Common use of MEMBERS - RESTRICTION ON TRANSFER Clause in Contracts

MEMBERS - RESTRICTION ON TRANSFER. (a) Except as otherwise set forth in this Section or in this Agreement, no Membership Interest 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 Membership Interest shall have been transferred in accordance with the provisions of this Agreement and in compliance with such additional restrictions as may be imposed by any federal or state securities regulatory authority or law and with the consent of the Board of Directors. In no event, however, shall a Member transfer or sell all or any of its Membership Interest to any party which, if a Member, would be in violation of Section 5.10(b) hereof. (b) Except as otherwise set forth in this Section or in this Agreement, a Member may transfer, sell or assign its entire Membership Interest only if it has received the approval of the Board of Directors. Subject to the foregoing: (i) 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 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 (ii) 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 it meets the investor suitability standards established by the appropriate state of residence, or, in the absence thereof, the investor suitability standards established by the Company. The Board of Directors shall use reasonable care to determine that transfers are in accordance with applicable laws and regulations, including obtaining an opinion of

MEMBERS - RESTRICTION ON TRANSFER. (a) Except as otherwise set forth in this Section or in this Agreement, no Membership Interest 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 Membership Interest shall have been transferred in accordance with the provisions of this Agreement and in compliance with such additional restrictions as may be imposed by any federal or state securities regulatory authority or law and with the consent of the Board of Directors. In no event, however, shall a Member transfer or sell all or any of its Membership Interest to any party which, if a Member, would be in violation of Section 5.10(b) hereof. (b) Except as otherwise set forth in this Section or in this Agreement, a Member may transfer, sell or assign its entire Membership Interest only if it has received the approval of the Board of Directors. Subject to the foregoing: (i) the Company first for a period of fifteen (15) days, and thereafter the other Members in proportion to their Membership Interest in the Company for a period of fifteen (15) days days, shall have the right, but not the obligation, to purchase all, but not less than all, of the 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 Membership Interests by a third-party (the "Right of First Refusal"), and (ii) 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 it meets the investor suitability standards established by the appropriate state of residence, or, in the absence thereof, the investor suitability standards established by the Company. The Board of Directors 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 that assigns all of its Membership Interest shall cease to be a Member of the Company. Any Membership Interests acquired by the Company pursuant to Section 8.1 may, subject to applicable law, be re-offered by the Company to suitable investors. (c) Subject to (d) below, any dissolution, liquidation, merger (unless Members or their Affiliates existing prior to such merger own at least fifty-one percent (51%) of the surviving entity after the merger or unless both parties to such merger are majority owned by parties who are Members or their Affiliates prior to such merger) or sale of a Member which is an Entity (a sale shall include a transfer of fifty percent (50%) or more of its ownership interests or of substantially all of its assets or any other transaction or series of related transactions intended to accomplish, in substance, a sale of such Entity), which event shall not occur, subject to (d) below, without the written consent of the other Members, shall constitute an offer by such Member to sell such Member's Membership Interest to the Company and the other Members pursuant to Section 8.6 for a purchase price equal to five (5) multiplied by the 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 such event multiplied by the percentage Membership Interest of such Member in the Company (the "Formula Purchase Price"). The Formula Purchase Price shall be paid in three (3) equal annual installments, the first third of which shall be paid upon the determination of the Formula Purchase Price and the remaining two (2) installments of which shall be paid on the first and second anniversary of such date (the "Payment Method"). The remaining two (2) installments shall bear interest at the Prime Rate as of the date of the date of the determination of the Formula Purchase Price. Accrued interest shall be paid as of the dates payments of principal are due as provided above according to the Payment Method. (d) Notwithstanding anything herein to the contrary, MHMI may assign its Membership Interest in the Company, its rights to designate Directors hereunder, and its rights as manager under the Management Services Agreement (i) to any party who purchases fifty-one percent (51%) or more of MedCath Corporation, MedCath Holdings, Inc., MedCath Incorporated's and their subsidiaries' assets or capital stock if such purchaser (in case of an asset sale) assumes in writing the obligations of MHMI (and as to MedCath Corporation and MedCath Incorporated, their respective successor(s), as applicable, assume in writing their respective guarantee obligations assumed specifically under this Agreement) hereunder or (ii) to a party under control of, common control, or which controls MHMI. MHMI may also assign its Membership Interest in the Company, its right to designate Directors, and its rights under the Management Services Agreement to a financial institution (a "Lender") as collateral security for repayment of indebtedness for borrowed funds by MedCath Incorporated or its Affiliates; provided, however, that a Lender will not have the right to vote on behalf of MHMI as a Member of the Company unless and until the Lender forecloses on MHMI's Membership Interest in the Company. The Members acknowledge and agree, however, that a Lender may require that the Company not amend agreements entered into by the Company without Lender's consent and that a Lender may require that the Company or MHMI or its Affiliates agree to certain restrictions and covenants that will bind the Company and/or otherwise restrict certain rights of the Members under this Agreement. (e) Notwithstanding anything in this Agreement to the contrary, an Investor Member may, upon the consent of the Board of Directors, assign his, her or its Membership Interest to a trust or family limited partnership that is formed and maintained for the sole benefit of the Investor Member or the individual who owns the Investor Member, as the case may be, and/or his or her immediate family so long as: (i) the Investor Member or individual who owns the Investor Member agrees in writing that he or she continues to be bound by the terms of Section 5.10 of the Agreement and all confidentiality obligations under this Agreement; (ii) the Investor Member or individual who owns the Investor Member agrees in writing that he or she shall remain a trustee, general partner or otherwise exercises control over the trust or family limited partnership as determined by the Board of Directors in its sole discretion; (iii) the Manager first approves in writing the terms of all documents creating and constituting the trust or family limited partnership; and (iv) the assignment meets such other requirements as reasonably established by the Board of Directors from time to time. Other than (i) through (iv) above, an assignment made under this Section 8.1(e) shall not be subject to any of the restrictions on the transfer of Membership Interests set forth in this Agreement including, but not limited to, the Right of First Refusal set forth at Section 8.1(b).

MEMBERS - RESTRICTION ON TRANSFER. (a) Except as otherwise set forth in this Section or in this Agreement, no Membership Interest 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 Membership Interest shall have been transferred in accordance with the provisions of this Agreement and in compliance with such additional restrictions as may be imposed by any federal or state securities regulatory authority or law and with the consent of the Board of Directors. In no event, however, shall a Member transfer or sell all or any of its Membership Interest to any party which, if a Member, would be in violation of Section 5.10(b) hereof. (b) Except as otherwise set forth in this Section or in this Agreement, a Member may transfer, sell or assign its entire Membership Interest only if it has received the approval of the Board of Directors. Subject to the foregoing: (i) the Company first for a period of fifteen (15) days, and thereafter the other Members in proportion to their Membership Interest in the Company for a period of fifteen (15) days days, shall have the right, but not the obligation, to purchase all, but not less than all, of the 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 Membership Interests by a third-party (the "Right of First Refusal"), and (ii) 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 it meets the investor suitability standards established by the appropriate state of residence, or, in the absence thereof, the investor suitability standards established by the Company. The Board of Directors 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 that assigns all of its Membership Interest shall cease to be a Member of the Company. Any Membership Interests acquired by the Company pursuant to Section 8.1 may, subject to applicable law, be re-offered by the Company to suitable investors. (c) Subject to (d) below, any dissolution, liquidation, merger (unless Members or their Affiliates existing prior to such merger own at least fifty-one percent (51%) of the surviving entity after the merger or unless both parties to such merger are majority owned by parties who are Members or their Affiliates prior to such merger) or sale of a Member which is an Entity (a sale shall include a transfer of fifty percent (50%) or more of its ownership interests or of substantially all of its assets or any other transaction or series of related transactions intended to accomplish, in substance, a sale of such Entity), which event shall not occur, subject to (d) below, without the written consent of the other Members, shall constitute an offer by such Member to sell such Member's Membership Interest to the Company and the other Members pursuant to Section 8.6 for a purchase price equal to five (5) multiplied by the 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 such event multiplied by the percentage Membership Interest of such Member in the Company (the "Formula Purchase Price"). The Formula Purchase Price shall be paid in three (3) equal annual installments, the first third of which shall be paid upon the determination of the Formula Purchase Price and the remaining two (2) installments of which shall be paid on the first and second anniversary of such date (the "Payment Method"). The remaining two (2) installments shall bear interest at the Prime Rate as of the date of the date of the determination of the Formula Purchase Price. Accrued interest shall be paid as of the dates payments of principal are due as provided above according to the Payment Method. (d) Notwithstanding anything herein to the contrary, LHMI may assign its Membership Interest in the Company, its rights to designate Directors hereunder, and its rights as manager under the Management Services Agreement (i) to any party who purchases fifty-one percent (51%) or more of MedCath Holdings, Inc., MedCath Incorporated's and their subsidiaries' assets or capital stock if such purchaser (in case of an asset sale) assumes in writing the obligations of LHMI hereunder or (ii) to a party under control of, common control, or which controls LHMI. LHMI may also assign its Membership Interest in the Company, its right to designate Directors, and its rights under the Management Services Agreement to a financial institution (a "Lender") as collateral security for repayment of indebtedness for borrowed funds by MedCath Incorporated or its Affiliates; provided, however, that a Lender will not have the right to vote on behalf of LHMI as a Member of the Company unless and until the Lender forecloses on LHMI's Membership Interest in the Company. The Members acknowledge and agree, however, that a Lender may require that the Company not amend agreements entered into by the Company without Lender's consent and that a Lender may require that the Company or LHMI or its Affiliates agree to certain restrictions and covenants that will bind the Company and/or otherwise restrict certain rights of the Members under this Agreement.

MEMBERS - RESTRICTION ON TRANSFER. (a) Except as otherwise set forth in this Section or in this Agreement, no Membership Interest 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 Membership Interest shall have been transferred in accordance with the provisions of this Agreement and in compliance with such additional restrictions as may be imposed by any federal or state securities regulatory authority or law and with the consent approval of the Board of Directors. In no event, however, shall a Member transfer or sell all or any of its Membership Interest to any party which, if a Member, would be in violation of Section 5.10(b) hereof.; (b) Except as otherwise set forth in this Section or in this Agreement, a Member may transfer, sell or assign its entire Membership Interest only if it has received the approval of the Board of Directors. Subject to the foregoing: (i) the Company first for a period of fifteen (15) days, and thereafter the other Members in proportion to their Membership Interest in the Company for a period of fifteen (15) days days, shall have the right, but not the obligation, to purchase all, but not less than all, of the 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 Membership Interests by a third-party (the "“Right of First Refusal"”), and (ii) 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 it meets the investor suitability standards established by the appropriate state of residence, or, in the absence thereof, residence and the investor suitability standards established by the Company. The Board of Directors 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 that assigns all of its Membership Interest shall cease to be a Member of the Company. Any Membership Interests acquired by the Company pursuant to Section 8.1 may, subject to applicable law, be re-offered by the Company to suitable investors; (c) Except as permitted in (d) below, any dissolution, liquidation, merger (unless Members or their Affiliates existing prior to such merger own at least fifty-one percent (51%) of the surviving entity after the merger or unless both parties to such merger are majority owned by parties who are Members or their Affiliates prior to such merger) or sale of a Member which is an Entity (a sale shall include a transfer of fifty percent (50%) or more of its ownership interests or of substantially all of its assets or any other transaction or series of related transactions intended to accomplish, in substance, a sale of such Entity), which event shall not occur, subject to (d) below, without the written consent of the Board of Directors, shall constitute an offer by such Member to sell such Member’s Membership Interest to the Company and the other Members pursuant to Section 8.6 for a purchase price equal to the lesser of (i) two (2) multiplied by the net income (as reasonably determined by the Company’s independent public accountants) of the Company for the twelve (12) month period ending as of the calendar quarter most recently ended prior to such event multiplied by the percentage Membership Interest of such Member in the Company (the “Formula Purchase Price”), or (ii) the Capital Contributions of the Member less all amounts distributed to such Member by the Company. The Formula Purchase Price shall be paid in three (3) equal annual installments, the first third of which shall be paid upon the determination of the Formula Purchase Price and the remaining two (2) installments of which shall be paid on the first and second anniversary of such date (the “Payment Method”). The remaining two (2) installments shall bear interest at the Prime Rate as of the date of the determination of the Formula Purchase Price. Accrued interest shall be paid as of the dates payments of principal are due as provided above according to the Payment Method; (d) Notwithstanding anything herein to the contrary, MedCath may assign its Membership Interest in the Company, its rights to designate Directors hereunder, and its rights as Manager of the Company to any party (i) who assumes in writing the obligations of MedCath under this Agreement and who purchases fifty-one percent (51%) or more of MedCath, or (ii) purchases fifty-one percent (51%) or more of MedCath Corporation, MedCath Holdings, Inc., MedCath Incorporated’s and their subsidiaries’ assets or capital stock if such purchaser (in the case of an asset sale) assumes in writing the obligations of MedCath Partners, LLC (and as to MedCath Corporation and MedCath Incorporated, their respective successor(s), as applicable, assume in writing their respective guarantee obligations assumed specifically under this Agreement), hereunder, or (iii) to a party under control of, common control with, or which controls MedCath. Hospital may also assign Hospital’s Membership Interest in the Company and its rights to designate Directors hereunder to any party who acquires or succeeds to fifty-one percent (51%) or more of Hospital’s assets or outstanding ownership interests or a party under control of, common control with, or which controls Hospital, so long as the Hospital requires such party to assume simultaneously in writing the obligations of Hospital under this Agreement and the Management and Service Agreement. MedCath may also assign its Membership Interest in the Company to a financial institution (a “Lender”) as collateral security for repayment of indebtedness for borrowed funds by MedCath Incorporated or its Affiliates; provided, however, that a Lender will not have the right to vote on behalf of MedCath as a Member of the Company unless and until the Lender forecloses on MedCath’s Membership Interest in the Company.

MEMBERS - RESTRICTION ON TRANSFER. (a) Except as otherwise set forth in this Section or in this Agreement, no Membership Interest or any portion thereof, shall be validly sold or assigned directly or indirectly whether voluntarily, involuntarily or by operation of law, and no purported assignee shall be recognized by the Company for any purpose, unless such Membership Interest shall have been transferred in accordance with the provisions of this Agreement and in compliance with such additional restrictions as may be imposed by any federal or state securities regulatory authority or law and with the consent of the Board of Directors. In no event, however, shall a Member transfer or sell all or any of its Membership Interest to any party which, if a Member, would be in violation of Section 5.10(b) hereof. The Members acknowledge that there is no obligation of the Company or any Member to purchase the Membership Interest of any Member at any time under the terms of this Agreement. (b) Except as otherwise set forth in this Section or in this Agreement, a Member may transfer, sell or assign its entire Membership Interest only if it has received the approval of the Board of Directors. Subject to the foregoing: , provided that: (i) the Company first for a period of fifteen (15) days, and thereafter the other Members in proportion to their Membership Interest in the Company for a period of fifteen (15) days days, shall have the right, but not the obligation, to purchase all, but not less than all, of the 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 Membership Interests by a third-party (the "“Right of First Refusal"”); provided, and however, the Board of Directors can in its discretion on a case by case basis approve a sale by an Investor Member without requiring the transferring Investor Member to first comply with the Right of First Refusal requirements; and (ii) 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 it meets the investor suitability standards established by the appropriate state of residence, or, in the absence thereof, the investor suitability standards established by the Company. The Board of Directors shall use reasonable care to determine that transfers are in accordance with applicable laws and regulations, including obtaining an opinion ofof counsel to that effect. Any Member that assigns all of its Membership Interest shall cease to be a Member of the Company. Any Membership Interests acquired by the Company pursuant to Section 8.1 may, subject to applicable law, be re-offered by the Company to suitable investors. (c) Subject to (d) below, any dissolution, liquidation, merger (unless Members or their Affiliates existing prior to such merger own at least fifty-one percent (51%) of the surviving entity after the merger or unless both parties to such merger are majority owned by parties who are Members or their Affiliates prior to such merger) or sale of a Member which is an Entity (a sale shall include a transfer of fifty percent (50%) or more of its ownership interests or of substantially all of its assets or any other transaction or series of related transactions intended to accomplish, in substance, a sale of such Entity), which event shall not occur, subject to (d) below, without the written consent of the Board of Directors, shall constitute an offer by such Member to sell such Member’s Membership Interest to the Company pursuant to Section 8.6 for a purchase price equal to five (5) multiplied by the 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 such event multiplied by the percentage Membership Interest of such Member in the Company (the “Formula Purchase Price”). The Formula Purchase Price shall be paid in three (3) equal annual installments, the first third of which shall be paid upon the determination of the Formula Purchase Price and the remaining two (2) installments of which shall be paid on the first and second anniversary of such date (the “Payment Method”). The remaining two (2) installments shall bear interest at the Prime Rate as of the date of the date of the determination of the Formula Purchase Price. Accrued interest shall be paid as of the dates payments of principal are due as provided above according to the Payment Method. (d) Notwithstanding anything herein to the contrary, DCHMI may, upon the approval of at least two (2) of the Board Members appointed by the Investor Members, which determination shall not be unreasonably withheld, assign its Membership Interest in the Company, its rights to designate Directors hereunder, and its rights as manager under the Management Services Agreement to any third party who acquires such Membership Interest and rights and who is not controlled by, controlling, or under common ownership with DCHMI so long as such third party (i) assumes in writing or by operation of law the obligations of DCHMI hereunder, and (ii) would not be in violation of the terms of this Agreement. Notwithstanding anything contained in this Agreement to the contrary, DCHMI may assign its Membership Interest in the Company, its right to designate Directors and its rights under the Management Services Agreement to any party controlled by, controlling or under common ownership with DCHMI without the consent of the Investor Members or the Board of Directors. DCHMI may also assign its Membership Interest in the Company, its right to designate Directors, and its rights under the Management Services Agreement to a financial institution as collateral security for repayment of indebtedness for borrowed funds by MFC, MedCath Incorporated or its Affiliates or by the Company without the consent of the Investor Members or the Board of Directors. (e) Notwithstanding anything in this Agreement to the contrary, an Investor Member may, upon the consent of the Board of Directors, assign his, her or its Membership Interest to a trust or family limited partnership that is formed and maintained for the sole benefit of the Investor Member or the individual who owns the Investor Member, as the case may be, and/or his or her immediate family so long as: (i) the Investor Member or individual who owns the Investor Member agrees in writing that he or she continues to be bound by the terms of Section 5.10 of the Agreement and all confidentiality obligations under this Agreement; (ii) the Investor Member or individual who owns the Investor Member agrees in writing that he or she shall remain a trustee, general partner or otherwise exercises control over the trust or family limited partnership as determined by the Board of Directors in its sole discretion; (iii) the Manager first approves in writing the terms of all documents creating and constituting the trust or family limited partnership; (iv) the Company shall continue to have the benefit of its purchase rights under Section 8.6 as if such assignment had not occurred; and (v) the assignment meets such other requirements as reasonably established by the Board of Directors from time to time. Other than (i) through (iv) above, an assignment made under this Section 8.1(e) shall not be subject to any of the restrictions on the transfer of Membership Interests set forth in this Agreement including, but not limited to, the Right of First Refusal set forth at Section 8.1(b). (f) Notwithstanding anything contained in this Agreement to the contrary, subsequent to the initial capitalization of the Company, DCHMI will make available for sale a portion of its Membership Interest based on fair market value terms and conditions to qualified investors provided, however, that DCHMI shall not reduce its Membership Interest below 51% except as otherwise provided in this Section 8.1.