OPERATING AGREEMENT
OF
CCT, L.L.C.
A North Carolina Limited Liability Company
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM SUCH
REGISTRATION SET FORTH IN THE SECURITIES ACT OF 1933 PROVIDED BY SECTION 4(2)
THEREOF, NOR HAVE THEY BEEN REGISTERED WITH THE SECURITIES COMMISSION OF CERTAIN
STATES IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED WITH THE
TERMS AND CONDITIONS OF THIS AGREEMENT AND IN A TRANSACTION WHICH IS EITHER
EXEMPT FROM REGISTRATION UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACTS.
THIS OPERATING AGREEMENT (the "Agreement") of CCT, L.L.C. (the
"Company"), a North Carolina Limited Liability Company is effective as of the
15th day of January, 1996, by and among the Company and Southern Arizona Heart,
Inc., a North Carolina corporation ("SAHI") as a Member and each of the other
parties identified on Schedule A as Members (the "Investor Members").
RECITALS
1. The Company has been formed to develop, own and operate a fixed-site
cardiac catheterization laboratory which shall be located on the premises of an
acute care hospital being developed as a high-quality cost-effective provider of
cardiology and cardiovascular care and surgery in Tucson, Arizona (the "Hospital
Venture").
2. No member of the Hospital Venture is subject to any prohibitions on
their ownership of an acute care hospital which includes in it a catheterization
laboratory among its numerous other services and facilities. However, the
members of the Hospital Venture desire to take every step and action reasonably
available to them to avoid giving rise to even the argument that members of the
Hospital Venture are in violation of any agreement to which they are a party
relating to their interests in other catheterization laboratories in Tucson.
Accordingly, the members of the Hospital Venture have elected to have the
catheterization laboratories located at the heart hospital being developed by
the Hospital Venture separately owned and operated by this Company, whose
Members will not include any party who separately has an ownership interest in
any other cardiac catheterization laboratory in Tucson, Arizona.
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
definitions (unless otherwise expressly provided herein).
1.1 "Affiliate" with respect to a Person, (i) any relative of such
Person; (ii) any officer, director, trustee, partner, manager, employee or
holder of ten percent (10%) or more of any class of the outstanding voting
securities or of an equity interest of such Person; or (iii) any corporation,
partnership, limited liability company, trust, or any officer, director,
trustee, partner, manager, employee or holder of ten percent (10%) or more of
the outstanding voting securities or of an equity interest of any corporation,
partnership, limited liability company, trust or other equity, controlling,
controlled by, or under common control with such Person.
1.2 "Agreement" shall mean this Operating Agreement, as amended from
time to time.
1.3 "Articles of Organization." The Articles of Organization of the
Company, as filed with the Secretary of State of North Carolina as the same may
be amended from time to time.
1.4 "Capital Account" shall mean the amount of any actual or imputed
contribution to the capital of the Company of each of the Members, including any
value specifically assigned to any property or right, tangible or intangible,
contributed by such Member to the capital of the Company, as the same may be (i)
increased from time to time by such Member's share of income and gains for
federal income tax purposes, (ii) decreased from time to time by distributions
to such Member from the Company and by such Member's share of deductions or
losses for Federal income tax purposes, (iii) increased and/or decreased by
those other items required by the Code and the Regulations thereunder (items
described in (i) and (ii) are subject to change from time to time to comply with
the Code and the Regulations), and (iv) upon or in connection with (1) the
liquidation of the Company, (2) a contribution of money or other property (other
than a de minimis amount) to the Company by a new or existing member as
consideration for an interest in the Company, or (3) a distribution of money or
other property (other than a de minimis amount) by the Company to a retiring or
continuing member as consideration for an interest in the Company, the capital
accounts of all Members shall be increased or decreased to reflect a
re-evaluation of all assets of the Company on its books and records in
accordance with the requirements of Treasury Regulation ss. 1.704-1(b)(2)(iv)(f)
or any successor regulatory or statutory provision, as of the date that the
event occurs causing the capital accounts to be re-evaluated. For purposes of
computing the amount of any item of income, gain, deduction, or loss to be
reflected in the Member's Capital Accounts, the determination, recognition, and
classification of any such items shall be the same as its determination,
recognition, and classification for Federal income tax purposes (including any
method of depreciation, cost recovery, or amortization used for this purpose);
provided that if in any taxable year the Company has in effect an election under
Section 754 of the Code, capital accounts shall be adjusted in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
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Loans by a Member to the Company shall not be considered Capital Contributions.
If any Member or Assignee shall advance funds to the Company in excess of the
amounts required hereunder to be contributed by it to the capital of the
Company, the making of such advances shall not result in any increase in the
amount of the Capital Account of such Member or Assignee, shall be treated
solely as loans, and shall be payable or collectible only out of the Company
assets in accordance with the terms and conditions upon which such advances are
made.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulation Section 1.704-1(b)(2)(iv), and shall be interpreted and applied in a
manner consistent with such Regulation. In the event SAHI shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto, are computed to comply with such Regulation, SAHI may make
such modification, provided that it is not likely to have a material effect on
the amounts distributable to any Member pursuant to Articles VI or VII hereof
upon the dissolution of the Company. In the event SAHI shall determine such
adjustments are necessary or appropriate to comply with Regulation Section
1.704-1(b)(2)(iv), SAHI shall adjust the amounts debited or credited to Capital
Accounts with respect to (i) any property contributed by the Members or
distributed to the Members and (ii) any liabilities secured by such contributed
or distributed property or assumed by the Members. SAHI shall also make any
other appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulation Section 1.704-1(b).
In the event any interest in the Company 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.
1.5 "Capital Contribution" shall mean the gross amount of cash
investment in the Company by each and all of the Members.
1.6 "Cash Distributions" shall mean net cash distributed to Members
resulting from Cash Flow from Operations or Cash from Sales or Refinancing, but
shall not include any amount in repayment of loans made by the Members to the
Company.
1.7 "Cash Flow from Operations" shall mean net cash funds provided from
operations of the Company or investment of any Company funds, without deduction
for depreciation, but after deducting cash funds used to pay or establish a
reserve for expenses, debt payments, capital improvements, and replacements and
for such other items as SAHI reasonably determines to be necessary or
appropriate.
1.8 "Cash from Sales or Refinancing" shall mean the net cash proceeds
received by the Company from or as a result of any Sale or Refinancing of
property after deducting (i) all expenses incurred in connection therewith, (ii)
any amounts applied by SAHI in its sole and absolute discretion toward the
payment of any indebtedness and other obligations of the Company, including
payments of principal and interest on mortgages, (iii) the payment of any other
expenses or amounts owed by the Company to other parties, and (iv) the
establishment of any reserves deemed necessary by SAHI in its sole and absolute
discretion. If the proceeds of any Sale or Refinancing are paid in more than one
installment, each such installment shall be treated as a separate Sale or
Refinancing for the purposes of this definition.
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1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time. "Regulations" shall mean rules, orders, and regulations
issued pursuant to or under the authority of the Code. Any reference herein to a
specific section(s) of the Code or Regulations shall be deemed to include a
reference to any corresponding provision of future law.
1.10 "Company" shall refer to CCT, L.L.C. which shall be created upon
the filing of the Articles of Organization with the Office of the Secretary of
State of North Carolina, to be operated under the name CCT, L.L.C., a North
Carolina limited liability company, and to continue under this Agreement, as
amended from time to time.
1.11 "Economic Interest" shall refer to that portion of the Membership
Interest of a Member in the economic rights and benefits of the Company,
including but not limited to all Income, Loss and Cash Distributions. Such an
Economic Interest will be measured by an amount equal to the percentage of the
Member's Membership Interest in the Company as the same may be adjusted from
time to time.
1.12 "Economic Interest Owner" shall mean a person who has acquired a
Member's Economic Interest but who has not become a Member.
1.13 "Entity" shall mean any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association or any foreign trust or foreign business
organization.
1.14 "Hospital" shall mean the acute care hospital specializing in
cardiology and cardiovascular care and surgery being developed by MedCath of
Tucson, L.L.C. in or near Tucson, Arizona.
1.15 "Income" or "Loss" shall mean, with respect to any fiscal year,
the taxable income or taxable loss in such year or other period determined in
accordance with Code Section 703(a) by the Company under the Code and
Regulations including, without limitation, each item of income, credit, gain,
loss, or deduction required to be separately stated pursuant to Code Section
703(a)(1), determined by the method of accounting then being utilized by the
Company (provided it is permitted by the Code), applied on a consistent basis
throughout the period for which taxable income or taxable loss is determined,
adjusted to take into account (i) any tax exempt income received or accrued;
(ii) expenditures and losses referred to in Code Section 705(a)(2)(B),
267(a)(1), 707(b), and 709 which are not deductible, depreciable, or amortizable
in computing net income or net loss; (iii) amounts of net income or net loss
that would be recognized if property distributed in kind to a Member was sold to
an unrelated person at fair market value on the date of distribution, and (iv)
expenditures which reduce capital accounts under Regulation Section
1.704-1(b)(2)(iv) including, but not limited to, nonamortizable syndication
expenses. To the extent the Company recognizes a tax deduction attributable to
an amount included in Income or Loss under the preceding sentence, such amount
shall not again be included in taxable income or taxable loss but shall be
allocated among the Members in accordance with the allocation of the amount
under the preceding sentence.
1.16 "Investor Manager" shall refer to the individual elected by
Investor Members in accordance with Section 5.14 who shall serve as a Manager of
the Company.
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1.17 "Investor Members" shall mean the Members other than SAHI listed
on Schedule A attached hereto.
1.18 "Laboratory" shall have the meaning provided in Section 2.3
hereof.
1.19 "Majority Vote of Investor Members" shall refer to the affirmative
vote, approval or consent of Investor Members holding a majority of the
Membership Interests held by the Investor Members in the aggregate.
1.20 "Majority Vote of Members" shall refer to the affirmative vote,
approval or consent of Members holding sixty-seven percent (67%) of the
Membership Interests in the aggregate.
1.21 "Manager" or "Managers" shall refer to one or more managers
designated pursuant to this Agreement. Pursuant to this Agreement and the
Articles of Organization, no Member shall automatically be a manager by virtue
of such Person's status as a Member. Subject to Section 11.1(g) hereof, the
Managers of the Company shall be SAHI and the Investor Manager. The powers,
rights and duties of each Manager to manage the affairs of the Company are
specified or designated in this Agreement.
1.22 "Member" shall refer to the organizers of the Company and each of
the members identified in the then applying Schedule A attached hereto and
incorporated herein by this reference. To the extent a Manager has purchased a
Membership Interest in the Company, such Person will have all the rights of a
Member with respect to such Membership Interest, and the term "Member" as used
herein shall include a Manager to the extent he has purchased such Membership
Interest in the Company. If a Person is already a Member immediately prior to
the purchase or other acquisition by such Person of an Economic Interest or
Membership Interest, such Person shall have all the rights of a Member with
respect to such purchased or otherwise acquired Membership Interest or Economic
Interest, as the case may be.
1.23 "Membership Interest" shall mean all of a Member's rights in the
Company, including without limitation the Member's share of the profits, losses
and benefits of the Company, the right to receive distributions of the Company
assets, any right to vote, any right to participate in the management of the
business and affairs of the Company, including the right to vote on, consent to,
or otherwise participate in any decision or action of or by the Members granted
pursuant to this Operating Agreement or the North Carolina Act. The initial
Membership Interest of each Member shall be listed on Schedule A and shall be
based upon the pro rata Capital Contribution of each Member.
1.24 "Minimum Gain" shall mean the excess, if any, of debt of the
Company as to which no Member is personally liable over the Company's basis in
the assets that secure such debt, and as such term is further defined in
Temporary Regulation Section 1.704-1T(b)(4)(iv)(c).
1.25 "North Carolina Act." The North Carolina Limited Liability Company
Act, N.C. Gen. Stat. ss. 57-1-01, et. seq.
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1.26 "Organization Expenses" shall mean those expenses incurred, either
by the Company or for which the Company has agreed to make reimbursement, in
connection with the formation of the Company including such expenses as: (i)
registration fees, filing fees, and taxes; and (ii) legal fees incurred in
connection with any of the foregoing.
1.27 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such individual or Entity where the context so permits.
1.28 "Prime Rate" means the rate of interest as of the relevant day or
time period as announced by the First Union National Bank, N.A. or its successor
in interest from time to time as its prime or reference rate.
1.29 "Refinancing" means any borrowing incurred or made to recapitalize
the Company or the equity investment in, or to refinance any loan used to
finance the acquisition of property.
1.30 "SAHI" shall refer to Southern Arizona Heart, Inc. who shall serve
as a Manager of the Company.
1.31 "Sale" means the sale, exchange, involuntary conversion (other
than a casualty followed by reconstruction), condemnation, or other disposition
of property by the Company, except for dispositions of inventory items and
personal property in the ordinary course of business and in connection with the
replacement of such property.
1.32 "Substitute Manager" shall mean a Manager who succeeds either SAHI
or any of the Investor Manager with all of the specific rights and powers of
such Manager under this Agreement.
1.33 "Substitute Member" shall mean an assignee of a Member who has
been admitted to the Company and granted all the rights of a Member in place of
his or her assignor pursuant to the provisions of this Agreement. A Substitute
Member, upon his or her admission as such, shall replace and succeed to the
rights, privileges, and liabilities of the Member from whom he or she acquired
his or her interest in the Company, to the extent of the Economic Interest
assigned.
ARTICLE II
FORMATION AND AGREEMENT OF LIMITED LIABILITY COMPANY
2.1 Company Formation. The Company will be formed upon the execution
by SAHI and one other individual or entity on behalf of the Company of Articles
of Organization which are then filed with the Secretary of State of North
Carolina in accordance with the provisions of the North Carolina Act. SAHI shall
execute or cause to be executed all other such certificates or documents, and
shall do or cause to be done all such filing, recording, or other acts, as may
be necessary or appropriate from time to time to comply with the requirements of
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law for the continuation and/or operation of a limited liability company in the
State of North Carolina, the operation of a foreign limited liability company in
the State of Arizona and other documents to reflect the admission of additional
Members to the Company. Any costs incurred by SAHI in connection with the
foregoing shall be reimbursed promptly upon the completion of such action.
2.2 Name of Company. The name of the Company is CCT, L.L.C., a North
Carolina limited liability company.
2.3 Purposes and Investment Objectives. The principal purposes of the
Company are as follows:
(a) To develop, own and operate a cardiac catheterization
laboratory which shall be located in space leased to the Company by the
Hospital (the "Laboratory").
(b) Any other purpose reasonably related to (a) above.
2.4 Registered Office and Principal Place of Business; Registered
Agent. The registered office and principal place of business of the Company
shall be maintained at the offices of SAHI, whose mailing address is ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such
other place in the State of North Carolina as SAHI shall designate. The
Registered Agent of the Company shall be ▇▇▇▇▇ ▇. ▇▇▇▇ whose business office is
identical with the registered office. SAHI shall promptly notify the Members of
any changes in the principal place of business, the registered office, or the
registered agent of the Company.
2.5 Commencement and Term. The Company shall commence on the filing of
the Articles of Organization in the Office of the Secretary of State of North
Carolina, as required by Section 2.1 hereof, and shall continue until December
31, 2035, unless sooner terminated or dissolved as provided herein; provided,
however, that the termination date may be extended for up to an additional forty
(40) years in five (5) year increments upon the election of SAHI. In the event
SAHI does not elect to extend the term hereof, the Investor Manager may instead
elect to extend the term hereof, subject to SAHI's consent which shall not be
unreasonably withheld or delayed.
ARTICLE IIII
MEMBERS AND CAPITAL CONTRIBUTIONS
3.1 Contributions of Members.
(a) The Members shall contribute capital as follows:
(i) SAHI shall own at least a fifty-one percent
(51%) Membership Interest in the Company and shall contribute
to the Company for its Membership Interest the amount shown on
Schedule A.
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(ii) The Investor Members shall own in the
aggregate up to a forty-nine percent (49%) Membership Interest
and shall contribute to the Company for their Membership
Interests amounts as shown on Schedule A attached hereto.
The Members may be liable to the Company for amounts distributed to
them as a return of capital as provided by the North Carolina Act. The
Members shall not be required to contribute any additional capital to
the Company except as provided in Section 3.5.
3.2 Liability of Members - For Capital. The liability of each Member,
as such, shall be limited to the amount of its Capital Contribution as a Member.
3.3 Members' Accounts and Withdrawals. An individual Capital Account
shall be maintained for each Member in accordance with requirements of the Code
and the Regulations promulgated thereunder for limited liability companies. It
shall be credited initially with the amount of each Member's Capital
Contribution and shall be increased by such Member's share of income and gain
and any additional contributions at fair market value, decreased by such
Member's share of distributions and losses, and increased and/or decreased by
those other items required by the Code and the Regulations. No Member shall be
entitled to withdraw or to make demand for withdrawal of any part of his or her
Capital Account or to receive any distribution except as provided herein.
3.4 Interest on Capital Contributions. No interest shall be paid on
Capital Contributions.
3.5 Additional Funding. If from time to time, SAHI reasonably
determines that funds in addition to that contemplated by Sections 3.1 and 3.2
are necessary or appropriate for the development or operation of the Laboratory,
then:
(a) First, SAHI shall use commercially reasonable efforts to
borrow such funds from a bank or other lender on terms and conditions
reasonably acceptable to SAHI, or SAHI may, but shall not be required,
to loan such funds to the Company at the Prime Rate plus one percent
(1%) per annum which loan shall be secured by the Company's assets.
Interest shall be paid monthly in arrears and principal shall be repaid
as the Company has funds available therefore. All loans obtained
hereunder shall be subject to the approval of the Investor Manager
which approval shall not be unreasonably withheld or delayed;
(b) Second, if loans as provided in (a) above are not
available, SAHI may request that the Members contribute additional
capital to the Company pro rata according to their respective
Membership Interests, provided however, such Capital Contributions
shall be made only if SAHI and the Investor Manager approve such
Capital Contributions. If additional Capital Contributions are so
approved, each Member may elect whether or not to contribute its pro
rata portion thereof. The other Investor Members may elect to
contribute capital not contributed by any Investor Member hereunder.
SAHI may then elect to contribute amounts which the Investor Members,
in the aggregate, have not so contributed. Thereafter, SAHI shall
reasonably adjust the
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Membership Interest of each Member (taking into
consideration the Capital Contributions made by the Members in
accordance with this Section 3.5) in the event any Member elects not to
contribute capital pursuant to a capital call approved in accordance
with this Section 3.5;
(c) If funds are not available in accordance with (a) or (b)
above, then SAHI may elect to dissolve the Company.
ARTICLE IV
NAMES AND ADDRESSES OF INITIAL MEMBERS
4.1 The names and addresses of the Members are as follows:
Name Address
o Southern Arizona Heart, Inc. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
o See the Members listed on Schedule A attached hereto.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1 General Authority and Powers of SAHI. Subject to the terms and
conditions of this Agreement SAHI shall have complete authority over and the
exclusive control and management of the business affairs of the Company,
provided, however, that certain actions and decisions of SAHI as specified
herein shall be made with the approval of the Investor Manager, and decisions
relating to medical and clinical practice at the Laboratory shall be made
exclusively by the Investor Manager and/or qualified medical personnel who
perform procedures within the Laboratory. Without limiting the generality of the
foregoing, SAHI shall have the right and the power, if, as, and when it, from
time to time, deems necessary or appropriate on behalf of the Company, subject
only to the terms and conditions of this Agreement:
(a) To negotiate and execute on behalf of the Company all
documents, instruments and agreements reasonably necessary or
appropriate to lease appropriate space and to develop and construct the
Laboratory, and to borrow funds to finance such efforts, the material
terms and conditions of which shall be subject to the approval of the
Investor Manager which approval shall not be unreasonably withheld or
delayed;
(b) To prepare a budget for the development of the Laboratory
and thereafter, annual operating budgets;
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(c) To acquire all appropriate equipment and supplies required
from time to time in connection with the development and operation of
the Laboratory (the "Equipment") and loans or other financing therefor,
provided however, material items of medical equipment shall be acquired
with the approval of the Investor Manager which approval shall not be
unreasonably withheld or delayed;
(d) The negotiation and execution of fair market agreements
pursuant to which the services of the Laboratory will be provided to
patients of the Hospital;
(e) The negotiation and execution of all such other agreements
regarding the purchase of goods or services for the Laboratory,
provided however, any agreement involving physician services or any
agreement for the expenditure of more than One Hundred Thousand Dollars
($100,000.00) by the Company which is not cancelable upon no more than
ninety (90) days notice shall not be entered into without the approval
of the Investor Manager which approval shall not be unreasonably
withheld or delayed;
(f) With the approval of the Investor Manager which will not
be unreasonably withheld or delayed, establish regular procedures for
quality assurance, peer review and granting privileges to physicians at
the Laboratory;
(g) To expend all or portions of the Company's capital and
income in furtherance of or relating to the Company's business and
purposes, including, but not limited to, payment of all ongoing
operational expenses, payment of commissions, organization expenses,
professional fees, rental fees, and management fees, and to invest in
short-term debt obligations (including, but not limited to, obligations
of Federal and state governments and their agencies, commercial paper,
and certificates of deposit of commercial banks, or savings banks or
savings and loan associations) such of the Company's funds as are
temporarily not required for the development or operation of the
Company and the payment of Company obligations;
(h) To employ or retain on such terms and for such
compensation as SAHI may reasonably determine, such persons, firms, or
corporations as SAHI may deem advisable, including without limitation
qualified medical and other employees necessary or appropriate to
operate the Laboratory, attorneys, accountants, financial and technical
consultants, supervisory managing agents, insurance brokers, brokers
and loan brokers, appraisers, architects and engineers, who may also
provide such services to SAHI, provided that physicians and the senior
administrator of the Laboratory shall be hired or retained with the
approval of the Investor Manager which shall not be unreasonably
withheld or delayed; provided further, that the Investor Manager shall
present to SAHI any concerns which they may have about the senior
administrator of the Laboratory from time to time and SAHI shall meet
with the Investor Manager to discuss such concerns and to explore what
actions should reasonably be taken by SAHI on behalf of the Company
with respect thereto;
(i) Except to the extent the approval of the Investor Manager
is expressly required elsewhere in this Section 5.1:
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(A) To execute leases, deeds, contracts, rental
agreements, construction contracts, sales agreements, and
management contracts;
(B) To exercise all rights, powers, and privileges of
the Company as lessee with respect to the Laboratory or rights
held by the Company;
(C) To consent to the modification, renewal, or
extension of any obligations to the Company of any person or
of any agreement to which the Company is a party or of which
it is a beneficiary;
(D) To execute in furtherance of any or all of the
purposes of the Company, any deed, lease, deed of trust,
security interest, mortgage, promissory note, ▇▇▇▇ of sale,
assignment, contract, or other instrument purporting to
purchase or convey or encumber in whole or in part the
Equipment or the Laboratory or other real or personal property
of the Company;
(E) To prepay in whole or in part, refinance, recast,
increase, modify, or extend any security interest, deed of
trust, or mortgage affecting the Laboratory and in connection
therewith to execute any extensions or renewals thereof on the
Laboratory and to grant security interests in any of the
Equipment or the Laboratory;
(j) To adjust, compromise, settle, or refer to arbitration any
claim against or in favor of the Company, and to institute, prosecute,
and defend any actions or proceedings relating to the Company, its
business, and properties; provided, however, the resolution of any
claim in excess of Two Hundred Fifty Thousand Dollars ($250,000.00)
shall be subject to the approval of the Investor Manager which approval
shall not be unreasonably withheld or delayed;
(k) To acquire and enter into any contract of insurance which
SAHI deems necessary or appropriate for the protection of the Company
and SAHI, for the conservation of the Company or its assets, or for any
purpose beneficial to the Company; however, neither SAHI nor its
Affiliates shall be compensated for providing insurance brokerage
services relating to obtaining such insurance;
(l) To prepare or cause to be prepared reports, statements,
and other relevant information for distribution to the Members
including annual reports;
(m) To open accounts and deposit and maintain funds in the
name of the Company in banks or savings and loan associations;
provided, however, that the Company's funds shall not be commingled
with the funds of any other person;
(n) To cause the Company to make or revoke any of the
elections referred to in Section 754 of the Internal Revenue Code of
1986 as amended or any similar provisions enacted in lieu thereof;
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(o) To make all decisions related to generally accepted
principles of accounting to be applied on a consistent basis and
Federal income tax election;
(p) Except to the extent the approval of the Investor Manager
is expressly required elsewhere in this Section 5.1, generally, to
possess and exercise any and all of the rights, powers and privileges
of a Manager under the North Carolina Act;
(q) To execute, acknowledge, and deliver any and all documents
or instruments in connection with any or all of the foregoing;
(r) Except to the extent the approval of the Investor Manager
is expressly required elsewhere in this Section 5.1, to modify or
otherwise improve the Laboratory;
(s) To manage, direct, and guide the operation of the
Laboratory, other than medical or clinical matters which shall be under
the direction of the Investor Manager and other agreed upon qualified
medical personnel, including all necessary acts relating thereto;
(t) With the approval of the Investor Manager not to be
unreasonably withheld or delayed to establish minimum insurance
requirements for all physicians practicing at the Laboratory;
(u) To admit as Members additional investors who have been
approved by the Investor Manager, which approval shall not be
unreasonably withheld or delayed.
(v) Subject to Section 5.2(j), to sell assets of
the Company.
5.2 Restrictions on Authority of the Managers. The Managers shall not
do any of the following:
(a) Act in contravention of this Agreement;
(b) Act in any manner which would make it impossible to carry
on the express business purposes of the Company;
(c) Commingle the Company funds with those of any other person
or entity;
(d) Admit an additional Manager, except as provided in this
Agreement;
(e) Admit an additional Member, except as provided in this
Agreement;
(f) Alter the primary purposes of the Company as set forth in
Section 2.3;
(g) Possess any property or assign the rights of the Company
in specific property for other than a Company purpose;
-12-
(h) Employ, or permit the employ of, the funds or assets of
the Company in any manner except for the exclusive benefit of the
Company;
(i) Make any payments of any type, directly or indirectly, to
anyone for the referral of patients to the Laboratory in order to use
the Laboratory or to provide other services payable by Medicare or
Medicaid;
(j) Sell all or substantially all of the assets of the Company
or merge the Company without the approval of a Majority Vote of the
Members.
5.3 Duties of the Managers. Each Manager shall do the following:
(a) Diligently and faithfully devote such of its time to the
business of the Company as may be necessary to properly conduct the
affairs of the Company, however, each Manager shall not be required to
devote its full time to such duties;
(b) Use its best efforts to cause the Company to comply with
such conditions as may be required from time to time to permit the
Company to be classified for Federal income tax purposes as a limited
liability company and not as an association taxable as a corporation;
(c) In the case of SAHI file and publish all certificates,
statements, or other instruments required by law for the formation and
operation of the Company as a limited liability company in all
appropriate jurisdictions;
(d) In the case of SAHI cause the Company to obtain and keep
in force during the term of the Company fire and extended coverage and
public liability and professional liability insurance with such issuers
and in such amounts shall deem advisable, but in amounts not less (and
deductible amounts not greater) than those customarily maintained with
respect to the business equipment and property comparable to the
Company's; and
(e) Have a fiduciary duty to conduct the affairs of the
Company in the best interests of the Company and of the Members,
including the safekeeping and use of all funds and assets, whether or
not in its immediate possession and control, and it shall not employ or
permit others besides Managers to employ such funds or assets in any
manner except for the benefit of the Company.
(f) In the case of SAHI deliver to the Secretary of State of
North Carolina for filing an annual report in accordance with the North
Carolina Act and deliver to the Arizona Secretary of State a
qualification as a foreign limited liability company.
5.4 Delegation by the Managers. Subject to restrictions otherwise
provided herein, the Managers may at any time employ any other person, including
persons and entities employed by, affiliated with, or related to the Managers to
perform services for the Company and its business, and may delegate all or part
of their authority or control to any such other persons, provided that such
employment or delegation shall not relieve the Managers of their
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respective responsibilities and obligations under this Agreement or under the
laws of the State of North Carolina nor will it make any such person a Member or
Manager of the Company.
5.5 Right to Rely Upon the Authority of the Managers. Persons dealing
with the Company may rely upon the representation of the Managers that such
Managers are managers of the Company and that such Managers have the authority
to make any commitment or undertaking on behalf of the Company. No person
dealing with the Managers shall be required to determine its authority to make
any such commitment or undertaking. In addition, no purchaser from the Company
shall be required to determine the sole and exclusive authority of any Manager
to sign and deliver on behalf of the Company any instruments of transfer with
respect thereto or to see to the application or distribution of revenues or
proceeds paid or credited in connection therewith, unless such purchaser shall
have received written notice from the Company affecting the same.
5.6 Company Expenses.
(a) In general, the Company's expenses shall be billed
directly to and paid by the Company. The Company shall reimburse the
Managers or their Affiliates for: (i) all Organization Expenses
incurred by the Managers or their Affiliates in connection with the
formation of the Company; (ii) the actual costs to the Managers or
their Affiliates of goods, services, and materials used for and by the
Company; and (iii) all reasonable travel and other out-of-pocket
expenses incurred by the Managers in the development and management of
the Company and its business. The reimbursement for expenses provided
for in this Section 5.6(a) shall be made to the Managers or their
Affiliates regardless of whether any distributions are made to the
Members under Article VI and Article VII.
(b) The Company shall also pay the following expenses of the
Company:
(i) All development and operational expenses of
the Company, which may include, but are not limited to: the
salary and related expenses of any employees and staff of the
Laboratory, all costs of borrowed money, taxes, and
assessments on the Laboratory, and other taxes applicable to
the Company; expenses in connection with the acquisition,
maintenance, leasing, refinancing, operation, and disposition
of the Equipment, furniture and fixtures of the Laboratory
(including legal, accounting, audit, commissions, engineering,
appraisal, and the other fees); the maintenance of the
Laboratory and its Equipment may be performed by SAHI or one
of its Affiliates as long as the charges to the Company for
such service are no greater than the charges for such service
from a third party service provider;
(ii) All fees and expenses paid to third parties
for accounting, legal, documentation, professional, and
reporting services to the Company, which may include, but are
not limited to: preparation and documentation of Company
bookkeeping, accounting and audits; preparation and
documentation of budgets, cash flow projections, and working
capital requirements; preparation and documentation of Company
state and federal tax returns; and taxes incurred in
connection with the issuance, distribution, transfer,
registration, and recordation
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of documents evidencing ownership of a Membership Interest or
Economic Interest in the Company or in connection with the
business of the Company; expenses in connection with preparing
and mailing reports required to be furnished to the Members or
Economic Interest Owners for tax reporting or other purposes,
including reports, if any, that may be required to be filed
with any federal or state regulatory agencies, or expenses
associated with furnishing reports to Members which SAHI deems
to be in the best interest of the Company; expenses of
revising, amending, converting, modifying, or terminating the
Company or this Agreement; costs incurred in connection with
any litigation in which the Company is involved as well as any
examination, investigation, or other proceedings conducted by
any regulatory agency involving the Company; costs of any
computer equipment or services used for or by the Company; the
costs of preparing and disseminating informational material
and documentation relating to potential sale, refinancing, or
other disposition of the Laboratory or the Equipment.
5.7 No Management by Members. Other than the Managers, the Members
shall take no part in, or at any time interfere in any manner with, the
management, conduct, or control of the Company's business and operations and
shall have no right or authority to act for or bind the Company except as set
forth in this Agreement. The rights and powers of such Members shall not extend
beyond those set forth in this Agreement and those granted under the Articles of
Organization and any attempt to participate in the control of the Company in a
manner contrary to the rights and powers granted herein and under the Articles
of Organization shall be null and void and without force and effect. Subject to
the decisions and judgement with respect to all professional medical or clinical
matters of qualified medical personnel, SAHI, in conjunction with the Investor
Manager where applicable, shall have the right to determine when and how the
operations of the Company shall be conducted. The exercise by any other Member
of any of the rights granted him or her hereunder shall not be deemed to be
taking part in the control of the business of the Company and shall not
constitute a violation of this section.
5.8 Consent by Members to Exercise of Certain Rights and Powers by
Managers. By its execution hereof, each Member expressly consents to the
exercise by the Managers of the rights, powers, and authority conferred on the
Managers by this Agreement.
5.9 Other Business of Members.
(a) Subject to (b) below, any Member, including any Manager,
may engage independently or with others in other business ventures of
every nature and description, including without limitation the purchase
of medical equipment, the rendering of medical services of any kind,
and the making or management of other investments and neither the
Company nor any Member shall have any right by virtue of this Agreement
or the relationship created hereby in or to such other ventures or
activities or to the income or proceeds derived therefrom, and the
pursuit of such ventures.
(b) As long as any Member owns a Membership Interest herein,
and for a period of five (5) years after a Member ceases for any reason
to own a Membership
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Interest in the Company, neither a Member nor any of its respective
Affiliates, shall hold, directly or indirectly, an investment or
ownership interest in any entity which provides any of the services or
facilities then being provided by the Laboratory or by SAHI within or
adjacent to the Laboratory within a fifty (50) mile radius of the
Laboratory (the "Territory"), provided that no Member shall be
prohibited from holding an investment or ownership interest in MedCath
of Tucson, L.L.C. and no Member who is a physician shall be prohibited
from: (A) engaging in his or her regular medical practice which may
include nuclear imaging, cardiac catheterization, ultrasound, cardiac
rehabilitation and office based electro-physiology studies, cardiac
research programs and cardiac devices in connection with which
subcontracts are entered into with other area hospitals but all only to
the extent that these facilities exist and the services are provided as
of the date hereof; provided that no such practice shall hereafter be
expanded to include any other modalities or equipment which provide any
of the services provided or intended to be provided by the Laboratory
unless the Investor Manager and SAHI agree, which agreement shall not
be unreasonably withheld or delayed, that such modalities or equipment
are being generally provided in physician's offices in communities
comparable to Tucson, Arizona, (B) notwithstanding (A) above, engaging
at any time and to any extent in that portion of his or her medical
practice which includes only clinical laboratories and
electrocardiograms, or (C) maintaining his or her staff privileges at
any other hospital. SAHI may continue to provide management services to
any cardiac catheterization lab in Tucson to which it provides services
as of the date hereof until the opening of the Hospital. In addition,
SAHI may separately operate a mobile catheterization laboratory within
the Territory but only upon a Majority Vote of Investor Members;
(c) The Members, including the Managers, have reviewed the
term and geographical restrictions included in Section 5.9(b), and in
light of the interests of the parties hereto, agree that such
restrictions are fair and reasonable.
(d) If there is a breach or threatened breach of the
provisions of this Section 5.9 of this Agreement, in addition to other
remedies at law or equity, the non-breaching party shall be entitled to
injunctive relief. The parties desire and intend that the provisions of
this Section 5.9 shall be enforced to the fullest extent permissible
under the law and public policies applied, but the unenforceability or
modification of any particular paragraph, subparagraph, sentence,
clause, phrase, word, or figure shall not be deemed to render
unenforceable the remainder of this Section 5.9. Should any such
paragraph, subparagraph, sentence, clause, phrase, word, or figure be
adjudicated to be wholly invalid or unenforceable, the balance of this
Section 5.9 shall thereupon be modified in order to render the same
valid and enforceable and the unenforceable portion of this Section 5.9
shall be deemed to have been deleted from this Agreement.
(e) SAHI, the Company and the Investor Members agree that the
benefits to any Investor Member hereunder do not require, are not
payment for, and are not in any way contingent upon the referral,
admission or any other arrangement for the provision of any item or
service offered by SAHI or the Company to patients of such Investor
Member in any facility, laboratory, cardiac catheterization facility or
other health care
-16-
operation controlled, managed or operated by SAHI or
the Company and nothing herein is intended to prohibit any party from
practicing medicine at any other facility.
5.10 Managers' Standard of Care. Each Manager shall act in a manner he,
she or it believes in good faith to be in the best interest of the Company and
with such care as an ordinarily prudent person in a like position would use
under similar circumstances. In discharging its duties, each Manager shall be
fully protected in relying in good faith upon the records required to be
maintained under this Agreement and upon such information, opinions, reports and
statements by any of its other Managers, Members, or agents, or by any other
person as to matters each Manager reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits or losses of the Company or any other facts pertinent to the existence
and amount of assets from which distributions to members might properly be paid.
5.11 Limitation of Liability. A Manager shall not be liable to the
Company, its Members, or other Managers for any action taken in managing the
business or affairs of the Company if he, she or it performs the duty of his,
her or its office in compliance with the standard contained in Section 5.10. No
Manager has guaranteed nor shall have any obligation with respect to the return
of a Member's Capital Contribution or profits from the operation of the Company.
Furthermore, no Manager, its Affiliates or its employees (collectively, its
"Agents") shall be liable to the Company or to any Member for any loss or damage
sustained by the Company or any Member except loss or damage resulting from
gross negligence or intentional misconduct or knowing violation of law or a
transaction for which such Manager or Agent received a personal benefit in
violation or breach of the provisions of this Agreement.
5.12 Indemnification of the Managers.
(a) The Manager and its Agents shall be indemnified by the
Company against any losses, judgments, liabilities, expenses, including
attorneys' fees and amounts paid in settlement of any claims sustained
by them arising out of any action or inaction of the Manager or its
Agents in its capacity as a Manager of the Company (or, in the case of
an Agent, within the scope of the Manager's authority) to the fullest
extent allowed by law, provided that the same were not the result of
gross negligence or willful misconduct on the part of the Manager or an
Agent and provided that the Manager or an Agent, in good faith,
reasonably determined that such course of conduct was in the best
interest of the Company; provided, however, that such indemnification
and agreement to hold harmless shall be recoverable only out of Company
assets. Subject to applicable law, the Company shall advance expenses
incurred with respect to matters for which a Manager may be indemnified
hereunder.
(b) If at any time, the Company has insufficient funds to
furnish indemnification as herein provided, it shall provide such
indemnification if and as it generates sufficient funds and prior to
any cash distributions, pursuant to Article VI or Article VII hereof,
to the Members.
-17-
5.13 Decisions by Investor Manager. The Investor Members shall elect an
Investor Manager.
5.14 Election and Replacement of Investor Manager. In accordance with
the procedures outlined in Section 10.1 herein, the Investor Members shall elect
an Investor Manager to serve for one year terms or until his successor is duly
elected. At any time, in accordance with Section 10.1, the Investor Members may
replace the Investor Manager and elect a new Investor Manager.
5.15 Role of Investor Manager. Notwithstanding anything herein to the
contrary, the Investor Manager shall take no action nor make any decision on
behalf of the Company except to the extent he is expressly authorized to do so
under this Agreement in his capacity as a Investor Manager.
5.16 Purchase of Goods and Services from SAHI. SAHI shall give the
Investor Manager prior written notice of any purchase by the Company of goods
and services from SAHI or its Affiliates. The Investor Manager shall be deemed
to have approved any such purchase unless they provide a reasonable written
objection to the purchase of the goods or services described in such notice
within five (5) days from the date of such notice. Goods and services purchased
from SAHI or its Affiliates shall be of substantially the same quality and price
as could be obtained from an unrelated third party.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations and Distributions of Cash Flow from Operations and
Cash from Sales or Refinancing. After repayment of any loans made by the Members
to the Company, Cash Flow from Operations and Cash from Sales or Refinancing
shall be allocated, or distributed as Cash Distributions according to the
Economic Interests of the Members and Economic Interest Owners which, subject to
the provisions of Section 6.6 and Article VII, initially shall be in accordance
with their respective Membership Interests shown on Schedule A attached hereto.
Notwithstanding anything herein to the contrary no distributions shall be made
to Members if prohibited by N.C.G.S. ss. 57C-4-06.
6.2 Allocations of Income and Loss.
(a) Taxable gains shall be first allocated to those Members
and Economic Interest Owners, if any, with negative capital accounts,
pro rata according to their negative capital accounts, until all such
accounts have been returned to zero.
(b) After the allocations are made pursuant to Section 6.2(a),
all allocations and distributions of Income and Loss from whatever
source shall then be made according to the Economic Interest of each
Member and Economic Interest Owner.
-18-
(c) In accordance with Code Section 704(c) and the Regulations
thereunder, Income and Loss with respect to that portion of the
property contributed to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the
Company for Federal income tax purposes and its initial fair market
value used as the book value of the property by the Company.
6.3 Capital Accounts. Notwithstanding anything in this Agreement to
the contrary, no Member or Economic Interest Owner shall be entitled to any
allocation of Loss if such allocation, would result in such Member or Economic
Interest Owner having a negative Capital Account while any other Member or
Economic Interest Owner has a positive Capital Account. In such event, the
Losses shall be allocated to the Members or Economic Interest Owners with
positive Capital Accounts until their Capital Accounts have been reduced to zero
or until the negative amount in the Capital Accounts are proportionately the
same as the negative accounts of the other Members or Economic Interest Owners
as measured by their respective Economic Interests in the Company.
6.4 Qualified Income Offset Provision. Any Member or Economic Interest
Owner who unexpectedly receives an adjustment, allocation, or distribution as
described in Regulation Section 1.704-1(b)(2)(ii)(d) at (4) to (6), will be
allocated items of income and gain in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible. This provision is
intended to be a "qualified income offset" as defined in Regulation Section
1.704-1(b)(2)(ii)(d), such Regulation being specifically incorporated herein by
reference.
6.5 Minimum Gain Chargeback. If there is a net decrease in Minimum
Gain of the Company during any taxable year or other period, each Member or
Economic Interest Owner shall be allocated, before any other allocation is made
under Code Section 704(b) of Company items for such taxable year, an amount
equal to the greater of (i) such Company's share of the net decrease in Minimum
Gain allocable to the disposition of Company property subject to nonrecourse
liability, or (ii) the deficit balance in such Member's or Economic Interest
Owner's Capital Account. The items to be so allocated shall be determined in
accordance with Temporary Regulation Section 1.704-1T(b)(4)(iv)(e). This
provision is intended to be a "minimum gain chargeback" as described in
Temporary Regulation Section 1.704-1T(b)(4)(iv)(e), such Regulation being
specifically incorporated herein by reference.
6.6 Time and Manner of Cash Distributions. Cash Flow from Operations
and Cash from Sales or Refinancing (collectively, "Cash Distributions") shall be
distributed to the Members and Economic Interest Owners as Cash Distributions
according to the allocations set forth in Section 6.1 above, from time to time
as follows. SAHI shall distribute any cash available for distribution quarterly,
but shall retain such amounts as it may reasonably determine are required for
the support of the operations of the Company or payment of Company obligations
during a sixty (60) day period, plus amounts reasonably established as a reserve
to replace capital assets.
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ARTICLE VII
TERMINATION AND DISSOLUTION OF THE COMPANY
7.1 No Termination by Certain Acts of Member. Neither the transfer of
interest, withdrawal from the Company, bankruptcy, insolvency, dissolution,
liquidation or other disability, nor the legal incompetency of any Member shall
result in the termination or dissolution of the Company or affect its
continuance in any manner whatsoever.
7.2 Dissolution of the Company. The Company shall be dissolved upon
the happening of any of the following events, whichever shall first occur:
(a) The election by SAHI to dissolve the Company in accordance
with the terms of Section 3.5(c) hereof;
(b) The death, insanity, bankruptcy, retirement (other than
due to a failure of an Investor Manager to be re-elected as an Investor
Manager), resignation (other than due to an Investor Manager's
resigning from serving as a Manager while still remaining a Member) or
expulsion of any member - manager, unless the Company is continued by
the consent of not less than a majority in interest of the remaining
Members within sixty (60) days after notice of such event, effective as
of the date of such event. If there is no remaining Manager, the
remaining Members owning at least 51% of the Membership Interests which
are owned by the remaining Members shall elect a Substitute Manager who
shall assume all of the rights and duties of SAHI under this Agreement
(which Substitute Manager accepts such election);
(c) Upon the written agreement of SAHI and the Investor
Manager;
(d) The expiration of the term of the Company as provided in
Section 2.5 hereof;
(e) The adjudication of bankruptcy of the Company;
(f) Upon the written consent of a Majority Vote of the
Members;
(g) The dissolution of MedCath of Tucson, L.L.C.;
(h) Except as otherwise expressly provided herein, the
occurrence of any event which, under the North Carolina Act or any
other law, causes the dissolution or termination of the Company under
the law of the State of North Carolina; and
(i) In accordance with Section 12.11 hereof.
7.3 Dissolution and Final Liquidation.
(a) Upon any dissolution of the Company, the Company shall not
terminate, but shall cease to engage in further business except to the
extent necessary to perform
-20-
existing contracts and preserve the value of its assets. Its assets
shall be liquidated and its affairs shall be wound up as soon as
practical thereafter by SAHI and the Investor Manager, or if for any
reason there is no Manager, by another person (including a corporation,
firm, or entity) designated by a Majority Vote of the Members. In
winding up the Company and liquidating assets, SAHI, or other person so
designated for such purpose, may arrange, either by itself or through
others, for the collection and disbursement to the Members of any
future receipts from the Laboratory or other sums to which the Company
may be entitled, or may sell the Company's interest in the Laboratory
and the Equipment to any person, including SAHI or any Affiliate
thereof, on such terms and for such consideration as shall be
consistent with obtaining the fair market value thereof.
(b) Upon any such dissolution and liquidation of the Company,
the net assets, if any, of the Company available for distribution, and
any cash proceeds from the liquidation of any such assets, shall be
applied and distributed in the following manner or order, to the extent
available:
(i) To the payment of or creation of reserves
for all debts, liabilities, and obligations to all creditors
of the Company (other than the Members or its Affiliates) and
the expenses of liquidation;
(ii) To the payment of all debts and
liabilities (including interest) owed to the Members or their
Affiliates as a creditor; and
(iii) The balance according to the Members' and
Economic Interest Owners' positive Capital Accounts after
taking into account all other adjustments during the fiscal
year in which liquidation occurs;
(c) The Members shall look solely to the assets, if any, of
the Company for any return of their Capital Contributions and, if the
assets of the Company remaining after payment or discharge of the
Company's debts and liabilities, or provision therefor, are
insufficient to return all or any part of the Capital Contributions, no
Member shall have any right of recourse against the Managers or other
Members or to charge the Managers or other Members for any amounts
except as provided herein and except to the extent otherwise provided
by the North Carolina Act and/or North Carolina law.
(d) Upon such dissolution, reasonable time shall be allowed
for the orderly liquidation of the assets of the Company and the
discharge of liabilities to creditors so as to minimize the losses
normally attendant to a liquidation.
(e)The Capital Accounts of the Members and Economic Interest
Owners, as adjusted pursuant to Section 1.4, shall be utilized by the
Company for the purpose of making distributions to those Members and
Economic Interest Owners with positive balances in their respective
capital accounts pursuant to Section 7.3(b). In making such
distributions, SAHI or the person winding up the affairs of the Company
shall distribute all funds available for distribution to the Members
and Economic Interest Owners (after establishing any reserves that SAHI
or the person winding up the affairs of the Company
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deems reasonably necessary pursuant to Section 7.3(b)) prior to the
later of (a) the end of the taxable year in which the event occurs
which caused the termination and dissolution of the Company, or (b)
ninety (90) days after the occurrence of such event. SAHI in its sole
discretion, or the person winding up the affairs of the Company, in
his, her or its discretion, may elect to have the Company retain any
installment obligations owed to the Company until collected in full so
long as any portion of the reserves which are later determined to be
unnecessary, and all collections on such installment obligations which
are not deemed to be reasonably necessary by SAHI or the person winding
up the affairs of the Company to add to such reserves are distributed
as soon as practicable in accordance with the provisions of Section
7.3(b) as modified by this Section.
7.4 Termination. Upon completion of the dissolution, winding up,
distribution of the liquidation proceeds and any other Company assets, the
Company shall terminate.
7.5 Payment in Cash or in Kind. Any payments made to any Member
pursuant to Section 7.3 hereof may be made in cash or in property, tangible or
intangible, or partially in cash and partially in such property in the
discretion of SAHI; provided, however, that the other Members have no right to
receive other than cash in return for their contributions.
7.6 Good Will and Trade Name. Upon the dissolution of the Company the
firm or trade name of the Company and any good will associated therewith shall
become the sole property of SAHI, provided that distributions and allocations
otherwise due to SAHI shall not be reduced as a result of SAHI becoming entitled
to such assets.
7.7 Termination of Noncompetition Covenants. Upon a dissolution of
the Company, the Members shall have no continuing liability, or obligation under
Section 5.9(b) except that Section 5.9(b) shall continue to be binding upon a
Member whose breach of this Agreement caused a dissolution of the Company.
ARTICLE VIII
REMOVAL OR WITHDRAWAL OF MANAGERS AND MEMBER AND
TRANSFER OF MEMBERS' MEMBERSHIP AND/OR ECONOMIC INTERESTS
8.1 Manager - Transfers.
(a) Except as provided in this Section 8.1, without the
consent of a Majority Vote of Investor Members, SAHI shall not
voluntarily withdraw from the Company as a Manager at any time prior to
its termination, or transfer or assign any of its rights and duties as
a Manager, provided that SAHI may assign its Membership Interest in the
Company and its rights to be a Manager to any party who purchases all
or substantially all of SAHI's and its subsidiaries' assets or capital
stock if such purchaser assumes in writing the obligations of SAHI
hereunder or to a party under control of, common control, or which
controls, SAHI. SAHI may also assign its Membership Interest in the
Company and its rights to be a Manager to a financial institution as
collateral security for repayment of indebtedness for borrowed funds by
SAHI or its Affiliates. In the event
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that SAHI desires to sell any Membership Interest and such sale is not
in connection with the sale of all or substantially all of the assets
or capital stock of SAHI and its subsidiaries, then the other Members
shall first have an option to purchase such Membership Interest in
accordance with the Right of First Refusal provided in Section 8.4.
(b) No Investor Manager may assign his rights to be a Manager
herein. Upon the withdrawal or resignation of an Investor Manager, a
substitute therefore who must be an Investor Member may be elected by a
Majority Vote of Investor Members.
(c) Any resignation or withdrawal by a Manager as a manager
shall not constitute such Manager's withdrawal as a Member.
8.2 Members' Right to Continue. If at any time there is no remaining
Manager, a meeting of the Members shall be held at the principal place of
business of the Company within forty-five (45) days after the happening of such
event to consider whether to continue the Company on the same terms and
conditions as are contained in this Agreement (except that the Managers may be
different) and to select a Manager for the Company, or whether to wind up the
affairs of the Company, liquidate its assets and distribute the proceeds
therefrom in accordance with Article VII hereof. The Company may be continued
and a new Manager (who accept such appointment) selected by the Members within
ninety (90) days of the occurrence of the event described in Section 7.2(a). The
new Manager shall execute, acknowledge, file or record (as appropriate) Articles
of Organization and an Operating Agreement and such other documents as may be
required by the North Carolina Act. The continuance of the Company pursuant to
the terms of this Section 8.2 is conditioned upon (i) the amendment of the
Articles of Organization to reflect the foregoing change and, if applicable,
compliance by the Company with any notice provisions of the North Carolina Act
and (ii) delivery to the withdrawing Manager of an indemnification agreement by
the Company, in form and substance reasonably satisfactory to the withdrawing
Manager, indemnifying and holding SAHI harmless against all future liabilities
of the Company.
8.3 Relationship with Substitute Manager. The relationship of the
Members to any person or entity that has acquired the Membership Interest of
either SAHI or the Investor Manager shall be governed by this Agreement. If the
acquiring party was not theretofore a Manager, then such Substitute Manager
shall have all the rights and powers of such Manager under this Agreement;
provided, it assumes in writing the obligations of such Manager under this
Agreement and any arising thereafter, and accepts and adopts all the terms and
provisions of this Agreement in writing. The withdrawing Manager shall be liable
for all of its covenants and obligations under this Agreement for all periods
prior to its withdrawal until such liability is assumed by a Substitute Manager.
8.4 Members Who Are Not Managers - Restriction on Transfer. Except
as otherwise set forth in this Section or in this Agreement, no Economic
Interest and/or Membership Interest of an Investor Member or any portion
thereof, shall be validly sold or assigned whether voluntarily, involuntarily or
by operation of law, and no purported assignee shall be recognized by the
Company for any purpose, unless such Economic Interest and/or Membership
Interest shall have been transferred in accordance with the provisions of this
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Agreement and in compliance with such additional restrictions as may be imposed
by SAHI to comply with requirements imposed by any Federal or state securities
regulatory authority and unless SAHI's and the Investor Manager's consent is
obtained. In no event, however, shall an Investor Member transfer or sell all or
any of its Economic Interest and/or Membership Interest to any party which, if a
Member, would be in violation of Section 5.9(b) hereof. Except as otherwise set
forth in this Section or in this Agreement, an Investor Member may transfer,
sell or assign his or her entire Economic Interest and/or Membership Interest if
it has received the approval of both the Investor Manager and SAHI not to be
unreasonably withheld, provided however: (a) the Company first for a period of
fifteen (15) days, and thereafter the other Members for a period of fifteen (15)
days shall have the right, but not the obligation, to purchase all, but not less
than all, of the Economic Interest and/or Membership Interest proposed to be
transferred, which right shall be exercisable on the terms and for the purchase
price set forth in writing in a bona fide offer made for the Interests by a
third-party (the "Right of First Refusal"), and (b) there shall have been filed
with the Company a duly executed and acknowledged counterpart of the instrument
making such assignment signed by both the assignor and assignee and such
instrument evidences the written acceptance by the assignee of all of the terms
and provisions of the Agreement, represents that such assignment was made in
accordance with all applicable laws and regulations and the assignee shall have
represented to the Company in writing that he, she or it meets the investor
suitability standards established by his, her or its state of residence, or, in
the absence thereof, the investor suitability standards established by the
Company. SAHI shall use reasonable care to determine that transfers are in
accordance with applicable laws and regulations, including obtaining an opinion
of counsel to that effect. Any Member who is not a Manager who shall assign all
its Membership Interest shall cease to be a Member of the Company, except that
unless and until a Substitute Member is admitted in his or her stead, such
assigning Member shall retain the statutory rights of an assignor of a
Membership Interest under the North Carolina Act. Any Membership Interests
acquired by the Company pursuant to Section 8.4 shall, subject to applicable
law, be re-offered by the Company to suitable investors.
8.5 Condition Precedent to Transfer of Economic Interest and/or
Membership Interest. Notwithstanding anything herein to the contrary, no
transfer of an Economic Interest and/or Membership Interest may be made if such
transfer (a) constitutes a violation of the registration provisions of the
Securities Act of 1933, as amended, or the registration provisions of any
applicable state securities laws; (b) if after such transfer the Company will
not be classified as a limited liability company for Federal income tax
purposes; and (c) if when taken together with other prior transfers, results in
a "termination" of the Company for Federal income tax purposes. The Company may
require, as a condition precedent to transfer of an Economic Interest and/or
Membership Interest, delivery to the Company, at the proposed transferor's
expense, of an opinion of counsel satisfactory (both as to the counsel and
substance of the opinion) to SAHI that the transfer will not violate any of the
foregoing restrictions.
8.6 Substitute Member - Conditions to Fulfill. No assignee of a
Member's Membership Interest in the Company shall have the right to become a
Substitute Member in place of his or her assignor unless, in addition to any
other requirement herein, all of the following conditions are satisfied:
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(a) The Company has waived its right pursuant to Section 8.4
to purchase the Membership Interest held by the assignee;
(b) The duly executed and acknowledged written instrument of
assignment which has been filed with the Company sets forth that the
assignee becomes a Substitute Member in place of the assignor;
(c) The assignor and assignee execute and acknowledge such
other instruments as SAHI may deem reasonably necessary or desirable to
effect such admission, including, but not limited to, the written
acceptance and adoption by the assignee of the provisions of this
Agreement;
(d) The written consent of SAHI and the Investor Manager to
such substitution is obtained, which consent may be withheld in SAHI's
sole and absolute discretion;
(e) The payment by the Member of all costs to the Company
associated with the transaction, including but not limited to legal
fees, transfer fees, and filing fees.
8.7 Allocations Between Transferor and Transferee. Upon the transfer
of a Member's Economic Interest or Membership Interest, all items of income,
gain, loss, deduction and credit attributable to the Economic Interest or
Membership Interest so transferred shall be allocated between the transferor and
the transferee in such manner as the transferor and transferee agree at the time
of transfer; provided such allocation does not violate federal or state income
tax law. If SAHI, in its sole discretion, deems such laws violated, then such
allocation shall be made pro rata for the fiscal year based upon the number of
days during the applicable fiscal year of the Company that the Economic Interest
or Membership Interest so transferred was held by the transferor and transferee,
without regard to the results of Company activities during the period in which
each was the holder, or in such other manner as SAHI deems necessary to comply
with Federal or state income tax laws. Distributions as called for by this
Agreement shall be made to the holder of record of the Economic Interest or
Membership Interest on the date of distribution. Notwithstanding anything
contained in this Agreement to the contrary, both the Company and SAHI shall be
entitled to treat the assignor of any assigned Economic Interest or Membership
Interest as the absolute owner thereof in all respects, and shall incur no
liability for distributions of cash or other property made in good faith to such
assignor in reliance on the Company records as they exist until such time as the
written assignment has been received by, and recorded on the books of, the
Company. For purposes of this Article VIII, the effective date of an assignment
of any Economic Interest or Membership Interest shall be the last day of the
month specified in the written instrument of assignment.
8.8 Rights, Liabilities of, and Restrictions on Assignee. No
assignee of a Member's Economic Interest or Membership Interest shall have the
right to participate in the Company, inspect the books of account of the Company
or exercise any other right of a Member unless and until admitted as a
Substitute Member. Notwithstanding SAHI's failure or refusal to admit an
assignee as a Substitute Member, such assignee shall be entitled to receive the
share of income, credit, gain, expense, loss and deduction and cash
distributions provided hereunder that is assigned to it, and, upon demand, may
receive copies of all reports thereafter delivered pursuant to the requirements
of this Agreement; provided, the Company shall have first received
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notice of such assignment and all required consents thereto shall have been
obtained and other conditions precedent to transfer thereof shall have been
satisfied. The Company's tax returns shall be prepared to reflect the interest
of assignees as well as Members.
8.9 Death of a Member. Heirs of Members shall be entitled to inherit
the Membership Interests of a deceased Member, provided that upon a Member's
death such interests shall be automatically converted to an Economic Interest
only in the Company until such heir agrees in writing to all of the terms and
conditions of this Agreement and such other reasonable terms as may be
established by SAHI as a condition to such heir becoming a Member, in which
event such interest shall again become a Membership Interest in the Company.
Notwithstanding the previous sentence, within one hundred twenty (120) days of
the Company first learning of the death of a Member, the Company shall have the
option to purchase the Membership Interest of the deceased Member, and the
estate of the deceased Member shall be obligated to sell such Membership
Interest to the Company, in accordance with the terms of this Section 8.9. The
Company may exercise its option by giving written notice thereof to the estate
of the deceased Member, or the appropriate representative thereof, within such
one hundred twenty (120) day period. The purchase price for such Membership
Interest shall equal five (5) multiplied by the pretax net income (as reasonably
determined by the Company's accountants) of the Company for the twelve (12)
month period ending as of the calendar quarter most recently ended prior to the
death of such Member multiplied by the percentage interest of such Member in the
Company (the "Formula Purchase Price"). The purchase price shall be paid (the
"Payment Method") in three (3) equal annual installments, the first third of
which shall be paid upon the determination of the purchase price and the
remaining two (2) installments of which shall be paid on the first and second
anniversary of such date. The outstanding amounts due from the Company to the
estate of the deceased Member shall bear interest at Prime Rate as of the date
of such Member's death. Accrued interest shall be paid as of the dates payments
of principal are due as provided above.
8.10 Repurchase of Interests in Certain Event.
(a) In the discretion of SAHI, the Company may, but is not
obligated to, repurchase a Member's Economic Interest or Membership
Interest upon such Member's breach of the Member's obligations
contained in Article III, Sections 5.9, 8.1(b), 8.4, 8.9, 12.1 and
12.11 of this Agreement.
(b) Each Member agrees to sell its Membership Interest to the
Company in the event SAHI elects to exercise the right of repurchase
granted under Section 8.10(a) and the purchase price shall the lower of
(x) the Capital Contribution of the Member less all amounts distributed
to such Member by the Company, and (y) the fair market value of such
Member's Membership Interest determined by an appraiser reasonably
selected by SAHI.
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ARTICLE IX
RECORDS, ACCOUNTINGS AND REPORTS
9.1 Books of Account. At all times during the continuance of the
Company, SAHI shall maintain or cause to be maintained true and full financial
records and books of account showing all receipts and expenditures, assets and
liabilities, profits and losses, and all other records necessary for recording
the Company's business and affairs including those sufficient to record the
allocations and distributions required by the provisions of this Agreement.
9.2 Access to Records. The books of account and all documents and
other writings of the Company, including the Articles of Organization and any
amendments thereto, shall at all times be kept and maintained at the registered
office of the Company. Each Member or his or her designated representatives
shall, upon reasonable notice to SAHI, have access to such financial books,
records and documents during reasonable business hours and may inspect and make
copies of any of them. Each Member may receive by mail, upon written request to
the Company and at his or her cost, a list of the names and addresses of the
Members and the percentage of Economic Interest held by each of them or such
other information which may be obtained pursuant to requirements of the North
Carolina Act.
9.3 Bank Accounts and Investment of Funds.
(a) SAHI shall open and maintain, on behalf of the Company, a
bank account or accounts in a federally insured bank or savings
institution as it shall determine, in which all monies received by or
on behalf of the Company shall be deposited. All withdrawals from such
accounts shall be made upon the signature of such person or persons as
SAHI may from time to time designate.
(b) Any funds of the Company which SAHI may determine are not
currently required for the conduct of the Company's business may be
deposited with a federally insured bank or savings institution or
invested in short-term debt obligations (including obligations of
federal or state governments and their agencies, commercial paper,
certificates of deposit of commercial banks, savings banks or savings
and loan associations) as shall be determined by SAHI in its sole
discretion.
9.4 Fiscal Year. The fiscal year and accounting period of the Company
shall end on September 30 of each year.
9.5 Accounting Reports. As soon as reasonably practicable after the
end of each fiscal year but in no event later than 120 days after the end
thereof, each Member shall be furnished an annual accounting showing the
financial condition of the Company at the end of such fiscal year and the
results of its operations for the fiscal year then ended, which annual
accounting shall be prepared on an accrual basis in accordance with generally
accepted accounting principles applied on a consistent basis and shall be
delivered to each of the Members promptly after it has been prepared. It shall
include a balance sheet as of the end of such fiscal year and statements of
income and expense, each Member's equity, and cash flow for such fiscal
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year. At SAHI's election the Company shall either be audited or such annual
accountings shall be either reviewed or compiled by a firm of independent
certified public accountants engaged by SAHI on behalf of the Company. The
report shall set forth the distributions to the Members for such fiscal year and
shall separately identify distributions from (i) operating revenue during such
fiscal year, (ii) operating revenue from a prior period which had been held as
reserves, (iii) proceeds from the sale or refinancing of the Equipment, and (iv)
unexpended proceeds received from the sale of Membership Interests. SAHI shall
also cause to be prepared and distributed to the Members monthly financial
statements in a form and containing such information as reasonably determined by
SAHI.
9.6 Tax Returns. SAHI shall cause income tax returns for the Company
to be prepared, at Company expense, and timely filed with the appropriate
authorities. As soon as is reasonably practicable, and in any event on or before
the expiration of 75 days following the end of each fiscal year, each Member
shall be furnished with a statement to be used by him or her in the preparation
of his or her individual income tax returns, showing the amounts of any Income
or Losses allocated to him or her, and the amount of any distributions made to
him or her, pursuant to this Agreement, along with a reconciliation of the
annual report with information furnished to investors for income tax purposes.
ARTICLE X
MEETINGS AND VOTING RIGHTS OF MEMBERS
10.1 Meetings.
(a) Meetings of the Members of the Company for any purpose may
be called by SAHI, the Investor Manager or by Investor Members holding
in the aggregate ten percent (10%) of the Membership Interests. Such
request shall state the purpose of the proposed meeting and the matters
proposed to be acted upon thereat. Such meetings shall be held in
Tucson, Arizona.
(b) A notice of any such meeting shall be given by mail, not
less than fifteen (15) days nor more than sixty (60) days before the
date of the meeting, to each Member at his address as specified in
Section 12.7. Such notice shall be in writing, and shall state the
place, date and hour of the meeting, and shall indicate that it is
being issued at or by the direction of SAHI or by the Investor Members,
as the case may be. The notice shall state the purpose or purposes of
the meeting. If a meeting is adjourned to another time or place, and if
any announcement of the adjournment of time or place is made at the
meeting, it shall not be necessary to give notice of the adjourned
meeting.
(c) Each Member may authorize any person or persons to act for
him or her by proxy in all matters in which a Member is entitled to
participate, whether by waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Member or
his or her attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Member executing it.
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10.2 Voting Rights of Members.
(a) Each Member shall take no part in or interfere in any
manner with the control, conduct or operation of the Company, and shall
have no right or authority to act for or bind the Company except as
provided herein. Votes, to the extent taken, of the Members may be cast
at any duly called meeting of the Company. Each Member shall be
entitled to the number of votes determined by multiplying one thousand
(1,000) by the percentage Membership Interest of such Member.
(b) No Member shall have the right or power to vote to: (i)
withdraw or reduce his or her contributions to the capital of the
Company except as a result of the dissolution of the Company or as
otherwise provided by law or this Agreement; (ii) bring an action for
partition against the Company; (iii) cause the termination and
dissolution of the Company by court decree or otherwise, except as set
forth in this Agreement; or (iv) demand or receive property other than
cash in return for his or her contribution.
ARTICLE XI
AMENDMENTS
11.1 Authority to Amend by Managers. Except as otherwise provided by
Section 11.2, this Agreement and the Articles of Organization of the Company may
be amended by SAHI with the approval of the Investor Manager which approval
shall not be unreasonably withheld or delayed:
(a) To admit additional Members or Substitute Members but only
in accordance with and if permitted by the other terms of this
Agreement;
(b) To preserve the legal status of the Company as a limited
liability company under the North Carolina Act or other applicable
state or federal laws if such does not change the substance hereof, and
the Company has obtained the written opinion of its counsel to that
effect;
(c) To cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, to clarify any provision of this Agreement, or to make any
other provisions with respect to matters or questions arising under
this Agreement which will not be inconsistent with the provisions of
this Agreement;
(d) To satisfy the requirements of the Code and Regulations
with respect to limited liability companies or of any Federal or state
securities laws or regulations, provided such amendment does not
adversely affect the Membership Interests of Members and is necessary
or appropriate in the written opinion of counsel. Any amendment under
this subsection (e) shall be effective as of the date of this
Agreement;
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(e) To the extent that it can do so without materially
reducing the economic return to any Member on his or her investment in
the Company, to satisfy any requirements of federal or state
legislation or regulations, court order, or action of any governmental
administrative agency with respect the operation or ownership of the
Laboratory;
(f) Subject to the terms of Section 2.5, to extend the term of
the Company; and
11.2 Restrictions on Managers' Amendments; Amendments by Investor
Members. Except as provided in Section 11.1, amendments to this Agreement shall
be made only upon the consent of a Majority Vote of Investor Members. Except as
set forth in this Section 11.2, no amendment shall be made pursuant to Section
11.1 which would materially adversely affect the federal income tax treatment to
be afforded each Member, materially adversely affect the interests and
liabilities of each Member as provided herein, materially change the purposes of
the Company, extend or otherwise modify the term of the Company, or materially
change the method of allocations and distributions as provided in Article VI.
11.3 Amendments to Certificates. In making any amendments to this
Agreement, there shall be prepared, executed and filed for recording by SAHI
such documents amending the Articles of Organization as required under the North
Carolina Act.
ARTICLE XII
MISCELLANEOUS
12.1 Limited Power of Attorney. Upon the execution hereof, each Member
hereby irrevocably constitutes and appoints SAHI his or her true and lawful
attorney in his or her name and on his or her behalf to take at any time all
such action which SAHI is expressly authorized to perform, or which a Member is
expressly required to perform, under this Agreement.
12.2 Waiver of Provisions. The waiver of compliance at any time with
respect to any of the provisions, terms or conditions of this Agreement shall
not be considered a waiver of such provision, term or condition itself or of any
of the other provisions, terms or conditions hereof.
12.3 Interpretation and Construction. This Agreement contains the
entire agreement among the Members and any modification or amendment hereto must
be accomplished in accordance with the provisions of Article XI and Article XII.
Where the context so requires, the masculine shall include the feminine and the
neuter, and the singular shall include the plural. The headings and captions in
this Agreement are inserted for convenience and identification only and are in
no way intended to define, limit or expand the scope and intent of this
Agreement or any provision thereof. The references to Section and Article in
this Agreement are to the Sections and Articles of this Agreement.
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12.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina, exclusive of its
conflict of law rules.
12.5 Partial Invalidity. In the event that any part or provision of
this Agreement shall be determined to be invalid or unenforceable, the remaining
parts and provisions of said Agreement which can be separated from the invalid
or unenforceable provision and shall continue in full force and effect.
12.6 Binding on Successors. The terms, conditions and provisions of
this Agreement shall inure to the benefit of, and be binding upon the parties
hereto and their respective heirs, successors, distributees, legal
representatives, and assigns. However, none of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditors of the Company.
12.7 Notices and Delivery.
(a) To Members. Any notice to be given hereunder at any time
to any Member, or any document, reports or returns required by this
Agreement to be delivered to any Member, may be delivered personally or
mailed to such Member, postage prepaid, addressed to him or her at such
address as (s)he shall by notice to the Company have designated as his
or her address for the mailing of all notices hereunder or, in the
absence of such notice, to the address set forth in Article IV hereof.
Any notice, or any document, report or return so delivered or mailed
shall be deemed to have been given or delivered to such Member at the
time it is mailed, as the case may be.
(b) To the Company. Any notice to be given to the Company
hereunder shall be delivered personally or mailed to the Company, by
certified mail, postage prepaid, addressed to the Company at its
registered office. Any notice so delivered or mailed shall be deemed to
have been given to the Company at the time it is delivered or mailed,
as the case may be.
12.8 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be deemed an original, and the
several counterparts taken together shall constitute the Agreement of the
Members.
12.9 Statutory Provisions. Any statutory reference in this Agreement
shall include a reference to any successor to such statute and/or revision
thereof.
12.10 Waiver of Partition. Each party does hereby waive any right to
partition or the right to take any other action which might otherwise be
available to such party for the purpose of severing its relationship with the
Company or such party's interest in the Equipment held by the Company from the
interests of other Members until the end of the term of both this Company and
any successor company formed pursuant to the terms hereof.
12.11 Change In Law. If due to any new law, rule or regulation, or due
to an interpretation or enforcement of any existing law, rule or regulation,
health care counsel reasonably selected by SAHI determines in writing that it is
reasonably likely that the
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relationships established between any of the parties to this Agreement including
any of their Affiliates and/or successors or assigns will not comply with any
law, rule, regulation or interpretation thereof ("Applicable Law"), then the
parties hereto hereby agree first, to negotiate in good faith to restructure the
relationships established under this Agreement so as to bring them into
compliance with such applicable laws while at the same time preserving the
material benefits of each of the parties hereto. In the event that a specific
proposal for the restructuring of this Agreement is approved by SAHI and a
Majority Vote of Investor Members, such restructured agreement shall become
binding upon all Members of the Company. Second, in the event that within
forty-five (45) days following the Company's receipt of legal advice in writing
from such health care counsel regarding Applicable Law the parties hereto are
unable to negotiate an acceptable restructuring of their relationship, then SAHI
shall have the option, within the following forty-five (45) day period, to
purchase the Membership Interests of some or all of the Investor Members whose
ownership is involved with such noncompliance with Applicable Law for a purchase
price equal to the greater of: (a) the Formula Purchase Price or (b) the amount
of the Capital Contribution made by each Member to the Company together with
interest thereon computed at the Prime Rate as of the date of this Agreement
from the date of such contribution through the date upon which SAHI pays all
amounts due under the terms of this Section 12.11. Such purchase price shall be
paid in accordance with the Payment Method. Third, in the event that SAHI does
not exercise its option to purchase Membership Interests of a Member whose
ownership causes the Company not to be in compliance with Applicable Law, such
Members may elect in writing within the following forty-five (45) day period, to
require that the Company be dissolved, in which event the Company shall be
dissolved in accordance with the terms of this Agreement.
12.12 Investment Representations of the Members.
(a) Each Member or individual executing this Agreement on
behalf of an entity which is a Member hereby represents and warrants to
the Company and to the Members that such Member has acquired such
Member's Membership Interest in the Company for investment solely for
such Company's own account with the intention of holding such
Membership Interest for investment, without any intention of
participating directly or indirectly in any distribution of any portion
of such Membership Interest, including an Economic Interest, and
without the financial participation of any other Person in acquiring
such Membership Interest in the Company.
(b) Each Member or individual executing this Agreement on
behalf of an entity which is a Member hereby acknowledges that such
Member is aware that such Member's Membership Interest in the Company
has not been registered (i) under the Securities Act of 1933, as
amended (the "Federal Act"), (ii) under the Uniform Securities Act of
the State of North Carolina, as amended (the "Uniform Securities Act")
in reliance upon the exemption contained in ss. 78A-17(9) of the
Uniform Securities Act, or (iii) under any other State securities laws.
Each Member or individual executing this Agreement on behalf of an
entity which is a Member further understands and acknowledges that his
representations and warranties contained in this Section are being
relied upon by the Company and by the Members as the basis for the
exemption of the Members' Membership Interest in the Company from the
registration requirements of the Federal Act and from the registration
requirements of the Uniform Securities Act and all
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other State securities laws. Each Member or individual executing this
Agreement on behalf of an entity which is a Member further acknowledges
that the Company will not and has no obligation to recognize any sale,
transfer, or assignment of all or any part of such Member's Membership
Interest, including an Economic Interest in the Company to any Person
unless and until the provisions of this Agreement hereof have been
fully satisfied.
(c) Each Member or individual executing this Agreement on
behalf of an entity which is a Member hereby acknowledges that prior to
his execution of this Agreement, such Member received a copy of this
Agreement and that such Member has examined this Agreement or caused
this Agreement to be examined by such Member's representative or
attorney. Each Member or individual executing this Agreement on behalf
of an entity which is a Member hereby further acknowledges that such
Member or such Member's representative or attorney is familiar with
this Agreement and with the Company's business plans. Each Member or
individual executing this Agreement on behalf of an entity which is a
Member acknowledges that such Member or such Member's representative or
attorney has made such inquiries and requested, received, and reviewed
any additional documents necessary for such Member to make an informed
investment decision and that such Member does not desire any further
information or data relating to the Company or to the Members. Each
Member or individual executing this Agreement on behalf of an entity
which is a Member hereby acknowledges that such Member understands that
the purchase of such Member's Membership Interest in the Company is a
speculative investment involving a high degree of risk and hereby
represents that such Member has a net worth sufficient to bear the
economic risk of such Member's investment in the Company and to justify
such Member's investing in a highly speculative venture of this type.
12.13 Decisions by Investment Managers. Each of the Investor Members
hereby authorize the Investor Manager to make the decisions to be made by the
Investor Manager hereunder and hereby release and hold harmless the Investor
Manager from any and all claims, liabilities, losses or damages which any of
them may have now or in the future resulting from any decision made by the
Investor Manager hereunder unless due to the gross negligence or willful
misconduct of the Investor Manager.
12.14 Ownership of Shares of SAHI. Each Investor Member agrees that
either that he shall not acquire, nor continue to own any of the common shares
of the parent corporation of SAHI to the extent that in the reasonable opinion
of health care counsel of SAHI, that such ownership, together with referrals of
patients to the Laboratory, by such Investor Member, would cause or constitute a
violation of any federal or state law, rule or regulation or that such Investor
Member shall not refer patients to the Laboratory as long as such referral would
cause a violation of any such law, rule or regulation.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their
respective hands and seals as of the day and year first above written.
MEMBERS:
SOUTHERN ARIZONA HEART, INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
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SCHEDULE A
Membership Interests of Member
Name and Address Capital Contribution Interest
Southern Arizona Heart, Inc. $66,233.77 %
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
