Exhibit 3.36
OPERATING AGREEMENT
FOR
PARKWAY IMAGING CENTER, LLC
A Nevada Limited Liability Company
TABLE OF CONTENTS
Page
ARTICLE I INTRODUCTION.................................................................................... 1
1.1 Formation of Limited Liability Company.................................................. 1
1.2 Defined Terms........................................................................... 1
1.3 Company Purpose......................................................................... 4
ARTICLE II MEMBERS AND MEMBERSHIP INTERESTS............................................................... 5
2.1 Names and Addresses of the Members; Office.............................................. 5
2.2 [Intentionally deleted.]................................................................ 5
2.3 [Intentionally deleted.]................................................................ 5
2.4 Shares of Membership Interests.......................................................... 5
2.5 Certificates for Membership Interests................................................... 5
2.6 Initial Capital Contributions and Capital Accounts...................................... 5
2.7 Need for and Contribution of Additional Capital and/or Loans............................ 7
2.8 Failure to Make Additional Capital Contributions........................................ 7
2.9 Admission of Additional Members......................................................... 9
2.10 No Member Responsible for Other Member's Commitment..................................... 9
2.11 Limitations on Referrals................................................................ 9
ARTICLE III ALLOCATIONS; DISTRIBUTIONS; AND INTERESTS..................................................... 9
3.1 Allocation of Net Income and Net Loss................................................... 9
3.2 Tax Allocations......................................................................... 11
3.3 Distribution of Available Cash.......................................................... 11
3.4 Allocation of Income and Loss and Distributions in Respect of Interests Transferred..... 12
ARTICLE IV ACCOUNTING AND RECORDS......................................................................... 12
4.1 Records and Accounting.................................................................. 12
4.2 Access to Accounting Records............................................................ 12
4.3 Annual Report and Tax Information....................................................... 13
4.4 Accounting Decisions.................................................................... 13
4.5 Federa1 Income Tax Elections............................................................ 13
ARTICLE V RIGHTS OF MEMBERS............................................................................... 13
5.1 Right of Members........................................................................ 13
5.2 Waiver of Partition..................................................................... 14
5.3 Withdrawal.............................................................................. 14
5.4 Reimbursement of Expenses............................................................... 14
5.5 Organization Expenses................................................................... 14
5.6 Obligations of Members to Company....................................................... 15
ARTICLE VI MEETINGS OF MEMBERS............................................................................ 15
6.1 Special Meetings........................................................................ 15
6.2 Notice of Meetings...................................................................... 15
i
6.3 Waiver of Notice........................................................................ 15
6.4 Voting by Proxy......................................................................... 15
6.5 Action by Consent....................................................................... 15
6.6 Presence................................................................................ 16
6.7 Conduct of Meetings..................................................................... 16
ARTICLE VII CHANGES IN MEMBERS............................................................................ 16
7.1 Dissolution or Bankruptcy of Member..................................................... 16
7.2 Restriction on Transfer and Assignment of Members' Interest............................. 16
7.3 Further Restrictions on Transfer........................................................ 16
7.4 Substitute Members...................................................................... 17
7.5 Effect of Transfer...................................................................... 17
7.6 Buyout Provisions....................................................................... 17
7.7 Company Value........................................................................... 21
ARTICLE VIII MANAGERS..................................................................................... 22
8.1 Managers................................................................................ 22
8.2 Powers of the Managers.................................................................. 24
8.3 Appointment of Tax Matters Manager...................................................... 24
8.4 Salaries................................................................................ 24
8.5 Removal of Managers..................................................................... 24
8.6 Resignation of a Manager................................................................ 25
8.7 Vacancies............................................................................... 25
ARTICLE IX TERMINATION.................................................................................... 25
9.1 Termination of the Company.............................................................. 25
9.2 Jeopardy Event.......................................................................... 25
9.3 Hospital Purchase Upon Dissolution...................................................... 26
9.4 Reservation of Rights................................................................... 27
ARTICLE X GENERAL......................................................................................... 27
10.1 Confidentiality......................................................................... 27
10.2 Confidential Information and Trade Secrets.............................................. 27
10.3 Additional Assurances................................................................... 28
10.4 Consents, Approvals and Discretion...................................................... 28
10.5 Construction of Agreement............................................................... 28
10.6 Attorneys' Fees......................................................................... 28
10.7 Notices................................................................................. 28
10.8 Binding on Successors in Interest....................................................... 28
10.9 Terms................................................................................... 29
10.10 Title to Company Property............................................................... 29
10.11 Reliance on Authority of Person Signing Agreement....................................... 29
10.12 Severability............................................................................ 29
10.13 Captions................................................................................ 29
10.14 Counterparts............................................................................ 29
10.15 No Waiver............................................................................... 29
10.16 Remedies; Injunctive Relief............................................................. 30
ii
10.17 Exhibits................................................................................ 30
10.18 Force Majeure........................................................................... 30
10.19 [Intentionally deleted]................................................................. 30
10.20 Entire Agreement; Amendments............................................................ 30
10.21 Disputes; Mediation; Arbitration........................................................ 30
10.22 Covenants Not to Compete................................................................ 32
iii
OPERATING AGREEMENT
FOR
PARKWAY IMAGING CENTER, LLC
This OPERATING AGREEMENT is made and entered into as of September 17,
1999 among INSIGHT HEALTH CORP., a Delaware corporation ("InSight"), ST. ROSE
DOMINICAN HOSPITAL, a Nevada nonprofit public benefit corporation ("Hospital"),
and J. PAUL WIESNER & ASSOCIATES CHARTERED d/b/a RADIOLOGY ASSOCIATES OF NEVADA,
a Nevada professional corporation ("RAN"). The parties to this Agreement shall
also be referred to individually as a "Member" and collectively as the
"Members."
RECITALS
The Members desire to form a limited liability company under the laws
of the State of Nevada for the purpose of developing and operating an outpatient
imaging center at 100 North Green Valley Parkway, Henderson, Nevada (the
"Imaging Operation") on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
INTRODUCTION
1.1 FORMATION OF LIMITED LIABILITY COMPANY.
The Members have formed a Nevada limited liability company under the
laws of the State of Nevada by the filing of Articles of Organization
("Articles") for Parkway Imaging Center, LLC (the "Company") and the certificate
of acceptance of appointment executed by the resident agent of the Company
pursuant to the Title 7, Chapter 86 of the Nevada Revised Statutes (the "Act").
The Company's business shall be conducted under such name until such time as all
the Members shall hereafter designate otherwise and file amendments to the
Articles in accordance with applicable law. It is intended that the Company be
managed by its Managers and not its Members, and the Articles shall so state.
This Agreement is subject to, and governed by, the Act and the Articles
of the Company filed with the Nevada Secretary of State. In the event of a
direct conflict between the provisions of this Agreement and mandatory
provisions of the Act or the provisions of the Articles of the Company, such
provisions of the Act or the Articles of the Company, as the case may be, will
be controlling.
1.2 DEFINED TERMS.
The terms used in this Agreement with their initial letters capitalized
shall, unless the context otherwise requires or unless otherwise expressly
provided herein, have the meaning specified in this Section 1.2. The singular
shall include the plural and the masculine gender shall
include the feminine and neuter, and vice versa, as the context requires. When
used in this Agreement, the following terms shall have the meanings set forth
below:
1.2.1 "Act" means Chapter 7, Title 86 of the Nevada Revised
Statutes, as the same may be amended from time to time.
1.2.2 "Additional Member" means any person or Entity admitted as a
Member pursuant to Section 2.9 hereof.
1.2.3 "Affiliate" means any individual, partnership, corporation,
limited liability company, 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 term "control," as used in the
immediately preceding sentence, means, with respect to a corporation, the right
to exercise, directly or indirectly, more than Fifty Percent (50%) of 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.
1.2.4 "Agreement" means this Operating Agreement of Parkway Imaging
Center, LLC as originally executed and as amended from time to time. The terms
"hereof," "hereto," "hereby" and "hereunder," when used with reference to this
Agreement, refer to this Agreement as a whole, unless the context otherwise
requires.
1.2.5 "Available Cash" means all cash funds of the Company on hand
from time to time (other than cash funds obtained as contributions to the
capital of the Company by the Members and cash funds obtained from loans to the
Company) after (i) payment of all operating expenses of the Company as of such
time, (ii) provision far payment of all outstanding and unpaid current
obligations of the Company as of such time, and (iii) provision for a working
capital reserve, if such reserve is established by the Managers.
1.2.6 "Bankruptcy" means, and a Member shall be deemed a "Bankrupt
Member" upon (i) the entry of a decree or order for relief against the Member by
a court of competent jurisdiction in any involuntary case brought against the
Member under any bankruptcy, insolvency or other similar law (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 of the winding up or liquidation
of the Member's affairs, (iv) the filing of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a period of 180 days or
which is not dismissed or suspended pursuant to Section 303 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law), (v) the commencement by the Member of a voluntary case under
any applicable Debtor Relief Laws now or hereafter in effect, (vi) the consent
by the Member to the entry of an order for relief in an involuntary case under
any such Debtor Relief Laws 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
2
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.
1.2.7 "Capital Account" means the individual accounts established
and maintained pursuant to Section 2.6.3 hereof, and in the manner provided in
Treasury Regulation Section 1.704-1(b)(2)(iv), as amended from time to time.
1.2.8 "Capital Contribution" means the total value of cash and
agreed fair market value of property contributed and agreed to be contributed to
the Company by each Member (net of liabilities secured by such property that the
Company is considered to assume or take subject to under Section 752 of the
Code), as shown in Exhibit A attached hereto as the same may be amended from
time to time. Except as provided in Section 2.7, additional Capital
Contributions may only be made by a Member with the consent of all other
Members.
1.2.9 "Code" means the Internal Revenue Code of 1986, as amended.
All references herein to sections of the Code shall include any corresponding
provision or provisions of succeeding law.
1.2.10 "Company" refers to Parkway Imaging Center, LLC.
1.2.11 "Entity" shall mean any association, corporation, general
partnership, limited partnership, limited liability company, joint stock
association, joint venture, firm, trust, business, trust, cooperative, and
foreign associations of like structure.
1.2.12 "Interest" means the entire ownership interest of a Member in
the Company at any particular time, including the right of such Member to any
and all benefits to which a Member may be entitled as provided in this Agreement
and under the Act, together with the obligations of such Member to comply with
all of the terms and provisions of this Agreement.
1.2.13 "Manager" means the individuals or Entities designated by the
Members in accordance with Article VIII.
1.2.14 "Majority in Interest of the Members" means the Member(s)
entitled to vote who own more than Fifty Percent (50%) of the total Percentage
Interests of all Members entitled to vote as stated on the records of the
Company; and "Majority in Interest of the Managers" means the Managers
designated by a Majority in Interest of the Members.
1.2.15 "Member" refers to InSight, Hospital and RAN, individually or
collectively, and any additional Members permitted hereunder.
1.2.16 "Percentage Interest" means the Interest of a Member as set
forth opposite the name of such member under the column "Percentage Interest" in
Exhibit A hereto, as such percentage may be adjusted from time to time pursuant
to the terms hereof.
1.2.17 "Principal Office" means 100 North Green Valley Parkway,
Henderson, Nevada, or such address as may be established pursuant to Section
2.1.2 hereof.
3
1.2.18 "Pro Rata Part" means the proportion that a Percentage
Interests of a Member bears to the aggregate Percentage Interests in the Company
of all Members.
1.2.19 "Share" refers to an Interest in the Company as may be
measured in such units as may be established pursuant to Section 2.4 hereof.
Whenever reference is made to "Percentage Interest," a Share may be converted
into the same by dividing a Member's number of Shares by the total of all Shares
outstanding.
1.2.20 "Substitute Member" means any person or Entity who or which is
admitted into Membership with the approval of Members pursuant to Section 5.1.5
hereof.
1.3 COMPANY PURPOSE.
1.3.1 The general purposes of the Company are as set forth in the
Articles. The Company may exercise all powers reasonable or necessary to pursue
the same. In addition, the Company may engage in and do any act concerning any
or all lawful businesses for which limited liability companies may be organized
according to the Act. Notwithstanding anything to the contrary herein, the
Company shall not take any action or conduct any activity or business that would
(i) jeopardize the tax-exempt status of Hospital under Section 501(c)(3) of the
Code, or (ii) cause a violation by the Company or any Member of any
self-referral or other laws.
1.3.2 The Members acknowledge that Hospital is entering into this
Agreement in order to carry out its charitable and religious health care
mission, which means that it may request the Company to conduct its activities
in some respects that may be detrimental to the overall profitability of the
Company. Therefore, notwithstanding anything to the contrary herein, the other
Members acknowledge and agree that Hospital, as a Member hereunder, and each
Manager designated by Hospital shall be entitled to act exclusively in
furtherance of Hospital's charitable and religious purposes as to the operation
of the Imaging Operation, notwithstanding any fiduciary or other obligation to
make decisions or take actions in a manner that would not adversely affect the
profitability of the Company or the value of the Interests of other Members.
1.3.3 It is understood and agreed that so long as Hospital or any
other affiliate of Catholic Healthcare West has an Interest in the Company, the
Company's facilities, including the Imaging Operation, and any part thereof will
be used only consistent with the Ethical and Religious Directives for Catholic
Facilities as promulgated from time to time by the National Conference of
Catholic Bishops.
1.3.4 The Company, in public announcements, publications, and other
settings, will use best efforts to be sensitive to the public identity of the
Imaging Operation given the public and legal association of the Imaging
Operation with Hospital as a Catholic health care facility (for example, care
will be taken that the Catholic Community is not offended by promotional
materials, etc.).
1.3.5 Company policies and procedures will reflect both ethical
practices and compassion in dealing with those served, particularly in business
and financial matters.
1.3.6 The Imaging Operation shall provide services to Medicare and
Medicaid patients (to the extent that applicable rates, including negotiated
payment rates, are reasonable
4
based on the historic rates for such services), and shall provide reasonable
levels of charity care based on both historical and actual need, particularly
considering the levels of charity outpatient imaging services provided by the
outpatient imaging service at St. Rose Dominican Hospital prior to the
commencement of this Agreement.
ARTICLE II
MEMBERS AND MEMBERSHIP INTERESTS
2.1 NAMES AND ADDRESSES OF THE MEMBERS; OFFICE.
2.1.1 Members, their initial Capital Contributions to the Company,
and their respective Percentage Interests in the Company are set forth on
Exhibit A attached hereto.
2.1.2 The Company shall at all times maintain a place of business
located within the State of Nevada.
2.2 [INTENTIONALLY DELETED.]
2.3 [INTENTIONALLY DELETED.]
2.4 SHARES OF MEMBERSHIP INTERESTS.
The aggregate Interests may be divided into Shares, each Share to
represent such amount of Capital Contribution as the Members shall unanimously
determine.
2.5 CERTIFICATES FOR MEMBERSHIP INTERESTS.
The Shares of a Member or the Member's Interests in the Company may be
represented by a Certificate of Membership. The exact contents of a Certificate
of Membership shall be as the Members shall unanimously determine.
2.6 INITIAL CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS.
2.6.1 The Members shall make initial Capital Contributions, and
obtain their respective initial Capital Accounts, as follows:
2.6.1.1 Hospital shall execute an Assignment and Assumption
Agreement in the form Exhibit B attached hereto (the
"Hospital Assignment") by which, among other matters,
(1) Hospital will assign and transfer to the Company
specified "Transferred Assets" (as therein defined) used
in connection with the operation of the outpatient
imaging operations of Hospital, and (2) the Company will
take subject to or assume certain obligations of
Hospital in connection with such Transferred Assets; and
each Member agrees that such Hospital Assignment will
have a net fair market value of $621,573 consistent with
an independent appraisal from Valuation Counselors.
5
2.6.1.2 InSight shall, concurrently with Hospital's execution of
the Hospital Assignment, execute (i) a Credit and
Security Agreement under which InSight loans funds to
Company without recourse to the Members, and (ii) a
Management Services Agreement under which InSight
provides, on a non-exclusive basis, the benefits of IRIS
related hardware and software without compensation
thereunder; and each Member agrees that the benefits of
such Agreements for Company will have a net fair market
value of $352,892, consistent with an independent
appraisal from Valuation Counselors.
2.6.1.3 RAN shall, concurrently with Hospital's execution of the
Hospital Assignment, make a cash payment to Company in
the amount of $243,616.
2.6.1.4 Immediately following the receipt of the contributions
outlined in Section 2.6.1.1 through 2.6.1.3, above, the
cash contribution received by Company pursuant to
Section 2.6.1.3 shall be distributed as a return of
capital as follows: Company shall distribute $134,341 to
Hospital and $109,276 to Insight.
2.6.1.5 Each Member understands and agrees that following the
contributions and distributions outlined in Sections
2.6.1.1 through 2.6.1.4, above, the respective interests
of the Members in the Company shall be Hospital (50%),
InSight (25%), and RAN (25%).
2.6.2 The initial Capital Contribution of each Member as set forth
in Section 2.6.1 shall also be set forth on Exhibit A attached hereto. No
interest shall be paid on any Capital Contribution.
2.6.3 A Capital Account shall be established and maintained on
behalf of each Member, including any additional or substituted Member who shall
hereafter receive an Interest in the Company. The Capital Account of each Member
shall consist of (i) the amount of cash such Member has contributed to the
Company, plus (ii) the agreed fair market value of any property such Member has
contributed to the Company, net of any liabilities assumed by the Company or to
which such property is subject, plus (iii) the amount of profits or income
(including tax-exempt income) allocated to such Member, less (iv) the amount of
losses and deductions allocated to such Member, less (v) the amount of all dash
distributed to such Member, less (vi) the fair market value of any property
distributed to such Member, net of any liability assumed by such Member or to
which such property is subject, less (vii) such Member's share of any other
expenditures which are not deductible by the Company for federal income tax
purposes or which are not allowable as additions to the basis of Company
property, and (viii) be subject to such other adjustments as may be required
under the Code. The Capital Account of a Member shall not be affected by any
adjustments to basis made pursuant to Section 743 of the Code but shall be
adjusted with respect to adjustments to basis made pursuant to Section 734 of
the Code to the extent provided in Treasury Regulation Section
1.7041(b)(2)(iv)(m).
6
2.6.4 No Member shall have the right to withdraw its Capital Account
or to demand and receive property of the Company or any distribution in return
for its Capital Contribution, except as may be specifically provided in this
Agreement or required by law.
2.6.5 Subject to the provisions of Article IX, a Member may
rightfully demand the return of its Capital Account (i) on the dissolution of
the Company, or (ii) as may otherwise be provided in the Act. A Member shall
have only the right to demand and receive cash in return for the Member's
Capital Account.
2.6.6 Except as is specifically provided otherwise in this Agreement
or in the Act, no Member shall have any liability or obligation to restore a
negative or deficit balance in such Member's Capital Account.
2.7 NEED FOR AND CONTRIBUTION OF ADDITIONAL CAPITAL AND/OR LOANS.
2.7.1 InSight shall, concurrently with the execution hereof, enter
into a Credit and Security Agreement with the Company under which the Company
will have access to certain loans, from InSight (collectively "Insight Loans").
In lieu of or in addition to the loans from InSight, the Company may obtain
loans from any other Entity, including a Member or an Affiliate of a Member, on
such terms as the Managers determine.
2.7.2 If the Net Working Capital of the Company should fall below
the Net Working Capital Reserve Threshold, as determined by InSight in
accordance with Exhibit F hereto, then the Members shall make additional cash
capital contributions in the amount of such difference ("Additional Capital") to
the Company in proportion to their Percentage Interests within ten days after
written notice from InSight to the Members. Any Member may challenge InSight's
determination that the Company requires Additional Capital hereunder in
accordance with the dispute resolution provisions of Section 10.21 hereof, but
only after it shall have first timely contributed such Additional Capital. If
such challenge is successful, then the Members shall be entitled to receive back
that portion of the Additional Capital as approved by the arbitrator.
2.7.3 In the event the total amount of Additional Capital in the
aggregate exceeds $850,000.00 (the "Contribution Threshold"), then each Member
shall have the right to redeem its Interest in the Company in accordance with
the Buyout Provisions set forth in Section 7.6.3. If all Members elect to redeem
their respective Interests in the Company pursuant to this Section, then such
action shall be deemed an approval by the Members to dissolve the Company in
accordance with Article IX.
2.8 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS.
Except as otherwise provided in Section 2.7.3, if a Member does not
timely contribute capital when required, that Member shall be in default under
this Agreement. In such event, any nondefaulting Member may send the defaulting
Member written notice of such default, giving it ten (10) days from the date
such notice is given to contribute the entire amount required. If the defaulting
Member does not make the required contribution to the Company within said ten
(10) day period, the nondefaulting Members may, in their sole discretion, agree
to elect any one or more of the following remedies:
7
2.8.1 The nondefaulting Members may elect to advance funds to the
Company to cover those amounts which the defaulting Member(s) fail to contribute
in such proportions as the other Members shall determine. Any such amounts which
a Member may advance to the Company on behalf of a defaulting Member shall
become a loan due and owing from the defaulting Member to the advancing Member
and bear interest at the rate of the lesser of (i) the "Prime Rate" as reported
from time to time in the Wall Street Journal, plus two (2) percentage points, or
(ii) the maximum amount permitted by applicable law, and shall provide for
payments of interest on at least a monthly basis. All cash distributions that
would otherwise be made to the defaulting Member under this Agreement shall
instead be paid to the advancing Member until such advances and interest thereon
are paid in full. In any event, any such advances shall be evidenced by a
promissory note in the form of Exhibit H and be due and payable by the
defaulting Member one (1) year from the date that such advance was made. Any
amounts repaid shall first be applied to interest and thereafter to principal.
Effective upon a Member becoming a defaulting Member, each defaulting Member
grants to the advancing Member a security interest in the defaulting Member's
Interest to secure its obligation to repay such advances and agrees to execute
and deliver a promissory note as described herein together with a pledge
agreement in the form of Exhibit I and such UCC1 financing statements and
assignments, of certificates of membership (or other documents of transfer) as
the advancing Member may reasonably request.
2.8.2 The nondefaulting Members may elect to make a capital
contribution or capital contributions that includes the amount of the capital
contribution that was required but not made by the defaulting Member, in such
proportions as the other Members shall determine, and the respective Percentage
Interests of the Members shall be adjusted, in which event each Member's
Percentage Interest shall be a fraction, the numerator of which represents the
amount of such Member's Capital Account and the denominator of which represents
the sum of all Members' Capital Accounts.
2.8.3 The nondefaulting Members may elect to dissolve the company,
in which event the Company shall be wound up, liquidated and terminated pursuant
to Article IX hereof.
2.8.4 The nondefaulting Members may elect to have the Company
purchase the Interest of the defaulting Member for a purchase price equal to the
defaulting Member's Pro Rata Part in the Company multiplied by the "Company
Value" as defined under Section 7.7. Payment of such purchase price shall be on
the same basis as set forth in Section 7.6.3.2.
Each Member acknowledges and agrees that the remedies described in this
Section 2.8 bear a reasonable relationship to the damages which the Members
estimate may be suffered by the Company by reason of the failure of a defaulting
Member to make an additional Capital Contribution, and the election of any or
all of the above-described remedies is not unreasonable under the circumstances
existing as of the date hereof. The election of the nondefaulting Members to
pursue any remedy provided in this Section 2.8 shall not be a waiver or
limitation of the Company's right to pursue an additional or different remedy
available hereunder or at law or equity with respect to any subsequent default.
8
2.9 ADMISSION OF ADDITIONAL MEMBERS.
The Members may admit to the Company Additional Member(s) who will
participate in the profits, Losses, available cash flow and other rights of a
Member on such terms as are determined by the Members. Admission of any such
Additional Member(s) shall require the consent of Members who own at least 80%
of all outstanding Percentage Interests, and such Additional Members shall be
allocated gain, loss, income or expense by such method as may be provided in
this Agreement, and if no method is specified, then as may be permitted by
Section 706(d) of the Code.
2.10 NO MEMBER RESPONSIBLE FOR OTHER MEMBER'S COMMITMENT.
In the event that any Member (or any of such Member's shareholders,
partners, members, owners, or Affiliates) (collectively, the "Liable Member")
has incurred any indebtedness or obligation prior to the date hereof that
relates to or otherwise affects the Company, neither the 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
the Company pursuant to a written instrument signed by the Managers or their
authorized delegee. Furthermore, neither the Company nor any Member shall be
responsible for any indebtedness or obligation that is hereafter incurred by any
Liable Member. In the event that a Liable Member, whether prior to or after the
date hereof, incurs (or has incurred) any debt or obligation that neither the
Company nor any of the other Members is to have any responsibility or liability
for, the Liable Member shall indemnify and hold harmless the Company and the
other Members from any liability or obligation they may incur in respect
thereof.
2.11 LIMITATIONS ON REFERRALS.
Hospital intends to continue to own and operate its own inpatient and
outpatient imaging units at its hospital facilities, and will take no actions,
financial or otherwise, to induce members of its medical staffs or its employees
to refer patients to the Imaging Operation. To the extent that Company or any
Member tracks physician referrals to the Imaging Operation, no such tracking
information shall be shared, directly or indirectly, with Hospital.
ARTICLE III
ALLOCATIONS; DISTRIBUTIONS; AND INTERESTS
3.1 ALLOCATION OF NET INCOME AND NET LOSS.
3.1.1 Except is may be expressly provided otherwise in this Article
III, and subject to the provisions of Sections 704(b) and 704(c) of the Code,
the Net Income or Net Loss of the Company for each fiscal year of the Company
shall be allocated among the Members in accordance with their respective
Percentage Interests. The parties hereto understand and agree that, due to the
application of Section 704(b) of the Code, it is possible that the Net Loss of
the Company (or items of loss of the Company) that would otherwise have been
allocated to the Members in accordance with their respective Percentage
Interests will instead be allocated in a disproportionate manner (each such
disproportionate allocation to a Member being referred to herein as a
"Disproportionate Loss Allocation" and collectively as the "Disproportionate
Loss Allocations"). In that event, the Members intend, to the extent possible,
that all such
9
Disproportionate Loss Allocations will, over the term of the Company, be offset
with other allocations pursuant to Section 3.1.2 or 3.1.3 hereof, or with
special allocations of other items of the Company's income, gain, loss, or
deduction pursuant to this Section 3.1.1. Accordingly, the Managers are hereby
authorized and directed to make offsetting allocations of the Company's income,
gain, loss or deduction under this Section 3.1.1 in whatever manner the Managers
determine is appropriate so that, after such offsetting special allocations are
made, the Capital Accounts of the Members are, to the extent possible, equal to
the Capital Accounts each would have had if the Disproportionate Loss
Allocations had not been made.
3.1.2 In the event any Member has a deficit balance in the Member's
Capital Account at the end of any fiscal year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to this Agreement,
and (ii) the amount such Member is deemed obligated to restore pursuant to the
penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specifically allocated items of income
and gain in an amount and manner sufficient to eliminate, to the extent required
by the Treasury Regulations, such excess as quickly as possible, provided that
the Company's subsequent income, gain, losses, deductions and credits shall be
allocated among the Members so as to achieve as nearly as possible the results
that would have been achieved if this Section 3.1.2 had not been in this
Agreement, except that no allocation shall be made which would violate the
provisions or purposes of such Treasury Regulation.
3.1.3 Notwithstanding any other provision of this Agreement, if a
Member unexpectedly receives an adjustment, allocation, or distribution
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(D)(4), (5) or (6)
which gives rise to a deficit balance in the Member's Capital Account, such
Member shall be allocated items of income and gain in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations,
such deficit balance as quickly as possible, provided that the Company's
subsequent income, gain, losses, deduction and credits shall be allocated among
the Members so as to achieve as nearly as possible the results that would have
been achieved if this Section 3.1.3 had not been in this Agreement, except that
no allocation shall be made which would violate the provisions or purposes of
such Treasury Regulation.
3.1.4 "Net Income" and "Net Loss" shall mean, for each fiscal year
or other period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(1) Any income that is exempt from federal income tax shall
be added to the Company's gross income;
(2) Any expenditure of the Company described in Code Section
705(a)(2)(B) (or treated by Treasury Regulations as if described in that
section) shall be treated as a deduction of the Company;
10
(3) Gain or loss from any disposition of Company property
shall be computed with reference to the book value of the property if its book
value differs from its adjusted tax basis;
(4) If the book value of any Company property differs from
its adjusted tax basis, depreciation, amortization, or other cost recovery
deductions with respect to the property shall be computed with reference to the
book value;
(5) Any tax liens which are specially allocated pursuant to
Section 3.2 hereof shall not be taken into account in computing Net Income or
Net Loss for purposes of Section 3.1.1; and
(6) Any other adjustments which the Managers determine are
necessary to comply with Treasury Regulations Section 1.704-1(b).
3.1.5 If any asset of the Company is to be distributed in kind to
one or more Members (including upon dissolution of the Company), such asset
shall be valued at its fair market value (taking Code section 7701(g) into
account) on the date of distribution, and the Capital Accounts shall be adjusted
to reflect the manner in which the unrealized income, gain, loss, or deduction
inherent in such asset (that has not been reflected in the Capital Accounts
previously) would be allocated among the Members if there were a taxable
disposition of such asset at its fair market value on the date of distribution.
3.2 TAX ALLOCATIONS.
Except as otherwise provided in the next sentence of this Section 3.2,
all items of Company taxable income, gain, loss and deduction shall be allocated
among the Members consistent with the allocations of Net Income and Net Loss
under Section 3.1.1. If any property of the Company is reflected in the Capital
Accounts and on the books of the Company at a book value that differs from the
adjusted tax basis of such property, then depreciation, depletion, amortization,
and gain or loss, as computed for tax purposes, with respect to such property,
shall be determined and allocated among the Members, solely for tax purposes, so
as to take account of the variation between the adjusted tax basis and the book
value of such property in any manner selected by the Managers and permitted
under Section 704(c) of the Code and applicable Treasury Regulations.
3.3 DISTRIBUTION OF AVAILABLE CASH.
Periodically, but not less frequently than at the end of each fiscal
year, the Available Cash of the Company, if any, shall be distributed to the
Members in accordance with their respective Percentage Interests. For any fiscal
year, Available Cash of the Company need not be distributed to the extent that
such cash is required for a working capital reserve for the Company, the amount
of such working capital reserve to be determined by the Managers.
11
3.4 ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS IN RESPECT OF INTERESTS
TRANSFERRED.
3.4.1 If any Interest in the Company is transferred, or is increased
or decreased by reason of the admission of a new Member or otherwise, during any
fiscal year of the Company, each item of income, gain, loss, deduction or credit
of the Company for such fiscal year shall be assigned pro rata to each day in
the particular period of such fiscal year to which such item is attributable
(i.e., the day on or during which it is accrued or otherwise incurred) and the
amount of each such item so assigned to any such day shall be allocated to the
Member based upon Section 3.1.1 at the close of such day. For the purpose of
accounting convenience and simplicity, the Company may treat a transfer of, or
an increase or decrease in, an Interest in the Company which occurs at any time
during a semimonthly period (commencing with the semimonthly period including
the date hereof) as having been consummated on the first day of such semimonthly
period, regardless of when during such semimonthly period such transfer,
increase, or decrease actually occurs (i.e., sales and dispositions made during
the first fifteen (15) days of any month will be deemed to have been made on the
16th day of the month).
3.4.2 Distributions of Company assets in respect of an Interest in
the Company shall be made only to the Members who, according to the books and
records of the Company, are the holders of record of the Interests in respect of
which such distributions are made on the actual date of distribution. Neither
the Company nor any Member shall incur any liability for making distributions in
accordance with the provisions of the preceding sentence, whether or not the
Company or the Member has knowledge or notice of any transfer or purported
transfer of ownership of an Interest in the Company which has not been approved
in accordance with this Agreement or otherwise by unanimous vote of the Members.
Notwithstanding any provision above to the contrary, gain or loss of the Company
realized in connection with a sale or other disposition of any of the assets of
the Company shall be allocated solely to the parties owning Interests in the
Company as of the date such sale or other disposition occurs.
ARTICLE IV
ACCOUNTING AND RECORDS
4.1 RECORDS AND ACCOUNTING.
The books and records of the Company shall be kept, and the financial
position and the results of its operations recorded, in accordance with the
accounting methods elected to be followed by the Company for federal income tax
purposes. The books and records of the Company shall reflect all Company
transactions and shall be appropriate and adequate for the Company's business.
The Company, on an annual basis, shall arrange for an outside financial review
of the Company's business and its books and records. The fiscal year of the
Company for financial reporting and for federal income tax purposes shall
commence on July 1 and end on June 30 of each year.
4.2 ACCESS TO ACCOUNTING RECORDS.
All books and records of the Company shall be maintained at the office
of the Tax Matters Manager (as defined in Section 8.3 hereof); provided,
however, that the Tax Matters
12
Manager shall respond to any reasonable request for a copy of such books
and records by a Member or its duly authorized representative within five (5)
working days, unless a sooner date is required by any federal, state or local
law, regulation or order. Each Member, and its duly authorized representative,
shall have access to such books and records at such office of the Tax Matters
Manager and the right to inspect and copy them during normal business hours.
4.3 ANNUAL REPORT AND TAX INFORMATION.
The Managers shall use their best efforts to cause the Company to
deliver to each Member within ninety (90) days after the end of each fiscal year
all information necessary for the preparation of such Member's federal income
tax return. The Managers shall also use their best efforts to cause the Company
to prepare, within one hundred and twenty (120) days after the end of each
fiscal year, a financial report of the Company for such fiscal year 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 sources and applications of funds; and a
statement of reconciliation of the Capital Accounts of the Members.
4.4 ACCOUNTING DECISIONS.
All decisions as to accounting matters, except as otherwise
specifically set forth herein, shall be made by the Manager. The Managers may
rely upon the advice of their accountants as to whether such decisions are in
accordance with accounting methods followed for federal income tax purposes.
4.5 FEDERA1 INCOME TAX ELECTIONS.
The Company may make all elections for federal income tax purposes,
including, but not limited to, the following:
4.5.1 To the extent permitted by applicable law and regulations, to
elect to use an accelerated depreciation method on my depreciable unit of the
assets of the Company; and
4.5.2 In case of a transfer of all or part of the Company Interest
of any Member, to elect, pursuant to Sections 734, 743, and 754 of the Code, to
adjust the basis of the assets of the Company.
ARTICLE V
RIGHTS OF MEMBERS
5.1 RIGHT OF MEMBERS.
Except as otherwise provided herein, a Majority in Interest of the
Members shall have the right to approve all actions of the Company required to
be approved by Members in accordance with the Act, the Articles, or this
Agreement, except that the following acts require the approval of Members
entitled to vote who own at least eighty percent (80%) of the Percentage
Interests of all Members entitled to vote as stated in the records of the
Company.
13
5.1.1 Approval or disapproval of the issuance of Shares for sale to
then-existing Members or new subscribers in accordance with the provisions set
forth in this Agreement;
5.1.2 Approval of a merger of the Company, or the sale, exchange or
other disposition of all or substantially all of the Company's assets, when such
merger, sale, exchange or other disposition is, or is part of, a single
transaction or plan;
5.1.3 Dissolution of the Company, except as otherwise specifically
authorized under this Agreement;
5.1.4 Amendment of the Articles or this Agreement; and
5.1.5 Sale, transfer, assignment, pledge, hypothecation or other
disposition of a Member's Interest, and the admission of additional Member(s) or
Substitute Member(s), except as otherwise specifically authorized under this
Agreement.
5.2 WAIVER OF PARTITION.
Each Member, on behalf of such Member, its successors and its assigns,
hereby waives any rights to have any Company property partitioned.
5.3 WITHDRAWAL.
Except as otherwise explicitly provided herein, a Member may not
withdraw from the Company without the, consent of a Majority in Interest of the
remaining Members. Further, unless specifically authorized by a Majority in
Interest of the remaining Members, a Member may not withdraw unless the Member
has contributed the full amount of money or other consideration which
constitutes the Member's Capital Contribution as set forth on Exhibit A attached
hereto. The Company may recover damages for breach of this Section 5.3 and may
offset the Company's damages against any amount owed to a Member.
5.4 REIMBURSEMENT OF EXPENSES.
Each Member shall be entitled to reimbursement from the Company of all
expenses of the Company reasonably incurred and paid by such Member on behalf of
the Company. Any question as to whether a Member is entitled to reimbursement of
expenses under this Section 5.4 shall be determined by the Managers.
5.5 ORGANIZATION EXPENSES.
Each Member will bear its respective costs, charges and expenses
incurred in connection with the organization of the Company (including the
development and negotiation of this Agreement), including, but not limited to,
the fees of its legal counsel, consultants and accountants. The Company shall
pay all Company expenses incurred in the organization of the Company, as
determined by the Managers.
14
5.6 OBLIGATIONS OF MEMBERS TO COMPANY.
Except as otherwise explicitly provided herein, the Members shall take
all actions with respect to Company in accordance with their fiduciary
obligations under applicable law.
ARTICLE VI
MEETINGS OF MEMBERS
6.1 SPECIAL MEETINGS.
Special Meetings of the Members may be called by the Managers. Special
meetings of the Members shall be called upon delivery to the Members of notice
of a special meeting of the Members given in accordance with Section 6.2 signed
and dated by the Managers or the authorized delegee.
6.2 NOTICE OF MEETINGS.
The Company shall deliver or mail written notice stating the date,
time, and place of any Members meeting and, in the case of a special Members
meeting or when otherwise required by law, a description of the purposes for
which the meeting is called, to each Member of record entitled to vote at the
meeting, at such address as appears in the records of the Company and at least
two (2), but no more than thirty (30), days before the date of the meeting.
6.3 WAIVER OF NOTICE.
A Member may waive notice of any meeting, before or after the date and
time of the meeting as stated in the notice, by delivering a signed waiver to
the Company for inclusion in the minutes. A Member's attendance at any meeting,
in person or by proxy (a) waives objection to lack of notice or defective notice
of the meeting, unless the Member at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting, and (b) waives
objection to consideration of a particular matter at the meeting that is not
within the purposes described in the meeting notice, unless the Member objects
to considering the matter when it is presented.
6.4 VOTING BY PROXY.
A Member hay appoint a proxy to vote or otherwise act for the Member
pursuant to a written appointment form executed by the Member or the Member's
duly authorized attorney-in-fact. An appointment of a proxy is effective when
received by the officer or agent of the Company authorized to tabulate votes. A
proxy appointment is valid for eleven (11) months unless otherwise expressly
stated in the appointment form.
6.5 ACTION BY CONSENT.
Any action required or permitted to be taken at a Members' meeting may
be taken without a meeting if the action is taken by all the Members entitled to
vote on the action. The action must be evidenced by one or more written consents
describing the action taken, signed by
15
all of the Members entitled to vote on the action, and delivered to the Company
for inclusion in the minutes.
6.6 PRESENCE.
Any or all Members may participate in any annual or special Members'
meeting by, or through the use of, any means of communication by which all
Members participating may simultaneously hear each other during the meeting. A
Member so participating is deemed to be present in person at the meeting.
6.7 CONDUCT OF MEETINGS.
At any Members' meeting, the Managers shall appoint a person to preside
at the meeting and shall appoint a person to act as secretary of the meeting.
The secretary of the meeting shall prepare minutes of the meeting which shall be
placed in the minute books of the Company. In the event that noticed matters are
not resolved at a Members' meeting, the Members shall, at the request of any
Member, schedule a subsequent meeting with no more than thirty (30) days, and
each Member shall use good faith, best efforts to taka all necessary action to
be able to resolve such matters at the subsequent meeting.
ARTICLE VII
CHANGES IN MEMBERS
7.1 DISSOLUTION OR BANKRUPTCY OF MEMBER.
As contemplated in the Articles, upon the resignation, expulsion,
Bankruptcy or dissolution of a Member, or the occurrence of any other event
which terminates the continued membership of a Member, the Company shall, except
as otherwise explicitly provided herein, be immediately dissolved (a
"Dissolution Event"), unless a Majority in Interest of the remaining Member(s)
consent to the continuation of the business of the Company within ninety (90)
days of the Dissolution Event.
7.2 RESTRICTION ON TRANSFER AND ASSIGNMENT OF MEMBERS' INTEREST.
No Member shall be entitled to assign, convey, sell, encumber or in any
way alienate all or any part of its Interest in the Company and as a Member
except in accordance with Section 5.1 hereof, and any purported assignment,
conveyance, sale, encumbrance or obligation shall be null and void.
7.3 FURTHER RESTRICTIONS ON TRANSFER.
In addition to the restrictions set forth in Section 7.2, no Member
shall assign, convey, sell, encumber or in any way alienate all or any part of
its Interest in the Company: (i) without registration under applicable federal
and state securities laws, or unless it delivers an opinion of counsel
satisfactorily to the 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 the Company for tax
purposes under Section 708 of the Code.
16
7.4 SUBSTITUTE MEMBERS.
A transferee shall have the right to become a Substitute Member if (i)
the requirements of Sections 7.2 and 7.3 hereof are met, (ii) such person
executes an instrument satisfactory to the remaining Members accepting and
adopting the terms and provisions of this Agreement, and (iii) such person pays
any reasonable expenses in connection with its admission as a Substitute Member.
7.5 EFFECT OF TRANSFER.
Any permitted transfer of all or any portion of a Member's Interest in
the Company will take effect on the first day of the month following receipt by
the Member of written notice of transfer. Any transferee of an Interest in the
Company shall take subject to the restrictions on transfer imposed by this
Agreement.
7.6 BUYOUT PROVISIONS.
7.6.1 RAN
7.6.1.1 RAN and Hospital are parties to an agreement regarding
the provision of professional radiology services at the
general acute care hospital located at 102 East Lake
Mead Drive, Henderson, Nevada, and intend to enter into
a substantially similar agreement regarding the
provision of professional radiology services at the
general acute care hospital to be located at 2929 West
Lake Mead Drive, Henderson, Nevada (collectively, the
"HPSAs"), and, approximately concurrently herewith, RAN
will be entering into a Professional Services Agreement
with the Company (the "PSA"). If at any time while RAN
has an Interest in the Company either HPSA expires
without renewal, as defined below, or is terminated by
Hospital without cause, or is terminated by RAN based on
the material breach of an HPSA by Hospital, or the PSA
expires without renewal, as defined below, or is
terminated by the Company without cause, or is
terminated by RAN under Section 3.2.3 of the PSA
[material breach by Company], the Company shall have the
right to repurchase and RAN shall have the right to
require the Company to repurchase all, but not less than
all, of RAN's Interest in the Company for a purchase
price (the ("Buyout Price") equal to RAN's Pro Rata Part
in the Company multiplied by the "Company Value" as
determined under Section 7.7 set forth below. Either
party shall exercise its right, if at all, by delivery
of written notice to the other party exercising such
right not later than ninety (90) days after the
effective date of expiration or termination (as the case
may be) of either HPSA or the PSA, as applicable. As
promptly as possible thereafter, the Buyout Price shall
be determined and the Company's purchase of RAN's
Interest consummated. An agreement shall not be
considered to "expire without renewal" under this
Section 7.6.1.1 if the parties to the agreement continue
the relationship
17
established by the agreement following the natural
expiration of the agreement while said parties negotiate
a renewal or replacement arrangement.
7.6.1.2 If, on the other hand, either HPSA or the PSA is
terminated on a basis other than as enumerated in
Section 7.6.1.1, the Company shall have the right (but
not the obligation) to repurchase all, but not less than
all, of RAN's Interest in the Company for a Buyout Price
equal to RAN's Pro Rata Part in the Company multiplied
by the Company's net book value (net of liabilities),
determined by the Company's accountants in accordance
with generally accepted accounting principles
consistently applied; provided, however, that in no
event shall the Buyout Price exceed the fair market
value of RAN's Interest on the date of repurchase. The
Company shall exercise its purchase right, if at all, by
delivery of written notice to RAN exercising such right
not later than ninety (90) days after the effective date
of termination of either HPSA or PSA, as applicable. As
promptly as possible thereafter, the Buyout Price shall
be determined and the Company's purchase of RAN's
Interest consummated.
7.6.1.3 In either of the foregoing cases, the Company shall pay
the Buyout Price under this Section 7.6.1 to RAN in five
(5) equal annual installments of principal and interest,
commencing on the first anniversary of the closing of
the Company's purchase of RAN'S Interest and continuing
on each succeeding anniversary date until fully paid.
All unpaid installments of the Buyout Price shall bear
interest at the lesser of (i) the maximum rate permitted
at law, or (ii) the annual rate equal to the "Prime
Rate" as reported from time to time in the Wall Street
Journal, plus two (2) percentage points.
7.6.1.4 If RAN's Interest is purchased pursuant to Section
7.6.1.2 (as opposed to Section 7.6.1.1), for the entire
five (5) year period immediately following the closing
of the Company's purchase of RAN's Interest, neither RAN
nor any of its shareholders, directors, employees,
agents or Affiliates shall establish, operate and/or
participate in, engage in or otherwise carry on, either
individually or as a member of a partnership, or as a
shareholder, officer or director of a corporation, or as
an employee, agent, associate or consultant of any
person, partnership or corporation, any business or
operation offering imaging services located within the
Service Area of the Company as more specifically set
forth in Exhibit E (the "Service Area"). The parties
agree that this Section 7.6.1.4 is not intended and
shall not be construed to prohibit arrangements where
the covered entities are solely providing professional
radiology services. The parties further agree that if
any restriction contained in this paragraph is held by
any court to be unenforceable or unreasonable, the
maximum lesser restriction, both as
18
to time and place, shall be severable therefrom and be
enforced in its place.
7.6.2 MANAGEMENT SERVICES AGREEMENT
7.6.2.1 Approximately concurrently herewith, InSight will be
entering into a Management Services Agreement with the
Company (the "Management Agreement"). If the Management
Agreement expires without renewal, or is terminated on a
basis other than as enumerated in Section 7.6.2.2,
InSight shall have the right to require the Company to
repurchase all, but not loss than all, of InSight's
Interest in the Company for a purchase price (the
"Buyout Price") equal to InSight's Pro Rata Part in the
Company multiplied by the "Company Value" as determined
in accordance with Section 7.7, below. InSight shall
exercise its right, if at all, by delivery of written
notice to Company exercising such right not later than
thirty (30) days after the effective date of expiration
or termination (as the case may be) of the Management
Agreement. As promptly as possible thereafter, the
Buyout Price shall be determined and the Company's
purchase of InSight's Interest consummated.
7.6.2.2 If, on the other hand, the Management Agreement is
terminated by the Company under Sections 5.2.1, and
5.2.3 of the Management Agreement [insolvency of InSight
or material breach by Insight], or by InSight without
authorization under the Management Agreement, the
Company shall have the right (but not the obligation) to
repurchase all, but not less than all, of InSight's
Interest in the Company for a Buyout Price equal to
InSight's Pro Rata Part in the Company multiplied by the
Company's net book value (net of liabilities),
determined by the Company's accountants in accordance
with generally accepted accounting principles
consistently applied; provided, however, that in no
event shall the Buyout Price exceed the fair market
value of InSight's Interest on the date of repurchase.
The Company shall exercise its purchase right, if at
all, by delivery of written notice to Insight exercising
such right not later than thirty (30) days after the
effective date of termination of the Management
Agreement. As promptly as possible thereafter, the
Buyout Price shall be determined and the Company's
purchase of InSight's Interest consummated.
7.6.2.3 In either of the foregoing cases, the Company shall pay
the Buyout Price under this Section 7.6.2 to InSight in
five (5) equal annual installments of principal and
interest, commencing on the first anniversary of the
closing of the Company's purchase of InSight's Interest
and continuing on each succeeding anniversary date until
fully paid. All unpaid installments of such amounts
shall bear interest at the lesser of (i) the maximum
rate permitted at law, or (ii) the annual rate
19
equal to the "Prime Rate" as reported from time to time
in the Wall Street Journal, plus two (2) percentage
paints.
7.6.2.4 If InSight's Interest is purchased pursuant to Section
7.6.2.2 (as opposed to Section 7.6.2.1), for the entire
five (5) year period immediately following the closing
of the Company's purchase of Insight's Interest, neither
Insight nor any of its Affiliates shall establish,
operate and/or participate in, engage in or otherwise
carry on, either individually or as a member of a
partnership, or as a shareholder, officer or director of
a corporation, or as an employee, agent, associate or
consultant of any person, partnership or corporation,
any business or operation offering imaging services
located within the Service Area of the Company as more
specifically set forth in Exhibit E (the "Service
Area"), except as specifically permitted under Exhibit
E. The parties agree that if any restriction contained
in this paragraph is held by any court to be
unenforceable or unreasonable, the maximum lesser
restriction, both as to time and place, shall be
severable therefrom and be enforced in its place.
7.6.3 CONTRIBUTION THRESHOLD
7.6.3.1 If the Contribution Threshold has been exceeded, then
each Member shall have the right (but not the
obligation) to require the Company to repurchase all,
but not less than all, of such Member's Pro Rata Part in
the Company multiplied by the "Company Value" as
determined under Section 7.7. Each Member shall exercise
its right, if at all, by delivery of written notice to
the Company and the other Members exercising such right
not later than thirty (30) days after the Contribution
Threshold has been exceeded. As promptly as possible
thereafter, the Buyout Price shall be determined and the
Company's purchase of such Member's Interest
consummated; provided, however, if all Members elect to
have their Interests repurchased the Company shall
instead be dissolved.
7.6.3.2 The Company shall pay the Buyout Price under this
Section 7.6.3 to such Member in five (5) equal annual
installments of principal and interest, commencing on
the first anniversary of the closing of the Company's
purchase of such Member's Interest and continuing on
each succeeding anniversary date until fully paid. All
unpaid installments of such amounts shall bear interest
at the lesser of (i) the maximum rate permitted at law,
and (ii) the annual rate equal to the "Prime Rate" as
reported form time to time in the Wall Street Journal,
plus two (2) percentage points.
20
7.7 COMPANY VALUE.
7.7.1 In connection with any calculation of Company Value hereunder
as of any date up to and including the third anniversary of this Agreement, the
Company Value shall be the aggregate Capital Contributions to the Company
reduced by the aggregate distributions to Members pursuant to Section 3.3 or
otherwise, and, notwithstanding anything to the contrary herein, any Member's
Pro Rata Part of the Company Value shall be equal to the value of that Member's
Capital Contribution reduced by the aggregate distributions to that Member
pursuant to Section 3.3 or otherwise. In connection with any calculation of
Company Value hereunder as of any date following the third anniversary of this
Agreement, the Company Value shall, subject to Section 7.7.2, be an amount equal
to (i) four multiplied by Company's aggregate earnings before interest, taxes
and depreciation and amortization ("EBITDA"), as calculated for Company's then
last complete fiscal year ending as of or prior to the calculation date (the
"Calculation Year"), minus (ii) the aggregate of all liabilities and
indebtedness of Company, or to which any Company property is subject, as of the
calculation date. Company Value shall be calculated hereunder by Company's
independent certified public accountants based on financial statements of
Company for the Calculation Year, using generally accepted accounting principles
consistently applied in the same manner as in prior years. Except as provided in
Section 7.7.2, the determination of Company Value by Company's independent
public accountants shall be final and binding on all Members and Company.
7.7.2 The Members agree that the Pro Rata Part of the Company Value
as determined in accordance with Section 7.7.1, or a Buyout Price as determined
in accordance with Section 7.6.1.2 or 7.6.2.2, shall not exceed the fair market
value of the applicable Pro Rata Part of the Company. If any Member concludes in
good faith that the Pro Rata Part of the Company Value as determined pursuant to
Section 7.7.1, or a Buyout Price as determined in accordance with Section
7.6.1.2 or 7.6.2.2, will likely be more than the fair market value of the
applicable Pro Rata Part of Company with respect to any transaction hereunder,
the Member may notify the other Members hereof within ten days of the noticing
of the transaction at issue, and the Company Value or Buyout Price, as
applicable, in connection with such transaction shall be the lower of the amount
determined pursuant to Section 7.7.1, 7.6.1.2 or 7.6.2.2, as applicable, or this
Section 7.7.2. For purposes of this Section 7.7.2 and Section 9.3, the Pro Rata
Part of the Company Value and Buyout Price (sometimes referred to collectively
as the "Price" herein) shall be determined as follows:
7.7.2.1 The Members shall first negotiate in good faith in an
attempt to establish the Price.
7.7.2.2 If the Members are unable to agree upon the Price, an
appraisal process may be initiated by any Member (such
Member being referred to herein as the "Initiating
Member") by submitting a written notification to the
other Members (such other Members being referred to
herein as the "Responding Members") (i) stating its
opinion as to the Price, and (ii) proposing the name of
a person who shall act as the single appraiser.
21
7.7.2.3 The Responding Members shall have thirty (30) business
days in which to respond in a written answer (i) stating
the Responding Members' opinion (or opinions) as to the
Price, and (ii) either agreeing to the person proposed
by the Initiating Member as the single appraiser or
proposing the name (or names) of another person (or
persons) who shall act as the single appraiser.
7.7.2.4 If this response is not timely made by any Responding
Member, or if the Responding Members agree with the
person proposed as the single appraiser, then the person
named by the Initiating Member shall serve as the
appraiser.
7.7.2.5 If any Responding Member submits a written answer
rejecting the proposed appraiser, then, unless the
Members are able to mutually agree upon a single person
who shall act as the single appraiser, the persons
designated by each of the Members (as referred to in
Sections 7.7.2.2 and 7.7.2.3) shall, within five (5)
business days thereafter, select a third person who
shall act as the single appraiser. If for any reason
they cannot timely agree on a third person, any Member
may apply to the District Court for the County of Clark,
State of Nevada, for the name of a neutral third party
who shall be the appraiser.
7.7.2.6 The appraiser so selected shall, within twenty (20) days
of his designation hereunder, state his opinion as to
the Price in writing, which opinion shall be final and
binding upon all Members.
7.7.2.7 Each of the Members shall bear a percentage of the costs
of such appraisal equal to the Member's Percentage
Interest hereunder, including without limitation the
fees of the appraiser, and their own legal fees and
expenses.
7.7.3 The Members understand and agree that the valuations and
repurchases contemplated by Sections 7.6 and 7.7 have been established solely
for the purpose of creating a mechanism that transfers the Company's assets in a
manner that avoids disputes between the Members and preserves the value of those
assets. However, nothing herein is intended to limit the ability of the Company
or any Members to seek damages that might otherwise be available in connection
with the event causing the repurchase, and Sections 7.6 and 7.7 are specifically
not intended to constitute an agreement regarding liquidated damages.
ARTICLE VIII
MANAGERS
8.1 MANAGERS.
8.1.1 To the extent provided in Section 8.2, management of the
Company's business shall be exclusively vested in a group of Managers (who shall
collectively hereinafter be sometimes referred to as the Management Committee),
all of whom, except as explicitly
22
provided herein, shall be either a director, officer or other employee of a
Member. The number of Managers shall be six (6). The Members hereby elect the
natural persons, 18 years or older, identified on Exhibit D attached hereto to
be the initial Managers of the business of the Company. Each Manager shall serve
for a term of three (3) years and until the Manager's successor is duly elected
and qualified. A Manager may be authorized by the Managers to sign agreements
and other instruments on behalf of the Company without the signature of any
other Manager.
8.1.2 Hospital shall have the right to elect two (2) Managers;
InSight shall have the right to elect two (2) Managers; and RAN shall have the
right to elect two (2) Managers. The Managers designated by the same Member
shall be required to take the same action in connection with any vote of the
Managers. The vote of the two Managers designated by a Member shall be assigned
the same Percentage Interest as the Member designating the Manager, and the
Management Committee shall act by an affirmative vote of a Majority in Interest
of the Managers, as defined hereinabove. The Managers shall meet from time to
time as necessary to perform their functions hereunder. If the Managers are
unable to resolve any issue at a meeting, the Managers shall, at the request of
any Manager, schedule a subsequent meeting within no more than thirty (30) days,
and each Manager shall use good faith, best efforts to take all necessary
actions to be able to resolve such matters at the subsequent meeting.
8.1.3 Managers shall not be personally liable for the debts,
obligations or liabilities of the Company, whether arising in contract, tort or
otherwise, or for the acts or omissions of any Member, other Manager, agent or
employee of the Company. Each Manager shall perform its duties as a Manager in
good faith, and, except as otherwise provided in Section 1.3.2, in a manner the
Manager reasonably believes to be in the best interests of the Company and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances. A Manager is not liable for any action taken as a
Manager, or any failure to take any action, unless the Manager has breached or
failed to perform the Manager's duties and the breach or failure to perform
constitutes willful misconduct or recklessness
8.1.4 In performing the Manager's duties, a Manager shall be
entitled to rely on information, opinions, reports, or statements of the
following persons or groups unless the Manager has knowledge concerning the
matter in question that would cause such reliance to be unwarranted:
8.1.4.1 one or more employees or other agents of the Company
whom the Manager reasonably believes to be reliable and
competent in the matters presented;
8.1.4.2 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
8.1.4.3 a committee upon which the Manager does not serve, duly
designated in accordance with a provision of the
Articles or this Agreement, as to matters within its
designated authority, which committee the Manager
reasonably believes to merit competence.
23
8.1.5 In addition to their other general responsibilities, the
Managers shall have the following specific responsibilities: (i) to approve the
Company's annual strategic, capital and operating plans; and (ii) to review the
Company's monthly financial performance.
8.2 POWERS OF THE MANAGERS.
The Managers shall have the right and authority to take all actions
which the Managers deem necessary, useful or appropriate for the management and
conduct of the Company's business. Subject to the restrictions set forth in this
Section 8.2, the Managers may exercise all powers of the Company and do all such
lawful acts and things as are not by the Articles, this Agreement or the Act,
directed or required to be exercised or done by the Members. All instruments,
contracts, agreements and documents providing for the acquisition, mortgage or
disposition of property of the Company shall be valid and binding on the Company
if executed by one or more Managers. All instruments, contracts, agreements and
documents of whatsoever type executed on behalf of the Company shall be executed
in the name of the Company by one or more Managers. The Managers understand and
agree that they are fiduciaries of Company and, accordingly, they must take all
actions hereunder in accordance with what is in the best interests of Company,
unless otherwise explicitly authorized hereunder (e.g., Section 1.3), which
obligations include, without limitation, a prohibition against the appropriation
of a Company opportunity.
8.3 APPOINTMENT OF TAX MATTERS MANAGER.
InSight is hereby designated as the Tax Matters Manager ("TMM"). The
TMM shall save as such until a successor is duly elected by the Managers and
qualified, or until the earlier withdrawal or retirement of the TMM, or removal
by the Managers.
8.4 SALARIES.
The Company shall not pay to any Manager a salary and/or bonus as
compensation for services rendered to the Company. The Company shall not make
any payment to any Member except in connection with those agreements entered
into concurrently herewith, or as otherwise specifically approved by the
Management Committee. The Company may pay to any other person a salary and/or
bonus as compensation for services rendered to the Company if approved by the
Management Committee.
8.5 REMOVAL OF MANAGERS.
8.5.1 Subject to the provisions of the Act and subject to the
satisfaction of the conditions specified in this Section 8.5, each Member may
remove all or any lesser number of the Managers appointed by such Member, and
only such Manager(s).
8.5.2 Any removal of a Manager shall become effective when written
notice thereof is given by the appointing Member unless a later effective date
is specified in such notice. Such notice must be delivered to the Manager being
removed, any remaining Managers and the Manager elected to replace the removed
Manager. Should a Manager be removed who is also a Member, such removal shall
not affect the Person's rights as a Member except as may otherwise be provided
in the Act, the Articles or this Agreement.
24
8.6 RESIGNATION OF A MANAGER.
A Manager may resign from his or her position as a Manager at any time
by notice to the Members. Such resignation shall become effective when such
notice is received, unless a delayed effective date is specified in such notice.
8.7 VACANCIES.
In the event there is a vacancy, the Member whose appointee(s) created
the vacancy shall fill the vacancy. A Manager chosen to fill a vacancy shall
serve for the unexpired term of his or her predecessor and until his or her
successor has been duly elected and qualified.
ARTICLE IX
TERMINATION
9.1 TERMINATION OF THE COMPANY.
9.1.1 The Company shall be dissolved, its assets shall be disposed
of, and its affairs wound up on the first to occur of the following:
9.1.1.1 A determination by the Members pursuant to Section 5.1
that the Company should be dissolved;
9.1.1.2 The occurrence of a Dissolution Event if the Company is
not continued pursuant to Section 7.1;
9.1.1.3 The occurrence of a Dissolution Event under Section 9.2;
9.1.1.4 The expiration of the Company term as stated in its
Articles; or
9.1.1.5 At such earlier time as may be provided by applicable
law.
9.1.2 In settling accounts of the Company after dissolution,
distributions in liquidation shall be made in the following order:
9.1.2.1 To creditors, including Members, in the order of
priority as provided by law;
9.1.2.2 To Members of the Company in accordance with their
positive Capital Account balances.
9.2 JEOPARDY EVENT.
9.2.1 If any Member (the "Noticing Member") reasonably concludes,
based on an advice letter from its legal counsel, and notifies the other
Members, that any provision of this Agreement or its implementation (i) exposes
such Member or such Member's Managers to substantial potential liabilities for
violation of (a) any federal or state third-party reimbursement program, or (b)
any federal or state law, or (ii) jeopardizes Hospital's (a) participation in
the Medicare or Medicaid program; (b) income tax exemption under Section
501(c)(3) of the Code
25
or (c) state or local tax exemptions, the Members shall meet and discuss
corrective amendments to this Agreement as provided in Section 9.2.3.
9.2.2 The Noticing Member shall give notice under Section 9.2.1 to
the other Members, together with a copy of the referenced advice letter from
legal counsel, setting forth the following information:
9.2.2.1 The event(s) under Section 9.2.3, (the "Event(s)")
giving rise to the notice;
9.2.2.2 The consequences of the Event(s) as to the Noticing
Member;
9.2.2.3 The Noticing Member's proposed amendment(s); and
9.2.2.4 The Noticing Member's request for commencement of the
Renegotiation Period (as defined below).
9.2.3 In the event of notice under Section 9.2.2, the Members shall
have thirty (30) days from the giving of such notice ("Renegotiation Period")
within which to attempt to amend this Agreement in accordance with the Noticing
Member's proposal or otherwise as the Members may agree. If this Agreement is
not so amended within the Renegotiation Period, any Member may, within the
following sixty (60) day period, require the dissolution of Company upon notice
to the other Members. All advice letters from legal counsel presented by the
Noticing Member hereunder, and any corresponding advice letters given by the
other Member(s) in response, shall be deemed confidential and given solely for
purposes of renegotiation and settlement of a potential dispute, and shall not
be deemed disclosed so as to waive any privileges otherwise applicable to said
advice letters.
9.2.4 Each Member represents and warrants to the others that, to the
best of its knowledge, upon the commencement of this Agreement, there exists no
Event.
9.3 HOSPITAL PURCHASE UPON DISSOLUTION.
Notwithstanding anything contained herein to the contrary, immediately
prior to the dissolution and winding up of the Company, or in any event upon the
expiration or termination for any reason of this Agreement, Hospital shall
purchase all, but not less than all, of the other Members' Interests in the
Company for a purchase price equal to each such Member's respective Pro Rata
Part in the Company multiplied by the Company Value as determined under Section
hereof (without modification based on Section 7.7.1). As promptly as possible,
the Company Value shall be determined and Hospital's purchase consummated.
Hospital shall pay the purchase price to the other Members in five (5) equal
annual installments of principal and interest, commencing on the first
anniversary of the closing of Hospital's purchase and continuing on each
succeeding anniversary date until fully paid. All unpaid installments of the
purchase price shall bear interest at the lesser of the annual rate equal to the
"Prime Rate" as reported from time to time in the Wall Street Journal, plus two
(2) percentage points, compounded monthly, or the maximum amount permitted by
applicable law.
26
9.4 RESERVATION OF RIGHTS.
The Members understand and agree that the valuations and transfers
contemplated by this Article IX have been established solely for the purpose of
creating a mechanism that transfers the Company's assets in a manner that avoids
disputes between the Members and preserves the value of those assets. However,
nothing in this Article IX is intended to limit the ability of any Member to
seek damages that might otherwise be available in connection with the event
causing the dissolution of the Company or otherwise, and this Article IX is
specifically not intended to constitute an agreement among the Members regarding
liquidated damages.
ARTICLE X
GENERAL
10.1 CONFIDENTIALITY.
No Member shall, at any time, in any manner, either directly or
indirectly, divulge, disclose or communicate to any person or entity (other than
its Affiliates, directors, officers, employees and representatives), this
Agreement or any component thereat except as may be required by law or as
reasonably required in connection with Hospital's or its Affiliates' financing
transactions.
10.2 CONFIDENTIAL INFORMATION AND TRADE SECRETS.
Each Member recognizes that, due to the nature of this Agreement,
Members may have access to information (which, may be in various media and
forms) owned by another Member that is confidential and proprietary, as
reasonably determined by the Member that is the source of the information
("Confidential Information"). Each Member acknowledges and agrees that all such
Confidential Information constitutes confidential and proprietary information
and trade secret property. Each Member will hold all Confidential Information in
the strictest confidence and will not, without the prior written consent of the
Member that is the original source of the Confidential Information, disclose it
or allow it to be disclosed, directly or indirectly, other than to those persons
or entities who are employed by or affiliated with the Company or Members for
purposes contemplated hereunder, and each Member shall, in connection with any
such disclosure, use reasonable efforts to ensure that the Confidential
Information is not further disclosed. Each Member hereby waives any and all
right, title and interest in and to the Confidential Information of the other
Members and agrees to return, upon request, all copies of such Confidential
Information to the Member that is the original source of the Confidential
Information, upon either the dissolution of the Company or the acquisition of
any Member's entire Interest in the Company. Each Member understands and agrees
that this Agreement shall not apply to that Confidential Information that (i)
becomes generally available to the public, without violation of any obligation
of confidentiality by any Member, (ii) becomes available to any Member on a
non-confidential basis, provided that such source is not known by the Member to
be bound by a confidentiality agreement concerning the Confidential Information,
or (iii) has been independently acquired or developed by any Member without
violating any obligations under this Agreement
27
10.3 ADDITIONAL ASSURANCES.
The provisions of this Agreement shall be self-operative and shall not
require further agreement by the Members except as may be herein specifically
provided to the contrary; provided, however, at the reasonable request of any
Member, the other Member shall execute such additional instruments and take such
additional acts as the requesting Member may reasonably deem necessary to
effectuate this Agreement.
10.4 CONSENTS, APPROVALS AND DISCRETION.
Except as herein expressly provided to the contrary, whenever this
Agreement requires any consent or approval to be given by any Member or any
Member must or may exercise discretion, the Members agree that such consent or
approval shall not be unreasonably delayed and such discretion shall be
reasonably exercised.
10.5 CONSTRUCTION OF AGREEMENT.
The provisions of this Agreement shall be construed and enforced in
accordance with the internal laws of the State of Nevada. The Members agree that
the terms and provisions of this Agreement embody their mutual intent and
agreement and they are not to be construed more liberally in favor of, nor more
strictly against, any party hereto.
10.6 ATTORNEYS' FEES.
Should disputes arise between the Members to enforce any provision of
this Agreement or otherwise with respect to the subject matter hereof, the
unsuccessful party in such dispute shall pay to the successful party all costs
and expenses, including reasonable attorneys' fees.
10.7 NOTICES.
Any notice, demand, request or other communication required or
permitted to be given hereunder shall be in writing and may be served
personally, or by United States first class mail, postage prepaid, and addressed
or delivered to the Members or the Company at the addresses set forth on the
signature page hereof or by electronic facsimile to the Members or the Company
at the numbers set forth on the signature page hereof (or at such other address
or number as any Member or the Company may from time to time designate by notice
in the manner provided in this Section 10.7 to the other Members and the
Company). If delivered personally or by electronic facsimile, such notice shall
be effective upon delivery and, if mailed, such notice shall be effective two
days after it is placed in the mail.
10.8 BINDING ON SUCCESSORS IN INTEREST.
Subject to the provisions of this Agreement relating to
transferability, the provisions of this Agreement and obligations arising
hereunder shall extend to and be binding upon and inure to the benefit of the
permitted assigns and successors of each of the Members.
28
10.9 TERMS.
Any reference to the Code or other statutes or laws will include all
amendments, modifications, or replacements of the specific sections and
provisions concerned.
10.10 TITLE TO COMPANY PROPERTY.
Legal title to all property of the Company shall be held and conveyed
in the name of the Company.
10.11 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT.
In the event that a Member is not a natural person, neither the Company
nor any other Member shall (a) be required to determine the authority of the
individual signing this Agreement to make any commitment or undertaking on
behalf of such Entity or to determine any fact of 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
this Agreement on behalf of such Entity.
10.12 SEVERABILITY.
If any provision of this Agreement shall be held by a court of
competent jurisdiction to be invalid or unenforceable, such invalidity or
unenforceability shall not affect or impair the validity or enforceability of
the remaining provisions of this Agreement, which shall remain in full force and
effect and the Members shall be bound thereby.
10.13 CAPTIONS.
Any captions to or headings of the articles, sections, subsections,
paragraphs, or subparagraphs of this Agreement are solely for the convenience of
the Members, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
10.14 COUNTERPARTS.
This Agreement may be executed in a number of counterparts, each of
which executed counterparts shall be deemed an original, and all such
counterparts together shall constitute one and the same instrument.
10.15 NO WAIVER.
The failure or delay by any of the Members to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement, or
to exercise any right, power or remedy hereunder or consequent upon a breach
hereof shall not constitute a waiver of any such term, condition, covenant,
agreement, right, power or remedy or of any such breach or preclude any of the
Members from exercising any such right, power or remedy at any later time or
times. Any waiver or consent given hereunder shall be effective only if given in
writing and then only in the specific instances and for the specific purpose for
which given.
29
10.16 REMEDIES; INJUNCTIVE RELIEF.
Subject to Section 10.21, no right, power or remedy herein conferred
upon or reserved to any of the Members is intended to be exclusive of any other
right, power or remedy or remedies, and each and every right, power and remedy
of any Member hereto pursuant to this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise shall to the extent permitted by law
be cumulative and concurrent, and shall be in addition to every other right,
power or remedy exercisable pursuant to this Agreement. The exercise or
beginning of the exercise by any Member of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or other exercise by any
Member hereto of any or all such other rights, powers or remedies.
Notwithstanding Section 10.21, the Members acknowledge and agree that any breach
of Sections 7.2, 7.3 and/or 10.2 of this Agreement would result in irreparable
injury to the nonbreaching Member, for which damages would be inadequate and,
therefore, in the event of such breach, the nonbreaching Member shall be
entitled to have an injunction issued by any court of equity enjoining and
restraining such breach, without posting bond or other security, in addition to
all other legal and equitable remedies. The Members further agree that no actual
damages shall be required to be proved by the Members to be entitled to
injunctive relief.
10.17 EXHIBITS.
All exhibits attached hereto and referred to herein are hereby
incorporated herein as though fully set forth herein.
10.18 FORCE MAJEURE.
No Member shall be liable nor deemed to be in default for any delay or
failure in performance under this Agreement deemed resulting, directly or
indirectly, from Acts of God, civil or military authority, acts of public enemy,
war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, machinery or supplies, vandalism, strikes or other work
interruptions or any similar or dissimilar cause beyond the reasonable control
of any Member. However, each Member shall make good faith efforts to perform
under this Agreement in the event of any such circumstance.
10.19 [INTENTIONALLY DELETED.]
10.20 ENTIRE AGREEMENT; AMENDMENTS.
This Agreement contains a full and complete expression of the rights
and obligations of the Members regarding the subject matter hereof and shall
supersede all other agreements, written or oral, heretofore made by the Members
regarding the subject matter hereof. This Agreement may be modified only in
writing and in accordance with Section 5.1 hereof.
10.21 DISPUTES; MEDIATION; ARBITRATION.
10.21.1 In the event of any dispute hereunder that any Member
determines, in its sole discretion, will not be resolved informally, such Member
shall notify the other Member of its intent to initiate mediation hereunder. Any
such dispute shall thereafter be addressed by a dispute resolution committee
consisting of one person appointed by In Sight, one person
30
appointed by Hospital, and one person appointed by RAN, which committee shall
use its best efforts to resolve any such dispute. If any Member, in its sole
discretion, concludes, at any time more than 30 days following such
notification, that the dispute cannot be resolved by the Members under this
Section 10.21.1, the Members shall resolve such dispute exclusively in
accordance with Section 10.21.2 et seq.
10.21.2 The arbitration process may be initiated regarding any dispute
hereunder by any member (such Member being referred to herein as the "Initiating
Member") following the mediation process outlined in Section 10.21.1 regarding
such dispute by submitting a written notification to the other Members (such
other Members being referred to herein as the "Responding Members") (i) stating
the nature of the dispute and the Initiating Member's proposed resolution
thereof, specifically identifying any amount at issue, and (ii) proposing the
name of a person who shall act as the single arbitrator.
10.21.3 The Responding Members shall have ten business days in which
to respond to this demand in a written answer (i) stating the Responding
Members' proposed resolution (or resolutions) of the dispute, specifically
identifying any amount at issue, and (ii) either agreeing to the person proposed
by the Initiating Member as the single arbitrator or proposing the name of
another person (or persons) who shall act as the single arbitrator.
10.21.3.1 If this response is not timely made by any
Responding Member, or if the Responding Members
agree with the person proposed as the single
arbitrator, then the person named by the Initiating
Member shall serve as the arbitrator.
10.21.3.2 If any Responding Member submits a written answer
rejecting the proposed arbitrator, then, unless the
Members are able to mutually agree upon a single
person who shall act as the single arbitrator, the
persons designated by each of the Members (as
referred to in Sections 10.21.2 and 10.21.3 above)
shall, within five business days thereafter, select
a third person who shall act as the single
arbitrator. If for any reason they cannot timely
agree on a third person, any Member may apply to the
District Court for the County of Clark, State of
Nevada, for the name of a neutral third party who
shall be the arbitrator.
10.21.4 The arbitration shall take place in Henderson, Nevada, at a
time and place selected by the arbitrator. The Members may obtain discovery in
aid of the arbitration to the extent permitted by the arbitrator.
10.21.5 The arbitrator so selected shall (i) within 30 days of his
designation hereunder as the acting arbitrator, tentatively resolve the dispute,
and (ii) within 15 days after the completion of such tentative determination,
submit a decision in writing, specifying the proposed resolution, and, as
applicable, the calculations by which the arbitrator arrived at such proposed
resolution. Each of the Members shall have a period of ten days following its
receipt of such tentative determination in which to submit comments to the
arbitrator. Within ten days following the deadline for the submission of such
written comments the arbitrator shall announce
31
a determination, which may include a determination under Section 10.21.6, which
decision shall be final and binding upon all Members.
10.21.6 Each of the Members shall bear a percentage of the costs of
such arbitration equal to the Member's Percentage Interest hereunder, including
without limitation the fees of the arbitrator, and their own legal fees and
expenses, except that if the arbitrator determines that the determination by the
arbitrator is substantially closer to the proposed resolution submitted by any
of the Members (the "Closest Member") under Sections 10.21.2 or 10.21.3 than the
proposed resolutions submitted by the other Members, then the arbitrator, in its
sole and absolute discretion, any require the other Members to bear the entire
cost of such arbitration, as well as the legal fees and expenses of the Closest
Member.
10.21.7 Any disputed arrangement hereunder shall continue on an
interim basis pending the arbitrator's resolution of the dispute, but, once
resolved, the resolution shall, as the arbitrator deems appropriate, relate
back, and the arbitrator shall, as part of his decision, direct, as appropriate,
payments among the Members to take account of any interim over or under
payments.
10.21.8 Nothing herein is intended to limit any Member's ability to
exercise its rights upon the occurrence of any event that may terminate the
Company as set forth in Section 9.1 hereof.
10.22 COVENANTS NOT TO COMPETE.
Commencing on the date the Imaging Operation first provides services to
patients, no Member (or Member Affiliate), while the Member continues to be a
Member hereunder, shall (except indirectly through its Interest in the Company),
directly or indirectly, in any "Specified Capacity" (as hereinafter defined)
engage in the provision of imaging services from any facility located within the
Non-compete Area as specified in Exhibit E (it being understood and agreed,
however, that the restrictions set forth in this Section 10.22 shall not apply
to any activity exempted under Exhibit E or otherwise authorized under the
Management Services Agreement between Company and InSight).
10.22.1 As used herein, the term "Specified Capacity" shall mean each
of the following capacities:
10.22.2 As an operator, manager or owner of any such business;
10.22.3 As a partner with or member or shareholder of any entity
engaged in any such business;
10.22.4 As an advisor or consultant to any person or entity engaged in
any such business; or
10.22.5 As a creditor and/or security holder of any entity engaged in
any such business.
32
IN WITNESS WHEREOF, the Members have executed this Agreement
as of the date first above written, to be effective, however, as of the date the
Articles of the Company are accepted for filing by the Nevada Secretary of
State.
"INSIGHT'
InSight Health Corp.
4400 MacArthur Boulevard, Suite 800
Newport Beach, California 92660
Facsimile Number: (949) 851-5981
By: /s/ Michael Madler
-----------------------------------------
Its: E.V.P
"HOSPITAL"
St. Rose Dominican
Hospital 102 East
Lake Mead Drive
Henderson, Nevada 89015
Facsimile Number: (702) 564-4689
By: /s/ Ron A. Davis
----------------------------------------
Its: President and CEO
"RAN"
Radiology Associates of Nevada
801 South Rancho, Suite D-1B
Las Vegas, Nevada 89106
Facsimile Number: (702) 477-0486
By: /s/ J. Paul Wiesner
---------------------------------------
Its: President
33