JOINT VENTURE AGREEMENT
This Agreement made and entered into this 31st day of May, 1995, among
INMOBILIARA Y FRACCIONADORA DE LA NUEVA VIZCAYA, S.A. DE C.V., HERMOSILLO,
SONORA, MEXICO (INMOB), HEALTH CARE CENTERS OF AMERICA, INC., (HCCA) and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇. (RRK) or his nominee; both OAKBROOK TERRACE, ILLINOIS, USA
WITNESSETH
WHEREAS, INMOB Is the owner of certain property located in ▇▇▇▇▇▇▇▇▇▇
Municipality, Mexico as described on Exhibit A hereto attached, as sometimes
referred to as GRAN KINO, and
WHEREAS, RRK has extensive mufti-facetted experience in development,
finance and operation of various real estate VENTURES, developments and projects
and, said knowledge and experience is unique and crucial to the success of the
Intent of the parties to this VENTURE; and;
WHEREAS, HCCA and INMOB (VENTURERS) desire to enter into a Joint VENTURE
(VENTURE) for the development of the property described on Exhibit A on the
terms hereinafter set forth and
WHEREAS, to ensure suceess of the VENTURE, the VENTURERS deem it in their
mutual best Interest to engage the service of RK as an independent consultant
with the power, authority and responsibilities herein after set forth.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and
obligations, the sufficiency and receipt of which is hereby acknowledged it is
hereby agreed:
1. INMOB for its contribution to the VENTURE shall convey the property
described on Exhibit A, of which INMOB hereby represents itself to be the true
and lawful owner, said property shall be conveyed to the VENTURE free and clear
of all claims, easements and other restrictions. Evidence of title satisfactory
to HCCA shall be furnished by INMOB.
A. In consideration of such conveyance, INMOB shall be paid
(a) the sum of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars
($100,000,000) USD which is to be paid as set forth in paragraph
six (6) hereof;
(b) at one-third (1/3) interest in the VENTURE hereby created; and
(c) INMOB shall be granted an option to purchase certain shares of
HCCA stock a hereinafter set forth.
2. HCCA shall provide to the VENTURE
(a) HCCA shaft use its best efforts to obtain and put in place and
to continue foras long as feasible the financing arrangements
hereinafter described HCCA shall receive an interest of 66-2/3%
of the Joint VENTURE for such services, provided, however, that it
is understood by the parties that HCCA, without the consent of
INMOB, but keeping it properly informed, may transfer up to
33-113% of the total Interest In the VENTURE (up to 50% of Its
Interest) to such bank, financing institution or other entity that
shall assist the VENTURE in the attainment of the financing,
construction, and management of the project. Regardless of the
foregoing, any transfer by HCCA of its interest in accordance with
this paragraph shall be preceded by written notice to INMOB and
HCCA shall provide reasonable information to INMOB regarding said,
transfer, if any.
3. RRK shall provide the VENTURE his personal skills, knowledge, direction
and consultation regarding all phases of the project as contemplated between the
parties. To include, but in no way intended to be limited by, assistance in the
procurement of the financing, direction of the development of the project, all
daily operational decision making regarding the VENTURE, etc.. The parties
further acknowledge and agree that RRK's involvement in this VENTURE is crucial
and indispensable to the success of the business of the VENTURE and RRK shall
therefore have broad powers to develop manage and operate same. Said powers
shall be more clearly defined in the following paragraphs however, the parties
hereto agree that any power or authority not specifically withheld from RRK is
deemed to have been bestowed upon him.
For and as compensation for his service, RRK shall be compensated in an
amount equal to that which Is generally paid to an Individual or entity which
undertakes a project of the complexity and magnitude of the one herein involved.
4. It Is the object of the VENTURE to generate funds for the initial
payment to INMOB hereinabove set forth and for the development of the real
estate, through an Investment program to be established and to be continued on
an' ongoing basis as long as is feasible at a bank or other financial
Institution selected by HCCA and through other available financing. To this end,
a letter of credit shall be obtained by HCCA within thirty (30) days of the date
of this Agreement, to be secured by a first lien on the property contributed by
INMOB, such letter of credit to be a minimum of Two Hundred Million USD
($200;000,000). It shall not be necessary for INMOB, RRK or HCCA to assume
personal liability for the letter of credit. The letter of credit shall be used
to obtain an advance of funds from a bank selected by RRK, which funds will be
used to establish a Trading Program (TP) at said bank. The documents
establishing the TP shall expressly state that the principal of the funds shall
never be placed at risk or, to the extent that such funds are placed at risk,
all risk will be borne by the bank operating said program, and that said bank
never call upon the issuer of the letter of credit for payment thereunder.
Investments to be made with the funds deposited in such account shall be for the
primary purpose of developing INMOB property and under the complete discretion
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of RRK and the VENTURERS hereby agree that no claim whatever shall be made
against RRK for any losses in connection with such trading account, except such
losses as shall be caused as the result of the fraud of RRK, it being the sense
hereof that RRK shall not be liable for negligence in the administration of such
account or in the selection of investments.
If the letter of credit is not obtained within thirty (30) days of the date
of signing this Agreement, the VENTURE shall be considered terminated unless
INMOB decides to extend said time period within which to secure the
aforementioned letter of credit. The parties further agree, that INMOB hereby
given its consent to an automatic extension of seven (7) banking days after the
expiration of the time period within which the letter of credit was t0 be
obtained.
5. It shall be a condition of INMOB's obligation to convey the real estate
herein described that a commitment for issuance of a bankable letter of credit
in the amount of at least Two Hundred Million Dollars USD ($200,000,000) be
obtained within thirty (30) days from the date hereof. If such commitment Is not
obtained, or the time for its obtaining not extended by agreement of both
parties, this VENTURE shall thereupon terminate without liability of each party
to the other.
6. The VENTURERS acknowledge that the requirements of the TP direct that
seventy percent (70%) of the proceeds from any element of the TP Investment must
be applied first to the project including, but not limited to, the payment of
the purchase price for the land and subsequent development of the project; and
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it must be verified that same has been applied to the project. The remaining
thirty (30) percent of each particular aspect or payout from the TP can be
distributed. The VENTURERS further acknowledge that only fifty (50%) percent of
the funds to be used for the TP are permitted by the bank directing the TP to be
used for purposes of collateral in the program. It is estimated that the
earnings to be generated from the first (1st) TP shall be approximately Fifteen
Million Dollars USD ($15,000,000) per week and that said program shall last for
approximately twenty two (22) weeks. The first (1st) earnings from the above
referenced (TP) shall be disbursed and paid as follows:
(a) An amount equal to seventy percent (70%) shall be at all times
used specifically for the development of this project.
(b) An amount equal to thirty percent (30%) of the net earnings
per week for said twenty-two (22) weeks up to a total amount of
One Hundred Million Dollars USD ($100,000,000) shall be paid to
INMOB.
(c) From the funds identified in (b) above, paid to INMOB, six
percent (6%) of same shall be distributed as follows: amount equal
to two percent (2%) to Royce Realty and Management Corporation,
two percent (2%) to Crown Development, Ltd. and two percent (2%)
to American Group and Companies, Inc. (hereinafter RCA Group). Up
to a total amount of Six Million Dollars USD ($6,0 00,000).
(d) After the above disbursements have been made and from the
thirty percent (30 %) of the net earnings per week, an amount to
total approximately Two Hundred Million Dollars USD ($200,000,000)
or an amount as otherwise determined by RRK, which total amount
will be equal to the amount of the letter of credit, shall be
deposited into a separate account, segregated from all other
accounts, and shall be identified as the Reserve Fund. The purpose
of this fund Is for the payment of any liens placed on the
property as a result of the use of said property or to release RRK
from any personal liability that he has had to assume on behalf of
the VENTURE for purposes of the VENTURE, Including but not limited
to the pledge and/or mortgage of said land and the personal
guarantee of RRK for collateral purposes to obtain the
aforementioned letter of credit. (e) After the above funds have
been paid, the remaining funds generated as a result of TP shall
be distributed as follows:
i. At all times, not less than Seventy percent (70%) shall be
paid to the VENTURE for the express purpose of the development
of the project on the property contributed to the VENTURE by
INMOB.
ii. Thirty percent (30%) to the VENTURERS as follows:
Sixty-six and two-thirds percent (66-2/3%) of said thirty
percent (30%)to HCCA; of said amount HCCA shall transfer fifty
percent (50%), or a net of thirty three and a third percent .
(33-1/3%) of the total, to The R K Company, a common law
business organization, (R.K.C.) with the right of further
assignment; and thirty three and one third (33-13) percent to
INMOB.
(e) The funds generated from the TP shall be deposited immediately
Into the appropriate bank account in accordance with the above
referenced percentages. Said deposits shall be made directly from
the bank managing the TP Into specific accounts. The seventy
percent (70%) of the funds to be used In the development of the
GRAN KING property shall be deposited Into an account opened In
the name of the VENTURE and shall be identified as the Development
Account. The power of signature on said account shall be vested In
RRK and monies in said account shall be used exclusively and
specifically for the development of GRAN KING. RRK expressly has
the authority and discretion to establish said bank account with
any banking institution he deems appropriate, including, but not
limited to, the locations, jurisdiction and banking laws governing
said account. Further, two (2) additional bank accounts shall be
opened and shall be used specifically for the receipt of the
remaining thirty percent (30%) of the accumulation of the net
profits from the Trading Program and shall be distributed in the
following manner:
i. Ten percent (10%) of said funds to an account in the name
of INMOB and:
ii. Twenty percent (20%) of said fund to an account In the
name of HCCA or as further directed In writing;
7. INMOB shall make available and assign to the VENTURE promptly upon the
execution hereof current evidence of title to the property (which evidence of
title shall be in the form of an attorney's opinion or other not interested
third party In accordance with the customs and business procedures in Mexico), a
survey, serial photographs, governmental permits, including documents filed in
connection with application therefor, and all studies regarding the location,
description, composition, contours (topographic and oceanographic), uses,
feasibility, marketing, engineering, and development now in the possession of
INMOB.
INMOB in consideration of the aforesaid One Hundred Million Dollars USD
($100,000,000) and those items identified in paragraph 1(A) shall further convey
title to the VENTURE all title to all personal property located on land
Including but not limited to all mineral rights, water rights, equipment, al)
permits, applications to permits, leasehold or other agreements, evidence, third
party interest in the property yr any other information deemed by the VENTURE to
be necessary.
8. HCCA agrees, to induce INMOB to enter into this agreement, that lNMOB
shall have an option to purchase up to seven million five hundred thousand
(7,500,000) shares of HCCA stock at 60% of the asking price at closing of the
market at the time notice of exercise of the option is given. Said option shall
continue for a period of two(2) years after conveyance of the real estate by
INMOB. The notice of exercise of the option shall be accompanied by a full
payment of the purchase price. The shares purchased hereunder shall be preferred
shares with the rights, obligations, privileges and restrictions, if any, as set
forth by HCCA.
9. HCCA and INMOB, hereby irrevocably give RRK discretion and the companion
authority in connection with the development of the Project, and other items
Incidental to the development of the Project, including all such uses thereof as
may be permitted by law or permitted after due application is made therefor, by
way of example and not by way of limitation, RRK shall have the power to:
arrange for Interim and long term financing for the construction of improvements
on the land and to pledge or mortgage the VENTURE'S assets as security
therefore; to establish accounts with banks or other financial institution
regardless of country of origin or location of same; contract for architects,
consultants, engineers and construction services; coordinate all accounting and
clerical functions of the VENTURE, and employ such accountants, lawyers,
brokers, land planners, landscape architects, and other management, service or
other personnel as may be in his judgment necessary; coordinate and supervise
the work of contractors; coordinate all management and operational functions;
and keep in force such Insurance coverage for public liability, fire and
casualty, and any and all other insurance required or necessary or appropriate
business of the VENTURE in such amounts and of such types as he shall determine;
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contract for services of any kind or nature, and incur expenses of any kind or
nature incident to the other powers and authority granted to RRK; perform any
and all acts he deems necessary, appropriate and desirable for the protection
and preservation of VENTURE property, Its assets or business, and as required to
advance the business of the VENTURE.
RRK may, from time to time, provide the VENTURERS with a status report on
the progress of the development of the property in accordance with the project
plans.
10. The VENTURERS' rights and obligation shall be governed by the Illinois
Uniform Partnership Act, provided, however, that In the event of a conflict
between the Act and the terms and provisions hereof, the terms and provisions
hereof shall govern. A VENTURER'S interest in the VENTURE shall be personal
property for all purposes. All real and other property owned by the VENTURE
shall be deemed owned by the VENTURE as an entity and no VENTURER, individually,
shall have any ownership of such property.
11. RRK shall at all times have the express authority and explicit power
and authorization to arrange for short term, interim and/or long term financing
for the purpose of the construction of improvements and development of the of
the project as, in his discretion and judgment is necessary for the project. RRK
then also have the express authority and explicit powers relating to all aspects
of the subject matter of this agreement to engage in such activity as he deems
appropriate.
a) The only purposes of the VENTURE are:
i. To acquire, own, develop, and operate the Gran Kino property as an
investment for the production of income and profit or for any other
business purpose;
ii. to engage in the investment program herelnabove described including,
but not limited to providing any documentation, signature, ate. as
required by any bank or any other financial Institution Involved in the
TP's previously described.
iii. to assist HCCA in any lawful manner, In the furtherance of its
corporate activities, including but not limited to the research,
development, educational advancement or other items directly or
incidentally related to the operations of HCCA.
iv. to engage in such other activities as are reasonably incidental to
the foregoing with respect to the Property.
b) The VENTURERS are not end shall not be deemed to be Partners or
VENTURERS with each other for any other purposes or with respect to any other
activities or business or other property except as herein provided. Also, except
as specifically provided in this Agreement, including not limited by, those
specific and general power granted to RRK, neither VENTURER acting alone, shall
have any authority to bind or act for, or assume any obligations or
responsibility on behalf of, the other VENTURER or the VENTURE. This agreement
shall not be deemed to create a general partnership between the VENTURERS with
respect to any activities whatsoever other than activities within the scope and
business purposes of the VENTURE.
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c) The principal place of business of the VENTURE shall be located at such
place as HCCA shall from time to time determine.
d) Except as specifically provided herein, nothing in this Agreement shall
be deemed to restrict in any way the freedom of any VENTURER to conduct any
other business or activity whatsoever, without any accountability or liability
to the VENTURE or any other VENTURER, even Is such business or activity competes
with the business of the VENTURE or of any other VENTURER.
e) Forthwith upon the execution and delivery of the Agreement, the VENTURE
and the VENTURERS shall execute and file, record and/or obtain all licenses,
permits, certificates and authorizations required in connection with the
formation and lawful existence of the VENTURE as a joint VENTURE under the laws
of the states in which it does business, including, but not limited to, making
application for and obtaining an Assumed Name Certificate M the State of
Illinois.
f) The fiscal year ("Fiscal Year") of the VENTURE shall commence on the f
day of January and end on the last day of December of each year.
g) The VENTURE shall commence on the date hereof and continue until
December 31, 2050, unless sooner terminated In accordance with the terms and
provisions of this Agreement or by operation of law.
h) INMO has represented and hereby warrants that it has certain special
expertise and has developed certain important business relationships with
particular entities and individuals who are citizens of Mexico.
i) INMOB further warrants that It either possesses or shall, without delay
possess all the necessary and required permits national, state, territorial,
local or other governmental authority regarding the subject matter of this
agreement. To the extent that any permits and or authorizations etc. have been
granted or are in place, the costs of same shall be that of INMOB. INMOB has
induced HCCA to enter into this agreement In part based on INMOB's ability to
confidently and successfully negotiate with those entities In the Country of
Mexico who shall grant the necessary permits, licenses or who will otherwise
provide for compliance with those laws of the country of Mexico required to
ensure the success of the project. In the event the representations and or
warranties of INMOB are not accurate and correct, then any claim for payment,
funds to be paid, damages, penalties, fines or liens shall be and hereby are the
possibility of INM08. The payment of same shall first come from any monies owing
INMOB pursuant to this agreement and if none, from INMOB directly.
j) INMOB further represents that it shall provide proof, acceptable to HCCA
and/or RRK that the project contemplative of the parties ▇▇▇▇▇ is permitted
under the law in the Country of Mexico and all State, local or other rules
regulations etc, of the Country of Mexico. All documents provided for in this
agreement shall be provided by INMOB in its original form in the Spanish
language accompanied by an exact English translation of said document.
12. If the VENTURE shall require funds to carry on its business, which
funds are not otherwise available, the holders of the majority interest In the
VENTURE may agree that all members of the VENTURE shall deposit proportionately
their share of the total amount determined to be necessary. If any VENTURER
fells to deposit his shares of such contribution within the fixed therefor, the
other partner may a) advance said sums, which advance shall bear interest at a
rate equal to 5% in excess of the rate published as the prime rate of interest
In the Wall Street Journal, or b) declare such noncontributing party In default
and proceed to liquidate the VENTURE.
13. Distributions shall be subject to the approval of ell VENTURERS, No
distribution shall be made at any time when a VENTURER has made an advance
pursuant to Paragraph 11 hereof, unless said advance Is repaid prior to such
distribution.
14. Upon liquidation, after payment of debts and liabilities, the expenses
of liquidation and the establishment of any reasonable reserves, the assets of
the VENTURE shall be distributed In the following order of priority:
i) FIRST:To the party, If any, which has made excess advances pursuant
to Section 12 hereof In the amount of his unpaid advances plus advances
made for the defaulting party with Interest on both amounts at prime
plus 5% per annum of the entire amount,
ii) Second: The balance of the assets, if any, shall be distributed to
the parties, pro rate, in accordance with their then respective
ownership percentage interests.
15. Except as otherwise provided herein, nether party may sail, assign or
otherwise dispose of, or mortgage, hypothecate or otherwise encumber or permit
to be encumbered, without the written consent of the other, its VENTURE
Percentage Interest, or any portion thereof. Any attempt so to transfer or
encumber such Interest, or portion thereof, shall be null and void.
Notwithstanding the foregoing, either party may transfer its interest to a
corporation controlling it or which it controls. Control shall mean direct stock
ownership of more then 60/0.
16. If at any time after December 31, 1995, either Party receives a bona
fide written offer (the Offer"), who is not a Party and who is not controlling,
controlled by or under common control with or otherwise affiliated with a Party,
such Party (the "Demanding Party's shall deliver a copy of such offer to the
other Party (the "Optionee Party"). If the Demanding Party desires to accept
such offer, he may also send a written demand that the Optlonee make the
election provided in this Section.
Upon delivery of such copy and such demand, the Optionee Party shall elect
either (i) to join in a sale of the Property to the Offeror for the price and on
the temps and conditions set forth therein, in which event both Parties shall
accept the Offer and consummate the transaction contemplated thereby, or (ii) to
purchase the interest of the other Party for the appro a portion of the price
and on the terms and conditions get forth in the Offer. If the Optionee Party
does not give notice of its election before expiration of thirty (30) days after
such demand by the Demanding Party, the Optionee Party shall be deemed to have
elected to sell the property or its interest therein pursuant to clause (i) of
the preceding sentence. For purposes of this Section, an offer shall not be
deemed a bona fide written offer if such offer (x) provides for a date of
closing of such purchase which is earlier than ninety (90) days after, or later
than one hundred twenty (120) days after, the date of delivery of the aforesaid
copy and demand to. the Optionee Party; (y) provides for total ▇▇▇▇▇▇▇ money of
less then 5% of the purchase price; (_) provides for interest less than the then
current requirement to avoid Imputed interest. If the Optionee Party, having
given notice of election to purchase the interest of the Demanding Party fails
to do so, the Demanding Party may have an action for damages against the
Optionee Party in the amount of 25% of what the Demanding Party would .receive
or have on option to purchase the interest of the Optionee Party at a sum
25(degree)!0 less than the Optionee Party's then Interest in the property, the
overall property being valued as set forth in the offer. If the Demanding Party
elects to purchase the Optionee Party's interest, he must glue notice within 30
days after this Optionee Party's default and complete the purchase for cash
within 80 days after giving such notice. It shell be a condition of any sale
that the terms thereof provide for complete release of the Party who does not
remain an owner by virtue of the transaction and that the purchaser agrees to be
bound by this agreement.
17. After December 31, 1997 either Party may cause termination of the
VENTURE by acquisition of the Interest of the other or disposal of his interest
in the Property pursuant to the provisions hereofl Either Party (hereafter
"Offeror") may make or cause to be made an offer to purchase to the other Party
(hereafter "Offeree") setting forth the price at which he Is desirous of
purchasing the other Party's interest in the Property. Such notice shall also
specify the terms of such purchase. Within one hundred (100) days after date of
the Offer, the Offeree shall advise of Offeror as to whether the Offeree accepts
the Offer or whether the Offeree selects to acquire the interest of the Ofieror
in the Property on the same terms and conditions adjusted according to the
percentage to be bought or sold. Failure of the Offerers to respond within the
period above set forth shall conclusively be determined to be an acceptance of
the Offer. Closing on the safe of such interest shall be had within one hundred
and fifty (150) days after the date of the offer, or if Offeree does not act,
within sixty (60) days after the one hundred (100) day period Offeree had in
which to elect. Any Purchase Offer under this paragraph must be for cash, but
may be subject to any existing mortgage. In the event that a party becoming
bound pursuant to the provisions hereof to purchase the interest of the other,
fails as complete such purchase, the other may elect one of the following
consequences fA) the defaulting party shall thenceforth have a five (5%) less
ownership Interest to this Property and the other party shall succeed to such
five (5%) interest, or b) the non-defaulting party may purchase the interest of
the defaulting party may purchase the interest of the defaulting party at a
price 25% less than the price at which the hsae was to be made. Such election
shall be evidenced by notice in writing within 30 days and if the purchase
method is elected, the purchase shall be closed within sixty (60) days
thereafter. The selling partner has the right to require that the purchaser
shall cooperate in a tax free exchange.
