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EXHIBIT 10.12
OPERATING AGREEMENT
FOR
GK FINANCING, LLC
This Agreement is effective as of
the 17th day of October, 1995
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OPERATING AGREEMENT
FOR
GK FINANCING, LLC
RECITALS
A. This Operating Agreement, effective as of October 17, 1995, governs
the relationship among Members of GK Financing, LLC ("Company") and between
Company and Members, pursuant to the Act and the Articles, as either may be
amended from time to time.
B. It is the intention of the Members that the Company be treated as a
partnership for income tax purposes.
Now therefore, in consideration of their mutual promises, covenants,
and Agreements, the parties hereto do hereby promise, covenant, and agree as
follows:
ARTICLE I
INTRODUCTORY MATTERS
1.1 FORMATION OF LIMITED LIABILITY COMPANY
Pursuant to the Act American Shared Radiosurgery Services
("ASRS") and GKV Investments, Inc. ("GKV"), acknowledge they are Members of the
limited liability company organized under the laws of the State of California
known as GK Financing, LLC whose Articles were filed effective October 16, 1995.
The purposes for the organization of Company shall be those set forth in its
Articles. Company may, as provided in its Articles and the Agreement, exercise
all of the powers described in Title 2.5 of Corporations Code of the State of
California also known as the Xxxxxxx-Xxxxxx Limited Liability Company Act.
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1.2 REGULATION OF INTERNAL AFFAIRS BY OPERATING AGREEMENT
Consistent with the Articles and the Act, the internal affairs of
Company and the conduct by its business shall be regulated by the Agreement as
it shall be amended by the Members from time to time.
1.3 LAWS GOVERNING OPERATING AGREEMENT
The Agreement is subject to, and governed by, the mandatory provisions
of the Act and the Articles filed with the Secretary of State, as both are
amended from time to time. In the event of a direct conflict between the
provisions of the Agreement and the mandatory provisions of the Act or the
provisions of the Articles, such provisions of the Act or the Articles, as the
case may be, will be controlling.
1.4 TERM OF OPERATING AGREEMENT
The term of the Agreement shall be co-terminus with the period of
duration of Company provided in the Articles unless Company is earlier
terminated upon its voluntary or involuntary dissolution.
1.5 USE OF FULL LEGAL NAME REQUIRED
The business of Company shall be conducted under the name GK Financing,
LLC, until such time as the Members shall designate otherwise and file
amendments to the Articles in accordance with applicable law. The phrase "LLC"
shall always appear as part of the name of Company on all correspondence,
stationery, checks, invoices and any and all documents and papers executed by
Company and as otherwise required by the Act.
1.6 NO INDIVIDUAL AUTHORITY FOR A MEMBER
No Member acting alone, shall have any authority to act for, or to
undertake or assume, any obligation, debt, duty or responsibility on behalf of
the Company, unless that member is a Manager and acting in accordance with this
Agreement.
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1.7 LIMITATIONS ON CONTRACTION OF DEBTS
Except as otherwise provided in the Agreement including Subparagraph
3.3.B, no debt shall be contracted or liability incurred by or on behalf of
Company, except in accordance with Paragraph 2.14.
1.8 TITLE TO ALL PROPERTIES IN NAME OF COMPANY
Real and personal property owned or purchased by Company shall be held
and owned, and conveyance made, in the name of Company. Instruments and
documents providing for the acquisition, mortgage or disposition of property of
Company shall be valid and binding upon Company, except as otherwise limited in
the Agreement including Subparagraph 3.3.B., if executed by the Manager.
1.9 MAINTENANCE OF REGISTERED OFFICE AND AGENT FOR SERVICE OF
PROCESS IN CALIFORNIA
Company shall have an agent for service of process in California who
may be either a natural person or a corporation meeting the qualifications of
Corporations Code Section 17061(d)(1) and Section 17050(a)(5). Every agent for
service of process must have a street address for the service of process. The
street address of the agent for service of process is the registered office of
the limited liability company in this state. Within 30 days after changing the
location of his office from one address to another in this state, an agent for
service of process must file a certificate with the Secretary of State setting
forth the names of the limited liability companies represented by him, the
address at which he, she, or it has maintained the office for each of the
limited liability companies, and the new address to which the office is
transferred.
1.10 REQUIRED MAINTENANCE OF RECORDS IN CALIFORNIA OFFICE
Company shall continuously maintain an office in the State of
California which may but need not be a place of its business in this state or
its registered office, at which it shall keep:
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a. A current list of the full name and last known business address of
each Member and of each holder of an Economic Interest in
alphabetical order together with the Capital Contribution and
Percentage Share in Net Profits and Net Losses;
b. If the Articles provide Company is to be managed by one or more
managers and not by all of its members, a current list of the full
name and business or residence address of each Manager;
c. A copy of the filed Articles and all amendments thereto, together
with any powers of attorney pursuant to which the Articles or any
amendments thereto were executed;
d. Copies of Company's federal, state and local income tax returns or
information returns and reports, if any, for the six (6) most
recent taxable years;
e. A copy of the Agreement and any amendments thereto, together with
any powers of attorney pursuant to which any written operating
Agreement or amendments were executed;
f. Copies of financial statements of Company for the six (6) most
recent taxable years; and
g. The books and records of the Company as they relate to the
internal affairs of the Company for at least the current and past
four fiscal years.
1.11 RECORDS OF COMPANY SUBJECT TO INSPECTION
Records kept pursuant to Paragraph 1.10 are subject to inspection and
copying at the reasonable request, and at the expense, of any Member during
ordinary business hours.
1.12 PLACES OF BUSINESS OUTSIDE STATE OF CALIFORNIA
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Members, acting through the Policy Committee, may identify other places
of business of Company outside the State of California, appoint agents for
service of process and make filings as may be required or desirable under the
laws of such other places.
1.13 FILING OF FICTITIOUS BUSINESS NAME STATEMENT
The Manager shall file such fictitious business name statements as may
be required or desirable under the laws of any place in which the Company holds
assets or conducts business activities.
1.14 OTHER FORMATION MATTERS
A. Adoption of Company Seal
Members, acting through the Policy Committee, shall adopt a
company seal circular in form containing the words GK FINANCING, LLC, together
with the date of organization of Company.
B. Maintenance of Company Minute Book
Members shall authorize the maintenance of a Company minute book
to include the Articles, the Agreement and any amendments thereto and the
minutes of meetings (or consents in lieu of meetings) of Members and Managers
and other important documents of Company.
C. Establishment of Bank Accounts
Members shall authorize the establishment of one or more
depository accounts for the funds of Company and designate persons authorized to
draw against such accounts on behalf of Company (more specifically described
elsewhere in the Agreement).
D. Reimbursement of Expenses of Organization
Members shall authorize Company to pay its expenses of
organization and to reimburse any person advancing
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funds for this purpose. Provided, however, no Member shall be reimbursed for
legal fees or expenses incurred in relation to the preparation and negotiation
of this Agreement.
1.15 MINIMUM OF TWO MEMBERS
The Company shall at all times have at least two Members.
1.16 DEFINITIONS OF TERMS
The terms used in the Agreement with their initial letters capitalized,
shall, unless the context otherwise requires, have the meanings specified in
this Paragraph 1.16 or, if not defined in this Paragraph 1.16, elsewhere in the
Agreement. When used in the Agreement, the following terms shall have the
meanings set forth below:
A. "Act" shall mean the Xxxxxxx-Xxxxxx Limited Liability Act as amended
from time to time.
B. "Affiliate" shall mean any individual, partnership, corporation,
trust, or other entity or association, directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common control with a
Member, the Company or other Person, as the context requires. The term
"control," as used in the immediately preceding sentence, means, with respect to
a corporation the right to exercise, directly or indirectly, more than 50
percent of the voting rights attributable to the controlled corporation, and,
with respect to any individual, partnership, trust, other entity or association,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled entity.
C. "Agreement" shall mean this Operating Agreement between all Members
of Company regulating the affairs of Company and the conduct of its business, as
originally executed and as amended from time to time, and shall refer to the
Agreement as a whole, unless the context otherwise requires.
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D. "Annual Budget" shall mean, with respect to each fiscal year, the
Annual Operating Budget and the Annual Capital Budget for such fiscal year. The
Annual Budget for the first fiscal year is included in the Business Plan. If the
Policy Committee does not approve an Annual Budget for a particular fiscal year,
then: (i) the Annual Operating Budget for such fiscal year shall be deemed to be
the Annual Operating Budget for the immediately preceding fiscal year but with
each line item in such budget increased by the percentage increase in the
Wholesale Price Index which occurred during the preceding fiscal year plus any
increase due to the expiration of a Gamma Knife warranty and the commencement of
the service agreement for such Gamma Knife; (ii) no capital expenditures shall
be made during such fiscal year.
E. "Annual Capital Budget" shall mean, with respect to each fiscal
year, the annual capital budget for such fiscal year proposed by the Manager and
approved by the Policy Committee, except as provided herein.
F. "Annual Operating Budget" shall mean, with respect to each fiscal
year, the annual operating budget for such fiscal year proposed by the Manager
and approved by the Policy Committee, except as provided herein.
G. "Articles" shall mean the Articles of Organization for Company
originally filed with the Secretary of State of California, including all
amendments thereto or restatements thereof and shall mean the Articles as a
whole unless the context otherwise requires.
H. "ASHS" shall mean American Shared Hospital Services, a California
corporation, which is the ultimate beneficial owner of all the outstanding
capital stock of ASRS.
I. "ASRS" shall mean American Shared Radiosurgery Services, a
California corporation.
J. "Bankruptcy" shall mean, (i) the entry of a decree or order for
relief against a Member by a court of competent jurisdiction in any involuntary
case brought against the Member under any bankruptcy, insolvency or other
similar law
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(collectively, "Debtor Relief Laws") generally affecting the rights of creditors
and relief of debtors now or hereafter in effect; (ii) the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar agent under applicable Debtor Relief Laws for the Member or for any
substantial part of its assets or property; (iii) the ordering by a court of
competent jurisdiction of the winding up or liquidation of a Member's affairs;
(iv) the filing of a petition in any such involuntary bankruptcy case, which
petition remains not dismissed for a period of 180 days or which is not
dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code
(or any corresponding provision of any future United States bankruptcy law); (v)
the commencement by a Member of a voluntary case under any applicable Debtor
Relief Law now or hereafter in effect; (vi) the consent by a Member to the entry
of an order for relief in an involuntary case under any such law or to the
appointment of or the taking of possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar agent under any applicable
Debtor Relief Laws for the Member or for any substantial part of its assets or
property; or (vii) the making by a Member of any general assignment for the
benefit of its creditors.
K. "Business Plan" shall mean that business plan for the Company which
will be agreed to by the Members.
L. "Capital Account" shall mean the amount of the capital interest of a
Member or assignee determined in accordance with Article IV of the Agreement.
M. "Capital Contribution" shall mean the value of any money, property
(including promissory notes or other binding obligation to contribute money or
property), contributed as capital in a Member's capacity as a Member, as shown
in Exhibit A, as the same may be amended from time to time. In the case of an
assignee who has not been admitted as a Member, the assignee's Capital
Contribution shall include such contributions made by the assignee and the
assignor.
N. "Code" shall mean the Internal Revenue Code of 1986, as amended. All
references herein to sections of the Code
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shall include any corresponding provision or provisions of succeeding law.
O. "Company" shall mean GK FINANCING, LLC.
P. "Distribution" means a transfer of money or property by Company to
its Members without consideration.
Q. "Dissolution Event" for Company means with respect to any Member,
the death, retirement, resignation, expulsion, bankruptcy or dissolution of such
Member or occurrence of any other event which terminates his continued
membership in the Company.
R. "EHUS" shall mean Elekta Holdings U.S., Inc., a Georgia corporation,
which is the indirect owner of all the outstanding capital stock of GKV and EII
and an Affiliate of Elekta AB.
S. "Economic Interest" shall mean the right to share in the Net
Profits, Net Losses, deductions, credit or similar items and to receive
Distributions from Company but neither Management and Voting Rights nor
Information Rights except as provided in Act Section 17106.
T. "Gamma Knife" shall mean the Leksell Gamma Knife, as such term is
defined in the LGK Purchase Agreement.
U. "GKV" shall mean GKV Investments, Inc., a Georgia corporation.
V. "Information Rights" means the right to inspect, copy or obtain
information and documents concerning the affairs of Company as provided in Act
Section 17106 and in Paragraphs 6.3 and 6.4 of the Agreement.
W. "Interest" means "Membership Interest".
X. "LGK Purchase Agreement" shall mean that certain LGK Purchase
Agreement to be executed on the effective date of
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this Agreement by the Company and Elekta Instruments, Inc. ("EII") (a Georgia
Corporation). EII is an affiliate of GKV.
Y. "Majority-In-Interest" shall mean more than fifty percent (50%)
of the interest of Members (or class of Members as the case may be) of the
profits interests and of the capital interests of Company within the meaning of
such term in Revenue Procedure 94-46, 1994-28 I.R.B. 1.
Z. "Management and Voting Rights" shall be those rights of a Member
described in Article III of the Agreement as they may be limited in the
Agreement, the Articles and the Act.
A(i). "Manager" shall be a Person elected by Members of Company to
manage Company.
B(i). "Member" shall mean each Person (other than any Person who has
withdrawn, been expelled, died, retired or dissolved) who has been admitted to
Company as a Member in accordance with the Articles and the Agreement.
C(i). "Membership Interest" in Company shall mean the entire ownership
interest of a Member in Company at any particular time, including collectively
Economic Rights, Management and Voting Rights and Information Rights of such
Member as provided in the Agreement and under the Act, together with the
obligations of such Member to comply with all terms and provisions of the
Agreement. A Membership Interest constitutes personal property. A Member or
assignee of any Membership Interest of a Member has no interest in specific
property of Company.
D(i). "Officer" means any person elected as such by Policy Committee.
E(i). "Percentage Interest" shall mean the percentage of a Member set
forth opposite the name of such Member under the column "Member's Percentage
Interest" in Exhibit A hereto, as such percentage may be adjusted from time to
time pursuant to the terms of the Agreement.
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F(i). "Person" includes individuals, general partnerships, limited
partnerships, other limited liability companies, corporations, trusts, estates,
real estate investment trusts and any other association.
G(i). "Provisional Business Plan" shall mean that provisional business
plan for the Company attached as Exhibit B hereto.
H(i). "Provisional Budget" shall mean the Provisional Capital Budget
and the Provisional Operating Budget.
I(i). "Provisional Capital Budget" shall mean the initial capital
budget for the period beginning on the date of this Agreement AND ENDING
DECEMBER 31, 1995 proposed by the Manager and approved by the Policy Committee.
J(i). "Provisional Operating Budget" shall mean the initial operating
budget for the period beginning on the date of this Agreement AND ENDING
DECEMBER 31, 1995 proposed by the Manager and approved by the Policy Committee.
K(i). "Registered Office" shall mean the office maintained at the
street address of the agent for service of process of the Company in California.
L(i). "Regulations" shall, unless the context clearly indicates
otherwise, mean the regulations currently in force as final or temporary that
have been issued by the U.S. Department of Treasury pursuant to its authority
under the Code.
M(i). "Return of Capital" means any distribution to a Member to the
extent of the positive balance in the Capital Account of the Member immediately
before the distribution.
N(i). "Secretary of State" shall mean the Secretary of State of
California or his or her duly appointed delegate unless another state is
mentioned in the same context.
O(i). "Territory" shall mean the United States of America and Brazil.
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P(i). "GKV Loan" shall have the meaning set forth in Subparagraph
12.22.A hereof.
Q(i). "UCSF Assets" shall have the meaning set forth in Exhibit A
hereto.
R(i). "USC Assets" shall have the meaning set forth in Exhibit A
hereto.
S(i). "Draw Down Loan" shall have the meaning set forth in Subparagraph
12.23.A hereof.
ARTICLE II
MEMBERS, CAPITAL CONTRIBUTIONS AND WITHDRAWALS,
MEMBERSHIP INTERESTS, ADMISSIONS, CERTIFICATES,
LIMITATIONS ON LIABILITIES AND RESPONSIBILITIES OF MEMBERS
AND CERTAIN FINANCING MATTERS
2.1 NAMES, ADDRESSES OF INITIAL MEMBERS AND INITIAL CAPITAL
CONTRIBUTIONS
A. Members, their respective addresses, their respective aggregate
Capital Contributions to Company, and their respective Percentage Interests in
Net Profits and Net Losses of Company are set forth on Exhibit A, as they may be
amended from time to time, pursuant to Subparagraph 2.1.B hereof.
B. (1) In the event a Member makes a capital contribution in
addition to its Capital Contribution described on Exhibit A
hereto, such Member's Percentage Interest shall be increased so
as to be equal to:
PPI x 1 - ( VNC ) + ( VNC )
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(FMV + VNC) (FMV + VNC)
where: PPI = the Contributing Member's Percentage Interest
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immediately prior to the contribution expressed
as a number less than 1.
VNC= the amount of cash and/or the fair market value
of the additional property contributed.
FMV= the fair market value of the assets of the
Company immediately prior to the contribution,
but including the contract with a health care
institution, if any, relating to the Gamma Knife
contributed.
The Percentage Interest of the other Member shall be reduced so as to be equal
to:
OPI x 1 - ( VNC )
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( FMV + VNC )
where: OPI = the other Member's Percentage Interest immediately prior to the
contribution expressed as a number less than 1.
(2) The fair market value of the Company's assets immediately
prior to the contribution shall be determined by mutual agreement of the
Members. In the event the Members are unable to agree on the fair market value
of the Company's assets immediately prior to the contribution, such value shall
be determined by an appraiser jointly agreed to by the Members. If the Members
do not agree on an appraiser, each Member shall select an appraiser, at its own
expense, and the two selected appraisers shall mutually select a third
appraiser, at the expense of the Company. The Fair Market Value shall be the
average of the two appraisals closest in amount to each other except that if one
appraisal is equal to the average of all three appraisals, the Fair Market Value
shall be equal to such average.
2.2 FORM OF CAPITAL CONTRIBUTIONS
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As provided in the Articles, Members shall make the initial Capital
Contributions in cash or property as provided in Exhibit A hereto. Members shall
make subsequent Capital Contributions (other than those described on Exhibit A),
if any, in cash unless otherwise agreed by all Members or as otherwise provided
herein. No Member shall be required to make any Capital Contributions to Company
other than the capital contributions set opposite to the name of Member on
Exhibit A, as it may be amended from time to time.
2.3 ACCEPTANCE OF ADDITIONAL CAPITAL CONTRIBUTIONS
As provided in the Articles, in order to obtain additional funds or for
other business purposes, a Member may contribute additional capital to Company,
but only upon the written consent of all other Members. Provided, however, GKV
shall have the right to transfer to the Company, as Capital Contributions, one
or two Gamma Knife units to be used in the Company's business at any time or
times determined by GKV during the three (3) year period following the effective
date of this Agreement. Each Gamma Knife unit shall be deemed to have a fair
market value equal to the price which was paid by the Company for the last Gamma
Knife purchased by it prior to such contribution pursuant to a Gamma Knife
purchase agreement. During the first eighteen (18) months of the three year
period following the effective date of this Agreement, GKV's right to transfer
any such Gamma Knife unit as a Capital Contribution to the Company shall be
subject to prior written approval of ASRS. ASRS shall have the right, but not
the obligation, to make a Capital Contribution to the Company, in cash, in any
amount less than or equal to the value of such Capital Contribution by GKV,
which Capital Contribution by ASRS shall be due and payable on the effective
date of the transfer of such Gamma Knife to the Company as a Capital
Contribution. The transfer of a Gamma Knife unit to the Company as a Capital
Contribution shall be effective upon delivery to the end user's site relating to
such Gamma Knife. At the time of each such contribution of such Gamma Knife
unit, the Company shall be valued to determine appropriate changes, if any, in
the Percentage Interest of the Members, pursuant to Subparagraph 2.1.B.
2.4 LIMITATIONS ON WITHDRAWALS OF CAPITAL CONTRIBUTION
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No Member shall have the right to withdraw its Capital Contributions or
to demand and receive property of Company or any distribution in return for its
Capital Contributions, except as may be specifically provided in the Agreement
or required by law. No Member shall receive out of Company property any part of
its Capital Contribution until (i) all liabilities of Company, except
liabilities to Members on account of their Capital Contributions, have been paid
or there remains property of Company sufficient to pay them; (ii) the consent of
all Members is had, unless the return of the Capital Contributions may be
rightfully demanded as provided in the Act; (iii) the Articles are canceled or
so amended as to allow the withdrawal or reduction. Subject to other provisions
of the Agreement and the Act, a Member may rightfully demand the return of its
Capital Contributions on the dissolution of Company. In the absence of a
statement in the Articles to the contrary or the consent of all Members of
Company, a Member, irrespective of the nature of its contribution, has only the
right to demand and receive cash in return for its Capital Contribution.
2.5 PERCENTAGE INTEREST OF MEMBER
Each Member shall have a Percentage Interest as reflected on Exhibit A
as it may be amended from time to time, pursuant to Subparagraph 2.1.B hereof.
2.6 ADMISSION OF ADDITIONAL MEMBER
As provided in the Articles, (i) Members may admit to Company
additional Member(s) who will participate in the profits, losses, available cash
flow, and ownership of the assets of Company on such terms as are determined by
all Members; (ii) admission of any such additional Member(s) shall require the
written consent of all Members then having any Interest in Company, which may be
granted or withheld in the sole and absolute discretion of each Member; and
(iii) admission of such additional Member(s) may result in a dilution of the
Percentage Interests of the then Members.
2.7 LIMITATION ON LIABILITY OF MEMBERS AND MANAGERS
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Except as provided under applicable law, no Member or Manager shall be
liable under a judgment, decree or order of a court, or in any other manner, for
a debt, obligation or liability of Company whether that liability or obligation
arises in contract or tort. No Member shall be required to loan any funds to
Company except as provided herein. No Member shall be required to make any
contribution to Company by reason of any negative balance in his Capital
Account, nor shall any negative balance in a Member's Capital Account create any
liability on the part of the Member to any third party.
2.8 LIABILITY OF MEMBERS TO COMPANY
A. Liability of Members to Company
A Member is liable to Company: (i) for the difference between his
or its contribution to capital as actually made and that stated in the Articles,
the Agreement, subscription for contribution or other document executed by the
Member as having been made by the Member; and (ii) for any unpaid contribution
to capital which he or it agreed in the Articles, the Agreement or other
document executed by the Member to make in the future at the time and on the
conditions stated in the Articles, Agreement or other document evidencing such
agreement. No Member shall be excused from an obligation to Company to perform
any promise to contribute money, property or to perform services because of
death, disability, dissolution or any other reason.
B. Member as Trustee for Company
A Member holds as trustee for Company (i) specific property stated
in the Articles, Agreement or other document executed by the Member as
contributed by such Member, but which was not contributed or which has been
wrongfully or erroneously returned; and (ii) money or other property wrongfully
paid or conveyed to such Member on account of his or its contribution.
C. Waiver of Liability of Member
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The liabilities of a Member as set out in this Paragraph 2.8 can
be waived or compromised only by the consent of all Members.
2.9 NO RESPONSIBILITY FOR PRE-FORMATION COMMITMENTS
In the event that any Member (or any of such Member's shareholders, or
Affiliates) has incurred any indebtedness or obligation prior to the date hereof
that related to or otherwise affects Company, neither Company nor any other
Member shall have any liability or responsibility for or with respect to such
indebtedness or obligation unless such indebtedness or obligation is assumed by
Company pursuant to a written instrument signed by all Members. Furthermore,
neither Company nor any Member shall be responsible or liable for any
indebtedness or obligation that is hereafter incurred by any other Member (or
any of such Member's shareholders or Affiliates). In the event that a Member (or
any of such Member's shareholders or Affiliates), (collectively, the "Liable
Member"), whether prior to or after the date hereof, incurs (or has incurred)
any debt or obligation that neither Company nor the other Members has any
responsibility or liability for, the Liable Member shall indemnify and hold
harmless Company and the other Members from any liability or obligation they may
incur in respect thereof.
2.10 RESERVED
2.11 RIGHTS OF JUDGMENT CREDITOR OF MEMBER
On application to a court of competent jurisdiction by a judgment
creditor of a Member, the court may charge the Member's Interest with payment of
the unsatisfied amount of the judgment with interest, if ordered by such court.
To the extent so charged the judgment creditor has only the rights of an
assignee of the Member's Interest. This Paragraph 2.11 does not deprive any
Member of the benefit of any exemption applicable to his Interest.
2.12 MEMBER REMUNERATION
Unless otherwise provided in this Agreement or in a separate written
agreement, no Member is entitled to remuneration
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for acting on Company business except for reasonable compensation under Act
Section 17352(c) for winding up of affairs of Company.
2.13 LEGAL REPRESENTATIVE OR SUCCESSOR OF A MEMBER
If a Member who is an individual dies or is adjudged by a court of
competent jurisdiction to be incompetent to manage his or her person or property
the executor, administrator, guardian, conservator or other legal representative
may exercise all rights of the Member in the purpose of settling his or her
estate or administering his or her property.
2.14 CERTAIN FINANCING MATTERS
A. Initial Capital Budget
The Members have established the Provisional Budget, including
provision for capital equipment, startup expenditures, and Working Capital,
which is set forth as Exhibit B. After all Capital Contributions described in
Exhibit A on the effective date of this Agreement have been made, the Company
shall, and the Members shall cause the Company to, maintain a cash reserve equal
to $800,000.00.
(a) Definition of "Working Capital": For the purposes of this
Paragraph 2.14, the term "Working Capital" refers to the cash and cash
equivalents available to the Company from time to time to satisfy its current
obligations and other reasonable cash flow requirements.
B. Additional Capital Requirements
(a) General: It is the expectation and intention of the Members
that, except as specifically provided in Paragraph 2.3 and in this Subparagraph
2.14.B, any and all additional capital requirements (if any) of the Company will
be funded out of the operating profits of the Company.
(b) Financing of Capital Requirements:
Whenever it is determined by the Policy Committee that the
Company's available Working Capital is, or is
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presently likely to become, insufficient for the effective conduct of the
Company's business, the Policy Committee may authorize the Manager, on behalf of
the Company, to arrange a financing transaction to obtain additional capital to
fund the operations of the business of the Partnership ("Financing
Transaction"). A Financing Transaction may include: (i) loans from third party
sources and/or any Member or any Affiliate of a Member (including without
limitation accounts receivables financing), and (ii) any leasing transaction for
equipment or furnishings utilized in the Company's business.
(c) Loans by Members:
Except as expressly provided herein, no Member shall lend or
advance money to or for the Company's benefit without the prior approval of the
Policy Committee. If any Member shall lend money to the Company or advance money
on the Company's behalf, the amount of such loan or advance shall not be an
increase in such Member's Interest, Capital Account or Economic Interest. The
amount of such loan or advance shall be a debt due from the Company to such
Member.
ARTICLE III
MANAGEMENT AND CONTROL OF BUSINESS INCLUDING MEETINGS
3.1 MANAGEMENT OF COMPANY AND DESIGNATION OF MANAGER
A. Policy Committee
(a) The Members shall establish the Policy Committee as follows:
ASRS shall appoint one (1) individual, Xxxxxx X. Xxxxx, M.D., to serve on the
Policy Committee, and act as Chairman thereof, and GKV shall appoint one (1)
individual, Xxxxxxx Xxxxxxx, to serve on the Policy Committee. Either individual
may appoint an alternate to represent them at a meeting of the Policy Committee.
The foregoing composition of the Policy Committee shall not be changed by
changes in a Member's Percentage Interest. The Policy Committee shall serve,
generally speaking, in the same role as a board of directors of a corporation,
and in this regard shall set operating policy of the Company and direct the
Manager with respect to the implementation
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thereof. Without limiting the generality of the foregoing, the Policy Committee
shall: (a) set all operating policies for the Company; (b) review, revise and
approve the Annual Budget proposed by the Manager; (c) review and approve all
proposed contracts, equipment acquisitions and related leases; (d) approve
contracts; (e) approve any individual expenditure over $10,000 not provided for
in the Annual Budget; (f) oversee the Manager; (g) approve all distributions in
accordance with Paragraph 5.3; (h) approve acquisition, mortgage and/or
disposition of property; (i) exercise such other authorities as are reserved to
the Policy Committee by other provisions of this Agreement; (i) approve all
borrowings by the Company in excess of $10,000 (including all drawings by the
Company under the GKV Loan and the Draw Down Loan) and (k) remove the Manager
and select a replacement for such Manager. The individuals on the Policy
Committee may be replaced at any time by a subsequent designee from the Member
having appointed that individual. The Policy Committee may act only with
unanimous approval of all of its members.
(b) Upon written request to the Policy Committee by any Member,
the Policy Committee shall immediately cause notice to be given to the Members
entitled to vote that a meeting will be held at a time requested by the Member
calling the meeting, not less than ten (10) days nor more than sixty (60) days
after the receipt of the request. If the notice is not given within twenty (20)
days after receipt of the request, the Member entitled to call the meeting may
give the notice or seek any remedy under applicable law.
B. Management of Company by Manager
As provided in the Articles and this Agreement, the business and
affairs of Company shall be managed under the direction of the Manager, who
shall be subject to the complete direction and control of the Policy Committee
except as otherwise provided in this Agreement. The initial Manager shall be
ASRS and it shall utilize Xxxxx Xxxxxx as its agent for such purpose. A Member,
unless also appointed (or hired) as a Manager, officer or other employee, shall
not participate in the day to day operation of the business affairs of Company,
except through the Policy Committee, and if so appointed (or hired), shall
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participate only within the scope of authority of such position as defined in
the Agreement or elsewhere.
C. Designation of Managers
Company shall have one Manager. Xxxxx Xxxxxx on behalf of the
Manager, ASRS, shall execute the duties of Manager on behalf of ASRS. Xxxxx
Xxxxxx shall be appointed Chief Executive Officer of Company unless he resigns,
dies or is removed by the Policy Committee and until otherwise agreed by all of
the Members. For as long as Xxxxx Xxxxxx is employed by ASRS or any of its
Affiliates, ASRS shall cause Xxxxx Xxxxxx to devote approximately ninety percent
(90%) of his business time to the Company. In the event of the death, disability
or resignation of Xxxxx Xxxxxx, a successor Chief Executive Officer shall be
elected by the Policy Committee.
D. Term of Manager
A Manager whose term has expired shall continue to serve until a
successor is elected and qualified.
3.2 SPECIFIC DUTIES OF MANAGER
A. Duty to Present Financial Statements
The Manager shall present monthly, quarterly and annual financial
statements of the Company to the Policy Committee as soon as such financial
statements are prepared.
B. Duty of Manager to Qualify to Do Business in California and Other
States
If required by law, the Manager shall be qualified to do business
in California by obtaining a certificate of authority to do so from the
Secretary of State of the State of California and other states as required.
C. Manager to Safekeep Funds of Company
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The Manager shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of Company, whether or not in its
immediate possession or control. The funds of Company shall not be commingled
with the funds of any other person and the Manager shall not employ, or permit
any other person to employ, such funds in any manner except for the benefit of
Company. The bank accounts of Company shall be maintained in such banking
institutions as are approved by the Policy Committee and withdrawals shall be
made only in the regular course of Company business and as otherwise authorized
in the Agreement on such signature or signatures as may be authorized by the
Policy Committee.
D. Day to Day Operations, etc
Day to day operations of the Company shall be directed by the
Manager. The Manager shall propose, subject to the review and approval of the
Policy Committee: (a) the Annual Budget of the Company (which Manager shall
propose to the Policy Committee not later than 60 days prior to the first day of
each fiscal year); (b) operating policies and procedures; (c) accounting
policies and procedures in accordance with United States generally accepted
accounting principles; (d) financial systems and controls; (e) proposed
expenditures by the Company with regards to the purchase and/or lease of
equipment; and (f) personnel policies for the Company. ASRS shall perform
billing services for the Company, either directly or through an arrangement with
an Affiliate of Manager. ASRS shall provide accounting and other administrative
services for the Company. Manager shall create an investment policy, which shall
include consideration of prices to be charged, services to be offered, site and
other minimum requirements, risk sharing with customers and return on Company
investment. Such investment policy shall not dictate or limit the decisions of
the Policy Committee, which may consider other relevant matters in deciding
whether or not the Company will invest in any proposed project.
E. Warranted Reliance by Manager on Others
In performing its duties, Manager shall be entitled to rely on
information, opinions, reports, or statements of the following persons or groups
unless it has knowledge
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concerning the matter in question that would cause such reliance to be
unwarranted:
(a) one or more employees or other agents of Company whom the
Manager reasonably believes to be reliable and competent in the matters
presented;
(b) any attorney, public accountant, or other person as to matters
which the Manager reasonably believes to be within such person's professional or
expert competence; or
(c) a committee that has been established by the Policy Committee,
as to matters within such committee's designated authority, which committee the
Manager reasonably believe to merit competence.
F. Other Activities of Members Permitted
Members may, subject to the limitations of Paragraph 12.9 hereof,
engage in other business activities and shall be obliged to devote only as much
of its time to the business of Company as shall be reasonably required in light
of the purposes of Company.
G. Manager's Liability
Manager shall perform its duties as a Manager in good faith, in a
manner it reasonably believes to be in the best interests of Company, with such
care as an ordinarily prudent person in a like position would use under similar
circumstances, and in accordance with the Articles, this Agreement and
applicable law. A Person who so performs its duties shall not have any liability
by reason of being or having been a Manager of Company.
3.3 POWERS OF MANAGER
X. Xxxxxx of Manager
Subject to the limitations of Subparagraph 3.3.B hereof, the
Manager shall have all necessary powers to carry out the purposes, business, and
objectives of Company consistent with
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the decisions of the Policy Committee, including, but not limited to, the right
to enter into and carry out contracts involving payments or obligations of less
than $10,000 in the aggregate for each contract; to employ employees, agents,
consultants and advisors on behalf of Company; to lend or borrow money involving
amounts of less than $10,000 in the aggregate for each loan or borrowing and to
issue evidences of indebtedness related thereto; to bring and defend actions in
law or at equity; provided in each case that such actions are contemplated by
the Provisional Budget or an Annual Budget and within the guidelines imposed by
the Policy Committee. The Manager may deal with any Affiliate, but only on terms
and conditions that would be available from an independent responsible third
party that is willing to perform and with the prior written consent of all
Members. The Manager shall have the authority to sign agreements and other
documents on behalf of Company in the ordinary course of business, subject to
the limitations of Subparagraph 3.3.B hereof. Subject to the limitations of
Subparagraph 3.3.B, the Manager shall have power and authority, to act on behalf
of Company and subject to the limitations of the Act and the limitations set
forth herein:
(a) To acquire property from any Person as Manager may determine,
provided the aggregate payments or indebtedness for each acquisition is less
than $10,000;
(b) To borrow money for Company from banks, other lending
institutions, the Members, or Affiliates of the Members or Manager on such terms
as they deem appropriate, and in connection therewith, to hypothecate, encumber
and grant security interests in the assets of Company to secure repayment of the
borrowed sums, provided the aggregate payments or indebtedness for each
borrowing is less than $10,000. Except as otherwise provided in the Act, no debt
shall be contracted or liability incurred by or on behalf of Company, except by
the Manager;
(c) To purchase liability and other insurance to protect the
property and business of Company. At a minimum, the Company shall maintain
liability insurance covering each Gamma Knife site having a maximum deductible
of $100,000 per site and coverage limit of at least $5,000,000 per site;
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(d) To hold and own any Company real and personal properties in
the name of Company;
(e) To invest any funds of Company temporarily (by way of example
but not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
(f) To execute on behalf of Company instruments and documents,
including, without limitation, checks and drafts; provided the aggregate
payments or indebtedness related to each such instrument or document is less
than $10,000 and is contemplated by the Provisional Budget or an Annual Budget;
(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for Company and to compensate them from Company
funds, provided such employment is contemplated by the Provisional Budget or an
Annual Budget;
(h) To retain and compensate employees and agents generally, and
to define their duties;
(i) To enter into any and all other agreements on behalf of
Company, with any other Person for any purpose necessary or appropriate to the
conduct of the business of Company in the ordinary course of business;
(j) Subject to the Provisional Budget or the Annual Budget, to pay
reimbursement from Company of all expenses of Company reasonably incurred and
paid by the Manager on behalf of Company;
(k) Subject to the Provisional Budget or the Annual Budget, to pay
from Company funds under control of Manager compensation due to ASRS or any
Affiliate of ASRS; and
(l) To do and perform all other acts as may be necessary or
appropriate to the conduct of the business of Company;
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B. Limitations on Power of Manager in Extraordinary Matters
In addition to other limitations set forth in this Agreement, the
Manager shall not have authority hereunder to cause Company to engage in
transactions as set forth in this Subparagraph 3.3.B. without the prior approval
of the Policy Committee.
(a) The sale, exchange or other disposition of Company's assets
not contemplated by an Annual Budget shall require the unanimous vote of
Members.
(b) The merger of Company with any other limited liability company
or limited partnership shall require the unanimous vote of Members and the
merger of Company with another corporation shall require the unanimous vote of
all Members of Company.
(c) Notwithstanding any other provisions of the Agreement, no
equipment acquisition or related lease may be effected, debt (including debt
refinancing), liability or individual expenditure of more than $10,000.00 may be
contracted, no contract may be entered into on behalf of Company, no Company
property may be disposed of, and no Distribution pursuant to Paragraph 5.2 shall
be made except as approved by the Policy Committee.
(d) The Manager shall neither change the amount nor character of
Capital Contributions, nor change the character of the business of Company
without the written consent of all Members.
(e) The Manager shall not make a false or erroneous statement in
the Articles.
(f) The amendment of the Agreement shall require the unanimous
agreement of all Members and as otherwise provided in Paragraph 12.13 hereof.
(g) Any other transaction described in the Agreement as requiring
a vote of Members.
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C. Manager as Agent of Company
The Manager is an agent of Company for the purpose of its
business, and for purposes of the execution in name of Company of any instrument
for apparently carrying on in the usual way the business of Company and binds
Company, unless such act is in contravention of the Articles or the Agreement or
unless the Manager so acting otherwise lacks the authority to act for Company
and the person with whom he is dealing has knowledge of the fact that he has no
such authority.
D. Acts of Manager as Conclusive Evidence of Authority
Every contract, deed, mortgage, lease and other instrument
executed by the Manager shall be conclusive evidence in favor of every person
relying thereon or claiming thereunder that at the time of the delivery thereof
(i) Company was in existence, (ii) neither the Agreement nor the Articles had
been amended in any manner so as to restrict the delegation of authority among
Members or the Manager, and (iii) the execution and delivery of such instrument
was duly authorized by Members and the Manager.
Any person may always rely on a certificate addressed to him and
signed by the Manager hereunder:
(i) as to who are the Members or Manager hereunder;
(ii) as to the existence or non-existence of any fact which
constitutes a condition precedent to acts by the Members or the Manager or in
any other manner germane to the affairs of Company;
(iii) as to who is authorized to execute and deliver any
instrument or document of Company;
(iv) as to the authenticity of any copy of the Articles, the
Agreement, amendments thereto and any other document relating to the conduct of
the affairs of Company; or
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(v) as to any act or failure to act by Company or as to any other
matter whatsoever involving Company, the Manager or any Member in the capacity
as a Member or Manager.
3.4 RESERVED
3.5 RESERVED
3.6 PROCEDURES FOR POLICY COMMITTEE MEETINGS
Subject to the provisions of Paragraph 3.1.A, the meeting procedures
set forth in the Act shall govern meetings of the Policy Committee.
3.7 COMPENSATION OF THE MANAGER, OFFICERS AND MEMBERS
Subject to the Provisional Budget and Annual Budget, the Company shall
reimburse ASRS for ninety percent (90%) of Xxxxx Xxxxxx'x compensation and all
of his expenses directly related to the business of the Company for as long as
Xxxxx Xxxxxx is acting as Chief Executive Officer of the Company and for the
costs reasonably incurred by ASRS in providing administrative services to the
Company as described herein. Subject to the Provisional Budget and Annual
Budget, the Company shall reimburse Members for all reasonable travel expenses
related to the business of the Company. Subject to the Provisional Budget and
Annual Budget, the Company shall reimburse GKV for sixty percent (60%) of
Xxxxxxx Xxxxx'x compensation and all of his expenses directly related to the
business of the Company for as long as Xxxxxxx Xxxxx is acting as Chief
Operating Officer. Such compensation shall not be a Distribution and shall be an
expense of the Company for all purposes.
3.8 RESERVED
3.9 BUSINESS PURPOSE OF THE COMPANY
The Company shall be the preferred alternative financing provider of
EII and EISA to health care institutions in the United States and Brazil
acquiring Gamma Knife units. The Company will purchase Gamma Knife units from
EII or its Affiliates and may enter leases (other than traditional financing
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leases), joint venture or enter into other operating arrangements with health
care institutions for the use of the Gamma Knife units. The Company's activities
in support of this business purpose will include:
A. Acquiring or arranging for the use of space and facilities necessary
for the implementation of the Company's business purpose.
B. Acquiring or arranging for the use of equipment, supplies, and
materials necessary for health care institutions' use of the Gamma Knife.
C. Purchasing or leasing the Gamma Knife to be utilized by the Company.
D. New or replacement equipment proposed to be utilized by the Company
will be obtained pursuant to such purchase or leasing or other arrangements as
may be approved by the Policy Committee. It is the current expectation and
intention of the Members that all major pieces of equipment or significant
upgrades to existing equipment will be obtained through leasing or other
financial arrangements.
E. Providing and obtaining the services of professional and technical
support personnel and related services necessary for the performance of the
Company's services.
F. Entering into licensing and royalty agreements related to
intellectual property developed or obtained by the Company.
G. Engaging in or performing all acts and activities which are
incidental to or in furtherance of its business purposes.
H. The Company shall not engage in the provision of any services for
which a license to practice medicine is required under California or other
applicable law.
ARTICLE IV
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CAPITAL ACCOUNTS
4.1 CAPITAL ACCOUNT FOR EACH MEMBER
Manager shall maintain a separate capital account (a "Capital Account")
for each Member in accordance with the requirements of Regulations Section
1.704-1(b)(2)(iv). To the extent that the results determined under any provision
of this Article IV vary from the results that would be required under the rules
described in Regulations Section 1.704-1(b)(2)(iv), the rules set forth in
Regulations Section 1.704-1(b)(2)(iv) shall be used and govern the maintenance
of Capital Accounts under the Agreement.
4.2 RESERVED
4.3 CAPITAL ACCOUNT MAINTENANCE
Subject to the other Paragraphs of this Article, the Capital Account of
any Member shall be maintained for such Member in accordance with the following
provisions:
A. To each Member's Capital Account there shall be credited the amount
of cash contributed by such Member, the initial Gross Asset Value of any
property contributed by such Member, such Member's distributive share of Net
Profits and any items in the nature of income or gains which are specially
allocated, and the amount of any liabilities of Company assumed by the Member or
which are secured by any property distributed to the Member.
B. To each Capital Account there shall be debited the amount of cash
and the Gross Asset Value of any property distributed to the Member pursuant to
any provision of the Agreement, the Member's distributive share of Net Losses
and any items in the nature of expenses or losses which are specially allocated,
and the amount of any liabilities of the Member assumed by Company or which are
secured by any property contributed by the Member to Company.
C. In the event all or a portion of a Membership Interest is
transferred in accordance with the terms of the
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Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred interest.
D. In the event that assets of Company other than cash are distributed
in kind to a Member, Capital Accounts shall be adjusted for the hypothetical
"book" gain or loss that would have been realized by Company if the distributed
assets had been sold for their fair market values in a cash sale (in order to
reflect unrealized gain or loss).
4.4 DEFINITIONS USED IN CAPITAL ACCOUNT MAINTENANCE
A. "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
a. The initial Gross Asset Value of any asset contributed by a
Member to Company shall, except as otherwise provided in Section 2.3 hereof in
relation to Gamma Knife units, be the gross fair market value of such asset, as
determined by the Policy Committee.
b. The Gross Asset Values of all assets of Company shall be
adjusted to equal their respective gross fair market values, as determined by
the Policy Committee, as of the following times: (i) the acquisition of an
additional Interest by any new or existing Member in exchange for more than a de
minimis Capital Contribution; (ii) the distribution by Company to a Member of
more than a de minimis amount of property as consideration for an Interest; and
(iii) the liquidation of Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) and (ii) above shall be made only if the Policy Committee reasonably
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in Company.
c. The Gross Asset Value of any asset of Company distributed to
any Member shall be adjusted to equal the gross fair market value of such asset
on the date of Distribution, as determined by the distributee and the Manager,
provided that, if
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the distributee is a Manager, the determination of the fair market value of the
distributed asset shall require the consent of the non-distributee Members; or
if the parties cannot agree, an appraiser mutually acceptable to both parties
shall be selected to determine the Gross Asset Value of such asset.
d. The Gross Asset Values of assets of Company shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this Subparagraph to the
extent the Manager determines that an adjustment pursuant to Subparagraph
4.4.A.b above is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this Subparagraph.
e. If the Gross Asset Value of an asset has been determined or
adjusted pursuant to any of the Subparagraphs above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset and shall be utilized for purposes of computing Net Profits and
Net Losses.
B. "Net Profits" and "Net Losses" shall have the meanings set forth
in Subparagraph 5.2.G.
4.5 POWER TO MODIFY CAPITAL ACCOUNTS TO COMPLY WITH REGULATIONS
The foregoing provisions and the other provisions of the Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Policy Committee determines
that it is necessary to modify the manner in which the Capital Accounts are
computed in order to comply with such Regulations and to reflect the agreed upon
sharing of the distribution of cash, the Policy Committee may make such
modification, provided that it is not likely to have a material effect on the
amounts
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distributable to any Member upon the dissolution of Company. The Policy
Committee also shall make any appropriate modifications in the event
unanticipated events occur that might otherwise cause the Agreement not to
comply with Regulations Section 1.704-1(b).
ARTICLE V
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
5.1 ALLOCATIONS OF NET PROFITS AND NET LOSSES
A. General Allocations of Net Profits and Net Losses
After giving effect to the special allocations set forth elsewhere
herein, Net Profits and Net Losses for any fiscal year of the Company shall
be allocated as follows:
(I) Allocation of Net Profits
Net Profits for any fiscal year shall be allocated to each
Member in accordance with its Percentage Interest.
(II) Allocation of Net Losses
Net Losses for any fiscal year shall be allocated to each
Member in accordance with its Percentage Interest.
B. Certain Special Allocations
The following special allocations shall be made in the following
order:
(I) Company Minimum Gain Chargeback
If there is a net decrease in Company Minimum Gain for a
Company taxable year, then each Member shall be allocated items of income and
gain for such year (and, if necessary, for subsequent years) in the manner and
to the extent required by Regulations Section 1.704-2(f).
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(II) Member Minimum Gain Chargeback
If there is a net decrease during a Company fiscal year in
Member Minimum Gain, then any Member with a share of Member Minimum Gain
(determined under Regulations Section 1.704-2(i)(5)) at the beginning of such
year shall be allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in the manner and to the extent required by
Regulations Section 1.704-2(i)(4).
(III) Qualified Income Offset
Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)
(d)(4), (5), or (6) will be allocated items of income and gain (consisting
of a pro rata portion of each item of Company income, including gross income
and gain, for such year) in an amount and manner sufficient to eliminate
any Adjusted Capital Account Deficit as quickly as possible, provided that
such allocation shall be made if and only to the extent such Member would
have an Adjusted Capital Account Deficit after all other allocations pursuant
to this Subparagraph 5.1.B have been made tentatively as if this Subparagraph
5.1.B(III) were not in the Agreement.
(IV) Gross Income Allocation
In the event any Member has a deficit Capital Account at the
end of any Company fiscal year which is in excess of the sum of (i) the amount
such Member is obligated to restore, and (ii) the amount such Member is deemed
to be obligated to restore pursuant to the penultimate sentences of Regulations
Section 1.704-2(g)(1) and Section 1.704-2(i)(5), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that any allocation pursuant to this
Subparagraph 5.1.B(IV) shall be made if and only to the extent that such Member
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Subparagraph 5.1.B have been tentatively made
as if this Subparagraph 5.1.B(IV) and Subparagraph 5.1.B(III) were not in the
Agreement.
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(V) Allocation of Nonrecourse Deductions
Member Nonrecourse Deductions shall be allocated to the
Member, if any, that bears the economic risk of loss for the Member Nonrecourse
Debt to which the Member Nonrecourse Deductions are attributable in accordance
with Regulations Section 1.704-2(i)(1). Company Nonrecourse Deductions shall be
allocated in the same manner as Net Profits.
(VI) Syndication Expenses
In the event that additional Members are admitted to the
Company on different dates, all syndication expenses shall be divided among the
persons who are Members from time to time so that, to the extent possible, the
cumulative amount of syndication expenses allocated with respect to each Member
at any time is in proportion to that Member's Percentage Interest as determined
after such admission. In the event the Manager shall determine that such result
is not likely to be achieved through future allocations of syndication expenses,
the Manager may allocate other items of income, gain, deduction or loss so as to
achieve the same effect on the Capital Accounts of the Members.
C. Certain Other Allocation Rules
(I) Allocation of Income, Gains and Losses Related to
Contributed Property
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to Company for federal income tax purposes and
its Gross Asset Value. In the event the Gross Asset Value of any Company asset
is adjusted pursuant to the provisions of 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
Section 704(c) and the Regulations
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thereunder. Any elections or other decisions relating to such allocations shall
be made by the Policy Committee in any manner permitted by the Regulations that
reasonably reflects the purpose and intention of the Agreement. Unless the
Policy Committee determines otherwise, the method of allocation with respect to
each item of contributed property shall be chosen in a manner that results in
the greatest allocation of depreciation or amortization with respect to such
item of property to the Members other than the Member that contributed such item
of property. Allocations pursuant to this Subparagraph 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 Net Profits,
Net Losses, or other items or distributions pursuant to any other provision of
the Agreement.
(III) Allocations to Avoid Adjusted Capital Account Deficit
Notwithstanding any other provision of this Article, no
Member shall receive an allocation of Net Losses or any other item of loss or
deduction that would create or increase an Adjusted Capital Account Deficit of
the Member. Any Net Loss, or item thereof, that cannot be allocated to a Member
as a result of the foregoing limitation shall be allocated to all Members who do
not have an Adjusted Capital Account Deficit. Any Net Loss, or item thereof,
allocated to Members pursuant to the preceding sentence shall be taken into
account in computing subsequent allocations of Net Profits so that the net
amount of any items so allocated to each Member shall, to the extent possible,
be equal to the net amount that would have been allocated to each Member if the
allocations required by the preceding sentence had not been made.
(IV) Excess Nonrecourse Liabilities
Solely for purposes of determining a Member's proportionate
share of the "excess nonrecourse liabilities" of the Company within the meaning
of Regulations Section 1.752-3(a)(3), the Member's interests in the Company
equal their respective Percentage Interests determined from time to time.
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(V) Allocation of Net Profits and Losses and Distributions in
Respect of a Transferred Interest
If any Interest is transferred, or is increased or decreased
by reason of the admission of a new Member or otherwise, during any fiscal year
of Company, each item of income, gain, loss, deduction, or credit of Company for
such fiscal year shall be allocated to the Members based upon the pro rata
method, except that any gain or loss of Company realized in connection with a
sale or other disposition of any of the assets of Company shall be allocated
solely to the parties owning Interests in Company as of the date such sale or
other disposition occurs.
(VI) Curative Allocations
The allocations set forth in Subparagraph 5.1.B hereof (the
"Regulatory Allocations") are intended to comply with certain requirements in
the Regulations. It is the intent of the Members that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss or deduction pursuant to this Subparagraph 5.1.C(VI). Therefore,
notwithstanding any other provisions of this Agreement (other than the
Regulatory Allocations), the Manager shall make such offsetting special
allocations of Company income gain, loss or deduction in whatever manner the
Manager determines appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal to
the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of this Agreement and all Company items were
located pursuant to Subparagraph 5.1.A. In exercising its discretion
hereunder, the Manager shall take into account any future Regulatory Allocations
that are likely to offset other Regulatory Allocations previously made.
5.2 DEFINITIONS OF TECHNICAL TERMS USED FOR ALLOCATION PURPOSES
A. "Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such
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Member's Capital Account as of the end of the relevant fiscal year, after giving
effect to the following adjustments:
(i) Credit to such Capital Account means any
amounts which such Member is obligated to restore pursuant to the terms of such
Member's promissory note or otherwise) or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) Debit to such Capital Account means the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
B. "Company Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2).
C. "Company Nonrecourse Deductions" has the meaning set
forth in Regulations Section 1.704-2(b)(1).
D. "Member Minimum Gain" means minimum gain attributable
to a Member Nonrecourse Debt pursuant to Regulations Section 1.704-2(i)(3).
E. "Member Nonrecourse Debt" means any debt of Company
that is nonrecourse for purposes of Regulations Section 1.1001-2, for which any
Member bears the economic risk of loss within the meaning of Regulations Section
1.752-2.
F. "Member Nonrecourse Deduction" has the meaning set
forth in Regulations Section 1.704-2(i)(1) and 1.704- 2(i)(2).
G. "Net Profits" and "Net Losses" means, for each fiscal
year or other period, an amount equal to Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a), and all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code
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Section 703(a)(1) shall be included in taxable income or loss, with the
following adjustments:
(i) Any income of Company that is exempt from
federal income tax and not otherwise taken into account in computing Net Profits
or Net Losses pursuant to this Paragraph, shall be added to such taxable income
or loss;
(ii) Any expenditures of Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704- 1(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Profits or Net Losses pursuant to this
Subparagraph, shall be subtracted from such taxable income or loss;
(iii) In the event that the Gross Asset Value of any
Company asset is adjusted pursuant to Subparagraph 4.4B, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Net Profits or Net Losses;
(iv) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such fiscal
year or other period;
(vi) To the extent an adjustment to the adjusted
tax basis of any Company asset is required pursuant to Code Section 734(b) or
Code Section 743(b) and in accordance with Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member's interest
in the Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from
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the deposition of the asset and shall be taken into account for computing Net
Profits or Net Losses; and
(vii) Any items that are specially allocated
pursuant to Article V of the Agreement shall not be taken into account in
computing Net Profits or Net Losses.
H. "Depreciation" means, for each fiscal year or other
period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that, if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, that if the adjusted basis
for federal income tax purposes of an asset at the beginning of such fiscal year
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Manager.
5.3 DISTRIBUTIONS OF NET CASH FLOW BY COMPANY
Subject to any limitations found elsewhere in the Agreement and
under law including the requirements of Section 17254 of the Act that the assets
of Company after the distribution be in excess of all liabilities except for
liabilities owed to Members for their capital Contributions as described in
Paragraph 5.6, the Manager shall, with the prior approval of the Policy
Committee, distribute Net Cash Flow as defined below to the Members in
accordance with their respective Percentage Interests, but only to those persons
or entities recognized on the books of Company as Members or as assignees of
interests on the day of the distribution. With respect to any fiscal period, Net
Cash Flow means all cash of the Company, other than cash retained for the
purposes of a Working Capital reserve established by the Policy Committee,
including cash from operations, financing, refinancing, exchange or other
disposition of Company assets (other than upon the dissolution of the
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Company) (all as determined by the Manager as directed by the Policy Committee);
provided, however, (i) that no distribution of cash will be made until all
amounts loaned by any Member, if any (and all interest with respect to such
amounts) have been repaid in full; and (ii) that no distribution shall be made
which is in violation of any security or lending agreement with a third party,
or which would occur at a time prior to repayment in full of any debt of the
Company, if any, to any Member.
5.4 RESERVED.
5.5 DISTRIBUTION OF ASSETS BY COMPANY
Distributions of assets with respect of an Interest in Company
shall be made only to the Members who, according to the books and records of
Company, are the holders of record of the interests in respect of which such
distributions are made on the actual date of distribution. Neither Company nor
any Member shall incur any liability for making distributions in accordance with
the provisions of the preceding sentence, whether or not Company or the Member
has knowledge or notice of any transfer or purported transfer of ownership of
Interest in Company which has not been approved by unanimous vote of the
Members.
5.6 IMPAIRMENT OF CAPITAL LIMITATIONS ON DIVISION AND
DISTRIBUTION OF NET CASH FLOW
Company may, from time to time, distribute Net Cash Flow to the
Members of Company upon the basis stipulated in this Article V (and subject to
the limitations set forth in Paragraph 5.3); provided that after distribution is
made, the assets of Company are in excess of all liabilities of Company except
liabilities to Members on account of their Capital Contributions after giving
effect to all distributions, revaluations and allocations.
ARTICLE VI
ACCOUNTING, RECORDS, AND REPORTING BY MEMBERS
6.1 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS
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All decisions as to accounting matters, except as otherwise
specifically set forth herein, shall be made by the Manager. The Manager may
rely upon the advice of accountants reasonably selected by the Manager as to
whether such decisions are in accordance with accounting methods followed for
federal income tax purposes.
6.2 RECORDS AND ACCOUNTING MAINTAINED
The books and records of Company shall be kept, and the
financial position and the results of its operations recorded, in accordance
with United States generally accepted accounting principles. The books and
records of Company shall reflect all Company transactions and shall be
appropriate and adequate for Company's business. The fiscal year of Company for
financial reporting and for federal income tax purposes shall be the calendar
year. The Company's annual financial statements shall be audited by one of the
following firms selected by the Policy Committee: (a) Xxxxxx Xxxxxxxx, LLP, (b)
Ernst & Young LLP, (c) Coopers & Xxxxxxx, (d) Deloitte & Touche, (e) Price
Waterhouse, or (f) KPMG Peat Marwick.
6.3 ACCESS FOR MEMBERS TO ACCOUNTING RECORDS
All books and records of Company shall be maintained at any
office of Company or at Company's principal place of business, and each Member
or holder of an Economic Interest, and his duly authorized representative, shall
have access to them at such office of Company and the right to inspect and copy
them at reasonable times. In addition, the Manager shall present monthly,
quarterly and annual financial statements of the Company to the Policy Committee
as soon as such financial statements are prepared.
6.4 ANNUAL TAX INFORMATION FOR MEMBERS
Company shall prepare and deliver to each Member within the
time period required by law after the end of each fiscal year all information
necessary for the preparation of such Member's federal income tax return.
Company shall also prepare and deliver, within 60 days after the end of each
fiscal year, an audited financial report of Company for such fiscal year,
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containing a balance sheet as of the last day of the year then ended, an income
statement for the year then ended, a statement of cash flows, and a statement of
reconciliation of the Capital Accounts of Members.
6.5 TAX MATTERS FOR COMPANY HANDLED BY MANAGER
The Manager shall be designated as "Tax Matters Partner" (as
defined in Code Section 6231), to represent Company (at Company's expense) in
connection with all examinations of Company's affairs by tax authorities,
including resulting judicial and administrative proceedings, and to expend
Company funds for professional services and costs associated therewith. In its
capacity as "Tax Matters Partner", the Manager shall oversee Company tax affairs
in the overall best interests of Company.
6.6 FEDERAL INCOME TAX ELECTIONS MADE BY POLICY COMMITTEE
The Manager, at the exclusive direction of the Policy Committee
and on behalf of Company, may make all elections for federal income tax
purposes, including but not limited to, the following:
A. Use of Accelerated Depreciation Methods
To the extent permitted by applicable law and
regulations, Company may elect to use an accelerated depreciation method on any
depreciable unit of the assets of Company.
B. Adjustment of Basis of Assets
In case of a transfer of all or part of the Interest
of any Member, Company may elect, pursuant to Code Sections 734, 743, and 754 of
the Code, as amended (or corresponding provisions of future law) to adjust the
basis of the assets of Company.
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C. Variation Between Tax Basis and Value
To the extent permitted by the Regulations, the
Policy Committee may elect any acceptable method under Code Section 704(c).
6.7 RESERVED
6.8 ANNUAL FILING OF LIST OF MANAGERS AND DESIGNATION OF
AGENT FOR SERVICE OF PROCESS
The Manager on behalf of Company shall, within ninety (90) days
after filing the original Articles and annually thereafter on or before the last
day of the month which the anniversary date of the filing of the original
Articles occurs in each year, file with the Secretary of State an annual
statement on a form prescribed by the Secretary of State and enclose any
required filing fee. The statement required to be filed must contain all of the
information required by Act Section 17060.
ARTICLE VII
CONSEQUENCES OF DEATH, DISSOLUTION,
RETIREMENT OR BANKRUPTCY OF MEMBER
7.1 CONSENT TO CONTINUE BUSINESS OF COMPANY
Upon the occurrence of any Dissolution Event, Company shall
dissolve unless the remaining Members holding a Majority-In-Interest consent to
the continuation of the business of Company. A Member whose actions or conduct
result in the Dissolution Event is referred to herein as the "Former Member".
7.2 PURCHASE OF MEMBER'S INTEREST
Upon the occurrence of any Dissolution Event specified in
Subparagraph 9.1(iii) and the consent of the remaining Members holding a
Majority-In-Interest (excluding for this purpose the Membership Interest of the
Former Member) to continue the business of Company, the other Members (the
"Remaining Members") shall have an option to purchase the Former Member's
Membership Interest. Within ninety (90) days of such consent, or
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within ninety (90) days of the inheritance or transfer by operation of law to a
person of the Former Member's Membership Interest, the Remaining Members shall
notify the Manager in writing of their desires to purchase a portion of the
Former Member's Interest.
7.3 FAILURE TO SUBMIT NOTICE OF PURCHASE
The failure of any Remaining Member to submit a notice within
the applicable period shall constitute an election on the part of the Member not
to purchase any of the Former Member's Interest. Each Remaining Member shall be
entitled to purchase a portion of the Former Member's Interest on a pro rata
basis based on the Remaining Member's Percentage of Interest on the date of the
consent referred to in Paragraph 7.2 hereof.
7.4 ELECTION TO PURCHASE LESS THAN ALL OF AN INTEREST
In the event any Remaining Member elects to purchase none or
less than all of its pro rata part of the Former Member's Interest, then, at its
election, those Remaining Members can elect to purchase more than their pro rata
part, i.e., the proportion that the Percentage Interest of the Former Member
bears to the aggregate of the Percentage Interests of all Members and the Former
Member. If the Remaining Members fail to purchase the entire interest of the
Former Member, Company may elect to purchase the unpurchased portion of the
Former Member's Interest. If none of the above elects to purchase, the same
shall pass by operation of law to any assignee or shall remain in the hands of
the Former Member. Notwithstanding any provision of the Agreement to the
contrary, the remaining Members may mutually agree to an allocation of the
Former Member's Interest to be purchased by each of them.
7.5 VALUATION OF INTEREST OF MEMBER
The Former Member's Interest shall be valued according to its
book value determined in accordance with generally accepted accounting
principles, provided, however, if the Former Member or such Former Member's
trustee or heirs or any Remaining Member electing to purchase or Company if it
elects to purchase, deems the book value to vary from fair market value by more
than
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five percent (5%), such person shall be entitled to require an appraisal. In
such event, the value of the Former Member's Interest shall equal the fair
market value of the Interest as determined by agreement within ninety (90) days
after the notice to remaining Members or, in case of a failure to agree within
such ninety (90) day period, as determined by three appraisers, one selected by
the Former Member or such Former Member's trustee(s) or heir(s), one selected by
the Remaining Member, and one selected by the two appraisers so named. All
appraisers appointed under this Paragraph 7.5 shall be generally known and
respected with respect to appraisals in the Company's industry. The fair market
value of the Former Member's interest in Company shall be the average of the two
appraisals closest in amount to each other except that if one appraisal is equal
to the average of all three appraisals, the fair market value shall be equal to
such average. In the event the fair market value is determined to be within five
percent (5%) of book value, the party requesting such appraisal shall pay all
expense of the same otherwise incurred by the parties offering to enter into the
transaction at the book valuation. In the event the fair market value is
determined not to be within five percent (5%) of book value, the expense of such
appraisal shall be paid by the Company.
7.6 PAYMENT OF PURCHASE PRICE
The purchase price shall be paid by Company or the Remaining
Member, as the case may be, within 60 days after the determination of the fair
market value of the Former Member's Interest in Company as provided herein.
7.7 PURCHASE TERMS VARIED BY AGREEMENT
Nothing contained herein is intended to prohibit Members from
agreeing upon terms and conditions for the purchase by Company or any Member of
the Interest of any Member in Company desiring to retire, withdraw or resign, in
whole or in part, as a Member (on such terms and conditions as may be agreed
upon by the selling Member and Company or the remaining Members as the case may
be), nor is anything herein intended to limit or otherwise affect the ability of
a Member to demand a return of his or its contribution to Company as may be
required in the Act.
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ARTICLE VIII
TRANSFER AND ASSIGNMENT OF INTERESTS
8.1 TRANSFER AND ASSIGNMENT OF INTERESTS
No Member shall be entitled to assign, convey, sell, encumber
or in any way alienate all or any part of his Membership Interest in Company as
a Member except with the prior written consent of all other Members, which
consent may be given or withheld, conditioned or delayed as the other Members
may determine in their sole and absolute discretion.
8.2 FURTHER RESTRICTIONS ON TRANSFER OF INTERESTS
In addition to other restrictions found in the Agreement, no
Member shall assign, convey, sell, encumber or in any way alienate all or any
part of his Interest in Company: (i) without registration under applicable
federal and state securities laws, or unless he delivers an opinion of counsel
satisfactory to Company that registration under such laws is not required; or
(ii) if the Interest to be sold or exchanged, when added to the total of all
other Interests sold or exchanged in the preceding twelve (12) consecutive
months prior thereto, would result in the termination of Company under Code
Section 708.
8.3 SUBSTITUTION OF MEMBERS AFTER TRANSFER OF INTEREST
Notwithstanding anything herein to the contrary, a transferee
of an Interest shall have the right to become a substitute Member (with all
Membership Rights related thereto) only if (i) the other Members shall have
consented thereto (which consent may be granted or withheld in the sole and
absolute discretion of each Member), (ii) the requirements of Paragraph 8.2
relating to securities and tax requirements hereof are met, (which approval may
be granted, delayed or withheld in their sole and absolute discretion), (iii)
such Person executes an instrument satisfactory to the Remaining Members
accepting and adopting the terms and provisions of the Agreement, and (iv) such
Person pays any reasonable expenses in connection with his or her admission as a
new Member. An assignee who becomes a substituted Member has, to the extent
assigned, the rights and powers of a
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Member under the Articles, the Agreement and the Act. An assignee who becomes a
substituted Member is also liable for obligations to contribute to capital and
to return any unlawful distributions made to such assignee.
8.4 EFFECTIVE DATE OF PERMITTED TRANSFERS OF AN INTEREST
Any permitted transfer of all or any portion of an Interest in
Company will take effect on the first day of the month following the date of
receipt by the other Members of written notice of the transfer. Any transferee
of an Interest in Company shall take subject to the restrictions on transfer
imposed by the Agreement.
8.5 NO EFFECT TO TRANSFERS IN VIOLATION OF AGREEMENT
Upon any transfer of an Interest in Company in violation of the
Agreement, the transferee shall have only Economic Rights and shall have no
Management and Voting Rights or Information Rights. Until the assignee of an
Interest in Company becomes a Member, the assignor continues to be a Member and
to have the power to exercise Management Rights and Information Rights.
8.6 RESERVED
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 CONDITIONS OF DISSOLUTION
Company shall be dissolved, its assets shall be disposed of,
and its affairs wound up on the first to occur of the following:
(i) The expiration of the period fixed for the duration of
Company term as stated in its Articles;
(ii) A determination by the unanimous written agreement of
all Members that Company shall be dissolved and wound up;
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(iii) The occurrence of a Dissolution Event and the failure
of either (a) Company or the Remaining Members to purchase the Interest of the
Former Member as provided in Paragraph 7.2, (b) Members holding a
Majority-In-Interest (excluding for this purpose the Membership Interest of the
Former Member) to consent to the continuation of business of Company;
(iv) The sale of all or substantially all of the assets of
Company;
(v) The entry of a decree of judicial dissolution by a
court of competent jurisdiction providing for the dissolution of company filed
by any Manager or any Member or Members;
(vi) If performance of any term, covenant, condition or
provision of this Agreement is or will be illegal or in violation of any
statute, regulation or ordinance and cannot be corrected by the good faith
efforts of the Members within ten (10) days after written notice thereof;
(vii) If the Company has not entered into six (6)
alternative financing agreements (evidenced by executed written contracts)
during the two (2) year period commencing with the effective date of this
Agreement; provided that this Subparagraph (vii) shall become void and of no
further effect on the day on which the Company receives an equity capital
contribution from a Member that is not ASRS or GKV; or
(viii) If the Policy Committee is unable to attain a
unanimous vote on any decision materially affecting the business of the Company,
or to obtain a unanimous vote to approve an Annual Budget for two (2)
consecutive fiscal years.
9.2 STATEMENT OF INTENT TO DISSOLVE
As soon as possible following the occurrence of any of the
events specified in Paragraph 9.1, the Manager on behalf of Company shall file a
certificate of dissolution and form prescribed by the Secretary of State as
required by the Act. The Manager shall deliver two signed copies of the
Statement of Intent to Dissolve to the Secretary of State. Upon the filing of
the certificate of dissolution, the Company shall cease to carry
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on its business, except insofar as may be necessary for the winding up of its
business, but its separate existence continues until the certificate of
cancellation of articles of organization has been filed with the Secretary of
State or until a decree dissolving the company has been entered by a court of
competent jurisdiction.
9.3 WINDING UP
Upon the occurrence of any of the events specified in Paragraph
9.1, Company shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets, disposing of and conveying its
property, collecting and dividing its assets, satisfying the claims of its
creditors and prescribing and defending actions by or against Company in order
to collect and discharge obligations. No Member shall take any action that is
inconsistent with, or not necessary to or appropriate for, winding up the
business and affairs of Company. To the extent not inconsistent with the
foregoing, all covenants and obligations in the Agreement shall continue in full
force and effect until such time as the assets have been distributed and Company
has terminated. If any Member receives a distribution in kind such item or items
shall be deemed to have been sold for fair market value, and Capital Accounts
shall be adjusted to reflect deemed gain or loss on each such transaction. Upon
the filing of the Statement of Intent to Dissolve, the following shall occur:
A. ASRS shall have the right (but not the obligation) to purchase
from the Company either or both of the Company's Gamma Knife projects (including
all physical assets and all intangible assets associated with such projects)
located at the USC University Hospital and at the University of California San
Francisco Hospital previously transferred by ASRS to the Company. At the time
of such transfer(s), if any, ASRS shall pay to the Company cash in an amount
equal to the fair market value of such transferred assets as of the time of
transfer.
B. GKV shall have the right and obligation to purchase from the
Company the rights of the Company under the LGK Purchase Agreement relating to
each Gamma Knife for which the Company has not entered into an alternative
financing agreement with an end-
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user (and each such Gamma Knife if title thereto shall have passed to the
Company), and the consideration for such rights shall consist of: (i) the
assumption by GKV of all of the Company's obligations under the LGK Purchase
Agreement relating to each such Gamma Knife; and (ii) a cash amount equal to any
advance payments theretofore actually paid by the Company to EII and/or its
Affiliates in relation to Gamma Knife units ordered by the Company but for which
no alternative financing agreement has been entered by the Company with an
end-user. However, GKV shall have the right to offset such cash payment against
the then outstanding principal and accrued interest under the GKV Loan and/or
the Draw Down Loan, whether or not such principal or accrued interest is then
payable.
C. In addition, the Members shall have the option to acquire the
rights of the Company to other existing alternative financing agreements with
end-users relating to Gamma Knives (which shall include any Gamma Knife related
thereto) and other assets by paying to the Company cash in an amount equal to
the fair market value of such transferred assets. Such fair market value shall
be determined in accordance with the procedures described in Subparagraph
2.1.B.2. In the event more than one Member desires to exercise such right, such
rights shall be exercised by the Members as closely as practicable in proportion
to their Percentage Interests.
9.4 RESPONSIBILITIES FOR WINDING UP
The Manager shall be responsible and be compensated for
overseeing the winding up and liquidation of Company, shall take full account of
the liabilities of Company and assets, shall cause its assets to be liquidated
as promptly as is consistent with obtaining the fair market value thereof, and
shall cause the proceeds therefrom, to the extent sufficient therefor, to be
applied and distributed as next provided. The persons responsible for winding up
the affairs of Company shall give written notice of the commencement of winding
up by mail for all known creditors and claimants whose addresses appear on the
records of Company.
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9.5 ORDER OF PAYMENT UPON DISSOLUTION
In settling accounts of Company after dissolution, the Manager
shall settle the liabilities of Company with payments in the following order, as
required by the Act:
(i) To creditors, including Members, in the order of
priority as provided by law, except those to Members of Company on account of
their contributions;
(ii) To Members of Company in accordance with the
respective positive Capital Account balances after giving effect to all Capital
Contributions, distributions, revaluations and allocations required under this
Agreement, in an amount equal to the sum of such positive Capital Account
balances; and
(iii) Any remaining assets shall be distributed to the
members in proportion to their Percentage Interests.
9.6 COMPLIANCE WITH REGULATIONS
All distributions to the Members upon the winding up and
dissolution of Company shall be strictly in accordance with the positive Capital
Account balance limitation and other requirements of Regulations Section
1.704-1(b)(2)(ii)(d), provided however that no Member shall be required to
restore a negative balance in its Capital Account upon dissolution of Company.
9.7 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION
Except as otherwise specifically provided in the Agreement,
each Member shall only be entitled to look solely at the assets of Company for
the return of his positive Capital Account balance. The Manager shall be
entitled to reasonable compensation for winding up the affairs of the Company.
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ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION OF MEMBERS AND MANAGER
Company shall indemnify against expenses and liabilities any
Member, Manager or Officer made a party or who was threatened to be made a party
to any proceeding by Company or another because such party is or was a Member,
Manager or Officer, as a matter of right, against all liability incurred by such
individual in connection with any action, suit, or proceeding or any threatened,
pending or complete action, suit or proceeding; whether civil, criminal,
administrative, or investigative provided that it shall be determined in the
specific case in accordance with Paragraph 10.5 of this Article X that
indemnification of such individual is permissible in the circumstances because
the individual has met the standard of conduct for indemnification set forth in
this Article X.
10.2 ADVANCE UNDERTAKINGS FOR INDEMNIFICATION
Company shall pay for or reimburse the reasonable expenses
incurred by a Member, Manager or Officer in connection with any such proceeding
as incurred in advance of final disposition of the action, suit, or proceeding
thereof if (i) the person furnishes Company a written affirmation of the
person's good faith belief that it has met the standard of conduct for
indemnification described in Paragraph 10.5, (ii) the person furnishes Company a
written undertaking, executed personally or on such person's behalf, to repay
the advance if it is ultimately determined by a court of competent jurisdiction
that such person did not meet such standard of conduct and that it is not
entitled to be indemnified, and (iii) a determination is made in accordance with
Paragraph 10.6 that based upon facts then known to those making the
determination, indemnification would not be precluded under this Article.
The undertaking described above must be a general obligation of
the individual, subject to such reasonable limitations as Company may permit,
but need not be secured and may be accepted without reference to financial
ability to make
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repayment. Company shall indemnify a Member, Manager or Officer
who is wholly successful, on the merits or otherwise, in the defense of any such
proceeding, as a matter of right, against reasonable expenses incurred by the
person in connection with the proceeding without the requirement of a
determination as set forth in Paragraph 10.6.
10.3 ADVANCEMENT OF EXPENSES
Upon demand by a Member, Manager or Officer for indemnification
or advancement of expenses incurred in defending a civil or criminal suit or
proceeding, as the case may be, Company shall expeditiously determine whether
the Member, Manager or Officer is entitled thereto in accordance with this
Article X.
10.4 INDEMNIFICATION OF OTHERS
Company shall be empowered, but shall not be obligated, to
indemnify any individual who is or was an employee or agent of Company to the
same extent as if such individual were a Member, Manager or Officer. Such
indemnification shall occur only after unanimous approval by the Policy
Committee.
10.5 STANDARDS OF CONDUCT FOR INDEMNIFICATION
Indemnification of a Manager, Member or Officer is permissible
under this Article X only if (i) such person conducted itself in good faith and
within the scope of authority granted by the Policy Committee, and (ii)
reasonably believed that its conduct was in or at least not opposed to Company's
best interest; and (iii) in the case of any criminal proceeding, it had no
reasonable cause to believe its conduct was unlawful. The termination of a
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent is not, of itself, determinative that the person
did not meet the standard of conduct described in this Paragraph 10.5.
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10.6 PROCEDURES TO DETERMINE INDEMNIFICATION
A determination as to whether indemnification of or
advancement of expenses is permissible shall be made by any one of the following
procedures:
(i) By the Policy Committee in good faith by a unanimous vote;
or
(ii) By special legal counsel to the Company selected by the
Policy Committee.
10.7 RESERVED
10.8 RESERVED
10.9 RESERVED
10.10 RESERVED
10.11 DEFINITIONS FOR INDEMNIFICATION PROVISIONS
A. "Expenses" mean all reasonable direct and indirect
costs (including without limitation counsel fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees
and all other disbursements or out-of-pocket expenses) actually incurred in
connection with the investigation, defense, settlement or appeal of a proceeding
or establishing or enforcing a right to indemnification under this Article X,
applicable law or otherwise.
B. "Liabilities" mean the obligations (including one incurred
by way of settlement) to pay a judgment, settlement, penalty, fine, excise tax
(including an excise tax assessed with respect to an employee benefit plan), or
reasonable expenses incurred with respect to a proceeding.
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C. "Party" means a person who was, is or is
threatened to be made a named defendant or respondent in a
proceeding.
D. "Proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal.
10.12 INSURANCE FOR INDEMNIFICATION
Company shall, upon approval by the Policy Committee, which
shall determine who may be covered, purchase and maintain insurance for the
benefit of any person who is or was a Member, Manager or Officer, employee or
agent, against any liability asserted against or expenses incurred by such
person in any capacity or arising out of such person's service with Company,
whether or not Company would have the power to indemnify such person against
such liability.
ARTICLE XI
REQUIRED ARBITRATION OF DISPUTES
11.1 DISPUTES REQUIRING ARBITRATION
All disputes arising in connection with this Agreement shall be
finally settled by arbitration in Chicago, Illinois, under the Commercial
Arbitration Rules of the American Arbitration Association. Judgement upon the
awarded rendered may be entered in any court having jurisdiction or application
may be made to such court for judicial acceptance of such award and an order of
enforcement as the case may be.
11.2 This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California, not including laws and principles
relating to the conflict of laws.
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ARTICLE XII
MISCELLANEOUS
12.1 COMPLETE AGREEMENT
The Agreement and the Articles constitute the complete and
exclusive statement of agreement among Members. The Agreement and the Articles
replace and supersede all prior agreements by and among Members or any of them.
The Agreement and the Articles supersede all prior written and oral statements
and no representation, statement, or condition or warranty not contained in the
Agreement or the Articles will be binding on the Members or have any force or
effect whatsoever. In the event of any conflict between provisions of the
Agreement and provisions of the Articles, the Articles shall be controlling.
12.2 BINDING EFFECT
Subject to the provisions of the Agreement relating to
transferability, the Agreement will be binding upon and inure to the benefit of
Members, and their respective distributees, successors and assigns, but only to
the extent that assignment and approval by all Members is in accordance with the
Act, the Articles and the Agreement.
12.3 NO THIRD PARTY BENEFICIARY
The Agreement is made solely and specifically among and for the
benefit of the parties hereto, and their respective successors and assigns
subject to the express provisions hereof relating to successors and assigns, and
no other person will have any rights, interest, or claims hereunder or be
entitled to any benefits under or on account of the Agreement as a third party
beneficiary or otherwise.
12.4 NOT FOR BENEFIT OF CREDITORS
The provisions of the Agreement are intended only for the
regulation of relations among Members and Company. The Agreement is not intended
for the benefit of a creditor who is not a Member and does not grant any rights
to or confer any benefits on any
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creditor who is not a Member or any other person who is not a Member, a Manager,
or an Officer.
12.5 GENDER AND NUMBER IN NOUNS AND PRONOUNS
Common nouns and pronouns will be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the person
or persons, firm or corporation may in the context require. The singular shall
include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context requires. Any reference to the Code,
Regulations, the Act, California statutes or other statutes or laws will include
all amendments, modifications, or replacements of the specific sections and
provisions concerned.
12.6 HEADINGS
All headings herein are inserted only for convenience and ease
of reference and are not to be considered in the construction or interpretation
of any provision of the Agreement.
12.7 REFERENCES IN THE AGREEMENT
Numbered or lettered Articles, Paragraphs and Subparagraphs
herein contained refer to Articles, Paragraphs and Subparagraphs of the
Agreement unless otherwise expressly stated.
12.8 EXHIBITS
All Exhibits attached to the Agreement are incorporated and
shall be treated as if set forth herein.
12.9 RESTRICTED ACTIVITIES OF MEMBERS
Each Member covenants that, while he or it is a Member of the
Company, he or it shall not (and shall not allow any of its Affiliates to),
directly or indirectly, either have any ownership or economic interest in, or be
an employee, agent, independent contractor or otherwise participate in the
operation or control of, any entity that engages in the ownership, operation or
utilization of a Gamma Knife in the same city in which a site owned or being
developed by the Company is located within the Territory, except
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for those potential sites listed on Exhibit D. In addition, each Member shall
have the obligation to inform the Company in writing of such potential
ownership, operation or utilization of any other Gamma Knife in the Territory
and the Company shall have 30 days to give the Member written notice that the
Company will take over the obligations of the Member in pursuing this ownership,
operation or utilization under the same or equivalent conditions and
circumstances in place of the Member. If the Company does not notify the Member
within 30 days, the Member is free to become involved in the aforementioned
ownership, operation or utilization. Provided, however, nothing contained herein
shall prohibit GKV or its Affiliates from any form of ownership, operation,
utilization or participation in : (i) any Gamma Knife site in which GKV or any
of its Affiliates presently has an ownership or participation as of the date of
this Agreement as set forth in Exhibit D; (ii) any Gamma Knife potential site
identified by EII or any of its Affiliates to the Company pursuant to that
certain letter agreement dated October , 1995, between the Company and EII, if
such site was not pursued by the Company in the manner described in such letter
agreement; or (iii) any business ancillary to the sale of Gamma Knifes,
including, without limitation, the provision of service or maintenance on a
Gamma Knife or provision of clinical, educational or marketing support related
to a Gamma Knife. In addition, ASRS covenants that while it is a Member it shall
not (and shall not allow any of its Affiliates to) promote, own or invest, in
the Territory, in alternative stereotactic radiosurgery equipment to the Gamma
Knife, except for those potential sites listed on Exhibit D. Except for the
foregoing restriction, any Member may engage in any other business, investment
or professional activity, and neither the Company nor any other Member shall
have any rights in and to said business, professions or investments, or in the
income or profits derived therefrom by reason of this Agreement.
12.10 RESERVED
12.11 ADDITIONAL DOCUMENTS AND ACTS
Each Member agrees to execute and deliver such additional
documents and instruments and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out and
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perform all of the terms, provisions, and conditions of the Agreement and the
transactions contemplated hereby.
12.12 NOTICES
Any notice to be given or to be served upon Company or any
party hereto in connection with the Agreement must be in writing and will be
deemed to have been given and received at the earlier of a) the time when
personally delivered or delivered by telefax to the address specified by the
party to receive the notice or b) four (4) days after deposited in the United
States Mail for First Class delivery. Such notices will be given to a Member at
the address specified below. Any Member or Company may, at any time by giving
four (4) days' prior written notice to the other Members and Company, designate
any other address in substitution of the foregoing address to which such notice
will be given.
The addresses of the Members are:
GKV: 0 Xxxxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telefax: (000) 000-0000
ASRS: Four Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Telefax: (000) 000-0000
12.13 AMENDMENTS
All amendments to the Agreement will be in writing and signed
by all the Members.
12.14 PUBLICITY
Neither of the parties will make any disclosure of the
transactions contemplated by the Agreement or the other agreements, or any
discussions in connection therewith, without the prior written consent of each
of the other parties. The preceding sentence shall not apply to any disclosure
required to be made by
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the Act, securities laws or other applicable law as
reasonably determined by counsel to the party determining that such disclosure
is required, except that such party, whenever practicable, shall be required to
consult with the other party concerning the timing and content of such
disclosure before making it.
12.15 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT
In the event that a Member is not a natural person, neither
Company nor any Member will (a) be required to determine the authority of the
individual signing the Agreement to make any commitment or undertaking on behalf
of such entity or to determine any fact or circumstance bearing upon the
existence of the authority of such individual or (b) be required to see to the
application or distribution of proceeds paid or credited to individuals signing
the Agreement on behalf of such entity.
12.16 WARRANTIES AND REPRESENTATIONS
Each Member separately represents and warrants that he/she/it
is not a party to any pending or threatened suit, action or legal,
administrative, arbitration or other proceeding which might materially and
adversely affect the business of the Company or the transactions contemplated by
this Agreement, nor does such Member know of any facts which are likely with the
passage of time to give rise to such a suit, action or proceeding. Each Member
separately represents and warrants that he/she/it is not a party to any
agreement, understanding, tment or other obligation that prohibits or restricts
such Member's performance under this Agreement, except that it is understood
that ASRS/ASHS is required to obtain certain approvals to transfer ownership of
its assets contributed pursuant to Exhibit A.
12.17 REPRESENTATIONS
Each of the Members acknowledges and agrees (a) that no
representation or promise not expressly contained in this Agreement has been
made by any of the other Members or by any of such Member's agents, employees,
representatives or attorneys; (b) that this Agreement is not being entered into
on the basis of, or in reliance upon, any promise or representation, express or
implied, other than such as are set forth expressly in this Agreement; and
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(c) that each Member has had the opportunity to be represented by counsel of
said Member's choice in this matter, including the negotiations and transaction
which preceded the execution of this Agreement.
12.18 REPRESENTATION BY COUNSEL, ETC.
Each Member acknowledges and represents that it has been
represented by counsel and other advisors of its own choice in the negotiations
with respect to the formation of the Company, the preparation of the Articles,
the preparation of this Agreement and all other documents with respect to the
Company, the potential consequences of investment in and operation of the
Company, and the decisions to invest in and become Members with respect to the
Company.
12.19 MULTIPLE COUNTERPARTS
The Agreement may be executed in several counterparts, each of
which will be deemed an original but all of which will constitute one and the
same instrument. However, in making proof hereof it will be necessary to produce
only one copy hereof signed by the party to be charged.
12.20 RESERVED
12.21 PARENT UNDERTAKINGS
A. Contemporaneously with the execution of this
Agreement, each Member shall cause its parent (ASHS for ASRS and EHUS for GKV)
to execute a Parent Undertaking in the form attached hereto as Exhibit E
pursuant to which such parent agrees:
(i) to respect and abide by the exclusivity provisions
set forth in Paragraph 12.9 hereof; and
(ii) not to allow a sale or transfer of any capital
stock in such Member without first offering to sell such capital stock to the
other Member for the same price and on the same terms and conditions as have
been offered by a third party.
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B. This Agreement shall not become effective until
ASHS and EHUS have executed the Parent Undertaking.
12.22 LOAN BY GKV TO THE COMPANY
A. On the date on which the Boards of Directors of the
Members give their approval pursuant to Section 12.24, GKV shall make a loan to
the Company in the amount of $1,300,000 (the "GKV Loan"). Such loan shall be
evidenced by a promissory note in the form attached hereto as Exhibit F. Such
loan shall bear interest at two percent (2%) above the "prime rate" as announced
from time to time by the Wachovia Bank of Georgia, N.A. Interest shall be
payable upon any payment of the principal amount. At a minimum, $1,000,000 in
principal amount of the loan shall be payable one year from the date of this
Agreement and the remaining principal balance shall be paid two years from the
date of this Agreement, but a mandatory prepayment of $250,000 (subject to a
maximum of $1,000,000) shall be made each time a Gamma Knife loan or lease
financing is obtained by the Company.
B. At any time prior to its maturity date, ASRS and
GKV shall have the right by mutual consent, to convert up to $1,000,000 of the
outstanding principal balance of the GKV Loan plus any accrued but unpaid
interest on the GKV Loan into a capital contribution to GKV. Such capital
contribution shall be deemed to have a fair market value equal to the
outstanding principal balance of the GKV Loan and any accrued but unpaid
interest on the GKV Loan. In the event of such conversion the outstanding
principal balance of the GKV Loan into a Capital Contribution, the Percentage
Interests of the Members shall be adjusted in the manner described in
Subparagraph 2.1.B hereof.
C. ASRS shall have the right, but not the obligation,
to make a Capital Contribution to the Company, in cash, in any amount less than
or equal to the amount converted described in Subparagraph 12.22.B, which
Capital Contribution by ASRS shall be due and payable on the effective date of
such conversion.
12.23 DRAW DOWN LOAN BY GKV TO THE COMPANY
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A. Upon the effectiveness of this Agreement, the
Company shall enter into the draw down Promissory Note attached hereto as
Exhibit G (the "Draw Down Loan").
B. At any time prior to the maturity date of the Draw
Down Loan, ASRS and GKV shall have the right by mutual consent, to convert any
of the outstanding principal balance of the Draw Down Loan plus any accrued but
unpaid interest on the Draw Down Loan into a capital contribution by GKV. Such
capital contribution shall be deemed to have a fair market value equal to the
converted principal of the Draw Down Loan plus any accrued but unpaid interest
on the Draw Down Loan. In the event of such conversion of any of the Draw Down
Loan into a capital contribution, the Percentage Interests of the Members shall
be adjusted in the manner described in Subparagraph 2.1.B hereof.
C. ASRS shall have the right, but not the obligation,
to make a Capital Contribution to the Company, in cash, in any amount less than
or equal to the amount converted described in Subparagraph 12.23.B, which
Capital Contribution by ASRS shall be due and payable on the effective date of
such conversion.
12.24 This Agreement shall not become effective until
ASRS/ASHS receives approval from its Board of Directors and EHUS/GKV receives
approval from their Boards of Directors. GKV shall have no obligation to make
its initial capital contribution described in Exhibit A until any and all
required consents and/or approvals necessary for ASRS/ASHS to contribute its
UCSF Assets to the Company are obtained and provided to GKV. GKV shall have no
obligation to make the second capital contribution described in Exhibit A until
any and all required consents and/or approvals necessary for ASRS/ASHS to
contribute its USC Assets to the Company are obtained and provided to GKV.
IN WITNESS WHEREOF, all of the Members of GK FINANCING, LLC, A
California Limited Liability Company, have executed the Agreement, effective the
17th DAY OF October, 1995.
MEMBER:
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GKV
BY:
-----------------------------
Title:
ASRS:
BY:
-----------------------------
Title:
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EXHIBIT A
CAPITAL CONTRIBUTION OF MEMBERS OF GK FINANCING, LLC
=====================================================================================================
MEMBER'S
MEMBER'S NAME MEMBER'S ADDRESS MEMBER'S CAPITAL CONTRIBUTION PERCENTAGE
INTEREST
-----------------------------------------------------------------------------------------------------
ASRS See Section 12.12 See below 78%
-----------------------------------------------------------------------------------------------------
GKV See Section 12.12 $278,000 in cash on date of ASRS's 22%
initial contribution of the UCSF
Assets, subject to Paragraph 12.24
and $522,000 in cash on date of
ASRS's second contribution of USC
Asset, subject to Paragraph 12.24 *
-----------------------------------------------------------------------------------------------------
TOTALS:
=====================================================================================================
* NOTE: Cash amounts to be contributed by GKV may be adjusted as
provided in paragraphs (1) and (3) below.
Initial Capital Contribution by ASRS:
(1) On the effective date of this Agreement or as soon as
practical, ASRS shall transfer to the Company good and marketable title to the
Gamma Knife located at the University of California at San Francisco (subject
only to a financing lease with a current principal balance of approximately
$1,237,000 (the "UCSF Lease")), the contract between ASHS/ASRS and the Regents
of the University of California which is located at the University of California
at San Francisco (the "UCSF Contract") relating to the Gamma Knife, and all
other physical and intangible assets relating to such Gamma Knife (collectively,
("UCSF Assets")) The UCSF Assets shall not include accounts receivable. The UCSF
Assets shall be deemed to
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have a net fair market value of approximately $2,224,000. The exact fair market
value of the UCSF Assets shall be determined as of the date of their transfer to
the Company on the basis of the methodology and assumptions set forth in the
existing valuation report by American Appraisal Associates. The exact amount of
cash to be contributed by GKV on the date on which ASRS transfers the UCSF
Assets to the Company shall be equal to 22/78 times the exact fair market value
of the UCSF Assets as of the date of their transfer.
(2) The Company shall assume the obligations of ASRS under the UCSF
Lease and the UCSF Contract which accrue from and after the date on which ASRS
transfer the UCSF Assets to the Company, but the Company shall assume no other
obligations of ASRS related to the UCSF Assets, including accounts payable. ASRS
shall indemnify the Company, GKV and their Affiliates for all damages, costs,
expenses, and liabilities (including attorneys' fees) incurred by any of them in
relation to any claims arising from or in relation to the UCSF Assets prior to
the date on which ASRS transfers the UCSF Assets to the Company. Upon demand by
the Company, GKV or their Affiliates, ASRS shall promptly reimburse the Company,
GKV and their Affiliates for attorneys' fees incurred by them related thereto.
(3) On January 1, 1996, or as soon as practical (when ASRS/ASHS has
obtained all required consents /approvals to transfer said asset to Company),
ASRS shall transfer to the Company good and marketable title to the Gamma Knife
located at the USC University Hospital (subject only to a financing lease with
an approximate principal balance as of January 1, 1996 of $2,314,000 (the "USC
Leases")), the contract between ASRS and USC University Hospital (the "USC
Contract") relating to the Gamma Knife, and all other physical and intangible
assets relating to such Gamma Knife (collectively, the "USC Assets"). The USC
Assets shall not include accounts receivable. The USC Assets shall be deemed to
have a net fair market value of approximately $4,426,000. The exact fair market
value of the USC Assets shall be determined as of the date of their transfer to
the Company on the basis of the methodology and assumptions set forth in the
existing valuation report by American Appraisal Associates. The exact amount of
cash to be contributed by GKV on the date on which ASRS transfers the USC
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Assets to the Company shall be equal to 22/78 times the exact fair market value
of the USC Assets as of the date of their transfer.
(4) The Company shall assume the obligations of ASRS under the USC
Lease and the USC Contract which accrue from and after the date on which ASRS
transfers the USC Assets to the Company, but the Company shall assume no other
obligations of ASRS relating to the USC Assets, including accounts payable. ASRS
shall indemnify the Company, GKV and their Affiliates for all damages, costs,
expenses, and liabilities (including attorneys' fees) incurred by any of them in
relation to any claims arising from or in relation to the USC Assets prior to
the date on which ASRS transfers the USC Assets to the Company. Upon demand by
the Company, GKV or their Affiliates, ASRS shall promptly reimburse
the Company, GKV and their Affiliates for attorneys' fees incurred by them
related thereto.
(5) ASRS hereby represents and warrants to the Company and to GKV
that the UCSF Contract, the UCSF Lease, the USC Contract and the USC Lease are
in full force and effect and neither party to each such contract or lease is in
breach thereof and that ASRS has heretofore delivered to GKV true, correct and
complete copies of all such contracts and leases.
(6) ASRS hereby represents and warrants to the Company and to GKV
that there is no suit, action, claim or investigation pending or threatened
against, affecting or relating to or arising from the UCSF Assets or the USC
Assets, and there exists no basis or grounds for same.
(7) If on a fiscal year basis, the cash flow (defined as revenues
less direct cash operating expenses) generated by the UCSF Assets or the USC
Assets, is insufficient to service the lease payments under the UCSF Lease or
the USC Lease, as the case may be, ASRS shall reimburse the Company in cash for
the difference between said lease payments and said cash flow, without credit to
the Capital Account of ASRS for such payment.
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EXHIBIT E
PARENT UNDERTAKING
WHEREAS, GKV INVESTMENTS, INC. ("GKV"), a Georgia corporation, and AMERICAN
SHARED RADIOSURGERY SERVICES, INC. ("ASRS"), a California corporation, are
parties to that certain Operating Agreement for GK Financing, LLC of even date
herewith (the "Operating Agreement");
WHEREAS, AMERICAN SHARED HOSPITAL SERVICES ("ASHS"), a California
corporation, is the ultimate beneficial owner of all of the outstanding capital
stock of ASRS;
WHEREAS, ELEKTA HOLDINGS U.S., INC. ("EHUS"), a Georgia corporation, is an
indirect owner of all of the outstanding capital stock of GKV;
WHEREAS, section 12.21 of the Operating Agreement requires EHUS and ASHS to
execute this Parent Undertaking as a condition to the effectiveness of the
Operating Agreement;
WHEREAS, it is in the direct interest of ASHS and EHUS for the Operating
Agreement to become effective;
NOW THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, ASHS and EHUS hereby agree as follows:
1. Definitions.
All capitalized terms used herein which are defined in the
Operating Agreement shall have the meanings set forth in the Operating
Agreement.
2. Exclusivity.
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EHUS and ASHS agree to abide by the restrictions set forth in
section 12.9 of the Operating Agreement and to cause each of their Affiliates to
abide by the restrictions set forth in section 12.9 of the Operating Agreement.
3. Right of First Refusal.
3.1 Except as provided in this Section 3.1, ASHS hereby
agrees that it shall not allow any shares of capital stock of ASRS to be sold,
transferred, assigned, pledged or otherwise encumbered during the term of the
Operating Agreement except for a bona fide sale for cash to a third party and
then only after ASHS shall have given GKV written notice of such proposed sale,
including the number of shares proposed to be sold, the price therefor, and the
identity of the proposed purchaser, and the opportunity to purchase the shares
proposed to be sold for the same price and on the same terms and conditions. GKV
shall have a period of thirty (30) days after receipt of notice from ASHS in
which to decide whether or not to purchase such shares. Notwithstanding the
foregoing, GKV shall not have such right of first refusal if ASHS sells,
transfers, assigns or pledges shares of capital stock of ASRS to an Affiliate of
ASHS.
3.2 Except as provided in this Section 3.2, EHUS hereby
agrees that it shall not permit any shares of capital stock of GKV to be sold,
transferred, assigned, pledged or otherwise encumbered during the term of the
Operating Agreement except for a bona fide cash sale to a third party and then
only after EHUS shall have given notice to ASRS of the proposed sale, including
the number of shares proposed to be sold, the price therefor, and the identity
of the proposed purchaser, and the opportunity to purchase such shares proposed
to be sold for the same price and on the same terms and conditions. ASRS shall
have a period of thirty (30) days after the receipt of such notice in which to
decide whether or not to purchase such shares. Notwithstanding the foregoing,
ASRS shall not have such right of first refusal if EHUS sells, transfers,
assigns or pledges shares of capital stock of GKV to an Affiliate of EHUS.
4. Indemnification for Representations.
4.1 ASHS hereby agrees to indemnify and hold harmless
EHUS, GKV and their Affiliates for any and all damages, costs, expenses and
liabilities (including attorneys' fees) incurred by any of them as a
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result of the breach of any representation or warranty made by ASRS in, or any
claim against ASRS for indemnification arising under, the Operating Agreement.
4.2 EHUS hereby agrees to indemnify and hold harmless
ASHS, ASRS and their Affiliates for any and all damages, costs, expenses and
liabilities (including attorneys' fees) incurred by any of them as a result of
the breach of any representation or warranty made by GKV in, or any claim
against GKV for indemnification arising under, the Operating Agreement.
5. Arbitration.
All disputes arising in connection with this Undertaking shall
be finally settled by arbitration in Chicago, Illinois under the Commercial
Arbitration Rules of the American Arbitration Association. Judgment upon the
award rendered may be entered in any court having jurisdiction, or application
may be made to such court for judicial acceptance of such award and an order of
enforcement, as the case may be. Any arbitration arising in relation to this
Undertaking may be joined with any arbitration arising in relation to the
Operating Agreement.
6. Governing Law.
This agreement shall be governed by and interpreted in
accordance with the laws of the State of California, not including laws and
principles relating to the conflict of laws.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the date first above-written.
AMERICAN SHARED HOSPITAL SERVICES
By:
--------------------------------
Title:
-----------------------------
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ELEKTA HOLDINGS U.S., INC.
By:
--------------------------------
Title:
-----------------------------
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