OPERATING AGREEMENT OF HEALTH DIAGNOSTICS OF NEW JERSEY, L.L.C. (“Company”)
OF
HEALTH DIAGNOSTICS OF NEW JERSEY,
L.L.C. (“Company”)
THIS OPERATING AGREEMENT is made and
entered into as of the 1st day of
August 2010, by NEW JERSEY
IMAGING PARTNERS, INC. (“NJIP”) with reference to the following
facts:
WHEREAS, the Company was formed under
and pursuant to the Act to operate cost-effective diagnostic imaging facilities
that provide quality diagnostic imaging and related services for the benefit of
the community;
WHEREAS, as of August 1, 2010 NJIP
acquired all of the membership interests of the Company; and
WHEREAS, NJIP desires to effect certain
changes with respect to the Company's operations and the parties' respective
rights and obligations, and in connection therewith, desires to amend and
restate the Original Operating Agreement by means of this Agreement in order to
set forth the relationships, rights, obligations and agreements with respect to
the Company.
WITNESSETH
NOW, THEREFORE, in consideration of the
mutual promises, covenants and undertakings hereinafter contained, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement hereby agree as follows effective as
of the Effective Date:
1. DEFINITIONS. For
purposes of this Agreement, and in addition to the terms defined above, the
following additional defined terms shall be used:
"Act" means the New Jersey
Limited Liability Company Act, as set forth in N.J.S.A. 42:2B-1, et seq., as
amended from time to time, and any successor to such Act.
"Adjusted Capital Account
Deficit" means, with respect to any Member, the deficit balance, if any,
in such Member's Capital Account as of the end of the relevant Allocation Year,
after giving effect to the following adjustments:
(i) Credit
to such Capital Account any amounts that such Member is obligated to restore
pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
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(ii) Debit
to such Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
The
foregoing definition of "Adjusted Capital Account
Deficit" is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" means, with
respect to a specified Person, any Person that directly or indirectly controls,
is controlled by, or is under common control with, the specified
Person. As used in this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" means this Amended
and Restated Operating Agreement, as amended or restated from time to time,
together with any and all schedules, exhibits and attachments expressly referred
to herein.
"Allocation Year" means (i) the period
commencing on the Effective Date and ending on December 31, (ii) any subsequent
period commencing on January 1 and ending on the following December 31, or (iii)
any portion of the period described in clause (ii) for which the Company is
required to allocate Profits, Losses, and other items of Company income, gain,
loss, or deduction pursuant to Section 6.
"Articles" means the Articles
of Organization of the Company, as amended or restated from time to
time.
"Budget" shall have the
meaning set forth in Section 4.6 of this Agreement.
"Capital Account" means, with respect
to any Member, the Capital Account maintained for such Member in accordance with
the following provisions:
(i) To
each Member's Capital Account there shall be credited such Member's Capital
Contributions, such Member's distributive share of Profits and any items in the
nature of income or gain that are specially allocated pursuant to Section 6.3 or
Section 6.4, and the amount of any Company liabilities assumed by such Member or
that are secured by any Property distributed to such Member.
(ii) To
each Member's Capital Account there shall be debited the amount of cash and the
Gross Asset Value of any Property distributed to such Member pursuant to any
provision of this Agreement, such Member's distributive share of Losses and any
items in the nature of expenses or losses that are specially allocated pursuant
to Section 6.3 or Section 6.4, and the amount of any liabilities of such Member
assumed by the Company or that are secured by any property contributed by such
Member to the Company.
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(iii) If
all or a portion of an Interest is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest.
(iv) In
determining the amount of any liability for purposes of subparagraphs (i) and
(ii) there shall be taken into account Code Section 752(c) and any other
applicable provisions of the Code and Regulations.
The
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Members shall determine that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that are
assumed by the Company or any Member), are computed in order to comply with such
Regulations, the Members may make such modification, provided that it is not
likely to have a material adverse effect on the amounts distributable to any
Member pursuant to Section 9.8 upon the dissolution of the Company. The Members
shall also (i) make any adjustments that are necessary or appropriate to
maintain equality between the aggregate Capital Accounts of the Members and the
amount of Company capital reflected on the Company's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q)
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
"Capital Contribution" means, with
respect to any Member, the amount of money and the initial Gross Asset Value of
any property (other than money) contributed to the Company by such Member (or
its predecessors in Interest) with respect to the Interest held by such Member.
The principal amount of a promissory note that is not readily traded on an
established securities market and that is contributed to the Company by the
maker of the note (or a Member related to the maker of the note within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) shall not be included in
the Capital Account of any Member until the Company makes a taxable disposition
of the note or until (and to the extent) principal payments are made on the
note, all in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
"Centers" means the diagnostic
imaging facilities operated by the Company. The locations of Centers
as of the Effective Date are: 3830 and ▇▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇.
"Centers Manager" means the
Person to whom day-to-day management of the Centers is delegated under the
Management Agreement. The initial Centers Manager shall be Advanced
or another Affiliate of Advanced.
"Change in Control" means,
with respect to a Member, any sale or liquidation of all or substantially all of
the assets of the Member, or any merger, consolidation or reorganization to
which the Member is a party and as to which the Member is not the surviving
entity or the sole owner of the surviving entity.
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"Code" means the Internal
Revenue Code of 1986, as amended, modified, or supplemented from time to time
(or any corresponding provisions of succeeding law).
"Company" means Health
Diagnostics of New Jersey, L.L.C.
"Company Minimum Gain" has the
meaning set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d) for
"partnership minimum
gain."
"Contributing Member" shall
have the meaning set forth in Section 5.1.2 of this Agreement.
"Covered Person" means a
Member, any Affiliate of a Member, any officer of the Company or any director,
shareholder, partner, member, employee, representative or agent of a Member or
of the Member’s Affiliates or of the Company or its Affiliates.
"Deadlock" means that a vote
has been taken by the members of the Board of Managers, or a written consent has
been requested from members of the Board of Managers, with respect to a Major
Decision and an equal number of voting members of the Board of Managers have
voted to approve and to disapprove the subject matter of the vote, or an equal
number of voting members has issued consent and has withheld consent, as the
case may be.
"Defaulting Member" shall have
the meaning set forth in Section 9.4.1 of this Agreement.
"Depreciation" means, for each
Allocation Year, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable for federal income tax purposes with respect
to an asset for such Allocation Year, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such Allocation Year, Depreciation shall be an amount that bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Allocation
Year bears to such beginning adjusted tax basis, provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Allocation Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Members.
"EBITDA" means, for a given
period, earnings before interest, taxes, depreciation and amortization of the
Company.
"Effective Date" means the
effective date of this Agreement, which shall be August 1, 2010.
"Fiscal Quarter" means (i) the period
commencing on the Effective Date and ending on June 30 and (ii) any subsequent
three (3) month period commencing on each of July 1, October 1, January 1, and
April 1, and ending on the next of, September 30, December 31, March 31, and
June 30, provided that the last Fiscal Quarter shall end on the date on which
all Company assets are distributed and the Articles have been canceled pursuant
to the Act.
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"Fiscal Year" means (i) the period
commencing on the Effective Date and ending on December 31 and (ii) any
subsequent period commencing on January 1 and ending on the earlier to occur of
(A) the following December 31 or (B) the date on which all Company assets are
distributed and the Articles have been canceled pursuant to the
Act.
"First and Second Appraisers"
shall have the meaning set forth in Section 9.6.4 of this
Agreement.
"Gross Asset Value" means,
with respect to any asset, the asset's adjusted basis for federal income tax
purposes, except as follows:
(i) The
initial Gross Asset Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the
Members, provided that the initial Gross Asset Values of the assets contributed
to the Company pursuant to Sections 5.1 and 5.2 shall be as set forth in such
Sections;
(ii) The
Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as determined by the Members, as of the
following times: (A) the acquisition of an additional Interest by any new or
existing Member in exchange for more than a de minimis Capital
Contribution; (B) the distribution by the Company to a Member of more than a
de minimis amount of
Property as consideration for an Interest; and (C) the liquidation of the
Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), provided, however, that
adjustments pursuant to clauses (A) and (B) above shall be made only if the
Members reasonably determine that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Members in the
Company;
(iii) The
Gross Asset Value of any Company asset distributed to any Member shall be
adjusted to equal the gross fair market value of such asset on the date of
distribution as determined by the distributee and the Members; and
(iv) The
Gross Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Section 743(b) but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of "Profits" and "Losses", provided, however,
that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv)
to the extent the Members determine that an adjustment pursuant to subparagraph
(ii) is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subparagraph
(iv).
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If the
Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses. For purposes of this definition of
Gross Asset Value, a Capital Contribution or distribution shall be considered
de minimis if its value
is less than $5,000.
"HIPAA" means the Health
Insurance Portability and Accountability Act of 1996 and the regulations
promulgated thereunder, as amended from time to time, and any successor to such
act or regulations.
"Interest" means a membership
interest (that is, an equity ownership interest) in the Company.
"Member" means each Person
signing this Agreement and any Person who subsequently is admitted as a member
(that is, an equity owner) of the Company.
"Member Nonrecourse Debt" has
the same meaning as the term "partner nonrecourse debt" set forth in
Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum
Gain" means an amount, with respect to each Member Nonrecourse Debt,
equal to the Company Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability, determined in accordance with
Regulations Section 1.704-2(i)(3).
"Member Nonrecourse
Deductions" has the same meaning as the term "partner nonrecourse deductions" set forth in
Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).
"Net Cash Flow" means the
gross cash proceeds of the Company less the portion thereof used to pay or
establish reserves for all Company expenses, debt payments, capital
improvements, replacements, and contingencies, all as determined by the Board of
Managers. "Net Cash
Flow" shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar allowances, but shall be increased by any reductions of
reserves previously established pursuant to the first sentence of this
definition.
"Non-Contributing Member"
shall have the meaning set forth in Section 5.1.2 of this
Agreement.
"Non-Defaulting Member" shall
have the meaning set forth in Section 9.4.1 of this Agreement.
"Nonrecourse Deductions" has the meaning
set forth in Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
"Nonrecourse Liability" has the meaning
set forth in Regulations Section 1.704-2(b)(3).
"Non-Withdrawing Member" shall
have the meaning set forth in Section 9.3 of this Agreement.
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"Original Operating Agreement"
shall have the meaning set forth in the recitals of this Agreement.
"Person" includes any
individual, profit or nonprofit corporation, association, partnership (general,
limited or limited liability), joint venture, trust, estate, limited liability
company or other legal entity or organization.
"Professional Services
Agreements" shall have the meaning set forth in Section 4.4 of this
Agreement.
"Profits" and "Losses" means, for each
Allocation Year, an amount equal to the Company's taxable income or loss for
such Allocation Year, determined in accordance with Code Section 703(a) (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any
income of the Company that is exempt from federal income tax and not otherwise
taken into account in computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be added to
such taxable income or loss;
(ii) Any
expenditures of the Company described in Code Section 705(a)(2)(B) or treated as
Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition of "Profits" and "Losses," shall be subtracted
from such taxable income or loss;
(iii) If
the Gross Asset Value of any Company asset is adjusted pursuant to subparagraphs
(ii) or (iii) of the definition of "Gross Asset Value," the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits or Losses;
(iv) Gain
or loss resulting from any disposition of Property with respect to which gain or
loss is recognized for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its Gross Asset
Value;
(v) In
lieu of the depreciation, amortization, and other cost recovery deductions taken
into account in computing such taxable income or loss, there shall be taken into
account Depreciation for such Allocation Year, computed in accordance with the
definition of "Depreciation";
(vi) To
the extent an adjustment to the adjusted tax basis of any Company asset pursuant
to Code Section 734(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4)
to be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's Interest, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and
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(vii) Notwithstanding
any other provision of this definition of "Profits" and "Losses," any items that are
specially allocated pursuant to Section 6.3 or Section 6.4 shall not be taken
into account in computing Profits or Losses.
The
amounts of the items of Company income, gain, loss, or deduction available to be
specially allocated pursuant to Sections 6.3 and 6.4 shall be determined by
applying rules analogous to those set forth in subparagraphs (i) through (vi)
above.
"Property" means the property
of the Company, whether real, personal or mixed.
"Purchaser" shall have the
meaning set forth in Section 9.6.1 of this Agreement.
"Regulations" shall mean the
income tax regulations and temporary regulations promulgated by the Internal
Revenue Service, Department of Treasury, pursuant to the Code.
"Seller" shall have the
meaning set forth in Section 9.6.1 of this Agreement.
"Tax Items" means all items of
profit or loss recognized by or allowable to the Company, as computed for
federal income tax purposes.
"Withdrawing Member" shall
have the meaning set forth in Section 9.3 of this Agreement.
2. FORMATION.
2.1 Formation. The
Company was formed by the filing of the Articles with the New Jersey Division of
Revenue on December 21, 1999.
2.2 Operating
Agreement. This Agreement constitutes the Operating Agreement
of the Company and sets forth the terms and conditions for the operation of the
Company and the relationship of the Members. This Agreement amends,
restates, supersedes, and replaces the Original Operating Agreement in its
entirety.
2.3 Name. The
name of the limited liability company shall be Health Diagnostics of New Jersey,
L.L.C., or such other name as may be selected by the Members.
2.4 Scope of Members’
Authority. Except as otherwise expressly and specifically
provided in this Agreement, no Member shall have any authority to act for, or to
assume any obligations or responsibility on behalf of, any other Member or the
Company.
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2.5 Principal Place of
Business. The Company’s initial principal place of business
will be ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
3. PURPOSES
AND SCOPE OF COMPANY.
3.1 Purposes. Subject
to the provisions of this Agreement, the purposes of the Company are to operate
diagnostic imaging facilities at locations as agreed upon by the Members, and to
engage in any and all activities related or incident thereto, including without
limitation the acquisition, improvement, sale, lease, mortgage or other use of
or dealings with real, personal or mixed property.
3.2 Other Legal/Compliance
Requirements. The Centers will (a) be operated and managed in
a manner that complies with all legal and regulatory operating restrictions that
are applicable to outpatient diagnostic imaging centers (including requirements
under HIPAA), and implement a compliance plan to ensure such compliance,
consistent with federal government compliance plan guidance, (b) have all
necessary licenses and maintain accreditation with such accrediting
organizations as determined by the Members, and (c) provide services to
Medicare, Medicaid and other government health care program
beneficiaries.
4. MANAGEMENT
AND OPERATIONS OF THE COMPANY.
4.1 Management by
NJIP. The powers of the Company shall be exercised by or under
the authority of, and the business and affairs of the Company shall be managed
under the direction of NJIP.
4.2 Indemnification of
Members.
4.2.1 The
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Covered
Person.
4.2.2 No
Covered Person shall be liable to the Company or any other Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Covered Person in good faith on behalf of the Company and in a
manner reasonably believed to be within the authority of such Covered
Person. No Covered Person shall be liable for any mistake of judgment
or omission unless the same constituted bad faith or was in breach of an express
provision of this Agreement.
4.2.3 Each
Covered Person shall be entitled to be indemnified by the Company for any loss,
damage or claim incurred by such Covered Person by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the
Company and in a manner reasonably believed to be within the authority of such
Covered Person; provided, however, that any indemnity permitted under this
Section 4.2.3 shall be provided out of and to the extent of Company assets only,
and no Member shall have any personal liability on account
thereof. To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any claim,
demand, action, suit or proceeding in respect of which such Covered Person is
entitled to be indemnified as provided in this Section 4.2.3 shall, from time to
time, be advanced by the Company upon receipt by the Company of an undertaking
by or on behalf of the Covered Person to repay such amount if it shall be
determined that the Covered Person is not entitled to be indemnified pursuant to
this Section 4.2.3.
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4.3 Compensation of
Members.
4.3.1 No
payment will be made by the Company to any Member for the services of such
Person.
4.4 Professional Services
Agreements. The Company shall enter into one or more
professional services agreements with Persons employing physician radiologists
and, where appropriate, cardiologists, pursuant to which such Persons shall
provide physician radiologists and cardiologists to the Centers to perform the
professional component of the Centers' diagnostic imaging services
("Professional Services Agreements").
4.5 Independent
Activities. (a) each of the Members may, notwithstanding the
existence of this Agreement or any fiduciary relationship created hereby, engage
in whatever activities they choose, whether or not the same be competitive with
the Company, without having or incurring any obligation to offer any interest in
such activities to the Company or any Member (or Affiliate of any Member), and
(b) neither this Agreement nor any activity undertaken pursuant hereto shall
prevent any Member (or any Affiliate of any Member) from engaging in such
activities or require a Member (or any Affiliate of a Member) to permit the
Company or any other Member (or any of its Affiliates) to participate in any
such activities and, as a material part of the consideration for the execution
hereof by the Members, each Member hereby waives, relinquishes and renounces any
such right or claim of participation.
4.6 Budgets. The
Company shall have a capital and an operating budget (each, a "Budget") for each
Fiscal Year.
5. FINANCING.
5.1 Additional Funds and
Adjustments.
5.1.1 Call for
Funds. The Members recognize that additional funds may
be required for the development and operation of the Centers and the
Company. The funds may be obtained by cash contributions of the
Members or by loans obtained by the Company or by any other
means. When NJIP determines that additional funds by way of cash
contributions to capital are required to meet current Company obligations or to
pay operating costs or to fund operating losses are necessary, the additional
funds shall be called for and shall be contributed by the Members in proportion
to their respective Ownership Percentage Interests. Such
contributions shall be in cash.
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5.1.2 Contributions for Defaulting
Member. If a Member (the "Non-Contributing Member") is
unable or unwilling to make any or all of its proportionate contribution under
this Section 5.1.2, then the other Member (the "Contributing Member") may, in
addition to pursuing any other remedies which may be available under this
Agreement or applicable law, make a contribution in excess of its proportionate
share (the "Excess Contribution"). If the Contributing Member makes
an Excess Contribution, then an adjustment shall be made to the Members’ Capital
Accounts, and each Member’s Ownership Percentage Interest in the Company shall
be adjusted accordingly. If, within one hundred (180) days from the
date the Contributing Member makes an Excess Contribution, the Non-Contributing
Member pays to the Contributing Member an amount equal to the Excess
Contribution, plus interest from the date the Contributing Member makes the
Excess Contribution until the date of the Non-Contributing Member’s payment to
the Contributing Member, at 2% per annum more than the prime rate of
interest as reported by The Wall Street
Journal, but not more than the maximum rate allowed by law, then the
Members’ Capital Accounts shall be adjusted for the reimbursement of the Excess
Contribution (excluding interest), and each Member’s Ownership Percentage
Interest in the Company shall be adjusted accordingly.
5.1.3 No Additional Required
Contributions. Except as set forth in this Section 5.1,
no Member shall have any obligation to make any additional capital contributions
to the Company.
5.2 No Right to Return of or
Interest on Capital Contributions. Except as otherwise
expressly provided in this Agreement, no Member shall have the right to withdraw
its capital contribution or to demand or receive a return of its capital
contribution or any part thereof. To the extent that any Member shall
ever have the right to withdraw its capital contribution or to demand or receive
the return of its capital contribution or any part thereof, the other Members
shall not be personally liable or responsible for the return of such capital
contribution and any such return shall be made solely from the assets of the
Company. No interest shall be paid by the Company on any capital
contribution to the Company.
5.3 Capital
Accounts. The Company shall establish and maintain a Capital
Account for each Member.
6. ALLOCATIONS.
6.1 Profits. After giving
effect to the special allocations set forth in Sections 6.3 and 6.4, Profits for
any Allocation Year shall be allocated among the Members in proportion to their
then respective Ownership Percentage Interests.
6.2 Losses. After giving
effect to the special allocations set forth in Sections 6.3 and 6.4, Losses for
any Allocation Year shall be allocated among the Members in proportion to their
then respective Ownership Percentage Interests.
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6.3 Special Allocations.
The following special allocations shall be made in the following
order:
6.3.1 Minimum Gain
Chargeback. Except as otherwise provided in Regulations Section
1.704-2(f), notwithstanding any other provision of this Article 6, if there is a
net decrease in Company Minimum Gain during any Allocation Year, each Member
shall be specially allocated items of Company income and gain for such
Allocation Year (and, if necessary, subsequent Allocation Years) in an amount
equal to such Member's share of the net decrease in Company Minimum Gain,
determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.1 is intended to comply with
the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and
shall be interpreted consistently therewith.
6.3.2 Member Minimum Gain
Chargeback. Except as otherwise provided in Regulations Section
1.704-2(i)(4), notwithstanding any other provision of this Article 6, if there
is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a
Member Nonrecourse Debt during any Allocation Year, each Member who has a share
of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain for
such Allocation Year (and, if necessary, subsequent Allocation Years) in an
amount equal to such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section 6.3.2 is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
6.3.3 Qualified Income
Offset. If any Member unexpectedly receives any adjustments, allocations,
or distributions described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), Section
1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Company income
and gain shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 6.3.3 shall be made only if and to
the extent that such Member would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article 6 have been tentatively made
as if this Section 6.3.3 were not in this Agreement.
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6.3.4 Gross Income
Allocation. If any Member has a deficit Capital Account at the end of any
Allocation Year that is in excess of the sum of (i) the amount such Member is
obligated to restore pursuant to any provision of this Agreement and (ii) the
amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Member shall be specially allocated items of Company income and gain
in the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 6.3.4 shall be made only if and to the extent that such
Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Section 6 have been made as if Section
6.3.3 and this Section 6.3.4 were not in the Agreement.
6.4 Rules of
Construction.
6.4.1 For
purposes of applying Sections 6.1 and 6.2 at the close of any Allocation Year, a
Member's Capital Account balance shall be deemed to be increased by such
Member's share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain
remaining at the close of such Allocation Year as determined under the
Regulations under Section 704(b).
6.4.2 If
there is insufficient Profit or Loss to allocate to the Members pursuant to any
subsection of Sections 6.1 or 6.2 or to cause every Member's Capital Account
balance to equal the entire Capital Account balance described in such subsection
with respect to such Member, the Profit or Loss available to be allocated among
the Members pursuant to said subsection shall be allocated in proportion to the
amounts thereof that would have been allocated to each Member pursuant to such
subsection if there had been sufficient amounts thereof to fully satisfy the
requirements of such subsection with respect to every Member.
6.5 Code Section 704(c).
Any item of income, gain, loss and deduction with respect to any property (other
than cash) that has been contributed by a Member to the capital of the Company
or which has been revalued for Capital Account purposes pursuant to Regulations
Section 1.704-1(b)(2)(iv) and which is required or permitted to be allocated to
such Member for income tax purposes under Section 704(c) of the Code so as to
take into account the variation between the tax basis of such property and its
fair market value at the time of its contribution shall be allocated solely for
income tax purposes in the manner so required or permitted under Code Section
704(c) using the "traditional method" described in Regulation Section 1.704-3(b)
(or any successor Regulation), such allocations to be made as shall be
reasonably approved by the Members; provided, however, that curative
allocations shall be made in accordance with Regulations Section 1.704-3(c) to
the extent necessary to eliminate any disparity, to the extent possible, between
the Members' book and tax Capital Accounts attributable to such property; and
further provided, however, that any
other method allowable under applicable Regulations may be used in connection
with any contribution of property or following any revaluation as shall be
determined by the Members. Any elections or other decisions relating
to allocations under this Section 6.5 will be made in any manner that the
Members reasonably determines to reflect the purpose and intention of this
Agreement. Allocations under this Section 6.5 are solely for purposes
of federal, state and local taxes and, shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Profit,
Loss, or other items or distributions under any provision of this
Agreement.
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6.6 Income Tax
Allocations. Except as otherwise provided herein, each Tax
Item shall be allocated among the Members in the same manner and proportion that
each correlative item of Profit or Loss, as calculated for book purposes, is
allocated pursuant to the provisions of Sections 6.1 and 6.2
hereof.
7. DISTRIBUTIONS.
7.1 Net Cash Flow. Except
as otherwise provided in Section 9.8, Net Cash Flow, if any, shall be
distributed not later than the sixtieth day after the end of each Fiscal Year
among the Members so that the Capital Account ratios of the Members are equal to
their respective Ownership Percentage Interests.
7.2 Amounts
Withheld.
7.2.1 The
Members are authorized and directed to cause the Company to withhold from or pay
on behalf of any Members the amount of federal, state, local or foreign taxes
that the Members, after consultation with such Member, reasonably believes the
Company is required to withhold or pay with respect to any amount distributable
or allocable to such Member pursuant to this Agreement, including, without
limitation, any taxes required to be paid by the Company pursuant to Code
Sections 1441, 1442, 1445 or 1446 and any taxes imposed by any state or other
taxing jurisdiction on the Company as an entity. Without limiting the foregoing,
the Members shall cause the Company to withhold (and remit to the appropriate
governmental authority), from amounts otherwise distributable to a Member, any
taxes that such Member notifies the Members in writing should be withheld, which
notice shall be given by any Member who becomes aware of any withholding
obligation to which it is subject and shall specifically set forth, inter alia,
the rate at which tax should be withheld and the name and address to which any
amounts withheld should be remitted.
7.2.2 If
the Company is required to withhold and remit to taxing authorities amounts on
behalf of a Member exceeding available amounts then remaining to be distributed
to such Member, such payment by the Company shall constitute a loan to such
Member that is repayable by the Member on demand, together with interest at the
applicable federal rate determined from time to time under Code Section
7872(f)(2) or the maximum rate permitted under applicable law, whichever is
less, calculated upon the outstanding principal balance of such loan as of the
first day of each month. Any such loan shall be repaid to the
Company, in whole or in part, as determined by the Members in their sole
discretion, either (i) out of any distributions from the Company which the
Member is (or becomes) entitled to receive, or (ii) by the Member in cash upon
demand by the Member (said Member bearing all of the Company's costs of
collection, including reasonable attorneys' fees, if payment is not remitted
promptly by the Member after such a demand for payment).
7.2.3 Each
Member agrees to cooperate fully with all efforts of the Company to comply with
its tax withholding and information reporting obligations and agrees to provide
the Company with such information as the Members may reasonably request from
time to time in connection with such obligations.
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7.3 Phantom
Income. Each Member understands that taxable income and gain
allocated to such Member by the Company pursuant to this Agreement and the tax
on the portion thereof allocated to such Member for any Fiscal Year may exceed
the distributions of Net Cash Flow to such Member and such Member may have to
look to sources other than distributions of Net Cash Flow from the Company to
pay such tax.
7.4 Limitations on
Distributions.
7.4.1 The
Company shall make no distributions to the Members except (i) as provided in
this Article 7 and Section 9.8 hereof or (ii) as agreed to by all of the
Members.
7.4.2 A
Member may not receive a distribution from the Company to the extent that, after
giving effect to the distribution, all liabilities of the Company, other than
liability to Members on account of their Capital Contributions, would exceed the
fair value of the Company's assets.
8. TRANSFERS
AND RIGHTS OF FIRST REFUSAL.
8.1 Transfers
Prohibited.
8.1.1 No
Member may sell, transfer, assign or otherwise encumber or permit or suffer any
encumbrance of all or any part of its interest in the Company (any such
transaction being hereinafter referred to as a "transfer"), except (a) a
transfer that is approved by the Board of Managers, (b) a transfer by either
Hospital or Advanced to one of its Affiliates, by Advanced to Hospital or by
Hospital to Advanced, (c) a pledge to an independent lending institution whereby
the Member retains voting control (but not the foreclosure of any such pledge)
and (d) a transfer made pursuant to this Section 8.
8.1.2 Notwithstanding
the foregoing or any other provision of this Agreement, no transfer of any
interest in the Company (a) may be made that would require the prior approval of
any regulatory agency, unless such approval has been duly obtained, or (b) shall
be effective unless and until the transferee agrees in writing to be bound by
this Agreement. Any attempt to effect a transfer in violation of this
Section 8 shall be void.
8.2 Right of First
Refusal. If at any time either Member (the "Offering Member")
receives a bona fide offer to purchase all or any part of its interest in the
Company from any Person that is not an Affiliate of the Offering Member and the
Offering Member desires to accept said offer and sell its interest, then the
Offering Member must in writing first offer to sell its interest to the other
Member, or at the other Member’s option, to permit such other Member to
participate pro rata in
the sale, for a period of ninety (90) days on the same terms and
conditions. By written notice to the Offering Member prior to the end
of such ninety (90) day period, the other Member may either (a) accept the offer
and purchase the interest of the Offering Member in accordance with the terms of
the offer or (b) require the Person who made the bona fide offer to purchase all
or a pro rata portion
of the interest of the other Member concurrently with purchasing all or a
portion of the Offering Member’s interest. If the other Member does
not elect one of the alternatives set forth in clause (a) or (b) within said
90-day period, the Offering Member may sell its interest on the terms and
conditions set forth in said third party offer, provided that such sale is
closed within ninety (90) days after the expiration of the aforesaid 90- day
period and the buyer agrees to sign and be bound by this
Agreement. If the other Member elects to sell its interest in the
Company pursuant to clause (b) above and the third party purchaser is unwilling
to purchase all or any portion of the interest in the Company held by such other
Member, then the Offering Party shall not sell its interest to such third party
purchaser and the transfer contemplated in connection therewith shall be null
and void and shall not be consummated.
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8.3 Purchase
Option.
8.3.1 Upon
the occurrence of any of the events described in Section 8.3.2 of this Agreement
(each a "Triggering Event") with respect to a Member (the "Selling Member"), the
other Member (the "Purchasing Member"), at its sole option, may require the
Selling Member to sell its interest in the Company to the Purchasing Member in
accordance with the procedures and terms set forth in Sections 9.5 and 9.6 of
this Agreement as if the Purchasing Member were a Non-Defaulting Member and the
Selling Member were a Defaulting Member.
8.3.2 Each
of the following event shall constitute a Triggering Event under Section 8.3.1
of this Agreement:
8.3.2.1 A
Change of Control. (In the event of a Change of Control of a Member,
such Member shall, no less than thirty (30) days prior to the consummation of a
Change in Control, give the other Member written notice thereof.)
8.3.2.2 The
Member or one of its Affiliates is convicted of a crime or enters into a
settlement arising from allegations of a criminal or civil offense which
materially adversely affects the reputation or operation of the
Centers. (Upon the occurrence of this Triggering Event, the involved
Member shall immediately notify the other Member of the occurrence of this
Triggering Event.)
8.3.2.3 The
Member is excluded from participation in any federally funded health care
program, including without limitation, the Medicare or Medicaid program. (Upon
the occurrence of this Triggering Event, the involved Member shall immediately
notify the other Member of the occurrence of this Triggering
Event.)
9. TERM AND
TERMINATION.
9.1 Term. The
Company shall continue in existence for a term beginning on the date hereof and
continuing on a perpetual basis unless and until terminated and liquidated in
accordance with the provisions hereof. All provisions of this
Agreement relating to termination and liquidation shall be cumulative; that is,
the exercise or use of one of the provisions hereof shall not preclude the
exercise or use of any other provision hereof.
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9.2 Voluntary
Termination. No Member shall have the right to withdraw
from the Company. The Company may be terminated upon the affirmative
unanimous election to terminate by the Members.
9.3 Certain Events of
Termination. Upon the occurrence of any of the following
events, the Company may terminate upon the vote of the "Non-Withdrawing Member"
(defined below). In the event the Non-Withdrawing Member determines
not to effect a termination of the Company pursuant to the preceding sentence,
the Member whose action or inaction gave rise to the following events, as of the
date of occurrence of the respective event, shall automatically be deemed to
have withdrawn from the Company and shall be referred to as the "Withdrawing
Member" and the other Member shall be referred to as the "Non-Withdrawing
Member."
9.3.1 A
Member files a voluntary petition for an order for relief, or is otherwise
subject to an order for relief, under the federal bankruptcy laws, or files any
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under the
present or any future federal bankruptcy laws or any other present or future
applicable federal, state or other statute or law relative to bankruptcy,
insolvency or other relief for debtors or seeks or consents to or acquiesces in
the appointment of any trustee, receiver, conservator or liquidator of said
Member or of all or any substantial part of its properties or its interest in
the Company or otherwise (the term "acquiesces" includes but is not limited to
the failure to file a petition or motion to vacate or discharge any order,
judgment or decree providing for such appointment within 60 days after the
appointment);
9.3.2 A
court of competent jurisdiction enters an order, judgment or decree approving a
petition filed against a Member seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy law, or any other present or future
applicable federal, state or other statute or law relating to bankruptcy,
insolvency or other relief for debtors, and said Member acquiesces in the entry
of such order, judgment or decree, or such order, judgment or decree remains
unvacated and unstayed for an aggregate of 60 days (whether or not consecutive)
from the date of entry thereof, or any trustee, receiver, conservator or
liquidator of said Member or of all or any substantial part of its property or
its interest in the Company or otherwise is appointed without the consent or
acquiescence of said Member and such appointment remains unvacated and unstayed
for an aggregate of 60 days (whether or not consecutive);
9.3.3 A
Member makes an assignment for the benefit of creditors or takes any other
similar action for the protection or benefit of creditors; or
9.3.4 The
corporate existence of a Member is terminated, unless such Member’s rights and
duties hereunder are first or concurrently transferred pursuant to Section
8.
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9.4 Termination for
Default.
9.4.1 If
a Member (the "Defaulting Member") fails to perform any of the material
obligations hereunder as a Member (but excluding for purposes of this Section
9.4 the obligations of the Member under the Management Agreement or any
Professional Services Agreement), the other Member (the "Non-Defaulting Member")
shall have the right to give such Defaulting Member a notice of default (the
"Notice of Default") which shall set forth the nature of the obligation that the
Defaulting Member has not performed.
9.4.2 If,
within thirty (30) days following receipt of the Notice of Default, the
Defaulting Member in good faith commences to perform such obligation and cure
such default and thereafter prosecutes to completion with diligence and
continuity the curing thereof within a reasonable time, it shall be deemed that
the Notice of Default was not given. However, if within such 30-day
period the Defaulting Member has not commenced in good faith the curing of such
default or does not thereafter prosecute to completion with diligence and
continuity the curing thereof, the Non-Defaulting Member hereunder shall have
the right to terminate the Company by giving the Defaulting Member written
notice thereof. Any obligation to pay money must be performed within
thirty (30) days after the Notice of Default relating to such nonpayment is
given.
9.4.3 The
rights of the Non-Defaulting Member under this Section 9.4 shall not be the
exclusive remedy of the Non-Defaulting Member or the Company, but shall be in
addition to all other rights and remedies available to the Non-Defaulting Member
and the Company at law or in equity (including without limitation the right to
institute suit on behalf of the Company to collect any amounts owed to the
Company by the Defaulting Member or to be compensated for any damages resulting
from the default of the Defaulting Member).
9.4.4 During
any period commencing with delivery of a valid and proper Notice of Default and
ending only when such default is cured pursuant to Section 9.4.2, the Defaulting
Member shall have no right to vote on Company matters or to participate in any
decisions of the Company, all of which decisions may be made by the
Non-Defaulting Member at its sole but reasonable discretion, and the power to
vote of the members of the Board of Managers appointed by the Defaulting Member
shall be suspended for the same period.
9.5 Option to Purchase Interest
of Non-Withdrawing or Non-Defaulting Member.
9.5.1 In
the event the Company is subject to termination pursuant to Section 8.3 or 8.4
of this Agreement, the Non-Defaulting Member or Non-Withdrawing Member, as the
case may be, may purchase the entire undivided interest in the Company of the
Defaulting Member or the Withdrawing Member, as the case may be, pursuant to the
appraisal procedures set forth in Section 9.6 of this Agreement. With
respect to any provision of this Section 9 whereunder more than one
Non-Defaulting Member or Non-Withdrawing Member are to purchase the interest of
the Defaulting Member or the Withdrawing Member, such Non-Defaulting Parties or
Non-Withdrawing Parties shall purchase such interest in proportion to their
respective Ownership Percentage Interests. In
the event the Company is subject to termination pursuant to Section 9.3 or 9.4
of this Agreement, the rights of the Non-Defaulting Member or Non-Withdrawing
Member, as the case may be, under this Section 9 shall not be the exclusive
remedies of the Non-Defaulting Member or Non-Withdrawing Member, as the case may
be, but shall be in addition to all other rights and remedies, if any, available
at law or in equity to the Non-Defaulting Member or Non-Withdrawing Member, as
the case may be.
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9.5.2 The
closing of a purchase pursuant to this Section 9.5 shall be held at a mutually
acceptable place on a mutually acceptable date not more than thirty (30) days
after the determination of the purchase price pursuant to Section 9.6 of this
Agreement. At such closing, the Defaulting Member or Withdrawing
Member shall assign to the purchasing Non-Defaulting Member or purchasing
Non-Withdrawing Member the interest in the Company so sold, free and clear of
all liens, claims and encumbrances and, at the request of the purchasing party,
in order to properly set forth the record title to the assets of the Company,
the selling party shall convey and transfer to the purchasing party an undivided
percentage interest in the assets of the Company to the extent of the selling
party’s Ownership Percentage Interest and execute all other documents that may
be necessary to effectuate the purposes of this Agreement, and the purchasing
party shall pay the purchase price therefor in immediately available
funds. The purchasing party shall expressly not assume the
obligations of the selling party with respect to all liabilities and obligations
of the Company created or incurred prior to the effective date of the sale, and
the purchasing party shall under no circumstances indemnify, defend and hold
harmless the selling party from all Company liabilities and obligations existing
prior to the effective date of the sale.
9.6 Price.
9.6.1 If
the interest of a Withdrawing Member or Defaulting Member (the "Seller") is to
be purchased pursuant to Section 9.5.1 of this Agreement, the purchaser (the
"Purchaser") shall purchase the interest of the Seller in the Company at a price
equal to (a) the Appraised Value set forth in Section 9.6.5 of this Agreement
multiplied by the Withdrawing Member’s or Defaulting Member’s Ownership
Percentage Interest, MINUS (b) any reductions effected pursuant to Section 9.6.2
or 9.6.3 of this Agreement.
9.6.2 The
Purchaser shall purchase the Seller’s interest in the Company for the price set
forth in Section 9.6.1 less the amount of any damages to the Company, the
Non-Withdrawing Member and/or the Non-Defaulting Member resulting from the
Defaulting Member’s breach or Withdrawing Member’s withdrawal under this
Agreement pursuant to Section 9.3, 9.4, or 9.5 of this Agreement.
9.6.3 If
at the time of the purchase the Seller’s Ownership Percentage Interest is
subject to an encumbrance, the Purchaser shall have the right but not the
obligation to discharge such encumbrance and reduce the amount of the purchase
price by the amount of money required to discharge such
encumbrance.
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9.6.4 In
order to determine the Appraised Value for purposes of Section 9.6.1 of this
Agreement, Seller and Purchaser shall each designate an appraiser who shall be a
member in good standing of the American Society of Appraisers and who shall have
expertise in valuing health care businesses (the "First and Second Appraisers")
by giving the other written notice thereof. If either party does not
so designate an appraiser with the aforementioned qualifications within fifteen
(15) days after a written request to do so is delivered to such party, then the
appointment of the First and/or Second Appraiser (as the case may be) shall be
made in the same manner as is hereinafter provided for the appointment of a
third appraiser, who shall have the same qualifications as referenced in the
first sentence of this Section 9.6.4 of this Agreement ("Third Appraiser") in a
case where the First and Second Appraisers and the parties themselves are unable
to agree upon the Third Appraiser. The First and Second Appraisers so
designated or appointed shall meet within ten (10) days after the Second
Appraiser is appointed, and if within thirty (30) days after the Second
Appraiser is appointed the First and Second Appraisers do not agree upon the
appraised value, they shall themselves appoint a Third Appraiser; and in the
event of their being unable to agree upon such appointment within ten (10) days
after the end of said 30-day period, the Third Appraiser shall be selected by
the parties themselves if they can agree thereon within a further period of
fifteen (15) days. If the parties do not so agree, then either party,
on behalf of both, may request such appointment by the office of the American
Arbitration Association located nearest to the Company’s principal
office. In the event of failure, refusal or inability of any
appraiser to act, a new appraiser with the aforesaid qualifications shall be
appointed in his stead, which appointment shall be made in the same manner as
hereinbefore provided for the appointment of the appraiser who fails, refuses or
is unable to act. Each party shall pay the fees and expenses of the
original appraiser appointed by such party or in whose stead such appraiser was
appointed, and the fees and expenses of the Third Appraiser shall be borne
one-half by the Seller and one-half by the Purchaser.
9.6.5 The
appraisers shall determine the appraised value (the "Appraised Value") of 100%
of the Company as a going concern, which shall be the amount by which (a) the
fair market value, at the time such appraisal is made, of all the businesses of
the Company (including goodwill of the Company and any undistributed Net Cash
Flow) is in excess of (b) all liabilities of the Company, including but not
limited to liabilities for the repayment of all loans made to the Company by any
Member. The appraisers shall endeavor to reach their decision within
thirty (30) days after the appointment of the Third Appraiser. After
reaching their decision, the appraisers shall give written notice thereof to the
Members. For all purposes under this Section 9.6 of this Agreement,
the unanimous decision of the appraisers or the decision of two out of three of
the appraisers shall be binding on the Members.
9.7 Operations of the Company
Pending Purchase.
9.7.1 If
the interest of one of the Members is purchased pursuant to Section 9.5 of this
Agreement, during the period beginning with the event giving rise to withdrawal
under Section 9.3 of this Agreement or the date of notice of termination under
Section 9.4 of this Agreement, and ending with the closing of the purchase of
the Seller’s interests under Section 9.5 of this Agreement, the business and
operations of the Company shall be conducted by the Purchaser.
9.7.2 In
the event of a purchase of any Member’s Interest in the Company, (a) the
Purchaser shall succeed to the Seller’s right to appoint members of the Board of
Managers pursuant to Section 4.2.1 of this Agreement, and (b) Section 5.1 shall be automatically
amended to reflect the revised Ownership Percentage Interests of the
Members.
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9.7.3 Except
as otherwise expressly set forth in this Agreement, the resignation, bankruptcy
or dissolution of a Member or the occurrence of any other event which terminates
the continued membership of a Member in the Company shall not cause a
dissolution of the Company and the Company shall continue notwithstanding any
such event or occurrence.
9.8. Winding
Up. Upon the termination of the Company pursuant to this
Section 9, if a purchase does not occur, the Company shall continue solely for
the purposes of winding up its affairs in an orderly manner, liquidating its
assets, and satisfying the claims of its creditors and Members and no Member
shall take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Company's business and
affairs. To the extent not inconsistent with the foregoing, all
covenants contained in this Agreement and obligations provided for in this
Agreement shall continue to be fully binding on the Members until such time as
the Property has been distributed pursuant to this Section 9.8 and the Articles
have been canceled in accordance with the Act. To the extent
sufficient therefor, the Company's assets shall be applied and distributed in
the following order:
9.8.1. First, to creditors,
including the Members, in satisfaction of all of the Company's debts and
liabilities other than liabilities for which reasonable provision for payment
has been made;
9.8.2. The balance, if any,
to the Members in accordance with their positive Capital Accounts, after giving
effect to all contributions, distributions, and allocations for all
periods.
9.9. Compliance with Regulations;
Deficit Capital Accounts. If the Company is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g):
9.9.1. Distributions
shall be made pursuant to Section 9.9 to the Members who have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2); and
9.9.2. If
any Member has a deficit balance in its Capital Account (after giving effect to
all contributions, distributions, and allocations for all Allocation Years,
including the Allocation Year during which such liquidation occurs), such Member
shall have no obligation to make any contribution to the capital of the Company
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Company or to any other Person for any purpose
whatsoever.
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10. JEOPARDY.
11.1 Noncompliance. In
the event (a) that there is (i) the adoption or amendment of any federal, state
or local law, regulation or ordinance, or (ii) an interpretation of such a law,
regulation or ordinance by a governmental agency or court, or (iii) the receipt
by either Member of notice from any recognized agency, authority or association
in the medical or hospital fields, or any federal, state or local government,
agency, authority, commission or other governmental body, and (b) that legal
counsel for either Member opines in writing that such event described in clause
(a) above (i) jeopardizes the participation of Member in Medicare or Medicaid or
other governmental program, or the accreditation by JCAHO or any other state or
nationally recognized organization, (ii) gives rise to the imposition of
intermediate sanctions under Section 4958 of the Code upon any Member or any
Person, (iii) causes either Member or any Affiliate to be in violation of any
statute, regulation or ordinance as a result of this Agreement or the Management
Agreement or any Professional Services Agreement, or the Member or Affiliate’s
performance thereunder, or (iv) suggests that either Member or any Affiliate of
a Member is engaged in illegal or unethical conduct as a result of this
Agreement or the Management Agreement or any Professional Services Agreement, or
the Member or Affiliate’s performance thereunder, THEN in any such event, the
Members agree to promptly amend this Agreement so as to eliminate the violation
or noncomplying aspects hereof or to take such actions as shall be necessary to
remedy the situation, but without materially altering the other rights and
obligations of the Members hereunder. The failure of either Member to
timely take whatever action within its power and authority that is necessary to
eliminate the violation or non-complying aspects hereof shall constitute a
material breach of this Agreement and shall give the non-breaching Member the
right to terminate the Company or purchase the defaulting Member's interest
pursuant to Section 9.4 hereof.
11. GENERAL.
11.1 Notices. All
notices, demands or requests provided for or permitted to be given pursuant to
this Agreement must be in writing and shall be deemed to have been properly
given or served by personal delivery, by depositing the same in the United
States mail, postage prepaid and registered or certified with return receipt
requested, or by facsimile transmission (with a confirmation by registered or
certified mail placed in the mail no later than the following day), or by
sending the same by a nationally recognized overnight delivery service as
follows:
|
If
to NJIP:
|
New
Jersey Imaging Partners, Inc.
|
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President &
CEO
Fax No.: (▇▇▇)
▇▇▇-▇▇▇▇
All
notices, demands and requests sent by personal delivery or by facsimile
transmission shall be effective and deemed served upon transmittal
thereof. All notices, demands and requests sent by mail shall be
effective and deemed served three days after being deposited in the United
States mail. All notices, demands and requests sent by overnight
delivery service shall be effective and deemed served on the day after being
deposited with such overnight delivery service. The above addresses
may be changed by giving notice of such change in the manner provided above for
giving notice.
11.2 Insurance. The
Company shall carry and maintain in force general liability and malpractice
liability insurance coverages through participation in Hospital’s insurance
programs. The premiums and any other expenses for such insurance
shall be a cost and expense to be borne by the Company.
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11.3 Pronouns. All
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine and neuter, and to the singular and plural, as the identity of the
person, persons, entity or entities intended to be referred to may
require.
11.4 Governing
Laws. This Agreement and the obligations of the Members
hereunder shall be interpreted, construed and enforced in accordance with the
laws of the State of New Jersey, without regard to its conflict of laws
provisions.
11.5 Entire
Agreement. This Agreement, including the Exhibits attached
hereto, and the related contracts referenced herein, contain the entire
agreement among the Members relative to the formation and management of the
Company and shall replace and supersede all prior understandings between and
among the Members and the Company as to the subject matter hereof.
11.6 Amendments. This
Agreement may only be amended by the written approval of the
Member(s).
11.7 Waiver. No
consent or waiver, express or implied, by the Company or by any Member to or of
any breach or default by another Member in the performance of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance by such other Member of the same or
any other obligations of such Member hereunder. Failure on the part
of the Company or any Member to complain of any act or failure to act of another
Member or to declare the other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by the Company or any Member of
its rights hereunder.
11.8 Severability. If
any provision of this Agreement or the application thereof to any person or
circumstance are held or agreed to be invalid or unenforceable to any extent,
the remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law, so long as the essential benefits expected
from this Agreement remain enforceable.
11.9 Dispute
Resolution.
11.9.1 In
the event of a Deadlock with respect to a Major Decision, a Member may, by
giving notice to the other Member, convene a meeting to resolve the
Deadlock. If said officers cannot resolve the Deadlock within thirty
(30) days after such request for a meeting is given, either party is entitled to
submit the matter to arbitration in accordance with the procedures outlined
below.
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11.9.2 Except
as otherwise provided in this Agreement, all disputes arising under this
Agreement shall be resolved by binding arbitration pursuant to the rules of the
American Arbitration Association then pertaining. Arbitration proceedings shall
be held in Edison, New Jersey. Members may, if they are able to do so, agree
upon one arbitrator; otherwise, there shall be three arbitrators selected to
resolve disputes, one named in writing by each Member within fifteen (15) days
after notice of arbitration is served upon one Member by the other Member and a
third arbitrator selected by the two arbitrators selected by the Members within
fifteen (15) days thereafter. If the two arbitrators cannot select a third
arbitrator within such fifteen (15) days, either Member may request that the
American Arbitration Association select such third arbitrator. If one
Member does not choose an arbitrator within fifteen (15) days, the other Member
shall request that the American Arbitration Association name such other
arbitrator. No one shall serve as arbitrator who is in any way
financially interested in this Agreement or in the affairs of either Member.
Each Member shall pay its own expenses of arbitration and one-half of the
expenses of the arbitrators. If any position by either Member
hereunder, or any defense or objection thereto, is deemed by the arbitrators to
have been unreasonable, the arbitrators shall assess, as part of their award
against the unreasonable Member or reduce the award to the unreasonable Member,
all or part of the arbitration expenses (including reasonable attorneys’ fees)
of the other Member and of the arbitrators.
11.9.3 The
decision of the arbitrator shall be binding upon the Members, absent manifest
error. In making his or her determination, the arbitrator shall
specifically take into account and give effect to the provisions of Section 3.2
of this Agreement, and any arbitration determination must be consistent with and
promote the charitable purposes and tax-exempt status of Hospital and its
Affiliates.
11.9.4 The
Members shall evenly divide all costs of arbitration (exclusive of each parties'
legal fees, which shall be borne by the party that incurs them).
11.10 Attorneys'
Fees. In any arbitration or action at law or equity to enforce
any of the provisions or rights under this Agreement, the unsuccessful party to
such arbitration or litigation, as determined by the arbitrators or the court in
a final judgment or decree, shall pay the successful party or parties all costs,
expenses and reasonable attorneys' fees incurred therein by such party or
parties (including without limitation such costs, expenses and fees on any
appeals or in connection with any bankruptcy proceeding), and if such successful
party shall recover judgment in any such arbitration, action or proceeding, such
costs, expenses and attorneys' fees shall be included in and as part of such
award or judgment.
11.11 Binding
Agreement. Subject to the restrictions on transfers set forth
herein, this Agreement shall inure to the benefit of and be binding upon the
Members and their respective successors and assigns. Whenever in this
instrument a reference to any party or Member is made, such reference shall be
deemed to include a reference to the Affiliates, successors and assigns of such
party or Member.
11.12 Counterparts. Separate
copies of this Agreement may be signed by the parties hereto, with the same
effect as though all of the parties had signed one copy of this
Agreement. Signatures transmitted by facsimile shall be accepted as
original signatures.
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11.13 Interpretation of
Agreement. The parties hereto acknowledge and agree that this
Agreement has been negotiated at arm's length and between parties equally
sophisticated and knowledgeable in the matters dealt with in this
Agreement. Accordingly, any rule of law or legal decision that would
require interpretation of any ambiguities in this Agreement against the party
that has drafted it is not applicable and is waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intent of the parties as set forth in this Agreement.
IN WITNESS WHEREOF, this Amended and
Restated Operating Agreement has been executed as of the day and year first set
forth above.
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NEW
JERSEY IMAGING PARTNERS, INC.
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By:
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/S/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, M.D.,
President
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