the testimony provided by members of our Medical Staff at your recent Council meeting, May 17, 2010. For example, con?dence of the Plan and the Heepital leadership?s willingness to address concerns of the Medical Staff was. expressed by Dr. Kristen Ekm'an, a leading Hospital obstetrician. Dr. John A. Costin, Chair of the Cleveland Clinic Lorain institute, described and complimented the quality of services provided by Lakewood Hospital to patients he and other physicians from "Lorain are bringing to Lakewood Hospital. Also, as we stated in our Notice letter; ?We would like to describe the dedication and involvement that was given by the Lakewood community members of our Board, the members or Lakewood Hospital?s Medical Staff, and others in formulating the Plan. The Board?s Executive Committee, at a meeting on November 5, 2009, estabiished a Special Committee (the ?Committee") to review and assess this Plan. Utilizing all available resources, an operational and strategic assessment was conducted which inciuded interviews 01? more than 40 key Hospital leaders. The Committee had 11 members and included representation from the Board?s Executive Committee, Finance Committee, and Medical Staff. The Committee met several times and, with the assistance of management, thoroughly discussed and reviewed the Plan. At its last meeting, the Committee recommended approval of 7 the Plan to the full Board, which adopted it on February it, 2010. The Plan in part af?rmed Lakewood Hospital?s Vision for Tomorrow plan, which is a multi? year strategic plan shaped to better meet the changing needs of the Lakewood community that was adopted by the Board in 2008.? How determined is. the Clinic Foundation to make this work? Our letter of April 6, 2010 describes the determination of the Clinic in its ongoing support of Lakewood Hospital: ?The agreements between the City of Lakewood and LHA unite the City, the Hospital and the Cleveland Clinic in a relationship of mutual commitment to serve the community. These agreements, including the Lease, not only bind us together but recognize that hospital services evolve and change over time.? ?in-2008, Cleveland Clinic expanded and extended the care and services of its Nehrological institute to Lakewood Hospital. This represented a signi?cant investment in Lakewood Hospital by Cleveland Clinic. The Neurological institute provides patients on the West Side with access to a multi- disciplinary team of specialists who provide a broad spectrum of neurological care, including "medical and surgical treatment for stroke and neurosurgery. Our outpatient services facilities and inpatient neurological intensive care unit were improved with capital investments totaling $3.3 million over the last two years. Cleveland Clinic continues to extend Neurological institute offerings at Lakewood Hospital. in 2009, we brought 10'Clevela-nd Clinic Neurological institute specialists to Lakewood Hospital in a variety of speciaities, including HeadacnefPain; Neurorehabilitation/Spactioity Management; Vascular NeurologyIStro'ke; Movement'Disorderslil/lultiple Sclerosis: Adult and Pediatric Epilepsy; and Neuromuscluar Medicine to complement cor community physician staff members. Additional recruitment is planned in 20-10. We recently began alignment of inpatient acute rehabilitation from Cleveland Clinic?s other West Side hospitals to Lakewood Hospital enabling the Hospital to serve as the hub for this needed service in this market complementing Lakewood?s Centers of Excellence in neuroscience and orthopedics. lnpatient rehabilitation will bring a signi?cant ?nancial bene?t to the Hospital and will provide intensive physical and occupational therapy so patients can return home to activities of daily living as quickly as possible. As part of our Plan, we are excited aboutpatient referrals from Cleveland Clinic facilities coming to Lakewood Hospital. We?_ continue to make great strides in orthopedics, including opening a new $3.2 million 18?bed orthopedic: unit with private rooms. We have developed strong relationships in Lorain County with the Cleveland Clinic facilities and physicians which have resulted in bringing orthopedic surgeries that Were previously performed in non-Cleveland Clinic hospitals to Lakewood Hospital.? ?Finally, we have engaged in discussions to align west Side diabetes programs with the goal to develop a regional center at the Hospital in conjunction with the Cleveland Clinic Endocrine Institute.? ?Over the past three years, we have invested $24.4 million into Lakewood Hospital for a variety of projects that support the Vision for Tomorrow plan, including major renovations in Orthopedics, intensive care units, the Neurological Institute, as well as signi?cant infrastructure improvements. We remain committed to investing in facilities and programs at Lakewood Hospital.? ?We believe you will agree that our Plan will ensure that the services Lakewood Hospital provides will continue to meet community health needs, reflect the changing needs of the Lakew?ood residents, and more deeply align Lakewood Hospital with Cleveland Clinic services to create a health delivery system for tOday's and tomorrow?s community health needs.? Please gravide estimates of gaffer}? that were used to make this decision bed census data}. As stated in Our Notice letter dated April 6, 2010: ?In developing the Plan, we found that inpatient pediatrics was under-utilized at Lakewood Hospital. Last year, for example, we averaged one to two patients daily on a 12-bed unit. ?Th is trend is not unique to Lakewood Hospital; nationally pediatric subspecialty care is becoming increasingly concentrated in large regional children?s hospitals. In fact, ?nding one major pediatric center serving an entire metro market, or in some cases an entire state, is not unusual. (A 2004 Survey of Pediatricians, backed by American Hospital Assdciation annual survey, 1992?2004, found a 50% decline in pediatric bed space)? ?Out of the 34,801 total emergency patients seen at the Hospital last year, more than 99% were not trauma-related. in 2009, we treated 25 trauma patients at Lakewood Hospital. We believe the right approachtor patients in this region is to take them to the beat trauma center for their care. We are privileged to have two trauma centers (Level Metro Health and Level. ll Fairview Hospital just 3.5 miles away} in close proximity to the City of Lakewood-? ow doe. @e?enior staiew Lkewod Hosgital?sljr?m I. ogegge, viability. and ownenship senators? Bees: 33 structure create a dish-7 est fences The incentives to invest are evident from the investments recently made. As we mentioned in the Notice letter: ?Over the past three years, we have invested $24.4 million into Lakewood Hospital for a variety of projects that support the Vision for Tomorrow plan, including major renovations in orthopedics, intensive care units, the Neurological institute, as well as signi?cant infrastructure improvements. We?remain committed to investing in facilities and programs'at Lakewood Hospital.? A speci?c illustration may be helpful. Lakewood Hospital?s plan involves multiple components, one of which is the investment million to develop a rehabilitation program, for which space is needed. The under-utilized pediatrics inpatient unit is being transitioned to Fairview Hospital to free up the needed space, subject to City Council?s review process- it Council does not permit the termination of the pediatric inpatient service at the Hospital, then the rehabilitation program will not be implemented as envisioned. Continued investment in that program, and others, depend on many factors, such as the success of the program, future patient volumes, the support of the Medical Staff, the impact of health care reform regulations, etc, that the Hospital and the Clinic would consider. As we stated in the Notice letter: ?The agreements between the City of Lakewood and LHA unite the City, the Hospital and the Cleveland Clinic in a relationship of mutual commitment, to serve the community. These agreements, including the Lease (the "Lease), not only bind us together but recognize that hospital services evolve and change over time- 7 What are the marketplace trends ferrite four proposed centers of eXceiienCe (Neuroscience, Orthopedics, Diabetes, and Geriati?i'csj and how would this strategy position Lakewood Hospital to gain Market share? The Plan was developed taking into consideration population trends, disease burden estimates and regional demographic trends, In looking at population trends in our market, for example, in the next ?ve years, the age group 0?17 is estimated to decrease 8% while the age groups of 55?64 and 65? 74 are estimated to have the iargest increase?by 3.3% and 1.2% respectively. The estimated outpatient growth for years 2005 through 2016 in the seven county market area is forecasted as follows: Neuroscience Orthopedics Diabetes +3.5 ?it; As stated in the Notice letter dated April 6, 2010: ?According to the World Health Organization, neurological diseases, ranging from epilepsy to stroke to headache, represent the largest and fastest growing unmet medical need: affecting more than 1 billion people worldwide. It is anticipated that as the population continues to age, this number will continue to rise.? ?We recently began alignment of inpatient acute rehabilitation from Cleveland Clinic?s other West Side hospitals to Lakewood Hospital, enabling the Hospital to Serve as the hub for this needed service in this market, complementing Lakewood?s centers of excellence in neuroscience and orthopedics. inpatient rehabilitation will bringa signi?cant ?nanCial bene?t to the Hospital and will provide intensive physical and occupational therapy so patients can return home to activities of daily living as quickly as possible. ?As part of- cur Plan, we are excited about patient referrals from Cleveland Clinic facilities coming to Lakewood Hospital. We continue to make great strides in orthopedics, including opening a new, $3 2 million ifs?bed orthOpedic unit with private rooms. We have developed strong relationships in Lorain County with the Cleveland Clinic facilities and physicians which have resulted in bringing orthopedic surgeries that were previously performed in hen?Cleveland Clinic hospitals to Lakewood Hospital. ?We also continue to implement strategies to strengthen our geriatric services by broadening our geographic reach through our relationship with medical directors and af?liated physicians caring for patients in assisted living andfor long?term Care facilities. This aging patient population bene?ts from our expanded SeniorCare program offerings, which has long been a strong foothold for Lakewood Hospital. We are expanding our reach beyond Cuyahoga County to care for these patients. ?Finally, we have engaged in discussions to align West Side diabetes programs with, the goal to develop a regional center at the Hospital in conjunction with the Cleveland Clinic Endocrine lnstitute.? What are the ?re eiements of I'm iementation success so ort- f?rom physician staff. investments. marketing, etc)? Continuing positive partnerships between the City, Lakeurood Hospital?Association and its Board, as evidenced in your meeting on May 2010, is imperative. The active and effective governance of the Hospital by its Board of Trustees, which continues to monitor and design services to address the changing needs of the community, is paramount. We believe the active involvement of City of?cials and their designates on the Board, (10 of 23 members), as well as continued hospital leadership on civic and locai organizations, will continue to position no to address the community needs today and in the future. This has been the long established tradition and rich heritage of Lakewood Hospital- "in addition, the creation of Centers of Excellence at Lakewood Hospital, which is supported by the Board of Trustees, as wet! as the collaboration and cooperation between Lakewood Hospital and Fairview Hospital will position both hospitals for future sustainability and allow us to meet the communities? needs at a higher level.? (As stated by Board Member, Gary Pritts to City Council on May 17, 2010..) ll What are the structure! considerations-that matte this strategy more/or less Iikgy to succeed fag. geographical location, age and design of the physical structure, demographic trends, technology investments and The management structure we?ve implemented, as well as the organizational changes outlined in the Notice ?led April 6., 2010 de?ne these details behind our Plan. What are the unintended conSeqUences of removing histo?catiy core services joeo'iatrics, cardioiogy, etc.) on the remaining sen/foes? All organizations need to change and, evolve to meet the needs of its customers and the needs of its community. The utilization of the services recommended for transition as noted in the Notice ?led April 6, 2010, as well as dedicating service in areas de?ned in the Plan (our Centers of Excellence), represents effective stewardship by the Lakewood Boardof Trustees. Lakewood Hospital will continue to be an acute care hospital and By working more closely with Fairview Hospital will be able to provide additional value to the communities we serve today and in the future. As stated in the Notice flied April 6, 2010; ?This structure better positions us to provide the highest level of Care in Lakewood and the communities we serve; ensures care is previded in the right setting; creates better coordination of services throughout our health system; and strengthens both hospitals? ?nancial outlooks.? What are the implications of the newly gassed Healthcare Reform . Act 2010-011 this strategy? At this time we continue to evaluate the implications of the Healthcare Reform Act, just like hospitals acress the country. Due to the complexity and the provisions of the reform bill it will require considerable study in the months ahead. In the meantime, Lakewood Hospital has scheduled an educational session in June for our Board of Trustees about healthcare reform What are patient caseload projections into future years? What are the actuate going back severe! years? A significant focus on trends, demographics and other market conditions were key factors which resulted in the development of the Plan. The Plan includes Centers of Excellence, as well as the recommendation regarding transitioning inpatient pediatrics and trauma. As stated in the Notice ?led April 6, 2010: ?We believe you will agree that our Plan will ensure that the services Lakewood Hospital provides will continue to meet community health needs, re?ect the changing needs ot'the Lakewdod residents, and more deeply align Lakewood Hospital with Cleveland Clinic services to create a health delivery system for today?s and tomorrow?s community health needs.? What are the metrics for success in which the Clinic will airaluatei Lakewood Hose-ital ind its transrmetio .v'o?ian What benmarics 7 no. the hasgita! is succui and will have a stable and continuing future? The metrics will include the following: 21 increased patient activity improved patient experience through the nationally monitored HCAHPs scoring - Financiai sustainability 8 Improved quality performance, as measured by CMS and Joint Commission standards. Ho do business decisions made bg the Cir'nic network to steer patient caseioad to other hos itais affect the of Lakewood Hos ital as a [on -term stable center for strokes, arthritis. and other aqino ConditionS? The health system and Lakewood hospital are focuSed on developing Centers of Excellence, which ?rst and foremost are designed around the needs of our patients. As we design these services, we anticipate an increase in activity which creates an opportuni for the continued improvement of services. Ultimately, this w?iti continue to grow the reputation of Lakewood Hospital. A good exampie of this is the coupling of services around a Center of Excellence. For instance, as part of the Plan, both Neuroiogical Services and Orthopedic Services be supported by the complementary service acute rehab. This vital complementary service is envisioned as the only one of its kind in a Cteveiand Clinic hospitaion the West Side: As stated in the Notice ?ied April 6, 2010: ?We recentiy began alignment of inpatient acute from Cleveland Clinic?s other West Side hospitals to Lakewood Hospital, enabiing the Hospital to serve as the hub for this needed service in this market, Complementing Lakewood?s centers of exceiience in neuroscience and orthopedics. inpatient rehabilitation will bring a signi?cant'?nanciai bene?t to the Hospital and Will provide intensive physical and occupations! therapy so patients can return home to activities of daily living as quickly as possible.? ?This structure better positions us to provide the highest ievel of care in Lakewood and the communities we serve; ensures care is provided in the right setting; creates better coordination of services throughout our health system; and strengthens both hospitals? ?nancial outlooks.? ?We aiso continue to impiement strategies to strengthen our geriatric services by broadening our geographic reach through our relationship with medical directors and af?liated physicians caring for patients in assisted living and/or long?term care This aging patient population bene?ts from our expanded SeniorCare program offerings, which has long been a strong foothold for LakeWood Hospital. We are expanding our reach beyond Cuyahoga County to care for these patients. Finally, we have engaged in discussions to align West Side diabetes programs with the goal to deveiop a regional center at the Hospital in coniunotion with the . Cleveland Clinic Endocrine Institute.? May 24, 2010 14 MORGANSN, DEVITO .P.A. TRIAL ?Legal Solutions for Individuals, Families, and Businesses? April 14, 2015 VIA EMAIL. REGULAR U.S. MAIL, AND CERTIFIED MAIL Kevin M. Butler, Esq, Law Director Lakewood City Hall 12650 Detroit Avenue Lakewood, Ohio 44107 Re: Taxpayer Reguest for Legal Action to Preserve Lakewood Hospital Dear Law Director Butler: I represent Mr. Edward M. Graham, Esq., Mr. William J. Grulich, Ms. Deborah L. Meckes, Marguerite Harkness, and all residents and taxpayers of the City of Lakewood. This letter constitutes the written request pursuant to Article VII, Section 1 (G), of the 2nd Amended Charter of Lakewood and Ohio Revised Code 733.59 on behalf of my clients that you, as Law Director of the City of Lakewood, apply to a court of competent jurisdiction for relief to preserve and ensure the continued operation of Lakewood Hospital for the bene?t of the Lakewood community. My clients are forced to take this action because of failed leadership. They are committed to hold- ing the Mayor and City Council, and the leadership of Lakewood Hospital Association, Lakewood Hospital Foundation, and the Cleveland Clinic Foundation responsible and accountable for their actions and omis- sions in managing Lakewood Hospital and failure in being good stewards of these valuable assets in our community. The only course of action the City should be pursuing is to protect these assets and manage them in the best interests of the health and welfare of the citizens of the City of Lakewood. The City needs to ignore the strategic plan of the Cleveland Clinic and begin to focus on the economic and healthcare inter- ests of its residents. The above named taxpayers request that you seek: 0 Relief under Article VII, Section 1 (D), of the 2nd Amended Charter of Lakewood and Ohio R.C. 733.56 for an injunction to enjoin abuses of the corporate power of Lakewood and execution or performance of any contract in contravention of the 2nd Amended Charter of Lakewood and the Ordinances of the City of Lakewood relating to the preservation and continued operation of Lakewood Hospital; 0 Relief under Article VII, Section 1 (E), of the 2nd Amended Charter of Lakewood and Ohio R.C. 733.57 for specific performance of the Amended and Restated Lease by and between the City of Lakewood and the Lakewood Hospital Association, dated December 23, 1996, as authorized by Ordinance No. 51-96 and the De?nitive Agreement by and between the Cleveland Clinic Foundation and the Lakewood Hospital Association, dated December 1996; and ,3 623 West Saint Clair Avenue, Cleveland, Ohio 44113-1204 Office 216.687.1212 or Fax 216.621.2951 MOGANSTERACADAMS DEVI 0. PA. TRIAL ORNEYS COUNSELQRSATS ?Legal Solutions for Individuals, Families, and Businesses? 0 Relief under Article VII, Section 1 (F), of the 2nd Amended Charter of Lakewood and RC. 733.58 for a writ of mandamus to compel City of Lakewood Of?cials, including the Mayor and Council, the performance of their duty under the 2nd Amended Charter of Lakewood and the Ordinances of the City of Lakewood to ensure the preservation and operation of Lakewood Hospital for the bene?t of the Lakewood community. Under the authority of Article XV of the Charter of the City of Lakewood and through adoption of Sec. 907.03 of the Codified Ordinances of the City of Lakewood, Council has declared "it necessary and conducive to the public health and general welfare to establish and it hereby does establish a municipal hospital of the City to be known as The Lakewood Hospital." As authorized by Ordinance No. 51-96, the City of Lakewood and the Lakewood Hospital Association entered into an amended and restated lease permitting the Hospital Association to enter into a definitive agreement with the Cleveland Clinic Foundation pertaining to the operation of Lakewood Hospital. The lease and agreement provide for operation of the Lakewood Hospital through the end of 2026. The obligations and duties underthe 1996 Amended and Restated Lease and Definitive Agreement as authorized by Ordinance No. 51 -96 have been and are currently being evaded and/or violated. Among other things, the hospital facilities are not being maintained and services have been significantly diminished or eliminated. Moreover, the Lakewood Hospital Association together with the sole member of the Lakewood Hospital Association the Cleveland Clinic Foundation) has assented to the referral and diversion of patients to other hospital facilities undermining the financial viability of Lakewood Hospital. Further, the Lakewood Hospital Association, and the Cleveland Clinic Foundation has provided noti?cation in writing and by other means to patients, Lakewood Hospital employees and the greater Lakewood community that Lakewood Hospital will be closing. The above named taxpayers assert that City of Lakewood of?cials, including the Mayor and Council, have failed and continue to fail to fulfill their duties to ensure compliance with the 2nd Amended Charter of the City of Lakewood, the Codi?ed Ordinances of the City of Lakewood and Ordinance No. 51-96 and the 1996 Amended and Restated Lease and Definitive Agreement. These abuses of the corporate power of Lakewood and failure in the performance of duties are compounded by the fact that the Mayor and the two Council members who serve as Ex Of?cio Members of the Lakewood Hospital Association voted in favor of the January 14, 2015, Letter of Intent, rather than seeking recusal from the vote. That vote was in direct con?ict with the exercise of their duties as public of?cials. As such, it is an abuse of the corporate powers of Lakewood for these three public officials to continue to participate in the consideration of those matters advanced in the Letter of Intent. It is further an abuse of the corporate powers of Lakewood for the Mayor to participate in consideration of this matter as the items outlined in the Letter of Intent bene?t the Lakewood Hospital Foundation, Inc., to which the wife of the Mayor has a ?duciary responsibility as a member of the Board of Trustees. Similarly, it is an abuse of the corporate powers of Lakewood for Councilman Ryan Nowlin to participate in consideration of this matter as the items outlined In the Letter of Intent bene?t the Lakewood Hospital Association, to which his 623 West Saint Clair Avenue, Cleveland, Ohio 44113-1204 Office 216.687.1212 or Fax 216.621.2951 MORGANSTE, ACADAMS DITO co., L.P.A. TRIALATTORNEYS. AND COUNSELORS ?Legal Solutions for Individuals, Families, and Businesses? law partner has a ?duciary responsibility as a member of the Board of Trustees. (The above named taxpayers would also like con?rmation as whether or not the law office of which Councilman Nowlin is a partner is providing legal counsel to the Lakewood Hospital Foundation, Inc.) My clients request that you, as Law Director for the City of Lakewood, bring an action in the name of the City of Lakewood to defend the Charter and Ordinances of Lakewood and to protect Lakewood Hospital and the economic interest of our community. If you fail to bring such action and include the necessary parties (including but not limited to the City of Lakewood, its of?cials, the Lakewood Hospital Association, the Cleveland Clinic Foundation and the Lakewood Hospital Foundation, Inc., my clients intend to enforce a right of action on behalf of and for the bene?t of the public by pursing a taxpayer claim underArticle Vll, Section 1 (G) of the 2nd Amended Charter of Lakewood and RC. 733.59 for the relief outlined above. In the event, that you, as Law Director, fail to bring such an action by the end of business on Friday, May 1, 2015, a taxpayer claim will be commenced by the undersigned on behalf of the above listed clients. The actions (including misfeasance and nonfeasance) of Lakewood City Of?cials and of the Lakewood Hospital Association, together with the Cleveland Clinic Foundation, the sole member of the Lakewood Hospital Association, are causing immediate and irreparable harm to the continued viability of Lakewood Hospital. These actions negatively impact the health and welfare of the citizens of Lakewood and require immediate attention. Thank you for your consideration. Sincerely, o/ 965660 Christopher M. DeVito, Esq. CC. Via Email ONLY: Mayor Michael P. Summers Ward 4 Councilperson Mary Louise Madigan, President of Council Councilperson at Large Thomas Bullock Councilperson at Large Ryan Nowlin Councilperson at Large Cindy Marx Ward 1 Councilperson David W. Anderson Ward 2 Councilperson Sam O'Leary Ward 3 Councilperson Shaun Juris 623 West Saint Clair Avenue, Cleveland, Ohio 44113-1204 Office 216.687.1212 or Fax 216.621.2951 KEVIN M. BUTLER DIRECTOR OF LAW PAMELA L. ROESSNER PROSECUTOR JENNIFER L. MLADEK CHIEF ASSISTANT LAW DIRECTOR MANDY J. GWIRTZ ASSISTANT LAW DEPARTMENT ASSISITANT LAW DIRECTOR OFFICE OF PROSECUTION 12650 Detroit Avenue, Lakewood, Ohio 44107 (216) 529-6030 Fax (216)228-2514 Iaw@lakewoodoh.net May 1,2015 By e-mail and regular mail Christopher M. DeVito, Esq. Morganstern, McAdams DeVito Co., L.P.A. 623 West St. Clair Ave. Cleveland, Ohio 44113 chrismdevito@gmail.com Re: Litigation Demand Dear Mr. DeVito: I am writing to respond to your correspondence of April 14, 2015 in which you demand that I initiate litigation on behalf of the city of Lakewood to ensure the continued operation of Lakewood Hospital. I have read this correspondence, and the in?ammatory and accusatory language you use suggests you do not appreciate that the city is attempting to identify the best course of action for Lakewood?s residents and to determine what the future holds for Lakewood Hospital. While you are anxious to involve the city of Lakewood in a lawsuit (which could cost hundreds of thousands or even millions of taxpayer dollars), you fail to identify any causes of action or speci?c factual support for the claims that could potentially support such litigation. This failure is signi?cant, particularly in light of the current status of the city?s consideration of the proposal before it. At this point in time, the city has done nothing more than enter into non- binding discussions with the Lakewood Hospital Association and Cleveland Clinic to explore options for future health services bene?ting Lakewood residents. No one has drawn a line in the sand, and no one has suggested that litigation is imminent or even necessary. After care?il review and analysis of your demand for litigation, I have determined that your correspondence is based on a number of misleading and conclusory allegations. Speci?cally, you identify a number of alleged con?icts of interest on the part of certain Lakewood public of?cials, and you fail to identify any causes of action or the alleged facts upon which those claims would EXHIIT Christopher M. DeVito, Esq. May 1, 2015 Page 2 be based. Because of these and other de?ciencies, I respectfully decline to bring your proposed lawsuit at this time. I will address some of the concerns you raise below. A. No Con?icts of Interest Exist. Your letter contrives a number of purported con?icts of interest that stem from Mayor Summers? and Councilmembers Mary Louise Madigan and Thomas Bullock?s service as ex-of?cio members of the Lakewood HOSpital Association?s board of trustees. As you may know, this arrangement is nothing new (it has been in place since 1986, when your client, Mr. Graham, himself served on city council), and these individuals serve on the LHA board to ensure that the city?s interests are represented and considered at LHA board meetings. This long-standing relationship has been examined and sanctioned by the Ohio Ethics Commission. As historical background, Lakewood Hospital requested guidance from the OEC in as to whether con?ict of interests existed under the Ohio ethics laws that would prevent the mayor and council members from serving as ex-of?cio members of the LHA board. The OEC provided an advisory opinion to Lakewood Hospital, making it clear that such service was permitted.1 With this understanding, our elected of?cials have protected our residents? best interests through their service on the LHA board. Please review the decision; it should resolve any of your concerns about a prohibited con?ict of interest arising from our Lakewood of?cials? service on the board. Nor does the service of certain colleagues or family members of the Mayor and Councilman Ryan Nowlin as unpaid, volunteer trustees on the board of the LHA and Lakewood Hospital Foundation create any con?ict of interest. As you may know, Wendy Summers? service on the LHF board predates Mayor Summers? election as mayor of Lakewood. Moreover, as stated above, she does not derive any compensation or personal gain from her service on the board. Similarly, the fact that Councilman Nowlin?s colleagues serve on the LHA board and on the board of LHF creates no con?ict of interest. Neither individual is paid for service on the boards, and Councilman Nowlin?s ?rm is not representing either LHA or LHF in connection with the ?lture plan for Lakewood Hospital currently under consideration by Council. Finally, it bears repeating that City Council is merely reviewing and considering a non-binding proposal (which was not signed onto by the city) in relation to the future of Lakewood Hospital. Because there have been no of?cial actions taken by our elected of?cers with respect to this proposal, your suggestion of a lawsuit to redress any action is entirely without merit. We have sought additional guidance from the DEC in these matters, and will await its analysis of these issues. Regardless, it makes little sense to prepare a lawsuit based upon any issues stemming from the mayor?s and councilmembers? obligatory service on the LPLA board, Mrs. Summers? unpaid, volunteer service on the LHF board or Councilman Nowlin?s colleagues? unpaid, volunteer service on both the LHA and LHF boards. 1I have enclosed a copy of the September 3, 1986 advisory opinion. Christopher M. DeVito, Esq. May 1, 2015 Page 3 B. There is no Basis to Initiate Legal Action Preventing the City from Considering Options for the Future of Lakewood Hospital. The city is still trying to determine what the future holds for Lakewood Hospital. Rather than ?le a lawsuit that has a questionable chance of success (at best), the city has chosen to work with the Cleveland Clinic and the LHA collaboratively to explore all potential options for Lakewood Hospital. The Mayor and City Council are currently conducting due diligence on the option of replacing Lakewood Hospital with a comprehensive family health center administered by the Cleveland Clinic, along with the formation of a community wellness foundation that would be intended to serve the health and wellness of Lakewood?s residents for years to come. You have intonated that you were made to believe this proposal was already approved by the city, which comes as quite a surprise to me. This letter should disabuse you of that notion. It is not yet clear whether the proposal will be approved (a decision that will be made by the elected public of?cials of Lakewood through a deliberative legislative process), but we can certainly agree that a lawsuit such as the one you have suggested will radically alter the city?s current negotiating stance with the Cleveland Clinic and LHA and its ability to perform the due diligence it has recently undertaken. I see no reason to intervene in this exercise of the democratic process, and I will not take any action that would prevent our officials from discharging their obligations as the elected stewards of our city. C. Conclusion. I see no good-faith basis for bringing an action seeking to enjoin Lakewood?s public of?cials from engaging in the legislative process, performing due diligence and participating in discussions of the best options for the providing health care options to the city?s residents. Should you decide to bring such an action, I would advise you that, pursuant to Ohio Revised Code 733.61, you would need to actually prevail on your claims in order to even be considered for a discretionary award of attorneys? fees. Given the frivolous nature of the action contemplated, such an award seems highly unlikely. I have done my best to try to explain why I must decline your litigation demand. I hope that my comments have persuaded you that the course of action you have proposed is founded on misconceptions and not suited for our current negotiating position. Thank you for your correspondence. Very truly yours, Kevin M. Butler COMMISSION THE ATLAS 8 LGNG $73557. SUWE 210 COLHMBUS. OHIG 432?35 {514311564090 September 3, 1986 Fred M. EeGmn?is, Bsquim Vitae President/Gwen). Counsel Lakgwood Heapital 1451-3 ?etroitAvenue Lakewood, Ohio 44107 Dear Mr. DeGrandis: In your iett'er dated June 16,- 1936, you asked the th0 Ethics Law and related statutes would prohibit a city council and mayor from approving an ardinance authorizing the lame of a city hGSpital to a. now-sectarian, mane-profit charitable eorporation, ?ring Ease pmvides that the mayor, twe members ofcity aounci}. selected by the comeil, an? other city afficials would serve an the haspital board of trustees. in addition, yan asked whether such city officiais would be prohibited from serving on the board of trustees foll?awing authc?ri'zation. Ynu stated, by way of history, that a city owns a hospital and operates it through a board of trustew emsisting of the mayar, a city council member who chairs the hospital cam'mittee, the city health director, and fifteen other members appointed by the magma You stated further that a city charter was sought by" the city? and approved by the voters: in 1985,, permitting the mnversion of the hospital to a non?profit carporation. Yau indicated that the current baard of trustees has presented to city council a pmposed lease with a noneseetari'an, nonnprofit eharitable carpomtion govern-ed by a board 0f trustees. cansisting of the mayor, two members of city e'auncil selected by council, three representatives of community organizations, the immediate past. presi?ent of the hospital medical staff, and thirteen members 01? the current {ward of trustees. You indicated further that. the proposed ordinance authorizing the lease Speeifically . the partieipation er the city, thraugh the eurrent board af trustees and city (roman, in the arganization of the carp-oration. It also provi?es that the mayor, city eouncil members, and current trustees are designated to serve on the board of trugtees of the corporation at?! are instructed to represent the interests of the city until the expiration of their terms as eity cfficials 0r employees. Final-y, you stated that the, board cf trustees are precluded from receiving any campensatian for their services, and that the iease is for the term of thirty years, renewable at the optic?: of the carpamtion for an additianai thirty years. Yau asked whether the Ohia Ethics Law and related statute? womd prohibit the transactian. Divisian (A) of Section of the Revised Code provides the following, in pertinent part:- (A) - public official shall mowingly do. any of the following: (1) Authorize, or employ the autherity or in?uence of his office to secure authorization of any pubiic ecntraet in which he, a member of his family, or any of his business associates has an interest; EXHIBIT Fred Mi DeGrandis, Esquire September 3, 1986 Page 2 (4) Have an interest in the profits or benefits of public contract entered intothe political subdivision er ge-verm menial agency er instrumentality with whieh he is eonnected. A eity eeuncil is a as defined in'Divisinn (A) of 2921:42 "ef?iifie Revised Code, Since he is an elected officer at? a petiticel subdivision of the state Ohio Ethiescomniissinn Advisory Opinions No. 854102 and 85-008). Simile?y, a "trus'te'ES municipal empire! is a sinee he is appointed to an eff-ice of the city. A lease of a (tit): hospital to a name'ectarien, non?profit charitable corporation is a ?manic it is a centraet for the purehase or acquisition {if the management and Operation of the hespitei by the eerpomtion. Thus, a city official is prohibited from voting, authorizing, or otherwise using the authority er influence of his office to secure approval of a public centraet with a nonwprofit cerporetinn in which he serves as a beard member. In addition, a city official is prohibited from serving as a board member at non~profit corporatinr; under contract with the city (See: Ohio Ethics Commission Advisory Opinion No. 81*308 . However, these preyisiens de net appiy under circumstances in - whieh a gev'erw teem-ei- entity participates in (intimates; eorpnr-atinn and designates public 3. to-eeiive i?g'w'et'ninig' many.- in Advisory Opinions No. 83-4310 and 84-4301 (copies enclosed), the Commission held that a city official or employee is net grohibited tram serving on the beard er a nenuprefit corporation, previdedthet. he is sewing. in his de?giy?t'ef?" by city-1 midi-that n?e cine? ef interest enigma.? Specifically, the Commission stated the: the following criteria must be satisfied: the gnvernmental entity must create or be a p'ertieigiant in the enrporation; (2) any public official or employee connected with the jurisdiction, including a ceuncil member, may be designated to serve on the board of the non-profit corpnratien, but the elected legislative authority or the appointed governing body meet fer'maliy'des'ign?eite the I office or position to represent the governmental entity; the public official or employee must be fermaliy instructed to represent the governmental} entity and its there must be no other conflict of interest on the part 91' the designated representative. Fen example, he, must. net-me his affine-in! peeitien te benefit him?seif Division (B) of Seetien 102.03 of the Revised Code). Under the facts presented, the voters have "approved a city charter amendment permitting the conversion of the city hospital to non?sectarian, charitable earporation, and the current board 01? trustees, city council, and mayor have participated in the cre'a?tiOn ef' the eorperation. Also, the eminence designates the city te seeye engine board of trustees of theecrporetion and formally instreets them to serve at the eity. Finally, the erganizetion prohibits compensation fer . beard members, which helps to avoid a majer, potential cen?ict of interest. Thus, the city is adhering to the criteria established in Advisery Opinions No. 834110 and 84-881, and the ingeyer-wonid not be prohibited- {rem ant-harming the ordinance _-and Bream .. In wenie m: be preh'ibiited from seieg?m ?fe-estates {if the baggie; in their official capacities; Fred M. DeGrandis, Esquire September 3, 1986 Page 3 This epini'an represents the views at the Cammissiun at its meeting on September 3, 19.86. It is basket} an the faets presente? anti is limited to questions. arising under Chapter 102. and Section 2921.42 of the Revised Code. If you have any questions, or wish t9 reqae'st a farmed advisory opinion [mm the Commission, plaase cantact me. Sincereiy, 5 James M. Long Assistant Executive Direetor ML:sm Encioismes