Exhibit 3.28
WILKES-BARRE IMAGING, LLC
OPERATING AGREEMENT
THIS OPERATING AGREEMENT (the "AGREEMENT") is made effective as of May
2, 2000 (the "EFFECTIVE DATE"), by and among the undersigned parties. The
parties listed on Exhibit A as the members are referred to collectively herein
as the "MEMBERS." Capitalized terms in this Agreement shall be defined as
either set forth in Section 9.2 of this Agreement or as defined in the Section
of this Agreement where they are first used.
RECITALS:
A. Wilkes-Barre Imaging, LLC (the "COMPANY") was organized pursuant to
Articles of Organization filed with, and approved by, the Department of State
of the Commonwealth of Pennsylvania (the "ARTICLES"). All references herein to
the Articles shall mean such document as it is in effect on the relevant date,
including any amendments thereto, made from time to time. The Members,
collectively, own all of the Membership Interests in the Company.
B. The Members have agreed to enter into this Agreement to regulate the
affairs of the Company, the conduct of its business, and the relations of its
Members.
C. The Members have agreed that this Agreement shall serve as an
Operating Agreement within the meaning of the Commonwealth of Pennsylvania's
Limited Liability Company Act of 1994, as amended from time to time (the "ACT").
AGREEMENT:
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE 1
ORGANIZATION
SECTION 1.1 FORMATION. The Company is a limited liability company formed
pursuant to the Act.
SECTION 1.2 NAME. The name of the Company is "Wilkes-Barre Imaging, LLC."
SECTION 1.3 PURPOSE. The Company is formed for the purpose of owning and
operating the diagnostic imaging center located at 146 Mundy Street,
Wilkes-Barre, Pennsylvania, and engaging in and conducting all and every kind
of lawful business for which limited liability companies may be organized
according to the laws of the Commonwealth of Pennsylvania. The Company also
shall have all the powers necessary, incidental, or convenient to effect any
purpose for which it is formed, including all powers granted by the Act.
SECTION 1.4 PRINCIPAL OFFICE, REGISTERED OFFICE AND REGISTERED AGENT. The
location of the principal office of the Company is 146 Mundy Street,
Wilkes-Barre, Pennsylvania, or such other locations as the Company may, from
time to time, designate. CT Corporation System is the registered agent for the
Company. The registered agent's business address is Oliver Building, Mellon
Square, Pittsburgh, Pennsylvania 15222, which shall be the registered office of
the Company.
SECTION 1.5 DURATION. The Company shall continue in existence until
dissolved by the Members or as otherwise provided for in this Agreement.
ARTICLE 2
MEMBERS
SECTION 2.1 MEMBERSHIP INTERESTS; CURRENT MEMBERS. The current Members of
the Company and their respective Membership Interests are listed on Exhibit A,
attached hereto and incorporated by reference. Exhibit A shall automatically be
amended from time to time to reflect adjustments in Membership Interests (as
defined in Section 9.2), the cessation of Membership Interests, and the
addition of new Members, pursuant to the terms of this Agreement.
SECTION 2.2 NO AUTHORITY TO ACT AS AN AGENT FOR THE COMPANY. No Member,
solely by reason of being a Member, shall be an agent of the Company except to
the extent that the majority in Interest of the Members have in writing
specifically authorized such Member to act as an agent of the Company.
SECTION 2.3 ADDITIONAL MEMBERS. Additional Members may be admitted into
the Company on such terms and conditions as provided in Section 5.5. Unless
named in this Agreement or admitted to the Company as a substitute or new
Member as provided herein, no person or entity shall be considered a Member, and
the Company need deal only with the Members so named and so admitted. The
Company shall not be required to deal with any other person or entity by reason
of an assignment by a Member or by reason of the death or bankruptcy of a
Member, except as otherwise provided in this Agreement.
SECTION 2.4 MEMBERS NOT LIABLE FOR COMPANY LOSSES. The Members shall have
no personal liability for the losses, debts, claims, expenses, or encumbrances
of or against the Company or its property.
ARTICLE 3
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
SECTION 3.1 INITIAL CAPITAL CONTRIBUTIONS. The Members have made initial
Capital Contributions to the Company as set forth on Exhibit A, attached hereto
and incorporated by reference (the "INITIAL CAPITAL CONTRIBUTIONS"). No interest
shall be paid on the Initial Capital Contributions, any additional capital
contributions, or on the balance in any Capital Account and no Member shall
have the right to withdraw any portion of the Member's Capital Contributions.
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SECTION 3.2 SEPARATE CAPITAL ACCOUNTS. The Company shall maintain a
separate Capital Account for each Member in accordance with the Regulations (as
defined in Section 9.2).
SECTION 3.3 WORKING CAPITAL LOANS. InSight shall provide the Company with
working capital loans to fund the Company's ongoing operations and purchase
necessary capital equipment (the "WORKING CAPITAL LOANS"). The principal
balance of a Working Capital Loan shall accrue interest at a rate equal to
InSight's cost of capital at the time of the making of the loan and upon other
non-financial, commercially reasonable terms and conditions, commencing on the
effective date of the applicable Working Capital Loan. All Working Capital
Loans shall be secured with a priority lien by the assets and the accounts
receivable of the Company.
SECTION 3.4 ADJUSTMENTS TO CAPITAL ACCOUNTS. The Capital Account of each
Member shall be credited with all amounts contributed to capital by the Members.
SECTION 3.5 NO THIRD PARTY RIGHTS. The provisions of this Article 3 are
not for the benefit of any creditor or other person to whom any debts,
liabilities, or obligations are owed by, or who otherwise has any claim
against, the Company or any Member, and no creditor or such other person shall
obtain any rights under this section or by reason of this Article, or shall be
able to make any claim in respect of any debts, liabilities, or obligations
against the Company or any Member.
SECTION 3.6 ADJUSTMENTS TO ASSAEL'S MEMBERSHIP INTERESTS. Assael hereby
guarantees that for two (2) years following the date hereof the amounts payable
by Company for professional services from radiologists under the current
agreement with General Medical Services Corporation and any subsequent
agreement negotiated by Assael shall not exceed five hundred fifty thousand
dollars ($550,000) per year (the "GUARANTEED RATE"), assuming that the volume
of the Company's business is no more than 14,532 scans per year or $6,973,155
in Net Revenue per year (the "BASE VOLUME"). During such two (2) year period,
if the actual rate paid by the Company for the services performed by the
radiologists for the Base Volume (the "ACTUAL RATE") exceeds the Guaranteed
Rate, the value of Assael's Membership Interest shall be decreased by four (4)
times the difference between the Guaranteed Rate and the Actual Rate and the
percentage of the Membership Interest shall be decreased accordingly. By way of
illustration, if the Actual Rate during such two (2) year period for the Base
Volume is six hundred fifty thousand dollars ($650,000) per year, the value of
Assael's interest would be reduced by $400,000 (100,000 times 4.0).
ARTICLE 4
ALLOCATIONS AND DISTRIBUTIONS
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SECTION 4.1 GENERAL RULE. Subject to the special allocation rules set
forth elsewhere in this Article 4, the Profits and Losses from the operations
of the Company for each fiscal year shall be allocated among the Members in
proportion to their respective Membership Interests in the Company. Any credit
available for income tax purposes shall be allocated among the Members in the
same manner. Notwithstanding anything herein to the contrary, Assael shall be
allocated Profits of the Company in an amount equal to the distributions
actually made to him by the Company during the then current fiscal year and any
Profits in excess of such amount shall be allocated to InSight.
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SECTION 4.2 ALLOCATION OF PROFITS AND LOSSES. The Profits and Losses of
the Company for each fiscal year shall be allocated as follows:
(a) Notwithstanding any other provision in this Article 4 to the
contrary, in order to comply with the rules set forth in the Regulations for
(i) allocations of income, gain, loss, and deductions attributable to
nonrecourse liabilities (as defined in the Regulations), and (ii) membership
allocations where Members are not liable to restore deficit capital accounts,
the following rules shall apply:
(i) Partner nonrecourse deductions (as that term is defined in
the Regulations) attributable to a particular party nonrecourse liability (as
that term is defined in the Regulations) shall be allocated among the Members
in the ratio in which the Members bear the economic risk of loss with respect to
such partner nonrecourse liability;
(ii) Items of Company gross income and gain shall be allocated
among the Members to the extent necessary to comply with the minimum gain
chargeback rules for partner nonrecourse liabilities set forth in the
Regulations; and
(iii) Items of Company gross income and gain shall be allocated
among the Members to the extent necessary to comply with the qualified income
offset provisions set forth in the Regulations, relating to unexpected deficit
capital account balances (after taking into account all capital account
adjustments prescribed in the Regulations).
Since the allocations set forth in this Article 4 (the "Regulatory Allocations")
may cause results not consistent with the manner in which the Members intend to
divide Company distributions, the Members may divide other allocations of
Profits, Losses, and other times among the Members so as to prevent the
Regulatory Allocations from distorting the manner in which distributions would
be divided among the Members under this Agreement, but for application of the
Regulatory Allocations. The Members may accomplish this result in any reasonable
manner that is consistent with section 704 of the Code and the related
Regulations.
(b) In accordance with Code section 704(c) and the Regulations
thereunder, taxable income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for federal
income tax purposes, be allocated among the Members so as to take into account
any variation between the adjusted basis of such property for federal income
tax purposes and its fair market value, as recorded on the books of the
Company. As provided in the Regulations, in the event that the Capital Accounts
of the Members are adjusted to reflect the revaluation of Company property on
the Company's books, then subsequent allocations of taxable income, gain, loss
and deduction with respect to such property shall take into account any
variation between the adjusted basis of such property for federal income tax
purposes and its adjusted fair market value, as recorded on the Company's
books. Allocations under this paragraph shall be made in accordance with the
Regulations and, consequently, shall not be reflected in the Members' Capital
Accounts and shall not affect distributions of the Company.
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(c) Except as otherwise provided in Section 4.2(d), in the event of a
sale, exchange, or other disposition of all or any substantial portion of the
Company's assets, Profits attributable to any fiscal year or other period of
the Company shall be allocated as follows:
(i) first, to Assael in an amount equal to the aggregate amount of
Net Cash Flow distributed to him during the current fiscal year and all prior
fiscal years of the Company, less the aggregate amount of Profits previously
allocated to him;
(ii) second, to the Members in an amount equal to and in proportion
to the amount necessary, if any, to bring the balances of their Capital Accounts
to an amount equal to their unreturned initial Capital Contributions; and
(iii) third, the remaining Profits shall be allocated to InSight.
(d) Profits shall be allocated to the Members in the following manner in
the event of a sale, exchange or other disposition of all or any substantial
portion of the Company's assets;
(i) first, to Assael in an amount equal to the aggregate amount of
the Net Cash Flow distributed to him, less the aggregate amount of the Profits
previously allocated to him;
(ii) second, to Assael until the balance of his Capital Account is
equal to eleven and one ninth percent (11-1/9%) of the balance of InSight's
Capital Account; and
(iii) third, to the Members in accordance with their Membership
Interests.
(e) The parties intend for Assael to be allocated Profits from the day to
day operations of the Company's business in an amount equal to the
distributions made to him during the current fiscal year and for certain
distributions made during the first quarter of the next fiscal year, and for
Profits in excess of such amount to be allocated to Insight. The goal being for
the balance of Assael's Capital Account at the end of each fiscal year to be
the same as it was on the first day of such fiscal year, which amount, is
intended to be the unreturned initial capital contribution of Assael to the
Company. In addition, Assael shall be allocated on a priority basis a
sufficient amount of the Profits from the sale, exchange, or other disposition
of all or any substantial portion of the Company's assets to bring the
outstanding balance of his Capital Account to an amount equal to what it would
have been if Profits were allocated and Net Cash Flow was distributed to the
Members in accordance with their percentage Interest throughout the entire term
of the Company.
(f) Losses of the Company shall be allocated to the Members with positive
balances in their Capital Accounts, until such balances shall be zero.
Thereafter, Losses shall be allocated to the Members in accordance with their
percentage Interests.
(g) If a Member transfers his/its Membership Interest, there shall be
allocated to each Member, who held the transferred Interest during the fiscal
year of the transfer, the product of
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(i) the Member's Profit or Loss allocated to such transferred Interest for such
fiscal year, and (ii) a fraction the numerator of which is the number of days
such Member held the transferred Interest during such fiscal year and the
denominator of which is the total number of days in such fiscal year; provided,
however, that the members may allocate such Profit or Loss by closing the
books of the Company immediately after the transfer of an Interest. Such
allocation shall be made without regard to the date, amount or receipt of any
distributions which may have been made with respect to such transferred
Interest.
(h) In the event that the Company sells, exchanges, or otherwise disposes
of all or any substantial portion of the Company's assets, the net cash
proceeds from any such sale, exchange, or other disposition shall (after the
Company's indebtedness to third parties and to Partners have been paid or
provided for, and sufficient reserves are set up for any contingent or
unforeseen liabilities of the Company) be distributed and applied by the
Company in order of priority and in the same manner as is set forth in this
Section 4.2(h);
(i) first, to InSight, until the amount of aggregate distributions
of Net Cash Flow are equal to nine hundred percent (900%) of the aggregate
distributions of Net Cash Flow distributed to Assael;
(ii) second, to the Members in accordance with the outstanding
balance of their Capital Accounts after the allocation of Profits set forth in
Section 4.2(d)(ii); and
(iii) third, to the Members in accordance with the outstanding
balance of their Capital Accounts after the allocation of Profits set forth in
Section 4.2(d)(iii).
SECTION 4.3 ESTABLISHMENT OF COMPANY ACCOUNT; PRIORITY OF PAYMENTS. The
Company will establish a bank account into which all collections of Company
revenue shall be deposited. Except as otherwise provided in this Agreement, all
distributions by the Company to its Members shall be subject to the terms and
conditions of the Act.
SECTION 4.4 PRIORITY OF DISTRIBUTIONS OF NET CASH FLOW. The Members agree
that the Manager (as defined below) shall make distributions to the Members in
the event that the Manager determine that Monthly Net Cash Flow is sufficient to
make such distributions. Notwithstanding the prior sentence of this Section, the
minimum monthly distribution payable to Assael shall be twenty thousand dollars
($20,000) (the "MINIMUM MONTHLY ASSAEL DISTRIBUTION"), subject to adjustment and
the limitations set forth below, and payable in advance on the first day of each
month commencing after the first complete calendar month of operations of the
Company. Within thirty (30) days following each calendar quarter commencing on
the effective date of this Agreement, the Manager shall conduct a reconciliation
and determine the actual amount of Quarterly Net Cash Flow and the monthly
distributions to Members. In the event the actual amount of distributions that
should have been paid to Assael based upon his Membership Interest for the prior
three (3) months is more than the amount of Minimum Monthly Assael Distributions
actually paid, then the difference shall be paid to Assael by the Company within
thirty (30) days after completion of the reconciliation. In the event the actual
amount of distributions that should have been paid to Assael based upon his
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Membership Interest for the prior three (3) months is less than the amount of
Minimum Monthly Assael Distributions actually paid, then the difference shall
be offset from the next three (3) monthly distributions, or such greater number
of distributions as may be necessary, to Assael on an equal pro rata basis
until the deficiency is recouped by the Company. By way of example only, in the
event Assael is paid $60,000 during a three month period, and the Company
determines that the actual distributions to Assael, based upon actual cash flow
and the distributions made to the other Members, should have been $54,000, then
$2,000 shall be deducted from each of the next three Minimum Monthly Assael
Distributions. Manager shall provide a report within thirty (30) days after
the end of each three (3) month period setting forth the financial information
used by Manager to calculate the actual distributions paid and payable and the
calculations set forth therein. The obligation of the Company to make the
Minimum Monthly Assael Distribution shall terminate in the event actual
performance of the Company results in a downward adjustment of the Minimum
Monthly Assael Distributions by ten thousand dollars or more for six (6)
consecutive months.
SECTION 4.5 RIGHT TO AUDIT. Any Member or its designee (the "AUDITING
MEMBER") shall have the right to audit the books and records of the Company for
the purpose of determining Quarterly Net Cash Flow and net income of the
Company upon reasonable notice to the Company within the thirty (30) day period
after each Member receives a quarterly report. In the event the Auditing Member
determines that the Manager has made an error in calculating Quarterly Net Cash
Flow or the net income within thirty (30) days of the date on which the audit
began, the Auditing Member shall provide prior written notice to the Company of
such discrepancy, along with a written explanation to the Auditing Member of
the discrepancy. In the event that the Company acknowledges a discrepancy or
cannot explain the discrepancy, the Company shall immediately correct the books
and records of the Company and pay to the Auditing Member any amounts due
him/it. If the Company disputes the discrepancy, the parties shall meet in good
faith to discuss the discrepancy and attempt to reconcile differing
determinations. If the parties cannot in good faith reconcile their differing
determinations within seven (7) days, the parties may institute dispute
resolution proceedings in accordance with Exhibit B, attached hereto and
incorporated by reference.
ARTICLE 5
MANAGEMENT AND VOTING REQUIREMENTS OF MEMBERS
SECTION 5.1 GOVERNANCE BY THE MANAGER. The Manager shall be responsible for
providing day-to-day management services to the Company, including those
services described on Exhibit C, attached hereto and incorporated by reference
(the "MANAGEMENT SERVICES"). The Manager shall direct, manage, and control the
business of the Company to the best of the Manager's ability. Except for
situations in which the approval of the Members is expressly required by this
Agreement or by nonwaivable provisions of applicable law, the Manager shall
have full and complete authority, power, and discretion to manage and control
the business, affairs, and properties of the Company to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business.
SECTION 5.2 MANAGEMENT FEE. In return for the Management Services provided to
Company by the Manager, Company shall pay to Manager a monthly management fee
in the amount
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of five percent (5%) of the Net Collected Revenue of the Company during the
prior month. Company shall also reimburse Manager for any and all costs
incurred by Manager to provide the Management Services, except as is set forth
in Section 5.4.
SECTION 5.3 NUMBER AND APPOINTMENT OF MANAGER. The initial number of
Manager of the Company shall be one (1) and the following entity shall serve as
the initial Manager of the Company: InSight. Such number of Managers may be
changed or the Manager may be removed or replaced upon the affirmative vote of
seventy-five percent (75%) of the outstanding Membership Interests. The Manager
shall hold office until such Manager's resignation, removal, or withdrawal.
SECTION 5.4 EMPLOYMENT OR ENGAGEMENT OF OTHERS, INCLUDING AFFILIATES. As
part of the Management Services described in Exhibit C, attached hereto and
incorporated by reference, InSight shall employ or retain all of the
individuals or entities necessary to work at the Center and to either operate
and manage all or any portion of the Center or to provide any service relating
to the business of the Center and InSight shall be reimbursed for the costs
directly related to such employment or retention. Notwithstanding the
foregoing, InSight, as the Manager, will not seek reimbursement from the
Company for its employees who are not retained for the purpose of providing
services at the Center and will not charge the Company for any indirect
expenses associated with the provision of the Management Services. The parties
hereby acknowledge that InSight shall employ Assael, who hereby agrees that on
the closing of the Asset Purchase Agreement (as defined below), he shall enter
into an Employment Agreement with InSight, a copy of which is attached hereto
as Exhibit D and incorporated by reference, pursuant to which Assael will
provide services to the Company (the "EMPLOYMENT AGREEMENT"). Notwithstanding
the foregoing, neither the Company nor any of the other Members shall have, as
a consequence of their relationship with InSight or the Company, any right in
or to any income or Profits derived by a Manager or Member or an affiliate of
any of the Manager or Member from any business arrangement with InSight or the
Company.
SECTION 5.5 LIABILITY OF THE MANAGER. No Manager or Affiliate of a
Manager, or their respective officers, shareholders, controlling persons,
directors, agents, and employees, shall be liable, responsible, or accountable
in damages or otherwise to the Company or to any of the Members, their
successors and permitted assigns, for any act or failure to act in connection
with the affairs of the Company, unless such act or omission constitutes gross
negligence or intentional misconduct.
SECTION 5.6 SPECIAL VOTING REQUIREMENTS. Except as otherwise expressly
provided for in this Agreement, the Members who are not Managers shall not have
any voting rights or take part in the day-to-day management or conduct of the
business of the Company, nor shall such Members have the right or authority to
act for or bind the Company. Actions and decisions that do require the approval
of the Members pursuant to any provision of this Agreement may be authorized by
the affirmative vote of at least a majority of the outstanding Membership
Interests held by the Members. Notwithstanding anything herein or in the Act to
the contrary, the following decisions and actions by the Company shall require
a vote of at least seventy-five percent (75%) of the Membership Interests held
by the Members:
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(a) Approval of a merger of the Company, or the sale, exchange,
or other disposition of all or substantially all of the Company's property, when
such merger, sale, exchange, or other disposition or is part of single
transaction or plan;
(b) Except as set forth in Section 7.1, dissolution of the
Company;
(c) Amendment of the Articles or this Agreement; and
(d) Sale, transfer, assignment, pledge, hypothecation, or other
disposition of a Member's Interest, and the admission of additional Members or
substitute Members, except as otherwise specifically authorized under this
Agreement.
SECTION 5.7 TAX MATTERS PARTNER. InSight shall be the tax matters partner,
as that term is defined in section 6231(a)(7) of the Code and shall have the
authority to exercise all functions provided for in the Act, or in regulations
promulgated thereunder.
ARTICLE 6
TRANSFER OF MEMBERSHIP INTERESTS
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SECTION 6.1 RESTRICTIONS ON TRANSFERS OF MEMBERSHIP INTEREST. Except as set
forth in Section 5.6, a Member may not transfer, assign, or encumber all or any
part of his/its Membership Interest in the Company except as expressly provided
herein, it being agreed that upon the death of a Member, such Member's interest
shall be transferred to the estate or heirs of the Member, which estate or
heirs shall be bound by the terms and conditions of the Agreement.
SECTION 6.2 ASSIGNMENT OF A MEMBER'S ENTIRE INTEREST. Except as otherwise
provided in this Agreement, upon the transfer of a Member's entire Membership
Interest, a Member ceases to be a Member and shall be deemed to have resigned
from the Company.
SECTION 6.3 SUBSTITUTE MEMBERS. Except as otherwise provided in this
Agreement, the transferee of a Membership Interest shall have the right to
become a substituted member in the Company if (i) the transferring Member so
provides in the instrument of transfer; (ii) the transferee agrees in writing
to be bound by the terms of this Agreement and the Articles, as amended from
time to time; and(iii) the transferee pays the reasonable costs incurred by the
Company in preparing and recording any necessary amendments to this Agreement
and the Articles.
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SECTION 6.4 PUT RIGHT IN FAVOR OF ASSAEL; OPTION RIGHT IN FAVOR OF INSIGHT.
(a) Upon the occurrence of a Triggering Event, Assael shall have
the right to "Put" all (but not part or less than all) of Assael's Membership
Interest to InSight or its designee and InSight or its designee will have the
right to "Call" such Membership Interest. For purposes of this Agreement,
"TRIGGERING EVENT" means the (i) termination of Assael's Employment Agreement by
InSight Without Cause, (ii) termination of Assael's Employment Agreement by
Assael for Good Cause, (iii) upon notice by Company to Assael that it intends to
execute a bona fide definitive agreement with a third party (other than to
Assael or an Affiliate of InSight), which as been negotiated at arms length and
in good faith and has a fair market value purchase price, and pursuant to which
the Company will sell substantially all of its assets, (iv) upon notice by
InSight to Assael that it intends to execute a bona fide definitive agreement
with a third party (other than Assael or an Affiliate of InSight), which has
been negotiated at arms length and in good faith and has a fair market value
purchase price, and pursuant to which InSight will transfer its Membership
Interest to such third party, or (v) the termination of Assael's Employment
Agreement pursuant to Section 5.2(a) thereof.
(b) In order for Assael to exercise his "Put" right or InSight
to exercise its "Call" right, Assael or InSight shall provide the other party
with written notice within thirty (30) days of the occurrence of a Triggering
Event of his/its intent to sell or purchase Assael's Membership Interest, as the
case may be (the "NOTICE"). Except for the Triggering Event defined in Section
6.4(a)(iii), any sale of all of Assael's Membership Interest pursuant to
Section 6.4(a) shall close no sooner than thirty (30) days after and no later
than ninety (90) days after the receipt by Assael or InSight, as the case may
be, of the Notice. If Assael exercises his right to "Put" or InSight exercises
its right to "Call" Assael's Membership Interest due to the occurrence of the
Triggering Event defined in Section 6.4(a)(iii), the sale of Assael's
Membership Interest shall occur just prior to the closing of the transactions
contemplated by the definitive agreement between the Company and a third party
on the date of the closing. In the event that such closing does not occur for
any reason, the sale of Assael's Membership Interest to InSight or its
designee shall not occur.
(c) In the event Assael exercises his right to "Put" or InSight
exercises its right to "Call" Assael's Membership Interest upon the execution of
a definitive agreement by Company and a third party, pursuant to which Company
will sell substantially all of its assets, the purchase price to be paid to
Assael will be the purchase price to be paid by the third party under the
definitive agreement multiplied by the percentage of Assael's Membership
Interest in Company. In the event Assael exercises his right to "Put" or InSight
exercises its right to "Call" Assael's Membership Interest upon the execution of
a definitive agreement by InSight and a third party, pursuant to which InSight
will transfer its interest to such third party, the purchase price to be paid to
Assael shall be an amount determined using the same valuation methodology as was
used to determine the purchase price paid to InSight for its Membership
Interest. If Assael exercises his right to "Put"or InSight exercises its right
to "Call" Assael's Membership Interest upon the occurrence of any other
Triggering Event, the purchase price to be paid to Assael shall be the fair
market value of Assael's Membership Interest. The fair market value of Assael's
Membership Interest shall mean the price at which a willing and eligible buyer
would buy the Membership Interest and a willing seller would sell
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the Membership Interest, with neither under compulsion. The parties may agree
upon the fair market value of Assael's Membership Interest; however,if the
parties cannot agree upon a purchase price, the parties may institute dispute
resolution proceedings in accordance with Exhibit B, attached hereto and
incorporated by reference.
(d) In the event that InSight terminates the Employment Agreement
With Cause or in the event that Assael terminates the Employment Agreement
Without Cause, Assael shall immediately transfer his Membership Interest in
Company to InSight or its designee and InSight shall have no obligation to pay
Assael for such Membership Interest. Any disputes regarding the determination
of whether the Employment Agreement has been terminated With Cause shall be
resolved pursuant to the Arbitration provision set forth in Section 9.8.
ARTICLE 7
DISSOLUTION
SECTION 7.1 DISSOLUTION PRIOR TO COMMENCEMENT OF OPERATIONS. The Members
acknowledge that the Company shall not commence operations prior to the closing
of the transactions contemplated by that certain Asset Purchase and Liabilities
Assumption Agreement by and among InSight, Assael, and US Diagnostic, Inc. (the
"ASSET PURCHASE AGREEMENT"). In the event that the closing of the Asset Purchase
Agreement does not occur for any reason, by June 30, 2000, the Company shall be
dissolved by the Manager as soon as possible thereafter without the vote or
consent, or any further action, of the Members being necessary.
SECTION 7.2 DISSOLUTION. Except as set forth in Section 7.1, the Company
shall be dissolved upon the affirmative vote of at least seventy-five percent
(75%) of the Membership Interests held by the Members. The Company shall not
dissolve upon the occurrence of any of the events described in Section 4A-606
of the Act as in effect as of the date of this Agreement unless, immediately
following the occurrence of such an event, the Company has no Members.
SECTION 7.3 WINDING UP. Upon dissolution of the Company, the Company shall
liquidate its assets and wind up its affairs in the following manner:
(a) LIQUIDATION OF ASSETS AND DISCHARGE OF LIABILITIES. A reasonable
time shall be allowed for the discharge of the Company's liabilities in order to
minimize the losses potentially attendant upon such a liquidation. The Manager
shall appoint a liquidator who shall liquidate the Company and shall have the
authority to perform any and all acts and to take any and all actions which may
be necessary, appropriate, or incidental to the process of winding up. The
authority of the liquidator shall continue as long as determined necessary by
the Members, and exercise of such authority shall be deemed a proper act in
winding up the affairs of the Company. Further, the liquidator is authorized
to sell the assets of the Company in a bona fide sale or sales to any party or
parties (including one or more Members) at such price or prices and upon such
terms as the liquidator may deem advisable, having due regard for the interests
of all Members. Any such sale or sales shall be deemed a proper act in winding
up the affairs of the Company.
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(b) PROCEEDS OF LIQUIDATION. The net liquidation proceeds (as
defined in Section 9.2) shall be applied and distributed in the following order
of priority:
(i) First, to the payment of or provision for the debts and
liabilities of the Company (including Member loans) and the expenses of
liquidation in order of priority as provided by law, and to the creation of any
reserves which may be reasonably necessary for any contingent or unforeseen
liabilities or obligations;
(ii) Second, to the Members in repayment of their Capital
Accounts in the Company; and
(iii) Finally, to the Members in proportion to their respective
Interests in the Company as set forth on Exhibit A.
ARTICLE 8
OTHER MATTERS OF THE COMPANY
SECTION 8.1 INDEMNIFICATION. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless each Member from and against any and
all losses, claims, damages, liabilities and expenses of whatever nature, as
incurred, arising out of, or relating to the fact that such person was or is a
Member of the Company and/or the Manager of the Company. Notwithstanding the
foregoing, no indemnification may be made to or on behalf of any Member or
Manager if a final judgment or other final adjudication adverse to the Member or
Manager establishes (i) that the Member's or Manager's acts were committed in
bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or (ii) that the Member or
Manager personally gained financial profit or other advantage to which the
Member or Manager was not legally entitled.
SECTION 8.2 NONCOMPETITION AGREEMENT. Assael shall enter into the
Confidentiality and Non-Competition Agreement set forth on Exhibit E, attached
hereto and incorporated by reference.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 NOTICE. All communications provided for herein shall be made
in writing and transmitted by mail, first class postage prepaid, return receipt
requested, to the Members at the addresses provided to the Company by the
respective Members. Any address may be changed by notice given to the Members,
as aforesaid, by the party whose address for notice is to be changed. Insofar
as practicable, any consent of the Members, required or appropriate under this
Agreement, shall be accomplished by written instrument without the necessity of
meetings of the Members.
SECTION 9.2 DEFINITIONS. As used herein, the term:
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(a) AFFILIATE means any corporation, partnership, limited liability
company, or other entity which is controlled by, controls, or is under common
control with any Member.
(b) ARTICLES or ARTICLES OF ORGANIZATION means the Company's Articles
of Organization as amended from time to time by the Members.
(c) ASSAEL means Roy Assael.
(d) CAPITAL ACCOUNT means, with respect to any Member, the Initial
Capital Contribution made by such Member -
(i) decreased by the amount of (1) any Losses or deductions
allocated to such Member, (2) any distributions made to such Member hereunder;
and (3) any liabilities of such Member assumed by the Company; and
(ii) increased by the amount of (1) any Profits allocated to
such Member, (2) any subsequent Capital Contributions made by such Member, and
(3) any liabilities of the Company that are assumed by such Member.
Capital Accounts shall be maintained in accordance with the
provisions of section 1.704-1(b)(2)(iv) of the Regulations and, to the extent
not inconsistent therewith, generally accepted accounting principles. Capital
Account balances shall be determined as of the last day of the fiscal year in
which a sale, refinancing or liquidation occurs, but prior to distribution of
the proceeds of the sale or other disposition resulting in the gain being
allocated therein.
(e) CAPITAL CONTRIBUTION means, with respect to each Member, the
aggregate amount of cash, the fair market value of any property, and the
principal amount of indebtedness that such Member contributes to the Company,
and which is accepted by the Company as a contribution to the Member's Capital
Account.
(f) CODE means the Internal Revenue Code of 1986, as amended from
time to time.
(g) EFFECTIVE DATE means the date first mentioned above.
(h) GOOD CAUSE means termination of the Employment Agreement in
accordance with Section 5.4 thereof.
(i) INSIGHT means Insight Health Corp.
(j) MEMBERSHIP INTEREST or INTEREST means a Member's percentage
equity in the Company as stated on Exhibit A.
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(k) MONTHLY NET CASH FLOW means monthly revenue received by the Company
from the provision of diagnostic imaging services during such period, less
monthly Operating Expenses.
(l) NET CASH FLOW means revenue received by the Company from the provision
of diagnostic imaging services during such period, less monthly Operating
Expenses.
(m) NET LIQUIDATION PROCEEDS means the amount of money, the principal
amount of any indebtedness due to the Company, and the fair market value (as of
the date of distribution) of any and all other property, distributed to the
Members in liquidation of the Company pursuant to this Agreement reduced by any
liabilities of the Company that are assumed by such Members or which are
secured by any property that is distributed by the Company to such Members.
(n) NET COLLECTED REVENUE means cash collections of the Company from
operations.
(o) OPERATING EXPENSES means all of the expenses necessary to operate the
business, including, without limitation, rent, cash required to purchase or
lease imaging equipment, principal and interest on loans, including Working
Capital Loans, compensation and reimbursements to the Manager for services
rendered, expenses incurred in connection with any casualty losses to the
extent such losses are not covered by insurance, payment of management fees,
payment of salaries and benefits, and reasonable cash reserves.
(p) PROFIT AND LOSS means for each fiscal year of the Company or other
period, an amount equal to the Company's taxable income or loss for such year
or other period, as determined by the Company's accountants in accordance with
Code Section 703(a), and including, without limitation, each item of Company
income, gain, loss, or deduction which must be separately stated pursuant to
Code Section 703(a), taking into account the following adjustments:
(i) all income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profit and Loss shall be added
to such taxable income or loss;
(ii) any expenditure of the Company described in Code Section
705(a)(2)(B), or treated as such an expenditure and not otherwise taken into
account in computing Profit or Loss shall be subtracted from such taxable
income or loss; and
(iii) notwithstanding any other provision of this Agreement, any
items of Company income, gain, loss, or deduction which are specially allocated
shall not be taken into account in computing Profit and Loss.
(q) QUARTERLY NET CASH FLOW means quarterly revenue received by the
Company from the provision of diagnostic imaging services during such period,
less quarterly Operating Expenses.
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(r) REGULATIONS means the regulations, including temporary
regulations, promulgated by the United States Treasury Department under the
Code, as the same may be amended from time to time.
(s) WITH CAUSE means the termination of the Employment Agreement in
accordance with Sections 5.2(b) and 5.3 thereof.
(t) WITHOUT CAUSE means any reason other than With Cause.
SECTION 9.3 SEVERABILITY. The invalidity or unenforceability of any
provision in this Agreement shall not affect the other provision hereof and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
SECTION 9.4 INTERPRETATION. This Agreement shall be interpreted and
construed in accordance with the laws of the Commonwealth of Pennsylvania
(without reference to such jurisdiction's conflicts of laws statutes or
decisions). Venue for any action brought by any of the parties hereto shall be
proper only in the federal or state courts sitting in the Eastern District of
Pennsylvania or Wilkes-Barre, Pennsylvania. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural as the identity of the person or persons referred to may require.
SECTION 9.5 COUNTERPARTS; EFFECTIVE DATE. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an original and all of
which shall constitute one agreement. The signature of any party to a
counterpart shall be deemed to be a signature to, and may be appended to, any
other counterpart. This Agreement is dated and shall be effective among the
parties as of the Effective Date.
SECTION 9.6 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
executors, administrators, and legal representatives.
SECTION 9.7 HEADINGS. The headings of sections herein are for
convenience of reference only, do not constitute a part of this Agreement, and
shall not be deemed to limit or affect any of the provisions hereof.
SECTION 9.8 ARBITRATION. Except as otherwise provided herein, in the event
of a dispute between the parties arising from or relating to this Agreement,
including, but not limited to, construction, interpretation, implementation, or
enforcement of this Agreement or the performance or breach of any provision in
this Agreement, the parties shall meet and confer in good faith to resolve such
dispute. In the event such efforts do not resolve the dispute within fifteen
(15) days from the date the dispute arises, either party may demand arbitration
administered and conducted in Wilkes-Barre, Pennsylvania, by the American
Arbitration Association, before one (1) arbitrator, under its Commercial
Arbitration Rules, such arbitration to be final, conclusive, and binding.
Judgment on
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the award rendered by the arbitrator may be entered by any court having proper
jurisdiction. This provision shall survive termination of this Agreement.
Notwithstanding the foregoing, any party may seek or assert entitlement to
injunctive relief or specific performance in court as an initial matter and
shall have no prior obligation to establish in arbitration the entitlement to
injunctive relief or specific performance.
SECTION 9.9 ENTIRE AGREEMENT. The parties hereto agree that all
understandings and agreements heretofore made between or among them are merged
in this Agreement, which alone fully and completely expresses their agreement
with respect to the subject matter hereof. There are no promises, agreements,
conditions, understandings, warranties, or representations, oral or written,
express or implied, among the parties concerning the subject matter of this
Agreement, other than as set forth in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the Effective Date.
WILKES-BARRE IMAGING, L.L.C. ADDRESS FOR NOTICES:
BY ITS MANAGER AND MEMBER, 146 Mundy Street
INSIGHT HEALTH CORP. Wilkes-Barre, Pennsylvania 18702
By: /s/Steven T. Plochocki
------------------------
Name: Steven T. Plochocki
----------------------
Title: President and CEO
---------------------
MEMBERS: ADDRESS FOR NOTICES:
Insight Health Corp.
By: /s/Steven T. Plochocki 4400 MacArthur Boulevard
------------------------ Suite 800
Name: Steven T. Plochocki Newport Beach, CA 92660
----------------------
Title: President and CEO
---------------------
Roy Assael
- ---------------------------
Signature -----------------------
-----------------------
-----------------------
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the Effective Date.
WILKES-BARRE IMAGING, L.L.C. ADDRESS FOR NOTICES:
By:
-------------------------- 146 Mundy Street
Name: Wilkes-Barre, Pennsylvania 18702
------------------------
Title:
-----------------------
MEMBERS: ADDRESS FOR NOTICES:
InSight Health Corp.
By:
-------------------------- 4400 MacArthur Boulevard
Name: Suite 800
------------------------ Newport Beach, CA 92660
Title:
-----------------------
Roy Assael
/s/Roy Assael
- -----------------------------
Signature -------------------------
-------------------------
-------------------------
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EXHIBIT A
WILKES-BARRE IMAGING, LLC'S
---------------------------
INITIAL CAPITAL CONTRIBUTION AND INTERESTS
------------------------------------------
I. CAPITAL CONTRIBUTIONS
MEMBER'S NAMES CAPITAL CONTRIBUTION(1)(2)
-------------- --------------------------
Roy Assael $1,299,781
InSight Health Corp. $12,997,810
II. MEMBERSHIP INTERESTS
MEMBER'S NAMES MEMBERSHIP INTERESTS
-------------- --------------------
Roy Assael 10%
InSight Health Corp. 90%
- ----------------
(1) The Members agree that the exact amount of the Capital Contributions
shall be changed based upon any adjustments, including post-closing
adjustments, to the purchase price pursuant to the Asset Purchase Agreement by
and among the Members and US Diagnostic, Inc.
(2) These amounts represent the fair market value of the assets
contributed by the Members. The assets consist of those assets listed on
Schedules 2.1(a), 2.1(b), 2.1(c), and 2.1(g) of the Asset Purchase Agreement
referenced above. The Assets will be contributed to the Company concurrently
with the closing of the Asset Purchase Agreement. The capital contribution of
Assael represents a credit on the purchase price that InSight received with
respect to the Asset Purchase Agreement in return for Assael receiving his
membership interest in the Company.
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AMENDMENT NUMBER 1
TO THE
OPERATING AGREEMENT
BY AND BETWEEN
INSIGHT HEALTH CORP.
AND
ROY ASSAEL
This Amendment Number 1 to the Operating Agreement by and between InSight
Health Corp. and Roy Assael is made as of the last date of signature below.
WHEREAS, InSight Health Corp. ("INSIGHT") and Roy Assael ("ASSAEL") are
the only members of Wilkes-Barre Imaging, LLC (the "COMPANY") pursuant to that
certain Operating Agreement dated as of May 2, 2000 (the "OPERATING AGREEMENT");
WHEREAS, InSight and Assael desire to amend certain terms of the Operating
Agreement, all as set forth herein;
NOW THEREFORE, in consideration of the foregoing and the conditions,
covenants, and agreements hereinafter set forth and intending to be legally
bound, the parties agree as follows:
The second sentence of Section 6.4(a) of the Operating Agreement shall be
deleted and replaced in its entirety with the following:
For purposes of this Agreement, "TRIGGERING EVENT" means (i) the
termination of Assael's Employment Agreement by InSight Without Cause
(ii) the termination of Assael's Employment Agreement by Assael for
Good Cause, (iii) notice by the Company to Assael that it intends to
execute a bona fide definitive agreement with a third party (other
than Assael or an Affiliate of InSight), which has been negotiated at
arms length and in good faith and has a fair market value purchase
price, and pursuant to which the Company will sell substantially all
of its assets, (iv) notice by InSight to Assael that it intends to
execute a bona fide definitive agreement with a third party (other
than Assael or an Affiliate of InSight), which has been negotiated at
arms length and in good faith and has a fair market value purchase
price, and pursuant to which InSight will transfer its Membership
Interest to such third party, (v) the termination of Assael's
Employment Agreement pursuant to Section 5.2(a) thereof, or (vi) the
termination of Assael's Employment Agreement at the end of the initial
term, as set forth in Section 5.1 of the Employment Agreement, or at
the end of any extension of such term of the Employment Agreement as
may be negotiated by the parties.
All other sections of the Operating Agreement shall remain in full force
and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment effective as
of the last date of signature below.
INSIGHT HEALTH CORP. ROY ASSAEL
/s/ Michael A. Boyle /s/ Roy Assael
- ---------------------------- ----------------------------
Signature Signature
/s/ Michael A. Boyle 8/15/00
- ---------------------------- ----------------------------
Print Name Date
EXECUTIVE VICE PRESIDENT
- ----------------------------
Office or Title
8/14/00
- ----------------------------
Date
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