EXHIBIT 2.4
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PARTNERSHIP AGREEMENT
OF
OUTPATIENT SURGERY CENTER OF INDIANA, LLP
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OMEGA HEALTH SYSTEMS OF INDIANA, INC., an Indiana corporation ("Omega"),
and THE OUTPATIENT SURGERY CENTER OF INDIANA, INC., an Indiana corporation
("OSCI") (Omega and OSCI are sometimes hereinafter collectively referred to as
the "Partners" and individually referred to as a "Partner"), hereby form an
Indiana limited liability partnership by entering into this Partnership
Agreement of OUTPATIENT SURGERY CENTER OF INDIANA, LLP, dated to be effective as
of May 1, 1997.
ARTICLE I - DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms shall, for purposes of this Agreement, have the meanings designated in
this ARTICLE I:
Section I.1 ACT. The term "Act" shall mean: the Uniform Partnership Act,
Indiana Code Section 23-4-1-1 et seq., as from time to time amended.
Section I.2 AFFILIATE. The term "Affiliate" shall mean: any Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with another Person
Section I.3 AGREEMENT. The term "Agreement" shall mean: this Limited
Liability Partnership Agreement of Outpatient Surgery Center of Indiana, LLP, as
originally executed and as subsequently amended from time to time.
Section I.4 BANKRUPTCY. The term "Bankruptcy" shall mean: bankruptcy under
the Federal Bankruptcy Code or insolvency under any state insolvency act.
Section I.5 BUSINESS DAY. The term "Business Day" shall mean: any day
other than a Saturday, Sunday and those legal public holidays specified in
U.S.C. (beta) 6103(a), as amended from time to time.
Section I.6 CAPITAL ACCOUNT. The term "Capital Account" shall mean: the
Capital Account maintained for each Partner pursuant to SECTION 6.5 of this
Agreement.
Section I.7 CAPITAL CONTRIBUTION. The term "Capital Contribution" shall
mean: the total amount of cash or property contributed to the Partnership by all
the Partners or any one Partner, as the case may be.
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Section I.8 CODE. The term "Code" shall mean: the Internal Revenue Code of
1986, as it has been and may be amended.
Section I.9 INTEREST. The term "Interest" shall mean: all rights and
interests of a Partner under this Agreement and the Act, including (i) the right
of a Partner, expressed as a percentage in SECTION 6.3A, to receive
distributions of revenues, allocations of income and loss and distributions of
liquidation proceeds under this Agreement, and (ii) all management rights,
voting rights or rights to consent.
Section I.10 MANAGING PARTNER. The term "Managing Partner" shall mean
Omega until such time, if any, as the Partners designate another Partner as
such.
Section I.11 OMEGA. The term "Omega" shall mean: Omega Health Systems of
Indiana, Inc., an Indiana corporation, which is one of the Partners under this
Agreement.
Section I.12 NOTIFICATION. The term "Notification" shall mean: a writing
containing any information required by this Agreement to be communicated to any
Person, which may be personally delivered, sent by registered or certified mail,
postage prepaid, to such Person, at the last known address of such Person on the
Partnership records. Any such Notification shall be deemed to be given (i) when
delivered, in the case of personal delivery, and (ii) on the earlier of actual
receipt by the addressee or three (3) days following the date on which it is
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and sent as aforesaid, in the case of mail. Any communication
containing information sent to any Person other than as required by the
foregoing sentences, but which is actually received by such Person, shall
constitute Notification as of the date of such receipt for all purposes of this
Agreement.
Section I.13 PARTNERS. The term "Partners" shall mean: at any time, the
Persons who then own Interests in the Partnership. The initial Partners are:
Omega and OSCI.
Section I.14 PARTNERSHIP. The term "Partnership" shall mean: Outpatient
Surgery Center of Indiana, LLP, an Indiana limited liability partnership, as
said limited liability partnership may from time to time be constituted.
Section I.15 PARTNERSHIP PROPERTY OR PROPERTIES. The term "Partnership
Property" and the term "Partnership Properties" shall mean: all interests,
properties and rights of any type owned by the Partnership, whether owned by the
Partnership at the date of its formation or thereafter acquired.
Section I.16 PERSON. The term "Person" shall mean: Any natural person,
limited liability company, limited liability partnership, general partnership,
limited partnership, corporation, joint venture, trust, business trust,
cooperative or association.
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Section I.17 OSCI. The term "OSCI" shall mean: The Outpatient Surgery
Center of Indiana, Inc., an Indiana corporation, which is one of the Partners
under this Agreement.
Section I.18 TRANSFER. The term "Transfer" shall mean: Any change in the
record ownership of an Interest, whether made voluntarily or involuntarily by
operation of law, including, but not limited to, the following:
A. a sale or gift to any Person;
B. if a Partner of the Partnership is an individual, a transfer to
the personal representative of the estate of such individual upon such
individual's death, and any subsequent transfer from such personal
representative to the heirs or devisees of the deceased individual under
such individual's will or by the applicable laws of descent and
distribution;
C. if a Partner of the Partnership is an individual, a transfer to a
judicially appointed personal representative as a result of the
adjudication by a court of competent jurisdiction that the transferor
individual is mentally incompetent to manage his person or property;
D. if a Partner of the Partnership is an individual, a transfer, to
the extent permitted by law, to the transferor individual's spouse or
former spouse, or heirs of such spouse or former spouse, in connection
with a division of their community or other property upon the death of the
transferor individual, divorce or the death of such spouse;
E. a general assignment for the benefit of creditors, or any
assignment to a creditor resulting from the creditor's foreclosure upon or
execution against such Interest;
F. the filing by the transferor Partner of a voluntary Bankruptcy
petition; or
G. the entry of a judicial order granting the relief requested by
the petitioner in an involuntary Bankruptcy proceeding filed against the
transferor Partner.
Section 1.18 GOVERNING BOARD. The term "Governing Board" shall mean a
three member committee chosen by the Partners in accordance with the provision
of this Agreement to assure patient care quality, compliance with statutory and
regulatory health requirements, and to appoint a Chief of Staff.
Section I.19 CHIEF OF STAFF. The term "Chief of Staff" shall mean a
physician holding an unlimited license to practice medicine in Indiana,
specializing in ophthalmology.
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Section I.20 TRANSFER DATE. The term "Transfer Date" shall mean the date
upon which the necessary licenses and approvals for the Partnership to operate
the Ambulatory Surgery Center (the "ASC") operated by OSCI on the date of this
Agreement are obtained by the Partnership.
ARTICLE II - THE PARTNERSHIP
Section II.1 FORMATION OF PARTNERSHIP. The Partners hereby form,
constitute and establish a limited liability partnership pursuant to the Act
and, as provided below, subject to the terms of this Agreement. Except as herein
stated, the Act shall govern the rights and liabilities of the Partners.
Section II.2 QUALIFICATION IN OTHER JURISDICTIONS. Prior to the
Partnership conducting business in any jurisdiction other than Indiana, the
Managing Partner shall cause the Partnership to comply with all requirements, if
any, necessary to qualify the Partnership as a foreign partnership in that
jurisdiction.
Section II.3 TERM. Pursuant to the Act, the term of the Partnership shall
commence effective as of the date first above written. The Partnership shall
exist until April 30, 2037, unless sooner terminated in accordance with this
Agreement.
Section II.4 MERGER. The Partnership may merge with or into another
partnership (general or limited) or other entity, or enter into an agreement to
do so with the consent of all of the Partners.
Section 2.5 REGISTRATION. The Managing Partner is hereby authorized to
execute and file a Certificate of Registration on behalf of the Partnership with
the Indiana Secretary of State as evidence of the intention of the Partnership
to act as an Indiana limited liability partnership, and to do all such other
things as execute and file all such other documents and instruments as may be
deemed necessary by the Partners for the Partnership to become and remain an
Indiana limited liability partnership.
Section 2.6 REGISTERED AGENT, REGISTERED OFFICE. The registered agent of
the Partnership for service of process shall be Xxxxxx X. Xxxxx, whose address
is 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxx 00000. The registered agent will notify
Omega promptly upon receipt of any notice received in his capacity as registered
agent.
ARTICLE III - NAME; PLACE OF BUSINESS; PRINCIPAL OFFICE
Section III.1 NAME. The name of the Partnership is Outpatient Surgery
Center of Indiana, LLP.
Section III.2 ASSUMED NAMES. The Managing Partner may cause the
Partnership to do business under one or more assumed names. In connection with
the use of any such assumed names, the Managing Partner shall cause the
Partnership to comply with Indiana law.
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Section III.3 PRINCIPAL OFFICE AND OTHER OFFICES. The principal office of
the Partnership shall be located at 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxx, 00000,
or such other place as the Managing Partner may designate from time to time, and
the Partnership shall maintain records there or in Memphis, Tennessee. The
Partnership may have such other offices as the Partners may designate from time
to time.
ARTICLE IV - PURPOSES
Section IV.1 PARTNERSHIP PURPOSES. The purpose of the Partnership is to
engage in the business of operating an ambulatory surgical center (the ASC), and
to do all acts or things necessary or appropriate to accomplish such purpose.
ARTICLE V - PARTNERS
Section V.1 INITIAL PARTNERS. The names and addresses of the initial
Partners of the Partnership are as set forth on SCHEDULE 5.1 of this Agreement.
At the date hereof, there are no other Partners of the Partnership and no other
Person has any right to take part in the ownership or management of the
Partnership.
Section V.2 ADMISSION OF ADDITIONAL PARTNERS. Additional Partners of the
Partnership may be admitted as follows:
A. ACQUISITION FROM THE PARTNERSHIP. If the proposed additional
Partner desires to purchase his Interest from the Partnership, such
purchase may be made and the admission of the additional Partner shall
become effective only if the identity of the proposed additional Partner
and the amount of the Capital Contribution to be made by him in exchange
for his Interest is first unanimously approved by the existing Partners.
B. ACQUISITION FROM A PARTNER. If the proposed additional Partner
desires to acquire his Interest in a Transfer from an existing Partner,
such Transfer may be made and the admission of the additional Partner
shall become effective only in accordance with SECTION 11.2 and ARTICLE
XVI hereof. All other attempted Transfers of any interest or right, or any
part thereof, in or in respect of the Partnership shall be null and void
ab initio.
ARTICLE VI - CAPITAL CONTRIBUTIONS AND INTERESTS
Section VI.1 INITIAL CAPITAL CONTRIBUTIONS. The Initial Capital
Contributions which have been delivered concurrently with the execution of this
Agreement by the Partners is cash in the amount of Two hundred Dollars ($200.00)
representing a contribution of One Hundred Dollars ($100.00) each by OSCI and
Omega.
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Section VI.2 ADDITIONAL CAPITAL CONTRIBUTIONS. The Additional Capital
Contributions (herein so called) of each Partner shall be made on the Transfer
Date set forth in Section 1.20 of this Agreement in accordance with the joint
instructions of Omega and OSCI to Mantel, Cohen, Garelick, Reiswerg & Xxxxxxx,
P.C., Indianapolis, Indiana, the Escrow Agent for the Partnership (the "Escrow
Agent"), and shall be as follows:
A. CONTRIBUTION OF OMEGA. The Additional Capital Contribution of
Omega, which has been delivered to the Escrow Agent, concurrently with the
execution of this Agreement by the Partners, is cash in the amount of One
Million Two Hundred Forty-One Thousand U.S. Dollars ($1,241,000.00); and,
B. CONTRIBUTION OF OSCI. The Additional Capital Contribution of
OSCI, which has been delivered to the Escrow Agent, concurrently with the
execution of this Agreement by the Partners, consists of a Xxxx of Sale to
the Partnership for substantially all the assets of the ASC owned by OSCI,
as set forth on SCHEDULE 6.2B(1), excepting those assets that are
excluded, as set forth on SCHEDULE 6.2B(2), and certain liabilities of
OSCI , as set forth on SCHEDULE 6.2B(3), which liabilities are acquired
and assumed by the Partnership, all of which assets and liabilities have a
net fair market value, as agreed to by the Partners, of Two Million Four
Hundred Eighty-Two Thousand U.S.
Dollars ($2,482,000.00).
Section VI.3 INTERESTS. The following provisions shall apply with regard
to Interests in the Partnership:
A. PERCENTAGE INTERESTS. Upon making the respective Initial Capital
Contribution specified in SECTION 6.1, each Partner shall own the
percentage Interest set forth opposite such Partner's name as follows:
Partner Interest
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Omega Health Systems of Indiana, Inc. 50%
The Outpatient Surgery Center of Indiana, Inc. 50%
The respective percentage Interest of each Partner may not be reduced without
such Partner's express written consent.
B. CERTIFICATES REPRESENTING INTERESTS. The Interests of the
Partners may be evidenced by certificates issued by the Partnership,
which, if issued, shall be in such form and incorporate such legends,
recitals and provisions as the Partners shall deem necessary or advisable.
If certificates are issued, the Partners shall establish reasonable
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procedures for the delivery and reissuance of certificates in connection
with Transfers of Interests, split-ups or combinations of certificates,
loss or destruction of certificates and other eventualities. Among other
matters, such procedures may set forth required fees, indemnifications,
documentation and signatures (including guarantees thereof) to be obtained
from parties requesting reissuance of certificates. Such procedures need
not be incorporated into this Agreement, but a copy thereof shall be
delivered to all Partners.
Section VI.4 NO FURTHER CAPITAL CONTRIBUTIONS. Without the approval of all
the Partners, no Partner shall be obligated or allowed to make any Capital
Contribution other than the respective Initial Capital Contribution and
Additional Capital Contribution of each Partner as set forth in SECTION 6.1 and
SECTION 6.2. This provision of this Agreement may not be amended without the
express written consent of all Partners.
Section VI.5 CAPITAL ACCOUNTS. A capital account shall be established and
maintained for each Partner. Each Partner's capital account (a) shall be
increased by (i) the amount of money contributed by that Partner to the
Partnership, (ii) the fair market value of property contributed by that Partner
to the Partnership (net of liabilities secured by the contributed property that
the Partnership is considered to assume or take subject to Section 752 of the
Code), and (iii) allocations to that Partner of Partnership income and gain (or
items thereof), including income and gain exempt from tax and income and gain
described in Treas. Reg. 1.704-1(b)(2)(iv)(g), but excluding income and gain
described in Treas. Reg. 1.704-1(b)(4)(i), and (b) shall be decreased by (i) the
amount of money distributed to that Partner by the Partnership, (ii) the fair
market value of property distributed to that Partner by the Partnership (net of
liabilities secured by the distributed property that the Partner is considered
to assume or take subject to Section 752 of the Code), (iii) allocations to that
Partner of expenditures of the Partnership described in Section 705(a)(2)(B) of
the Code, and (iv) allocations of Partnership loss and deduction (or items
thereof), including loss and deduction described in Treas. Reg.
1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii) above and
loss or deduction described in Treas. Reg. 1.704-1(b)(4)(i) or
1.704-1(b)(4)(iii). The Partners' capital accounts also shall be maintained and
adjusted as permitted by the provisions of Treas. Reg. 1.704-1(b)(2)(iv)(f) and
as required by the other provisions of Treas. Reg. 1.704-1(b)(2)(iv) and
1.704-l(b)(4), including adjustments to reflect the allocations to the Partners
of depreciation, depletion, amortization, and gain or loss as computed for book
purposes rather than the allocation of the corresponding items as computed for
tax purposes, as required by Treas. Reg. 1.704-1(b)(2)(iv)(g). A Partner that
has more than one Interest shall have a single capital account that reflects all
its Interests, regardless of the class of Interests owned by that Partner and
regardless of the time or manner in which those Interests were acquired. On the
transfer of all or part of an Interest, the capital account of the transferor
that is attributable to the transferred Interest or part thereof shall carry
over to the transferee Partner in accordance with the provisions of Treas.
Reg. 1.704-1(b)(2)(iv)(1).
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Section VI.6 RETURN OF CAPITAL CONTRIBUTIONS. Anything in this Agreement
to the contrary notwithstanding, upon the receipt by the Partnership of the
Additional Capital Contribution of both Partners from the Escrow Agent, the
Partnership shall distribute to OSCI cash in the amount of One Million Two
Hundred Forty-One Thousand U.S. Dollars ($1,241,000.00); otherwise, the Capital
Contributions of the Partners shall not be subject to withdrawal except with the
approval of all of the Partners, or upon dissolution of the Partnership.
Distributions of Partnership net profits, if any, that are not to be applied to
the business of the Partnership, shall be made to the Partners in accordance
with their respective Distributive Shares. Except as otherwise provided herein
or in the Act, no Partner shall have the right to withdraw, or receive any
return of, such Partner's Capital Contribution.
Section VI.7 INTEREST. No interest shall be paid by the Partnership on
Capital Contributions or on balances in Partners' Capital Accounts.
Section VI.8 LOANS FROM PARTNERS. Loans by a Partner to the Partnership
shall not be considered Capital Contributions. If any Partner shall advance
funds to the Partnership in excess of the amounts required hereunder to be
contributed by such Partner to the capital of the Partnership, the making of
such advances shall not result in any increase in the amount of the Capital
Account of such Partner. The amounts of any such advances shall be a debt of the
Partnership to such Partner and shall be payable or collectible only out of the
Partnership assets in accordance with the terms and conditions upon which such
advances are made. Any advances made to the Partnership pursuant to this Section
6.7 shall bear interest until repaid at the rate charged by Huntington National
Bank of Indiana, in Indianapolis, to its best corporate customers (the "Prime
Rate") plus one percentage point; for example, if the Prime Rate is 8%, interest
on such advances made pursuant to this SECTION 6.7 shall be at 9%. The repayment
of loans from a Partner to the Partnership upon liquidation shall be subject to
the order of priority set forth in SECTION 13.4A hereof. The Partnership debts
provided for in SECTION 7.9 hereof shall not be governed by this SECTION 6.8.
ARTICLE VII - ALLOCATIONS AND DISTRIBUTIONS
Section VII.1 ALLOCATION OF INCOME AND LOSS. Except as otherwise provided
for herein, the following provisions shall apply with regard to the allocation
of income and loss of the Partnership:
A. ALLOCATIONS GENERALLY. Except as may be required by Section
704(c) of the Code and Treas. Reg. 1.704-1(b)(2)(iv)(f)(4), the income,
gains, losses, deductions and credits (or items thereof) of the
Partnership shall be shared by the Partners in accordance with their
respective percentage Interests. It is the intention of the Partners that
allocations of income, gains, losses, deductions and credits (or items
thereof) pursuant to this SECTION 7.1 be in accordance with the Partners'
Interests for tax purposes.
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B. Allocations with respect to Transferred Interests. All items of
income, gain, loss, deduction, and credit allocable to any Interest that
may have been transferred shall be allocated between the transferor and
the transferee based on the portion of the calendar year during which each
was recognized as owning that Interest, without regard to the results of
Partnership operations during any particular portion of that calendar year
and without regard to whether cash distributions were made to the
transferor or the transferee during that calendar year; provided, however,
that this allocation must be made in accordance with a method permissible
under Section 706 of the Code and the regulations thereunder.
Section VII.2 DETERMINATION OF INCOME AND LOSS. At the end of each fiscal
year of the Partnership, income, gain, loss, deduction and credit (or items
thereof) shall be determined by the Managing Partner pursuant to this Agreement
for the accounting period then ending and shall be allocated to the Partners in
accordance with SECTION 7.1.
Section VII.3 CASH DISTRIBUTIONS. Commencing no later than the end of the
Partnership's first fiscal quarter, the Managing Partner shall, at least
quarterly, balance the Partnership's accounts and distribute to the Partners, in
accordance with their respective Interests, the amount by which cash on hand
exceeds the amount necessary to meet the current costs, expenses and liabilities
of the Partnership (including, without limitation, the certain debts listed in
Section 7.9 hereof, and a reasonably adequate reserve for working capital and
contingencies). The Partnership shall not make any distribution to the Partners
if, immediately after giving effect to the distribution, all liabilities of the
Partnership, other than liabilities to Partners with respect to their Interests
and liabilities for which the recourse of creditors is limited to specified
property of the Partnership, exceed the fair value of Partnership Property,
except that the fair value of Partnership Property that is subject to a
liability for which recourse of creditors is limited shall be included in the
Partnership assets only to the extent that the fair value of that Partnership
Property exceeds that liability.
Section VII.4 DISTRIBUTIONS OF OTHER PROPERTY. From time to time, the
Managing Partner also may cause property of the Partnership other than cash to
be distributed to the Partners, which distribution must be made in accordance
with their respective Interests and may be made subject to existing liabilities
and obligations. Immediately prior to such distribution, the capital accounts of
the Partners shall be adjusted as provided in Treas. Reg. 1.704-1(b)(2)(iv)(f).
Section VII.5 MINIMUM GAIN LIMITATIONS/QUALIFIED INCOME OFFSET.
A. MINIMUM GAIN DEFINED. The term "Minimum Gain" means the amount
determined by computing, with respect to each nonrecourse liability of the
Partnership, the amount of gain (of whatever character), if any, that
would be realized by the Partnership if the Partnership disposed of (in a
taxable transaction) the Partnership Property subject to such nonrecourse
liability in full satisfaction thereof, and by then aggregating the
amounts so computed.
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B. NONRECOURSE DEDUCTIONS DEFINED. The term "Nonrecourse Deduction"
means, for a taxable year, an amount of the net increase, if any, in the
amount of Minimum Gain of the Partnership during that taxable year plus
the amount, if any, by which the net increase in Minimum Gain of the
Partnership during any prior taxable year exceeds the total amount of
items of Partnership loss, deduction and expenditures set forth in Section
705(a)(2)(B) of the Code for such year. The nonrecourse deductions for a
taxable year shall consist first of depreciation or cost recovery
deductions, if any, with respect to items of Partnership Property subject
to one or more nonrecourse liabilities of the Partnership to the extent of
the increase in the Minimum Gain attributable to the nonrecourse
liabilities to which each such item of property is subject, with the
remainder Nonrecourse Deductions, if any, made up of a pro rata portion of
the Partnership's other items of deduction, loss and expenditures set
forth in Section 705(a)(2)(B) of the Code for that year.
C. DEFICIT CAPITAL ACCOUNT DEFINED. For purposes of this
SECTION 7.5, the term "Deficit Capital Account" means the deficit
balance, if any, of a Partner's Capital Account as determined pursuant
to SECTION 6.4 adjusted by (i) adding (crediting) to such Capital
Account the amount of such Partner's share of the Minimum Gain, and
(ii) subtracting (debiting) from such Capital Account the amount of
such Partner's share of the items described in Treas. Reg.
1.704-l(b)(2)(ii)(d)(4), (5), and (6).
D. PARTNER'S SHARE OF MINIMUM GAIN. A Partner's share of Minimum
Gain of the Partnership at the end of any Partnership taxable year equals
the aggregate Nonrecourse Deductions allocated to such Partner (and such
Partner's predecessor in interest) up to that time, less such Partner's
(and such Partner's predecessor in interest) aggregate share of the net
decreases in Minimum Gain of the Partnership up to that time. A Partner's
share of the net decrease in Minimum Gain of the Partnership during a
Partnership taxable year equals an amount that bears the same relation to
the net decrease in Minimum Gain of the Partnership during such year as
such Partner's share of Minimum Gain of the Partnership at the end of the
prior taxable year of the Partnership bears to the amount of Minimum Gain
of the Partnership at the end of such prior taxable year.
E. LIMITATION ON LOSS ALLOCATIONS. Notwithstanding anything in this
Article VII to the contrary, any allocation of loss or deduction of the
Partnership (other than a Nonrecourse Deduction) shall be allocated to a
Partner only to the extent that such allocation does not cause such
Partner to have a Deficit Capital Account.
F. MINIMUM GAIN CHARGEBACK. Notwithstanding anything in the
foregoing sections of this Article VII to the contrary, in the event that
there is a net decrease in Minimum Gain of the Partnership during the
Partnership's taxable year, all Partners with a Deficit Capital Account
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will be allocated, before any other allocations of Partnership items for
such taxable year under this Agreement, items of income and gain for such
year (and, if necessary, subsequent years) in an amount needed to
eliminate such deficit as quickly as possible. The Minimum Gain chargeback
allocated in any taxable year shall consist first of gains recognized from
the disposition of items of Partnership Property subject to one or more
nonrecourse liabilities of the Partnership to the extent of the decrease
in Minimum Gain attributable to the disposition of such items of property
with the remainder of such Minimum Gain chargeback, if any, made up of a
pro rata portion of the Partnership's other items of income and gain for
that year.
G. QUALIFIED INCOME OFFSET. Notwithstanding anything in the
foregoing sections of this ARTICLE VII to the contrary, in the event that
any Partner unexpectedly receives any adjustments, allocations, or
distributions described in Treas. Reg. 1.704-1(b)(2)(ii)(d)(4), (5) or
(6), which causes a deficit balance in such Partner's Capital Account (or
causes an increase in an existing deficit balance in such Partner's
Capital Account), items of income and gain shall be allocated to such
Partner in an amount and manner sufficient to eliminate the deficit
balance in such Partner's Capital Account as quickly as possible;
provided, however, that allocations of income or gain shall only be
required pursuant to this Subsection G of SECTION 7.5 if and to the extent
that the foregoing adjustments, allocations or distributions cause a
Deficit Capital Account of the Partners receiving such adjustments,
allocations, or distributions determined at the end of the taxable year of
the Partnership to which such allocations relate.
Section VII.6 COMPLIANCE WITH SECTION 704 OF THE CODE. The provisions of
this Agreement relating to maintenance of Capital Accounts and the computation
and allocation of net income, gains, and losses are intended to comply with
Section 704 of the Code and the Regulations thereunder (including, without
limitation, the provisions regarding substantial economic effect, qualified
income offset, allocations of nonrecourse deductions, minimum gain chargeback,
and other considerations under Section 704 of the Code and the Regulations
thereunder), and shall be interpreted and applied in a manner consistent with
Section 704 of the Code and such Regulations in order to achieve the agreed
allocation of cash among the Partners. In the event the Partners determine that
it is prudent or necessary to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed or allocated in order to comply
with Section 704 of the Code and/or the Regulations thereunder and/or to make
any optional elections thereunder, the Partnership may make such modification
and/or election, including an amendment to this Agreement if the Partners deem
it necessary. The Partners shall also make any appropriate modifications to this
Agreement in the event unanticipated events might otherwise cause this Agreement
not to comply with Section 704 of the Code and/or the Regulations thereunder.
Further, notwithstanding anything to the contrary contained in this Agreement,
if the Regulations thereunder require an allocation of net income, gains, and
losses in a manner different from that set forth in ARTICLE VII (other than this
SECTION 7.6) of this Agreement, such allocations shall be taken into account for
the purpose of equitably adjusting subsequent allocations of net income, gains,
and losses so that the net cumulative allocations, in the aggregate, allocated
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to each Partner pursuant to ARTICLE VII of this Agreement, including this
SECTION 7.6 shall, as quickly as possible and to the extent possible, and
without violating the constraints contained in this Section 7.6, be the same as
if no such allocations had been made under this SECTION 7.6 so that the agreed
upon allocation of cash among the Partners will be respected.
Section VII.7 SAVINGS CLAUSE. The tax allocation provisions contained in
ARTICLE VII of this Agreement are intended to produce final Capital Account
balances that are at levels ("Target Final Balances") which permit liquidating
distributions that are made in accordance with such final Capital Account
balances to be equal to distributions that would occur on final liquidation of
the Partnership. To the extent that the tax allocation provisions contained in
ARTICLE VII of this Agreement would not produce the Target Final Balances, the
provisions of this Agreement shall be amended to produce such Target Final
Balances. Notwithstanding the other provisions of this Agreement, allocations of
net income, gains, and losses shall be made prospectively as necessary to
produce such Target Final Balances (and, to the extent such prospective
allocations would not reach such result, the prior tax returns of the
Partnership shall be amended to reallocate Partnership net income, gains, and
losses to produce such Target Final Balances).
Section VII.8 DEPRECIATION RECAPTURE. To the extent not inconsistent with
the foregoing provisions of this ARTICLE VII, any gain of the Partnership
attributable to depreciation recapture shall be allocated among the Partners in
proportion with the depreciation deductions previously allowable to the Partners
with respect to the assets generating such recapture.
Section VII.9 CERTAIN DEBTS OF THE PARTNERSHIP. Omega Health Systems, Inc.
("OHSI") will loan to the Partnership certain amounts for payments to OSCI in
satisfaction of OSCI's obligation to pay to Xx. Xxxxxx Xxxxx the 1997 earnings
of OSCI prior to May 1, 1997 in the estimated amount of $15,830.00 and to
satisfy certain outstanding liabilities of OSCI noted on SCHEDULE 6.2B(3) HEREOF
in the amount of $263,030.98. Accordingly, the Partnership shall execute a note
in the amount of $278,860.98 in favor of OHSI in the form and under the terms
set forth in Exhibit 7.9.1 attached hereto. The principal and interest payments
on such note shall be paid by the Partnership as an operating expense of the
Partnership and before any allocation or distribution to the Partners of any
cash or other distributions from the Partnership pursuant to this Agreement. The
estimated amount set forth in this SECTION 7.9 representing OSCI's 1997 earnings
shall be adjusted on or before July 1, 1997, to reflect the actual 1997 earnings
amount as of April 30, 1997. The difference, if any, between the adjusted amount
determined as of April 30, 1997 and the amount referred to above and provided
for in the promissory note attached in Exhibit 7.9.1 shall be paid in cash to
the appropriate party on or before July 1, 1997. The OSCI 1997 earnings shall be
net after tax earnings of OSCI calculated in accordance with generally accepted
accounting prinicples, consistently applied.
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ARTICLE VIII - OWNERSHIP OF PARTNERSHIP PROPERTY
Section VIII.1 PARTNERSHIP PROPERTY. Partnership Property shall be deemed
to be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership Property or
any portion thereof. Title to any or all Partnership Property may be held in the
name of the Partnership or one or more nominees, as the Partners may determine.
All Partnership Property shall be recorded as the property of the Partnership on
its books and records, irrespective of the name in which legal title to such
Partnership Property is held.
ARTICLE IX - FISCAL MATTERS; BOOKS AND RECORDS
Section IX.1 BANK ACCOUNTS; INVESTMENTS. Capital Contributions, revenues
and any other Partnership funds shall be deposited in a bank account established
by the Managing Partner in the name of the Partnership, or shall be invested by
the Managing Partner in furtherance of the purposes of the Partnership. No other
funds shall be deposited into Partnership bank accounts or commingled with
Partnership investments. Funds deposited in the Partnership's bank accounts may
be withdrawn only to be invested in furtherance of the Partnership purposes, to
pay Partnership debts or obligations or to be distributed to the Partners
pursuant to this Agreement.
Section IX.2 RECORDS REQUIRED; RIGHT OF INSPECTION. During the term of the
Partnership and for a period of four (4) years thereafter, the Managing Partner
shall maintain in the Partnership's principal office in the United States
specified in SECTION 3.3 hereof all records of the Partnership, including,
without limitation, a current list of the names, addresses and Interests held by
each of the Partners (including the dates on which each of the Partners became a
Partner), copies of federal, state and local information or income tax returns
for each of the Partnership's six (6) most recent tax years, copies of this
Agreement, including all amendments or restatements, and correct and complete
books and records of account of the Partnership. On written request to the
Managing Partner stating the purpose, a Partner or an assignee of a Partner's
Interest (an "eligible Person") may examine and copy in person or by the
eligible Person's representative, at any reasonable time, for any proper
purpose, and at the eligible Person's expense, records required to be maintained
and such other information regarding the business, affairs and financial
condition of the Partnership as is just and reasonable for the eligible Person
to examine and copy. Upon written request by any eligible Person, the Managing
Partner shall provide to the eligible Person without charge true copies of (i)
this Agreement and all amendments or restatements, and (ii) any of the tax
returns of the Partnership described above.
Section IX.3 BOOKS AND RECORDS OF ACCOUNT. The Managing Partner shall
maintain adequate books and records of account for the Partnership that shall be
maintained on the cash method of accounting and on a basis consistent with
appropriate provisions of the Code, containing, among other entries, a Capital
Account for each Partner.
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Section IX.4 TAX RETURNS AND INFORMATION. The Partners intend for the
Partnership to be treated as a partnership for tax purposes. The Managing
Partner shall prepare or cause to be prepared and filed all federal, state and
local income and other tax returns that the Partnership is required to file.
Within the shorter of (i) such period as may be required by applicable law or
regulation, or (ii) seventy-five (75) days after the end of each calendar year,
the Managing Partner shall send or deliver to each Person who was a Partner at
any time during such year such tax information as shall be reasonably necessary
for the preparation by such Person of his federal income tax return and state
income and other tax returns.
Section IX.5 DELIVERY OF FINANCIAL STATEMENTS TO PARTNERS. As to each
fiscal year of the Partnership and as to each month during such fiscal year of
the Partnership, the Managing Partner shall send to each Partner a copy of (i) a
balance sheet of the Partnership as of the end of such period, (ii) an income
statement of the Partnership for such period, and (iii) a statement showing the
revenues distributed by the Partnership to Partners in respect of such period.
Such financial statements shall be delivered by no later than ninety (90) days
following the end of the fiscal year to which the statements apply and no later
than thirty (30) days following the end of the month to which such financial
statements apply. Unless a Partner requests in writing prior to the end of the
fiscal year to which the financial statements apply that the financial
statements shall be audited (in which case SECTION 9.6 below shall apply), such
statements need not be audited.
Section IX.6 AUDITS AT REQUEST OF PARTNER. Any Partner shall have the
right at all reasonable times during usual business hours to audit, examine and
make copies of or extracts from any and all records of the Partnership. At any
time during the term of this Agreement, or within a reasonable time after the
termination of this Agreement, but no more often than annually, any Partner
shall have the right to have KPMG Peat Marwick LLP, or another nationally
recognized accounting firm reasonably acceptable to the other Partner(s) conduct
an audit during normal business hours upon reasonable notice to Managing
Partner. The cost and related expenses of such audit shall be paid for by the
Partner requesting the audit, provided, however, in the event any such audit
discloses an annual underpayment to the Partners exceeding $25,000, then
Managing Partner shall promptly pay such underpayment to the Partners in
accordance with this Agreement and shall reimburse the Partner requesting the
audit for the cost of such audit. Managing Partner shall have the right to
review the auditor's preliminary draft report and to discuss any indicated
underpayment with such auditor.
Section IX.7 FISCAL YEAR. The Partnership's fiscal year shall end on
December 31 of each calendar year.
Section IX.8 TAX ELECTIONS. The Managing Partner shall make the following
elections on the appropriate tax returns of the Partnership:
A. to adopt the calendar year as the Partnership's fiscal year;
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B. to adopt the cash method of accounting and to keep the
Partnership's books and records on the income-tax method;
C. if a distribution of Partnership property as described in Section
734 of the Code occurs or if a transfer of Interest as described in
Section 743 of the Code occurs, on written request of any Partner, to
elect, pursuant to Section 754 of the Code, to adjust the basis of
Partnership properties subject to the agreement of the Partners;
D. to elect to amortize the organizational expenses of the
Partnership ratably over a period of sixty (60) months as permitted by
Section 709(b) of the Code; and
E. any other election the Managing Partner may deem appropriate and
in the best interests of the Partners and/or the Partnership.
Neither the Partnership nor any Partner may make an election for the Partnership
to be excluded from the application of the provisions of subchapter K of chapter
1 of subtitle A of the Code or any similar provisions of applicable state law.
Section IX.9 "TAX MATTERS PARTNER". The Managing Partner shall be the "tax
matters partner" of the Partnership pursuant to Section 6231 (a)(7) of the Code.
The Managing Partner shall take such action as may be necessary to cause each
other Partner to become a "notice partner" within the meaning of Section 6223 of
the Code. The Managing Partner shall inform each other Partner of all
significant matters that may come to its attention in its capacity as "tax
matters partner" by giving notice thereof on or before the fifth Business Day
after becoming aware thereof and, within that time, shall forward to each other
Partner copies of all significant written communications it may receive in that
capacity. The Managing Partner may not take any action contemplated by Sections
6222 through 6232 of the Code without the consent of the Partners.
ARTICLE X - MANAGEMENT OF THE PARTNERSHIP
Section X.1 MANAGEMENT. The following shall apply with respect to the
management of the Partnership:
A. PARTNERS. The powers of the Partnership shall be exercised by or
under the authority of, and the business and affairs of the Partnership
shall be managed under the direction of, the Managing Partner. Any Person
dealing with the Partnership, other than a Partner, may rely on the
authority of the Managing Partner and its managers and officers in taking
any action in the name of the Partnership without inquiry into the
provisions or compliance herewith, regardless of whether that action is
actually taken in accordance with the provisions of this Agreement.
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B. OFFICERS. The Managing Partner may designate one or more
individuals as officers of the Partnership, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to them
from time to time. Officers need not be Partners or residents of the State
of Indiana. Any officer may be removed by the Managing Partner at any
time, with or without cause. Each officer shall hold office until his or
her successor shall be duly designated and shall qualify or until the
earlier of the officer's death, resignation or removal. Any number of
offices may be held by the same Person. The salaries or other
compensation, if any, of the officers and agents of the Partnership shall
be fixed by the Managing Partner with the prior consent of the Partners
holding eighty percent (80%) of the Partnership Interests.
Section X.2 POWERS OF THE MANAGING PARTNER GENERALLY. Except with the
written consent of Partners holding eighty percent (80%) of the Partnership
Interests, the Managing Partner shall have no power to cause the Partnership to
do any act outside the purpose of the Partnership as set forth in ARTICLE IV
hereof. Subject to the foregoing limitation and all other limitations in this
Agreement, the Managing Partner shall have full, complete and exclusive power to
manage and control the Partnership, and shall have the authority to take any
action it deems to be necessary, convenient or advisable in connection with the
management of the Partnership (but solely for Partnership purposes as set forth
in SECTION 4.1), including, but not limited to, the power and authority on
behalf of the Partnership:
A. to expend the Partnership's Capital Contributions and revenues
and to execute and deliver all checks, drafts, endorsements and other
orders for the payment of Partnership funds for individual expenditures or
a series of related expenditures not exceeding Ten Thousand Dollars
($10,000.00) each;
B. to employ agents, employees, accountants, lawyers, clerical help,
and such other assistance and services as may seem proper, and to pay
therefor such remuneration as is reasonable and appropriate;
C. to purchase, lease, rent, or otherwise acquire or obtain the use
of office equipment, materials, supplies, and all other kinds and types of
real or personal property, and to incur expenses for travel, telephone,
telegraph and for such other things, services and facilities, as may be
deemed necessary, convenient or advisable for carrying on the business of
the Partnership not exceeding Five Thousand Dollars ($5,000.00);
D. to carry, at the expense of the Partnership, insurance of the
kinds and in the amounts that is advisable or make other arrangements for
payment of losses or liabilities to protect the Partnership or the
Partners, officers, agents and employees of the Partnership against loss
or liability;
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E. to do all acts, take part in any proceedings, and exercise all
rights and privileges as could an absolute owner of Partnership Property,
subject to the limitations expressly stated in this Agreement and the
faithful performance of the Managing Partner's fiduciary obligations to
the Partnership and the Partners;
F. to borrow money in the name of the Partnership and to pledge
Partnership Property as collateral therefor, provided, that the aggregate
outstanding principal amount of loans in the name of the Partnership
(excluding the loans provided for in SECTION 7.9 HEREOF) shall not at any
time exceed One Hundred Thousand Dollars ($100,000.00) unless consented to
by Partners holding eighty percent (80%) of the Partnership Interests;
and,
G. to take such other action and perform such other acts as the
Managing Partner deems reasonably necessary, convenient or advisable in
carrying out the business of the Partnership.
The enumeration of powers in this Agreement shall not limit the general or
implied powers of the Managing Partner or any additional powers provided by law.
Section 10.3 LIMITATION OF THE POWERS OF THE MANAGING PARTNER.
Notwithstanding the foregoing, the Managing Partner may NOT cause the
Partnership to do any of the following without the express written consent of
Partners holding eighty percent (80%) of the Partnership Interests:
A. Purchase any real property for or on behalf of the Partnership;
B. Sell any real property owned by the Partnership;
C. Merge with or into another partnership, corporation, limited
liability company or other entity, regardless of whether the Partnership
is the surviving entity of such merger;
D. Reorganize the Partnership;
E. Take any action in contravention of this Agreement or the Act;
F. Make an assignment for the benefit of creditors of the
Partnership or file a voluntary petition under the federal Bankruptcy Code
or any state insolvency law on behalf of the Partnership;
G. Confess any judgment against the Partnership;
H. Dispose or otherwise transfer any name, trademark, trade name,
service xxxx, or any other intangible asset used in the business of the
Partnership;
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I. Borrow money in the name of the Partnership or pledge Partnership
Property as collateral therefor if such borrowing causes the aggregate
outstanding principal amount of all loans in the name of the Partnership
(excluding the loans provided for in SECTION 7.9 hereof) at such time to
exceed One Hundred Thousand Dollars ($100,000.00);
J. Assign, transfer, pledge, compromise or release any individual
claim of or debt owing to the Partnership that is in excess of Five
Thousand Dollars ($5,000.00) except for payment in full;
K. Convey, sell or assign any Partnership property;
L. Do any act that would make it impossible to carry on the normal
and ordinary business of the Partnership; or
M. Amend, modify, supplement or otherwise change any of the terms or
conditions of the "Management Agreement" (defined in SECTION 17.1).
ARTICLE XI - RIGHTS POWERS AND OBLIGATIONS OF PARTNERS
Section XI.1 AUTHORITY. Except as otherwise specifically provided in this
Agreement, no Partner has the authority or power to act for or on behalf of the
Partnership, to do any act that would be binding on the Partnership, or to file
a withdrawal notice with the Indiana Secretary of State or take any other action
or execution or file any other document or instrument which would revoke or
otherwise adversely affect the status of the Partnership as an Indiana limited
liability partnership.
Section XI.2 RIGHT OF FIRST REFUSAL. In the event that Omega or its
parent, OHSI, in an isolated transaction (not involving a change of control or
sale of OHSI) desire (i) to sell substantially all of the assets of Omega
located in Xxxxxx and Fort Xxxxx, Indiana and any other location serviced by
Referral Eye Center, P.C., (ii) to sell Omega's interest in the Partnership to
an unrelated third party, or (iii) to merge or consolidate Omega into an
unrelated third party, then such proposed transaction shall be in writing and
signed by the third party and Omega or OHSI. Omega shall deliver to OSCI a copy
of such written proposal, and OSCI shall have forty-five (45) days to determine
whether it wishes to enter into such transaction with Omega or OHSI at the same
price and terms as offered to the third party. In the event that OSCI accepts
such purchase proposal, Omega or OHSI and OSCI shall close such sale within
thirty (30) days of the acceptance by OSCI. In the event that OSCI does not
accept such purchase proposal, then Omega or OHSI may proceed to consummate the
proposed sale to the third party on the price and terms as previously noticed to
OSCI. In the event that Omega or OHSI desires to modify the price or terms in a
manner that is more favorable to the third party buyer, then Omega or OHSI shall
give to OSCI the notice required above.
Section XI.3 TIME; OUTSIDE ACTIVITIES. Each Partner shall be required to
spend such time on Partnership matters as is reasonably required for the
purposes of the Partnership. All Partners shall be free to devote their
remaining time and attention to any other business matters. Each of the Partners
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hereto may engage in whatever other activities such Partner chooses, provided
that such activities, including the activities of an affiliate of such Partner,
are not directly or indirectly in competition with the business of the
Partnership within forty (40) miles of the ambulatory surgical center operated
by the Partnership which is, at the time of the execution of this Agreement,
located at 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxx. Except as provided herein,
nothing shall be deemed to prevent such Partners from engaging in such permitted
activities, individually, jointly with others, or as a part of any other limited
or general partnership, joint venture, or other entity to which such Partner is
or may become a party, or from dealing with the Partnership as independent
parties or through any other entity in which such Partner may be interested.
Section 11.4 TERMINATION BY OSCI IN EVENT OF DEFAULT BY OMEGA. In the
event of a default in that certain Management Agreement between the Partnership
and Omega provided for in SECTION 17 hereof, which default is not timely cured,
OSCI shall have the right to terminate the Management Agreement or in its
discretion to act in the name of the Partnership for purposes of such
termination or to otherwise act in the Partnership's best interest with respect
to the Management Agreement.
ARTICLE XII - MEETINGS OF PARTNERS
Section XII.1 PLACE OF MEETINGS. All meetings of Partners shall be held in
Marion, Indiana, during usual and customary business hours, or at such other
time or location as may be agreed to by the Partners.
Section XII.2 ANNUAL MEETING. Commencing with the calendar year next
following the calendar year in which the Partnership was organized, annual
meetings of the Partners shall be held on the first Tuesday in May each year at
such hour as may be designated in the notice of the meeting, if such day is a
Business Day, and if not a Business Day, then on the next following day that is
a Business Day. If the annual meeting is not held on the date above specified,
the Managing Partner shall cause a meeting in lieu to be shall be held as soon
thereafter as convenient, and any business transacted or election held at that
meeting shall be as valid as if held at the annual meeting. Failure to hold the
annual meeting at the designated time shall not work a dissolution of the
Partnership.
Section XII.3 SPECIAL MEETINGS. Special meetings of the Partners may be
called by resolution of the Partners holding ten percent (10%) or more of the
Interests, for the purpose of addressing any matter upon which the Partners may
vote under this Agreement. Partners may call a meeting by delivering to the
other Partners one or more written requests signed by the requisite number of
Partners, stating that the signing Partners wish to call a meeting and
indicating the specific purpose for which the meeting is to be held. Action at
the meeting shall be limited to those matters specified in the call of the
meeting.
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Section XII.4 NOTICE. A Notification of all meetings, stating the place,
day, and hour of the meeting and in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days before the meeting to each Partner
entitled to vote.
Section XII.5 WAIVER OF NOTICE. Attendance of a Partner at a meeting shall
constitute a waiver of Notification of the meeting, except where such Partner
attends for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened. Notification
of a meeting may also be waived in writing. Attendance at a meeting is not a
waiver of any right to object to the consideration of matters required to be
included in the Notification of the meeting but not so included, if the
objection is expressly made at the meeting.
Section XII.6 QUORUM. A quorum at any meeting of the Partners shall exist
if there is present at such meeting, whether present in person or by proxy,
Partners representing more than fifty percent (50%) of the total percentage
Interests.
Section XII.7 VOTING. Voting of the Partners with respect to issues
relative to the Partnership shall be as follows:
A. VOTING AND VOTING POWER. All Partners shall be entitled to vote
at meetings. Partners may vote either in person or by proxy at any
meeting. Each Partner's percentage voting power at a meeting shall be in
proportion to his percentage Interest except as provided in Section 13.1,
hereof.
B. VOTING ON MATTERS. With respect to any matter for which the
affirmative vote of Partners owning a specified portion of the Interests
is required by the Act or this Agreement, the affirmative vote of the
Partners owning such specified portion at a meeting at which a quorum is
present shall be the act of the Partners.
C. CHANGE IN VOTING PERCENTAGES. No provision of this Agreement
requiring that any action be taken only upon approval of Partners holding
a specified percentage of Interests may be modified, amended or repealed
unless such modification, amendment or repeal is approved by Partners
holding at least such percentage of Interests.
Section XII.8 CONDUCT OF MEETINGS. The Partners shall designate a Person
to serve as chairman of any meeting and shall further designate a Person to take
minutes of any meeting.
Section XII.9 ACTION BY WRITTEN CONSENT. Any action that may be taken at a
meeting of the Partners may be taken without a meeting if a consent in writing,
setting forth the action to be taken, shall be signed by Partners holding the
percentage of Interests required to approve such action under the Act or this
Agreement. Such consent shall have the same force and effect as a vote of the
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signing Partners at a meeting duly called and held pursuant to this ARTICLE XII.
No prior notice from the signing Partners to the other Partners shall be
required in connection with the use of a written consent pursuant to this
Section. Notification of any action taken by means of a written consent of less
than all of the Partners shall, however, be sent, within a reasonable time after
the date of the consent, to all of the Partners who did not sign the consent.
Section XII.10 PROXIES. A Partner may vote either in person or by proxy
executed in writing by the Partner. A facsimile, telegram, telex, cablegram or
similar transmission by the Partner, or a photographic, photostatic, facsimile
or similar reproduction of a writing executed by the Partner shall be treated as
an execution in writing for purposes of this Section. Proxies for use at any
meeting of Partners or in connection with the taking of any action by written
consent shall be filed with the Managing Partner, before or at the time of the
meeting or execution of the written consent, as the case may be. All proxies
shall be received and taken charge of and all ballots shall be received and
canvassed by the Managing Partner who shall decide all questions touching upon
the qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise provided in the proxy. A
proxy shall be revocable unless the proxy form conspicuously states that the
proxy is irrevocable and the proxy is coupled with an interest. Should a proxy
designate two or more Persons to act as proxies, unless such instrument shall
provide to the contrary, a majority of such Persons present at any meeting at
which their powers thereunder are to be exercised shall have and may exercise
all the powers of voting or giving consents thereby conferred, or if only one be
present, then such powers may be exercised by that one; or, if an even number
attend and a majority do not agree on any particular issue, the Partnership
shall not be required to recognize such proxy with respect to such issue if such
proxy does not specify how the Interests that are the subject of such proxy are
to be voted with respect to such issue.
Section XII.11 INFORMATION. In addition to the other rights specifically
set forth in this Agreement, each Partner is entitled to all information
relating to the business of the Partnership.
ARTICLE XIII - GOVERNING BOARD AND CHIEF OF STAFF
Section 13.1 PURPOSE AND SELECTION. In accordance with the regulatory
requirements of the State of Indiana, the Partners shall nominate a three-member
Governing Board which shall have patient care oversight of the ambulatory
surgical center. Omega shall nominate two members of the Governing Board and
OSCI shall nominate one member of the Governing Board.
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Section 13.2 DUTIES OF THE GOVERNING BOARD. The Governing Board shall:
A. Meet at least four times a year and function as an organized
board in accordance with the terms of this Agreement and maintain a written
record of its proceedings.
B. Adopt and maintain a listing of procedures that may be performed
by the Center.
C. Approve the Bylaws, Rules and Regulations of the medical staff.
D. Appoint members of the medical staff and assign privileges
consistent with their individual qualifications on an annual basis upon
recommendation of the medical staff.
E. Maintain a written transfer agreement with one or more hospitals
in proximity to the ASC immediate acceptance of patients who develop
complications or require postoperative confinement.
F. Provide for the periodic review of the ASC its operation by a
utilization review or other committee composed of three or more duly licensed
physicians having no financial interest in the facility.
G. Maintain liaison with the medical staff of the ASC.
H. Assure that in the event the ASC is not established under the
aegis of physicians, a physician holding an unlimited license to practice in
Indiana shall be appointed Chief of Staff and shall be responsible for
monitoring of procedures and care provided in the ASC.
I. Provide a physical plant that meets statutory requirements and
provisions of applicable regulations of the Indiana State Department of Health.
In addition to patient service areas, space and equipment shall be provided for
administrative and business offices, private admitting area, public lobby and
toilets, medical records storage area, personnel facilities, and storage
facilities for patients' clothing and valuables.
Section 13.3 CHIEF OF STAFF. A Chief of Staff shall be selected by the
Governing Board who shall be responsible to the Governing Board and the
Partnership for monitoring the medical procedures and care provided by the
ambulatory surgical center. The initial Chief of Staff shall be Xxxxxx Xxxxx,
M.D.
ARTICLE XIV - DISSOLUTION AND WINDING UP
Section XIV.1 EVENTS CAUSING DISSOLUTION. The Partnership shall be
dissolved upon the first of the following events to occur:
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A. the expiration of the term of the Partnership set forth in
SECTION 2.3 of this Agreement;
B. the written consent of all Partners at any time to dissolve and
wind up the affairs of the Partnership;
C. the Bankruptcy or dissolution of a Partner or the occurrence of
any other event that terminates the continued membership of a Partner in
the Partnership, unless (i) there are at least two remaining Partners and
the business of the Partnership is continued by the consent of all
remaining Partners, or (ii) within ninety (90) days of the occurrence of
such event, all remaining Partners agree in writing to continue the
business of the Partnership; or
D. the occurrence of any other event that causes the dissolution of
a partnership under the Act.
Section XIV.2 WINDING UP. If the Partnership is dissolved pursuant to
SECTION 13.1, the Partnership's affairs shall be wound up as soon as reasonably
practicable in the manner set forth below.
A. APPOINTMENT OF LIQUIDATOR. The winding up of the Partnership's
affairs shall be supervised by a Liquidator. The Liquidator shall be
selected by the Partners or, if the Partners prefer, a liquidator or
liquidating committee selected by the Partners.
X. XXXXXX OF LIQUIDATOR. In winding up the affairs of the
Partnership, the Liquidator shall have full right and unlimited
discretion, for and on behalf of the Partnership:
1. to prosecute and defend civil, criminal or administrative
suits;
2. to collect Partnership assets, including obligations owed
to the Partnership;
3. to settle and close the Partnership's business;
4. to dispose of and convey all Partnership Property for cash,
and in connection therewith to determine the time, manner and terms
of any sale or sales of Partnership Property, having due regard for
the activity and condition of the relevant market and general
financial and economic conditions;
5. to pay all reasonable selling costs and other expenses
incurred in connection with the winding up out of the proceeds of
the disposition of Partnership Property;
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6. to discharge the Partnership's known liabilities and, if
necessary, to set up, for a period not to exceed five (5) years
after the date of dissolution, such cash reserves as the Liquidator
may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership;
7. to distribute any remaining proceeds from the sale of
Partnership Property to the Partners;
8. to prepare, execute, acknowledge and file any certificates,
tax returns or instruments necessary or advisable under any
applicable law to effect the winding up and termination of the
Partnership; and
9. to exercise, without further authorization or consent of
any of the parties hereto or their legal representatives or
successors in interest, all of the powers conferred upon a Partner
under the terms of this Agreement to the extent necessary or
desirable in the good faith judgment of the Liquidator to perform
its duties and functions. The Liquidator shall not be liable as a
partner to the Partners and shall, while acting in such capacity on
behalf of the Partnership, be entitled to the indemnification rights
set forth in the Act and in ARTICLE XV hereof
Section XIV.3 COMPENSATION OF LIQUIDATOR. The Liquidator appointed as
provided herein shall be entitled to receive such reasonable compensation for
its services as shall be agreed upon by the Liquidator and the Partners.
Section XIV.4 DISTRIBUTION OF PARTNERSHIP PROPERTY AND PROCEEDS OF SALE
THEREOF. The distribution of Partnership Property and the proceeds from the sale
thereof shall be in accordance with the following:
A. ORDER OF DISTRIBUTION. Upon completion of all desired sales of
Partnership Property, and after payment of all selling costs and expenses,
the Liquidator shall distribute the proceeds of such sales, and any
Partnership Property that is to be distributed in kind, to the following
groups in the following order of priority:
1. to the extent permitted by law, to satisfy Partnership
liabilities to creditors, including Partners who are creditors
(other than for past due Partnership distributions), whether by
payment or establishment of reserves;
2. to satisfy Partnership obligations to Partners to pay past
due Partnership distributions;
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3. to the Partners in accordance with their respective
Interests.
B. INSUFFICIENT ASSETS. The claims of each priority group specified
above shall be satisfied in full before satisfying any claims of a lower
priority group. If the assets available for disposition are insufficient
to dispose of all of the claims of a priority group, the available assets
shall be distributed in proportion to the amounts owed to each creditor or
the respective Capital Account balances or Interests of each Partner in
such group.
Section XIV.5 FINAL AUDIT. Within a reasonable time following the
completion of the liquidation, the Liquidator shall supply to each of the
Partners a statement which shall set forth the assets and the liabilities of the
Partnership as of the date of complete liquidation and each Partner's pro rata
portion of distributions pursuant to SECTION 14.4.
Section XIV.6 DEFICIT CAPITAL ACCOUNTS. Notwithstanding anything to the
contrary contained in this Agreement, to the extent that the deficit, if any, in
the Capital Account of any Partner results from or is attributable to deductions
and losses of the Partnership (including non-cash items such as depreciation),
or distributions of money pursuant to this Agreement, such deficit shall not be
an asset of the Partnership and such Partners shall not be obligated to
contribute such amount to the Partnership to bring the balance of such Partner's
Capital Account to zero.
ARTICLE XV - LIABILITY, INDEMNIFICATION AND INSURANCE
Section XV.1 LIABILITY OF PARTNERS. No Partner nor any shareholder,
director, officer, agent, affiliate or employee of any Partner shall be liable,
responsible or accountable in damages or otherwise to the Partnership or any
other Partner for any action taken or failure to act on behalf of the
Partnership within the scope of the authority conferred on such Partner by this
Agreement or by law unless such act or omission constituted willful or wanton
misconduct or was performed or omitted fraudulently or in bad faith or
constituted gross negligence. No Partner nor any shareholder, director, officer,
agent, affiliate or employee of any Partner shall be personally liable for the
return or repayment of all or any portion of the capital or profits of any other
Partner (or transferee thereof), it being expressly agreed that any such return
of capital or profits made pursuant to this Agreement shall be made solely from
the assets of the Partnership. Nothing herein shall be interpreted to (i) limit
the liability of any Partner with respect to debts and obligations to third
parties under the Act, (ii) limit the obligation of any Partner to transfer to
the Partnership the full amount of such Partner's Initial Capital Contribution
and subsequent capital contributions, if any, or (iii) limit the liability of
any Partner with respect to the fiduciary duty of such Partner to the
Partnership or to the other Partners.
Section XV.2 REIMBURSEMENT AND INDEMNIFICATION OF PARTNERS. The
Partnership shall promptly reimburse and indemnify each Partner in respect of
reasonable payments made and personal liabilities reasonably incurred by such
Partner for services performed for the benefit of or on behalf of the
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Partnership business, or for the preservation of the Partnership's business or
property. Without limiting the generality of the foregoing, in any threatened,
pending, or contemplated action, suit or proceeding to which a Partner and/or
any officer, director, shareholder, agent, affiliate or employee of such Partner
(collectively, the "Indemnified Parties"), was or is a party or is threatened to
be made a party by reason or because of the fact that such Partner is or was a
Partner in the Partnership (including any action by or in the right of the
Partnership), the Partnership shall indemnify the Indemnified Parties against
expenses, including attorneys' fees, judgments and amounts paid in settlement
incurred by the Indemnified Parties in connection with such action, suit or
proceeding if the Indemnified Parties acted in accordance with the standards set
forth in the Act. The termination of any action, suit or proceeding by judgment,
order or settlement shall not, of itself, create a presumption that the
Indemnified Parties did not act in accordance with such standards. Nothing
herein shall be interpreted to indemnify or limit the liability of any Partner
with respect to debts or obligations of the Partnership. Nothing herein shall be
considered to guarantee that the Partnership or any of the Partners shall gain
or derive any profit or benefit from the operations of the Partnership's
business or that such operations shall result in any particular outcome.
Section XV.3 LIMIT ON LIABILITY OF PARTNERS. The indemnification set forth
in this ARTICLE XV shall in no event cause the Partners to incur any personal
liability beyond their total Capital Contributions.
Section XV.4 INSURANCE. To the extent not prohibited by applicable law,
the Partnership may purchase and maintain insurance or another arrangements on
behalf of any Person who is or was an Indemnified Party against any liability
asserted against him or incurred by him in such a capacity or arising out of his
status as an Indemnified Party.
Section XV.5 Nothing contained in this Article XV shall apply to the
conduct of the Managing Partner pursuant to the Management Agreement between the
Managing Partner and the Partnership (as defined in Section 17.1), and nothing
contained in this Article XV shall alter or affect in any way the obligations,
rights and liabilities of the Managing Partner or the Partnership provided in
the Management Agreement.
ARTICLE XVI - RESTRICTIONS ON TRANSFER OF
INTEREST; AND PURCHASE OF OSCI INTEREST
Section XVI.1 ARTICLE XVI DEFINITIONS. Solely for purposes of this ARTICLE
XVI, the following terms shall have the meanings indicated:
A. "Annual Net Earnings" means (i) the gross receipts of the
Partnership received in the ordinary course of business during the
calendar year in question (the "Annual Period"), computed in accordance
with generally accepted accounting principles using a cash method of
accounting, minus (ii) the operating expenses of the Partnership paid in
the ordinary course of business during the Annual Period, computed in
accordance with generally accepted accounting principles, consistently
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applied, using a cash method of accounting, including all amounts paid to
Omega with respect to the Annual Period pursuant to the "Management
Agreement" (as defined in SECTION 17.1 hereof).
B. "Buyout Amount" means an amount equal to five and fifteen one
hundredths (5.15) times the average Annual Net Earnings of the Partnership
Interest being sold based upon the Partnership's Annual Net Earnings for
each of the two (2) calendar years immediately preceding the "Trigger
Date" (hereinafter defined).
C. "Disability" means, as applied to Xx. Xxxxx, the physical or
mental inability of Xx. Xxxxx to perform, for a period of ninety (90)
consecutive days, the material duties of such person's occupation or any
covenant or duty of Xx. Xxxxx required by that certain Professional
Employment Agreement of even date between Referral Eye Center, P.C. and
Xxxxxx Xxxxx, M.D.
D. "Xx. Xxxxx" means Xxxxxx Xxxxx, M.D.
E. "Employment Agreement" means that certain Professional Employment
Agreement by and between Referral Eye Center, P.C. and Xx. Xxxxx dated as
of May 1, 1997.
F. "Trigger Date" means the date that the first of the following
events occur: (a) the death of Xx. Xxxxx, (b) the Disability of Xx. Xxxxx,
(c) the retirement of Xx. Xxxxx or (d) the termination of employment of
Xx. Xxxxx pursuant to Section 14 of the Employment Agreement.
Section XVI.2 RESTRICTIONS ON OSCI INTEREST PRIOR TO APRIL 30, 2002. Prior
to April 30, 2002, OSCI shall not sell, encumber, or transfer all, or any part
of, its Interest in the Partnership, except (i) with the consent of all of the
Partners, or (ii) upon the occurrence of an event specified in SECTION 16.3.
Section XVI.3 MANDATORY SALE AND PURCHASE FROM EVENT INVOLVING XX. XXXXX.
Upon the occurrence of any one of the following events: (i) the death of Xx.
Xxxxx; (ii) the Disability of Xx. Xxxxx; or (iii) the retirement of Xx. Xxxxx,
or (iv) the termination of employment of Xx. Xxxxx pursuant to Section 14 of the
Employment Agreement, OSCI is obligated to sell, and Omega is obligated to buy
OSCI's Interest. Upon the expiration of sixty (60) days following the Trigger
Date, Omega shall purchase from OSCI, and OSCI shall sell to Omega, at the
Buyout Amount, the Interest that OSCI is required to sell, and that Omega is
required to buy, under the provisions of this SECTION 16.3. Notwithstanding the
foregoing, in the event that Xx. Xxxxx has given notice of his retirement as
provided in the Employment Agreement and is able to sell his stock in said
corporation to an ophthalmologist or ophthalmologists reasonably acceptable to
Omega within the time period prescribed in the Management Agreement, then OSCI
may sell its Interest to such ophthalmologist or ophthalmologists on the closing
date of the sale of Xx. Xxxxx'x stock; however, if Xx. Xxxxx is unable to sell
his stock in said corporation within such time period, then Omega shall purchase
OSCI's Interest as provided above.
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Upon the termination of that certain Management Agreement between Referral
Eye Center, P.C. and Omega dated May 1, 1997, by Referral Eye Center, P.C. prior
to May 1, 2002, pursuant to Sections 6.1 or 6.2 thereof, Omega shall be
obligated to sell and OSCI shall be obligated to purchase Omega's Interest upon
the expiration of sixty (60) days after such termination at the Buyout Amount.
Upon the termination of that certain Management Agreement between Referral Eye
Center, P.C. and Omega dated May 1, 1997, by Referral Eye Center, P.C. after May
1, 2002, pursuant to Section 6.1 or 6.2 thereof, OSCI shall have the option, but
not the obligation, to purchase Omega's Interest upon the expiration of sixty
(60) days after such termination at the Buyout Amount.
Section XVI.4 PAYMENT OF THE BUYOUT AMOUNT. The Buyout Amount shall be
paid by Omega to OSCI by delivery to OSCI (i) an amount of cash equal to fifty
percent (50%) of the Buyout Amount, and (ii) an amount equal to the difference
between the Buyout Amount minus the amount of cash paid to OSCI under (i) of
this SECTION 16.4 which shall, at the option of Omega, be paid in cash, in
unregistered common stock (the "Stock") of Omega Health Systems, Inc., or in a
combination of both. For purposes of this SECTION 16.4, the Stock shall be
valued at the average of the closing price of the common stock of OHSI for the
twenty (20) trading days prior to the date that the certificates representing
the Stock are required to be delivered to OSCI.
ARTICLE XVII - MANAGEMENT AGREEMENT
Section XVII.1 Concurrently with the execution of this Agreement by the
Partners, the Partnership has entered into a Management Agreement with Omega, in
the form attached hereto as EXHIBIT 17 (the "Management Agreement"). Anything in
this Agreement to the contrary notwithstanding, after the Partnership has
entered into the Management Agreement, none of the terms or conditions of the
Management Agreement shall be amended, modified, supplemented or otherwise
changed except with the prior written consent of the Partners holding eighty
percent (80%) of the Partnership Interests.
Section XVII.2 In the event a majority of the non-managing partners has
determined that the Manager is in default under the provisions of such
Management Agreement, this majority of the non-managing partners may notify
Omega of its determination and Omega may exercise its rights to cure such
default or be subject to the default provisions of the Management Agreement, or
dispute the occurrence of a default. In the event of a dispute the majority of
non-managing partners may submit the dispute to mediation and arbitration in
accordance with the provisions of Article 18 of this Agreement. In such event,
if the determination of the arbitrators is that a default has occurred
triggering the termination provisions of the Management Agreement, the Partners
shall agree to sell the Partnership assets or if they cannot agree upon the
terms of a sale, the Partners shall dissolve the Partnership in accordance with
the provisions of Article XIV of this Agreement.
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ARTICLE XVIII - ARBITRATION AND MEDIATION
Section XVIII.1 In the event a dispute arises out of or relating to this
Agreement, or the breach thereof, and if said dispute cannot be settled through
negotiation, the parties agree to attempt in good faith to settle the dispute by
mediation under the Commercial Mediation Rules of the American Arbitration
Association. This mediation will be non-binding, but the parties must
participate in good faith in non-binding mediation, before resorting to
arbitration, litigation, or some other dispute resolution procedure.
Section XVIII.2 Except as noted hereafter, any controversy or claim
arising out of or relating to this Agreement, or its breach, shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
As soon as reasonably practical after submission of a demand for binding
arbitration, Omega and OSCI shall select one arbitrator, agreeable to all
parties. The arbitrator will be selected from lists prepared by the American
Arbitration Association. From the American Arbitration Association list the
parties will submit to the American Arbitration Association a ranked list of
arbitrators which are acceptable. The highest ranking acceptable candidate will
be selected by the American Arbitration Association are acceptable by either of
the parties, the American Arbitration Association will compile a second list.
This procedure will be followed until the parties have selected an arbitrator.
The results of the arbitrator's finding will be binding on the parties.
ARTICLE XIXI- MISCELLANEOUS PROVISIONS
Section XIX.1 Entire Agreement. This Agreement contains the entire
agreement among the Partners relating to the subject matter hereof and all prior
agreements relative hereto which are not contained herein are terminated.
Section XIX.2 LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the local, internal laws of the State of Indiana.
In particular, this Agreement is intended to comply with the requirements of the
Act. In the event of a direct conflict between the provisions of this Agreement
and the mandatory provisions of the Act, the Act will control. The venue of any
mediation, arbitration or litigation hereunder shall be Xxxxxx County, Indiana.
Section XIX.3 CONFERENCE TELEPHONE MEETINGS. Meetings of the Partners may
be held by means of conference telephone or similar communications equipment so
long as all Persons participating in the meeting can hear each other.
Participation in a meeting by means of conference telephone shall constitute
presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business
thereat on the ground that the meeting is not lawfully called or convened.
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Section XIX.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the Partners and their respective heirs, legal
representatives, successors and assigns.
Section XIX.5 SEVERABILITY. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement or the
application thereof to any Person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, but the extent of such invalidity or
unenforceability does not destroy the basis of the bargain among the Partners as
expressed herein, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
Section XIX.6 AMENDMENT. Except as expressly provided herein, this
Agreement may be amended only by a written amendment hereto executed by all of
the Partners.
Section XIX.7 HEADINGS. The Article, Section and Subsection headings
appearing in this Agreement are for convenience of reference only and are not
intended, to any extent or for any purpose, to limit or define the text of any
Article, Section or Subsection.
Section XIX.8 CONSTRUCTION. Whenever required by the context, as used in
this Agreement, the singular number shall include the plural, and vice versa,
and the gender of all words used shall include the masculine, feminine and the
neuter. Unless expressly stated herein, all references to Articles, Sections
and/or Subsections refer to Articles, Sections and/or Subsections of this
Agreement, and all references to Schedules and/or Exhibits are to Schedules
and/or Exhibits attached hereto, each of which is made a part hereof for all
purposes.
Section XIX.9 OFFSET. Whenever the Partnership is to pay any sum to any
Partner, any amounts that Partner owes the Partnership may be deducted from that
sum before payment.
Section XIX.10 EFFECT OF WAIVER OR CONSENT. A waiver or consent, express
or implied, to or of any breach or default by any Person in the performance by
that Person of its obligations with respect to the Partnership is not a consent
or waiver to or of any other breach or default in the performance by that Person
of the same or any other obligations of that Person with respect to the
Partnership. Failure on the part of a Person to complain of any act of any
Person or to declare any Person in default with respect to the Partnership,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run.
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Section XIX.11 FURTHER ASSURANCES. In connection with this Agreement and
the transactions contemplated hereby, each Partner shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
Section XIX.12 INVESTMENT REPRESENTATIONS; RESTRICTIONS ON Transfer. Each
Partner, by such Partner's execution of this Agreement, represents and agrees
that such Partner is purchasing such Partner's Interest in the Partnership for
investment purposes only, and without a view toward the distribution or resale
thereof. Pursuant to SECTION 11.2 and ARTICLE XVI hereof, Interests in the
Partnership shall be nontransferable except in accordance therewith; and, no
assignee of a Partnership Interest in the Partnership shall become a substitute
Partner without the consent of the transferor and Partners holding eighty
percent (80%) of the Partnership Interests.
Section XIX.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute a single document. This Agreement shall be binding
upon each Partner upon execution, regardless of whether any other Partner has
executed the same or a different counterpart. A photocopy or telecopy of an
executed counterpart of this Agreement shall be sufficient to bind the
Partner(s) whose signature(s) appear thereon.
IN WITNESS WHEREOF, the Partners have executed this Agreement to be
effective as of the date first above written.
THE OUTPATIENT SURGERY CENTER OF OMEGA HEALTH SYSTEMS OF INDIANA,
INDIANA, INC., an Indiana Corporation INC., an Indiana Corporation
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxx, M.D., President Xxxxxx X. Xxxxxxx,
Executive Vice-President
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