TUSCARAWAS OPEN MRI, L.P.
AN OHIO LIMITED PARTNERSHIP
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OCTOBER 1, 2005
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TABLE OF CONTENTS
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ARTICLE I
ORGANIZATIONAL POWERS AND
PURPOSE..........................................................1
1.1
Organization...................................................................................1
1.2 Purpose of
the
Partnership.....................................................................2
1.3
Powers.........................................................................................2
1.4
Partners.......................................................................................3
1.5 Classes of
Limited
Partnership.................................................................5
1.6
Permissible
Relationships......................................................................5
ARTICLE II
CAPITAL CONTRIBUTIONS AND LIABILITY OF LIMITED
PARTNERS....................................6
2.1 Capital
Accounts...............................................................................6
2.2 Capital
Contributions..........................................................................6
2.3 Percentage
Interests...........................................................................6
2.4 Additional
Limited Partnership
Interests.......................................................6
2.5 Additional
Capital
Contributions...............................................................7
2.6
Loans..........................................................................................7
2.7 No
Withdrawal of or Interest on
Capital........................................................7
2.8 Liability
of Limited
Partners..................................................................7
2.9 Investment
Through
Trust.......................................................................7
ARTICLE III
ADDITIONAL
CAPITAL.........................................................................8
3.1 Funding
Capital
Requirements...................................................................8
3.2 Third
Party
Liabilities........................................................................8
ARTICLE IV
DISTRIBUTIONS; PROFITS AND
LOSSES..........................................................8
4.1
Distribution of Partnership Funds - In
General.................................................8
4.2
Distribution Upon
Dissolution..................................................................9
4.3
Distribution of Assets in
Kind.................................................................9
4.4 Allocation
of Profits and
Losses...............................................................9
4.5 Required
Regulatory
Allocations................................................................9
4.6 Curative
Allocations..........................................................................11
4.7 Tax
Allocations and Book
Allocations..........................................................11
4.8 General
Allocation and Distribution
Rules.....................................................12
4.9 Tax
Withholding...............................................................................12
ARTICLE V
MANAGEMENT................................................................................13
5.1 Management
of the
Partnership.................................................................13
5.2 Right of
General Partner to
Consolidate.......................................................14
5.3
Restrictions..................................................................................15
5.4 Prohibited
Acts of General
Partner............................................................15
5.5 Binding
the
Partnership.......................................................................15
5.6
Compensation of
Partners......................................................................16
5.7 Management
Contract...........................................................................16
5.8
Indemnification...............................................................................17
5.9 Other
Activities..............................................................................18
5.10
Meetings of the
Partners......................................................................18
5.11
Tax Matters
Partner...........................................................................19
5.12
Power of
Attorney.............................................................................19
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TABLE OF CONTENTS
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ARTICLE VI
FISCAL
MATTERS............................................................................20
6.1 Books and
Records.............................................................................20
6.2 Bank
Accounts.................................................................................20
6.3 Fiscal
Year...................................................................................21
ARTICLE VII
TRANSFER AND REDEMPTION OF UNITS AND ADMISSION OF NEW
PARTNERS............................21
7.1 General
Provisions Regarding
Transfers........................................................21
7.2
Requirements for
Transfer.....................................................................21
7.3
Redemptions...................................................................................22
7.4 Compliance
with Current Legislation; Subsequent
Legislation...................................26
7.5 Removal of
a
Partner..........................................................................27
7.6
Noncompetition................................................................................27
7.7 Non
Solicitation..............................................................................29
7.8
Confidentiality...............................................................................29
7.9 Change in
Control.............................................................................30
7.10
Optional Call Rights of General
Partner.......................................................31
ARTICLE VIII
DISSOLUTION AND
TERMINATION...............................................................31
8.1 Events
Causing
Dissolution....................................................................31
8.2 Procedures
on
Dissolution.....................................................................31
ARTICLE IX
GENERAL
PROVISIONS........................................................................32
9.1
Notices.......................................................................................32
9.2 Word
Meanings.................................................................................32
9.3 Binding
Provisions............................................................................32
9.4 Applicable
Law;
Venue.........................................................................32
9.5 Entire
Agreement;
Counterparts................................................................32
9.6
Separability of
Provisions....................................................................33
9.7 Section
Titles................................................................................33
9.8
Amendments....................................................................................33
9.9 Waiver of
Partition...........................................................................34
9.10
Survival of Certain
Provisions................................................................34
9.11
Attorneys'
Fees...............................................................................34
9.12
Force
Majeure.................................................................................34
ARTICLE X
DISCLOSURE
REQUIREMENTS...................................................................35
ARTICLE XI
DEFINITIONS...............................................................................35
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TUSCARAWAS OPEN MRI, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
THIS AMENDED
AND RESTATED LIMITED PARTNERSHIP AGREEMENT (the
"AGREEMENT") is made and entered into as of October 1, 2005 (the "EFFECTIVE
DATE") by and among Union Hospital,
an Ohio nonprofit
corporation (referred
to
herein as the "GENERAL PARTNER" or the "HOSPITAL") and the those Persons
identified on SCHEDULE I annexed
hereto and
incorporated
herein (the
"LIMITED
PARTNERS"). The Limited Partners and the General Partner are collectively
referred to as the "PARTNERS." Except as otherwise provided or defined herein,
the capitalized terms used in this Agreement shall
have the meanings set forth
in Article XI hereof.
RECITALS
WHEREAS, the parties
hereto (or their
predecessors) formed a
limited
partnership, TUSCARAWAS OPEN MRI, LP, under and pursuant to the Ohio
Limited
Partnership Act on November 7, 2003 (the "ORGANIZATION DATE"), enacted as
Chapter 1782 of the Act, in order to
operate a diagnostic imaging center located
at 340 Oxford Street, Suite 30, Dover, Ohio and arrange for the
delivery of
diagnostic imaging services, and to engage in other
activities in
connection
therewith which are necessary or beneficial in
delivering or arranging for the
delivery of such diagnostic imaging
services (the "PARTNERSHIP"); and
WHEREAS, the General Partner and the Limited Partners identified on
the
signature page hereof, who own a majority of the UNITS (hereafter defined)
outstanding as of the date hereof and thus can give the
Consent of the Limited
Partners, desire to amend and restate certain terms and conditions of the
Partnership all as more particularly set
forth below.
NOW, THEREFORE,
in consideration of the mutual covenants herein
expressed, and for other good and valuable consideration, the receipt and
adequacy of which are hereby conclusively acknowledged, the parties hereto
desiring to become legally bound, hereby
agree to amend that Limited Partnership
Agreement, as follows:
ARTICLE I
ORGANIZATIONAL POWERS AND PURPOSE
1.1 ORGANIZATION.
The General Partner
(or its predecessor)
executed a
certificate
of
limited partnership and caused the same to be filed for record with the
Secretary of State of the State of Ohio in
accordance with the provisions of the
Act. The General Partner shall file such other certificates and documents as
appropriate to comply with the applicable
requirements
for the operation of
a
limited partnership in accordance with the
laws of any
jurisdictions in
which
the Partnership shall conduct business and shall continue to do
so as long as
the Partnership conducts business therein. The
Partnership may establish places
of business within and without the State of
Ohio, as and when
required by its
business and in furtherance of its purposes
set forth in Section 1.2 hereof, and
may appoint agents for service of process in all
jurisdictions
in which the
Partnership shall conduct business. The
Partnership may from time to time change
its name, its Agent, the location of its registered office, the general
character of its business and/or any other
matter described in the Certificate.
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1.2 PURPOSE OF THE PARTNERSHIP.
The Partnership is organized for the general purposes of (i) operating
a diagnostic imaging center (the "CENTER") and arranging for the delivery
of
diagnostic imaging services, (ii) engaging in other
activities in
connection
therewith which are necessary or beneficial in
delivering or arranging for the
delivery of such diagnostic imaging services, and (iii) engaging in any
other
lawful business activity permitted under the Act consistent
with the foregoing.
The purpose of the Partnership is to
provide health care in a charitable manner
(consistent with the community benefit standards set forth in
Section 501(c)(3)
of the Internal Revenue Code). If there is a conflict between charitable
objectives and profit maximization when the Partners are making a
particular
decision, charitable operation will prevail over profit maximization. The
Partnership may not engage in activities
that would
jeopardize the
tax-exempt
status of the General Partner.
1.3 POWERS.
Subject to all other
provisions of this
Agreement, in
furtherance of
the conduct of the business of the Partnership, the Partnership is hereby
authorized:
(a) To acquire by
purchase, lease or
otherwise any real or personal
property which may be necessary,
convenient or
incidental to the accomplishment
of the purposes of the Partnership;
(b) To invest and
reinvest in
securities
or any property, real or
personal, or any businesses, partnerships
or joint ventures;
(c) To construct,
operate, maintain, finance and improve, and own,
sell, convey, assign or lease any real estate
improvements and/or
any personal
property;
(d) To borrow money and issue evidences of indebtedness in
furtherance
of any or all of the purposes of the Partnership, and to secure the same by
mortgage, pledge or other loan on any of
the assets of the Partnership;
(e) To guarantee
the repayment of the
loans of other
parties, and to
secure the same by mortgage, pledge or other loan on any of the
assets of the
Partnership;
(f) To the extent that funds of the Partnership are available, to pay
all expenses, debts and obligations of the
Partnership;
(g) To prepay, in
whole or in part,
refinance or modify
any mortgage
affecting any assets of the
Partnership;
(h) To employ Persons, including Affiliated Persons, to provide
advisory, administrative, professional and other services to the
Partnership,
and to pay reasonable compensation for such
services;
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(i) To enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in
connection with, or
incidental to the
accomplishment of, the purposes of the
Partnership, so long
as said activities
and contracts may be lawfully carried on or performed by a
limited
partnership
under the laws of the State of Ohio;
(j) To sell,
convey and assign any or all of the assets of the
Partnership in the ordinary course of
business and to take all other appropriate
actions in connection with the dissolution
or liquidation of the Partnership;
(k) To enter into, execute, modify, amend, supplement, acknowledge,
deliver, perform and carry out contracts of
any kind, including, but not limited
to, any of the following:
(i) any and
all agreements, certificates, instruments or
documents required by any mortgagee
from time to time in
connection
with the
acquisition, ownership, development and operation of any of the assets
of the
Partnership;
(ii) any deed, lease,
mortgage, mortgage
note, bill of sale,
contract or any other instrument purporting to convey or encumber any of the
assets of the Partnership;
(iii) any and
all instruments or documents requisite to
carrying out the intention and purpose of this Agreement, including, without
limitation, the filing of all business
certificates, all
amendments thereto and
documents deemed advisable by the General Partner
in connection with obtaining
or maintaining any financing arrangements for any of the assets of the
Partnership;
(iv) any and all
agreements,
contracts,
documents,
notes,
certificates and instruments whatsoever
involving the construction, development,
management, maintenance and operation of any
of the assets of the
Partnership;
and
(v) any and all operating agreements or regulations of limited
liability companies, whether as a member or manager,
joint venture, limited and
general partnership agreements,
guarantees, and
contracts establishing business
arrangements or organizations, necessary to, in connection with,
or incidental
to the accomplishment of the purposes of
the Partnership; and
(l) To take any other
action not prohibited under the Act or other
applicable law.
1.4 PARTNERS. Only the following Persons may become Partners:
(a) the Hospital;
(b) POTENTIAL REFERRING LIMITED PARTNERS, which shall mean:
(i) an individual
who: (A) is a bona fide resident of the
State of Ohio; (B) is licensed by the State of
Ohio either as medical doctor or
doctor of osteopathy; (C) is actively practicing
full-time clinical medicine in
Tuscarawas County, Ohio; and (D) is in a
position to make or influence referrals
to, furnish items or services to, or
otherwise generate business for the Center;
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(ii) certain
Ohio
professional
corporations,
business
corporations, limited liability companies,
limited partnerships,
professional
partnerships or pension plans that for
business reasons have been established or
are being used as an investment entity or
"vehicle" for purposes of investing in
the Partnership, or that constitute a group
practice of physicians under Federal
"Stark II" law's definition of a "group
practice," if any of
the shareholders,
partners, members, principal beneficiaries,
physician-owners, physician-members,
physician-employees, and physician-beneficiaries,
as applicable (each,
individually a "DESIGNATED PRINCIPal" and collectively the "DESIGNATED
PRINCIPALS") that effectively own or control such entity are
individuals
as
described in Section 1.4(b)(i); provided the entity identifies its Designated
Principals at the time of investment, and the entity and its Designated
Principals represent and agree, at the time of investment, that each of the
entity's Designated Principals meets all the
requirements of Section 1.4(c)(i)
and agrees to be bound as a "Partner" to
all terms of this Agreement; or
(iii) certain
retirement
or other trusts
primarily for the
benefit of any individual described in
Section 1.4(b)(i);
provided such plan or
trust designates at the time of investment, an individual ("DESIGNATED
Principal") meeting the requirements of
Section 1.4(c)(i) and agrees to be bound
as a "Partner" to all terms of this
Agreement; or
(c) NON-REFERRING LIMITED PARTNERS, which shall mean:
(i)
an individual
who: (A) is a bona fide resident of the
State of Ohio; (B) is licensed by the State of
Ohio either as medical doctor or
doctor of osteopathy; and (C) is NOT in a position to make or influence
referrals to, furnish items or services to,
or otherwise generate
business for
the Center;
(ii) certain
Ohio
professional
corporations,
business
corporations, limited liability companies,
limited partnerships,
professional
partnerships or pension plans that for
business reasons have been established or
are being used as an investment entity or
"vehicle" for purposes of investing in
the Partnership, or that constitute a group
practice of physicians under Federal
"Stark II" law's definition of a "group practice," so long as all of the
shareholders, partners, members, principal beneficiaries, physician-owners,
physician-members, physician-employees,
and physician-beneficiaries,
as
applicable (each, individually a "DESIGNATED
PRINCIPAL" and
collectively the
"DESIGNATED PRINCIPALS") that effectively own or control such entity are
individuals as described in Section
1.4(c)(i);
provided the entity
identifies
its Designated Principals at the time of investment, and the entity and its
Designated Principals represent and agree,
at the time of investment, that each
of the entity's Designated Principals meets all the requirements of Section
1.4(c)(i) and such person or persons
continue(s) to meet such requirements, and
agrees to be bound as a "Partner" to all
terms of this Agreement; or
(iii) certain
retirement
or other trusts
primarily for the
benefit of only individuals described in Section 1.4(c)(i);
provided such plan
or trust designates at the time of investment, an individual ("DESIGNATED
Principal") meeting the requirements of Section 1.4(c)(i) and such person
continues to meet such requirements and
agrees to be bound as a "Partner" to all
terms of this Agreement.
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Potential Referring Limited Partners and Non-Referring Limited
Partners
are at times collectively referred to as
"PHYSICIAN LIMITED PARTNERS"; or
(d) Any Person upon the Approval of the General Partner.
1.5 CLASSES OF LIMITED
PARTNERSHIP. There
shall initially be one
(1)
authorized class of Limited Partners.
The General Partner,
however, shall
have
the authority to create additional classes
of Limited Partners.
1.6 PERMISSIBLE
RELATIONSHIPS.
The Physician Limited Partners
understand that the Partnership's operations are subject to various
state and
federal laws regulating permissible
relationships between
the Physician Limited
Partners and entities such as the General
Partner and the Partnership, including
42 U.S.C. ss. 1320a-7b(b) (the "ANTI-KICKBACK STATUTE" or "FRAUD AND ABUSE
STATUTE"), and 42 U.S.C. ss. 1395nn (the "STARK ACT" or
"STARK II"). It is the
intent of the parties that the Partnership
operate in a manner
consistent with
the foregoing statutes, fall within the Fraud and Abuse
Statute safe harbors,
and comply with the rural exception to the Stark Act. Accordingly, each
Physician Limited Partner represents and warrants, upon his, her or its
investment herein and throughout the entire
period of his, her or its ownership
of Units, that he, she or it (i) has not received loans, or had loans
guaranteed, for the purpose of investing in the Partnership from or by the
Partnership, General Partner, nor any other investor in the
Partnership,
and
that to his, her or its knowledge, the purchase price for the Units is not
related to the previous or expected volume
of referrals, services
furnished or
the amount of business otherwise
generated by him, her
or it; (ii) has not been
excluded or suspended from participation in the Medicare and/or Medicaid
programs; and (iii) shall treat patients receiving medical benefits or
assistance under any Federal health care
program in a nondiscriminatory manner.
Each Potential Referring Limited Partner further
represents and
warrants that
he, she or it, (i) upon his, her or its investment herein, has provided the
Partnership a certified statement which sets forth all of the zip
codes from
which the Potential Referring Limited Partner derives his, her
or its Medicare
patients and the percentage of Medicare
patients derived from each such zip code
listed on such certified statement, and that such statement is true,
accurate
and complete; (ii) throughout the entire period
of his, her or its ownership of
Units, shall provide the Partnership, on a monthly basis, with certified
statements setting forth all the zip codes
from which the
Potential
Referring
Limited Partner derives his, her or its
Medicare patients and
the percentage of
Medicare patients derived from each such zip code;
and (iii) throughout the
entire period of his, her or its
ownership of Units, shall fully inform each
patient prior to referring such patient to the Center,
in a manner
compliant
with Ohio law, of his, her or its investment interest in the Center. Each
Non-Referring Limited Partner further
represents and warrants, upon his, her or
its investment herein and throughout the entire period of his, her or its
ownership of Units, that he, she or it
shall not make or influence any referrals
to, furnish any items or services to, or
otherwise generate any business for the
Center.
The Potential
Referring Limited Partners acknowledge that their ability
to invest in the Partnership and make referrals to the Center is
dependent on
the Center being located in a "rural area," as defined under the Stark
Act and
regulations promulgated thereunder, and the Partnership complying with the
additional requirements of the rural
exception to the Stark Act and regulations
promulgated thereunder. As of the Organization
Date, the Center is
located in
Tuscarawas County, Ohio, and Tuscarawas County, Ohio
is deemed a rural area for
purposes of the Stark Act. If in the future, the Center is not located in a
rural area, or the status of Tuscarawas
County as a rural area is changed, or in
the event the Partnership no longer
complies with the additional requirements of
the rural exception to the Stark Act, then
the Partnership shall (1) immediately
stop submitting bills or claims to Medicare
for "designated health services" (as
defined in the Stark Act) furnished by the Center until the Partnership is
reasonably assured that it will satisfy the rural exception to the Stark Act
prospectively; (2) cancel any bills or claims to
Medicare for designated health
services that have already been processed or submitted by or on
behalf of the
Partnership for any calendar month (or monthly billing cycle) during which,
based on a review of patient data, the Partnership did not satisfy the rural
exception to the Stark Act; (3)
immediately
stop providing
designated
health
services to any Medicare patients of the Center that are
referred by Potential
Referring Limited Partners until the
Partnership is reasonably assured that it
will satisfy the rural exception to the Stark Act
prospectively;
and (4) take
such additional actions as set forth in Section 7.4 herein, unless such
designated health services may be provided and
billed for in
compliance with
another applicable exception to the Stark Act, the regulations promulgated
thereunder, or any successor statute and/or
regulations thereto.
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ARTICLE II
CAPITAL CONTRIBUTIONS AND LIABILITY OF LIMITED PARTNERS
2.1 CAPITAL ACCOUNTS.
A separate
Capital Account shall
be maintained
for each Partner, including any Partner who shall
hereafter acquire a Unit in
the Partnership.
2.2 CAPITAL CONTRIBUTIONS. The initial General Partner and each
initial
Limited Partner contributed the requested
amount as Capital
Contribution
for
their respective Units.
2.3 PERCENTAGE
INTERESTS. Schedule I
sets forth the name(s) of all of
the Partners, the number of Units owned and their respective PERCENTAGE
INTERESTS. Schedule I shall be updated by the General Partner upon the
admittance of additional Partners.
2.4 ADDITIONAL LIMITED PARTNERSHIP INTERESTS.
The General
Partner, in its sole discretion, may issue additional
Limited Partnership Units at such price as determined
by the General
Partner;
provided however, the General Partner
shall, at all times, retain at least a one
percent (1%) Percentage Interest in the
Partnership (by an automatic increase in
the General Partner's Units to ensure
maintenance of such
percentage), and
all
dilution shall be effected pro-rata among the Limited
Partners. The Partners
further agree and acknowledge that it is the intent of the parties for the
Hospital to retain at least a seventy
percent (70%)
Percentage Interest in
the
Partnership (inclusive of the General Partnership Interest). Additional
physicians may be added as Limited
Partners pursuant to Transfer(s) of
Limited
Partnership Units from the then current Physician Limited Partners to the
additional physicians upon the Majority Consent of the Physician Limited
Partners, which consent shall not be
unreasonably withheld. Should the Physician
Limited Partners agree to additional physicians being admitted as Limited
Partners, then the Physician Limited Partners shall sell their Limited
Partnership Units to the additional
physicians on a pro
rata basis, so that the
Hospital shall remain the owner of at least seventy percent (70%) of the
Partnership.
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2.5 ADDITIONAL CAPITAL CONTRIBUTIONS.
No Partner is required to make additional Capital Contributions,
unless
he, she or it consents to making such
additional Capital Contributions.
2.6 LOANS.
Except as set forth in
Article III,
no Partner shall be entitled,
obligated or required to make any loan to
the Partnership
in addition to
his,
her or its Capital Contribution made pursuant to
Section 2.2, unless he, she or
it consents to making such a loan. No loan made to the Partnership by any
Partner shall constitute a Capital Contribution to the Partnership for any
purpose.
2.7 NO WITHDRAWAL OF OR INTEREST ON CAPITAL.
Except as otherwise
provided in this Agreement, no Partner shall have
the right to resign from the Partnership and to receive any
distribution
from
the Partnership as a result of such
resignation,
and no Partner shall
have the
right to receive the return of all or any part of his,
her, or its Capital
Contribution or Capital Account, or any other distribution, except with the
Approval of the General Partner or as
specifically
provided in this
Agreement.
Except as otherwise provided in this Agreement, (i) no Partner shall have any
right to demand and receive property of the Partnership in exchange for all
or
any portion of his, her, or its Capital
Contribution
or Capital
Account, and
(ii) no interest or preferred return shall accrue or be paid on any
Capital
Contribution or Capital Account.
2.8 LIABILITY OF LIMITED PARTNERS.
No Limited Partner, in
his, her, or its capacity as a Limited Partner,
shall have any liability to restore any negative
balance in his,
her, or its
Capital Account or to contribute
to, or in respect of,
the liabilities or
the
obligations of the Partnership,
or to restore any
amounts distributed
from the
Partnership, except as may be required under
the Act or other
applicable law.
Except to the extent otherwise provided by applicable law or as otherwise
provided for herein, no Limited Partner, in his, her, or its capacity as a
Limited Partner, shall be personally liable for any liabilities or
obligations
of the Partnership.
2.9 INVESTMENT THROUGH TRUST.
Subject to Article VII, any Limited Partner ("TRANSFEROR") who places
or has placed his, her or its Units in a
trust or other estate planning vehicle
("TRANSFEREE") hereby acknowledges and agrees that such Transferor and the
Transferee shall remain bound by all of the terms and provisions of this
Agreement, including without limitation, all eligibility requirements, the
indemnification provision in Section 5.8 and the
non-competition
provision in
Section 7.6 (i.e., even though the Transferor
does not individually hold the
Units, such Transferor shall remain bound
by the provisions of this Agreement as
if the Transferor held the Units as an individual rather than through the
Transferee). If a Unit Redemption Event should occur with respect to such
Transferor, the Transferee as a whole will be
treated as having suffered a Unit
Redemption Event, and the Partnership or
General Partner, as
applicable, shall
redeem one hundred percent (100%) of the
Transferee's
Units in the
Partnership
consistent with this Agreement. Such Transferor and Transferee further
acknowledge and agree to provide such information and to execute and deliver
such documents as the Partnership may deem to be necessary or desirable to
comply with this Section 2.9.
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ARTICLE III
ADDITIONAL CAPITAL
3.1 FUNDING CAPITAL REQUIREMENTS.
(a) In the event that
the Partnership
requires additional funds to
carry out its purposes, to conduct its
business, or to meet its obligations, the
Partnership may borrow funds from such
lender(s),
including Partners, and on
such terms and conditions as are determined by the Approval of the General
Partner. It is specifically provided that no such terms or
conditions
shall
impose any personal liability on any Limited
Partner without the
prior written
consent of such Partner. In addition, terms
and conditions of loans from Limited
Partners (if any) shall be consistent with fair market value in arms-length
transactions, and shall not be determined in a manner that takes into
account
the volume or value of any referrals or business otherwise generated to the
Partnership or the Center by such Limited
Partner.
(b) No Partner
shall be obligated to make any additional Capital
Contributions or loans to the Partnership,
or otherwise supply or make available
any funds to the Partnership, even if the failure to do so would
result in a
default of any of the Partnership's obligations or the loss or termination of
all or any part of the Partnership's assets
or business.
3.2 THIRD PARTY LIABILITIES.
The provisions of this
Article III and of Section 2.2 are not intended
to be for the benefit of any creditor or
other Person
(other than a Partner
in
his, her, or its capacity as a Partner) to whom any debts, liabilities or
obligations are owed by (or who otherwise
has any claim against) the Partnership
or any of the Partners. Moreover, notwithstanding anything contained in this
Agreement, including specifically but without
limitation this
Article III, no
such creditor or other Person
shall obtain any
rights under this
Agreement or
shall, by reason of this Agreement, make any claim in respect of any debt,
liability or obligation (or otherwise)
against the
Partnership or any
Partner.
Except as set forth in Section 3.1(a) above, no Partner shall be required to
guaranty any third party obligations
without the Consent of the Limited Partners
and Approval of the General Partner.
ARTICLE IV
DISTRIBUTIONS; PROFITS AND LOSSES
4.1 DISTRIBUTION OF PARTNERSHIP FUNDS - IN GENERAL.
(a) Except as
necessary to comply with the following Section 4.2 and
Section 4.9, all NET OPERATING CASH Flow of the Partnership over and above
REASONABLE RESERVES shall be distributed at
least annually to the Partners on a
pro rata basis, based on the proportion of Units
then held by each such Partner
to the total number of Units then issued
and outstanding.
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(b) Except as
necessary to comply with the following Section 4.2 and
Section 4.9, all other cash flow of the
Partnership shall be
distributed among
the Partners of the Partnership as may be
determined by the General Partner.
4.2 DISTRIBUTION
UPON DISSOLUTION.
Proceeds from a TERMINATING CAPITAL TRANSACTION and/or other
amounts or
assets available upon dissolution,
and after payment of,
or adequate
provision
for, the debts and obligations of the Partnership, shall be distributed and
applied in the following priority:
(a) First, to fund
reserves for liabilities not then due and owing and
for contingent liabilities to the extent deemed reasonable by Approval of the
General Partner, provided that, upon the
expiration of such period of time as is
determined by Approval of the General
Partner to be
advisable,
the balance of
such reserves remaining after payment of
such contingencies shall be distributed
in the manner hereinafter set forth in this
Section; and
(b) Second,
to the Partners, an amount sufficient to reduce the
Partners' Capital Accounts to zero, in proportion to
the positive balances
in
such Capital Accounts (after reflecting in
such Capital Accounts all adjustments
thereto necessitated by (i) all other
Partnership
transactions
(distributions
and allocations of Profits and Losses and
items of income, gain,
deduction and
loss) and (ii) such Terminating Capital
Transaction).
4.3 DISTRIBUTION OF ASSETS IN KIND.
No Partner
shall have the right
to require any
distribution
of any
assets of the Partnership in kind. If any assets of the Partnership are
distributed in kind, such assets shall be distributed
at the sole discretion of
the General Partner on the basis of their
respective
fair market values as
determined by the Approval of the General
Partner. Any Partner entitled to any
interest in such assets shall, unless otherwise determined by the Approval of
the General Partner, receive separate assets of the Partnership and not an
interest as tenant-in-common, with other Partners so entitled, in each asset
being distributed.
4.4 ALLOCATION OF PROFITS AND LOSSES.
After giving effect to
the allocations
set forth in Sections
4.5 and
4.6 which affect the Partners' distributive shares, Profits and
Losses shall be
allocated among the Partners on a pro rata
basis, based on the
proportion
of
Units then held by each such Partner to the total number of Units then issued
and outstanding.
4.5 REQUIRED REGULATORY ALLOCATIONS.
(a) LIMITATION
ON AND REALLOCATION OF LOSSES. At no time shall any
allocations of Losses, or any item of loss
or deduction, be made to a Partner if
and to the extent such allocation would cause such Partner to have, or would
increase the deficit in, any Adjusted
Capital Account Deficit of such Partner at
the end of any fiscal year. To the extent any Losses or items
are not allocated
to one or more Partners pursuant to the
preceding sentence, such Losses shall be
allocated to the Partners to which such
losses or items may be allocated without
violation of this Section 4.5(a).
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<PAGE>
(b) MINIMUM GAIN CHARGEBACK. If there is a net decrease in the
MINIMUM
GAIN of the Partnership during any fiscal
year, then items of income and gain of
the Partnership for such fiscal year (and,
if necessary, subsequent fiscal
years) shall be allocated to each Partner in an
amount equal to such
Partner's
share of the net decrease in the Minimum
Gain, determined
in accordance with
Treasury Regulations Section 1.704-2(d)(1). A Partner's share of the net
decrease in the Minimum Gain of the Partnership shall be determined in
accordance with Treasury Regulations
Section 1.704-2(g). The items of income and
gain to be so allocated shall be determined in accordance with Treasury
Regulations Section 1.704-2(j)(2)(i).
(c) NONRECOURSE DEDUCTIONS. NONRECOURSE DEDUCTIONS for any
fiscal year
or other period (not including any Partner Nonrecourse Deductions allocated
pursuant to Section 4.5(d)) shall be allocated among
the Partners on a pro rata
basis, based on the proportion of Units then held by each such
Partner to the
total number of Units then issued and outstanding. Solely for purposes of
determining each Partner's proportionate share of the "excess nonrecourse
liabilities" of the Partnership, within the meaning of Treasury Regulations
Section 1.752-3(a)(3), the Partnership Profits shall be allocated
among the
Partners on a pro rata basis, based on the
proportion of Units then held by each
such Partner to the total number of Units
then issued and outstanding. The items
of losses, deductions and Code Section 705(a)(2)(B) expenditures to be so
allocated shall be determined in accordance
with Treasury
Regulations
Section
1.704-2(j)(1)(ii).
(d) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions
for any fiscal year or other period shall be allocated to the
Partner who bears
the economic risk of loss with respect to the nonrecourse liability, as
determined and defined under Treasury
Regulations
Section 1.704-2(b)(4), to
which such Partner Nonrecourse Deductions are attributable in accordance
with
Treasury Regulations Section 1.704-2(i)(1).
The items of losses,
deductions and
Code Section 705(a)(2)(b) expenditures to
be so allocated shall be determined in
accordance with Treasury Regulations
Section 1.704-2(j)(1)(ii).
(e) PARTNER MINIMUM
GAIN CHARGEBACK. Notwithstanding any contrary
provisions of this Article IV, other than
Section 4.5(b)
above, if there is a
net decrease in Partner Minimum Gain
attributable to
Partner Nonrecourse
Debt
during any fiscal year, then each Partner who has a share of such
Partner
Minimum Gain, determined in accordance with Treasury Regulations Section
1.704-2(i), shall be allocated items of income and gain of the Partnership,
determined in accordance with Treasury
Regulations
Section 1.704-2(j)(2)(ii),
for such fiscal year (and, if necessary,
subsequent
fiscal years) in an
amount
equal to each such Partner's share of the net decrease in such
Partner Minimum
Gain, determined in accordance with
Treasury Regulations Section 1.704-2(i)(3)
and 2(i)(5).
(f) QUALIFIED INCOME OFFSET. If any Partner unexpectedly receives an
item described in Treasury Regulations
Section
1.704-1(b)(2)(ii)(d)(4), (5) or
(6), items of Partnership income and gain shall be allocated to each such
Partner in an amount and manner sufficient
to eliminate, as
quickly as possible
and to the extent required by Treasury
Regulations Section 1.704-1(b)(2)(ii)(d),
the ADJUSTED CAPITAL ACCOUNT DEFICIT of such Partner, provided that an
allocation pursuant to this Section 4.5(f) shall only be made if and to
the
extent that such Partner would have an
Adjusted Capital
Account Deficit after
accounting for all other allocations
provided for in this
Article IV other than
that described in this Section 4.5(f).
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(g) BASIS ADJUSTMENT.
To the extent an
adjustment to the adjusted tax
basis of any Partnership asset pursuant to either of Code
Sections 734(b) or
743(b) is required to be taken into
account in
determining
Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), the amount of
such adjustment to the Capital Accounts shall be treated as an
item of gain (if
the adjustment increases the basis of the asset) or loss (if the
adjustment
decreases such basis) and such gain or loss
shall be allocated to
the Partners
in a manner consistent with the manner in which
their Capital Accounts are
required to be adjusted pursuant to said
Section of the Treasury Regulations.
(h) GROSS INCOME
ALLOCATION. If at the
end of any Partnership
fiscal
year any Partner has a Capital Account deficit which is in excess
of the sum of
the items to be credited to a Partner's
Capital Account under
clause (a) of the
definition of Adjusted Capital Account
Deficit, then each
such Partner shall be
allocated items of Partnership income and gain in the amount of
such excess as
quickly as possible provided that an
allocation pursuant to
this Section 4.5(h)
shall only be made if and to the extent
that such Partner
would have a
Capital
Account deficit in excess of such sum after
accounting for all other allocations
provided for in this Article IV other than that described in this Section
4.5(h). As among Partners having such
excess, if there are not sufficient items
of income and gain to eliminate all such
excess, such
allocations shall be made
in proportion to the amount of each
Partner's respective excess.
4.6 CURATIVE ALLOCATIONS.
The allocations
set forth in Section
4.5 are intended to
comply with
certain requirements of Treasury
Regulations Sections 1.704-1(b) and 1.704-2 and
shall be interpreted consistently therewith. Such allocations may not be
consistent with the manner in which the
Partners intend to
divide Partnership
distributions and to make Profit and Loss allocations. Accordingly, by the
Approval of the General Partner, after effecting the allocations required
pursuant to Section 4.5, other allocations
of Profits, Losses and
items thereof
shall be divided among the Partners so as
to prevent the
allocations in Section
4.5 from distorting the manner in which Partnership distributions will be
divided among the Partners pursuant to Sections 4.1 and 4.2
hereof. In general,
the Partners anticipate that this will be accomplished by specifically
allocating other Profits, Losses and items of income,
gain, loss and
deduction
among the Partners so that the net amount
of allocations
under Section 4.5
and
allocations under this Section 4.6 to each
such Partner is zero.
However, the
General Partner shall have discretion to accomplish this result in any
reasonable manner.
4.7 TAX ALLOCATIONS AND BOOK ALLOCATIONS.
(a) Except as
otherwise provided
in this Section 4.7, for federal
income tax purposes, each item of income,
gain, loss and deduction shall, to the
extent appropriate, be allocated among the Partners in the same
manner as its
correlative item of "book" income,
gain, loss or deduction has been
allocated
pursuant to the other provisions of this
Article IV.
(b) In accordance with Code Section 704(c) and the Treasury
Regulations
thereunder, depreciation, amortization, gain and loss, as determined
for tax
purposes, with respect to any property whose Book Value differs from its
adjusted basis for federal income tax purposes shall, for tax purposes, be
allocated among the Partners so as to take
account of any variation between the
adjusted basis of such property to the Partnership for federal income tax
purposes and its Book Value, such allocation to be made in any
manner which is
permissible under said Code Section 704(c) and the Treasury Regulations
thereunder.
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<PAGE>
(c) In the event the Book Value of any property of the Partnership is
subsequently adjusted, subsequent allocations of income, gain, loss and
deduction with respect to any such property shall take into account any
variation between the adjusted basis of such asset for federal income tax
purposes and its respective Book Value in the manner
provided under Section
704(c) of the Code and the Treasury
Regulations thereunder.
(d) Allocations
pursuant to this
Section 4.7 are solely
for federal,
state, and local income tax purposes, and shall not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of
Profits, Losses, other items, or
distributions pursuant to any provision of this
Agreement. Any election or other decisions relating to such allocations
(including any elections under Treasury Regulation Section 1.704-3) shall be
made by the General Partner in its sole
discretion.
4.8 GENERAL ALLOCATION AND DISTRIBUTION RULES.
(a) For purposes of determining the Profits, Losses, or any other
items
allocable to any period, Profits, Losses, and any such other items shall
be
determined on a daily, monthly, or other
basis, as determined by the Approval of
the General Partner using any permissible
method under Code
Section 706 and the
Treasury Regulations thereunder. Except as
otherwise provided in this Agreement,
all items of income, gain, loss, and deduction shall be allocated among the
Partners in the same proportions as the
allocations of Profits or Losses for the
fiscal year in which such items are to be
allocated.
(b) Upon the admission of a new Partner or the Transfer of a Unit,
the
new and old Partners or the transferor and
transferee shall be
allocated shares
of Profits and Losses and other allocations
and shall receive distributions, if
any, based on the portion of the fiscal year that the new or transferred
Partnership Unit was held by the new and old
Partners, or the
transferor
and
transferee, respectively. For the purpose of allocating
Profits and Losses and
other allocations and distributions, (i) such admission or Transfer
shall be
deemed to have occurred on the first day of
the month in which it occurs, or if
such date shall not be permitted for
allocation
purposes under the
Code or the
Treasury Regulations, on the nearest date otherwise
permitted under the Code or
the Treasury Regulations, and (ii) if required by the Code or the Treasury
Regulations, the Partnership shall close its books on an
interim basis on the
last day of the previous calendar
month.
4.9 TAX WITHHOLDING.
If the Partnership
incurs a withholding tax obligation with respect to
the share of income allocated to any Partner, (a) any amount which is (i)
actually withheld from a distribution that would otherwise have been made to
such Partner and (ii) paid over in satisfaction of such withholding tax
obligation shall be treated for all
purposes under this Agreement as if such
amount had been distributed to such
Partner, and (b) any amount which is so paid
over by the Partnership, but which exceeds
the amount, if any, actually withheld
from a distribution which would otherwise
have been made to such Partner, shall
be treated as an interest-free advance to such Partner. Amounts treated as
advanced to any Partner pursuant to this
Section shall be repaid by such Partner
to the Partnership within thirty (30) days
after the General Partner, acting by
Approval of the General Partner, gives notice to such Partner
making demand
therefor. Any amounts so advanced and not
timely repaid by such
Partner shall
bear interest, commencing on the expiration of said thirty (30) day
period,
compounded monthly on unpaid balances, at an annual rate equal to the lowest
Applicable Federal Rate as of such expiration date. The Partnership shall
collect any unpaid amounts so advanced from
any Partnership
distributions that
would otherwise be made to such
Partner.
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ARTICLE V
MANAGEMENT
5.1 MANAGEMENT OF THE PARTNERSHIP.
The overall management
and control of the
business and affairs of the
Partnership shall be vested in the General
Partner, acting by Approval of the
General Partner. All management and other
responsibilities
not specifically
reserved to the Limited Partners in this Agreement shall be vested in the
General Partner, and the Limited Partners shall
have no voting rights except as
specifically provided in this Agreement.
The General Partner
shall devote such
time, or shall cause its officers, directors, shareholders, and/or other
employees or agents to devote such time, to
the affairs of the Partnership as is
reasonably necessary for performance by the General Partner of its duties.
Except as otherwise specifically provided in Section 3.2 and
Section 5.3, the
General Partner shall have the right,
discretion, and power
to manage, operate,
and control the Partnership without any required consent, to do all things
necessary or appropriate to carry on the business and purposes of the
Partnership, including without limitation
the right:
(a) To manage
the business of the Partnership, including through
Persons employed by the Partnership for such purpose and
having the duties and
authority specified in this Agreement or delegated in writing by the
General
Partner;
(b) To execute,
deliver, make, modify or amend such documents and
instruments, in the name of the Partnership, as are determined by Approval
of
the General Partner to be necessary or desirable in connection with the
management of the business of the Partnership or for the purposes of the
Partnership;
(c) To acquire, sell, transfer, assign, finance, convey, lease,
mortgage or otherwise dispose of any asset of the Partnership, subject to
Section 5.3(b);
(d) To borrow money and otherwise obtain credit and other financial
accommodations;
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(e) To authorize
additional
Units or create
additional
classes of
Limited Partners;
(f) To perform
or cause to be performed all of the Partnership's
obligations under any agreement to which the
Partnership is a party, including
without limitation, any obligations of the Partnership
or otherwise in respect
of any indebtedness secured in whole or in part by, or
by lien on, or security
interest in, any asset(s) of the
Partnership;
(g) To employ,
engage, retain or deal with any Persons to act as
employees, agents, brokers, accountants, lawyers or in such other capacity
as
are determined by Approval of the General
Partner to be necessary or desirable;
(h) To appoint
individuals to act as officers of the Partnership and
delegate to such individuals such authority to act
on behalf of the Partnership
and such duties and functions as are determined by Approval of the General
Partner, including such duties as would normally be
delegated to officers of a
corporation holding similar offices;
(i) To adjust, compromise, settle or refer to arbitration any
claim in
favor of or against the Partnership or any
of its assets;
(j) To acquire and enter into any contract of insurance necessary or
proper for the protection of the Partnership and/or any Partner, including
without limitation to provide the indemnity described in Section 5.8 or any
portion thereof;
(k) To make
elections in connection with the preparation of any
federal, state and local tax returns of the Partnership, and to institute,
prosecute, and defend any legal action or
any arbitration proceeding;
(l) To establish a
record date for any
distribution to be
made under
Article IV; and
(m) To perform any
other act which is
determined by
APPROVAL OF THE
GENERAL PARTNER to be necessary or desirable for the Partnership or its
business.
5.2 RIGHT OF GENERAL PARTNER TO CONSOLIDATE.
It is the intention of the Partners that the General Partner shall
have
such rights as are necessary for the General Partner and its Affiliates,
including any Affiliate in its capacity as a Limited
Partner, to be able to
consolidate the financial results of operations and
financial condition of
the
Partnership with the financial results of
operations and financial condition of
the General Partner and its Affiliates
including any
Affiliate in its capacity
as a Limited Partner under applicable requirements of generally accepted
accounting principles, as such may change from time to
time. As a result,
the
General Partner shall have the exclusive
authority over the
following matters:
(a) hiring, firing and setting compensation
of employees of the Partnership; (b)
establishing operating and capital budgets for
the Partnership; (c)
incurrence
of indebtedness by the Partnership;
(d) the terms of any
managed care contracts
that will be applicable to the Center; (e) pricing for goods and services
provided by the Partnership; (f) policies and procedures for
the management and
ongoing operations of the Partnership's business; and (g) acquisitions and
dispositions in the ordinary course of business of the Partnership.
Notwithstanding anything to the contrary in this
Agreement,
the provisions of
this Agreement shall be deemed to be amended as
necessary from time to time to
grant the General Partner and its Affiliates including any Affiliate in its
capacity as a Limited Partner the continuing right of consolidation if the
independent certified accountants for the General Partner determine that
additional or other rights must be granted to the
General Partner in
order to
permit consolidation under applicable
generally accepted
accounting
principles
in the future.
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5.3 RESTRICTIONS.
Notwithstanding any
other provision in this Agreement to the contrary,
the Partnership shall not take any of the
following actions without the written
consent of the Partners holding eighty
(80%) percent of the Partnership Units:
(a) Except as
provided in Section 7.2 and Section 9.8, cause any
amendment to be made to this Agreement;
(b) Authorize the merger, consolidation or similar
combination of the
Partnership with any other entity, or
authorize the sale of all or substantially
all the assets of the Partnership;
(c) Except as provided
in Section
8.1(d), effect the voluntary or
involuntary dissolution, liquidation or
winding-up of the Partnership;
(d) Effect any
transaction with a
total dollar value
greater than or
equal to One Hundred Thousand and No/100
Dollars ($100,000)
between the General
Partner and any of its Affiliates to provide advisory, administrative,
professional and other services to the
Partnership;
(e) File a voluntary Bankruptcy by the Partnership; or
(f) Authorize the Transfer of any Units to new Limited Partners
without
the Majority Consent of the Physician
Limited Partners.
5.4 PROHIBITED ACTS OF GENERAL PARTNER.
The General Partner agrees not to: (a) do any act in contravention of
this Agreement; (b) confess a judgment against the
Partnership;
(c) terminate
the Partnership by withdrawing or
otherwise; or (d) take
any action or omit to
take any action which would cause the Partnership to be classified as an
association taxable as a corporation for
federal income tax purposes, including
specifically, the failure of the General
Partner to satisfy,
on a continuing
basis, all Internal Revenue Service requirements applicable to the General
Partner, as amended from time to time, for
partnership classification.
5.5 BINDING THE PARTNERSHIP.
Any action
taken by a
General Partner as general partner of the
Partnership (and, when so required, with the Consent of the
Partners or the
Consent of the Limited Partners, as applicable) shall bind the
Partnership and
shall be deemed to be the action of the
Partnership.
The signature(s) of the
General Partner on any agreement,
contract, instrument or other document
shall
be sufficient to bind the Partnership in respect thereof and conclusively
evidence the authority of such General
Partner and the Partnership with respect
thereto, and no third party need look to
any other evidence or require joinder
or consent of any other party.
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No Limited Partner
other than one who is also a General Partner, and
then only in his, her or its capacity as
General Partner, shall
participate in
or have any control over the Partnership
activities,
except as required by
law
or except as otherwise specifically provided in this Agreement. The Limited
Partners hereby consent to the exercise by the General
Partner of the
powers
conferred upon it by this Agreement and to the employment, when, in the sole
discretion of the General Partner, the same
is deemed necessary or advisable, of
such brokers, agents or attorneys as the General Partner may determine
(notwithstanding that any parties to this Agreement
may have an interest in, or
be one of, such brokers, agents or
attorneys, provided,
however, that where the
Limited Partners are involved, the terms
and conditions of such employment shall
be consistent with fair market value in
arms-length transactions, and shall not
be determined in a manner that takes into account the volume or value of
any
referrals or business otherwise generated to the Partnership or the Center by
such Limited Partner). No Limited Partner (except one who
may also be a General
Partner, and then only in his, her or its capacity as General
Partner) shall
have any authority or right to act for or bind
the Partnership. No Limited
Partner shall participate in the control of the
Partnership within the
meaning
of the Act.
5.6 COMPENSATION OF PARTNERS.
No payment shall be
made by the
Partnership to any
Partner for such
Partner's services as Partner except as
provided in this Agreement. The General
Partner shall be entitled to reimbursement
from the Partnership for all expenses
incurred by such General Partner in managing and
conducting
the business and
affairs of the Partnership. The General Partner, acting by Approval of the
General Partner, shall determine which expenses,
if any, are allocable
to the
Partnership in a manner which is fair and
reasonable to the General Partner and
the Partnership, and if such allocation is made in good faith it shall be
conclusive in the absence of manifest
error.
5.7 MANAGEMENT CONTRACT.
It is specifically
provided that the
Partnership
shall enter into a
management services agreement (the "MANAGEMENT SERVICES AGREEMENT") by and
between the Partnership and a third party
management
company (the
"Manager").
Provided, however, that such agreement shall not have a term longer than
five
(5) years and shall require the Manager to operate the Center in conformance
with the Partnership's charitable purposes. Failure to comply with this
requirement shall be included as a basis
for termination and/or
non-renewal of
the Management Services Agreement. If the management fee is based on a
percentage of revenues of the
