AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VIII
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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VIII
THE PARTNERSHIP INTEREST REPRESENTED BY THIS AMENDED AND RESTATED LIMITED
PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE IN RELIANCE UPON AN EXEMPTION THEREFROM. THESE SECURITIES HAVE
NOT BEEN APPROVED BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE. THE SALE
OR OTHER DISPOSITION OF THE PARTNERSHIP INTEREST IS RESTRICTED AS SET FORTH IN
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, AND IN ANY EVENT IS
PROHIBITED UNLESS THE LIMITED PARTNERSHIP RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE LIMITED PARTNERSHIP AND ITS COUNSEL THAT SUCH SALE OR OTHER
DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE IN RELIANCE UPON AN
EXEMPTION THEREFROM. BY ACQUIRING THE PARTNERSHIP INTEREST REPRESENTED BY THIS
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, THE LIMITED PARTNER
REPRESENTS THAT IT WILL NOT SELL OR OTHERWISE DISPOSE OF THE PARTNERSHIP
INTEREST WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THE SECURITIES ACT OF
1933, AS AMENDED, AND OTHER APPLICABLE STATE STATUTES AND THE RULES AND
REGULATIONS THEREUNDER.
This Amended and Restated Agreement of Limited Partnership of Texas
Lithotripsy Limited Partnership VIII (the "Agreement") is entered into by and
among Lithotripters, Inc., a North Carolina corporation ("Lithotripters"), as
the General Partner (the "General Partner"), and each of the limited partners
listed on the Signature Pages attached hereto (collectively, the "Limited
Partners" and individually, a "Limited Partner").
R E C I T A L S :
A. Lithotripters, as general partner, and Xxxxx Xxxx, M.D., as the
initial limited partner, formed a limited partnership under the laws of the
State of Texas effective as of October 6, 2000, for the purpose of acquiring,
owning and operating the Lithotripsy Systems (as hereinafter defined) in the
Service Area (as hereinafter defined).
B. Lithotripters caused the Partnership to offer to sell Units (as
hereinafter defined) pursuant to the Memorandum (as hereinafter defined).
C. Upon the closing of the offering of the Units, Xxxxx Xxxx, M.D. withdrew
as the initial limited partner and the subscribers of the Units were admitted as
new Limited Partners.
D. Lithotripters and the Limited Partners desire to provide for the
governance of the Partnership and to set forth in detail their respective rights
and duties relating to the Partnership and to amend and restate the original
partnership agreement in its entirety.
A G R E E M E N T :
NOW THEREFORE, in consideration of the mutual covenants set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lithotripters and the Limited
Partners hereby agree as follows:
1 ARTICLE
2 DEFINITIONS
2.1. Terms Defined. When used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Act" shall mean the Texas Revised Limited Partnership Act as set forth
in Vernon's Revised Civil Statutes Annotated Article 6132a-1, as
subsequently amended.
(b) "Additional Capital Contributions" shall have the meaning set forth in
Section 3.2.
(c) "Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the
following adjustments:
(i) Credit to such Capital Account any amounts which
such Partner is obligated to restore or is deemed to be
obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.7041(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
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The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
(d) "Adjusted Gross Revenues" shall mean, with respect to the calculation
of the Management Fee for the applicable period, all gross receipts
from any source for such period, other than from Partnership loans, the
refinancing, sale, exchange, casualty or other disposition of the
Partnership's assets and Capital Contributions, less adjustments for
contractual reimbursements and bad debts.
(e) "Affiliate" shall mean a Person, directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common
control with the Person in question. The term "control," as used in the
immediately preceding sentence, means, with respect to an entity that
is a corporation, the right to exercise, directly or indirectly, more
than 10% of the voting rights attributable to the shares of such
corporation and, with respect to a Person that is not a corporation,
the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person.
(f) "Bank" shall mean Whitney National Bank.
(g) "Bankruptcy" means, with respect to any Person, a "Voluntary Bankruptcy" or
an "Involuntary Bankruptcy". A "Voluntary Bankruptcy" means, with respect
to any Person, the inability of such Person generally to pay its debts as
such debts become due, or an admission in writing by such Person of its
inability to pay its debts generally or a general assignment by such Person
for the benefit of creditors; the filing of any petition or answer by such
Person seeking to adjudicate it a bankrupt or insolvent, or seeking for
itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking, consenting to, or acquiescing in the entry
of an order for relief or the appointment of a receiver, trustee,
custodian, or other similar official for such Person or for any substantial
part of its property; or corporate action taken by such Person to authorize
any of the actions set forth above. An "Involuntary Bankruptcy" means, with
respect to any Person, without the consent or acquiescence of such Person,
the entering of an order for relief or approving a petition for relief or
reorganization or any other petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or other
similar relief under any present or future bankruptcy, insolvency, or
similar statute, law, or regulation, or the filing of any such petition
against such Person which petition shall not be dismissed within ninety
(90) days, or, without the consent or acquiescence of such Person, the
entering of an order appointing a trustee, custodian, receiver, or
liquidator of such Person or of all or any substantial part of the property
of such Person which order shall not be dismissed within sixty (60) days.
(h) "Xxxx of Sale and Assignment" shall mean that xxxx of sale and
assignment (or similar instrument of transfer) to be received by the
Partnership from Sunbelt in connection with the Partnership's purchase
of the Sunbelt Assets.
(i) "Capital Contributions" shall mean, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property other
than money (net of liabilities which the Partnership assumes or takes
the property subject to) contributed to the Partnership with respect to
the Partnership Interest held by such Partner.
(j) "Capital Transaction" shall mean either a Major Capital Event or
Liquidating Event.
(k) "Cash Flow" shall mean, for the period in question, or in the case of a
Major Capital Event, the event in question, the amount by which the
aggregate cash receipts of the Partnership from any source (including
loans and Capital Contributions) exceed the sum of the cash
expenditures of the Partnership plus a cash reserve in the amount
determined by the General Partner to be sufficient to meet the working
capital requirements of the Partnership.
(l) "Certificate" shall mean the Certificate of Limited Partnership filed
on behalf of the Partnership with the Secretary of State of Texas in
accordance with all applicable statutes.
(m) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(n) "Defaulting Limited Partner shall have the meaning set forth in
Section 9.2(c) hereof.
(o) "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, except that if the
Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Fiscal Year
bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using
any reasonable method selected by the General Partner.
(p) "Dilution Offering" shall mean the sale of additional Partnership
Interest after the Offering.
(q) "Escrow Agent" shall mean Whitney National Bank.
(r) "Escrow Agreement" shall mean that certain agreement by and between
the Partnership and the Escrow Agent.
(s) "Exhibit" shall mean an exhibit attached to this Agreement.
(t) "Fiscal Year" shall mean (i) the period commencing on the effective
date of this Agreement and ending on December 31, 2000, (ii) any
subsequent twelve (12) month period commencing on January 1st and
ending on December 31st, or (iii) any portion of the period described
in clause (ii) for which the Partnership is required to allocate
Profits, Losses, and other items of Partnership income, gain, loss, or
deduction pursuant to Article VI hereof.
(u) "General Partner" shall mean Lithotripters, so long as such Person
shall continue as a general partner hereunder, and any other Person who
has been admitted as and continues to be a general partner of the
Partnership.
(v) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross
fair market value of such asset, as determined by the
contributing Partner and the General Partner; provided,
however, if the contributing Partner is the General Partner,
the determination of the fair market value of a contributed
asset shall be determined by appraisal;
(ii) The Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross fair market
values, as determined by the General Partner, as of the
following times: (a) the acquisition of an additional interest
in the Partnership (other than pursuant to Section 3.1(c)
hereof) by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (b) the distribution
by the Partnership to a Partner of more than a de minimis
amount of Partnership Assets as consideration for an interest
in the Partnership; and (c) the liquidation of the Partnership
within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments
pursuant to clauses (a) and (b) above shall be made only if
the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the
Partnership;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the
gross fair market value of such asset on the date of
distribution as determined by the distributee and the General
Partner; provided, however, if the distributee is the General
Partner, the determination of the fair market value of the
distributed asset shall be determined by appraisal; and
(iv) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that
such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b) (2) (iv)
(m) and Sections 1.1(bf) (vi) and 6.5(g) hereof; provided,
however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.1(v)(iv) to the extent the General
Partner determines that an adjustment pursuant to Section
1.1(v)(ii) hereof is necessary or appropriate in connection
with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.1(v)(iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to Section 1.1(v)(i), Section 1.1(v)(ii), or Section
1.1(v)(iv) hereof, such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
(w) "Involuntary Bankruptcy" shall have the meaning set forth in Section
1.1(f) hereof.
(x) "Limited Partner" shall mean any Person who has been admitted as, and
who continues to be, a limited partner of the Partnership.
(y) "Liquidating Event" shall mean the sale, condemnation or exchange of
all or substantially all of the Partnership Assets, or any other
transaction which, individually or together with any similar
transaction or transactions, results in the disposition of all or
substantially all of the Partnership Assets and occurs in the course of
liquidation of the Partnership or upon and with respect to which event
the Partnership is dissolved and wound-up and all payments, including
payments on any promissory notes, have been received.
(z) "Lithotripsy Systems" shall mean, collectively, the Sunbelt Lithotripsy
System, the New Lithotripsy System and any other shock-wave
lithotripter acquired by the Partnership for the lithotripsy of kidney
stones.
(aa) "Major Capital Event" shall mean any event (excluding a Liquidating
Event) arising other than in the ordinary course of the Partnership's
business, including, without limitation: (i) the sale of less than
substantially all of the Partnership Assets; (ii) a condemnation of
less than substantially all of the Partnership Assets; (iii) the
recovery of damage awards or settlements or insurance proceeds from the
loss of or damage to the Partnership Assets; and (iv) a borrowing or
refinancing. The General Partner's designation of an event as a Major
Capital Event shall be binding upon the Partners and the Partnership
absent manifest error.
(bb) "Majority in Interest" shall mean Partners (or Partners of a designated
class) owning more than 50% of the Partnership Interests (or
Partnership Interests of the designated class).
(cc) "Management Agreement" shall mean the agreement by and between the
Partnership and the General Partner, as the same may be amended from
time to time, with respect to the management of the Partnership.
(dd) "Management Fee" shall mean that certain fee, accrued and payable
monthly to the General Partner pursuant to the Management Agreement,
equal to 7.0% of Adjusted Gross Revenues for the month in question.
(ee) "Memorandum" shall mean that certain Confidential Private Placement
Memorandum dated October 13, 2000 relating to the offering of Units.
(ff) "Negative Cash Flow" shall mean, for the period in question, the amount
by which the operating expenses, capital expenditures and debt service
of the Partnership due and payable within the period in question exceed
the cash amounts held by the Partnership or which are expected to be
received by the Partnership within the period in question and which are
or will be available for payment of such expenses and debt service.
(gg) "Net Gains from Capital Transactions" shall mean the net gains and
income, if any, realized by the Partnership as a result of or upon any
sale, exchange or other disposition of the capital assets of the
Partnership (including assets described in Section 1231 of the Code) or
as a result of or upon the damage or destruction of such capital
assets.
(hh) "Net Losses from Capital Transactions" shall mean the net losses and
deductions, if any, realized by the Partnership as a result of or upon
any sale, exchange or other disposition of the capital assets of the
Partnership (including assets described in Section 1231 of the Code) or
as a result of or upon the damage or destruction of such capital
assets.
(ii) "New Lithotripsy System" shall mean, collectively, a new Storz
Modulith(R) SLX-T transportable lithotripter and a new coach to
transport such lithotripter.
(jj) "Nonrecourse Deductions" shall have the meaning set forth in Section
1.704-2(b) (1) of the Regulations.
(kk) "Nonrecourse Liability" shall have the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
(ll) "Notice of Default" shall have the meaning set forth in Section 9.2(c)
hereof.
(mm) "Notice of Election" shall have the meaning set forth in Section
9.2(e) hereof.
(nn) "Notice of Incompetency" shall have the meaning set forth in Section
9.2(d) hereof.
(oo) "Notice of Insolvency" shall have the meaning set forth in Section
9.2(b) hereof.
(pp) "Offering" shall mean the sale of Units pursuant to the Memorandum.
(qq) "Offering Expenses" shall mean all expenditures classified as
syndication expenses pursuant to Section 1.709-2(b) of the Regulations.
Offering Expenses shall be taken into account under this Agreement at
the time they would be taken into account under the Partnership's
method of accounting if they were deductible expenses.
(rr) "Offering Termination Date" shall mean January ___, 2001, or such
earlier date on which the maximum number of Units set forth in the
Memorandum is sold or such later date to which such date may be
extended in accordance with the Memorandum.
(ss) "Operations" shall mean all activities arising in the ordinary course
of the Partnership's business not constituting a Major Capital Event or
a Liquidating Event.
(tt) "Option Period" shall have the meaning set forth in Section 9.2
hereof.
(uu) "Partner Nonrecourse Debt" shall have the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
(vv) "Partner Nonrecourse Debt Minimum Gain" shall mean an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were
treated as a Nonrecourse Liability, determined in accordance with
Section 1.704-2(i)(3) of the Regulations.
(ww) "Partner Nonrecourse Deductions" shall have the meaning set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
(xx) "Partners" shall mean the General Partner and the Limited Partners.
"Partner" shall mean any one of the Partners.
(yy) "Partnership" shall mean Texas Lithotripsy Limited Partnership VIII, as
constituted from time to time.
(zz) "Partnership Assets" shall mean, collectively, all property and assets
owned by the Partnership, whether real, personal or mixed or tangible
or intangible.
(aaa)"Partnership Accountant" shall have the meaning set forth in Section
9.2(f) hereof.
(bbb)"Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
(ccc) "Partnership Interest" shall mean a Partner's interest in the Profits,
Losses, Net Gains from Capital Transactions, Net Losses from Capital
Transactions, any other income, gains, losses, or deductions, tax
credits, voting rights and distributions of the Partnership as may be
affected by the provisions of this Agreement and as may hereafter be
adjusted.
(ddd) "Person" shall mean an individual, partnership, joint venture,
corporation, limited liability company, trust, estate or other entity
or organization.
(eee) "Proceeding" shall mean any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or
proceeding, and any inquiry or investigation that could lead to such an
action, suit or proceeding.
(fff) "Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in
computing Profits and Losses pursuant to this Section 1.1(bf)
shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b) (2)(iv)(f), and not otherwise taken into account in
computing Profits or Losses pursuant to this Section 1.1(bf)
shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any
Partnership Asset is adjusted pursuant to Section 1.1(v)(ii)
or Section 1.1(v)(iii) hereof, the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of
Partnership Assets with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such fiscal year or other period, computed in
accordance with Section 1.1(o) hereof;
(vi) To the extent an adjustment to the adjusted tax
basis of any Partnership Asset pursuant to Code Section 734(b)
or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b) (2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution
other than in liquidation of a Partner's interest in the
Partnership, the amount of such adjustment shall be treated as
an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken
into account for purposes of computing Profits or Losses;
(vii) Notwithstanding any other provision of this
Section 1.1(bf), any items which are specially allocated
pursuant to Section 6.5 or Section 6.6 hereof shall not be
taken into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss, or
deduction available to be specially allocated pursuant to Sections 6.5
and 6.6 hereof shall be determined by applying rules analogous to those
set forth in Sections 1.1(bf)(i) through 1.1(bf)(vi) above.
(ggg) "Regulations" shall mean the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
(hhh)"Regulatory Allocations" shall have the meaning set forth in Section
6.6 hereof.
(iii)"Retiring Limited Partner" shall have the meaning set forth in
Section 9.2(f) hereof.
(jjj) "Sales Agency Agreement" shall mean that certain agreement by and
between the Partnership and the Sales Agent with respect to the sale of
Units.
(kkk)"Sales Agent" shall mean MedTech Investments, Inc., a registered
broker-dealer, member of the National Association of Securities
Dealers, Inc. and an Affiliate of the General Partner.
(lll) "Section" shall mean any section or subsection in this Agreement.
(mmm) "Service" shall mean the Internal Revenue Service.
(nnn)"Service Area" shall mean the geographic area of Xxxxxx County, Texas
and surrounding counties.
(ooo)"Subscription Agreement" shall mean the Subscription Agreement,
included in the Subscription Packet accompanying the Memorandum.
(ppp)"Sunbelt" shall mean Sunbelt Lithotripsy Associates, Ltd., a Texas
limited partnership.
(qqq) "Sunbelt Assets" shall mean, collectively, certain tangible assets
owned and operated by Sunbelt and certain intangible property rights
held by Sunbelt, including but not limited to, the Sunbelt Lithotripsy
System and eight separate lithotripsy services agreements with
hospitals, medical centers and ambulatory surgery centers in the
Service Area.
(rrr) "Sunbelt Lithotripsy System" shall mean the Storz Modulith SLX mobile
lithotripter and the related trailer.
(sss) "Tax Matters Partner" shall mean the General Partner.
(ttt) "Transfer" shall mean, as a noun, any voluntary or involuntary
transfer, sale, conveyance, assignment, pledge, hypothecation, mortgage
or other encumbrance or other disposition of all or any part of a
Partnership Interest and, as a verb, to voluntarily or involuntarily
transfer, sell, convey, assign, pledge, hypothecate, mortgage, encumber
or otherwise dispose of all or any part of a Partnership Interest.
(uuu)"Unit" shall mean a unit of limited partner partnership interest
equal to a 1% Partnership Interest.
(vvv) "Unreturned Capital Contributions" shall mean, as to each Partner, the
aggregate Capital Contributions made to the Partnership by such Partner
reduced by the aggregate distributions to such Partner from the
Partnership pursuant to Sections 6.2(a) and 6.4(a).
(www)"Valuation Date" shall have the meaning set forth in Section 9.2(f)
hereof.
(xxx)"Voluntary Bankruptcy" shall have the meaning set forth in Section
1.1(g) hereof.
2.2. Number and Gender. Whenever the context requires, references in this
Agreement to the singular number shall include the plural, and the
plural number shall include the singular, and words denoting gender
shall include the masculine, feminine and neuter.
3 ARTICLE
4 CONTINUATION
4.1. Continuation. The Partners hereby continue the Partnership as a
limited partnership pursuant to the Act for the purposes hereinafter
described.
4.2. Name. The business of the Partnership shall be conducted under the
name "Texas Lithotripsy Limited Partnership VIII".
4.3. Principal Place of Business; Registered Office; Registered Agent. The
principal place of business, the principal office and the registered
office of the Partnership shall be at 0000 Xxxxxxx xx Xxxxx Xxxxxxx,
Xxxxx X-000, Xxxxxx, Xxxxx 00000. The General Partner may change the
principal place of business of the Partnership to any other place
within the State of Texas upon ten (10) days written notice to the
Limited Partners. The registered agent shall be the General Partner.
4.4. Purposes. The purposes of the Partnership shall be:
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(a) to acquire and own the Sunbelt Assets and the New Lithotripsy System;
(b) to operate the Lithotripsy Systems in the Service Area;
(c) to manage, maintain, lease, sell or otherwise deal with the
Partnership Assets;
(d) to do any and all other acts and things necessary, incidental or
convenient to carry on the Partnership business as contemplated under
this Agreement; and
(e) to engage in any lawful act or activity for which partnerships may be
organized under the Act.
4.5. Term. The Partnership shall continue until terminated pursuant to
Section 12.1.
5 ARTICLE
CAPITAL CONTRIBUTIONS
6
6.1. Initial Capital Contributions.
(a) General Partner. At the time of executing this Agreement, the General
Partner will make a Capital Contribution of cash in exchange for its Partnership
Interest.
(b) Limited Partners. At the time of executing this Agreement, each Limited
Partner will make a Capital Contribution of cash in exchange for its Partnership
Interest.
6.2 . Additional Capital Contributions. At the request of the General Partner
each Partner shall be permitted to make, but shall not be personally liable to
make, additional Capital Contributions ("Additional Capital Contributions") to
the Partnership in an amount equal to such Partner's pro rata share, based on
its respective Partnership Interest, of all Negative Cash Flow from Operations
of the Partnership. A Partner's pro rata share shall be the product of the
Additional Capital Contribution then due multiplied by such Partner's respective
Partnership Interest. Such Partner's pro rata share shall be paid to the
Partnership no later than the date specified by the General Partner.
6.3 . Capital Accounts. The Partnership shall establish and maintain a capital
account ("Capital Account") for each Partner in accordance with Section 704(b)
of the Code and Section 1.704-1(b)(2)(iv) of the Regulations. Except as
otherwise provided in this Agreement, the Capital Account balance of each
Partner shall be credited (increased) by (i) the amount of cash contributed by
such Partner to the capital of the Partnership, (ii) the fair market value of
property contributed by such Partner to the capital of the Partnership (net of
liabilities secured by such property that the Partnership assumes or takes
subject to under Code Section 752), and (iii) such Partner's allocable share of
Partnership income and gain (or items thereof) including income and gain exempt
from federal taxation and income and gain attributable to adjustments to reflect
book value pursuant to Regulations' Section 1.704-1(b)(2)(iv)(g), but excluding
income and gain attributable to tax items which differ as a result of the
revaluation of Partnership property as described in Regulations' Section
1.704-1(b)(4), and the Capital Account balance of each Partner shall be debited
(decreased) by (i) the amount of cash distributed to such Partner, (ii) the fair
market value of property distributed to such Partner (net of liabilities secured
by such property which the Partner assumes or takes subject to under Code
Section 752), (iii) such Partner's allocable share of expenditures of the
Partnership described in Code Section 705(a)(2)(B), and (iv) such Partner's
allocable share of Partnership losses, depreciation and other deductions (or
items thereof) including loss and deduction attributable to adjustments to
reflect book value pursuant to Regulations' Section 1.704-1(b)(2)(iv)(g) but
excluding expenditures described in (iii) above and loss or deduction
attributable to tax items which differ as a result of the revaluation of
Partnership property or excess percentage depletion as described in Regulations'
Section 1.704-1(b)(4)(i) and (ii). Notwithstanding the foregoing, a Partner's
Capital Account shall not be adjusted to reflect gain or loss attributable to
the disposition of property contributed by such Partner to the extent such
Partner's Capital Account reflected such inherent gain or loss in the property
on the date of its contribution to the Partnership.
6.4. Failure to Make Additional Capital Contributions. In the event a
Partner fails to contribute cash equal to his pro rata share of a
requested Additional Capital Contribution, the General Partner may, at
its election, do any one or more of the following:
(a) Contribute cash to the Partnership as an Additional Capital
Contribution in an amount up to the difference between the
total Additional Capital Contribution requested from all
Partners and the aggregate of the Additional Capital
Contributions actually contributed by the Partners;
(b) Loan funds to the Partnership as provided in Section 3.5; and/or
(c) Cause the Partnership to offer to the other Partners (other than the
non-contributing Partner) the right to contribute the amount which the
non-contributing Partner elected not to contribute (and if more than
one other Partner elects to contribute pursuant to this subclause (c),
each such other Partner shall have the priority right to contribute
that portion of the amount which the non-contributing Partner elected
not to contribute which is equal to the ratio of such other Partner's
Partnership Interest to the aggregate Partnership Interests owned by
all such other Partners who elect to contribute pursuant to this
subclause (c)).
(d) Upon the occurrence of an event described in subsection (a)
and/or (c) above, the Partnership Interests of the Partners
shall be redetermined, and each Partner's Partnership Interest
shall thereafter be equal to a fraction, the numerator of
which shall be equal to the aggregate Capital Contributions
made by such Partner (or his assignor) and the denominator of
which shall be equal to the aggregate Capital Contributions
made by all Partners.
6.5 . Partner Loans. A Partner, or an Affiliate of a Partner, may, but is not
obligated to, loan or cause to be loaned to the Partnership such additional sums
as the General Partner deems appropriate or necessary for the conduct of the
Partnership's business. Loans made by a Partner, or an Affiliate of a Partner,
shall be upon such terms and for such maturities as the General Partner deems
reasonable in view of all the facts and circumstances and the repayment of which
may be designated in priority to distributions of Cash Flow. In no event shall a
Partner be permitted to make a loan to the Partnership pursuant to this Section
3.5, in lieu of making an Additional Capital Contribution which it is permitted
to make pursuant to Section 3.2.
6.6. Other Matters Relating to Capital Contributions.
(a) Loans by any Partner to the Partnership shall not be considered
Capital Contributions.
(b) No Partner shall be required to make Capital Contributions
except to the extent expressly provided by this Article III.
(c) No Partner shall be entitled to withdraw, or to obtain a
return of, any part of its Capital Contribution, or to receive
property or assets other than cash in return thereof, and no
Partner shall be liable to any other Partner for a return of
its Capital Contributions, except as provided in this
Agreement.
(d) No Partner shall be entitled to priority over any other
Partner, either with respect to a return of its Capital
Contributions, or to allocations of Profits, Losses, Net Gains
from Capital Transactions, Net Losses from Capital
Transactions or any other income, gains, losses or deductions,
credits, or to distributions, except as provided in this
Agreement.
(e) No interest shall be paid on any Partner's Capital Contribution or
Additional Capital Contribution.
6.7 . Deficit Capital Account Balances. Upon liquidation of the Partnership, no
Partner with a deficit balance in its Capital Account shall have any obligation
to restore such deficit balance, or to make any contribution to the capital of
the Partnership, except to the extent such Partner is personally liable to make
contributions to the capital of the Partnership pursuant to Article III of this
Agreement.
7 ARTICLE
RIGHTS AND POWERS OF THE GENERAL PARTNER
8
8.1 . Duties of General Partner. The General Partner shall be solely responsible
for the operation and management of the business of the Partnership, and, except
as otherwise expressly provided in this Agreement, shall possess all rights and
powers generally conferred by applicable law or otherwise deemed by the General
Partner as necessary, advisable or consistent in connection therewith.
8.2 . Illustrative Rights and Powers. In addition to any other rights and powers
which it may possess by law, the General Partner shall have all the specific
rights, powers and authorities required or appropriate to the operation and
management of the business of the Partnership which, by way of illustration, but
not by way of limitation, shall include the right and power:
(a) To acquire other assets related to the
provision of lithotripsy services (collectively, the
"Additional Assets"), at such times and at such price and upon
such terms, as the General Partner deems to be in the best
interest of the Partnership;
(b) To purchase, hold, manage and dispose of
Partnership Assets, including the purchase, exchange, trade or
sale of the Partnerships' assets at such price, or amount, for
cash, securities or other property and upon such terms, as the
General Partner deems to be in the best interest of the
Partnership;
(c) To determine the travel itinerary and site locations for the
Lithotripter Systems;
(d) To borrow money for any Partnership purpose
(including the acquisition of the Additional Assets) and, if
security is required therefor, to subject to any security
device any portion of the property of the Partnership, to
obtain replacements of any other security device, to prepay,
in whole or in part, refinance, increase, modify, consolidate
or extend any encumbrance or other security device;
(e) To deposit, withdraw, invest, pay, retain
(including the establishment of reserves in order to acquire
the Additional Assets) and distribute the Partnership's funds
in any manner consistent with the provisions of this
Agreement;
(f) To institute and defend actions at law or in equity;
(g) To enter into and carry out contracts and
agreements and any or all documents and instruments and to do
any and all such other things as may be in furtherance of
Partnership purposes or necessary or appropriate to the
conduct of the Partnership activities;
(h) To execute, acknowledge and deliver any and all instruments which may
be deemed necessary or convenient to effect the Partnership's business;
(i) to acquire the Sunbelt Assets and the New Lithotripsy System;
(j) to perform any and all acts necessary or appropriate in connection with
the business of the Partnership, including, without limitation, commencing,
defending and settling litigation;
(k) to take and hold all Partnership Assets in the name of the Partnership;
(l) to negotiate, execute and deliver contracts,
deeds, notes, leases, subleases, mortgages, bills of sale,
financing statements, security agreements and any and all
other instruments necessary or incidental to the conduct of
the business of the Partnership, and to amend or modify any
such instruments;
(m) to coordinate all accounting and clerical
functions of the Partnership and to employ such accountants,
lawyers, managers, agents and other management or service
personnel as may from time to time be required to carry on the
business of the Partnership; and
(n) if a Transfer has occurred in accordance with
this Agreement, to admit such transferee to the Partnership
and to amend this Agreement to reflect such admission.
8.3 . Payment of Costs and Expenses. The Partnership shall be responsible
for paying all costs and expenses of forming and continuing the
Partnership, owning, operating and holding the Partnership Assets, and
conducting the business of the Partnership, including, without
limitation, costs of utilities, costs of furniture, fixtures, equipment
and supplies, insurance premiums, property taxes, advertising expenses,
accounting costs, legal expenses and office supplies. If any such costs
and expenses are or have been paid by the General Partner, or any of
its Affiliates, on behalf of the Partnership, then such General Partner
(or its Affiliates) shall be entitled to be reimbursed for such payment
so long as such cost or expense was reasonably necessary and was
reasonable in amount. Any reimbursement pursuant to this Section shall
not be treated as compensation to the General Partner.
8.4 . Exercise of Rights and Powers. The General Partner shall endeavor to
operate and manage the business of the Partnership to the best of its
ability, in a careful and prudent manner and in accordance with good
industry practice. The authority of the General Partner to take any
action required or permitted under the provisions of this Agreement
shall in all respects be exercised in its sole and absolute discretion,
and the General Partner shall be required to devote only such time to
the performance of its duties and obligations hereunder as it shall, in
its sole and absolute discretion, determine to be necessary or
advisable. The General Partner shall be entitled to deal with its
Affiliates in the performance of its duties and obligations under this
Agreement, so long as the material terms and conditions of such
dealings are not substantially different from the prevailing market
terms, conditions and prices available from non-Affiliated third
parties.
8.5 . Management Fee. As compensation for its services rendered to or on
behalf of the Partnership, the General Partner shall be entitled to
payment of the Management Fee in accordance with the terms and
conditions of the Management Agreement.
8.6 . Liability. The General Partner shall endeavor to perform its duties
under this Agreement with ordinary prudence and in a manner reasonable
under the circumstances. The General Partner shall not be liable to the
Partnership or the Limited Partners for any loss or liability caused by
any act, or by the failure to do any act, unless such loss or liability
arises from the General Partner's intentional misconduct, gross
negligence or fraud. In no event shall the General Partner be liable by
reason of a mistake in judgment made in good faith, or action or lack
of action based on the advice of legal counsel. Further, the General
Partner shall in no event be liable for its failure to take any action
unless it is specifically directed to take such action under the terms
of this Agreement.
8.7 . Indemnification. Upon the determination as set forth in Section 11.06
of the Act that such indemnification is permissible under Section 11.02
of the Act, the Partnership (but not the Limited Partners) hereby
indemnifies and holds harmless any Person who is or was a General
Partner (and its Affiliates) against any and all losses, costs,
expenses (including reasonable attorneys' fees), penalties, taxes,
fines, settlements, damages and judgments resulting from the fact the
General Partner was or is threatened to be named a defendant or
respondent in a Proceeding because such Person was or is a General
Partner in the Partnership, EVEN IF SUCH LOSSES, COSTS, EXPENSES ETC.
WERE THE RESULT OF THE GENERAL PARTNER'S OWN NEGLIGENCE. This
indemnification shall only be effective if the General Partner (i)
acted in good faith, (ii) reasonably believed that in instances that
the General Partner was acting in its official capacity that its
conduct was in the Partnership's best interest and in all other
instances that the General Partner's conduct was not opposed to the
Partnership's best interests, and (iii) in a criminal proceeding, had
no cause to believe its conduct was unlawful; provided, however, this
indemnification shall in no event be applicable to a Proceeding in
which the General Partner has been found to be liable for intentional
misconduct, gross negligence or fraud in the performance of the General
Partner's duty to the Partnership or the Limited Partners.
8.8 . Removal of the General Partner.
------------------------------
(a) Upon unanimous written consent of all of the Limited Partners,
the General Partner may be removed upon (but only upon)
delivery of written notice to the General Partner of the
occurrence of any of the following events:
(i) Any act of the General Partner, or its Affiliates, in contravention of
the terms or intent of any provision contained in this Agreement;
(ii) The Bankruptcy or insolvency of the General Partner;
(iii) Entry of a final judgment by a court of
competent jurisdiction to the effect that
the General Partner was guilty of
intentional misconduct, gross negligence or
fraud in connection with any duty or
obligation hereunder;
(iv) The application or appropriation of Partnership Assets in a manner
contrary to that which is permitted under this Agreement;
(v) The appointment of a receiver for all or
substantially all of the assets of the
General Partner and the failure to have such
receiver discharged within thirty (60) days
of such appointment; or
(vi) The bringing of any legal action against the General Partner by a
creditor of the General Partner, or an Affiliate of the General
Partner, resulting in the attachment, garnishment or sequestration of
any portion of the General Partner's Partnership Interest and the
failure of the General Partner to have such attachment, garnishment or
sequestration discharged within thirty (30) days of such event.
The General Partner shall be deemed removed upon delivery to
it of notice of its removal. Upon the removal of the General
Partner, the General Partner shall retain its Partnership
Interest as a Limited Partner with all the rights and duties
pertaining thereto.
(b) Upon the removal of the General Partner as described in
subsection (a) above, a new General Partner shall be elected
by a vote of a Majority in Interest of the Limited Partners
and shall be admitted to the Partnership as a General Partner.
8.9. Tax Matters Partner.
(a) The General Partner is hereby designated as the "tax matters partner"
of the Partnership (as defined in the Code) and is authorized and
required to represent the Partnership (at the Partnership's expense)
in connection with all examinations of the Partnership's affairs by
tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services
and costs associated therewith. The Limited Partners agree to
cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct
such proceedings. In addition, each Limited Partner agrees that: (i)
it will not file a statement under section 6224(c)(3)(B) of the Code
prohibiting the tax matters partner from entering into a settlement on
its behalf with respect to Partnership items; (ii) it will not form or
become a member of a group of Partners having a 5% or greater interest
in the profits of the Partnership under section 6223(b)(2) of the
Code; and (iii) the General Partner is authorized to file a copy of
this Agreement with the Service pursuant to section 6224(b) of the
Code if necessary to perfect such Partner's waiver of rights
hereunder.
(b) As the Tax Matters Partner, the General Partner will give notice to
all Partners, within 30 days (in advance, unless impossible), of:
(i) the receipt by the Partnership of notification from the Service of its
intent to conduct an audit of the Partnership;
(ii) the receipt of final Partnership administrative adjustments pursuant
to section 6223 of the Code;
(iii)any settlement by the General Partner with the Service or any
settlement by any other Partner with the Service of which the General
Partner received notice;
(iv) notice of the Partnership's filing of a petition for judicial review
of any final Partnership administrative adjustment or an appeal of a
judicial decision;
(v) notice of the Partnership's decision not to file a petition for
judicial review of any final Partnership administrative adjustment;
and
(vi) any other information required by section 6223(g) of the Code.
(c) Subject to the limitations set forth in this Agreement, the General
Partner is authorized to:
(i) enter into a settlement agreement with the
Service with respect to any tax audit or
judicial review, in which agreement the
General Partner may expressly state that the
agreement will bind all Partners;
(ii) file a petition for judicial review of a final administrative
adjustment pursuant to section 6226 of the Code;
(iii)intervene in any action brought by any other Partner for judicial
review of a final administrative adjustment;
(iv) file a request for an administrative
adjustment with the Service at any time and,
if any part of the request is not allowed by
the Service, to file a petition for judicial
review with respect to the request; and
(v) take any other action on behalf of the
Partners or the Partnership in connection
with any administrative or judicial tax
proceeding to the extent permitted by
applicable law or regulations.
(d) The Partnership shall reimburse the General Partner for all
expenses incurred by it in connection with any administrative
or judicial proceeding with respect to the tax liabilities of
the Partners.
9 ARTICLE
10 LIMITED PARTNER MATTERS
10.1 . Limitation of Liability. No Limited Partner shall be bound by, or
personally liable for, obligations or liabilities of the Partnership
beyond the amount of its required contributions to the capital of the
Partnership, and no Limited Partner shall be required to contribute any
capital to the Partnership in excess of the contributions for which it
is personally liable for under Article III.
10.2 . Management. No Limited Partner shall participate in the operation or
management of the business of the Partnership, or transact any business
for or in the name of the Partnership, nor shall any Limited Partner
have any right or power to sign for or bind the Partnership in any
manner. The right of a Limited Partner to consent to and approve of
certain matters under the provisions of this Agreement shall not be
deemed a participation in the operation and management of the business
of the Partnership, or the exercise of control over the Partnership's
affairs.
10.3 . Consents. Any action requiring the consent or approval of the Limited
Partners under the provisions of this Agreement shall be taken only if
the consent or approval of the requisite number of Limited Partners is
evidenced by a written instrument executed by such Limited Partners.
10.4 . Power of Attorney.
-----------------
(a) Each Limited Partner hereby irrevocably severally appoints and
constitutes the General Partner, its successors and assigns
hereunder as its true and lawful attorney-in-fact, with full
power and authority, on its behalf and in its name, to
execute, acknowledge, swear to, deliver and, where
appropriate, file in such offices and places as may be
required by law:
(i) the Certificate, and any amendment thereto authorized under this
Agreement; and
(ii) any amendment to this Agreement upon compliance with this Agreement.
(b) The power of attorney granted by a Limited Partner to the
General Partner under paragraph (a) above is a special power
coupled with an interest and is irrevocable, and may be
exercised by any Person who at the time of exercise is the
General Partner. Such power of attorney shall survive the
death or legal disability of a Limited Partner and any
Transfer or abandonment of its Partnership Interest, or its
withdrawal from the Partnership.
10.5.Death, Bankruptcy, Etc. In no event shall the death, incompetency,
Bankruptcy, insolvency or other incapacity of a Limited Partner
operate to dissolve the Partnership.
10.6 . Outside Activities. A Limited Partner (which is not an Affiliate of the
General Partner) shall not directly or indirectly own a lithotripter (or
any other type of equipment used for treating renal stones and/or urinary
tract stones). Prohibited indirect ownership of a lithotripter shall
include the ownership of any interest in a business venture (through stock
ownership, partnership interest ownership, or as otherwise determined in
the sole discretion of the General Partner) involving the ownership,
purchase, use or operation of a lithotripter (or similar equipment used for
treating renal stones and/or urinary tract stones), unless the General
Partner determines in its sole and absolute discretion that such activity
by the Limited Partner is not detrimental to the best interests of the
Partnership. The Partnership's sole remedy for a Limited Partner's breach
of this Section 5.6 shall be the purchase rights provided in Section
9.1(c).
11 ARTICLE
12 ALLOCATIONS AND DISTRIBUTIONS
12.1 . Allocation of Profits and Losses.
--------------------------------
(a) Profits and Losses for each Fiscal Year shall be determined
for financial accounting purposes in accordance with the
method of accounting used for federal income tax purposes and
the books and records of the Partnership. Except as provided
in Sections 6.3, 6.5, 6.6, 6.7 and 6.11(b), Profits and Losses
shall be allocated to the Partners pro rata in accordance with
their Partnership Interests.
(b) Notwithstanding anything to the contrary in Section 6.1(a), any item of net
loss or deduction that is attributable to a Partner Nonrecourse Debt must
be allocated to the Partner that bears the economic risk of loss for such
debt as determined under Code Sections 704 and 752 and the Regulations
thereunder. If more than one Partner bears the economic risk of loss for a
Partner Nonrecourse Debt, any net loss attributable to such debt must be
allocated among such Partners in accordance with the ratios in which the
Partners share the economic risk of loss for such Partner Nonrecourse Debt.
(c) The Losses allocated pursuant to Section 6.1(a) hereof shall not exceed the
maximum amount of Losses that can be so allocated without causing any
Partner to have an Adjusted Capital Account Deficit at the end of any
Fiscal Year. In the event some but not all of the Partners would have
Adjusted Capital Account Deficits as a consequence of an allocation of
Losses pursuant to Section 6.1(a), the limitation set forth in this Section
6.1(c) shall be applied on a Partner by Partner basis so as to allocate the
maximum permissible Losses to each Partner under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
12.2 . Distributions of Cash Flow from Operations. The General Partner
shall, in its sole discretion and to the extent sufficient funds are
available, distribute Cash Flow from Operations from time to time, but
at least annually. Notwithstanding the frequency or amounts of
distributions, Cash Flow shall be distributed as follows:
(a) First, to the Partners pro rata in accordance with their
respective Unreturned Capital Contributions in such amount,
and until such time, as each Partner's Unreturned Capital
Contributions have been reduced to zero; and
(b) Thereafter, to the Partners pro rata in accordance with their Partnership
Interests.
12.3 . Allocation of Net Gains from Capital Transactions and Net Losses from
Capital Transactions. Except as otherwise provided in Sections 6.5,
6.6, 6.7 and 6.11(b), Net Gains from Capital Transactions and Net
Losses from Capital Transactions recognized by the Partnership in
accordance with the method of accounting and the books and records of
the Partnership as in effect from time to time upon the occurrence of a
Capital Transaction shall be allocated to the Partners, prior to any
distributions of Cash Flow attributable thereto, as set forth below.
(a) Net Gains from Capital Transactions shall be allocated as follows:
(i) First, to the Partners with deficit Capital
Account balances pro rata in accordance with
such deficit balances in an amount to each
such Partner until such Partner's deficit
balance has been reduced to zero;
(ii) Next, to the Partners in the proportion of
the difference between their Unreturned
Capital Contributions less their Capital
Account balance until the credit balance of
each Partner's Capital Account, if any, is
equal to such Partner's Unreturned Capital
Contributions;
(iii) Next, to the Partners in such amounts as
necessary to cause their Capital Account
balances, in excess of their Unreturned
Capital Contributions, to be in the ratio of
their Partnership Interests; and
(iv) Thereafter, to the Partners in accordance with their Partnership Interests.
(b) Net Losses from Capital Transactions shall be allocated as follows:
(i) First, to the Partners with a positive
balance in their Capital Accounts in excess
of their Unreturned Capital Contributions,
in the ratio of such excess positive
balances, in such amounts necessary to
reduce each such Partner's positive Capital
Account balance to an amount equal to its
Unreturned Capital Contributions;
(ii) Next, to the Partners with positive balances
in their Capital Accounts pro rata in the
ratio of such positive balances, in amounts
equal to such positive balances; and
(iii) Thereafter, to the General Partner.
12.4 . Distributions of Cash Flow from a Major Capital Event. Cash Flow arising
from a Major Capital Event shall be distributed within 60 days of such
event as follows:
(a) First, to the Partners pro rata in accordance with their
respective Unreturned Capital Contributions in such amount,
and until such time, as each Partner's Unreturned Capital
Contributions have been reduced to zero; and
(b) Thereafter, to the Partners pro rata in accordance with their Partnership
Interests.
12.5 . Special Allocations. The following special allocations shall be made in
the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(f)
of the Regulations, notwithstanding any other provision of this Section 6,
if there is a net decrease in Partnership Minimum Gain during any
Partnership Fiscal Year, each Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(f)(6) and
1.704-2(j)(2) of the Regulations. This Section 6.5(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Section 6.5, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any
Partnership Fiscal Year, each Partner who has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Section 1.7042(i)(5) of the
Regulations, shall be specially allocated items of Partnership income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in
an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This
Section 6.5(b) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i) (4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), Regulations Section 1.704-1(b)(2)(ii)(d)(5), or
Regulations Section 1.704-1(b)(2)(ii)(d)(6), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Regulations,
the Adjusted Capital Account Deficit of such Partner as quickly as
possible, provided that an allocation pursuant to this Section 6.5(c) shall
be made if and only to the extent that such Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this
Section 6 have been tentatively made as if this Section 6.5(c) were not in
the Agreement.
(d) Gross Income Allocation. In the event any Partner has an Adjusted Capital
Account Deficit at the end of any Fiscal Year, each such Partner shall be
specially allocated items of Partnership income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to
this Section 6.5(d) shall be made if and only to the extent that such
Partner would have an Adjusted Capital Account Deficit in excess of such
sum after all other allocations provided for in this Section 6 have been
tentatively made as if this Section 6.5(d) and Section 6.5(c) hereof were
not in the Agreement.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to
the Partner who bears the economic risk of loss with respect
to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(f) Section 754 Adjustment. To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b) (2)(iv)(m)(4), to
be taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of his interest in the
Partnership, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Partners in accordance with their
interests in the Partnership in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such
distribution was made in the event that Regulations Section
1.7041(b)(2)(iv)(m)(4) applies.
(g) Offering Expenses. Offering Expenses for any Fiscal Year shall be specially
allocated to the Partners in proportion to their Partnership Interests,
provided that, if additional Partners are admitted to the Partnership on
different dates, all Offering Expenses shall be divided among the Partners
from time to time so that, to the extent possible, the cumulative Offering
Expenses allocated with respect to each Partnership Interest at any time is
the same amount. In the event the General Partner shall determine that such
result is not likely to be achieved through future allocations of Offering
Expenses, the General Partner may allocate other items of income, gain,
deduction, or loss so as to achieve the same effect on the Capital Accounts
of the Partners.
12.6 . Curative Allocations. The allocations set forth in Sections 6.1(c),
6.5(a), 6.5(b), 6.5(c), 6.5(d), 6.5(e), and 6.5(f) hereof (the
"Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to
this Section 6.6. Therefore, notwithstanding any other provision of
this Section 6 (other than the Regulatory Allocations), the General
Partner shall make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each
Partner's Capital Account balance is, to the extent possible, equal to
the Capital Account balance such Partner would have had if the
Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Sections 6.1(a) and
6.5(g). In exercising its discretion under this Section 6.6, the
General Partner shall take into account future Regulatory Allocations
under Sections 6.5(a) and 6.5(b) that, although not yet made, are
likely to offset other Regulatory Allocations previously made under
Sections 6.5(f).
12.7 . Section 704(b) Limitation. Notwithstanding any other provision of
this Agreement to the contrary, no allocation of any item of income or
loss shall be made to a Partner if such allocation would not have
"economic effect" pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii) or otherwise be in accordance with its interest in
the Partnership within the meaning of Treasury Regulation Sections
1.704-1(b)(3) and 1.704-2. To the extent an allocation cannot be made
to a Partner due to the application of this Section 6.7, such
allocation shall be made to the other Partners entitled or required to
receive such allocation hereunder.
12.8 . Distributions Upon Liquidation of Partnership.
---------------------------------------------
(a) Upon liquidation of the Partnership the assets of the
Partnership shall be distributed no later than the later of 90
days after the date of such liquidation or the end of the
Partnership's taxable year in which the liquidation occurs and
shall be applied in the following order of priority:
(i) To the payment of debts and liabilities of the Partnership (including
amounts owed to Partners or former Partners) and expense of liquidation;
(ii) Unless inconsistent with Treasury Regulation Section
1.704-1(b)(2)(ii)(b), or any successor provision, to
set up any reserves which the General Partner deems
reasonably necessary for contingent or unforeseen
liabilities or obligations of the Partnership arising
out of or in connection with the business of the
Partnership; and
(iii) After all Capital Account adjustments for the
Partnership's taxable year in which the liquidation
occurs (including without limitation adjustments
required under Treasury Regulation Section
1.704-1(b)(2)(iv)(e), relating to distributions in
kind), to the Partners in accordance with each
Partner's positive Capital Account balance.
12.9 . Liquidation of Partner's Partnership Interest. Except as may
otherwise be required in this Agreement, if a Partner's Partnership
Interest is to be liquidated, liquidating distributions shall be made
in accordance with the positive Capital Account balance of such
Partner, as determined after taking into account all Capital Account
adjustments for the Partnership's taxable year during which such
liquidation occurs, by the end of the taxable year, or if later, within
ninety (90) days after the date of such liquidation. If a Partner's
Partnership Interest is to be liquidated, it has a negative Capital
Account balance and it is obligated to restore some or all of its
negative Capital Account upon liquidation of the Partnership pursuant
to Section 3.7, then such Partner shall, by the end of the taxable year
or, if earlier, within ninety (90) days of the date of such
liquidation, contribute cash to the Partnership in an amount equal to
its negative Capital Account or such lesser amount as provided in
Section 3.7. Where a Partner's Partnership Interest is to be liquidated
by a series of distributions, such Partner's Partnership Interest shall
not be considered liquidated until the final distribution has been
made. For purposes of this Section 6.9, a liquidation of a Partner's
Partnership Interest means the termination of the Partner's entire
Partnership Interest by means of a distribution or series of
distributions to the Partner by the Partnership.
12.10 . In-Kind Distributions.
---------------------
(a) Prior to a distribution of property (other than cash and other
than in complete liquidation of the Partnership or a Partner's
Partnership Interest), the Capital Accounts of the Partners
shall be adjusted to reflect the manner in which the
unrealized income, gain, loss and deduction inherent in such
property (that has not previously been reflected in the
Capital Accounts), would be allocated among the Partners if
there were a taxable disposition of the property on the date
of distribution.
(b) If the distribution of property (other than cash) is to a Partner in
complete liquidation of the Partner's Partnership Interest or in
liquidation of the Partnership, prior to such distribution, the Capital
Accounts of all the Partners shall be adjusted to reflect the manner in
which the unrealized income, gain, loss and deduction inherent in all the
Partnership's property (that has not previously been reflected in the
Capital Accounts) would be allocated among the Partners if there was a
taxable disposition of all such property on the date of the liquidating
distribution.
(c) If any assets of the Partnership are distributed to the Partners in kind,
the Partners shall own and hold the same as tenants in common.
12.11 . Additional Tax Allocation Provisions.
------------------------------------
(a) For income tax purposes, allocations of income and loss (and
items thereof) shall be made in accordance with the foregoing
allocations of income, gain and loss for financial purposes.
(b) Notwithstanding anything to the contrary contained herein, items of income,
gain, loss and deduction with respect to property, other than cash,
contributed to the Partnership by a Partner or with respect to an
adjustment to the Partners' Capital Accounts to reflect a revaluation of
the Partnership Assets, shall be allocated among the Partners so as to take
into account the variation between the basis of the property to the
Partnership and its fair market value at the time of contribution or, in
the case of a revaluation of the Partnership Assets, the variation between
the basis of the Partnership Assets to the Partnership and its fair market
value as of the date of revaluation, as provided in Section 704(c) of the
Code and Regulations thereunder and Treasury Regulations Section
1.704-1(b)(2)(iv)(g).
(c) As between a Partner who has transferred all or part of its Partnership
Interest and its transferee, all items of income, gain, deduction and loss,
for any year shall be apportioned on the basis of the number of days in
each such year that each was the holder of such Partnership Interest
(making any adjustments necessary to comply with the provisions of Section
706(d)(2) of the Code), without regard to the results of the Partnership's
operations during the period before and after the date of such transfer,
provided that if both the transferor and transferee consent thereto a
special closing of the books shall be had as of the effective date of such
transfer and the apportionment of items of income and gain, and deduction
and loss, shall be made on the basis of actual operating results.
Notwithstanding the above, gain or loss resulting from a Major Capital
Event or a Liquidating Event shall be allocated only to those persons who
are Partners as of the date on which such transaction is consummated.
13 ARTICLE
14 FISCAL MATTERS
14.1 . Books and Records. The General Partner shall keep, or cause to be
kept, at the expense of the Partnership, full and accurate books and
records of all transactions of the Partnership in accordance with
accepted accounting principles, consistently applied. Among such books
and records the General Partner shall keep:
(a) A current list of the following items:
(i) the name and mailing address of each Partner, separately identifying in
alphabetical order the General Partner and the Limited Partners;
(ii) the last known street address of the business or residence of each General
Partner;
(iii) the Partnership Interest of each Partner; and
(b) Copies of the Partnership's federal, state and local tax returns for each
of the Partnership's six most recent tax years;
(c) A copy of this Agreement, the Certificate, all amendments and
restatements, executed copies of any powers of attorney under
which this Agreement, the Certificate and any and all
amendments or restatements thereto have been executed. All of
such books and records shall, at all times, be maintained at
the principal place of business of the Partnership and the
Limited Partners and their agents and attorneys shall have the
right to inspect and copy any of them, at their own expense,
during normal business hours.
14.2 . Reports and Statements. Within ninety (90) days after the end of each
Year of the Partnership, the General Partner shall send to each person
who was a Limited Partner at any time during such year such tax
information, including without limitation, federal tax Schedule K-1, as
shall be reasonably necessary for the preparation by such person of his
federal income tax return.
14.3 . Audit. A Majority in Interest of the Limited Partners may require an
audit of the books and records of the Partnership to be conducted at
any time (but not more frequently than once each calendar year). Any
such audit so required shall be conducted by auditors selected by a
Majority in Interest of the Limited Partners at the expense of the
Partnership.
14.4 . Tax Returns. The General Partner shall cause to be prepared and
delivered to the Partners on or before seventy-five days following the
end of each Fiscal Year, at the expense of the Partnership, all federal
and any required state and local income tax returns for the Partnership
for the preceding Fiscal Year. If the Partnership's income tax returns
are audited, the General Partner shall retain, at the expense of the
Partnership, lawyers, accountants and other professionals to
participate in such audit in order to contest assertions by the
auditing agent that may be materially adverse to the Partners.
14.5 . Bank Accounts. The General Partner, in the name of the Partnership,
shall open and maintain a special bank account or accounts in a bank or
savings and loan association, the deposits of which are insured by an
agency of the United States government, in which shall be deposited all
funds of the Partnership. There shall be no commingling of the
Partnership Assets with the property and assets of any other Person.
14.6 . Tax Elections. The General Partner shall determine all federal income tax
elections available to the Partnership.
15 ARTICLE
TRANSFERS OF GENERAL PARTNERSHIP INTEREST;
16 ADMISSION OF SUBSTITUTE PARTNERS
16.1 . Restriction on Transfers by the General Partner.
-----------------------------------------------
(a) All or part of a general Partnership Interest may be
Transferred by the General Partner only with the prior written
approval of a Majority in Interest of the Limited Partners.
(b) The General Partner shall have the right and power, at any
time and from time to time without the consent of any other
Partner, to Transfer limited Partnership Interests.
16.2 Admission of General Partner.
----------------------------
A transferee of all or part of a general Partnership Interest
may be admitted to the Partnership as a general partner only upon
providing to the General Partner all of the following:
(a) The written approval of the General Partner and a Majority in Interest of
the Limited Partners, which approval may be granted or denied in the sole
discretion of the Partners;
(b) such financial statements, guarantee or other assurance as the
General Partner may require with regard to the ability of the
proposed general partner to fulfill the financial obligations
of a general partner hereunder;
(c) acceptance, in form satisfactory to the General Partner, of
all the terms and provisions of this Agreement and any other
documents required in connection with the operation of the
Partnership pursuant to the terms of this Agreement;
(d) a certified copy of a resolution of its Board of Directors (if it is a
corporation) authorizing it to become a general partner under the terms and
conditions of this Agreement;
(e) such other documents or instruments as may be required in order to effect
its admission as a general partner; and
(f) payment of such reasonable expenses as may be incurred in connection with
its admission as a general partner.
16.3 . Restrictions on Transfers by Limited Partners.
---------------------------------------------
(a) All or part of a Partnership Interest may be transferred by a Limited
Partner only with the prior written approval of the General Partner and
a Majority in Interest of the Limited Partners, which approval may be
granted or denied in the sole discretion of the Partners. In no event
may a Partnership Interest be transferred if such Transfer would result
in a termination of the Partnership under Code Section 708, nor may a
Partnership Interest be transferred to a "tax-exempt entity" (as
defined in Code Section 168(h)) which would effect the method or manner
in which the Partnership may depreciate Partnership Assets.
(b) A transfer of a Partnership Interest may be made only if, prior to the
date thereof, the Partnership receives an opinion of counsel,
satisfactory in form and substance to the General Partner, that neither
the offering nor the proposed transfer will violate any Federal or
applicable state securities law or regulations, will prevent the
Partnership from being entitled to use any method of depreciation which
the Partnership might otherwise be entitled to use, or will adversely
affect the status of the Partnership as a partnership for Federal
income tax purposes.
16.4 Admission of Limited Partners. A transferee of a Limited Partner's
Partnership Interest may be admitted to the Partnership as a Limited
Partner only upon furnishing to the General Partner all of the following:
(a) the written approval of the General Partner and a Majority in Interest of
the Limited Partners, which approval may be granted or denied in the sole
discretion of the Partners;
(b) acceptance, in a form satisfactory to the General Partner, of
all the terms and conditions of this Agreement and any other
documents required in connection with the operation of the
Partnership pursuant to the terms of this Agreement;
(c) such other documents or instruments as may be required in order to effect
his admission as a Limited Partner; and
(d) payment of such reasonable expenses as may be incurred in connection with
his admission as a Limited Partner.
Provided, however, the General Partner shall have the right to admit
Persons as Limited Partners in the event of a Dilution Offering
pursuant to Article X.
16.5 . Cost of Transfers. The transferor and, if it fails or refuses to do
so, then the transferee, of any Partnership Interest shall reimburse
the Partnership for all costs incurred by the Partnership resulting
from any Transfer.
16.6 . Effect of Attempted Disposition in Violation of this Agreement. Any
attempted Transfer of any Partnership Interest in breach of this
Agreement shall be null and void and of no effect whatsoever.
16.7 Rights of Transferee. Unless admitted to the Partnership in accordance
with Section 8.3 or Section 8.5, the transferee of a Partnership
Interest or a part thereof shall not be entitled to any of the rights,
powers, or privileges of his predecessor in interest, except that he
shall be entitled to receive and be credited or debited with his
proportionate share of Partnership income, gains, profits, losses,
deductions, credits or distributions.
16.8 Amendment of Certificate of Limited Partnership and Qualification.
The General Partner shall take all steps necessary and
appropriate to prepare and record any amendments to the Certificate, as
may be necessary or appropriate from time to time to comply with the
requirements of the Act, including, without limitation, upon the
admission to the Partnership of any general partner pursuant to the
provisions of Section 8.3, and may for this purpose exercise the power
of attorney delivered to the General Partner pursuant to Section 8.3,
Section 8.5 or Section 5.4. In addition, the General Partner shall take
all steps necessary and appropriate to prepare and record any and all
documents necessary to qualify the Partnership to do business in
jurisdictions where the Partnership is doing business, and may for this
purpose exercise the power of attorney delivered to the General Partner
pursuant to Section 8.3, Section 8.5 or Section 5.4.
17 ARTICLE
PURCHASE AND SALE OF A PARTNERSHIP INTEREST
18
18.1 . Optional Purchase of Partnership Interest from Limited Partners upon
Certain Events.
(a) Death. Upon the death of a Limited Partner, the deceased Limited Partner's
executor, administrator, or other legal or personal representative shall
give written notice of that fact to the Partnership. The Partnership shall
have the option to purchase at the Closing (as defined below) the
Partnership Interest of the deceased Limited Partner (whose executor,
administrator or other legal or personal representative shall then become
obligated to sell such Partnership Interest) at the price determined in the
manner provided in Section 9.1(f) of this Agreement and on the terms and
conditions provided in Section 9.2 of this Agreement. The Partnership shall
have a period of thirty (30) days following the date of notice of the death
of the Limited Partner (the "Option Period") within which to notify in
writing the deceased Limited Partner's executor, administrator or other
legal or personal representative, whether the Partnership wishes to
purchase all or a portion of the Partnership Interest of the deceased
Limited Partner. If the Partnership does not elect to purchase all of the
Partnership Interest of the deceased Limited Partner before the expiration
of the Option Period and in the manner provided herein, the portion of the
Partnership Interest not purchased shall be held by the deceased Limited
Partner's executor, administrator or other legal representative pursuant to
the terms of this Agreement. The Partnership, in its sole discretion, may
elect to assign its rights to purchase the Partnership Interest of a
deceased Limited Partner under this Section 9.1(a) to the General Partner
and, in such case, the General Partner shall have the same rights as
provided for the Partnership under this Section 9.1(a).
(b) Bankruptcy, Insolvency or Assignment for Benefit of Creditors of a Limited
Partner. In the event that an involuntary or voluntary proceeding under the
Federal Bankruptcy Code, as amended, is filed for or against any Limited
Partner, or if any Limited Partner shall make an assignment for the benefit
of his creditors, or if any Limited Partner has a receiver or custodian
appointed for his assets, or any Limited Partner generally fails to pay his
debts when due, the insolvent Limited Partner shall give written notice
(the "Notice of Insolvency") to the Partnership of the commencement of any
such proceeding or the occurrence of such event within five days of the
first notice to him of such commencement or occurrence of such event. The
Partnership shall have the option to purchase at the Closing (as defined
below) the Partnership Interest of the insolvent Limited Partner (which the
insolvent Limited Partner or his trustee, custodian, receiver or other
personal or legal representative, as the case may be, shall then become
obligated to sell) at the price determined in the manner provided in
Section 9.1(f) of this Agreement and on the terms and conditions provided
in Section 9.2 of this Agreement. The Partnership shall have a period of
thirty (30) days following the date of the Notice of Insolvency (the
"Option Period") within which to notify in writing the insolvent Limited
Partner or his trustee, custodian, receiver, or other legal or personal
representative, whether the Partnership wishes to purchase all or a portion
of the Partnership Interest of the insolvent Limited Partner. If the
Partnership does not elect to purchase all of the Partnership Interest of
the insolvent Limited Partner before the expiration of the Option Period
and in the manner provided herein, the portion of the Partnership Interest
not purchased shall be held by the insolvent Limited Partner, his trustee,
custodian, receiver or other legal or personal representative pursuant to
the terms of this Agreement. The Partnership, in its sole discretion, may
elect to assign its rights to purchase the Partnership Interest of an
insolvent Limited Partner under this Section 9.1(b) to the General Partner
and, in such case, the General Partner shall have the same rights as
provided for the Partnership under this Section 9.1(b).
(c) Breach of Section 5.6. In the event the Partnership receives notice of a
breach of Section 5.6 by or with respect to a Limited Partner (the
"Defaulting Limited Partner"), the Partnership may elect, in its sole
discretion, to treat such event as a default under this Agreement and
enforce the provisions of this Section 9.1(c). If the Partnership elects to
enforce the provisions of this Section 9.1(c), the Partnership shall give
written notice of such election (the "Notice of Default") to the Defaulting
Limited Partner. The Partnership shall have the option to purchase at the
Closing (as defined below) the Partnership Interest of the Limited Partner
(which the Limited Partner shall then become obligated to sell) at the
price determined in the manner provided in Section 9.1(f) of this Agreement
and on the terms and conditions provided in Section 9.2 of this Agreement.
The Partnership shall have a period of thirty (30) days following the date
it sends the Notice of Default (the "Option Period") within which to notify
in writing the Defaulting Limited Partner, whether the Partnership wishes
to purchase all or a portion of the Partnership Interest of the Defaulting
Limited Partner. If the Partnership does not elect to purchase all of the
Partnership Interest of the Defaulting Limited Partner before the
expiration of the Option Period and in the manner provided herein, the
portion of the Partnership Interest not purchased shall be held by the
Defaulting Limited Partner pursuant to the terms of this Agreement. The
Partnership, in its sole discretion, may elect to assign its rights to
purchase the Partnership Interest of a Defaulting Limited Partner under
this Section 9.1(c) to the General Partner and, in such case, the General
Partner shall have the same rights as provided for the Partnership under
this Section 9.1(c).
(d) Incompetency. If any Limited Partner shall be adjudicated incompetent in an
appropriate judicial proceeding, the legal or personal representative of
the incompetent Limited Partner shall give written notice to the
Partnership of the occurrence of such event (the "Notice of Incompetency").
The Partnership shall have the option to purchase at the Closing (as
defined below) the Partnership Interest of the Limited Partner adjudicated
incompetent (which the Limited Partner shall then become obligated to
sell), at the price determined in the manner provided in Section 9.1(c) of
this Agreement and on the terms and conditions provided in Section 9.2 of
this Agreement. The Partnership shall have a period of thirty (30) days
following the date of the Notice of Incompetency (the "Option Period")
within which to notify in writing the Limited Partner involved in the
Domestic Proceeding, whether the Partnership wishes to purchase all or a
portion of the Partnership Interest of such Limited Partner. If the
Partnership does not elect to purchase the Partnership Interest of the
Limited Partner adjudicated incompetent before the expiration of the Option
Period and in the manner provided herein, the portion of the Partnership
Interest not purchased shall be held by the legal or personal
representative of such Limited Partner pursuant to the terms of this
Agreement. The Partnership, in its sole discretion, may elect to assign its
rights to purchase the Partnership Interest of the Limited Partner
adjudicated incompetent under this Section 9.1(d) to the General Partner
and, in such case, the General Partner shall have the same rights as
provided for the Partnership under this Section 9.1(d).
(e) Divestiture Option. If state or federal regulations or laws are enacted or
applied, or if any other legal developments occur, which, in the opinion of
the General Partner adversely affect (or potentially adversely affect) the
operation of the Partnership (e.g., the enactment or application of
prohibitory physician self-referral legislation against the Partnership or
its Partners), the General Partner shall promptly either, in its sole
discretion, (i) take the steps outlined in this Section 9.1(e) to divest
the Limited Partners of their Partnership Interest, or (ii) dissolve the
Partnership. If the General Partner chooses option (i), it shall deliver a
written notice to all of the Limited Partners (the "Notice of Election")
and purchase such Partnership Interest for its own account. The purchase
price to be paid for the Partnership Interest shall be determined in the
manner as provided in Section 9.1(f) and shall be on the terms and
conditions as provided in Section 9.2. The transfer of the Partnership
Interest and the payment of the purchase price Limited Partners' shall be
made at such time as determined by the General Partner to be in the best
interests of the Partnership and its Limited Partners. Each Limited Partner
hereby makes, constitutes and appoints the General Partner, with full power
of substitution, his true and lawful attorney-in-fact, to take such actions
and execute such documents on his behalf to effect the transfer of his
Partnership Interest as provided in this Section 9.1(e). The foregoing
power of attorney shall not be affected by the subsequent incapacity,
mental incompetence, dissolution or bankruptcy of any Limited Partner.
(f) Purchase Price. The purchase price to be paid for the Partnership Interest
of any Limited Partner whose interest is being purchased pursuant to the
provisions of Sections 9.1(a) - (e) (the "Retiring Limited Partner") shall
be determined in the manner provided in this Section 9.1(f). The purchase
price for the Partnership Interest purchased pursuant to the provisions of
Section 9.1(a) shall be an amount equal to one and one-half (1 1/2) times
the aggregate distributions made with respect to such Partnership Interest
pursuant to Section 6.2 during the twelve-month period ending on the
Valuation Date (as defined below); provided, however, that the purchase
price shall not exceed the fair market value of the Partnership Interest.
The purchase price for the Partnership Interest purchased pursuant to the
provisions of Sections 9.1(b) - (e) shall be an amount equal to the
Retiring Limited Partner's share of the Partnership's book value, if any,
as reflected by the Capital Account of the Retiring Limited Partner
(unadjusted for any appreciation in Partnership assets and as reduced by
depreciation deductions claimed by the Partnership for tax purposes). The
determination of the Retiring Limited Partner's Capital Account on the
Valuation Date (as defined below) shall be made by the Partnership's firm
of certified public accountants (the "Partnership Accountant") upon a
review of the Partnership books of account, and a formal audit is expressly
waived. The statement of the Partnership Accountant with respect to the
Capital Account of the Retiring Limited Partner on the Valuation Date shall
be binding and conclusive upon the Partnership, the purchasing Partners and
the Retiring Limited Partner and his executor, administrator, trustee,
custodian, receiver or other personal or legal representative. The
"Valuation Date" means the last day of the month immediately preceding the
month in which occurs: (i) the death of a Retiring Limited Partner, in the
case of a purchase by reason of death; (ii) the bankruptcy or insolvency of
a Retiring Limited Partner, in the case of a purchase by reason of such
bankruptcy or insolvency; (iii) breach of Section 5.6 as provided in
Section 9.1(c) in the case of a purchase by reason thereof; (iv) the Notice
of Incompetency as provided in Section 9.1(c), in the case of a purchase by
reason thereof; (v) the Notice of Election as provided in Section 9.1(e),
in the case of a purchase by reason thereof. Any Limited Partner whose
Partnership Interest is purchased pursuant to the provisions of Section
9.1(a) - (e) shall be entitled only to the purchase price which shall be
paid at the Closing in cash (or by certified or cashier's check) and shall
not be entitled to any Partnership distributions made after the Valuation
Date. The transfer of Partnership Interest of a Retiring Limited Partner
shall be deemed to occur as of the Valuation Date and the Retiring Limited
Partner shall have no voting or other rights as a Limited Partner after
such date. The purchaser shall be entitled to any distributions
attributable to the transferred interest after the Valuation Date and the
Partnership shall have the right to deduct the amount of any such
distributions made to the Retiring Limited Partner after the Valuation Date
from the purchase price.
9.2 Closing.
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(a) Closing of Purchase and Sale. The Closing of any
purchase and sale of Partnership Interest pursuant to Sections
9.1(a) - (e) of this Agreement shall take place at the
principal office of the Partnership, or such other place
designated by the General Partner, on the date determined as
follows (the "Closing"):
(i) In the case of a purchase and sale occurring by
reason of the death of a Limited Partner as provided in
Section 9.1(a) of this Agreement, the Closing shall be held on
the thirtieth day (or if such thirtieth day is not a business
day, the next business day following the thirtieth day) next
following the last to occur of
(a) Qualification of the executor or personal administrator of the deceased
Limited Partner's estate;
(b) The date on which any necessary determination of the purchase price of
the Partnership Interest to be purchased has been made; or
(c) The date that coincides with the close of the Option Period.
(ii) In the case of a purchase and sale occurring by
reason of the occurrence of one of the events described in
Sections 9.1(b) - (d) of this Agreement, the Closing shall be
held on the thirtieth day (or if such thirtieth day is not a
business day, the next business day following the thirtieth
day) next following the later to occur of:
(a) The date on which any necessary determination of the purchase price of
the Partnership Interest to be purchased has been made; or
(b) The date that coincides with the close of the Option Period.
At the Closing, although not necessary to effect the transfer,
the Retiring Limited Partner shall concurrently with tender
and receipt of the applicable purchase price, deliver to the
purchaser duly executed instruments of transfer and
assignment, assigning good and marketable title to the portion
or portions of the Retiring Limited Partner's entire
Partnership Interest thus purchased, free and clear from any
liens or encumbrances or rights of others therein. The parties
acknowledge that occurrence of any of the triggering events
described in Sections 9.1(a) - (e) and compliance with all the
Sections of this Agreement are sufficient to effect the
complete transfer of the Retiring Limited Partner's
Partnership Interest and the Retiring Limited Partner shall be
deemed to consent to admission of the transferee as a
substitute Limited Partner. Notwithstanding the date of the
Closing or whether a Closing is successfully held, the
transfer of the Partnership Interest of a Retiring Limited
Partner shall be deemed to occur as of the Valuation Date as
defined in Section 9.1(f). The deemed transfer is effective
regardless of whether the Retiring Limited Partner performs
the duties set forth in this Section 9.2.
19 ARTICLE
DILUTION OFFERING
20
Notwithstanding any other provision of this Agreement to the
contrary, the General Partner may cause the Partnership to issue
additional Partnership Interest from time to time upon such terms and
conditions and in exchange for such Capital Contributions as determined
by the General Partner in its sole and absolute discretion. As a result
of a Dilution Offering, the Partnership Interest of each Partner will
be diluted proportionately.
21 ARTICLE
RESIGNATION AND WITHDRAWAL OF
22 GENERAL PARTNER
The General Partner shall not resign or withdraw as General
Partner except with the consent of a Majority in Interest of the
Limited Partners.
23 ARTICLE
24 DISSOLUTION
24.1 . Dissolution.
-----------
(a) It is the intention of the Partners that the business of the Partnership be
continued by the Partners, or those remaining, pursuant to the provisions
of this Agreement, notwithstanding the occurrence of any event which would
result in a statutory dissolution of the Partnership pursuant to the laws
of the State of Texas, and no Partner shall be released or relieved of any
duty or obligation hereunder by reason thereof; provided, however, that the
business of the Partnership shall be terminated, its affairs wound-up and
its property and assets distributed in liquidation on the earlier to occur
of:
(i) December 31, 2040;
(ii) a determination by all of the Partners that the business of the Partnership
should be terminated;
(iii) the Bankruptcy or insolvency of the Partnership;
(iv) subject to the provisions of paragraph (b) below, the
death, incompetency, Bankruptcy, insolvency,
withdrawal or removal from the Partnership of the
last remaining General Partner;
(v) the date upon which a Liquidating Event occurs, and all payments have been
received; or
(vi) entry of a decree of judicial dissolution.
(b) Upon the occurrence of any event set forth in subparagraph (iv) of
paragraph (a) above with respect to the last remaining General Partner, the
business of the Partnership shall be continued pursuant to the provisions
of this Agreement if, within a period of 90 days from the date of such
occurrence, each of the Limited Partners shall elect in writing that it be
so continued and shall designate one or more Persons to be admitted to the
Partnership as a General Partner. Any such Person shall upon admission to
the Partnership succeed to all of the rights and powers of a General
Partner hereunder, provided that the former General Partner shall retain
and be entitled to its share of Profits, Losses, distributions, and capital
associated with the General Partner's Partnership Interest.
24.2 . Wind-Up of Affairs. As expeditiously as possible following the
occurrence of an event giving rise to a termination of the business of
the Partnership, the General Partner (or a special liquidator who may
be appointed by a Majority in Interest of the other Partners if the
termination results from a circumstance described in Section 12.1
(a)(iv) above relative to the General Partner) shall wind-up the
affairs of the Partnership, sell Partnership Assets for cash at the
highest price reasonably obtainable, distribute the proceeds in
accordance with Section 6.8 in liquidation of the Partnership and file
a certificate of cancellation with the Secretary of State of Texas.
25 ARTICLE
26 MISCELLANEOUS
26.1 . Amendments. In addition to the right of the General Partner to amend
certain of the provisions of this Agreement by reason of the power of
attorney granted to the General Partner under Section 5.4, a Majority
in Interest of the Partners may, by instrument in writing, amend any of
the other provisions hereof, except for those provisions which affect
the rights of Partners to share income, gain, distributions, loss and
deductions and require Partners to make Additional Capital
Contributions, which provisions shall be amended only upon the written
consent of all Partners adversely affected thereby.
26.2 . Partition. No Partner shall be entitled to a partition of the Partnership
Assets notwithstanding any provision of law to the contrary.
26.3 . Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to
the other party pursuant to this Agreement shall be in writing and
shall be mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery,
telegram or facsimile transmission addressed as set forth on the
Signature Pages attached hereto. Each party may designate by notice in
writing a new address to which any notice, demand, request or
communication may thereafter be so given, served or sent. Each notice,
demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently
given, served, sent and received for all purposes at such time as it is
delivered to the addressee with the return receipt, the delivery
receipt, the affidavit of messenger or (with respect to a facsimile
transmission) the answer back being deemed conclusive evidence of such
delivery or at such time as delivery is refused by the addressee upon
presentation.
26.4 . Provisions Severable. Every provision of this Agreement is intended
to be severable and, if any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall
not affect the validity of the remainder of this Agreement.
26.5 . Counterparts. This Agreement, and any amendments hereto, may be
executed in counterparts, each of which shall be deemed an original,
and such counterparts shall constitute but one and the same instrument.
26.6 . Headings. The headings of the various Sections are intended solely
for convenience of reference, and shall not be deemed or construed to
explain, modify or place any construction upon the provisions hereof.
26.7 . Successors and Assigns. This Agreement and any amendments hereto
shall be binding upon and, to the extent expressly permitted by the
provisions hereof, shall inure to the benefit of the Partners and their
respective heirs, legal representatives, successors and assigns.
26.8 . APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND ALL OBLIGATIONS OF
ONE PARTNER TO ANOTHER ARE PERFORMABLE IN XXXXXX COUNTY.
26.9 . NOTICE OF INDEMNIFICATION. THE PARTIES TO THIS AGREEMENT HEREBY
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS CERTAIN INDEMNIFICATION
PROVISIONS PURSUANT TO SECTION 4.8.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
IN WITNESS WHEREOF, the Partners have executed this Agreement
this _____ day of January, 2001.
GENERAL PARTNER:
LITHOTRIPTERS, INC.
By:
Xxxx Xxxxxx, President
TABLE OF CONTENTS
(Continued)
Page
ARTICLE I.......DEFINITIONS 2
1.1....Terms Defined 2
1.2. Number and Gender......................12
ARTICLE II..... CONTINUATION 12
2.1....Continuation 12
2.2....Name 12
2.3....Principal Place of Business;
Registered Office; Registered Agent 13
2.4. Purposes...............................13
2.5....Term 13
ARTICLE III.....CAPITAL CONTRIBUTIONS 13
3.1....Initial Capital Contributions 13
3.2. Additional Capital Contributions.......14
3.3....Capital Accounts 14
3.4. Failure to Make Additional Capital
Contributions..........................14
3.5. Partner Loans..........................15
3.6. Other Matters Relating to Capital
Contributions..........................15
3.7....Deficit Capital Account Balances 16
ARTICLE IV......RIGHTS AND POWERS OF THE GENERAL
PARTNER 16
4.1....Duties of General Partner 16
4.2....Illustrative Rights and Powers 16
4.3....Payment of Costs and Expenses 18
4.4. Exercise of Rights and Powers..........18
4.5....Management Fee 18
4.6....Liability 18
4.7....Indemnification 19
4.8....Removal of the General Partner 19
4.9. Tax Matters Partner....................20
ARTICLE V.......LIMITED PARTNER MATTERS 22
5.1....Limitation of Liability 22
5.2. Management.............................22
5.3....Consents 22
5.4....Power of Attorney 22
5.5....Death, Bankruptcy, Etc. 23
5.6....Outside Activities 23
ARTICLE VI......ALLOCATIONS AND DISTRIBUTIONS 23
6.1... Allocation of Profits and Losses 23
6.2....Distributions of Cash Flow from
Operations 24
6.3. Allocation of Net Gains from Capital
Transactions
and Net Losses from Capital
Transactions...........................24
6.4....Distributions of Cash Flow from a
Major Capital Event 25
6.5. Special Allocations....................25
6.6....Curative Allocations 28
6.7....Section 704(b) Limitation 28
6.8. Distributions Upon Liquidation of
Partnership............................28
6.9....Liquidation of Partner's Partnership
Interest 29
6.10...In-Kind Distributions 29
6.11...Additional Tax Allocation
Provisions 30
ARTICLE VII.....FISCAL MATTERS 31
7.1....Books and Records 31
7.2. Reports and Statements.................31
7.3....Audit 31
7.4....Tax Returns 32
7.5. Bank Accounts..........................32
7.6....Tax Elections 32
ARTICLE VIII TRANSFERS OF GENERAL PARTNERSHIP
INTEREST;
ADMISSION OF SUBSTITUTE PARTNERS 32
8.1....Restriction on Transfers by the
General Partner 32
8.2....Admission of General Partner 32
8.3. Restrictions on Transfers by Limited
Partners...............................33
8.4....Admission of Limited Partners 34
8.5....Cost of Transfers 34
8.6. Effect of Attempted Disposition in
Violation of this Agreement............34
8.7....Rights of Transferee 34
8.8 Amendment of Certificate of Limited
Partnership
and Qualification......................35
ARTICLE IX.....PURCHASE AND SALE OF A PARTNERSHIP
INTEREST 35
9.1. Optional Purchase of Partnership
Interest from Limited Partners
upon Certain Events.....................35
9.2. .Closing 39
ARTICLE X......DILUTION OFFERING 40
ARTICLE XI.....RESIGNATION AND WITHDRAWAL OF
GENERAL PARTNER 40
ARTICLE XII....DISSOLUTION 41
12.1..Dissolution 41
12.2. Wind-Up of Affairs......................42
ARTICLE XIII MISCELLANEOUS...........................42
13.1..Amendments 42
13.2..Partition 42
13.3. Notices.................................42
13.4..Provisions Severable 43
13.5..Counterparts 43
13.6. Headings................................43
13.7..Successors and Assigns 43
13.8..APPLICABLE LAW 43
13.9..NOTICE OF INDEMNIFICATION 43
