EXHIBIT 3.18
REGULATIONS
OF
HEMO DIALYSIS OF AMARILLO, L.L.C.
A Texas Limited Liability Company
Dated as of December 5, 1994
REGULATIONS
OF
HEMO DIALYSIS OF AMARILLO, L.L.C.
A Texas Limited Liability Company
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01 Definitions
1.02 Construction
ARTICLE II
ORGANIZATION
2.01 Formation
2.02 Name
2.03 Registered Office; Registered Agent; Principal Office in the United
States; Other Officer
2.04 Purposes
2.05 Foreign Qualification
2.06 Term
2.07 Mergers and Exchanges
2.08 No State-Law Partnership
ARTICLE III
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 Initial Members
3.02 Representations and Warranties
3.03 Restrictions on the Disposition of an Interest
3.04 Additional Members
3.05 Interests in a Member
3.06 Information
3.07 Liability to Third Parties
3.08 Withdrawal
3.09 Lack of Authority
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.01 Initial Contributions
4.02 Subsequent Contributions
4.03 Failure to Contribute
4.04 Return of Contributions
4.05 Advances by Members
4.06 Capital Accounts
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.01 Allocations
5.02 Distributions
ARTICLE VI
MANAGERS
6.01 Management by Managers;
6.02 Actions by Managers; Committees; Delegation of Authority and Duties
6.03 Number and Term of Office
6.04 Vacancies; removal; Resignation
6.05 Meetings
6.06 Approval or Ratification of Acts or Contracts by Members
6.07 Action by Written Consent or Telephone Conference
6.08 Compensation
6.09 Conflicts of Interest
6.10 Officers
ARTICLE VII
MEETINGS OF MEMBERS
7.01 Meetings
7.02 Voting List
7.03 Proxies
7.04 Conduct of Meeting
7.05 Action by Written Consent or Telephone Conference
ARTICLE VIII
INDEMNIFICATION
8.01 Right to Indemnification
8.02 Advance Payment
8.03 Indemnification of Officers, Employees and Agents
8.04 Appearance as a Witness
8.05 Nonexclusivity of Rights
8.06 Insurance
8.07 Member Notification
8.08 Savings Clause
ARTICLE IX
TAXES
9.01 Tax Returns
9.02 Tax Elections
9.03 "Tax Matters Partner"
ARTICLE X
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
10.01 Maintenance of Books
10.02 Reports
10.03 Accounts
ARTICLE XI
BANKRUPTCY OF A MEMBER
11.01 Bankrupt Members
ARTICLE XII
DISSOLUTION, LIQUIDATION, AND TERMINATION
12.01 Dissolution
12.02 Liquidation and Termination
12.03 Deficit Capital Accounts
12.04 Articles of Dissolution
ARTICLE XIII
GENERAL PROVISIONS
13.01 Offset
13.02 Notices
13.03 Entire Agreement; Supersedure
13.04 Effect of Waiver or Consent
13.05 Amendment or Modification
13.06 Binding Effect
13.07 Governing Law; Severability
13.08 Further Assurances
13.09 Waiver of Certain Rights
13.10 Indemnification
13.11 Notice to Members of Provisions of this Agreement
13.12 Counterparts
EXHIBIT A
Names, Addresses, Commitments and Sharing Ratios of Initial Members
REGULATIONS
OF
HEMO DIALYSIS AMARILLO, L.L.C.
A Texas Limited Liability Company
These REGULATIONS OF HEMO DIALYSIS OF AMARILLO, L.L.C., (these
"Regulations"), dated as of December 5, 1994, are (a) adopted by the Members (as
defined below) and (b) executed and agreed to, for good and valuable
consideration, by the Members (as defined below).
ARTICLE I
DEFINITIONS
1.01 Definitions. As used in these Regulations, the following terms have
the following meanings:
"Act" means the Texas Limited Liability Company Act and any successor
statute, as amended from time to time.
"Articles" has the meaning given that term in Section 2.01.
"Bankrupt Member" means (except to the extent a Required Interest
consents otherwise) any Member (a) that (i) makes a general assignment
for the benefit of creditors; (ii) files a voluntary bankruptcy
petition; (iii) becomes the subject of an order for relief or is
declared insolvent in any federal or state bankruptcy or insolvency
proceedings; (iv) files a petition or answer seeking for the Member a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law; (v) files an answer or
other pleading admitting or failing to contest the material allegations
of a petition filed against the Member in a proceeding of the type
described in subclauses (i) through (iv) of this clause (a); or (vi)
seeks, consents to, or acquiesces in the appointment of a trustee,
receiver, or liquidator of the Member's or of all or any substantial
part of the Member's properties; or (b) against which, a proceeding
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law has been
commenced and 120 days have expired without dismissal thereof or with
respect to which, without the Member's consent or acquiescence, a
trustee, receiver, or liquidator of the Member or of all or any
substantial part of the Member's properties has been appointed and 90
days have expired without the appointment's having been vacated or
stayed, or 90 days have expired after the date
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of expiration of a stay, if the appointment has not previously been
vacated.
"Business day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of Texas are
closed.
"Capital contribution" means any contribution by a Member to the
capital of the Company.
"Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
"Commitment" means, subject in each case to adjustments on account of
Dispositions of Membership Interests permitted by these Regulations, (a) in
the case of a Member executing these Regulations as of the date of these
Regulations or a Person acquiring that Membership Interest, the amount
specified for that Member as its Commitment on Exhibit A, and (b) in the
case of a Membership Interest issued pursuant to Section 3.04, the
Commitment established pursuant thereto.
"Company" means HEMO DIALYSIS OF AMARILLO, L.L.C., a Texas limited
liability company.
"Default interest rate" means a rate per annum equal to the lesser of
(a) 10% plus a varying rate per annum that is equal to the interest rate
publicly quoted by Amarillo National Bank, Amarillo, Texas, from time to
time as its prime commercial or similar reference interest rate, with
adjustments in that varying rate to be made on the same date as any change
in that rate, or (b) the maximum rate permitted by applicable law.
"Delinquent Member" has the meaning given that term in Section
4.03(a).
"Dispose," "Disposing," or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or
other disposition or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
"General interest rate" means a rate per annum equal to the lesser of
(a) varying rate per annum that is equal to the interest rate publicly
quoted by Amarillo National Bank, Amarillo, Texas, from time to time as its
prime commercial or similar reference interest rate, with adjustments in
that varying rate to be made on the same date as any change in that rate,
or (b) the maximum rate permitted by applicable law.
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"Lending Member" has the meaning given that term in Section
4.03(a)(ii).
"Manager" means any Person named in the Articles as an initial manager
of the Company and any Person hereafter elected as a manager of the Company
as provided in these Regulations, but does not include any Person who has
ceased to be a manager of the Company.
"Member" means any Person or corporation executing these Regulations
as of the date of these Regulations as a member or hereafter admitted to
the Company as a member as provided in these Regulations, but does not
include any Person who has ceased to be a member in the Company.
"Membership interest" means the interest of a Member in the Company,
including, without limitation, rights to distributions (liquidating or
otherwise), allocations, information, and to consent or approve.
"Permitted transferee" has the meaning given that term in Section
3.03(b).
"Person" has the meaning given that term in Article 1.02(A)(4) of the
Act.
"Proceeding" has the meaning given that term in Section 8.01.
"Professional service" means any type of personal service that
requires as a condition precedent to the rendering of the service the
obtaining of a license, permit, certificate of registration rendered by a
doctor, physician, or surgeon.
"Limited Liability Company" means a limited liability company that is
organized under this Act for the sole and specific purpose of rendering
service.
"Regulations" has the meaning given that term in the introductory
paragraph.
"Required Interest" means one or more Members having among them more
than 75% of the Sharing Ratios of all Members.
"Sharing Ratio" with respect to any Member means a fraction (expressed
as a percentage), the numerator of which is that Member's Commitment and
the denominator of which is the sum of the Commitments of all Members.
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"TBCA" means the Texas Business Corporation Act and any successor
statute, as amended from time to time.
Other terms defined herein have the meanings so given them.
1.02 Construction. Whenever the context requires, the gender of all
words used in these Regulations includes the masculine, feminine, and neuter.
All reference to Articles and Sections refer to articles and sections of these
Regulations, and all references to Exhibits are to Exhibits attached hereto,
each of which is made a part hereof for all purposes.
ARTICLE II
ORGANIZATION
2.01 Formation. The Company has been organized as Texas limited
liability company by the filing of Articles of Organization (the "Articles")
under and pursuant to the Act and the issuance of a certificate of organization
for the Company by the Secretary of State of Texas.
2.02 Name. The name of the Company is "HEMO DIALYSIS OF AMARILLO,
L.L.C." and all Company business must be conducted in that name or such other
names that comply with applicable law as the Managers may select from time to
time.
2.03 Registered Office; Registered Agent; Principal Office in the
United States; Other Offices. The registered office of the Company required by
the Act to be maintained in the State of Texas shall be the office of the
initial registered agent named in the Articles or such other office (which need
not be a place of business of the Company) as the Members may designate from
time to time in the manner provided by law. The registered agent of the Company
in the State of Texas shall be the initial registered agent named in the
Articles or such other Person or Persons as the Managers may designate from time
to time in the manner provided by law. The principal office of the Company in
the United States shall be at such place as the Managers may designate from time
to time, which need not be in the State of Texas, and the Company shall maintain
records there as required by Article 2.22 of the Act and shall keep the street
address of such principal office at the registered office of the Company in the
State of Texas. The Company may have such other offices as the Managers may
designate from time to time.
2.04 Purposes. The purposes of the Company are those set forth in the
Articles.
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2.05 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than Texas, the Managers shall cause the Company to
comply, to the extent procedures are available and those matters are reasonably
within the control of the Managers, with all requirements necessary to qualify
the Company as a foreign limited liability company in that jurisdiction. At the
request of the Managers, each Member shall execute, acknowledge, swear to, and
deliver all certificates and other instruments conforming with these Regulations
that are necessary or appropriate to qualify, continue, and terminate the
Company as a foreign limited liability company in all such jurisdictions in
which the Company may conduct business.
2.06 Term. The Company commenced on the date the Secretary of State of
Texas issued a certificate of organization for the Company and shall continue in
existence for the period fixed in the Articles for the duration of the Company,
or such earlier time as these Regulations may specify.
2.07 No State-Law Partnership. The Members intend that the Company not
be a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Manager be a partner or joint venturer of any
other Member or Manager, for any purposes other than federal and state tax
purposes, and these Regulations may not be construed to suggest otherwise.
ARTICLE III
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 Initial Members. The initial members of the Company are the Persons
executing these Regulations as of the date of these Regulations as members, each
of which is admitted to the Company as a member effective contemporaneously with
the execution by such Person of these Regulations.
3.02 Representations and Warranties. Each Member hereby represents and
warrants to the Company and each other Member that (a) if that Member is a
corporation, it is duly organized, validly existing, and in good standing under
the law of the state of its incorporation and is duly qualified and in good
standing as a foreign corporation in the jurisdiction of its principal place of
business (if not incorporated therein); (b) if that Member is a limited
liability company, it is duly organized, validly existing, and (if applicable)
in good standing under the law of the state of its organization and is duly
qualified and (if applicable) in good standing as a foreign limited liability
company in the jurisdiction of its principal place of business (if not organized
therein); (c) if that Member is a partnership, trust, or other entity, it is
duly formed, validly existing, and (if applicable) in good standing under the
law of the state of its formation, and if required by law
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is duly qualified to do business and (if applicable) in good standing in the
jurisdiction of its principal place of business (if not formed therein), and the
representations and warranties in clause (a), (b) or (c), as applicable, are
true and correct with respect to each partner (other than limited partners),
trustee, or other member thereof; (d) that Member has full corporate, limited
liability company, partnership, trust, or other applicable power and authority
to execute and agree to these Regulations and to perform its obligations
hereunder and all necessary actions by the board of directors, shareholders,
managers, members, partners, trustees, beneficiaries, or other Persons necessary
for the due authorization, execution, delivery, and performance of these
Regulations by that Member have been duly taken; (e) that Member has duly
executed and delivered these Regulations; and (f) that Member's authorization,
execution, delivery, and performance of these Regulations do not conflict with
any other agreement or arrangement to which that Member is a party or by which
it is bound.
3.02(a) Restrictions on the Disposition of an Interest. (a) Except as
specifically provided in this Section 3.02, a Disposition of an interest in the
Company may not be effected without the consent of a Required Interest. Any
attempted Disposition by a Person of an interest or right, or any part thereof,
in or in respect of the Company other than in accordance with this Section 3.02
shall be, and is hereby declared, null and void ab initio.
(b) Notwithstanding the provisions of Section 3.02(a), the interest of
any Member in the Company may be transferred without the consent of the Members
if (i) the transfer occurs by reason of or incident to the death, dissolution,
divorce, liquidation, merger or termination of the transferor Member, and (ii)
the transferee is a Permitted Transferee. A "Permitted Transferee" is any member
of such Member's immediate family, or a trust, corporation, limited liability
company, or partnership controlled by such Member or members of such Member's
immediate family, or another Person controlling, controlled by, or under common
control with such Member.
(c) Subject to the provisions of Section 3.02(d) and (e), (i) a Person
to whom an interest in the Company is transferred has the right to be admitted
to the Company as a Member with the Sharing Ratio and the Commitment so
transferred to such Person, If (A) the Member making such transfer grants the
transferee the right to be so admitted, and (b) such transfer is consented to in
accordance with Section 3.02(a); (ii) a Permitted Transferee under the
circumstances described in Section 3.02(b) has the right to be admitted to the
Company as a Member with the Sharing Ratio and the Commitment so transferred to
the Permitted Transferee; and (iii) the Company or (with the permission of the
Company, which may be withheld in its sole discretion) a Lending Member may
grant the purchaser of a Delinquent Member's interest in the Company at a
6
foreclosure of the security interest therein granted pursuant to Section 4.03(b)
the right to be admitted to the Company as a Member with such Sharing Ratio and
such Commitment (no greater than the Sharing Ratio and the Commitment of the
Member effecting such Disposition prior thereto) as they may agree.
(d) The Company may not recognize for any purpose any purported
Disposition of all or part of a Membership Interest unless and until the other
applicable provisions of this Section 3.02 have been satisfied and the Managers
have received, on behalf of the Company, a document (i) executed by both the
Member effecting the Disposition (or if the transfer is on account of the death,
incapacity, or liquidation of the transferor, its representative) and the Person
to which the Membership Interest or part thereof is Disposed, (ii) including the
notice address of any Person to be admitted to the Company as a Member and its
agreement to be bound by these Regulations in respect of the Membership Interest
or part thereof being obtained, (iii) setting forth the Sharing Ratios and the
Commitments after the Disposition of the Member effecting the Disposition and
the Person to which the Membership Interest or part thereof is Disposed (which
together must total the Sharing Ratio and the Commitment of the Member effecting
the Disposition before the Disposition), and (iv) containing a representation
and warranty that the Disposition was made in accordance with all applicable
laws and regulations (including securities laws) and, if the Person to which the
Membership Interest or part thereof is Disposed is to be admitted to the
Company, its representation and warranty that the representations and warranties
in Section 3.02 are true and correct with respect to that Person. Each
Disposition and, if applicable, admission complying with the provisions of this
Section 3.02(d) is effective as of the first day of the calendar month
immediately succeeding the month in which the Managers receive the notification
of Disposition and the other requirements of this Section 3.02 have been met.
(e) For the right of a Member to dispose Interest or any part thereof or
of any Person admitted to the Company in connection therewith to exist or be
exercised, (i) either (A) the Membership Interest or part thereof subject to the
Disposition or admission must be registered under the Securities Act of 1933, as
amended, and any applicable state securities laws or, (B) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel acceptable to the Managers to the effect that the Disposition or
admission is exempt from registration under those laws and (ii) the Company must
receive a favorable opinion of the Company's legal counsel or of other legal
counsel acceptable to the Managers to the effect that the Disposition or
admission, when added to the total of allother sales, assignments, or other
Dispositions within the preceding 12 months, would not result in the Company's
being considered to have terminated within the
7
meaning of the Code. The Managers, however, may waive the requirements of this
Section 302(e).
(f) Contemporaneous with this execution of these Regulations, these
members have executed an Agreement including Interim Transfer Restriction and
BUY-OUT AGREEMENT and to the extent that these Regulations are inconsistent with
such Agreement, the provisions of such Agreement will govern and override these
Regulations.
3.03 Additional Members. Additional Persons may be admitted to the
Company as Members and Membership Interests may be created and issued to those
Persons and to existing Members at the direction of a Required Interest, on such
terms and conditions as the Managers may determine at the time of admission.
The terms of admission or issuance must specify the Sharing Ratios and the
Commitments applicable thereto and may provide for the creation of different
classes or groups of Members and having different rights, powers, and duties.
The Managers shall reflect the creation of any new class or group in an
amendment to these Regulations indicating the different rights, powers, and
duties, and such an amendment need be executed only by the Managers. Any such
admission also must comply with the provisions of Section 3.02(d)(i) and (ii)
and is effective only after the new Member has executed and delivered to the
Managers a document including the new Member's notice address, its agreement to
be bound by these Regulations, and its representation and warranty that the
representation and warranties in Section 3.02 are true and correct with respect
to the new Member. The provisions of this Section 3.03 shall not apply to
Dispositions of Membership Interests.
3.04 Information. (a) In addition to the other rights specifically set
forth in these Regulations, each Member is entitled to all information to which
that Member is entitled to have access pursuant to Article 2.22 of the Act under
the circumstances and subject to the conditions therein stated. The Members
agree, however, that the Managers from time to time may determine, due to
contractual obligations, business concerns, or other considerations, that
certain information regarding the business, affairs, properties, and financial
condition of the business, affairs, properties, and financial condition of the
Company should be kept confidential and not provided to some or all other
Members, and that it is not just or reasonable for those Members or assignees or
representatives thereof to examine or copy that information.
(b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or Persons with which it does business. Each Member shall hold in strict
confidence any information it receives regarding the Company that is identified
as being confidential (and if that information is
8
provided in writing, that is so marked) and may not disclose it to any Person
other than another Member or a Manager, except for disclosures (i) compelled by
law (but the Member must notify the Managers promptly of any request for that
information, before disclosing it if practicable), (ii) to advisers or
representatives of the Member or Persons to which that Member's Membership
Interest may be Disposed as permitted by these Regulations, but only if the
recipients have agreed to be bound by the provisions of this Section 3.04(b), or
(iii) of information that Member also has received from a source independent of
the Company that the Member reasonably believes obtained that information
without breach of any obligation of confidentiality. The Members acknowledge
that breach of the provisions of this Section 3.04(b) may cause irreparable
injury to the Company for which monetary damages are inadequate, difficult to
compute, or both. Accordingly, the Members agree that the provisions of this
Section 3.04(b) may be enforced by specific performance.
3.05 Liability to Third Parties. No Member or Manager shall be liable for
the debts, obligations or liabilities of the Company, including under a judgment
decree or order of a court.
3.06 Withdrawal. A Member has the right or power to withdraw from the
Company as a member.
3.07 Lack of Authority. No Member (other than a Manager or an officer) has
the authority or power to act for or on behalf of the Company to do any act that
would be binding on the Company, or to incur any expenditures on behalf of the
Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.01 Initial Contributions. Contemporaneously with the execution by such
Member of these Regulations, each Member shall make the Capital Contributions
described for that Member in Exhibit A.
4.02 Subsequent Contributions. Without creating any rights in favor of any
third party, each Member shall contribute to the Company, in cash, on or before
the date specified as hereinafter described, that Member's Sharing Ratio of all
monies that in the judgment of the Managers are necessary to enable the Company
to cause the Assets of the Company to be properly operated and maintained and to
discharge its costs, expenses, obligations, and liabilities. The Managers shall
notify each Member of the need for Capital Contributions pursuant to this
Section 4.02 when appropriate, which notice must include a statement in
reasonable detail of the proposed uses of the Capital Contributions and a date
(which date may be no earlier than the fifth Business Day following each
Member's receipt of its notice) before which the Capital
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Contributions must be made. Notices for Capital Contributions must be made to
all Members in accordance with their Sharing Ratios.
4.03 Failure to Contribute. (a) If a Member does not contribute by the
time required, all or any portion of a Capital Contribution that Member is
required to make as provided in these Regulations, the Company may exercise, on
notice to that Member (the "Delinquent Member"), one or more of the following
remedies:
(i) taking such action (including, without limitation, court
proceedings) as the Managers may deem appropriate to obtain payment by the
Delinquent Member of the portion of the Delinquent Member's Capital
Contribution that is in default, together with interest thereon at the
Default Interest Rate from the date that the Capital Contribution was due
until the date that it is made, all at the cost and expense of the
Delinquent Member;
(ii) permitting the other Members in proportion to their Sharing
Ratios or in such other percentages as they may agree (the "Lending
Member," whether one or more), to advance the portion of the Delinquent
Member's Capital Contribution that is in default, with the following
results:
(A) the sum advanced constitutes a loan from the Lending Member
to the Delinquent Member and a Capital Contribution of that sum to the
Company by the Delinquent Member pursuant to the applicable provisions
of these Regulations,
(B) the principal balance of the loan and all accrued unpaid
interest thereon is due and payable in whole on the tenth day after
written demand therefor by the Lending Member to the Delinquent
Member,
(C) the amount lent bears interest at the Default Interest Rate
from the day that the advance is deemed made until the date that the
loan, together with all interest accrued on it, is repaid to the
Lending Member,
(D) all distributions from the Company that otherwise would be
made to the Delinquent Member (whether before or after dissolution of
the Company) instead shall be paid to the Lending Member until the
loan and all interest accrued on it have been paid in full to the
Lending Member (with payments being applied first to accrued and
unpaid interest and then to principal),
(E) the payment of the loan and interest accrued on it is
secured by a security interest in the Delinquent Member's Membership
Interest, as more fully set forth in Section 4.03(b), and
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(F) the Lending Member has the right, in addition to the other
rights and remedies granted to it pursuant to these Regulations or
available to it at law or in equity, to take any action (including,
without limitation, court proceedings) that the Lending Member may
deem appropriate to obtain payment by the Delinquent Member of the
loan and all accrued and unpaid interest on it, at the cost and
expense of the Delinquent Member;
(iii) exercising the rights of a secured party under the Uniform
Commercial Code of the State of Texas, as more fully set forth in Section
4.03(b); or
(iv) exercising any other rights and remedies available at law or in
equity.
(b) Each Member grants to the Company, and to each Lending Member with
respect to any loans made by the Lending Member to that Member as a Delinquent
Member pursuant to Section 4.03(a)(ii), as security, equally and ratably, for
the payment of all Capital Contributions that Member has agreed to made and the
payment of all loans and interest accrued on them made by Lending Members to
that Member as a Delinquent Member pursuant to Section 4.03(a) (ii), a security
interest in and a general lien on its Membership Interest and the proceeds
thereof, all under the Uniform Commercial Code of the State of Texas. On any
default in the payment of a Capital Contribution or in the payment of such a
loan or interest accrued on it, the Company or the Lending Member, as
applicable, is entitled to all the rights and remedies of a secured party under
the Uniform Commercial Code of the State of Texas with respect to the security
interest granted in this Section 4.03(b). Each Member shall execute and deliver
to the Company and the other Members all financing statements and other
instruments that the Managers or the Lending Member, as applicable, may request
to effectuate and carry out the preceding provisions of this Section 4.03(b). At
the option of the Managers or a Lending Member, these Regulations or a carbon,
photographic, or other copy hereof may serve as a financing statement.
4.04 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is
not required to contribute or to lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions.
4.05. Advances by Members. If the Company does not have sufficient cash to
pay its obligations, any Member(s) that may agree to do so with the Managers'
consent may advance all or part of the needed funds to or on behalf of the
Company. An advance
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described in this Section 4.05 constitutes a loan from the Member to the
Company, bears interest at the General Interest Rate from the date of the
advance until the date of payment, and is not a Capital Contribution.
4.06 Capital Accounts. A capital account shall be established and
maintained for each Member. Each Member's capital account (a) shall be
increased by (i) the amount of money contributed by that Member to the Company,
(ii) the fair market value of property contributed by that Member to the Company
(net of liabilities secured by the contributed property that the Company is
considered to assume or take subject to under Section 752 of the Code), and
(iii) allocations to that Member of Company income and gain (or items thereof),
including income and gain exempt from tax and income and gain described in
Treas. Reg. (S) 1.704-1(b)(2)(iv)(g), but excluding income and gain described
in TReas. Reg. (S) 1.704-1(b)(4)(i), and (b) shall be decreased by (i) the
amount of money distributed to that Member by the Company, (ii) the fair market
value of property distributed to that Member by the Company (net of liabilities
secured by the distributed property that the Member is considered to assume or
take subject to under Section 752 of the Code), (iii) allocations to that Member
of expenditures of the Company described in Section 705(a)(2)(B) of the Code,
and (iv) allocations of Company loss and deduction (or items thereof), including
loss and deduction described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g), but
excluding items described in clause (b)(iii) above and loss or deduction
described in Treas. Reg. (S) 1.704-1(b)(4)(i) or (S) 1.704-1(b)(4)(iii). The
Members' capital accounts also shall be maintained and adjusted as permitted by
the provisions of Treas. Reg. (S) 1.704-1(b)(2)(iv)(f) and as required by the
other provisions of Treas. Reg. (S)(S) 1.704-1(b)(2)(iv) and 1.704-1(b)(4),
including adjustments to reflect the allocations to the Members of depreciation,
depletion, amortization, and gain or loss as computed for book purposes rather
than the allocation of the corresponding items as computed for tax purposes, as
required by Treas. Reg. (S) 1.704-1(b)(2)(iv)(g). A Member that has more than
one Membership Interest shall have a single capital account that reflects all
its Membership Interests, regardless of the class of Membership Interests owned
by that Member and regardless of the time or manner in which those Membership
Interests were acquired. On the transfer of all or part of a Membership
Interest, the capital account of the transferor that is attributable to the
transferred Membership Interest or part thereof shall carry over to the
transferee Member in accordance with the provisions of Treas. Reg. (S) 1.704-
1(b)(2)(iv)(1).
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ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.01 Allocations. (a) Except as may be required by Section 704(c) of the
Code and Treas. Reg. (S) 1.704-1(b)(2)(iv)(f)(4), all items of income, gain,
loss deduction, and credit of the Company shall be allocated among the Members
in accordance with their Sharing Ratios.
(b) All items of income, gain, loss, deduction, and credit allocable to
any Membership Interest that may have been transferred shall be allocated
between the transferor and the transferee based on the portion of the calendar
year during which each was recognized as owning that Membership Interest,
without regard to the results of Company operations during any particular
portion of that calendar year and without regard to whether cash distributions
were made to the transferor or the transferee during that calendar year;
provided, however, that this allocation must be made in accordance with a method
permissible under Section 706 of the Code and the regulations thereunder.
5.02 Distributions. (a) From time to time (but at least once each
calendar quarter) the Managers shall determine in their reasonable judgment to
what extent (if any) the Company's cash on hand exceeds its current and
anticipated needs, including, without limitation, for operating expenses, debt
service, acquisitions, and a reasonable contingency reserve. If such an excess
exists, the Managers shall cause the Company to distribute to the Members, in
accordance with their Sharing Ratios, an amount in cash equal to that excess.
(b) From time to time, the Managers also may cause property of the
Company other than cash to be distributed to the Members, which distribution
must be made in accordance with their Sharing Ratios and may be made subject to
existing liabilities and obligations. Immediately prior to such a distribution,
the capital accounts of the Members shall be adjusted as provided in Treas. Reg.
(S) 1.704-1(b)(2)(iv)(f).
ARTICLE VI
MANAGERS
6.01 Management by Managers. (a) Except for situations in which the
approval of the Members is required by these Regulations or by non-waivable
provisions of applicable law, and subject to the provisions of Section 6.02, (i)
the powers of the Company shall be exercised by or under the authority of, and
the business and affairs of the Company shall be managed under the direction of,
the Managers; and (ii) the Managers may make all decisions and take all actions
for the Company not otherwise provided for in these Regulations, including,
without limitation, the following:
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(i) entering into, making, and performing contracts, agreements,
and other undertakings binding the Company that may be necessary,
appropriate, or advisable in furtherance of the purposes of the Company and
making all decisions and waivers thereunder;
(ii) opening and maintaining bank and investment accounts and
arrangements, drawing checks and other orders for the payment of money, and
designating individuals with authority to sign or give instructions with
respect to those accounts and arrangements;
(iii) maintaining the assets of the Company in good order;
(iv) collecting sums due the Company;
(v) to the extent that funds of the Company are available therefor,
paying debts and obligations of the Company;
(vi) acquiring, utilizing for Company purposes, and Disposing of any
asset of the Company;
(vii) borrowing money or otherwise committing the credit of the
Company for Company activities and voluntary prepayments or extensions of
debt;
(viii) selecting, removing, and changing the authority and
responsibility of lawyers, accountants, and other advisers and consultants;
(ix) obtaining insurance for the Company;
(x) determining distributions of Company cash and other property as
provided in Section 5.02;
(xi) establishing a seal for the Company; and
(b) Notwithstanding the provisions of Section 6.01(a), the Managers may
not cause the Company to do any of the following without complying with the
applicable requirements set forth below:
(i) sell, lease, exchange or otherwise dispose of (other than by
way of a pledge, mortgage, deed of trust or trust indenture) all or
substantially all the Company's property and assets (with or without good
will), other than in the usual and regular course of the Company's
business, without complying with the applicable procedures set forth in the
Act and the TBCA, including, without limitation, the requirement in Article
5.10 of the TBCA regarding approval
14
by the Members (unless such provision is rendered inapplicable by another
provision of applicable law);
(ii) amend or restate the Articles, without complying with the
applicable procedures set forth in the Act and the TBCA, including, without
limitation, the requirement in Article 4.02 of the TBCA regarding approval
by the Members (unless such provision is rendered inapplicable by another
provision of applicable law); and
6.02 Actions by Managers; Committees; Delegation of Authority and Duties.
(a) In managing the business and affairs of the Company and exercising its
powers, the Managers shall act (i) collectively through meetings and written
consents pursuant to Sections 6.05 and 6.07; (ii) through committees pursuant to
Section 6.02(b); and (iii) through Managers to whom authority and duties have
been delegated pursuant to Section 6.02(c).
(b) The Managers may, from time to time, designate one or more committees,
each of which shall be comprised of one or more Managers, any such committee, to
the extent provided in such resolution or in the Articles or these Regulations,
shall have and may exercise all of the authority of the Managers, subject to the
limitations set forth in the Act and the TBCA. At every meeting of any such
committee, the presence of a majority of all the members thereof shall
constitute a quorum, and the affirmative vote of a majority of the members
present shall be necessary for the adoption of any resolution. The Managers may
dissolve any committee at any time, unless otherwise provided in the Articles or
these Regulations.
(c) The Managers may, from time to time, delegate to one or more Managers
such authority and duties as the Managers may deem advisable. In addition, the
Managers may assign titles (including, without limitation, president, vice
president, secretary, assistant secretary, treasurer and assistant treasurer) to
any such Manager. Unless the Managers decide otherwise, if the title is one
commonly used for officers of a business corporation formed under the TBCA, the
assignment of such title shall constitute the delegation to such Manager of the
authority and duties that are normally associated with that office, subject to
any specific delegation of authority and duties made pursuant to the first
sentence of this Section 6.02(c). Any number of titles may be held by the same
Manager. Any delegation pursuant to this Section 6.02(c) may be revoked at any
time by the Managers.
(d) Any Person dealing with the Company, other than a Member, may rely on
the authority of any Manager or officer in taking any action in the name of the
Company without inquiry into the provisions of these Regulations or compliance
herewith, regardless of whether that action actually is taken in accordance with
the provisions of these Regulations.
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6.03 Number and Term of Office. The number of Managers of the Company shall
be determined from time to time by resolution of the Members; provided, however,
that no decrease in the number of Managers that would have the effect of
shortening the term of an incumbent Manager may be made by the Managers. If the
Managers make no such determination, the number of Managers shall be the number
set forth in the Articles as the number of Managers constituting the initial
Managers. Each Manager shall hold office for the term for which he is elected
and thereafter until his successor shall have been elected and qualified, or
until his earlier death, resignation or removal. Unless otherwise provided in
the Articles, Managers need not be Members or residents of the State of Texas.
6.04 Vacancies; Removal; Resignation. Any Manager position to be filled by
reason of an increase in the number of Managers may be filled by election at an
annual or special meeting of Members called for that purpose. Any vacancy
occurring in the Managers other than by reason of an increase in the number of
Managers may be filled (a) by election at an annual or special meeting of the
Members called for that purpose or (b) by the affirmative vote of a majority of
the remaining Managers though less than a quorum of the Managers. A Manager
elected to fill a vacancy occurring other than by reason of an increase in the
number of Managers shall be elected for the unexpired term of his predecessor
in office. At any meeting of Members at which a quorum of Members is present
called expressly for that purpose, or pursuant to a written consent adopted
pursuant to these Regulations, any Manager may be removed, with or without
cause, by a Required Interest. Any Manager may resign at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time be specified, at the time of its receipt by the remaining
Managers. The acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
6.05 Meetings. (a) Unless otherwise required by law or provided in the
Articles or these Regulations, a majority of the total number of Managers fixed
by, or in the manner provided in, the Articles or these Regulations shall
constitute a quorum for the transaction of business of the Managers, and the act
of a majority of the Managers present at a meeting at which a quorum is present
shall be the act of the Managers. A Manager who is present at a meeting of the
Managers at which action on any Company matter is taken shall be presumed to
have assented to the action unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the Person acting as secretary of the meeting before the adjournment thereof or
shall deliver such dissent to the Company immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Manager who voted in
favor of such action.
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(b) Meetings of the Managers may be held at such place or places as
shall be determined from time to time by resolution of the Managers. At all
meetings of the Managers, business shall be transacted in such order as shall
from time to time be determined by resolution of the Managers. Attendance of a
Manager at a meeting shall constitute a waiver of notice of such meeting, except
where a Manager attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) In connection with any annual meeting of Members at which Managers
were elected, the Managers may, if a quorum is present, hold its first meeting
for the transaction of business immediately after and at the same place as such
annual meeting of the Members. Notice of such meeting at such time and place
shall not be required.
(d) Regular meetings of the Managers shall be held at such times and
places as shall be designated from time to time by resolution of the Managers.
Notice of such regular meetings shall not be required.
(e) Special meetings of the Managers may be called by any Manager on at
least 24 hours notice to each other Manager. Such notice need not state the
purpose or purposes of, nor the business to be transacted at, such meeting,
except as may otherwise be required by law or provided for by the Articles or
these Regulations.
6.06 Approval or Ratification of Acts or Contracts by Members. The
Managers in their discretion may submit any act or contract for approval or
ratification at any annual meeting of the Members, or at any special meeting of
the Members called for the purpose of considering any such act or contract, and
any act or contract that shall be approved or be ratified by a Required Interest
shall be as valid and as biding upon the Company and upon all the Members as if
it shall have been approved or ratified by every Member of the Company.
6.07 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the TBCA, the Articles or these Regulations to
be taken at a meeting of the Managers or any committee designated by the
Managers may be taken without a meeting if a consent in writing, setting forth
the action to be taken, is signed by all the Managers or members of such
committee, as the case may be. Such consent shall have the same force and effect
as a unanimous vote at a meeting and may be stated as such in any document or
instrument filed with the Secretary of State of Texas, and the execution of such
consent shall constitute attendance or presence in person at a meeting of the
Managers or any such committee, as the case may be. Subject to the requirements
of the Act, the TBCA, the Articles or these
17
Regulations for notice of meetings, unless otherwise restricted by the Articles,
Managers, or members of any committee designated by the Managers, may
participate in and hold a meeting of the Managers or any committee of Managers,
as the case may be, by means of a conference telephone or similar communications
equipment by means of which all Persons participating in the meeting can hear
each other, and participation in such meeting shall constitute attendance and
presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
6.08 Compensation. The Managers shall receive such compensation, if any,
for their services as may be designated from time to time by the Managers. In
addition, the Managers shall be entitled to be reimbursed for out-of-pocket
costs and expenses incurred in the course of their service hereunder, including
the portion of their overhead reasonably allocable to Company activities.
6.09 Conflicts of Interest. Subject to the other express provisions of
these Regulations, each Manager, Member and officer of the Company at any time
and from time to time may engage in and possess interests in other business
ventures of any and every type and description, independently or with others,
including ones in competition with the Company, with no obligation to offer to
the Company or any other Member, Manager or officer the right to participate
therein. The Company may transact business with any Manager, Member, officer or
Affiliate thereof, provided the terms of those transactions are no less
favorable than those the Company could obtain from unrelated third parties.
6.10 Officers. (a) The Managers may, from time to time, designate one or
more Persons to be officers of the Company. No officer need be a resident of the
State of Texas, a Member or a Manager. Any officers so designated shall have
such authority and perform such duties as the Managers may, from time to time,
delegate to them. The Managers may assign titles to particular officers. Unless
the Managers decide otherwise, if the title is one commonly used for officers of
a business corporation formed under the TBCA, the assignment of such title shall
constitute the delegation to such officer of the authority and duties that are
normally associated with that office, subject to (i) any specific delegation of
authority and duties made to such officer by the Managers pursuant to the third
sentence of this Section 6.10(b), or (ii) any delegation of authority and duties
made to one or more Managers pursuant to Section 6.02(a). Each officer shall
hold office until his successor shall be duly designated and shall qualify or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided. Any number of offices may be held by the same
Person. The salaries or other
18
compensation, if any, of the officers and agents of the Company shall be fixed
from time to time by the Managers.
(b) Any officer may resign as such at any time. Such resignation shall be
made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Managers. The acceptance of
a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such, either with or
without cause, by the Managers whenever in their judgment the best interests of
the Company will be served thereby; provided, however, that such removal shall
be without prejudice to the contract rights, if any, of the Person so removed.
Designation of an officer shall not of itself crate contract rights. Any vacancy
occurring in any office of the Company (other than Manager) may be filled by the
Managers.
ARTICLE VII
MEETINGS OF MEMBERS
7.01 Meetings. (a) A quorum shall be present at a meeting of Members if the
holders of a Required Interest are represented at the meeting in person or by
proxy. With respect to any matter, other than a matter for which the
affirmative vote of the holders of a specified portion of the Sharing Ratios of
all Members entitled to vote is required by the Act, the affirmative vote of a
Required interest at a meeting of Members at which a quorum is present shall be
the act of the Members.
(b) All meetings of the Members shall be held at the principal place of
business of the Company or at such other place within or without the State of
Texas as shall be specified or fixed in the notices or waivers of notice
thereof; provided that any or all Members may participate in any such meeting by
means of conference telephone or similar communications equipment pursuant to
Section 7.05.
(c) Notwithstanding the other provisions of the Articles or these
Regulations, the chairman of the meeting or the holders of a Required Interest
shall have the power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and place of the
holding of the adjourned meeting. If such meeting is adjourned by the Members,
such time and place shall be determined by a vote of the holders of a Required
Interest. Upon the resumption of such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally called.
(d) An annual meeting of the Members, for the election of the Managers and
for the transaction of such other business as may properly come before the
meeting, shall be held at such place,
19
within or without the State of Texas, on such date and at such time as the
Managers shall fix and set forth in the notice of the meeting, which date shall
be within 13 months subsequent to the date of organization of the Company or the
last annual meeting of Members, whichever most recently occurred.
(e) Special meetings of the Members for any proper purpose or purposes
may be called at any time by the Managers or the holders of at least ten percent
of the Sharing Ratios of all Members. If not otherwise stated in or fixed in
accordance with the remaining provisions hereof, the record date for determining
Members entitled to call a special meeting is the date any Member first signs
the notice of that meeting. Only business within the purpose or purposes
described in the notice (or waiver thereof) required by these Regulations may be
conducted at a special meeting of the Members.
(f) Written or printed notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than 60
days before the date of the meeting, either personally or by mail, by or at the
direction of the Managers or Person calling the meeting, to each Member entitled
to vote at such meeting. If mailed, any such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the Member at
this address provided for in Section 13.02, with postage thereon prepaid.
(g) The date on which notice of a meeting of Members is mailed or the date
on which the resolution of the Managers declaring a distribution is adopted, as
the case may be, shall be the record date for the determination of the Members
entitled to notice of or to vote at such meeting, including any adjournment
thereof, or the Members entitled to receive such distribution.
(h) The right of Members to cumulative voting in the election of Managers
is expressly prohibited.
7.02 Voting List. The Managers shall make, at least ten days before each
meeting of Members, a complete list of the Members entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the Sharing Ratios held by each, which list, for a period of ten
days prior to such meeting, shall be kept on file at the registered office or
principal place of business of the Company and shall be subject to inspection by
any Member at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Member during the whole time of the meeting. The
original membership records shall be prima-facie evidence as to who are the
Members entitled to examine such list or transfer records or to vote at any
meeting of Members. Failure to comply with the
20
requirements of this Section shall not affect the validity of any action taken
at the meeting.
7.03 Proxies. A Member may vote either in person or by proxy executed in
writing by the Member. A telegram, telex, cablegram or similar transmission by
the Member, or a photographic, photostatic, facsimile or similar reproduction
of a writing executed by the Member shall be treated as an execution in writing
for purposes of this Section. Proxies for use at any meeting of Members or in
connection with the taking of any action by written consent shall be filed with
the Managers, before or at the time of the meeting or execution of the written
consent, as the case may be. All proxies shall be received and taken charge of
and all ballots shall be received and canvassed by the Managers, who shall
decide all questions touching upon the qualification of voters, the validity of
the proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions. No proxy
shall be valid after 11 months from the date of its execution unless otherwise
provided in the proxy. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled with
an interest. Should a proxy designate two or more persons to act as proxies,
unless that instrument shall provide to the contrary, a majority of such Persons
present at any meeting at which their powers thereunder are to be exercised
shall have and may exercise all the powers of voting or giving consents thereby
conferred, or if only one be present, then such powers may be exercised by that
one; or, if an even number attend and a majority do not agree on any particular
issue, the Company shall not be required to recognize such proxy with respect to
such issue if such proxy does not specify how the Sharing Ratios that are the
subject of such proxy are to be voted with respect to such issue.
7.04 Conduct of Meetings. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Manager (or representative
thereof) designated by a majority of the Managers. The chairman of any meeting
of Members shall determine the order of business and the procedure at the
meeting including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
7.05 Action by Written Consent or Telephone Conference. (a) Any action
required or permitted to be taken at any annual or special meeting of Members
may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of not less than the minimum Sharing Ratios that
would be necessary to take such action at a meeting at which the holders of all
Sharing Ratios entitled to vote on the action were present and voted. Every
written consent shall bear the date of
21
signature of each Member who signs the consent. No written consent shall be
effective to take the action that is the subject to the consent unless, within
60 days after the date of the earliest dated consent delivered to the Company in
the manner required by this Section, a consent or consents signed by the holder
or holders of not less than the minimum Sharing Ratios that would be necessary
to take the action that is the subject of the consent are delivered to the
Company by delivery to its registered office, its principal place of business,
or the Managers. Delivery shall be by hand or certified or registered mail,
return receipt requested. Delivery to the Company's principal place of business
shall be addressed to the Managers. A telegram, telex, cablegram or similar
transmission by a Member, or a photographic, photostatic, facsimile or similar
reproduction of a writing signed by a Member, shall be regarded as signed by the
Member for purposes of this Section. Prompt notice of the taking of any action
by Members without a meeting by less than unanimous written consent shall be
given to those Members who did not consent in writing to the action.
(b) The record date for determining Members entitled to consent to action
in writing without a meeting shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Company by delivery to its registered office, its principal place of
business, or the Managers. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Company's principal
place of business shall be addressed to the Managers.
(c) If any action by Members is taken by written consent, any articles or
documents filed with the Secretary of State of Texas as a result of the taking
of the action shall state, in lieu of any statement required by the Act or the
TBCA concerning any vote of Members, that written consent has been given in
accordance with the provisions of the Act and TBCA and that any written notice
required by the Act and the TBCA has been given.
(d) Members may participate in and hold a meeting by means of conference
telephone or similar communications equipment by means of which all Persons
participating in the meeting can hear each other, and participation in such
meeting shall constitute attendance and presence in person at such meeting,
except where a Person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
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ARTICLE VIII
INDEMNIFICATION
8.01 Right of Indemnification. Subject to the limitations and
conditions as provided in this Article VIII, each Person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "Proceeding"), or
any appeal in such a Proceeding or any inquiry or investigation that could lead
to such a Proceeding, by reason of the fact that he or she, or a Person of whom
he or she is the legal representative, is or was a Manager of the Company or
while a Manager of the Company is or was serving at the request of the Company
as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise shall be indemnified by the
Company to the fullest extent permitted by the Act and the TBCA, as the same
exist or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such Person in
connection with such Proceeding, and indemnification under this Article VIII
shall continue as to a Person who has ceased to serve in the capacity which
initially entitled such Person to indemnity hereunder. The rights granted
pursuant to this Article VIII shall be deemed contract rights, and no amendment,
modification or repeal of this Article VIII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal. It is expressly
acknowledged that the indemnification provided in this Article VIII could
involve indemnification for negligence or under theories of strict liability.
8.02 Advance Payment. The right to indemnification conferred in this
Article VIII shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a Person of the type entitled to be indemnified
under Section 8.01 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such Person in advance of the final disposition of a Proceeding, shall be
made only upon delivery to the Company of a written affirmation by such Manager
of his or her good faith belief that he has met the standard of
23
conduct necessary for indemnification under this Article VIII and a written
undertaking, by or on behalf of such Person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified Person is not entitled
to be indemnified under this Article VIII or otherwise.
8.03 Indemnification of Officers, Employees and Agents. The Company, by
adoption of a resolution of the Managers, may indemnify and advance expenses to
an officer, employee or agent of the Company to the same extent and subject to
the same conditions under which it may indemnify and advance expenses to
Managers under this Article VIII; and, the Company may indemnify and advance
expenses to Persons who are not or were not Managers, officers, employees or
agents of the Company but who are or were serving at the request of the Company
as a Manager, director, officer, partner venturer, proprietor, trustee, employee
agent or similar functionary of another foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any liability asserted against
him and incurred by him in such a capacity or arising out of his status as such
a Person to the same extent that it may indemnify and advance expenses to
Managers under this Article VIII.
8.04 Appearance as a Witness. Notwithstanding any other provision of
this Article VIII, the Company may pay or reimburse expenses incurred by a
Manager in connection with his appearance as a witness or other participation in
a Proceeding at a time when he is not a named defendant or respondent in the
Proceeding.
8.05 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article VIII shall not be
exclusive of any other right which a Manager or other Person indemnified
pursuant to Section 8.03 may have or hereafter acquire under any law (common or
statutory), provision of the Articles or these Regulations, agreement, vote of
Members or disinterested Managers or otherwise.
8.06 Insurance. The Company may purchase and maintain insurance, at its
expense, to protect itself and any Person who is or was serving as a Manager,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a Manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against any
expense, liability or loss, whether or not the Company would have the power to
indemnify such Person against such expense, liability or loss under this Article
VIII.
24
8.07 Member Notification. To the extent required by law, any
indemnification of or advance of expenses to a Manager in accordance with this
Article VIII shall be reported in writing to the Members with or before the
notice or waiver of notice of the next Members' meeting or with or before the
next submission to Members of a consent to action without a meeting and, in any
case, within the 12-month period immediately following the date of the
indemnification or advance.
8.08 Saving Clause. If the Article VIII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager or any other
Person indemnified pursuant to this Article VIII as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Article VIII that shall not have been invalidated and
to the fullest extent permitted by applicable law.
ARTICLE IX
TAXES
9.01 Tax Returns. The Managers shall cause to be prepared and filed
all necessary federal and state income tax returns for the Company, including
making the elections described in Section 9.02. Each Member shall furnish to the
Managers all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed.
9.02 Tax Elections. The Company shall make the following elections on
the appropriate tax returns;
(a) to adopt the calender year as the Company's fiscal year;
(b) if a distribution of Company property as described in Section 734
of the Code occurs or if a transfer of a Membership Interest as described
in Section 743 of the Code occurs, on written request of any Member, to
elect, pursuant to Section 754 of the Code, to adjust the basis of Company
properties;
(c) to elect to amortize the organizational expenses of the Company
and the startup expenditures of the Company under Section 195 of the Code
ratably over a period of 60 months as permitted by Section 709(b) of the
Code; and
25
(d) any other election the Managers may deem appropriate and in the
best interests of the Members.
Neither the Company nor any Manager or Member may make an election for the
Company to be excluded from the application of the provisions of Subchapter K of
Chapter 1 of Subtitle A of the Code or any similar provisions of applicable
state law, and no provision of these Regulations (including, without limitation,
Section 2.08) shall be construed to sanction or approve such an election.
9.03 "Tax Matters Partner." A majority of the Managers who are Members
shall designate one Manager that is a Member to be the "tax matters partner" of
the Company pursuant to Section 6231(a)(7) of the Code; or, if there is no
Manager that is a Member, the "tax matters partner" shall be a Member that is
designated as such by a Required Interest. Any Member who is designated "tax
matters partner" shall take such action as may be necessary to cause each other
Member to become a "notice partner" within the meaning of Section 6223 of the
Code. Any Member who is designated "tax matters partner" shall inform each other
Member of all significant matters that may come to its attention in its capacity
as "tax matters partner" by giving notice thereof on or before the fifth
Business Day after becoming aware thereof and, within that time, shall forward
to each other Member copies of all significant written communications it may
receive in that capacity. Any Member who is designated "tax matters partner" may
not take any action contemplated by Sections 6222 through 6232 of the Code
without the consent of a Required Interest, but his sentence does not authorize
such Manager (or any other Manager) to take any action left to the determination
of an individual Member under Sections 6222 through 6232 of the Code.
ARTICLE X
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
10.01 Maintenance of Books. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Managers
and each committee of the Managers. The books of account for the Company shall
be maintained on a cash basis in accordance with the terms of these Regulations,
except that the capital accounts of the Members shall be maintained in
accordance with Section 4.06. The calendar year shall be the accounting year of
the Company.
10.02 Reports. On or before the 120th day following the end of each fiscal
year during the term of the Company, the Managers shall cause each Member to be
furnished with a balance sheet, an income statement, and a statement of changes
in Members' capital of the Company for, or as of the end of, that year. These
financial statements must be prepared in accordance with accounting
26
principles consistently applied (except as therein noted.)
10.03 Accounts. The Managers shall establish and maintain one or more
separate bank and investment accounts and arrangements for Company funds in the
Company name with financial institutions and firms that the Managers determine.
The Managers may not commingle the Company's funds with the funds of any Member;
however, Company funds may be invested in a manner the same as or similar to the
Managers' investment of their own funds or investments by their Affiliates.
ARTICLE XI
BANKRUPTCY OF A MEMBER
11.01 Bankrupt Members. Subject to Section 12.01(c), if any Member
becomes a Bankrupt Member, the Company shall have the option, exercisable by
notice from the Managers to the Bankrupt Member (or its representative) at any
time prior to the 180th day after receipt of notice of the occurrence of the
event causing it to become a Bankrupt Member, to buy, and on the exercise of
this option the Bankrupt Member or its representative shall sell, its Membership
Interest. The purchase price shall be an amount equal to the fair market value
thereof determined by agreement by the Bankrupt Member (or its representative)
and the Managers; however, if those Persons do not agree on the fair market
value on or before the 30th day following the exercise of the option, either
such Person, by notice to the other, may require the determination of fair
market value to be made by an independent appraiser specified in that notice.
If the Person receiving that notice objects on or before the tenth day
following receipt to the independent appraiser designated in that notice, and
those Persons otherwise fail to agree on an independent appraiser, either such
Person may petition the United States District Judge for the Northern District
of Texas (Amarillo Division) then senior in service to designate an independent
appraiser. The determination of the independent appraiser, however designated,
is final and binding on all parties. The Bankrupt Member and the Company each
shall pay one-half of the costs of the appraisal. The purchaser shall pay the
fair market value as so determined in four equal cash installments, the first
due on closing and the remainder (together with accumulated interest on the
amount unpaid at the General Interest Rate) due on each of the first three
anniversaries thereof. The payment to be made to the Bankrupt Member or its
representative pursuant to this Section 11.01 is in complete liquidation and
satisfaction of all the rights and interest of the Bankrupt Member and its
representative (and of all Persons claiming by, through, or under the Bankrupt
Member and its representative) in and in respect of the Company, including
without limitation, any Membership Interest, any rights in specific Company
property, and any rights against the Company and (insofar as the affairs of the
Company are concerned)
27
against the Members, and constitutes a compromise to which all Members have
agreed pursuant to Article 5.02(D) of the Act.
ARTICLE XII
DISSOLUTION, LIQUIDATION, AND TERMINATION
12.01 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the written consent of a Required Interest;
(b) the expiration of the period fixed for the duration of the
Company set forth in the Articles;
(c) any Manager who is a Member (or, if there is no Manager who is a
Member, any Member) shall become a Bankrupt Member (with or without the
consent of a Required Interest); provided, however, that if the event
described in this Section 12.01(c) shall occur and there shall be at least
one other Member remaining, the Company shall to be dissolved, and the
business of the Company shall be continued, if all Members so agree; and
(d) entry of a decree of judicial dissolution of the Company under
Article 6.02 of the Act.
Except as provided in Section 12.01(c), the death, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member, or the occurrence of any
other event that terminates the continued membership of a Member in the Company,
shall not cause a dissolution of the Company.
12.02 Liquidation and Termination. On dissolution of the Company, the
Managers shall act as liquidator or may appoint one or more Members as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Managers. The steps to be
accomplished by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in
which the dissolution occurs or the final liquidation is completed, as
applicable;
28
(b) the liquidator shall cause the notice described in Article
6.05(A)(2) of the Act to be mailed to each known creditor of the claimant
against the Company in the manner described in such Article 6.05(A)(2);
(c) the liquidator shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including,
without limitation, all expenses incurred in liquidation and any advances
described in Section 4.05) or otherwise make adequate provision for payment
and discharge thereof (including, without limitation, the establishment of
a cash escrow fund for contingent liabilities in such amount and for such
term as the liquidator may reasonably determine); and
(d) all remaining assets of the Company shall be distributed to the
Members as follows:
(i) the liquidator may sell any or all Company property,
including to Members, and any resulting gain or loss from each sale
shall be computed and allocated to the capital accounts of the
Members;
(ii) with respect to all Company property that has not been
sold, the fair market value of that property shall be determined and
the capital accounts of the Members shall be adjusted to reflect the
manner in which the unrealized income, gain, loss, and deduction
inherent in property that has not been reflected in the capital
accounts previously would be allocated among the Members if there were
a taxable disposition of that property for the fair market value of
that property on the date of distribution; and
(iii) Company property shall be distributed among the Members in
accordance with the positive capital account balances of the Members,
as determined after taking into account all capital account
adjustments for the taxable year of the Company during which the
liquidation of the partnership occurs (other than those made by reason
of this clause (iii)); and those distributions shall be made by the
end of the taxable year of the Company during which the liquidation of
the Company occurs (or, if later, 90 days after the date of the
liquidation).
All distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses, and liabilities shall be allocated to the distributee pursuant
to this Section 12.02. The distribution of cash and/or
29
property to a Member in accordance with the provisions of this Section 12.02
constitutes a complete return to the Member of its Capital Contributions and a
complete distribution to the Member of its Membership Interest and all the
Company's property and constitutes a compromise to which all Members have
consented within the meaning of Article 5.02(D) of the Act. To the extent that
a Member returns funds to the Company, it has no claim against any other Member
for those funds.
12.03 Deficit Capital Accounts. Notwithstanding anything to the contrary
contained in these Regulations, and notwithstanding any custom or rule of law
to the contrary, to the extent that the deficit, if any, in the capital account
of any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
money pursuant to these Regulations to all Members in proportion to their
respective Sharing Ratios, upon dissolution of the Company such deficit shall
not be an asset of the Company and such Members shall not be obligated to
contribute such amount to the Company to bring the balance of such Member's
capital account to zero.
12.04 Articles of Dissolution. On completion of the distribution of
Company assets as provided herein, the Company is terminated, and the Managers
(or such other Person or Persons as the Act may require or permit) shall file
Articles of Dissolution with the Secretary of State of Texas, cancel any other
filings made pursuant to Section 2.05, and take such other actions as any be
necessary to terminate the Company.
ARTICLE XIII
GENERAL PROVISIONS
13.01 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that Member owes the Company may be deducted from that sum before
payment.
13.02 Notices. Except as expressly set forth to the contrary in these
Regulations, all notices, requests, or consents provided for or permitted to be
given under these Regulations must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under these Regulations is
effective on receipt by the Person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the addresses given
for that Member on Exhibit A or in the instrument described in Section 3.03(d)
or 3.04, or such other address as that Member may specify
30
by notice to the other Members. Any notice, request, or consent to the Company
or the Members must be given to the Members at the following address: 1900 S.
Coulter, Suite E, Amarillo, Texas 79106. Whenever any notice is required to be
given by law, the Articles or these Regulations, a written waiver thereof,
signed by the Person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
13.03 Entire Agreement; Supersedure. These Regulations constitute the
entire agreement of the Members and their Affiliates relating to the Company and
supersedes all prior contracts or agreements with respect to the Company,
whether oral or written.
13.04 Effect of Waiver of Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any
Person or to declare any Person in default with respect to the Company,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run.
13.05 Amendment or Modification. These Regulations may be amended or
modified from time to time only by a written instrument adopted by the Managers
and executed and agreed to by a Required Interest; provided, however, that (a)
an amendment or modification reducing a Member's Sharing Ratio or increasing its
Commitment (other than to reflect changes otherwise provided by these
Regulations) is effective only with that Member's consent, (b) an amendment or
modification reducing the required Sharing Ratio or other measure for any
consent or vote in these Regulations is effective only with the consent or vote
of Members having the Sharing Ratio or other measure theretofore required, and
(c) amendments of the type described in Section 3.04 may be adopted a therein
provided.
13.06 Binding Effect. Subject to the restrictions on Dispositions set
forth in these Regulations, these Regulations are binding on and inure to the
benefit of the Members and their respective heirs, legal representatives,
successors, and assigns.
13.07 Governing Law; Severability. THESE REGULATIONS ARE GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS, EXCLUDING
ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THESE REGULATIONS TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict betweeen the provisions of these Regulations.
31
and (a) any provision of the Articles, of (b) any mandatory provision of the Act
or (to the extent such statutes are incorporated into the Act) the TBCA or the
Texas Miscellaneous Corporation Laws Act, the application provision of the
Articles, the Act, the TBCA or the Texas Miscellaneous Corporation Laws Act
shall control. If any provision of these Regulations or the application thereof
to any Person or circumstance is held invalid or unenforceable to any extent,
the remainder of these Regulations and the application of that provision to
other Persons or circumstances is not affected thereby and that provision shall
be enforced to the greatest extent permitted by law.
13.08 Further Assurances. In connection with these Regulations and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of these
Regulations and those transactions.
13.09 Waiver of Certain Rights. Each Member irrevocably waives any right
it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
13.10 Indemnification. To the fullest extent permitted by law, each Member
shall indemnify the Company, each Manager and each other Member and hold them
harmless from and against all losses, costs, liabilities, damages, and expenses
including, without limitation, costs of suit and attorney's fees) they may
incur on account of any breach by that Member of these Regulations.
13.11 Notice to Members of Provisions of this Agreement. By executing
these Regulations, each Member acknowledges that it has actual notice of (a) all
of the provisions of this Agreement, including, without limitation, the
restrictions on the transfer of Membership Interest set forth in Article III,
and (b) all of the provisions of the Articles, [including, without limitation,
the fact that the Articles provide that no Member shall have the preemptive
right to acquire any Membership Interest or securities of any class that may at
any time be issued, sold or offered for sale by the Company]. Each Member hereby
agrees that these Regulations constitute adequate notice of all such provisions,
including, without limitation, any notice requirement under Article 2.19(D) of
the TBCA and Chapter 8 of the Texas Uniform Commercial Code, and each Member
hereby waives any requirement that any further notice thereunder be given.
13.12 Counterparts. These Regulations may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
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IN WITNESS WHEREOF, following adoption of these Regulations by the Manager,
the Members have executed these Regulations as of the date first set forth
above.
MEMBERS
HOME DIALYSIS OF AMERICA, INC.
By: /s/ Martin Fox
---------------------------------
Martin Fox
Title: President
------------------------------
Date of Execution: 12-27-94
------------------
By: /s/ Georges Maliha, M. D.
---------------------------------
Georges Maliha, M. D.
Date: 10.14.94
-------------------------------
By: /s/ Milton Giron
---------------------------------
Milton Giron, M. D.
Date: 12/14/94
-------------------------------
By: /s/ William C. Biggs
----------------------------------
William C. Biggs, M. D.
Date: 12-13-94
--------------------------------
33
EXHIBIT A
Name, Address and Initial Capital
Contribution of Each Member Commitment Sharing Ratio
- --------------------------------- ---------- -------------
Georges Maliha, M.D.
1900 S. Coulter, Suite E
Amarillo, Texas 79106 $_________ 30%
Milton Giron, M.D.
1900 S. Coulter, Suite E
Amarillo, Texas 79106 $_________ 30%
Home Dialysis of America, Inc.
6420 East Broadway, Suite B-103
Tucson, Arizona 85710 $_________ 30%
William Biggs, M. D.
1900 S. Coulter, Suite O
Amarillo, Texas 79106 $_________ 30%
34