Joint Venture Agreement of Los Gatos Imaging Center - TME Diagnostic Partners Ltd. and Los Gatos Partners Ltd.
JOINT VENTURE AGREEMENT
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
THIS JOINT VENTURE AGREEMENT is made and entered into as of the 31st day
of December, 1987, by and between TME DIAGNOSTIC PARTNERS, LTD., a Texas limited
partnership ("TMEDP") and LOS GATOS PARTNERS, LTD. (the "Medical Limited
Partnership"), hereinafter sometimes collectively referred to as the "Joint
Venturers" or "Venturers," and hereinafter sometimes individually referred to as
the "Venturer";
W I T N E S S E T H:
WHEREAS, the Venturers desire to form a Joint Venture (the "Venture") to
acquire, develop, construct, own, lease, operate, manage, and dispose of a
medical diagnostic imaging center (the "Center"), .
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants, agreements, and undertakings herein contained, the Venturers do
hereby agree as follows:
1. PURPOSE
The Venturers hereby form a Joint Venture for the purpose of acquiring,
constructing. owning, leasing, operating, managing, and disposing of the Center.
2. NAME
The Joint Venture shall conduct its business and operate under the name of
LOS GATOS IMAGING CENTER, or such other name or names as the Venturers may
hereafter determine Necessary and appropriate Assumed or Fictitious Name
Certificates shall be filed in states in which the filing of an Assumed or
Fictitious Name Certificate is required by law.
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3. TERM
The term of the Joint Venture shall commence on the date of this Agreement
and shall continue until the close of business on December 31, 2030, unless
earlier terminated under the provisions hereof.
4. OFFICE
The principal office of the Joint Venture shall be 333 North Belt, Suite
500, Houston, Texas 77060. The address of the Center will be 800 Pollard Road,
Los Gatos, California. The Joint Venture may maintain such other office as may
hereafter be mutually agreed upon by the Venturers.
5. AUTHORITY
Except as herein expressly provided for, neither of the Venturers shall
have any authority to act for or to assume any obligation or responsibility on
behalf of any other Venturer or the Venture.
6. DEFINITIONS
"Affiliate": Any person or entity directly or indirectly controlling,
controlled by or under common control with another person or entity.
"Bankruptcy": Shall mean, with respect to either of the Ventures, the
happening of any one of the following: (i) the filing of an application by the
applicable party for, or a consent to, the appointment of a trustee of its
assets; (ii) the filing by the applicable party of a voluntary petition in
bankruptcy or the filing of a pleading in any court of record admitting in
writing an inability to pay its debts as they come due; (iii) the making by the
applicable party of a general assignment for the benefit of creditors; (iv) the
filing by the applicable party of an answer admitting the material allegations
of, or consent to, a bankruptcy petition filed against it in any bankruptcy
proceedings or a failure to answer a bankruptcy petition; or (v) the entry of an
order,
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judgment or decree by any court of competent jurisdiction, adjudicating the
applicable party a bankrupt or appointing a trustee of its assets, and such
order, judgment or decree continuing unstayed and in effect for a period of 120
days after its entry.
"Capital Contributions": The amount of money and the fair market value of
any property contributed to the Joint Venture by a Venturer. This shall include
all such contributions to the capital of the Joint Venture whenever made.
"Distributable Funds": Shall mean the funds provided from Venture
operations, interest on Venture cash and short-term investments, and proceeds of
the sale of any Joint Venture interest or other asset, without deduction for
non-cash expenses (such as depreciation and amortization or imputed interest),
but after deducting cash funds used to pay all other expenses, debt payments,
and to establish or to restore any replacement and working capital reserves
deemed necessary or appropriate. Additionally, Distributable Funds shall include
any cash distributed to the Venture from any entity which is attributable to
cash flow from operations of any other entity of which the first such entity is
an Affiliate.
"Distributions": With respect to any period selected for accounting
purposes, the cash amount or the fair market value of any property distributed
to the Venturers from the Joint Venture as provided herein.
"Imaging Equipment": The Magnetic Resonance Imager ("MRI") and the special
Modular Metal Container and other major diagnostic imaging equipment presently
or hereafter owned or leased and operated by the Venture, together with all
appliances, parts, instruments, appurtenances, accessories, and all
substitutions, renewals or replacements of, and all additions, improvements and
accessions to, any and all thereof. Sometimes referred to herein as the
"Equipment."
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"Net Income and Net Loss": For any fiscal year means the net income or net
loss of the Venture for such fiscal year, as determined in accordance with
Section 703(a) of the Code using the tax accounting method of the Venture,
provided that, for this purpose, all items of income, gain, loss and deduction
required to be stated separately pursuant to Section 703(a)(l) of the Code shall
be included in such net income or net loss, sometimes referred to herein as Net
Income or Loss.
"Optional Loans": Shall mean a loan to the Venture made by a Venturer in
the event that both Venturers cannot or are not willing to make capital
contributions required to be made by the Venturers pursuant to this Agreement.
Optional Loans shall bear interest at a floating rate equal to the prime rate
announced by Manufacturers Hanover Trust Company, New York, New York, plus 2%
per annum and will be nonrecourse obligations repayable only from Distributable
Funds.
"Sharing Ratio": Shall mean those percentages set forth opposite each
Venturer's name on Exhibit "A" attached hereto.
"TMEDP Offering": Shall mean the offering in which limited partnership
interests will be offered in TME Diagnostic Partners, Ltd. for the purpose of
investing in up to three (3) joint ventures, each of which will own an
outpatient diagnostic imaging center.
7. MANAGEMENT OF THE JOINT VENTURE
Each Venturer shall represent its respective interests in the Venture.
TME, Inc. ("TME") is hereby designated Joint Venture Manager, and as
Joint Venture Manager shall manage the acquisition, construction and operation
of the Center on a day-to-day basis, including all administrative, accounting,
billing, collection, marketing, personnel, and related duties. Without limiting
the generality of the foregoing, TME shall have the following authority and
duties:
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A. Site selection for the Center, and negotiation of space and
equipment leases, if applicable;
B. Negotiation of referral agreements with hospitals, physicians,
Health Maintenance Organizations, Preferred Provider Organizations,
and insurance companies;
C. Selection of the medical director(s) and negotiation of the
contract(s) with the medical director(s);
D. Preparation of and implementation of a capital budget and an
operating budget for the Center;
E. Coordination of the design, construction and opening of the Center;
F. Supervision of the acquisition, installation and operation of all
Imaging Equipment and other equipment for the Center;
G. Employment, training and supervision of personnel at the Center;
H. Negotiation and consummation of all borrowing transactions by or on
behalf of the Joint Venture including an ongoing review of debt
service requirements and financial arrangements; and
I. Any and all other actions necessary for the delivery of a complete
and operational Center at the maximum price agreed upon by TME and
Paine Webber, Inc. ("PWI").
Notwithstanding the foregoing, neither TME nor its Affiliates shall, on
behalf of the Venture, cause either Venturer or the Venture to incur any
indebtedness other than (i) interim financing in an aggregate amount not
exceeding the unpaid balance of the investor notes executed in connection with
the offering of Units of limited partnership interest of either
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Venturer, in the aggregate, which shall be due and payable upon payment of such
investor notes; (ii) trade indebtedness incurred in the ordinary course of
business; (iii) financing for the purpose of funding initial construction,
Imaging Equipment, other equipment and furnishings, acquisition of the Center,
provided that such financing shall not exceed one-third of TMEDP's contribution
to the Joint Venture; (iv) indebtedness for the purpose of providing working
capital reserves of no more than $500,000; or (v) indebtedness for the purpose
of purchasing or leasing Imaging Equipment or other equipment.
The investor partners who become limited partners of TMEDP pursuant to the
TMEDP Offering will have the absolute right to replace TME as Joint Venture
Manager in the event: (i) Cherrill Farnsworth fails to remain active in the
day-to-day management of TME; (ii) TME, the Medical Partnership, any subsequent
manager, or the Joint Venture becomes subject to Bankruptcy; (iii) TME, the
Medical Partnership, or any subsequent manager defaults in any material respect
under this Joint Venture Agreement and TME fails to cure such default within
thirty (30) days (or fails to commence to cure such default within thirty (30)
days, with regard to any default which could not be reasonably expected to be
cured within thirty (30) days) of delivery of written notice from PWI specifying
such default; or (iv) TME, or any subsequent manager engages in any act,
practice or course of conduct constituting gross negligence or fraud, or an
employee or agent of TME or any subsequent manager engages in any material act
of misappropriation or embezzlement that is not bonded or insured involving the
Center.
8. PAYMENTS TO TME
TME will receive the following payments from the Venture in connection
with the performance of its duties under this Agreement:
A. Organization charge of $155,000, payable upon formation of the
Venture;
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B. Consulting charge of $180,000, payable upon formation of the
Venture, for TME's services in selecting the radiology group, and/or
the hospital affiliation, planning the Center and the Imaging
Equipment to be placed therein, negotiating radiology service and
hospital affiliation agreements and negotiating Equipment purchase
agreements; and
C. Management fee equal to the greater of (i) $5,000 per month or (ii)
7% of monthly revenues collected, on a cash basis, pursuant to
operation of the Center, net of fees paid to the radiologists
pursuant to the radiology service agreement, payable in arrears on
the last day of each calendar month. TME shall pay up to
two-sevenths (2/7ths) of its management fee to TMEDP in the event
that forecasts of Joint Venture Distributions to TMEDP agreed upon
between TME and PWI prior to the formation of the Joint Venture are
met.
9. CONTRIBUTIONS OF THE VENTURERS IN AND TO THE JOINT VENTURE
The Venturers are purchasing an interest in the Joint Venture which will
invest in the Center. Each Venturer shall be initially obligated to contribute
to the capital of the Joint Venture a total amount not to exceed the amount set
forth by such Venturer's name on Exhibit "A." The Venturers are obligated when
called upon by the Joint Venture Manager to provide additional contributions in
proportion to their Sharing Ratios.
A. If any Venturer falls to contribute its entire proportionate share
of the Capital Contributions within the time and in the manner
specified by the Joint Venture Manager, the Joint Venture Manager
may, at its option:
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(i) take such action as the Joint Venture Manager deems
appropriate to enforce payment by such noncontributing
Venturer at the cost and expense of such noncontributing
Venturer; or
(ii) if such failure shall continue for a period of thirty (30)
days following notice by the Joint Venture Manager to the
noncontributing Venturer, elect to treat such failure as an
election by such noncontributing Venturer to terminate the
Venture. The election by the Joint Venture Manager under this
Section 9.A.(ii) to so treat the failure to pay the Capital
Contribution shall be made by giving notice to the Venturers
that such election has been made. The effective date of such
termination shall be the date of such notice.
10. FUNDS OF THE JOINT VENTURE
Funds of the Joint Venture shall be maintained in a segregated bank
account or bank accounts in a bank or banks approved by the Venturers; provided,
however, that any bank selected shall be required to have deposits of at least
$100,000,000. Venture funds shall not at any time be commingled with those of
any other person or entity. The Joint Venture Manager shall have signatory
authority over these accounts.
11. BOOKS AND RECORDS OF THE JOINT VENTURE
The Joint Venture Manager shall be charged with the responsibility of
maintaining true and full books of account of the Venture in which shall be
entered fully and accurately the transactions of the Venture. Also, the Joint
Venture Manager shall maintain all records of the Venture. It is the intention
of the Venturers to maintain the book and capital accounts of the
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Venture in accordance with the accrual method of accounting, and to file Venture
tax returns in accordance with regulations promulgated by the Internal Revenue
Service.
A. The Joint Venture Manager shall cause to be prepared and delivered
to PWI within thirty (30) days after the close of each calendar
quarter, an unaudited balance sheet, income statement and statement
of net cash flow for the Venture, all in reasonable detail, as of
the last day of each such calendar quarter and for the calendar year
to date prepared on an income tax basis (accrual and in accordance
with applicable Treasury Regulations), and certified by the chief
financial officer of the Joint Venture Manager on behalf of the
Joint Venture to be true and correct to the best of his knowledge
and belief; an unaudited report summarizing the fees and other
remuneration paid by the Venture for such calendar quarter to any
Venturer or any Affiliate of any Venturer; an unaudited statement
showing all Distributions (including Distributable Funds) and each
Venturer's share of such Distributions.
B. In addition, the books of the Venture shall be examined, audited and
certified annually at the expense of the Venture by any firm of
independent public accountants of nationally recognized standing as
approved by the Venturers.
C. Tax Matters Partner. TMEDP shall be the "tax matters partner" with
respect to the determination of all federal tax matters required to
be determined for the Venture by the Internal Revenue Code of 1986,
as amended.
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12. DISTRIBUTIONS
All revenue and income received or derived from any source in the
operation of the Venture business shall be deposited in the bank accounts of the
Venture.
A. Distributable Funds, if any, shall be distributed within forty-five
(45) days after the end of each fiscal quarter.
B. Distributable Funds shall be distributed from the Venture as
follows:
(i) first, to repay accrued interest and principal, in that order,
on Optional Loans; and
(ii) thereafter, to the Venturers in accordance with their
respective Sharing Ratios.
13. ALLOCATIONS OF INCOME, LOSS AND GAIN; MAINTENANCE OF CAPITAL
ACCOUNTS
In general, (i) income of the Venture will be allocated in the manner
distributions have been made pursuant to 12.B.ii with respect to the calendar
year for which the allocation is to be made; and (ii) losses of the Venture will
be allocated in the percentage Sharing Ratio of the Venturers, however, in no
event shall the losses allocable to TMEDP exceed an amount which would reduce
TMEDP's capital account balance below zero except in excess of TMEDP's share of
any "minimum gain" attributable to the Partnership as defined in this Section
13.
A. The Joint Venture shall maintain for each Venturer a single and
separate capital account. The capital account of each Venturer shall
be maintained in accordance with the requirements set forth in
Treasury Regulations, Section 1.704-1(b)(2)(iv) as in effect on the
date hereof. Subject to the specific provisions of such regulation,
the capital account of each Venturer shall be:
(i) increased by the amount of all Capital Contributions to the
Joint Venture made by such Venturer;
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(ii) increased by the amount of all items of income and gain
(computed in accordance with this Article 13) and allocated to
such Venturer;
(iii) decreased by the amounts of cash distributed to the Venturer
by the Joint Venture;
(iv) decreased by the fair market value of any property distributed
to a Venturer, provided that such fair market value shall be
decreased by any liabilities assumed by the Venturer with
respect to the distributed property;
(v) decreased by the amount of any deduction or loss (computed in
accordance with this Article 13) and allocated to such
Venturer; and
(vi) decreased by the amount of any syndication costs allocated to
such Venturer.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in a Venturer's capital account,
the determination, recognition and classification of any such item
shall be the same as its determination, recognition and
classification for federal income tax purposes (including any method
of depreciation, cost recovery or amortization used for that
purpose), provided that:
(i) such capital account shall be decreased by the amount of any
expenses of the Venture described in Section 705(a)(2)(B) of
the Code or treated as described in such section which are
allocated to such capital account;
(ii) such capital account shall be adjusted in accordance with
Treasury Regulations, Section 1.704-l(b)(2)(iv)(g), if
applicable, for allocations to such capital account of
depreciation, amortization, and gain and loss, as computed for
book purposes; and
(iii) such capital account shall be adjusted as provided in Treasury
Regulations, Section 1.704-l(b)(2)(iv)(m), as a result of any
adjustments to the tax basis of property of the Joint Venture
pursuant to Sections 732, 734, or 743 of the Code.
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C. Optional Loans shall not be considered Capital Contributions.
13.1. Allocations for Capital Account Purposes
A. For purposes of maintaining capital accounts and in
determining the rights of the Venturers among themselves,
except as otherwise provided in this Section 13.1., each item
of income, gain, loss, deduction and credit (computed in
accordance with Section 13.1.B) shall be allocated to the
Venturers in accordance with their Sharing Ratios.
B. If any Venturer unexpectedly receives any adjustments,
allocations or Distributions described in Treasury
Regulations, Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
items of Joint Venture income and gain shall be specially
allocated to such Venturer in an amount and manner sufficient
to eliminate a deficit in its capital account created by such
adjustments, allocations or Distributions as quickly as
possible. This Section 13.1.B is intended to constitute a
"qualified income offset" within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(3).
C. If, and to the extent that, any Venturer is deemed to
recognize income as a result of any transaction between such
Venturer and the Joint Venture pursuant to Sections 1272-1274,
Section 7872, Section 483 or Section 482 of the Code, or any
similar provision now or hereafter in effect, any
corresponding resulting loss or deduction of the Joint Venture
shall be allocated to the Venturer who was charged with such
income.
D. If any Venturer's capital account has a deficit balance
resulting in whole or in part from allocations of loss or
deduction attributable to nonrecourse debt which is secured by
Joint Venture property, which deficit balance exceeds such
Venturer's
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share of minimum gain (as defined below), then income and gain
shall first be allocated to such Venture in an amount equal to
such excess. For purposes of this Section 13.1.D, "minimum
gain" means gain which would be recognized by the Venture upon
a sale of the properties subject to nonrecourse debt for fair
market value, in full satisfaction of such nonrecourse
liabilities. This Section 13.1.D is intended to constitute a
"minimum gain chargeback" within the meaning of Treasury
Regulations Section 1.704-1(b)(4)(iv), and is to be
interpreted to comply with the requirements of such
Regulation.
13.2. Allocations for Tax Purposes
A. For federal income tax purposes, except as otherwise provided
in this Section 14.2, each item of income, gain, loss,
deduction and credit of the Joint Venture shall be allocated
among the Venturers in accordance with their respective
Sharing Ratios.
B. If any Venturer unexpectedly receives any adjustments,
allocations or Distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), items of
Venture income and gain shall be specially allocated to such
Venturer in an amount and manner consistent with the
allocations of income and gain pursuant to Section 13.1.B.
C. If, and to the extent that, any Venturer is deemed to
recognize income as a result of any transaction between such
Venturer and the Joint Venture pursuant to Sections 1272-1274,
Section 7872, Section 483 or Section 482 of the Code, or any
similar provisions now or hereinafter in effect, corresponding
items of Venture deduction shall be allocated to such Venturer
in an amount and manner consistent with the allocation of loss
or deduction pursuant to Section 13.1.C.
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D. If any Venturer's capital account has a deficit balance as
described in Section 13.1.D, items of income, gain, loss and
deduction of the Venture shall be allocated to the Venturer in
an amount and manner consistent with the allocations of
income, gain, loss or deduction pursuant to Section 13.1.D.
E. To the extent of any recapture income resulting from the sale
or other taxable disposition of Joint Venture assets, the
amount of any gain from such disposition allocated to (or
recognized by) a Venturer (or its successor in interest) for
federal income tax purposes pursuant to the above provisions
shall be deemed to be recapture income to the extent such
Venturer has been allocated or has claimed any deduction
directly or indirectly giving rise to the treatment of such
gain as recapture income.
F. All items of income, gain, loss, deduction and credit
recognized by the Joint Venture for federal income tax
purposes and allocated to the Venturers in accordance with the
provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by
the Joint Venture; provided, however, such allocations, once
made, shall be adjusted as necessary or appropriate to take
into account those adjustments permitted by Sections 734 and
743 of the Code and, where appropriate, to provide only
Venturers recognizing gain on Distributions covered by Section
734 of the Code with the federal income tax benefits
attributable to the increased basis in Joint Venture property
resulting from any election under Section 754 of the Code.
14. ASSIGNMENT OF INTEREST IN THE JOINT VENTURE
No Venturer may sell, assign, transfer, mortgage, encumber or otherwise
hypothecate all or any part of its interest in the Venture.
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15. PARTICIPATION BY JOINT VENTURE MANAGER IN OTHER VENTURES
Each Venturer understands that TME has been and will, in the future,
participate in the development of diagnostic imaging centers in which the Joint
Venture will have no participation. In addition, each Venturer understands that
TME may arrange for the ownership by third parties, and that TME may participate
in such ownership by others in varying ways. Neither this Agreement nor any
activity undertaken pursuant hereto shall prevent TME from engaging in any such
activity.
16. COVENANT NOT TO COMPETE
Notwithstanding the foregoing section, TME and T Brooke Farnsworth,
Cherrill Farnsworth and Jerry Chambers hereby agree not to compete and to cause
all affiliated corporations and partnerships not to compete with the Venture
within fifteen (15) miles of the Center without the prior written consent of
PWI, except where such agreement would conflict with obligations under existing
contracts or on-going relationships.
17. INSURANCE
The Joint Venture Manager will procure and maintain with responsible
companies, a combined single limit comprehensive general public liability
insurance policy in the minimum amount of $1,000,000 per occurrence and
$1,000,000 in the annual aggregate, which policy shall also cover the negligent
acts and omissions of all employees and agents of the Venture. In addition,
during the term of this Agreement, the Joint Venture Manager will maintain and
keep in force, all risk property damage insurance covering the property of the
Joint Venture at the Center with limits of not less than $1,000,000. The Joint
Venture Manager shall furnish to PWI a certificate of each such policy and shall
cause to be included within each such policy a requirement that PWI be notified
in writing at least thirty (30) days prior to any cancellation or expiration of
the coverage evidenced by such policy.
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18. BANKRUPTCY OF A JOINT VENTURER
In the event that any Venturer hereto should be adjudicated bankrupt,
either voluntary or involuntary, or should execute an assignment for the benefit
of creditors, or in the event a receiver should be appointed to control the
interest of any Venturer, or in the event of the levy of a writ of execution
upon such interest, then in any such event, this Agreement shall terminate
automatically, except with respect to the conditions and obligations of Section
9, which shall survive.
19. TERMINATION
Unless sooner terminated, under the other provisions of this Agreement,
the Venture shall terminate upon the occurrence of any of the following events:
A. The sale by the Venture of all or substantially all of its assets;
which such sale shall require unanimous consent of the Venturers.
B. The receipt of written notice of termination by either of the
Venturers.
20. LIQUIDATION OF THE VENTURE
Upon dissolution of the Venture, no further business shall be conducted by
the Venture, except for the taking of such action as shall be necessary for the
winding up of the business and affairs of the Venture and the distribution of
its assets to the Venturers. The Venturers shall unanimously agree upon a
Liquidating Trustee for the Venture. In the event the Venturers cannot agree on
a Liquidating Trustee, then the Liquidating Trustee shall be the Joint Venture
Manager. The winding up and liquidation of the Venture shall consist of the use,
application and distribution of the assets of the Venture, at the conclusion of
which the Venture shall terminate.
The Liquidating Trustee shall not be liable for any action taken or
omitted in its capacity as a Liquidating Trustee hereunder, except for its gross
negligence or willful misconduct.
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The Liquidating Trustee shall use its best efforts to sell all of the
assets and properties of the Venture at the best cash price available and shall
collect all obligations owed to the Venture, including any obligation of a
Venturer. A Venturer may purchase assets from the Venture, provided at least
fifteen (15) days' notice of said proposed sale has been given to the other
Venturer. Proceeds of all such sale and disposition shall be applied by the
Liquidating Trustee in the following order:
A. To the Joint Venture's liabilities and obligations to creditors;
B. Payment of Optional Loans or other debts due to Venturers; then
C. The remaining proceeds shall be distributed to the Venturers in
accordance with their respective positive capital account balances,
and, after such capital account balances have been reduced to zero,
in accordance with each Venturer's percentage interests in the
Venture, provided, however, any amount then owed to the Venture by a
Venturer, shall, if not previously paid, be deducted from the amount
to be distributed to such Venturer.
The Liquidating Trustee shall be entitled to reasonable compensation for
his services.
21. PARTITION
The Venturers hereby irrevocably waive for the term of this Agreement any
and all rights they may have to maintain an action for partition with respect to
each Venturer's interest in the assets of the Venture or to compel any sale
thereof under the statutes of any state.
In this connection, each Venturer acknowledges and agrees that he has been
induced to enter into this Agreement in reliance on the foregoing agreement.
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22. DISCHARGE OF OBLIGATIONS
Each of the Venturers and the Joint Venture Manager agree that they will
discharge their proper share (as provided elsewhere in this Agreement) of all
obligations and liabilities of the Joint Venture, and will hold all other
parties hereto harmless from all claims and losses arising out of their failure
to do so. It is recognized by the Venturers that the business of the Venture
involves substantial risks and hazards; and it is agreed by all parties that
such risks and hazards, and all costs hereunder, will be borne by the Venturers
in proportion to the Sharing Ratios hereunder. Notwithstanding any other
provisions hereof, (a) each Venturer shall be severally liable for its aforesaid
pro rata portion of all Joint Venture liabilities without limitation as to
amount, and agrees to pay and discharge same and (b) the Joint Venture Manager
shall never be held liable or responsible to the Venturers for, nor shall the
obligations of the Joint Venture hereunder to share in liabilities be diminished
by, any acts done or omitted to be done in good faith in the performance of any
of the provisions of this Agreement, or for the negligence, or other fault of
the agents, independent contractors or employees of the Joint Venture Manager
(except that the Joint Venture Manager shall be liable for willful or wanton
misconduct or gross negligence), it being the purpose and intention of the
provision that all liabilities of the Joint Venture shall be borne by the
Venturers in proportion to the Sharing Ratio.
23. AMENDMENTS
This Agreement may be amended or modified only by written agreement
executed by the Venturers.
24. INDEMNIFICATION
The Joint Venture shall indemnify and hold harmless the Joint Venture
Manager and its directors, officers, employees and agents, and any person who is
or was serving at the request of the Joint Venture (acting through the Joint
Venture Manager) as a director, officer, partner,
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trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (individually, an "Indemnitee") as follows:
(a) In any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, to
which an Indemnitee was or is a party or is threatened to be made a party
by reason of the fact that such Indemnitee is or was the Joint Venture
Manager, a director, officer, employee or agent of the Joint Venture
Manager or a Person servicing at the request of the Joint Venture in
another entity in a similar capacity, involving an alleged cause of action
arising from the activities of such Indemnitee under this Agreement or
from the management of the affairs of the Joint Venture, or which relates
to the Joint Venture, its property, business or affairs, the Joint Venture
shall indemnify such Indemnitee against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such Indemnitee in connection with the defense or
settlement of such action, suit or proceeding, if such Indemnitee acted in
good faith or in a manner reasonably believed by such Indemnitee to be in
or not opposed to the best interests of the Joint Venture; provided that
the Indemnitee's conduct shall not have constituted gross negligence or
willful or wanton misconduct. The termination of a proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that an Indemnitee did
not act in good faith and in a manner reasonably believed by such
Indemnitee to be in or not opposed to the best interests of the Joint
Venture. The Joint Venture shall also provide such indemnification in any
action, suit or proceeding by or in the right of
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the Joint Venture to procure a judgment in its favor; provided that if in
such action, suit or proceeding the Indemnitee shall have been adjudged to
be liable for gross negligence or willful or wanton misconduct, such
indemnification shall be provided only if, and only to the extent that,
the court in which such action, suit or proceeding was brought shall
determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses as such court shall
deem proper.
(b) Expenses (including attorneys' fees and expense) incurred in
defending any action, suit or proceeding subject to Section 24(a) shall be
paid by the Joint Venture in advance of the final disposition of such
proceeding upon receipt of an undertaking (which need not be secured) by
or on behalf of the Indemnitee to repay such amount if it shall ultimately
be determined, by a court of competent jurisdiction or otherwise, that the
Indemnitee is not entitled to be indemnified by the Joint Venture as
authorized hereunder.
(c) Any indemnification under Section 24(a), unless ordered by a
court, shall be made by the Joint Venture only as authorized in the
specific case and only upon a determination, (i) by a vote of the
Venturers or (ii) if such a vote cannot be obtained, (iii) by legal
counsel to the Venture, that indemnification of an Indemnitee is proper in
the circumstances because such Indemnitee has met the applicable standard
of conduct set forth in Section 24(a). Any such indemnification shall be
made only from the assets of the Joint Venture.
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(d) The indemnification provided by this Section 24 shall be in
addition to any other rights to which an Indemnitee may be entitled under
any agreement or vote of the Venturers, as a matter of law or otherwise,
both as to action in the Indemnitee's capacity as the Joint Venture
Manager, a director, officer, employee or agent of the Joint Venture
Manager or a Person serving at the request of the Joint Venture and to
action in another capacity. Such indemnification shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns, administrators and personal
representatives of such Indemnitee.
(e) The Joint Venture may purchase and maintain insurance on behalf
of any one or more Indemnitees and other Persons as the Venturers shall
determine against any liability that may be asserted against or expense
that may be incurred by such Person in connection with the activities of
the Joint Venture, whether or not the Joint Venture would have the power
to indemnify such Person against such liability hereunder.
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 24 because the Indemnitee had an interest in the
transaction with respect to which indemnification applies if the
transaction was otherwise permitted by the terms hereof.
(g) The provisions of this Section 24 are for the benefit of the
Indemnitees and their heirs, successors, assigns, administrators and
personal representatives and shall not be deemed to create any rights for
the benefit of any other Persons.
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25. NOTICES
Any notice to be given in connection with this Agreement must be in
writing and be given by registered or certified mail, return receipt requested,
and shall be deemed to have been given when a registered or certified letter
containing such notice properly addressed, postage prepaid is deposited in the
United States Mail.
26. BINDING EFFECT
This Agreement and the covenants, obligations, undertakings, rights and
benefits hereof shall be binding upon and shall inure to the benefit of the
respective parties hereto and their respective heirs, legal representatives,
successors and assigns.
27. HEADINGS
Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
28. INTERPRETATION
Agreement shall be construed and enforced in accordance with the Uniform
Partnership Act as adopted in the State of Texas and the laws of the State of
Texas.
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EXECUTED this 31st day of December, 1987.
TME DIAGNOSTIC PARTNERS, LTD.
By: First TME Partners, Inc., its General Partner
By: /s/ Joseph Smith
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LOS GATOS PARTNERS, LTD.
By: TME Gatos, Inc., its General Partner
By: /s/ Joseph Smith
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TME, INC., a Delaware corporation
By: /s/ Cherrill Farnsworth
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The following are hereby executing this Agreement for
the limited purposes therein expressed:
/s/ T. Brooke Farnsworth
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T Brooke Farnsworth
/s/ Cherrill Farnsworth
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Cherrill Farnsworth
/s/ Jerry Chambers
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Jerry Chambers
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