OPERATING AGREEMENT
OF
DSMB PROPERTIES, L.L.C.
This OPERATING AGREEMENT OF DSMB PROPERTIES, L.L.C. (the "Agreement")
is entered into effective as of the 1st day of September, 1995 (the "Effective
Date"), by and among UNIVERSAL HEALTH REALTY INCOME TRUST, a Maryland real
estate investment trust ("UHT"), and DESERT COMMERCIAL PROPERTIES LIMITED
PARTNERSHIP, an Arizona limited partnership ("DCP").
SECTION 1.
DEFINITIONS
1.1. DEFINED TERMS. Unless otherwise stated, the terms used in this
Agreement shall have the usual and customary meanings associated with their use,
and shall be interpreted in the context of this Agreement. The following terms
when used in this Agreement and capitalized shall have the meanings stated
below:
"ACT" means the Arizona Limited Liability Company Act, as set
forth in Arizona Revised Statutes ss.ss.29-601, et seq., as amended from time to
time (or any corresponding provisions of succeeding law).
"AFFILIATE" means, with respect to any Person: (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) any Person owning or controlling ten percent or more of the
outstanding voting securities of such Person; (iii) any officer, director or
general partner of such Person; (iv) any person referred to in Sections 267(B)
and (C), 414, 707 (B) (substituting 10% for 50% whenever such appears therein),
1563, and 4975 (E)(2), (3), (4), (5) and (6), of the Code; or (v) any Person who
is an officer, director, general partner, trustee or holder of ten percent or
more of the voting securities of any Person described in clauses (i) through
(iv) of this sentence.
"ANNUAL BUDGET" means a budget for each fiscal year of the
Company (or portion thereof) approved by all Members and including, among other
items, the following: (i) an operating budget; (ii) a capital improvement
budget; (iii) a reserve utilization schedule for capital improvements; (iv)
parameters for Leasing (including lease rates, tenant improvement allowances and
similar matters); and (v) a schedule for distributions. The initial Annual
Budget, for the period through December 31, 1995 will be approved by all Members
prior to any acquisition of any Property by the Company.
"ARTICLES" means the Articles of Organization of the Company
as adopted and amended from time to time by the Members and filed (initial
filing on September 9, 1995) with the Arizona Corporation Commission.
"BUILDING I" means that real property (interest of "Tenant"
under Building I Ground Lease), improvements located thereon, and rights and
other personal property appurtenant thereto, described on Exhibit "A-1" attached
hereto.
"BUILDING II" means that real property (interest of "Tenant"
under Building II Ground Lease), improvements located thereon, and rights and
other personal property appurtenant thereto, described on Exhibit "A-2" attached
hereto.
"BUILDING III" means that real property (interest of "Tenant"
under Building III Ground Lease), improvements located thereon, and rights and
other personal property appurtenant thereto, described on Exhibit "A-3" attached
hereto.
"BUILDING I GROUND LEASE" means that Ground Lease, as amended,
for Building I as described on Exhibit "B-1" attached hereto.
"BUILDING II GROUND LEASE" means that Ground Lease, as
amended, for Building II as described on Exhibit "B-2" attached hereto.
"BUILDING III GROUND LEASE" means that Ground Lease, as
amended, for Building III as described on Exhibit "B-3" attached hereto.
"BUILDING(S)" means Building I, Building II and/or Building
III, as appropriate.
"BUILDING III PURCHASE AGREEMENT" means that Agreement and
Escrow Instructions for the Purchase and Sale of Certain Assets dated
September 1, 1995, as amended, by and between Phase III Desert Samaritan Medical
Building Partners as "Seller" and DCP as "Buyer", for the purchase and sale of
Building III, including assignment of the interest of "Tenant" under the
Building III Ground Lease.
"CAPITAL ACCOUNT" means, with respect to any Member, the
Capital Account maintained for such Member in accordance with Regulations
Section 1.704-1(b). In the event the Company shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto, are computed in order to comply with such Regulations, the Company may,
upon mutual approval of the Members, make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any Member
upon the dissolution of the Company. The Company also shall: (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company's balance sheet, as computed for book purposes in accordance with
Regulations Section 1.704-1(b) (2)(iv)(q); and (ii) make any appropriate
modification in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).
"CAPITAL CONTRIBUTION" means, with respect to any Member, the
total amount of cash or net fair market value (as mutually agreed upon by the
Members) of any property (other than cash) contributed to the Company with
respect to the Interest in the Company held by such Member.
"CASH AVAILABLE FROM OPERATIONS" means any cash held by the
Company, whether generated from operating, financing, or investment activity,
which exceeds the amount needed for: (i) prudent operation of the Company; and
(ii) investments and prudent reserves, all consistent with the then applicable
Annual Budget (including required installment payments on Financing and Member
Loans), but in any event excluding Net Financing Proceeds and Net Sales
Proceeds.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding law).
"COMPANY" means the limited liability company formed pursuant
to this Agreement and the limited liability company continuing the business of
this Company in the event of dissolution as herein provided.
"COMPANY DEBT" means any debt of the Company (including
Financing and Member Loans) whether or not secured by Company Property.
"COMPANY MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(b)(2).
"CONTRIBUTION BALANCE" means, with respect to each Member, the
aggregate of all Capital Contributions made by such Member, less the aggregate
of all Distributions to such Member constituting or characterized as a return of
Capital Contributions pursuant to Sections 4.1.2(b) and 4.1.3(c).
"DISTRIBUTIONS" means the distributions by the Company to the
Members pursuant to Section 4.
"EXISTING FINANCING" means the current financing in favor of
United States Leasing, International, Inc. encumbering Building I and Building
II, as evidenced by the Promissory Note dated September 15, 1993, in the
original principal amount of $11,500,000.00, and also secured or evidenced by
Deed of Trust, Security Agreement, Assignment of Leases and Rents, Fixture
Filing and Financing Statement dated September 15, 1993, and recorded September
16, 1993, at Instrument No. 93-0626122, Office of the Maricopa County Recorder,
Arizona, and related documents.
"FINANCING" means any finance or refinance of all or any
portion of the Project.
"FINANCING PROCEEDS" means the proceeds payable to or for the
benefit of the Company from a Financing.
"GROSS PROCEEDS" means the gross price payable by a buyer
participating in a Sale, before any deductions for closing costs, commissions or
other items.
"GROUND LEASE(S)" means the Building I Ground Lease, Building
II Ground Lease and/or Building III Ground Lease, as appropriate.
"INITIAL CAPITAL CONTRIBUTION" means the Capital Contribution
in property and/or cash made or to be made by the Members in the amounts and at
the times required in accordance with Section 3.1.2.
"INITIAL FINANCING" means that Financing, to be obtained by
the Company to finance the acquisition and ownership of the Buildings (including
the acquisition of Building III and the payoff of the Existing Financing, except
for the prepayment penalty associated therewith to be paid by DCP), on the
following basic terms: (i) principal amount not to be more than $17,900,000.00
nor less than $17,775,000.00; (ii) final maturity date of not less than ten (10)
years following Closing and funding thereof; (iii) amortization term of not less
than twenty-five (25) years; and (iv) interest rate no greater than eight and
one-half percent (8-1/2%).
"INTEREST" means the entire ownership interest of a Member in
the Company at any particular time, including the right of such Member to any
and all benefits to which a Member may be entitled as provided in this
Agreement, together with the obligations of such Member to comply with all of
the terms and provisions of this Agreement.
"INTEREST RATE" means a per annum rate of interest equal to:
(i) one percent (1%) in excess of the Prime Rate for a Member Loan having a
principal balance of $250,000.00 or less; and (ii) two percent (2%) in excess of
the Prime Rate for a Member Loan having a principal balance in excess of
$250,000.00.
"KEYSTONE" means Keyman Realty Group, L.L.C., an Arizona
limited liability company, doing business as Keystone Management Services, an
Affiliate of DCP.
"KEYSTONE CAPITAL" means Keystone Capital Group, Inc., an
Arizona corporation, and affiliate of DCP.
"KEYSTONE FINANCING ARRANGEMENT" means engagement by the
Company of Keystone Capital or a duly licensed affiliate of Keystone Capital or
DCP, to obtain the Initial Financing for the Project on an exclusive basis,
pursuant to a separate agreement.
"KEYSTONE MANAGEMENT ARRANGEMENT" means engagement by the
Company of Keystone, or a duly licensed Affiliate of Keystone or DCP, under a
fifteen (15) year management contract for the Project providing, among other
things, for the following: (i) management fee payable monthly equal to three and
one-half percent (3-1/2%) of gross cash receipts, excluding Tenant security
deposits and lump sum Tenant Improvement reimbursements; (ii) Leasing
commissions of one and one-quarter percent (1-1/4%) on Lease renewals and two
and one-half percent (2-1/2%) on new Leases (five percent [5%] if an outside
broker is involved with a co-brokerage arrangement); and (iii) a cancellation
clause, pursuant to which UHT, on behalf of the Company, has the right to
unilaterally cancel the Keystone Management Arrangement if a Keystone Removal
Event occurs.
"KEYSTONE REMOVAL EVENT" means that time at which the
Company's actual receipt of net operating income (as defined in the applicable
Annual Budgets) in each of two consecutive calendar years is an amount less than
seventy-five percent (75%) of the amount estimated in the applicable Annual
Budget.
"LEASES" or "LEASING" (or equivalent terms) means lease
arrangements by which Tenants lease portions of the Project from the Company.
"MEMBER" means any Person: (i) who executes this Agreement as
a Member or who has been admitted as an additional or Substitute Member pursuant
to the terms of this Agreement; and (ii) who is the owner of an Interest in the
Company. "Members" means all such Persons, with the initial members to be UHT
and DCP. All references in this Agreement to a "majority in interest" means all
Members.
"MEMBER LOANS" means the loans from time to time made to the
Company by a Member (the "MEMBER LENDERS") pursuant to Section 3.2, which shall
be accounted for by the Company, be an obligation of the Company payable to the
Member Lenders, bear interest at the applicable Interest Rate, and require
scheduled (but not necessarily full) payments (applied first to accrued interest
and then to reduction of principal) from time to time (pro rata to each Member
Lender based on Member Loans then outstanding) as appropriate prior to
determination and distribution of Cash Available from Operations, Net Financing
Proceeds or Net Sales Proceeds. Member Loans shall not be treated as Capital
Contributions to the Company.
"NET FINANCING PROCEEDS" AND "NET SALES PROCEEDS" means that
portion of Financing Proceeds or Sales Proceeds, respectively, from time to time
actually received by the Company, after deduction for any and all closing costs
(including but not limited to legal, title, escrow and similar fees and
charges), payment of Financing (including Member Loans) refinanced thereby,
commissions, loan costs or fees, and similar matters, and retention or payment
by the Company of all or any portion thereof to pay expenses of the Company or
to fund reasonable Company reserves.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in, and
shall be determined in accordance with, Regulations Section 1.704-2(b)(1) and
shall be computed in accordance with Regulations Section 1.704-2(c).
"NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
"PERCENTAGE INTEREST" means, with respect to each Member, the
following (subject to adjustment as from time to time provided in this
Agreement):
UHT - 50%
DCP - 50%
"PERSON" means any individual, partnership, corporation,
trust, or other entity.
"PREAPPROVED LEASES" means Leases which comply with the
Leasing requirements and parameters set forth in a then applicable Annual
Budget.
"PREFERRED RETURN" means an amount equal to ten and one-half
percent (10-1/2%) per annum simple, non-compounded interest, computed on the
from time to time outstanding Contribution Balance for each Member based on a
365-day year (or 366-day year if applicable) applied to the actual number of
days until such referenced return is paid.
"PREFERRED RETURN ARREARAGE" means any Preferred Return from
time to time payable but not paid for a fiscal year of the Company, which shall
be separately accounted by the Company and not bear interest.
"PRIME RATE" means the "prime rate" as from time to time
published in the Wall Street Journal as the "base rate on corporate loans posted
by at least 75% of the nation's 30 largest banks".
"PROFITS" and "LOSSES" means, for each fiscal year or other
period, an amount equal to the Company'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 ss.703(a)(1) shall be included in taxable income or loss) with
the following adjustments:
(a) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code
ss.705(a)(2)(B) or treated as Code ss.705(a)(2)(B)
expenditures pursuant to Regulations ss.1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Profits or
Losses pursuant to this definition shall be subtracted from
such taxable income or loss; and
(c) Notwithstanding any other provisions of this
definition of Profits and Losses, any items which are
specially allocated pursuant to Section 4.2 hereof shall not
be taken into account in computing Profits or Losses.
"PROJECT" means the ownership and operation, including
Leasing, of the Buildings as a medical office complex, and related amenities
(both onsite and offsite).
"PROJECT AGREEMENTS" means the Financing, Building III
Purchase Agreement, Leases, Keystone Financing Arrangement, Property Management
Arrangement, and any other contractual arrangements from time to time entered
into by the Company in connection with the Project.
"PROPERTY" or "COMPANY PROPERTY" means all real and personal
property, tangible and intangible, acquired by the Company (whether leased
through the Ground Lease(s) or otherwise) and any improvements thereon,
including without limitation the real and other property described on Exhibit
"A".
"PROPERTY MANAGEMENT ARRANGEMENT" means whichever of the
following is from time to time applicable: (i) the Keystone Management
Arrangement; or (ii) a Replacement Management Arrangement.
"PRO RATA" means (as of the applicable time) the proportion
that a referenced participation of a Member (whether Percentage Interest,
Contribution Balance or otherwise) bears to the aggregate referenced
participations of all Members, and shall not, unless expressly so stated, be
based on the number of Members in the Company.
"REGULATIONS" means 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).
"REPLACEMENT MANAGEMENT ARRANGEMENT" means replacement of
Keystone pursuant to the Keystone Management Arrangement and as a result of a
Keystone Termination Event, with a duly licensed management company, and on
terms, designated by UHT and approved by DCP (with such approval not to be
unreasonably withheld).
"SALE" means a sale or other disposition of all or any portion
of the Project, including by condemnation or other governmental taking, but
excluding any Financing, Refinancing or Leasing of all or any portion of the
Project in the ordinary course of operation thereof.
"SALE PROCEEDS" means any and all sums (or cash equivalent of
all property) payable to the Company as a result of a Sale (including
condemnation or insurance proceeds not applied to reconstruction).
"SUBSTITUTE MEMBER" means any Person admitted to the Company
as a Substitute Member pursuant to Section 8 hereof.
"TAX MATTERS MEMBER" means the "tax matters partner" as
defined in Section 6231(a)(7) of the Code, who shall be UHT (or its individual
designee).
"TENANT(S)" means lessees (sublessees pursuant to the Ground
Leases) of portions of the Project from the Company.
"TENANT IMPROVEMENTS" means leasehold, tenant or similar
improvements to be made to the Project by the Company for Tenants pursuant to
Leases.
"TERM" shall mean the term of the Company, as set forth in
Section 2.2.
SECTION 2.
FORMATION; PURPOSE
2.1. ORGANIZATION. The Company is a limited liability company. The
Company has been or will be formed, pursuant to the provisions of the Act, by
the filing of the Articles with the Arizona Corporation Commission, and upon the
terms and conditions set forth in the Articles and in this Agreement.
2.2. TERM. The term of the Company shall commence on the date the
Articles are or were filed as described in Section 2.1 and shall continue until
the first to occur of: (a) the winding up and liquidation of the Company; (b)
the occurrence of a Liquidating Event as provided in Section 10 of this
Agreement; or (c) December 31, 2045.
2.3. NAME. The business of the Company shall be carried on under the
name "DSMB Properties, L.L.C", "Desert Samaritan Medical Buildings", or any
other fictitious name or tradename from time to time utilized or adopted by the
Company.
2.4. PURPOSE. Purpose and character of the business of the Company
shall be to acquire, operate, market, and dispose of, the Project as follows:
2.4.1. BUILDING I AND BUILDING II. As a part of their Initial
Capital Contributions: (a) DCP will contribute an undivided 89.280% ownership
interest in Building I and Building II; and (b) UHT will acquire from DCP,
pursuant to a separate Purchase Agreement between DCP and UHT, an undivided
10.720% ownership interest, in Building I and Building II, and contribute such
interest to the Company.
2.4.2. BUILDING III. The Company will acquire Building III
pursuant to an assignment of the interest and obligations of DCP under the
Building III Purchase Agreement.
2.4.3. FINANCING. The Company will from time to time finance
its acquisition, Leasing and ownership of the Project, with the Initial
Financing to refinance repayment of the Existing Financing on Building I and
Building II, and to finance acquisition of Building III; provided, that DCP (and
not the Company or UHT) shall be fully responsible for and shall pay, at or
prior to the closing of the Initial Financing, any prepayment penalty applicable
to the payoff of the Existing Financing.
2.4.4. POST-ACQUISITION. Upon completion of the acquisition of
the Buildings and the Initial Financing, the Company will proceed with Leasing
and management of the Project.
2.4.5. DISPOSITION ACTIVITIES. At such time as shall be
mutually acceptable to all Members, the Company shall commence marketing and
sale or other disposition of each or all of the Buildings.
2.4.6. NATURE OF INCOME. The Company will receive only income
which is enumerated in Code ss.ss.856(c)(2) and 856(c)(3), and will receive no
income enumerated in Code ss.856(c)(4). The Company will not, directly or
indirectly, acquire any assets other than those enumerated in Code ss.856(c)(5).
Moreover, the Company will not take any action or enter into any agreement which
is inconsistent with UHT's status or qualification as a real estate investment
trust, as defined in Code ss.856(a) (a "REIT"), or take any action which would
cause (or be one of the causes for) UHT to lose its status or qualification as a
REIT.
2.5. PLACE OF BUSINESS. The Company's principal place of business shall
be at the Phoenix, Arizona office of DCP, currently located at 0000 X. Xxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000. The Company may have other or
additional places of business within or without the State of Arizona. The name
and address of the agent for service of process is S.A. One Ltd., 0000 Xxxx
Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000.
2.6. NATURE OF MEMBERS' INTERESTS. The Interests of the Members in the
Company shall be personal property for all purposes. All property owned by the
Company, whether real or personal, tangible or intangible, shall be owned by the
Company as an entity, and no Member shall have any direct ownership of such
property or any right to use such property for any purpose other than a purpose
of the Company.
2.7. SPECIFIC PERFORMANCE. Each and all of the provisions of this
Agreement shall be specifically enforceable (in addition to all other rights and
remedies available under this Agreement or applicable laws).
2.8. CONTINGENCY. The obligations of UHT and DCP hereunder shall be
expressly conditioned upon the Company obtaining a commitment for the Initial
Financing on or before October 30, 1995, as and if such date is extended by
mutual agreement of UHT and DCP (the "Initial Financing Contingency"). UHT and
DCP each agree to proceed diligently and in good faith to apply for and obtain
commitment for the Initial Financing; provided, that in the event the Initial
Financing Contingency is not timely satisfied, this Agreement shall be deemed
terminated and of no further force and effect, with UHT and DCP to each be
released from any and all rights or obligations hereunder, and with UHT and DCP
each to bear and pay fifty percent (50%) of the cost incurred to date with
respect to the Company.
SECTION 3.
CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1. MEMBER CAPITAL ACCOUNTS AND CONTRIBUTIONS.
3.1.1. CAPITAL ACCOUNTS. A separate capital account shall be
maintained for each Member. The Capital Account of each Member shall be
increased by its Capital Contributions to the Company and by such Member's share
of Profits of the Company, and shall be decreased by any Distributions of cash
or other property to such Member and by such Member's share of Losses of the
Company, as allocated under Section 4 hereof. This Section and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulation Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations.
3.1.2. INITIAL CAPITAL CONTRIBUTIONS. As and for their
respective Initial Capital Contributions, the Members shall contribute the
following to the Company upon and as a condition to their respective entrance
into the Company:
(a) UHT: Upon UHT's acquisition of an
undivided 10.720% ownership interest in Building I
and Building II and concurrently with DCP's
contribution set forth in (b) below, UHT shall
contribute:
(1) an undivided 10.720% ownership
interest in Building I and Building II for a
deemed Capital Contribution of
$1,741,431.00; and
(2) $3,240,000.00 in cash.
(b) DCP: Upon UHT's acquisition of an
undivided 10.720% ownership interest in Building I
and Building II and concurrently with UHT's
contribution set forth in (a) above, DCP shall
contribute an undivided 89.280% ownership interest in
Building I and Building II for a deemed Capital
Contribution of $3,133,569.00.
DCP's contribution set forth in (b) above shall be subject to the Existing
Financing and the obligation of DCP to pay any prepayment penalty applicable to
the payoff of the Existing Financing. Neither the Company nor UHT shall have any
obligation in connection with such prepayment penalty. Prior to the funding of
Initial Capital Contributions, as described above, expenses of forming and
operating the Company and preparing for the planned acquisitions (including
escrow and loan deposits) shall be borne equally by the Members and be Member
Loans to the Company, for repayment upon closing of the Initial Financing.
3.1.3. ADDITIONAL CAPITAL CONTRIBUTIONS. To the extent the
Members by mutual agreement determine additional Capital Contributions are
required for Company purposes, the Members shall each then make additional
Capital Contributions, Pro Rata to their then applicable Percentage Interests.
3.2. MEMBER LOANS. Any Member may, with the approval of all Members, or
as otherwise permitted by Section 9 of this Agreement, lend or advance money to
the Company as Member Loans. If any Member shall make any Member Loan to the
Company, the amount of any such Member Loan shall not be treated as a Capital
Contribution to the Company but shall be an indebtedness of the Company payable
to such Member, repayable out of the Company's cash and bear interest at the
Interest Rate during the period such loan is outstanding unless a different rate
of interest is specifically agreed to by the Members. Member Loans or an agreed
portion of such Member Loans shall be payable prior to any Distributions to be
made after such Member Loans are funded.
3.3. WITHDRAWAL OR RETURN OF CONTRIBUTIONS. Except as otherwise
specifically provided in this Agreement, or as otherwise provided by law, no
Member shall have the right to withdraw from the Company or to demand or receive
a return of his capital without the consent of all Members. No Member shall have
the right to receive return of any Capital Contribution in any form other than
cash except as may be specifically provided herein.
3.4. OTHER MATTERS.
3.4.1. No Member or Affiliate of a Member shall receive any
interest, salary or draw with respect to its Capital Contributions or its
Capital Account or for services rendered on behalf of the Company or otherwise
in its capacity as a Member or otherwise, except as specifically provided for in
the Keystone Management Arrangement, Keystone Financing Arrangement, this
Agreement or as otherwise approved by all Members.
3.4.2. Except as otherwise provided by this Agreement or by
separate agreement with third party creditors, no Member shall be liable for the
debts, liabilities, contracts or any other obligations of the Company. Except as
otherwise provided by this Agreement, a Member shall not be required to lend any
funds, or to make any additional Capital Contributions, to the Company.
3.4.3. None of the provisions of this Agreement, whether in
regard to contributions, loans or otherwise, are intended for the benefit of,
nor shall such provisions be enforceable by, person or entities not a party to
this Agreement (including but not limited to creditors of the Company).
SECTION 4.
DISTRIBUTIONS AND ALLOCATIONS
4.1. DISTRIBUTIONS AND ALLOCATIONS TO MEMBERS.
4.1.1. DISTRIBUTIONS OF CASH AVAILABLE FROM OPERATIONS. The
Members shall seek to establish the Annual Budget for each fiscal year of the
Company in a manner that provides for Distributions to Members from operating
activity on a monthly basis. Cash Available From Operations, if any, shall be so
distributed to Members as follows:
(a) First, to UHT until UHT has received any
accrued but unpaid Preferred Return (including any
Preferred Return Arrearage) on its Contribution
Balance;
(b) Second, to DCP until DCP has received
any accrued but unpaid Preferred Return (including
any Preferred Return Arrearage) on its Contribution
Balance; and
(c) Third, the remainder to the Members Pro
Rata to their respective Percentage Interests.
Notwithstanding the foregoing, in the event Distributions of Cash Available From
Operations fall below that specified by the then applicable Annual Budget, by
fifteen percent (15%) or more (with the date thereof referred to herein as the
"Deficit Date"), at any time during the course of the involved fiscal year, the
Annual Budget will be adjusted, to provide for modified Distributions consistent
with the adjusted Annual Budget, by mutual agreement of the Members within
forty-five (45) days following the Deficit Date. From and after the Deficit
Date, DCP will not have the right to receive the Preferred Return on its
Contribution Balance, until such approval of an adjusted Annual Budget, if and
to the extent the Preferred Return to UHT is impaired or is projected to be
impaired pending implementation of the adjusted Annual Budget.
4.1.2. DISTRIBUTIONS OF NET SALES PROCEEDS. Net Sales
Proceeds, if any, shall be distributed from time to time promptly following
receipt by the Company to Members in the following priorities:
(a) First, to UHT until UHT has received any
and all accrued and unpaid Preferred Return
(including any Preferred Return Arrearage) on its
Contribution Balance;
(b) Second, to the Members, Pro Rata to
their respective Contribution Balances, until the
Members have received return (pursuant to this
Section 4.1.2(b) and Section 4.1.3(c)) equal to their
aggregate Capital Contributions;
(c) Third, to DCP until DCP has received any
and all accrued and unpaid Preferred Return
(including any Preferred Return Arrearage) on its
Contribution Balance; and
(d) Fourth, the remainder Pro Rata to the
Members in accordance with their respective
Percentage Interests.
4.1.3. DISTRIBUTIONS OF NET FINANCING PROCEEDS. Net Financing
Proceeds, if any, shall be distributed from time to time promptly following
receipt by the Company to Members in the following priorities:
(a) First, to UHT until UHT has received any
and all accrued and unpaid Preferred Return
(including any Preferred Return Arrearage) on its
Contribution Balance;
(b) Second, to DCP until DCP has received
any and all accrued and unpaid Preferred Return
(including any Preferred Return Arrearage) on its
Contribution Balance;
(c) Third, to the Members, Pro Rata to their
respective Contribution Balances, until the Members
have received return (pursuant to this Section
4.1.3(c) and Section 4.1.2(b)) equal to their
aggregate Capital Contributions; and
(d) Fourth, the remainder Pro Rata to the
Members in accordance with their respective
Percentage Interests.
4.1.4. ALLOCATION OF LOSSES. Losses shall be allocated to the
Members, Pro Rata to their respective Percentage Interests.
4.1.5. ALLOCATION OF PROFITS.
(a) First, a specific allocation of income
shall be nade to each Member in each fiscal year in
an amount equal to the Distributions received by such
Member during such year under Sections 4.1.1(a),
4.1.1(b), 4.1.2(a), 4.1.2(c), 4.1.3(a) and 4.1.3(b).
(b) Second, Profits shall be allocated to
the Members, Pro Rata to the extent to which Losses
were allocated to the Members, until all Members have
been allocated Profits pursuant to this priority
equal to all Losses allocated to such Members.
(c) Third, all remaining Profits shall be
allocated to the Members Pro Rata to their respective
Percentage Interests.
4.2. SPECIAL ALLOCATIONS. The special allocations set forth in this
Section 4.2 shall, if necessary, be made in the following order:
4.2.1. COMPANY MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Section 4, if there is a net decrease in Company Minimum
Gain during any Company fiscal year, each Member shall be specially allocated
items of Company income and gain for such year (and, if necessary, subsequent
years) in an amount equal to the portion of such Person's share of the net
decrease in Company Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g), that is allocable to the disposition of Company Property
subject to Nonrecourse Liabilities, determined in accordance with Regulations
Section 1.704-2(iv)(e). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Section 1.704-2(f) of the Regulations. This Section 4.2.1 is
intended to comply with the minimum gain chargeback requirement in such Section
of the Regulations and shall be interpreted consistently therewith.
4.2.2. MEMBER MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Section 4 except Section 4.2.1, if there is a net
decrease in Member Minimum Gain attributable to Member Nonrecourse Debt during
any Company fiscal year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to the portion of such Person's share of the net decrease in Member
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), that is allocable to the
disposition of Company Property subject to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Section 1.704-2(i)(4) of
the Regulations. This Section 4.2.2 is intended to comply with the minimum gain
chargeback requirement in such Section of the Regulations and shall be
interpreted consistently therewith.
4.2.3. QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustment, allocation, or distribution described in
Sections 1.704-1(b)(2)(ii)(d)(4) through 1.704-1(b)(2)(ii)(d)(6) of the
Regulations which causes or increases a deficit in such Member's Capital Account
as of the end of the tax year to which the adjustment, allocation or
distribution relates, items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Capital Account deficit of such
Member as quickly as possible, provided that an allocation pursuant to this
Section 4.2.3 shall be made if and only to the extent that such Member would
have a Capital Account deficit after all other allocations provided for in this
Section 4 have been tentatively made as if this Section 4.2.3 were not in the
Agreement.
4.2.4. CODE SECTION 704(C) ALLOCATIONS.
(a) In accordance with Code ss.704(c) and
the Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the
Members and assignees so as to take account of any variation
between the adjusted basis of such property to the Company for
federal income tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of
any Company asset is adjusted pursuant to this Agreement,
subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income
tax purposes and its Gross Asset Value in the same manner as
under Code ss.704(c) and the Regulations thereunder.
(c) Any elections or other decisions
relating to such allocations shall be made by the Members in
any manner that reasonably reflects the purpose and intention
of this Agreement. With respect to the Initial Capital
Contributions, consisting of the interests of the Members in
Building I and Building II, the allocation made pursuant to
Code ss.704(c) shall be made in accordance with the
"traditional method". Allocations pursuant to this Section
4.2.4 are solely for purposes of federal, state and local
taxes and shall not affect, or in any way be taken into
account in computing, any Member's Capital Account or share of
Profits, Losses, other items or distributions pursuant to any
provision of this Agreement.
4.2.5. SECTION 754 ADJUSTMENTS. To the extent an adjustment to
the adjusted tax basis of any Company 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), to be taken into account in determining Capital Accounts,
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 Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
4.3. OTHER ALLOCATION RULES.
4.3.1. For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any such other items
shall be determined on a daily, monthly, or other basis, as determined by the
Members using any permissible method under Code Section 706 and the Regulations
thereunder.
4.3.2. The Members are aware of the income tax consequences of
the allocations made by this Section 4 and hereby agree to be bound by the
provisions of this Section 4 in reporting their shares of Company income and
loss for income tax purposes.
SECTION 5.
MANAGEMENT AND RESPONSIBILITIES
5.1. AUTHORITY OF THE MEMBERS. Except to the extent otherwise provided
herein, the Members shall have the sole and exclusive right to manage the
business of the Company and shall have all of the rights and powers which may be
possessed by a member or manager under the Act.
5.2. DAY-TO-DAY OPERATIONS. Except as otherwise expressly provided by
this Agreement, DCP shall be responsible for the day-to-day management of
Company business, with all rights and powers generally conferred by this
Agreement, the Act, by law, or as necessary, advisable or consistent with the
proper management of Company affairs, including but not limited to, the
following:
5.2.1. Enter into Leases, contracts and other agreements with
third parties consistent with the then applicable Annual Budget.
5.2.2. Engage and retain legal counsel and other third parties
(excluding accountants, the engagement and retention of which shall be governed
by Section 5.3) for appropriate representation of, and providing of other
reasonable and necessary services to the Company.
5.2.3. Keep the other Member informed of status of operation
of the Company, and any actions and events causing material deviations from the
Annual Budget.
5.2.4. Implement, supervise and carry out the Leasing of the
Project to Tenants (including installation of Tenant Improvements), in
accordance with the then applicable Annual Budget.
5.2.5. Correspond and interface, as appropriate, on behalf of
the Company with Samaritan Health System, with respect to the Project and Ground
Leases.
5.2.6. Issue to the Members monthly operating reports for the
Project.
5.2.7. Control and administer (including deposits and
withdrawals) all cash accounts for the Company, except those maintained pursuant
to the Property Management Arrangement, and maintain all books and records for
the Company and its activities, which shall be open to inspection at all
reasonable times by all Members and, unless otherwise agreed by UHT, be
physically located or available for such inspection within Phoenix, Arizona.
Third parties transacting with the Company or DCP shall in all respects be
entitled to rely upon the signature of DCP as having authority to bind the
Company, with the exception of those actions set forth in Section 5.3 which
shall require resolution (or equivalent action) signed by all Members. DCP shall
devote to the Company such time as may be necessary for the proper performance
of its duties hereunder, but DCP shall not be required to devote full time to
the performance of such duties.
5.3. MEMBER APPROVALS. The affirmative vote of all Members shall be
required:
5.3.1. To sell, exchange, encumber or otherwise dispose of all
or a material portion of the Project.
5.3.2. To approve the Annual Budget.
5.3.3. To commit the Company to any Financing, including the
Initial Financing.
5.3.4. To commit the Company to any Leases other than
Preapproved Leases.
5.3.5. To do any act in contravention of this Agreement.
5.3.6. To do any act which would make it impossible to carry
on the ordinary business of the Company (including filing of any bankruptcy
petition), except as otherwise provided in this Agreement.
5.3.7. To amend or change this Agreement, or any other
document or agreement relating to operation of the Property in any manner.
5.3.8. To possess Company Property, or assign rights in
specific Company Property, for other than a Company purpose.
5.3.9. To permit the Company to engage in any activities
inconsistent with or in addition to the stated purposes of the Company.
5.3.10. To acquire or contract to acquire any property in
addition to, and not reasonably related to use and operation of, the Buildings.
5.3.11. To approve a settlement of any lawsuit, condemnation
action, or insurance claim not set forth in a then applicable Annual Budget
involving the payment or receipt of greater than $10,000.00.
5.3.12. To engage and retain accountants for the Company.
5.3.13. To enter into or modify the Keystone Management
Agreement or Keystone Financing Agreement.
5.4. DUTIES AND OBLIGATIONS OF MEMBERS.
5.4.1. The Members shall take all actions which may be
necessary or appropriate: (i) for the continuation of the Company's valid
existence as a limited liability company under the laws of the State of Arizona;
and (ii) for the accomplishment of the Company's purposes, including the
maintenance, preservation, and operation of the Company Property in accordance
with the provisions of this Agreement and applicable laws and regulations.
5.4.2. Members or their Affiliates may provide services to the
Company and be compensated therefor only as provided in this Agreement
(including the Keystone Management Arrangement), or with the approval of all
Members. All Company transactions with Affiliates shall be on competitive,
market rate terms.
5.5. EXPENSES OF MEMBERS. The Members shall be entitled to payment of,
or reimbursement for, all reasonable bona fide out-of-pocket business expenses
approved by all Members incurred with or to a non-affiliate third party in
connection with and reasonably related to Company business (including but not
limited to any and all loan commitment and other financing fees, attorneys,
accounting, appraisal, engineer and other professional fees, cost of fundings,
and other costs incurred in negotiating and finalizing the Company, this
Agreement, the Initial Financing, the Building III Purchase Agreement and
similar matters), upon presentation of satisfactory documentation as to time,
place, amount, nature and purpose of such expense; provided, the foregoing shall
not apply to expenses required to be borne other than by the Company pursuant to
the Keystone Financing Arrangement and the Project Management Arrangement. All
of the expenses of the Company shall be paid from Company funds or, in the event
that a Member shall advance his own funds to pay any such expenses of the
Company, the Company shall reimburse such Member for all such advances within
thirty (30) days of request if and to the extent it is within the then
applicable Annual Budget.
5.6. OTHER ACTIONS. Unless otherwise specifically provided by this
Agreement, all actions of the Company shall require approval by all Members.
SECTION 6.
MEETINGS; VOTING
6.1. MEETINGS OF THE MEMBERS. Meetings of the Members, or a vote of the
Members without a meeting, may be called by any Member. The call shall state the
nature of the business to be transacted or, if no meeting is to be held, the
matter to be voted on and the day that the votes shall be counted. Notice of any
such meeting shall be given to all Members not less than ten (10) business days
or more than thirty (30) days prior to the date of such meeting. Whenever the
vote or consent of Members is permitted or required under the Agreement, such
vote or consent may be given at a meeting of Members or may be given in
accordance with the procedure prescribed in Section 6.3. Meetings will, unless
all Members agree otherwise, be held at a mutually acceptable location or by
telephonic conference call.
6.2. RECORD DATE. For the purpose of determining the Members entitled
to vote on a matter, or to vote at any meeting of the Members or any adjournment
thereof, the Company may fix, in advance, a date as the record date for any such
determination. Such date shall not be more than thirty (30) days nor less than
ten (10) business days before any such meeting.
6.3. METHOD OF VOTING. With respect to each matter for which a vote is
required, each Member may cast the number of votes equal to such Member's
Percentage Interest. A Member may vote in person at a meeting, by written proxy
or by a signed writing directing the manner in which such Member desires its
vote to be cast, which writing must be received by the Company prior to the date
on which votes are to be counted. The proxy of a Member may authorize any Person
or Persons to act for him on all matters in which a Member is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Member or his attorney-in-fact.
No proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Member executing it. The Members shall at all times be permitted
to act without a formal meeting or voting whenever there is unanimous consent
signed by all Members on a resolution of the Company.
6.4. MEETINGS. Each meeting of Members shall be conducted by such
Person as the Members may appoint pursuant to such rules for the conduct of the
meeting as the Members deem appropriate.
6.5. REQUIRED MEETING. Unless otherwise agreed or waived in writing by
all Members, semi-annual meetings of the Members shall be held on the second
Tuesday of each December and July during the Term.
SECTION 7.
BOOKS AND RECORDS
7.1. BOOKS AND RECORDS. The Company shall keep adequate books and
records at either the principal place of business of the Company setting forth a
true and accurate account of all business transactions arising out of and in
connection with the conduct of the Company. Such books and records shall be kept
in accordance with the accrual method of accounting with Federal Tax Principles
consistently applied. Any Member or its designated representative shall have the
right, at any reasonable time, to have access to and inspect and copy the
contents of such books and records. Portions of the books and records under the
necessary and reasonable control of the Property Manager may be kept at the
principal place of business of the Property Manager.
7.2. TAX INFORMATION. Necessary tax information shall be delivered to
each Member after the end of each fiscal year of the Company. Every effort shall
be made to furnish such information within seventy-five (75) days after the end
of each fiscal year. In addition, UHT (or any individual designated by UHT if
the Tax Matters Member must be an individual) is specifically authorized to
represent the Members and act as the "Tax Matters Partner," as that term is used
under the Code and in any similar capacity under state or local law.
7.3. AUDITS. The books and records of the Company for each fiscal year
shall be audited by an independent accounting firm approved by all Members.
7.4. FISCAL YEAR. The fiscal year of the Company shall be the Calendar
Year.
SECTION 8.
TRANSFER OF INTERESTS
8.1. TRANSFER OF COMPANY INTEREST. Except as otherwise expressly
provided in this Section 8, no Member may voluntarily withdraw from the Company
and no Interest in the Company may be transferred without the consent of all
Members. As used in this Section, "Transfer" means to directly or indirectly
(including by transfer of controlling equity or other ownership interest in a
Member) transfer, sell, assign, pledge, hypothecate, or otherwise dispose of any
interest in the Company.
8.2. PERMITTED TRANSFERS. Subject to the conditions and restrictions
set forth in Section 8.3 hereof, all or any portion of the Interest in the
Company of a Member may be subjected to a transfer only to: (i) any other Member
to the extent expressly allowed by this Section 8 or Section 9; (ii) in the case
of UHT, transfers of the publicly-held ownership of UHT; (iii) any Affiliate of
the transferor; or (iv) any Purchaser as defined in and pursuant in accordance
with Sections 8.4 and 8.5.
8.3. CONDITIONS TO TRANSFERS. The Company shall not be required to
acknowledge and be bound by a Transfer (including but not limited to a Transfer
pursuant to Section 8.4) unless and until the following conditions are
satisfied:
8.3.1. Except in the case of a Transfer of an Interest at
death or involuntarily by operation of law, the transferor and transferee shall
execute and deliver to the Company such documents and instruments of conveyance
as may be necessary or appropriate in the opinion of counsel to the Company to
effect such Transfer and to confirm the agreement of the transferee to be bound
by the provisions of this Section 8. In any case not described in the preceding
sentence, the Transfer shall be confirmed by presentation to the Company of
legal evidence of such Transfer, in form and substance satisfactory to counsel
to the Company. In all cases, the Company shall be reimbursed by the transferor
and/or transferee for all costs and expenses that it reasonably incurs in
connection with such Transfer.
8.3.2. Except in the case of a Transfer at death or
involuntarily by operation of law, the transferor may be required to furnish the
Company an opinion of counsel, which counsel and opinion shall be reasonably
satisfactory to the Company, that the Transfer will not cause the Company to
terminate for federal income tax purposes.
8.3.3. The transferor and transferee shall furnish the
transferee's taxpayer identification number, sufficient information to determine
the transferee's initial tax basis in the interest transferred, and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns.
8.4. PURCHASE AND SALE. Each Member shall have the right, but not the
obligation, at any time such Member (an "Offering Member") is not in material
breach of its obligations under this Agreement or with respect to the Company,
to make an offer (the "Offer") to any other Member or Members (the "Non-Offering
Members") to either: (i) sell the Entire Interest of the Offering Member to the
Non-Offering Members (an "Offer to Sell"); or (ii) purchase the Entire Interest
of the Non-Offering Members (an "Offer to Purchase"), subject to the following:
8.4.1. The "Entire Interest" with respect to a Member shall
mean the Interest of such Member, together with any or all Member Loans or
similar matters payable or to such Member to or from the Company or the other
Members.
8.4.2. Subject to the Minimum Purchase Price (as herein
defined) requirement set forth in Section 8.5.1 below, the Offer shall specify a
price to be paid for each point of Percentage Interest (to be adjusted for
partial percentage points to the thousanth place) for the Interest subject to
the Offer, which shall be the same for a sale or purchase of an Interest (the
"Percentage Price").
8.4.3. The Non-Offering Members shall have sixty (60) days
following receipt of the Offer (the "Acceptance Period"), to agree in writing to
the Offering Member to accept either the Offer to Sell or the Offer to Purchase;
provided, that if the Non-Offering Members fail to so accept either the Offer to
Sell or the Offer to Purchase, the Non-Offering Members will be deemed to have
accepted the Offer to Purchase.
8.4.4. The Non-Offering Members shall have the right only to
accept either, and not both, the Offer to Sell or Offer to Purchase.
8.4.5. The acceptance, or deemed acceptance, by the
Non-Offering Members of the Offer to Sell or Offer to Purchase shall constitute
a binding agreement between the Offering Member and the Non-Offering Members for
such transaction, to be consummated in accordance with this Section 8.
8.5. SALE TRANSACTION. Closing ("Closing") of transfer of an Entire
Interest pursuant to Section 8.4 (a "Sale Transaction") shall occur within sixty
(60) days following the acceptance or deemed acceptance by the Non-Offering
Members of the Offer at 10:00 o'clock local time, or at such other time and
place as shall be mutually agreed upon by the Offering Member and Non-Offering
Members as follows:
8.5.1. The purchase price to be paid by the purchaser in a
Sale Transaction (the "Purchaser") to the selling Member (the "Seller") for the
Entire Interest (the "Purchase Price") shall be an amount equal to the
Percentage Price times the Percentage Interest within the Entire Interest,
increased or decreased, as appropriate, for the following:
(a) Any disparity, dollar for dollar, in the
Contribution Balance between the respective Interests subject
to the Offer to the extent required to equalize the
Contribution Balances (but without adjustment for any accrued
but unpaid Preferred Returns) between Seller and Purchaser
(with an example of the application of this Section 8.5.1(a)
being attached as Exhibit "C"); and
(b) The unpaid balance (principal and
interest) of any Member Loans or other amounts payable to or
by the Seller, whether to or from the Members or the Company.
Notwithstanding any other provision of Sections 8.4 or 8.5 to the contrary, the
Purchase Price before adjustment pursuant to Section 8.5.1.(a) shall never be
less than the Contribution Balance of the Seller (the "Minimum Purchase Price").
8.5.2. Closing of the Sale Transaction shall be conditioned
upon obtaining any consents required by material contracts (including Project
Agreements) to which the Company is a party which in any way would be breached
by, or cause a material adverse change in the terms thereof in the event of the
completion of, a Sale Transaction, with provisions of any Financing being deemed
such a material contract. The Seller and Purchaser will each exert diligent and
good faith efforts, prior to Closing, to obtain any necessary consents or
approvals required to satisfy such contingency. In the event such contingency
cannot be so satisfied, the Sale Transaction shall be deemed withdrawn and
terminated, with neither the Seller nor the Purchaser to have any further right
or liability as to the other thereunder.
8.5.3. The Seller and Purchaser shall execute any and all
documents and take any and all acts reasonably required to complete the Sale
Transaction, including but not limited to the following:
(a) The documents otherwise required by this
Section 8 in connection with Transfers.
(b) Amendment to this Agreement and filings,
as required by applicable law.
(c) Indemnification by the Purchaser of the
Seller of any and all liabilities pertaining to the Entire
Interest accruing from and after the Closing, and
indemnification by the Seller to the Purchaser of any and all
liabilities pertaining to the Entire Interest accruing prior
to the Closing.
(d) Evidence of authority to execute any and
all documents and take such further acts as shall be required
to complete the Sale Transaction.
8.5.4. The Seller shall, if and to the extent requested by the
Purchaser, cancel or cause its Affiliates to cancel, effective as of Closing,
all contracts (including but not limited to the Property Management Arrangement)
between the Seller or its Affiliates and the Company.
8.5.5. The Seller and Purchaser shall each bear their
respective expenses, including attorneys' fees, in connection with the Sale
Transaction and the Purchaser and Seller shall each pay, as a part of Closing of
the Sale Transaction, one-half of any expenses, including attorney, accounting
and tax preparation fees, incurred by the Company in connection with the Sale
Transaction. While an Offer is outstanding or a Sale Transaction is pending, the
Entire Interest of the Offering Member and Non-Offering Members shall not be
subject to an Offer by any other Member pursuant to this Section 8.
8.6. PROHIBITED TRANSFERS. Any purported Transfer of an Interest not in
compliance with this Section 8 shall be null and void and of no effect whatever;
provided that, if the Company is required by law to recognize a Transfer (or if
the Company, in its sole discretion, elects to recognize a Transfer) the
Interest transferred shall be strictly limited to the transferor's rights to
allocations and distributions as provided by this Agreement with respect to the
transferred interest, which allocations and distributions may be applied
(without limiting any other legal or equitable rights of the Company) to satisfy
any debts, obligations, or liabilities for damages that the transferor or
transferee of such interest may have to the Company.
8.7. NON-COMPLIANCE INDEMNITY. In the case of a Transfer not in
compliance with this Section 8, the parties engaging or attempting to engage in
such Transfer shall be liable to indemnify and hold harmless the Company and the
other Members from all cost, liability, and damage that any of such indemnified
Persons may incur (including, without limitation, incremental tax liability and
lawyers fees and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce the indemnity granted hereby.
8.8. RIGHTS OF UNADMITTED ASSIGNEES. A Person who acquires a Company
Interest but who is not admitted as a Substituted Member pursuant to Section 8.9
hereof shall be entitled only to allocations and distributions with respect to
such interest in accordance with this Agreement, but shall have no right to any
information or accounting of the affairs of the Company, shall not be entitled
to inspect the books or records of the Company, and shall not have any of the
rights of a Member under the Act or this Agreement.
8.9. ADMISSION OF TRANSFEREES AS MEMBERS. Subject to compliance with
the other provisions of this Section 8, a transferee of a Company Interest may
be admitted to the Company as a Substituted Member only if each of the following
conditions is satisfied:
8.9.1. All existing Members unanimously consent to such
admission;
8.9.2. The Interest with respect to which the transferee is
being admitted was acquired by means of a Permitted Transfer;
8.9.3. The transferee becomes a party to this Agreement and
executes such documents and instruments as the Company may reasonably request to
confirm such transferee as a Member and such transferee's agreement to be bound
by the terms and conditions hereof;
8.9.4. The transferee pays or reimburses the Company for all
reasonable legal, filing, and publication costs that the Company incurs in
connection with the admission of the transferee as a Member with respect to the
transferred interest; and
8.9.5. The transferee executes a statement that it is
acquiring such Interest in the Company interest for investment and not for
resale.
8.10. DISTRIBUTIONS AND ALLOCATIONS IN RESPECT TO TRANSFERRED
INTERESTS. If any Interest in the Company is Transferred during any accounting
period in compliance with the provisions of this Section 8, all Profits, Losses,
each item thereof, and all other items attributable to the transferred interest
for such period shall be divided and allocated between the transferor and the
transferee by taking into account their varying interests during the period in
accordance with Code Section 706(d), using any convention permitted by law and
selected by the Company. All distributions on or before the date of such
Transfer shall be made to the transferor, and all distributions thereafter shall
be made to the transferee.
8.11. COVENANT NOT TO OTHERWISE WITHDRAW OR DISSOLVE. Notwithstanding
any provision of the Act, each Member recognizes that the Members have entered
into this Agreement based on their mutual expectation that all Members will
continue as Members and carry out the duties and obligations undertaken by them
hereunder and that, except as otherwise expressly required or permitted hereby,
each Member hereby covenants and agrees not to: (a) take any action to file a
certificate of dissolution or its equivalent with respect to itself; (b) take
any action that would cause a voluntary bankruptcy of such Member; (c)
voluntarily withdraw or attempt to withdraw from the Company; (d) exercise any
power under the Act to dissolve the Company; (e) petition for judicial
dissolution of the Company; or (f) demand a return of such Member's
contributions or profits without the unanimous consent of the Members.
SECTION 9.
FAILURE TO MAKE CAPITAL CONTRIBUTIONS
9.1. OCCURRENCE AND DILUTION. In the event any Member (a "Non-Paying
Member") shall at any time fail to timely fund to the Company any additional
Capital Contribution required by Section 3.1.3 (an "Unpaid Contribution"), the
other Members ("Other Members") shall have the right, but not the obligation, to
give written notice to the Non-Paying Member requesting that the Unpaid
Contribution be paid and, if the Unpaid Contribution is not paid by the
Non-Paying Member within ten (10) days following the giving of such notice, the
Other Members shall have the right, but not the obligation, to fund all or any
portion of the Unpaid Contribution (the "Dilution Funding"), providing to the
Non-Paying Member concurrent written notice of such funding as being pursuant to
this Section 9.1 (the "Dilution Notice"). To the extent the Non-Paying Member
does not repay the Other Members the Dilution Funding (together with interest
thereon at the Interest Rate from the date of funding until repaid) within sixty
(60) days following the Dilution Notice (the "Dilution Date"), the Percentage
Interest of the Non-Paying Member shall be decreased, and the Percentage
Interest of the Other Members increased (a "Dilution"), by the basis of one
percent (1%) of Percentage Interest for the number of Capital Increment Units
within a Dilution Funding (adjusted pro rata for partial Capital Increment
Units), determined as of the Dilution Date.
9.2. CAPITAL INCREMENT UNIT. A Capital Increment Unit shall be an
amount, calculated as of a certain date, obtained by dividing: (a) the product
of ninety percent (90%) multiplied by the aggregate Contribution Balances
of all Members as of such date; by (b) 100.
9.3. EXAMPLE. By way of illustration of the operation of Sections 9.1
and 9.2, in the event that, as of a Dilution Date, Member One and Member Two
each hold a 50% Percentage Interest, Member One has a Contribution Balance of
$600,000.00 and Member Two has a Contribution Balance of $400,000.00, and Member
Two funds an Unpaid Contribution of Member One of $120,000.00, the Dilution
would be calculated as follows:
(a) The Capital Increment Unit would be
$9,000.00, being: (i) 90% multiplied by $1,000,000.00
(aggregate of $600,000.00 Contribution Balance of
Member One and $400,000.00 Contribution Balance for
Member Two), divided by (ii) 100;
(b) Dilution Funding of $120,000.00 by
Member Two would equate to Percentage Interest of
13.333% ($120,000.00 divided by $9,000.00 per Capital
Increment Unit);
(c) Percentage Interest of Member One would
be decreased by 13.333% from 50% to 36.667%, and
Percentage Interest of Member Two would be increased
by 13.333% from 50% to 63.333%.
SECTION 10.
DISSOLUTION OF COMPANY
10.1. LIQUIDATING EVENTS. The Company shall dissolve and commence
winding up and liquidating upon the first to occur of any of the following
("Liquidating Events"):
10.1.1. December 31, 2045;
10.1.2. Sale of all of the Project (including receipt of all
proceeds therefrom);
10.1.3. The written consent of all Members to dissolve, wind
up, and liquidate the Company;
10.1.4. The happening of any other event that makes it
unlawful or impossible to carry on the business of the Company;
10.1.5. Any event which causes there to be only one Member;
10.1.6. An event of withdrawal of a Member, unless the
remaining Member(s) elect to continue the Company in accordance with the
provisions set forth in this Section 10.1, below; or
10.1.7. The occurrence of any dissolution event set forth in
Section 29-271 of the Act, or the entry of a judgment of dissolution under
Section 29-785 of the Act.
The Members hereby agree that, notwithstanding any provision of the Act, the
Company shall not dissolve prior to the occurrence of a Liquidating Event.
Furthermore, if an event specified in Sections 10.1.6 or 10.1.7 hereof occurs,
the remaining Member(s) may, within sixty (60) days of the date such event
occurs, elect to continue the Company's business by the affirmative vote of a
such remaining Member(s), in which case the Company shall not dissolve and shall
continue to operate.
10.2. NOTICE OF DISSOLUTION. As soon as possible following the
occurrence of a Liquidating Event, a written notice of dissolution signed on
behalf of the Company shall be filed with the Corporation commission giving
notice of the dissolution of the Company and the commencement of the winding up
of its business affairs.
10.3. WINDING UP. Upon the occurrence of a Liquidating Event, the
Company shall continue solely for the Purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Members. No Member shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the Company's
business and affairs. The Members shall each be responsible for overseeing the
winding up and dissolution of the Company and shall take full account of the
Company's liabilities and Company Property and the Company Property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom, to the extent sufficient therefor, shall be applied
and distributed in the following order:
10.3.1. First, to the payment and discharge of all of the
Company's debts and liabilities to creditors other than Members;
10.3.2. Second, to the payment and discharge of all of the
Company's debts and liabilities to Members; then
10.3.3. The balance, if any, to the Members in accordance with
their respective rights to receive Distributions pursuant to Section 4.1.2 of
this Agreement.
10.4. DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provision of this Section 10, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(i) but no Liquidating Event has
occurred, the Company Property shall not be liquidated, the Company's
liabilities shall not be paid or discharged, and the Company's affairs shall not
be wound up. Instead, the Company shall be deemed to have distributed the
Company Property in kind to the Members, who shall be deemed to have assumed and
taken subject to all Company liabilities, all in accordance with their
respective rights to receive Distributions pursuant to this Agreement.
Immediately thereafter, the Members shall be deemed to have recontributed the
Company Property in kind to the Company, which shall be deemed to have assumed
and taken subject to all such liabilities.
10.5. ARTICLES OF TERMINATION. At such time as all of the debts,
liabilities and obligations of the Company have been paid, discharged or
otherwise provided for, written articles of Termination signed on behalf of the
Company shall be filed with the Corporation Commission in accordance with
Section 29-783 of the Act.
10.6. NEGATIVE CAPITAL ACCOUNTS. Notwithstanding anything to the
contrary in this Agreement, upon a liquidation within the meaning of Regulations
ss.1.704-1(b)(2)(ii)(g), if any Member has a negative Capital Account balance
(after giving effect to all contributions, distributions, allocations and other
Capital Account adjustments for all taxable years, including the year during
which such liquidation occurs), such Member shall have no obligation to make any
contributions to the capital of the Company, and the negative balance of such
Member's Capital Account shall not be considered a debt owed by such Member to
the Company or to any other Person for any purpose whatsoever.
SECTION 11.
REMEDIES
11.1. DEFAULT. In the event a Member (the "Defaulting Party") fails to
timely perform any material duty or obligation required under the terms of this
Agreement, the Members shall have the right to pursue such legal remedies as are
available under the Act and the laws of the State of Arizona in such manner and
to such extent deemed to be in the best interest of the Company under the
prevailing facts and circumstances, including, but not limited to, the
institution of legal proceedings to specifically enforce the obligation of the
Defaulting Party in accordance with this Agreement; provided, however, before
pursuing such remedies the Defaulting Party shall be given written notice of the
default and a period of ten (10) days after such notice is given in which to
cure the default.
11.2. SUSPENSION OF RIGHTS. Subsequent to the material default by the
Defaulting Party and until such time as the default has been cured, the
Defaulting Party shall have no right to receive any Distribution from the
Company or to vote or otherwise participate in the management of Company
affairs.
SECTION 12.
MISCELLANEOUS
12.1. NOTICES. Any notice, payment, demand, or communication required
or permitted to be given by any provision of this Agreement shall be in writing
and shall be delivered personally to the Person or to an officer of the Person
to whom the same is directed, or sent by regular, registered, or certified mail,
or by a nationally recognized overnight delivery service to the address set
forth below or to such other address as such Person may from time to time
specify by notice to the Company and the Members.
UHT: Xxxx X. Xxxxxx, President
Universal Health Realty Income Trust
000 Xxxxx Xxxxx Xxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Xxxxxxx X. Xxxxxx
Universal Health Realty Income Trust
0 Xxxxxxxx Xxxxxx, Xxxxx 000
3525 Piedmont Road, N.E.
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxx Xxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxx
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
DCP: Attn: Xxxxxx Xxxxxxx
Rokmar Capital, L.L.C.
0000 Xxxx Xxxxxxxxx xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Xxxxxx X. Xxxx, Esq.
Xxxxx, Beaugureau, Shaw, Xxxxxxxx & Xxxxxxx, PC
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If a notice is sent to the Company, it shall be sent to the Company's principal
place of business. Any such notice shall be deemed to be delivered, given, and
received for all purposes as of the date so delivered, if delivered personally
or if sent by regular mail, or as of the date on which the same was deposited in
a regularly maintained receptacle for the deposit of United States mail, if sent
by registered or certified mail, postage and charges prepaid.
12.2. SEVERABILITY. Every provision of this Agreement is intended to be
severable. If any portion of this Agreement is determined to be illegal or
invalid for any reason, such determination shall not affect the validity or
legality of the remainder of this Agreement.
12.3. GOVERNING LAW; PARTIES IN INTEREST. This Agreement will be
governed by and construed according to the laws of the State of Arizona, and
(subject to the restrictions on transfers of Interests herein) will bind and
inure to the benefit of the heirs, successors, assigns and personal
representatives of the Members.
12.4. AMENDMENT. Unless otherwise required by this Agreement, a
proposed amendment to this Agreement shall be adopted and effective as an
amendment if it receives the affirmative vote of all Members.
12.5. WAIVER OF LIS PENDENS AND PARTITION. The Members recognize that
no Member has any direct right in the Company Property but only an interest in
the Company which is deemed to be personal property. Nevertheless, because the
Company may suffer irreparable financial injury if a lis pendens or an action
for partition were filed with respect to the Company Property in connection with
a Company dispute, each Member does hereby agree to waive any such right to file
a lis pendens against the Company Property or an action for partition thereof.
12.6. EXECUTION IN COUNTERPART. This Agreement or the Certificate may
be executed in counterparts, all of which taken together shall be deemed one
original.
12.7. INCORPORATION BY REFERENCE. Every exhibit, schedule and other
appendix attached to this Agreement referred to herein is deemed incorporated in
this Agreement by reference.
12.8. COMPUTATION OF TIME. In computing any period of time pursuant to
this Agreement, the day of the act, date of notice, event or default from which
the designated period of time begins to run will not be included. The last day
of the period so computed will be included, unless it is a Saturday, Sunday or
legal holiday in the State of Arizona, in which event the period shall run until
the end of the next day which is not a Saturday, Sunday or such legal holiday.
12.9. TITLES AND CAPTIONS. All article, section or paragraph titles or
captions contained in this Agreement are for convenience only and are not deemed
part of the context hereof.
12.10. PRONOUNS AND PLURALS. All pronouns and any variations thereof
are deemed to refer to the masculine, feminine, neuter, singular or plural as
the identity of the person or Persons may require.
12.11. CONSTRUCTION. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member.
12.12. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the Members, and supersedes any prior understandings and
agreements (including but not limited to Letter Agreement dated June 14, 1995)
previously entered into (whether oral or written) between them representing the
subject matter contained herein.
12.13. OTHER TRANSACTIONS. Each Member acknowledges and agrees that the
other Members or their respective Affiliates currently are or may be engaged in
other transactions and projects ("Other Projects") including projects of a
similar nature or in some manner competitive with the Project ("Similar
Projects"). Neither the Company nor the Members shall have any right or
obligation to in any way participate in, or preclude any Member or its Affiliate
from being involved with, any Other Projects, including Similar Projects;
provided, that in the event any Member or its Affiliate (an "Opportunity
Member") hereafter possesses the opportunity, right or option to purchase or
develop a medically oriented property (an "Opportunity") within a five (5) mile
radius of the Project (the "Radius Area"), the Opportunity Member shall offer
the other Members ("Other Members") participation with the Opportunity Member to
jointly develop, own and operate the Opportunity within this Company (in the
case of an Opportunity on the Desert Samaritan Hospital Campus, Mesa, Arizona)
or, if the Opportunity involves property located elsewhere within the Radius
Area, in a similarly structured company or joint venture to this Company (the
"Opportunity Offer"). The Opportunity Offer will be deemed rejected by the Other
Members unless the Other Members, within twenty (20) days following receipt of
the Opportunity Offer, in writing to the Opportunity Member accept the
Opportunity Offer and thereafter proceed continuously, diligently and in good
faith, with the Opportunity Member, to negotiate, participate and finalize the
Opportunity transaction.
12.14. UHT TRUSTEES' LIABILITY. This Agreement is made on behalf of UHT
by Trustees of UHT, not individually, but solely in their capacity in such
office as authorized by the Trustees pursuant to UHT's Declaration of Trust, and
the obligations of this Agreement are not binding upon, nor shall resort be had
to, the private property of any of the Trustees, shareholders, officers,
employees or agents of UHT personally, but bind only UHT's property. The
provision contained in the foregoing sentence is not intended to, and shall not,
limit any right that DCP or any third parties might otherwise have to obtain
injunctive relief against UHT or UHT's successors in interest, or any action not
involving the personal liability of the Trustees, shareholders, officers,
employees or agents of UHT (original or successor).
12.15. CONFIDENTIALITY. Each of the Members agrees to maintain the
confidentiality of this Agreement and the terms of their respective
participation in the Company, except to the extent required: (a) for carrying
out the activities of the Company, including but not limited to obtaining
financing; (b) for filing tax returns and other tax-related financing; (c) for
internal disclosures among the various participants in each Member; or (d) by,
or to insure compliance with, applicable law.
12.16. EXHIBITS. Exhibits "A" through "C" attached hereto are by this
reference incorporated herein.
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth above.
UNIVERSAL HEALTH REALTY INCOME
TRUST, a Maryland real estate
investment trust
By: /s/ XXXXXXXXXX
--------------------------------
Its: Vice President
--------------------------------
Tax I.D. No. 00-0000000
DESERT COMMERCIAL PROPERTIES
LIMITED PARTNERSHIP, an Arizona
limited partnership
By: ROKMAR CAPITAL, L.L.C., an Arizona
limited liability company, its
Managing General Partner
By: /s/ XXXXXXXXX
--------------------------------
Its: Manager
--------------------------------
Tax I.D. No 00-0000000
