Exhibit 3.206
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SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
TEXAS HERITAGE OAKS NURSING AND REHABILITATION CENTER, LP
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF JULY 20, 2004
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TABLE OF CONTENTS
Page
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ARTICLE 1. ORGANIZATION.................................................. 3
1.1 Formation........................................................ 3
1.2 Name............................................................. 3
1.3 Principal Place of Business...................................... 3
1.4 Business Purpose................................................. 3
1.5 Certificate of Limited Partnership............................... 4
1.6 Fictitious Business Name Statements.............................. 4
1.7 Registered Office; Agent for Service of Process.................. 4
1.8 Term............................................................. 4
1.9 Partnership Interests and Certificates........................... 4
ARTICLE 2. DEFINITIONS................................................... 5
2.1 "Adjusted Capital Account Deficit"............................... 5
2.2 "Agreement"...................................................... 5
2.3 "Capital Account"................................................ 5
2.4 "Capital Contributions".......................................... 6
2.5 "Cash Available for Distribution"................................ 6
2.6 "Code"........................................................... 6
2.7 "Depreciation"................................................... 6
2.8 "Financing Proceeds"............................................. 7
2.9 "General Partner"................................................ 7
2.10 "Gross Asset Value".............................................. 7
2.11 "Interest"....................................................... 8
2.12 "Limited Partner"................................................ 8
2.13 "Net Profits" or "Net Losses".................................... 8
2.14 "Nonrecourse Deductions"......................................... 9
2.15 "Nonrecourse Liability".......................................... 9
2.16 "Partner Minimum Gain"........................................... 9
2.17 "Partner Nonrecourse Debt"....................................... 9
2.18 "Partner Nonrecourse Deductions"................................. 9
2.19 "Partners"....................................................... 9
2.20 "Partnership".................................................... 9
2.21 "Partnership Minimum Gain"....................................... 9
2.22 "Partnership Property"........................................... 9
2.23 "Percentage Interest"............................................ 9
2.24 "Person"......................................................... 9
2.25 "Recourse Liability"............................................. 9
2.26 "Regulations".................................................... 9
2.27 "Reserves"....................................................... 9
2.28 "Terminating Capital Transaction"................................ 10
2.29 "Transfer"....................................................... 10
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ARTICLE 3. CAPITAL; CAPITAL ACCOUNTS AND PARTNERS........................ 10
3.1 Initial Capital Contributions of the Partners.................... 10
3.2 Additional Capital Contributions by the Partners................. 10
3.3 Capital Accounts................................................. 10
3.4 Other Matters.................................................... 10
ARTICLE 4. ALLOCATIONS AND DISTRIBUTIONS................................. 11
4.1 Distributions In General......................................... 11
4.2 Distributions of Cash Available for Distribution and Net Proceeds
From Terminating Capital Transactions......................... 11
4.3 Allocation of Net Profits and Losses............................. 11
4.4 Additional Special Allocations................................... 11
ARTICLE 5. OPERATIONS.................................................... 14
5.1 Management....................................................... 14
5.2 Reimbursement.................................................... 15
5.3 Reports.......................................................... 15
5.4 Indemnification of General Partner; Liability of General
Partner....................................................... 15
ARTICLE 6. TRANSFERS..................................................... 16
6.1 Transfers and Assignments........................................ 16
ARTICLE 7. DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP... 16
7.1 Limitations...................................................... 16
7.2 Exclusive Causes................................................. 17
7.3 Liquidation...................................................... 17
7.4 No Capital Contribution Upon Dissolution......................... 17
7.5 Notice of Dissolution............................................ 17
ARTICLE 8. MISCELLANEOUS................................................. 18
8.1 Accounting and Fiscal Year....................................... 18
8.2 Entire Agreement................................................. 18
8.3 Further Assurances............................................... 18
8.4 Notices.......................................................... 18
8.5 Attorneys' Fees.................................................. 18
8.6 Governing Law.................................................... 18
8.7 Amendments....................................................... 18
8.8 Counterparts..................................................... 19
8.9 Facsimile Signatures............................................. 19
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SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
TEXAS HERITAGE OAKS NURSING AND REHABILITATION CENTER, LP
THIS SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this
"Agreement") is made and entered into effective as of July 20, 2004 (the
"Effective Date"), by and between Texas Heritage Oaks Nursing and Rehabilitation
Center GP, LLC a Delaware limited liability company, as general partner (the
"General Partner"), and Summit Care Corporation, a California corporation (the
"Limited Partner"), for the purpose of continuing a limited partnership under
the Delaware Revised Uniform Limited Partnership Act (the "Act").
ARTICLE 1.
ORGANIZATION
1.1 FORMATION. The General Partner and the Limited Partner hereby continue
the Partnership under the Act for the purposes and upon the terms and conditions
hereinafter set forth. The rights and liabilities of the General Partner and the
Limited Partner shall be as provided in the Act, except as otherwise expressly
provided herein.
1.2 NAME. The name of the Partnership is "Texas Heritage Oaks Nursing and
Rehabilitation Center, LP." The Partnership may also do business at the same
time under one or more fictitious names if the General Partner determines that
such is in the best interests of the Partnership. The General Partner may from
time to time for reasonable cause change the name of the Partnership.
1.3 PRINCIPAL PLACE OF BUSINESS. The principal office of the Partnership is
located at 19365 FM 2252, Suite 5, Garden Ridge, TX 78266, or such other place
as the General Partner may from time to time designate by notice to the Limited
Partner. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
1.4 BUSINESS PURPOSE.
(a) The Partnership may engage in any lawful act or activity for
which a limited partnership may be engaged under applicable law
(including, without limitation, the Act).
(b) The General Partner and the Limited Partner shall have the right
to engage or invest in any business activity, enterprise or
venture regardless whether such activity, enterprise or venture
competes with the Partnership's activities, enterprises or
ventures, and neither the General Partner nor the Limited Partner
shall not have any obligation to offer any business opportunity
to the Partnership, the General Partner or the Limited Partner.
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1.5 CERTIFICATE OF LIMITED PARTNERSHIP. The Partnership was formed as a
limited partnership under the Act by the initial Limited Partnership Agreement
of the Partnership, effective as of July 3, 2003, and by the General Partner
filing a Certificate of Limited Partnership with the Secretary of State of the
State of Delaware on July 3, 2003. The General Partner shall cause amendments to
the Certificate to be filed whenever required by the Act. Such amendments may be
executed by the General Partner. The existence of the Partnership as a separate
legal entity shall continue until the cancellation of its Certificate of Limited
Partnership in accordance with the Act.
1.6 FICTITIOUS BUSINESS NAME STATEMENTS. Following the execution of this
Agreement, fictitious business name statements shall be filed and published when
and if the General Partner determines it to be necessary. Any such statement
shall be renewed as required by law.
1.7 REGISTERED OFFICE; AGENT FOR SERVICE OF PROCESS. The address of the
registered office of the Partnership in the State of Delaware is located at 9
East Loockerman Street, Suite 1B, Dover, Delaware 19901, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office is National Registered Agents, Inc.
1.8 TERM. The term of the Partnership commenced on the date that the
Certificate was filed with the Office of the Delaware Secretary of State and
shall continue until the Partnership is dissolved pursuant to this Agreement.
1.9 PARTNERSHIP INTERESTS AND CERTIFICATES. The General Partner and Limited
Partner shall each receive a Partnership Certificate evidencing their respective
Interest in the Partnership (the "Partnership Certificates"). The Partnership
hereby irrevocably elects that all Interests in the Partnership shall be
securities governed by Article 8 of the Uniform Commercial Code as in effect in
the State of Delaware and each other applicable jurisdiction. Each Partnership
Certificate shall bear the following legends:
"This certificate evidences a [LP][GP] interest in Texas Heritage Oaks
Nursing and Rehabilitation Center, LP, and shall be a security governed by
Article 8 of the Uniform Commercial Code as in effect in the State of Delaware
and, to the extent permitted by applicable law, Article 8 of the Uniform
Commercial Code of each other applicable jurisdiction."
"THIS CERTIFICATE AND THE [LP][GP] INTEREST EVIDENCED HEREBY ARE NOT
NEGOTIABLE AND ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE TRANSFER
RESTRICTIONS OF THE LIMITED PARTNERSHIP AGREEMENT. The Partnership maintains
books for the purpose of registering transfers. This Certificate has not been
and will not be registered under the Securities Act of 1933 or under the
securities or blue sky laws of any state. The holder of this Certificate, by its
acceptance hereof, represents that it is acquiring this security for investment
and not with a view to any sale or distribution hereof."
This provision shall not be amended, and any purported amendment to
this provision, shall be null and void.
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ARTICLE 2.
DEFINITIONS
The following capitalized words and phrases used in this Agreement
shall have the following meanings:
2.1 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
2.1.1 Add to such Capital Account the following items:
(a) The amount, if any, that such Partner is obligated to contribute
to the Partnership upon liquidation of such Partner's Interest;
and
(b) The amount that such Partner is obligated to restore or is deemed
to be obligated to restore pursuant to the penultimate sentence
of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and
2.1.2 Subtract from such Capital Account, such Partner's share of the
items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
2.1.3 The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
2.2 "AGREEMENT" means this Limited Partnership Agreement, as amended from
time to time.
2.3 "CAPITAL ACCOUNT" means the Capital Account maintained for each Partner
in accordance with the following provisions:
2.3.1 To each Partner's Capital Account there shall be added (a) such
Partner's Capital Contributions, (b) such Partner's allocable share of Net
Profits and any items in the nature of income or gain that are specially
allocated to such Partner pursuant to Article 4 hereof and (c) the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Partnership property distributed to such Partner.
2.3.2 From each Partner's Capital Account there shall be subtracted
(a) the amount of (i) cash and (ii) the Gross Asset Value of any Partnership
Property distributed to such Partner pursuant to any provision of this
Agreement, (b) such Partner's allocable share of Net Losses and any other items
in the nature of expenses or losses that are specially allocated to such Partner
pursuant to Article 4 and (c) the amount of any liabilities of such Partner
assumed by the Partnership or which are secured by any property contributed by
such Partner to the Partnership.
2.3.3 In determining the amount of any liability for purposes of
Section 2.3.1 and Section 2.3.2, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
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2.3.4 Additional adjustments shall be made to the Partners' Capital
Accounts as required by Regulations Sections 1.704-1(b) and 1.704-2 or, as
permitted but not required, in the discretion of the General Partner.
Adjustments to Capital Accounts in respect of Partnership income, gain, loss,
deduction and non-deductible expenditures (or any item thereof) shall be made
with reference to the federal tax treatment of such items (and, in the case of
book items, with reference to federal tax treatment of the corresponding tax
items) at the Partnership level, without regard to any requisite or elective tax
treatment of such items at the Partner level.
2.3.5 The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and
applied in a manner consistent with such Regulations. In the event that the
General Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any additions or subtractions thereto, are computed in
order to comply with such Regulations, the General Partner may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Partner pursuant to Article 7 hereof upon the
dissolution of the Partnership. The General Partner shall also make (a) any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners and the amount of Partnership capital reflected
on the Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(q), and (b) any appropriate
modifications in the event that unanticipated events might otherwise cause this
Agreement not to comply with Regulations Sections 1.704-1(b) and 1.704-2.
2.4 "CAPITAL CONTRIBUTIONS" means, with respect to any Partner, the amount
of money and the Gross Asset Value of any property contributed to the capital of
the Partnership by such Partner, whether as an initial Capital Contribution or
as an additional Capital Contribution.
2.5 "CASH AVAILABLE FOR DISTRIBUTION" means, with respect to any fiscal
year, all Partnership cash receipts (but excluding any proceeds from a
Terminating Capital Transaction), after deducting payments for operating cash
expenses and any other amounts set aside for the restoration, increase or
creation of Reserves. Notwithstanding the foregoing, Cash Available for
Distribution shall not include Financing Proceeds.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
2.7 "DEPRECIATION" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year, Depreciation shall be an
amount that bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the General Partner.
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2.8 "FINANCING PROCEEDS" means the net proceeds from any loan secured by
all or any portion of the Partnership's real property (including any
refinancing) that remain after the repayment of any indebtedness of the
Partnership secured by all or a portion of such real property with such proceeds
and all costs related to such loan.
2.9 "GENERAL PARTNER" means Texas Heritage Oaks Nursing and Rehabilitation
Center GP, LLC a Delaware limited liability company, and its permitted
successors and assigns.
2.10 "GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
2.10.1 The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the General Partner and the Limited Partner.
2.10.2 The Gross Asset Values of all Partnership assets immediately
prior to the occurrence of any event described in subsection (a), subsection
(b), subsection (c) or subsection (d) hereof shall be adjusted to equal their
respective gross fair market values, as determined by the General Partner using
such reasonable method of valuation as it may adopt, as of the following times:
(a) the acquisition of an additional interest in the Partnership by a
new or existing Partner in exchange for more than a de minimis
Capital Contribution, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership;
(b) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership property as consideration for an
interest in the Partnership, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership;
(c) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
(d) at such other times as the General Partner shall reasonably
determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
2.10.3 The Gross Asset Value of any Partnership asset distributed to a
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the General Partner and the Limited Partner.
2.10.4 The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-
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1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted
pursuant to this Section 2.10.4 to the extent that the General Partner
reasonably determines that an adjustment pursuant to subsection (b) of Section
2.10.2 above is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this Section 2.10.4.
2.10.5 If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to Section 2.10.1, Section 2.10.2 or Section
2.10.4 hereof, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Net Income and Net Losses.
2.11 "INTEREST" means the entire partnership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any
and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all of
the terms and provisions of this Agreement, which Interest shall be evidenced by
a Partnership Certificate.
2.12 "LIMITED PARTNER" means Summit Care Corporation, a California
corporation, and its permitted successors and assigns.
2.13 "NET PROFITS" OR "NET LOSSES" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
2.13.1 Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Profits or Net
Losses pursuant to this Section 2.12 shall be added to such taxable income or
loss;
2.13.2 Any expenditure of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Profits or Net Losses pursuant to this Section 2.12, shall be
subtracted from such taxable income or loss;
2.13.3 Gain or loss resulting from any disposition of Partnership
Property where such gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Partnership
Property disposed of, notwithstanding that the adjusted tax basis of such
Partnership Property differs from its Gross Asset Value;
2.13.4 If the Gross Asset Value of any Partnership asset is adjusted
in accordance with the terms of this Agreement, the amount of such adjustment
shall be taken into account in the taxable year of such adjustment as gain or
loss from the disposition of such asset for purposes of computing Net Profits or
Net Losses;
2.13.5 Notwithstanding any other provision of this Section 2.12, any
items that are specially allocated pursuant to Section 4.4 hereof shall not be
taken into account in computing Net Profits or Net Losses.
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2.14 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
2.15 "NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Sections 1.704-2(b)(3) and 1.752-1(a)(2).
2.16 "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i).
2.17 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
2.18 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i).
2.19 "PARTNERS" means the General Partner and the Limited Partner.
2.20 "PARTNERSHIP" means the Delaware limited partnership governed by this
Agreement.
2.21 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Sections 1.704-2(b)(2) and 1.704-2(d)(1).
2.22 "PARTNERSHIP PROPERTY" means all direct and indirect interests in real
and personal property owned by the Partnership from time to time and shall
include both tangible and intangible property (including cash).
2.23 "PERCENTAGE INTEREST" means with respect to each Partner, the
percentage of outstanding Interests held by such Partner as evidenced by a
Partnership Certificate, which percentage shall be set forth opposite such
Partner's name on Exhibit A attached hereto as it may be amended or supplemented
from time to time.
2.24 "PERSON" means any individual, corporation, partnership, joint
venture, limited liability partnership, limited liability company, association,
joint stock company, trust, unincorporated organization, whether or not a legal
entity or other business or governmental entity.
2.25 "RECOURSE LIABILITY" has the meaning set forth in Regulations Section
1.752-1(a)(1).
2.26 "REGULATIONS" means proposed, temporary and final Treasury Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding Treasury Regulations).
2.27 "RESERVES" means, with respect to any fiscal year or other period,
funds set aside or amounts allocated during such period to reserves that shall
be maintained in amounts deemed
9
sufficient by the General Partner for working capital, to pay taxes, insurance,
debt service, and other costs or expenses incident to the ownership of the
Partnership Property and the conduct of business by the Partnership as
contemplated hereunder.
2.28 "TERMINATING CAPITAL TRANSACTION" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
2.29 "TRANSFER" means a sale, conveyance, exchange, assignment, pledge,
encumbrance, making a gift of, hypothecation or other transfer, or an agreement
to do any of the foregoing.
ARTICLE 3.
CAPITAL; CAPITAL ACCOUNTS AND PARTNERS
3.1 INITIAL CAPITAL CONTRIBUTIONS OF THE PARTNERS. The Partners have made
or been credited with the Capital Contributions to the Partnership reflected in
the Capital Account established for each Partner.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS BY THE PARTNERS. Neither of the
Partners shall be required to and no Partner has the right to make any
additional Capital Contributions to the Partnership, except that the Partners
shall make such additional Capital Contributions as provided below in this
Section 3.2.
3.2.1 If the General Partner determines, at any time and from time to
time, that the Partnership requires additional capital for its business and
operations, the General Partner, in its sole and absolute discretion, may
deliver notice (an "Additional Capital Requirement Notice") to the Limited
Partner specifying the additional amount of capital so determined to be
required; provided, however, the General Partner shall have no obligation to any
creditor of the Partnership to deliver an Additional Capital Requirement Notice.
At any time after the delivery to the Limited Partner of such an Additional
Capital Requirement Notice, the Partners, in proportion to their Percentage
Interests, shall make an additional Capital Contribution to the Partnership up
to the amount stated in such notice.
3.2.2 Notwithstanding anything to the contrary in this Agreement, with
respect to any future Capital Contributions, the actual making of such Capital
Contributions by the Partners in proportion to their Percentage Interests shall
be deemed to have been made pursuant to an Additional Capital Requirement
Notice, whether written or oral.
3.3 CAPITAL ACCOUNTS. A Capital Account shall be established and maintained
for each Partner in accordance with the terms of this Agreement.
3.4 OTHER MATTERS.
3.4.1 Except as otherwise provided in this Agreement, a Partner shall
not demand or be entitled to receive a return of or interest on its Capital
Contributions or Capital Account, withdraw any portion of its Capital
Contributions or receive any distributions from the
10
Partnership as a return of capital on account of such Capital Contributions
without, in each instance, the approval of both Partners. Under circumstances
requiring or permitting a return of its Capital Contributions, the Partners
shall have the right to receive property other than cash as reasonably
determined by the General Partner, except as may be specifically prohibited
herein.
3.4.2 Except as otherwise provided by the Act, neither the General
Partner nor the Limited Partner shall be liable for the debts, liabilities,
contracts or any other obligations of the Partnership, nor shall the General
Partner or the Limited Partner be required to lend any funds to the Partnership.
ARTICLE 4.
ALLOCATIONS AND DISTRIBUTIONS
4.1 DISTRIBUTIONS IN GENERAL. Except as otherwise provided in Article 7
hereof and subject to Sections 17-607 and 17-804 of the Act, for any fiscal year
all Cash Available for Distribution, net proceeds from any Terminating Capital
Transaction and Financing Proceeds shall be distributed to the Partners at least
quarterly.
4.2 DISTRIBUTIONS OF CASH AVAILABLE FOR DISTRIBUTION AND NET PROCEEDS FROM
TERMINATING CAPITAL TRANSACTIONS.
4.2.1 Subject to Article 7 hereof, any Cash Available for Distribution
shall be distributed to the Partners in proportion to their Percentage
Interests.
4.2.2 Any net proceeds of a Terminating Capital Transaction shall be
applied or distributed as provided in Section 7.3(c) hereof.
4.2.3 All amounts withheld pursuant to the Code or any provision of
any state or local tax law with respect to any payment or distribution to the
Partnership or the Partners shall be treated as amounts distributed to the
Partners pursuant to this Article 4 and Article 7 hereof for all purposes under
this Agreement.
4.3 ALLOCATION OF NET PROFITS AND LOSSES. Subject to Section 4.4, Net
Profits, Net Losses and any other items of income, gain, loss and deduction for
any fiscal year shall be allocated, for purposes of adjusting the Capital
Accounts of the Partners, in proportion to the Partners' Percentage Interests.
4.4 ADDITIONAL SPECIAL ALLOCATIONS. Notwithstanding the foregoing
provisions of this Article 4:
4.4.1 Tax items with respect to Partnership Property that is
contributed to the Partnership with a Gross Asset Value that varies from its
basis in the hands of the contributing Partner immediately preceding the date of
contribution shall be allocated between the Partners for income tax purposes
pursuant to Regulations promulgated under Code Section 704(c) so as to take into
account such variation. The Partnership shall account for such variation under
any method approved under Code Section 704(c) and the applicable Regulations as
chosen by the General Partner, including, without limitation, the "traditional
method" as described in Regulations Section 1.704-3(b). If the Gross Asset Value
of any Partnership asset is adjusted
11
pursuant to Section 2.10.2, subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the Regulations
promulgated thereunder. Allocations pursuant to this Section 4.4.1 are solely
for purposes of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Partner's Capital Account or share
of Net Profits, Net Losses and any other items or distributions pursuant to any
provision of this Agreement.
4.4.2 The Nonrecourse Deductions for each taxable year of the
Partnership shall be allocated to the Partners in proportion to their Percentage
Interests.
4.4.3 If there is a net decrease in Partnership Minimum Gain during a
Partnership taxable year, then each Partner shall be allocated items of
Partnership income and gain for such taxable year (and, if necessary, for
subsequent years) in an amount equal to such Partner's share of the net decrease
in Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g)(2). This Section 4.4.3 is intended to comply with the minimum gain
chargeback requirement of Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith. The allocation otherwise required pursuant
to this Section 4.4.3 shall, however, not apply to a Partner to the extent that
the minimum gain chargeback rules are inapplicable in a particular circumstance.
4.4.4 The Partner Nonrecourse Deductions shall be allocated each year
to the Partner that bears the economic risk of loss (within the meaning of
Regulations Section 1.752-2) for the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable.
4.4.5 If there is a net decrease in Partner Minimum Gain attributable
to a Partner Nonrecourse Debt during any Partnership taxable year, each Partner
who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such taxable year (and, if necessary, subsequent years) in an amount equal
to such Partner's share of the net decrease in Partner Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in a manner consistent with the
provisions of Regulations Section 1.704-2(g)(2). This Section 4.4.5 is intended
to comply with the partner nonrecourse debt minimum gain chargeback requirement
of Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
4.4.6 If any Partner unexpectedly receives an adjustment, allocation
or distribution of the type contemplated by Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes an Adjusted Capital Account
Deficit in such Partner's capital account, items of income and gain shall be
allocated to all such Partners (in proportion to the amounts of their respective
Adjusted Capital Account Deficits) in an amount and manner sufficient to
eliminate the deficit balances in such Partners' Capital Accounts, that are in
excess of such Partners' respective Adjusted Capital Account Deficits, as
quickly as possible as of the end of the Partnership's taxable year to which
adjustment, allocation or distribution relates. It is intended that this Section
4.4.6 qualify and be construed as a "qualified income offset" within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(d).
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4.4.7 In the event that any Partner has a deficit Capital Account at
the end of any fiscal year that is in excess of the sum of (1) the amount (if
any) that such Partner is obligated to restore to the Partnership upon
liquidation of such Partner's Partnership Interest and (2) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Partner shall be specially 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 4.4.7 shall be made if and only to the extent that such
Partner would have a deficit Capital Account in excess of such sum after all
other allocations provided in this Article 4 have been tentatively made as if
this Section 4.4.7 and Section 4.4.6 hereof were not in the Agreement.
4.4.8 If the allocation of Net Loss to a Partner as provided in
Section 4.3 hereof would create or increase an Adjusted Capital Account Deficit,
there shall be allocated to such Partner only that amount of Net Loss as will
not create or increase an Adjusted Capital Account Deficit. The Net Loss that
would, absent the application of the preceding sentence, otherwise be allocated
to such Partner shall be allocated to the other Partners pro rata to the
allocation of other Losses to such Partner, subject to the limitations set forth
in this Section 4.4.8.
4.4.9 To the extent that an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his Interest in the Partnership, 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 specially allocated to the Partners in accordance with
their interests in the Partnership in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such distribution
was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
4.4.10 The allocations set forth in Sections 4.4.2, 4.4.3, 4.4.4,
4.4.5, 4.4.6, 4.4.7, 4.4.8 and 4.4.9 hereof (the "Regulatory Allocations") are
intended to comply with certain requirements of Regulations Sections 1.704-1(b)
and 1.704-2(i). The Regulatory Allocations may not be consistent with the manner
in which the Partners intend to distribute the cash of the Partnership or
allocate Partnership income or loss. Accordingly, the General Partner is hereby
authorized to allocate Net Profits, Net Losses, and other items of income,
gains, loss and deductions to the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided between the Partners. In general, the Partners anticipate that this
will be accomplished by specially allocating other Net Profits, Net Losses and
other items of income, gain, loss and deduction to the Partners so that, to the
extent possible, the net amount of such allocations of other Net Profits, Net
Losses and other items and the Regulatory Allocations to the Partners shall be
equal to the net amount that would have been allocated among the Partners if the
Regulatory Allocations had not occurred. However, the General Partner shall have
discretion to accomplish this result in any reasonable manner.
4.4.11 Except as otherwise required by Sections 4.4.1 through 4.4.9
hereof, but notwithstanding the other foregoing provisions of this Article 4, at
all times during the existence
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of the Partnership the General Partner's interest in each item of Partnership
income, gain, loss, deduction or credit shall equal at least one percent (1%) of
each of those items.
4.4.12 For purposes of determining the Net Profits, Net Losses and any
other items of income, gain, loss and deduction allocable to any period, Net
Profits, Net Losses, and any such other items shall be determined on a daily,
monthly, or other basis, as determined by the General Partner using any
permissible method under Code Section 706 and the Regulations thereunder.
ARTICLE 5.
OPERATIONS
5.1 MANAGEMENT. The business and affairs of the Partnership shall be
managed exclusively by the General Partner. The General Partner shall have full
and complete charge of all the affairs and business of the Partnership, in all
respects and in all matters, including (without limitation) the responsibility,
authority and power, on behalf of the Partnership, at Partnership expense and
without the approval of the Limited Partner, to:
(a) pay, collect, compromise, arbitrate or otherwise adjust any and
all claims or demands of or against the Partnership, in such
amounts and upon such terms and conditions as the General Partner
shall reasonably determine;
(b) from time to time, employ, engage, hire or otherwise secure the
services of such Persons, including any of the parties hereto or
any Persons, firms or corporations related thereto or affiliated
therewith, as the General Partner may reasonably deem advisable
for the proper execution of its duties as General Partner
hereunder, provided such services are within the scope of the
foregoing authority granted to the General Partner hereunder,
such employment to be for such reasonable compensation and upon
such reasonable terms and conditions as the General Partner shall
determine;
(c) prepare, execute, file, record, publish and deliver any and all
instruments, documents or statements necessary or convenient to
effectuate any and all actions that the General Partner is
authorized to take on behalf of the Partnership.
(d) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of
the Partnership, and secure the same by mortgage, pledge or other
lien on any Partnership assets;
(e) deal with, or otherwise engage in business with, or provide
services to and receive compensation therefor from, any Person
who has provided or may in the future provide services to, lend
money to, sell property to or purchase property from the Partners
or any affiliate of the Partners;
(f) establish and maintain Reserves for such purposes and in such
amounts as it deems appropriate from time to time; and
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(g) engage in any kind of activity and perform and carry out
contracts of any kind necessary to, in connection with or
incidental to the accomplishment of the purposes of the
Partnership, as may be lawfully carried on or performed by a
limited partnership under the laws of the State of Delaware.
5.1.2 Except as expressly provided in this Agreement, the Limited
Partner shall have no right to vote on or consent to any other matter, act,
decision or document involving the Partnership or its business, including any
vote provided for in the Act.
5.2 REIMBURSEMENT. Subject to Article 8 hereof, the General Partner shall
be entitled to reimbursement from the Partnership for all costs and expenses
(including allocable overhead) incurred by it for or on behalf of the
Partnership.
5.3 REPORTS.
5.3.1 The General Partner shall cause to be kept, at the principal
place of business of the Partnership, or at such other location as the General
Partner shall reasonably deem appropriate or advisable, full and proper ledgers
and other books of account of all receipts and disbursements and other financial
activities of the Partnership.
5.3.2 The Limited Partner (personally or through its authorized
representative) shall have the right to examine and copy the books and records
of the Partnership at all reasonable times.
5.4 INDEMNIFICATION OF GENERAL PARTNER; LIABILITY OF GENERAL PARTNER.
5.4.1 Other than with respect to an action by, on behalf of, or in the
right of the Partnership, the Partnership shall indemnify and hold harmless the
General Partner, its parents, affiliates and subsidiaries, and all officers,
directors, employees and agents of any of the foregoing (individually, an
"Indemnitee") to the full extent permitted by law from and against any and all
losses, claims, demands, costs, damages, liabilities, joint and several,
expenses of any nature (including attorneys' fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
in which the Indemnitee may be involved, or threatened to be involved as a party
or otherwise, arising out of or incident to the business of the Partnership, if
(i) the Indemnitee acted in good faith and in a manner it believed to be in, or
not opposed to, the best interests of the Partnership and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful, and (ii) the Indemnitee's conduct did not constitute gross negligence
or willful misconduct. The termination of an action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendre or its
equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnitee acted in a manner contrary to that
specified in clauses (i) or (ii) above.
5.4.2 Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 5.4 shall be advanced
by the Partnership prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the
15
Partnership of a written commitment by or on behalf of the Indemnitee to repay
such amount if it shall be determined that such Indemnitee is not entitled to be
indemnified as authorized in this Section 5.4.
5.4.3 The indemnification provided by this Section 5.4 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to a vote of the Partners, as a matter of law or equity or
otherwise, and shall inure to the benefit of the heirs, successors, assigns and
administrators of the Indemnitee.
5.4.4 Any indemnification provided hereunder shall be satisfied solely
out of the assets of the Partnership. Neither the General Partner nor the
Limited Partner shall be subject to personal liability by reason of these
indemnification provisions.
5.4.5 No Indemnitee shall be denied indemnification in whole or in
part under this Section 5.4 by reason of the fact that the Indemnitee had an
interest in the transaction with respect to which the indemnification applies if
the transaction was otherwise permitted by the terms of this Agreement.
5.4.6 The provisions of this Section 5.4 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of any
other Person.
5.4.7 Neither the General Partner nor its parents, subsidiaries or
affiliates nor the officers, directors, employees of any of the foregoing shall
be liable to the Partnership or to the Limited Partner for any losses sustained
or liabilities incurred as a result of any act or omission of the General
Partner or any such other Person if (i) the General Partner or such other Person
acted (or failed to act) in good faith and in a manner it believed to be in, or
not opposed to, the interests of the Partnership, and (ii) the conduct of the
General Partner or such other Person did not constitute gross negligence or
willful misconduct.
ARTICLE 6.
TRANSFERS
6.1 TRANSFERS AND ASSIGNMENTS. Subject to this Section 6.1, a Partner may
transfer or assign all but not less than all of its Interest. If a Partner
transfers or assigns all of its Interest pursuant to this Section 6.1, the
transferee shall be admitted as a Partner of the Partnership upon its execution
of an instrument signifying its agreement to be bound by the terms and
conditions of this Agreement, which instrument may be a counterpart signature
page to this Agreement. Such admission shall be deemed effective immediately
prior to the transfer and, immediately following such admission, the transferor
Partner shall cease to be a Partner of the Partnership. Any successor to a
Partner by merger or consolidation shall, without further act, be a Partner
hereunder, and such merger or consolidation shall not constitute an assignment
for purposes of this Agreement and the Partnership shall continue without
dissolution.
ARTICLE 7.
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
7.1 LIMITATIONS. The Partnership may be dissolved, liquidated and
terminated pursuant to and only pursuant to the provisions of this Article 7,
and the parties hereto do hereby
16
irrevocably waive any and all other rights they may have to cause a dissolution
of the Partnership or a sale or partition of any or all of the Partnership's
assets.
7.2 EXCLUSIVE CAUSES. The following and only the following events shall
cause the Partnership to be dissolved, liquidated and terminated:
(a) The unanimous election of the Partners;
(b) The occurrence of an event of withdrawal of the General Partner;
provided, however, the events set forth at Sections 17-402(a)(4)
and (5) of the Act shall not constitute events of withdrawal of
the General Partner and upon the occurrence of any such event the
General Partner shall not cease to be general partner of the
Partnership and the Partnership shall continue without
dissolution; and
(c) Dissolution of the Partnership by law, including pursuant to a
decree of judicial dissolution under Section 17-802 of the Act.
7.3 LIQUIDATION. In all cases of dissolution of the Partnership, the
business of the Partnership shall be continued to the extent necessary to allow
an orderly winding up of its affairs, including the liquidation of the
Partnership pursuant to the provisions of this Section 7.3, and, as promptly as
practicable, each of the following shall be accomplished:
(a) The Partnership Property shall be liquidated in an orderly,
businesslike and commercially reasonable manner.
(b) Any Net Profit, Net Loss or other item of income, gain, loss or
deduction realized by the Partnership upon the sale of the
Partnership Property or transfer in kind shall be deemed
recognized and allocated to the Partners in the manner set forth
in Article 4 hereof.
(c) The proceeds of sale of Partnership assets and all other assets
of the Partnership shall first be applied to satisfaction of all
Partnership debts in accordance with the Act and to the
establishment of any necessary Reserves, and then shall be
distributed to the Partners in proportion to and to the extent of
positive balances in their respective Capital Accounts.
7.4 NO CAPITAL CONTRIBUTION UPON DISSOLUTION. Each Partner shall look
solely to the assets of the Partnership for all distributions with respect to
the Partnership, its Capital Contribution thereto, its Capital Account, its
share of Net Profits or Net Losses or other items and shall have no recourse
therefor (upon dissolution or otherwise) against any Partner. No Partner shall
be obligated to restore to the Partnership any negative balance that may exist
or continue in such Partner's Capital Account.
7.5 NOTICE OF DISSOLUTION. In the event that an event described in Section
7.2 occurs, the General Partner shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Limited Partner and to all other
parties with whom the Partnership regularly conducts business (as determined in
the discretion of the General Partner).
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ARTICLE 8.
MISCELLANEOUS
8.1 ACCOUNTING AND FISCAL YEAR. Subject to Code Section 448, the books of
the Partnership shall be kept on such method of accounting for tax and financial
reporting purposes as may be determined by the General Partner. The fiscal year
of the Partnership shall end on December 31 of each year, or on such other date
permitted under the Code as the General Partner shall determine.
8.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and fully
supersedes any and all prior agreements or understandings between the parties
hereto pertaining to the subject matter hereof.
8.3 FURTHER ASSURANCES. Each of the parties hereto does hereby covenant and
agree on behalf of itself, its successors and its assigns, without further
consideration, to prepare, execute, acknowledge, file, record, publish and
deliver such other instruments, documents and statements, and to take such other
action as may be required by law or necessary to effectively carry out the
purposes of this Agreement.
8.4 NOTICES. Any notice, consent, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer of the
Person to whom the same is directed, or sent by registered or certified mail,
return receipt requested, addressed as follows: if to the Partnership, to the
Partnership at the address set forth in Section 1.3 hereof, or to such other
address as the Partnership may from time to time specify by notice to the
Partners; if to a Partner, to such Partner at the address set forth in Exhibit
A, or to such other address as such Partner may from time to time specify by
notice to the Partnership. Any such notice shall be deemed to be delivered,
given and received for all purposes as of the date so delivered, if delivered
personally, or if sent by registered or certified mail, postage and charges
prepaid and properly addressed, on the date of receipt or refusal indicated on
the return receipt.
8.5 ATTORNEYS' FEES. In the event that any action or proceeding be filed by
any Partner or by the Partnership as against the Partnership or any other
Partner to enforce any of the covenants or conditions hereof, the party in whose
favor final judgment shall be entered shall be entitled to have and recover of
and from the other reasonable attorneys' fees to be fixed by the court wherein
said judgment be entered.
8.6 GOVERNING LAW. This Agreement, including its existence, validity,
construction and operating effect, and the rights of each of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware (without regard to principles of conflicts of laws).
8.7 AMENDMENTS. No amendments to this Agreement shall be effective without
the prior written approval of all of the Partners, which approval may be given
or withheld in the sole and absolute discretion of a Partner.
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8.8 COUNTERPARTS. This Agreement may be executed in any number of identical
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 FACSIMILE SIGNATURES. This Agreement maybe executed by facsimile
transmission and such facsimile will be valid and binding to the same extent as
if it were an original.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
"GENERAL PARTNER"
Texas Heritage Oaks Nursing and
Rehabilitation Center GP, LLC
a Delaware limited liability company
By: /s/ Roland Rapp
------------------------------------
Roland Rapp,
Secretary
"LIMITED PARTNER"
Summit Care Corporation.,
a California corporation
By: /s/ Roland Rapp
------------------------------------
Roland Rapp,
Secretary
S-1
EXHIBIT A
PARTNERS AND PERCENTAGE INTERESTS
NAME AND ADDRESS OF PARTNERS PERCENTAGE INTEREST
- ---------------------------- -------------------
Summit Care Corporation 99%
27442 Portola Parkway, Suite 200
Foothill Ranch, CA 92610
Texas Heritage Oaks Nursing and
Rehabilitation Center GP, LLC 1%
27442 Portola Parkway, Suite 200
Foothill Ranch, CA 92610
EXHIBIT A