EXHIBIT 4.4
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP OF
LTC PARTNERS IV, L.P.
TABLE OF CONTENTS
Page no.
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ARTICLE 1. Definitions ........................................................ 1
ARTICLE 2. Formation and Business of the Partnership; Filings ................. 9
2.1 Formation .......................................................... 9
2.2 Name ............................................................... 9
2.3 Business ........................................................... 9
2.4 REIT Requirements .................................................. 9
2.5 Principal Place of Business ........................................ 9
2.6 Registered Agent and Registered Office ............................. 9
2.7 Term ............................................................... 10
2.8 Filings ............................................................ 10
2.9 Power of Attorney .................................................. 10
ARTICLE 3. Partners and Partnership Interests; Capital Contributions .......... 11
3.1 Partners ........................................................... 11
3.2 Initial Capital Contributions ...................................... 11
3.4 Capital Accounts ................................................... 11
3.5 No Interest on or Return of Capital Contribution ................... 12
3.6 Units .............................................................. 12
ARTICLE 4. Allocations of Partnership Items ................................... 13
4.1 Allocation of Profits and Losses ................................... 13
4.2 Special Allocations ................................................ 14
4.3 Curative Allocations ............................................... 15
4.4 Tax Allocations .................................................... 16
4.5 Varying Interests .................................................. 17
4.6 Allocations Between Transferor and Transferee ...................... 17
ARTICLE 5. Distributions ...................................................... 17
5.1 Distributions ...................................................... 17
5.2 Certain Loans and Offset ........................................... 18
5.3 REIT Distribution Requirements ..................................... 18
5.4 Limitations on Distributions ....................................... 18
5.5 Distributions Upon Liquidation ..................................... 19
ARTICLE 6. Management of the Partnership ...................................... 19
6.1 Rights, Powers and Duties of General Partner ....................... 19
6.2 Delegation of Authority ............................................ 22
6.3 Reliance by Third Parties .......................................... 22
6.4 Limitation on Authority of the General Partner ..................... 22
6.5 Payment of Partnership Expenses; Reimbursement of General Partner .. 23
6.6 Compensation of the General Partner ................................ 23
6.7 Loans by Partners or Affiliates to the Partnership ................. 23
6.8 Title to Partnership Assets ........................................ 24
6.9 Liability of the General Partner ................................... 24
6.10 Other Matters Concerning the General Partner ....................... 24
6.11 Outside Activities ................................................. 25
6.12 Limited Partner(s) ................................................. 25
Page No.
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ARTICLE 7. Books and Records; Tax Matters................................ 26
7.1 Books and Records ............................................ 26
7.2 Reports ...................................................... 26
7.3 Code Elections and Tax Audits ................................ 26
ARTICLE 8. Transfers of Partnership Interests; Admission of Substitute
or Additional Limited Partners ............................... 27
8.1 General Partner .............................................. 27
8.2 Purchase for Investment ...................................... 27
8.3 Restrictions on Transfer of Limited Partnership Interests .... 28
8.4 Certain Restrictions on Transfer ............................. 29
8.5 Effective Dates of Transfers ................................. 30
ARTICLE 9. Dissolution, Liquidation and Winding-Up ...................... 30
9.1 Events of Dissolution; Winding Up ............................ 30
9.2 Cancellation of Certificate of Limited Partnership ........... 31
9.3 Return of Capital ............................................ 31
ARTICLE 10. Miscellaneous ................................................ 31
10.1 Notices ...................................................... 31
10.2 Successors and Assigns ....................................... 32
10.3 Amendments ................................................... 32
10.4 Waiver of Partition .......................................... 32
10.5 Waivers ...................................................... 32
10.6 Entire Agreement ............................................. 32
10.7 Interpretation ............................................... 33
10.8 Counterparts ................................................. 33
10.9 Applicable Law ............................................... 33
10.10 Partial Invalidity ........................................... 33
10.11 No Third Party Rights ........................................ 33
10.12 Compliance with Laws ......................................... 33
10.13 Confidentiality .............................................. 33
10.14 Valid and Binding Agreement .................................. 34
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
LTC PARTNERS IV, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement") is made and entered into as of the 30th day of January, 1996, by
and among LTC GP I, Inc., a Delaware corporation ("LTC Subsidiary"), and Harvey
J. Angell ("HA"), a resident of Illinois, pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act.
WHEREAS, LTC Partners IV, L.P. (as further defined below, the
"Partnership") was formed as a limited partnership under the Delaware Revised
Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership
filed with the Secretary of State of the State of Delaware on November 17, 1995,
and is governed by an agreement of limited partnership (the "Original
Agreement") between LTC Subsidiary as the general partner of the Partnership (as
further defined below, the "General Partner") and Park Villa Corporation, a
Delaware corporation, as the original limited partner of the Partnership (the
"Original Limited Partner");
WHEREAS, in connection with the Partnership's acquisition of a
nursing home facility currently owned by the Seller (as defined below), the
General Partner and the Original Limited Partner desire to (i) provide for the
withdrawal of the Original Limited Partner, (ii) admit HA to the Partnership as
a Limited Partner, and (iii) amend and restate the Original Agreement in its
entirety;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree that the Original
Agreement is hereby amended to read in its entirety as follows:
ARTICLE 1. Definitions
As used in this Agreement, the following terms and phrases have the
meanings set forth below:
"Accountants" means such firm of independent certified public
accountants as may be selected by the General Partner on behalf of the
Partnership to audit the financial books and records of the Partnership and to
prepare statements and reports in connection therewith. Each Limited Partner
acknowledges and expressly agrees that the Accountants may be LTC Subsidiary's
and LTC's accountants, and initially will be Ernst & Young, LLP.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
amended and as the same may be further amended from time to time, together with
any successor thereto.
"Adjusted Capital Account Deficit" means, with respect to any
Partner other than the General Partner, the deficit balance, if any, in such
Partner's Capital Account as of the end of any relevant Fiscal Year and after
(i) crediting to such Capital Account all amounts, if any, that such Partner (A)
is obligated or treated as obligated to restore with respect to any deficit
balance in such Capital Account pursuant to Section 1.704-1 (b)(2)(ii)(c) of the
Regulations, or (B) is deemed to be obligated to restore with respect to any
deficit balance pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and (ii) debiting to such Capital Account
the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
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Regulations. The foregoing definition of "Adjusted Capital Account Deficit" is
intended to comply with the requirements of the alternate test for economic
effect contained in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
"Affected Gain" has the meaning set forth in subsection 4.4(b)
hereof.
"Affiliate" means, when used with reference to a specified Person:
(i) if such Person is an individual, any member of the Immediate Family of such
Person; (ii) if such Person is a trust, any trustee or beneficiary of that
Person; or (iii) any Person that, directly or indirectly, Controls, is
Controlled by or is under common Control with, the specified Person, including,
without limitation, any Person that beneficially owns, directly or indirectly,
5% of more of the outstanding shares of capital stock or other equity securities
of that Person, that is an officer, director or partner of, or serves in a
similar capacity with respect to, such Person or of which such specified Person
is an officer, director or partner or serves in a similar capacity.
"Agreement" means this Agreement of Limited Partnership, as from
time to time amended, supplemented or otherwise modified or restated from time
to time.
"Bankruptcy" means, with respect to any Person: (i) the filing by
such Person of a petition for relief, or the commencement by such Person of a
case or other proceeding seeking relief, under any provision of the federal
Bankruptcy Code or any other federal or state law relating to insolvency,
bankruptcy or reorganization; (ii) the filing against such Person of any such
petition or the commencement against such Person of any such proceeding
(including, but not limited to, a petition or application for the appointment of
a receiver or a trustee for such Person or a substantial part of such Person's
assets), unless such petition or proceeding is dismissed within 90 days from the
date of such filing or commencement; (iii) in the case of a petition or
proceeding described in clause (ii) above, the filing of an answer by such
Person admitting the allegations of such petition or the taking by such Person
of any action indicating such Person's approval of or acquiescence in any such
proceeding; (iv) an adjudication that such Person is insolvent or bankrupt; or
(v) the entry of an order for relief under the federal Bankruptcy Code with
respect to such Person.
"Acquired Assets" means the assets previously owned by Seller and
acquired by the Partnership pursuant to the Purchase Agreement and the
Contribution Agreement.
A "business day" means any day that is not a Saturday, Sunday or a
day on which banking institutions in the States of California or Illinois are
authorized or obligated by law or executive order to close.
"Capital Account" means, as to any Partner, the account maintained
under Section 3.4 hereof with respect to the Partnership Interest held by such
Partner.
"Capital Contribution" means, with respect to any Partner, the total
amount of cash and the initial Gross Asset Value of all other property, if any,
contributed to the Partnership by that Partner or the predecessor holder(s) of
that Partnership Interest, less the aggregate amount of Contributed Debt
attributable to such Partner.
"Capital Expenditures" means any and all payments made directly or
indirectly for the purpose of acquiring or constructing or restoring real
property, fixed assets or equipment that in accordance with GAAP would be
treated as a debit to the fixed asset account of the Partnership, including
without limitation amounts paid or payable as principal under any conditional
sale or other title retention agreement or under any lease or other periodic
payment
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arrangement or agreement that is of such a nature that payment obligations of
the lessee or obligor thereunder would be required by GAAP to be capitalized and
shown as a liability on the balance sheet of the lessee or obligor.
"Cash Flow from Operations" means for any Distribution Period, an
amount equal to the excess, if any, of (i) the rents and all other revenues that
are received by the Partnership during that Distribution Period and that the
Partnership is entitled to retain and use for its own purposes, over (ii) the
total amount paid or payable by the Partnership with respect to that
Distribution Period for the following purposes: (A) to pay the Preferred Return,
(B) to pay principal, interest or other amounts due in respect of indebtedness
owed by the Partnership or secured by the Partnership's assets, including
without limitation indebtedness to the General Partner or LTC, (C) for Capital
Expenditures with respect to the Acquired Assets (excluding for purposes of this
clause (ii) all Capital Expenditures paid for by incurring new indebtedness),
and (D) to pay costs and expenses incurred in operating the Partnership and for
Partnership general and administrative expenses as determined by the General
Partner in accordance with GAAP.
"Certificate" means the Certificate of Limited Partnership
establishing the Partnership, as filed with the office of the Delaware Secretary
of State pursuant to the Act and as the same may be amended from time to time.
"Closing Date" means the date on which the Closing (as defined in
the Purchase Agreement) occurs.
"Code" means the United States Internal Revenue Code of 1986, as
amended and as the same is further amended from time to time, as interpreted by
the applicable regulations thereunder. Any reference herein to a specific
provision of the Code shall be deemed to include a reference to any
corresponding provision of any succeeding law.
"Confidential Information" has the meaning set forth in subsection
10.13(a) hereof.
"Contributed Debt" means, with respect to any Partner, the aggregate
principal amount of indebtedness (and all accrued fees or interest related
thereto, if any) (i) that has been assigned by or otherwise transferred by that
Partner to the Partnership or that the Partnership shall have otherwise become
obligated to pay (including, without limitation, by way of guarantee,
endorsement or other contingent promise), or (ii) to which any property
contributed to the Partnership by, or otherwise attributable to, that Partner is
subject.
"Contribution Agreement" means that certain Agreement Regarding
Contribution of Undivided Interests in Nursing Home Facility dated as of the
date hereof, between the Partnership and HA.
"Control" means the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to select the managing
partner of a partnership or to otherwise select, or to have the power to remove
and then select, a majority of those Persons exercising governing authority over
an entity. In the case of a limited partnership, the sole general partner, each
of the general partners to the extent each has equal management authority, or if
such general partners do not have equal management authority, the managing
general partner or each managing general partner shall be deemed to Control of
such partnership; in the case of a trust, each trustee thereof and each Person
having the right to select any such trustee shall be deemed to Control of such
trust.
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"Depreciation" means, with respect to any asset of the Partnership
for any Fiscal Year, the depreciation, amortization or other cost recovery
deduction allowed or allowable for federal income tax purposes in respect of
such asset for such Fiscal Year; provided, however, that if the Gross Asset
Value of an asset differs from its adjusted tax basis for federal income tax
purposes at the beginning of such Fiscal 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
Fiscal Year bears to such beginning adjusted tax basis and provided, further,
that if such adjusted tax basis is zero, Depreciation shall be determined with
respect to such beginning Gross Asset Value using any reasonable method selected
by the General Partner.
"Distribution Period" means as to each Fiscal Year, the period of
six calendar months that begins on January 1 or July 1 of that Fiscal Year,
except that the first Distribution Period shall begin as of January 1, 1996 and
end on June 30, 1996.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended and as in effect from time to time, as interpreted by the applicable
regulations thereunder (or, with respect to any provision of that statute
referred to herein, any corresponding provision of any succeeding law).
"Exchange Rights Agreement" means that certain Exchange Rights
Agreement dated as of the date hereof, among LTC and HA.
"Facility" means the nursing home facility commonly known as
Rockwood Manor and located at 2000 N. Main, Midland, Texas 79705.
"Fiscal Year" means the annual accounting period ending on December
31 of each calendar year or, if different, the last day of the Partnership's
taxable year.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Gain on Sale" means the excess of the Sale Proceeds over the Sales
Price.
"General Partner" means LTC Subsidiary and each other Person
(including, but not limited to, LTC Subsidiary's successors and assigns), if
any, that after the date hereof becomes a general partner of the Partnership in
accordance with the terms hereof, in each case in such Person's capacity as such
general partner.
"Gross Asset Value" means, with respect to any asset, such asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Values of the assets contributed
by HA to the Partnership pursuant to Section 3.2 hereof are set forth on
Schedule A hereto; and the initial Gross Asset Value of any asset
contributed by a Partner to the Partnership after the Closing Date shall
be the gross fair market value of such asset at the time of such asset's
contribution, as determined by the General Partner;
(b) The Gross Asset Values of all Partnership assets at the
election of the General Partner may be adjusted to equal their respective
gross fair market values, as determined by the General Partner,
immediately prior to the following events:
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(i) a Capital Contribution (other than a de minimis
Capital Contribution) is made to the Partnership by a new or
existing Partner as consideration for the acquisition of a (or an
additional) Partnership Interest;
(ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership property as
consideration for the redemption of a Partnership Interest;
(iii) the liquidation of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; and
(iv) any other event as to which the General Partner
determines that an adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners.
(c) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on the
date of distribution as determined by the General Partner based upon an
appraisal or other appropriate valuation prepared by an independent third
party experienced in valuing assets of that kind.
(d) The Gross Asset Value of a Partnership asset shall be
increased (or decreased) to reflect any adjustment to the adjusted basis
of such asset pursuant to Sections 734(b) or 743(b) of the Code, but only
to the extent that such adjustment is taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this paragraph (d) to the extent that the General
Partner determines that an adjustment pursuant to paragraph (b) above is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph (d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (a), (b) or (d) immediately above, such Gross Asset Value
thereafter shall be adjusted by the Depreciation subsequently taken into account
with respect to such asset for purposes of computing Profits and Losses. Any
adjustment to the Gross Asset Value of any item of Partnership property shall
require an adjustment to the Capital Accounts.
"Immediate Family" means, with respect to any individual, such
Person's spouse (then current or former), parents, brothers and sisters,
children and grandchildren (including in each case by adoption) and other lineal
descendants.
"Indemnitee" has the meaning set forth in subsection 6.9(a) hereof.
"Limited Partner" means HA and each other Person, if any, who after
the date of this Agreement executes a counterpart hereof and becomes a limited
partner of the Partnership pursuant to Section 8.3 hereof, in each case in such
Person's capacity as a limited partner of the Partnership.
"LTC" means LTC Properties, Inc., a Maryland corporation.
"Majority-in-Interest of the Limited Partners" means the Limited
Partners who hold in the aggregate more than 50% of the Partnership Interests
then allocable to and held by the Limited Partners as a class.
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"Minimum Gain Attributable to Partner Nonrecourse Debt" means
"partner nonrecourse debt minimum gain" as determined in accordance with Section
1.704-2(i)(2) of the Regulations.
"Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(b)(1) and (c) of the Regulations and shall be determined in accordance
with Section 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(2) of the Regulations and the amount of Partner Nonrecourse
Deductions with respect to particular Partner Nonrecourse Debt shall be
determined in accordance with the rules of Section 1.704-2(i) of the
Regulations.
"Partners" means the General Partner and the Limited Partner(s), in
their respective capacities as such.
"Partnership" means the limited partnership formed under the Act
pursuant to this Agreement and any successor thereto.
"Partnership Interest" means the ownership interest in the
Partnership representing a Capital Contribution, and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled
pursuant to this Agreement, together with all obligations of such Person to
comply with the terms and conditions of this Agreement.
"Partnership Minimum Gain" has the meaning set forth in Section
1.704-2(b)(2) of the Regulations, and the amount of Partnership Minimum Gain
(and any net increase or decrease thereof) for a Fiscal Year shall be determined
in accordance with Section 1.704-2(d) of the Regulations.
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Partnership cash pursuant to Section 5.1
hereof.
"Person" means any natural person, sole proprietorship, corporation,
general or limited partnership, limited liability company, trust, business
trust, real estate investment trust, joint venture, association, unincorporated
organization or other form of entity.
"Preferred Return" means an amount equal to a 10% per annum return
on the capital contributed to the Partnership by the Limited Partner(s) pursuant
to subsection 3.2(b) hereof and not theretofore returned to the Limited
Partner(s). The Preferred Return shall be calculated on a daily basis on the
basis of a 360-day year and shall be cumulative but not compounded.
"Profits," "Loss" or "Losses" means, for any period, an amount equal
to the Partnerships's taxable income or loss for such period as determined for
federal income tax purposes by the Accountants, determined in accordance with
Sections 703(a) and 704(b) of the Code (with, for this purpose, all items of
income, gain, loss or deduction required to be stated
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separately pursuant to Section 703(a) of the Code included in taxable income or
loss), with the following adjustments:
(a) All income of the Partnership, if any, that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this definition shall be added to such
taxable income or loss;
(b) All expenditures of the Partnership, if any, described in
Section 705(a)(2)(B) of the Code (including amounts paid or incurred to
organize the Partnership (unless an election is made pursuant to Section
709(b) of the Code) or to promote the sale of interests in the Partnership
and by treating deductions for losses incurred in connection with the sale
or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or Section 707(b) of the Code, if any, as expenditures described
in Section 705(a)(2)(B) of the Code) and not otherwise taken into account
in computing Profits and Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(c) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing total income or loss,
there shall be taken into account Depreciation for such period;
(d) Gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of such property rather than its adjusted tax basis;
(e) In the event that the Gross Asset Value of any Partnership
asset is adjusted pursuant to this Agreement, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses, and
to the extent that an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or Section 743(b) of the Code
is required by Sections 1.704-1(b)(2)(iv)((m)(2) or (4) of the Regulations
to be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's Partnership
Interest, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) for purposes of computing
Profits or Losses and adjusting the Capital Accounts; and
(f) All items specially allocated pursuant to Sections 4.2 or
4.3 hereof shall not be taken into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Sections 4.2 and 4.3 hereof
shall be determined by applying rules analogous to those set forth in paragraphs
(a) through (f) immediately above.
"Purchase Agreement" means that certain Agreement Regarding
Purchase/Sale of an Undivided Interest in Nursing Home Facility dated as of the
date hereof, between Seller and the Partnership.
"Purchase Price" means $2,286,872, allocated $1,894,872 to real
property and $392,000 to personal property.
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"Regulations" means the income tax regulations promulgated under the
Code, whether in final or temporary form, as amended and as the same may
hereafter be amended from time to time (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 4.3
hereof.
"REIT" means a real estate investment trust as defined in Section
856 of the Code.
"REIT Requirements" means the requirements (i) for LTC to qualify as
a REIT under the Code and Regulations and to avoid any federal income or excise
tax liability; and (ii) for the General Partner to qualify as a "qualified REIT
subsidiary" under the Code and the Regulations. "REIT Requirements" also
includes the ownership limitation provisions set forth in LTC's certificate of
incorporation.
"REIT Shares" means the shares of common stock, par value $.01 per
share, of LTC.
"Restricted Entity" means any "employee benefit plan" as defined in
and subject to ERISA, any "plan" as defined in and subject to Section 4975 of
the Code, or any entity any portion or all of the assets of which are deemed
pursuant to United States Department of Labor Regulation Section 2510.3-101 or
otherwise pursuant to ERISA or the Code to be, for any purpose of ERISA or
Section 4975 of the Code, assets of any such "employee benefit plan" or "plan"
that invests in such entity.
"Sale" means any sale or other disposition for value of all or
substantially all of the assets that make up the Facility, but does not include
any borrowing by the Partnership that is secured by all or a portion of such
assets.
"Sale Expenses" means costs and expenses incurred by the Partnership
in connection with a Sale, including fees and expenses of attorneys,
accountants, appraisers and brokers, sales and transfer taxes, insurance costs
and other expenses; provided, however, that Sale Expenses do not included
payments of principal, interest or other amounts due from the Partnership as a
result of a Sale in respect of indebtedness secured by the Facility.
"Sale Price" means, as to any Sale, the sum of (x) the Purchase
Price, (y) the total amount of Capital Expenditures made with respect to the
Facility prior to the Sale and (z) the Sale Expenses incurred by the Partnership
in connection with the Sale.
"Sale Proceeds" means, as to any Sale, the total proceeds actually
received by the Partnership from the Sale either in cash or through the
assumption of debt.
"Seller" means Midtex Nursing Center, LLC, a Texas limited liability
company.
"Tax Items" has the meaning set forth in subsection 4.4(a) hereof.
"Termination Date" means September 29, 2040.
"Transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which a
Person purports to assign its Partnership Interest or any portion thereof
(including Units) to another Person, and includes a sale, assignment, exchange,
gift, pledge, mortgage or other disposition, by law or otherwise.
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"Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued hereunder, and is further defined in Section
3.6 hereof.
ARTICLE 2. Formation and Business of the Partnership; Filings
2.1 Formation. LTC Subsidiary and HA hereby agree to continue the
Partnership as a limited partnership pursuant to the provisions of the Act and
on the terms and subject to the conditions set forth herein.
2.2 Name. The name of the Partnership shall be LTC Partners IV,
L.P., or such other name as the General Partner may from time to time determine.
2.3 Business. The purpose and nature of the business of the
Partnership is to acquire, own, finance, develop and re-develop, construct,
improve, maintain, operate, lease, manage, sell, exchange, convey, mortgage and
otherwise invest in, deal with or dispose of the Acquired Assets, any and all
properties, businesses and activities related to the Acquired Assets and all
direct and indirect interests therein, and to conduct such other activities as
in the determination of the General Partner may be necessary, desirable or
incidental to or in connection with the foregoing. The Partnership may engage in
any lawful act or activity for which a limited partnership may be organized
under the Act (provided that such act or activity is in furtherance of the
foregoing purposes), including, without limitation, the execution, delivery and
performance of the Partnership's obligations under the Purchase Agreement, the
Exchange Rights Agreement and each other contract provided for or contemplated
by the Purchase Agreement.
2.4 REIT Requirements. Notwithstanding the provisions of Section 2.3
hereof or any other provision of this Agreement, the Partnership shall not
engage in any act or activity that the General Partner determines (i) could
adversely affect the ability of LTC to continue to qualify as a REIT, (ii) could
subject LTC to any additional tax under Section 857 or Section 4981 of the Code
or other potentially adverse consequence under the Code, (iii) could otherwise
violate the REIT Requirements, or (iv) could violate any law or regulation of
any governmental body or agency having jurisdiction over LTC or its securities,
unless such act or activity shall have been specifically consented to by the
General Partner in writing. Nothing in this Section 2.4 shall, however, waive or
in any way limit the Partnership's obligation pursuant to subsection 5.1 (a)
hereof to distribute to the Limited Partner(s) with respect to each Distribution
Period cash in an aggregate amount equal to the Preferred Return for that
Distribution Period.
2.5 Principal Place of Business. The principal place of business of
the Partnership shall be located at 300 Esplanade Drive, Suite 1860, Oxnard, CA
93030, or such other place as may be selected from time to time by the General
Partner; provided, however, that the General Partner shall notify the Limited
Partner(s) of any change in the location of the principal place of business of
the Partnership within 30 days thereafter.
2.6 Registered Agent and Registered Office. The registered agent for
service of process on the Partnership shall be The Corporation Trust Company,
and the registered office of the Partnership in the State of Delaware shall be
at c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801; provided, however, that the General Partner
may change the registered agent and/or the registered office of the Partnership
from time to time to such other Person and/or such other location as the General
Partner shall determine. The General Partner shall notify the Limited Partner(s)
of any change in the registered agent or the registered office of the
Partnership within 30 days thereafter.
9
2.7 Term. The Partnership's term shall continue through the close of
business on the Termination Date, unless the Partnership is sooner dissolved, or
the term of the Partnership is extended, pursuant to Article 9 hereof.
2.8 Filings. The General Partner shall execute, acknowledge, record
and file, at the expense of the Partnership, any and all such amendments to the
Certificate as the General Partner deems necessary or appropriate and all such
requisite fictitious name statements and notices in all such jurisdictions as
the General Partner determines may be necessary to cause the Partnership to be
treated as a limited partnership under, and otherwise to comply with, the laws
of each jurisdiction in which the Partnership conducts business. The Partners,
acting directly or through an attorney-in-fact, shall execute and deliver all
such other certificates, instruments and other documents, make all such other
filings and do all such other acts as in each case shall, in the judgment of the
General Partner, be required by applicable law or otherwise necessary or
appropriate for the formation and operation of the Partnership and the
qualification of the Partnership to do business in any and all jurisdictions in
which the Partnership conducts business.
2.9 Power of Attorney. Each Limited Partner hereby constitutes and
appoints the General Partner and its authorized officers and attorneys-in-fact
of each of them, and each of said Persons acting singly, in each case with full
power of substitution, as such Limited Partner's true and lawful agent and
attorney-in-fact, with full power and authority in such Limited Partner's name,
place and stead, to make, execute, swear to, acknowledge, deliver and to the
extent appropriate to publish, file and record in the appropriate public
offices:
(a) any and all certificates, agreements, instruments and
other documents that the General Partner deems necessary or appropriate
(i) to form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership conducts business
(including, without limitation, the Certificate and all amendments or
restatements thereof); (ii) to reflect any amendment or other modification
or restatement of this Agreement adopted in accordance herewith or to
correct any mistake, omission or inconsistency or cure any ambiguity
herein; (iii) to effect or reflect the admission, withdrawal or
substitution of any Partner pursuant to the provisions of this Agreement
or the making or return of any Capital Contribution; and/or (iv) to effect
or reflect the dissolution and termination of the Partnership and the
liquidation of the Partnership's assets pursuant to the terms of this
Agreement (including, without limitation, a certificate of cancellation);
and
(b) any and all consents, approvals, waivers, certificates,
agreements, instruments and other documents that the General Partner deems
necessary or appropriate to evidence or confirm any vote, consent,
approval, agreement or other action that is made, given or taken by the
Partners or any of them in accordance with the terms of this Agreement.
The power of attorney granted pursuant to this Section 2.9 is
irrevocable and is a special power coupled with an interest, in recognition of
the fact that each of the Partners will be relying upon the power of the General
Partner to act as contemplated by this Agreement in any filing or other action
by the General Partner on behalf of the Partnership, and to the maximum extent
permitted by applicable law, said power of attorney shall survive the death,
incompetency, incapacity, disability, dissolution, termination or Bankruptcy of
a Limited Partner and the assignment or other Transfer of all or any portion of
such Limited Partner's Partnership
10
Interest, and shall extend to and be binding upon such Limited Partner's heirs,
successors, assigns and personal representatives.
ARTICLE 3. Partners and Partnership Interests; Capital Contributions
3.1 Partners. As of the execution and delivery hereof, the General
Partner of the Partnership is LTC Subsidiary and the Limited Partner of the
Partnership is HA, who is hereby admitted to the Partnership.
3.2 Initial Capital Contributions. On or prior to the Closing Date,
LTC Subsidiary and HA shall make or cause to be made the following Capital
Contributions:
(a) LTC Subsidiary shall contribute to the Partnership, in
readily available funds, such amount as shall be required by the
Partnership to complete the purchase of a 79.375% undivided interest in
the Acquired Assets pursuant to the Purchase Agreement, to pay all costs
incidental to such purchase and to provide such initial working capital
for the Partnership as the General Partner shall determine to be necessary
for the conduct of the Partnership's business; and
(b) HA shall contribute to the Partnership, pursuant to the
Contribution Agreement, an undivided ownership interest in the Acquired
Assets of 20.625%, subject to the indebtedness encumbering such asset.
The cash contributed to the Partnership by LTC Subsidiary pursuant to this
Section 3.2 is set forth on Schedule A hereto.
3.3 Additional Capital Contributions. No Partner shall have any
obligation to make any Capital Contribution to the Partnership after the Closing
Date, even if the failure to do so could result in the Bankruptcy of, or any
other adverse consequence to, the Partnership. Any such additional Capital
Contribution that the General Partner may desire to make to the Partnership
shall be made only with the consent of the Limited Partner (or if there is more
than one Limited Partner, a Majority-in-Interest of the Limited Partners).
Except for the aforesaid Capital Contributions, any and all sums advanced to the
Partnership by the General Partner or any of its Affiliates (other than loans
made pursuant to Section 5.2 hereof, which loans shall be governed by the
provisions of that Section) shall be deemed loans to the Partnership. Each such
loan at the General Partner's election shall be evidenced by a promissory note
in form and substance satisfactory to the General Partner. The principal amount
of each such loan (i) shall bear interest at an annual rate equal to the Prime
Rate (as published in the Western Edition of the Wall Street Journal) as from
time to time in effect plus one percentage point, with interest payable monthly
in arrears, and (ii) shall be due and payable in full on demand of the Person
making such loan; provided, however, that if demand is made prior to the first
anniversary of the making of the loan and prior to the dissolution of the
Partnership, but only from and to the extent of Partnership cash available for
distribution to the Partners in excess of the cash required to pay the Preferred
Return for the Distribution Period immediately preceding the Distribution Period
in which the demand is made.
3.4 Capital Accounts. A separate book account shall be established
and maintained with respect to each Partner's interest in the Partnership's
capital in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be credited
such Partner's Capital Contributions, such Partner's distributive share of
Profits and all other
11
items, if any, of Partnership income or gain allocated to such Partner,
the amount of all Partnership liabilities, if any, that are assumed by
such Partner or that are secured by any property distributed to such
Partner, and all other items, if any, in the nature of income or gain that
are allocated to such Partner pursuant to Sections 4.1, 4.2 or 4.3 hereof;
and
(b) To each Partner's Capital Account there shall be debited
(i) the amount of cash distributed to such Partner, (ii) such Partner's
distributive share of Losses, the Gross Asset Value of any Partnership
asset distributed by the Partnership to such Partner pursuant to any
provision of this Agreement (net of the aggregate amount of Partnership
liabilities, if any, that are assumed by such Partner in respect of, or
that are secured by, such distributed property), (iii) to the extent not
otherwise included in calculating a Partner's Capital Contribution, the
amount of all liabilities, if any, of such Partner that are assumed by the
Partnership, and (v) all other items, if any, in the nature of expenses or
losses that are allocated to such Partner pursuant to Sections 4.1, 4.2 or
4.3 hereof.
The initial Capital Account balances of the Partners are set forth
on Schedule A hereto.
In the event that all or any part of a Partnership Interest or any
one or more Units are "transferred" within the meaning of Section
1.704-1(b)(2)(iv)(f) of the Regulations, the transferee shall succeed to the
Capital Account of the transferor to the extent that such Capital Account
relates to the Partnership Interest (or portion thereof) so transferred.
The foregoing provisions of this Section 3.5 and other provisions of
this Agreement relating to the maintenance of the Capital Accounts are intended
to comply with the maintenance of capital account provisions of Section
1.704-1(b) of the Regulations and shall be interpreted and applied in a manner
consistent therewith. In the event the General Partner shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any one or
more debits or credits thereto (including, without limitation, debits or credits
relating to liabilities that are secured by contributed or distributed property
or that are assumed by the Partnership or any Partner), are computed in order to
comply with such Regulations, the General Partner may make such modification,
provided that the General Partner has provided that such modification is not
likely to have a material economic effect on any Partner. The General Partner
also shall (i) make all adjustments, if any, that are necessary or, in the
judgment of the General Partner, appropriate to maintain the proper proportions
of the Capital Accounts 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 (ii) make all modifications, if
any, that the General Partner deems appropriate in the event there occur one or
more unanticipated events that might otherwise cause this Agreement not to
comply with Regulations Section 1.704-1(b).
3.5 No Interest on or Return of Capital Contribution. No Partner
shall be entitled to interest on such Partner's Capital Contribution or the
balance in such Partner's Capital Account. Except as specifically provided
herein or as required by applicable law, no Partner shall have any right to
demand, withdraw or receive such Partner's Capital Contribution or any Capital
Account balance.
3.6 Units. In consideration of the Capital Contributions made by the
Limited Partner(s) pursuant to Section 3.2 hereof and the other transactions
being consummated concurrently herewith, HA is being issued, as of the Closing
Date, an aggregate of 15,752 Units. At such time as any one or more Units are
Transferred (including, but not limited to, pursuant to the Exchange Rights
Agreement), there shall be transferred to the Transferee a Partnership
12
Interest and an amount of the transferor's Capital Account equal to the Capital
Account balance of the transferor immediately prior to the Transfer multiplied
by a fraction, the numerator of which is the number of Units so Transferred and
the denominator of which is the total number of Units held by the transferor
immediately prior to the Transfer.
In addition to setting forth the initial Capital Account balances of
the Partners, Schedule A hereto shall set forth the number of Units held by the
Limited Partner(s) from time to time, and upon the issuance of new Units or the
Transfer or cancellation of issued and outstanding Units, the General Partner
shall cause Schedule A to be amended or restated as necessary to reflect the
then current ownership of Units.
ARTICLE 4. Allocations of Partnership Items
The Profits, Losses and other Partnership items of income, gain,
loss and deduction shall be allocated to the Partners pursuant to the provisions
of this Article 4.
4.1 Allocation of Profits and Losses.
(a) Except as otherwise provided in this Article 4, Profits
for each Fiscal Year shall be allocated to the Partners as follows:
(i) First, 100% to the Limited Partner(s) (if there is
more than one Limited Partner, in proportion to their respective
Capital Account balances) until the Limited Partner(s) have been
allocated pursuant to this paragraph 4.1(a)(i) Profits in an
aggregate amount equal to the amount of the excess, if any, of all
distributions made pursuant to subsection 5.1(a) hereof over all
prior allocations of Profits to the Limited Partner(s) pursuant to
this paragraph 4.1(a)(i);
(ii) Second, 100% to the Limited Partner(s) (if there is
more than one Limited Partner, in proportion to their respective
Capital Account balances) until the Limited Partner(s) have been
allocated pursuant to this paragraph 4.1(a)(ii) Profits in an
aggregate amount equal to the amount of the excess, if any, of all
distributions made pursuant to subsection 5.1(b) hereof over all
prior allocations of Profits to the Limited Partner(s) pursuant to
this paragraph 4.1(a)(ii);
(iii) Third, 100% to the Limited Partner(s) (if there is
more than one Limited Partner, in proportion to their respective
Capital Account balances) until the Limited Partner(s) have been
allocated pursuant to this paragraph 4.1(a)(iii) Profits in an
aggregate amount equal to the amount of the excess, if any, of all
distributions made pursuant to subsection 5.1(c) hereof over all
prior allocations of Profits to the Limited Partner(s) pursuant to
this paragraph 4.1(a)(iii);
(iv) Fourth, 100% to the Limited Partner(s) (if there is
more than one Limited Partner, in proportion to their respective
Capital Account balances) until the Limited Partner(s) have been
allocated pursuant to this paragraph 4.1(a)(iv) Profits in an
aggregate amount equal to the amount of the excess, if any, of all
distributions made pursuant to subsection 5.1(d) hereof over all
prior allocations of Profits to the Limited Partner(s) pursuant to
this paragraph 4.1(a)(iv); and
(v) Thereafter, 100% to the General Partner.
13
(b) Losses for each Fiscal Year shall be allocated 100% to the
General Partner.
4.2 Special Allocations. Notwithstanding any provision of Section
4.1 hereof to the contrary, the following special allocations shall be made in
the following order:
(a) Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Article 4, if
there is a net decrease in Partnership Minimum Gain for any Fiscal Year
(except as a result of conversion or refinancing of Partnership
indebtedness, certain capital contributions or revaluation of the
Partnership property as further outlined in Section 1.704-2(f) of the
Regulations), each Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to that Partner's share of the
net decrease in Partnership Minimum Gain as determined under Section
1.704-2(g) of the Regulations. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of
the Regulations, and the allocations to be so made shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. This subsection 4.2(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of
the Regulations, notwithstanding any other provision of this Article 4
other than subsection 4.2(a), if there is a net decrease in Minimum Gain
Attributable to Partner Nonrecourse Debt during any Fiscal Year (other
than due to the conversion, refinancing or other change in the debt
instrument causing such debt to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of Partnership
property (as further outlined in Section 1.704-2(i)(4) of the
Regulations), each Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Partner's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt,
as determined under Section 1.704-2(g) of the Regulations. The items to be
so allocated shall be determined in accordance with Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This subsection 4.2(b) is intended
to comply with the minimum gain chargeback requirement with respect to
Partner Nonrecourse Debt contained in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) In the event any Partner unexpectedly receives in respect
of any Fiscal Year any adjustment, allocation or distribution described in
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations and such
Partner has an Adjusted Capital Account Deficit, items of Partnership
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as
quickly as possible; provided, however, that an allocation pursuant to
this subsection 4.2(c) shall be made only if and to the extent that such
Partner would have Adjusted Capital Account Deficit after all other
allocations provided for in this Article 4 have been tentatively made as
if this subsection 4.2(c) was not in this Agreement. This subsection
4.2(c) is intended to constitute a "qualified income offset" under Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
(d) In the event any Partner has a deficit Capital Account at
the end of any Fiscal Year that is in excess of the sum of (i) the amount
such Partner is obligated to
14
restore pursuant to any provision of this Agreement, and (ii) the amount
such Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1).and 1.704-2(i)(5) of the
Regulations, such Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in the amount of such excess as quickly as
possible; provided, however, that an allocation pursuant to this
subsection 4.2(d) shall be made only if and to the extent that such
Partner would have a Capital Account deficit in excess of such sum after
all other allocations provided for in this Article 4 have been made as if
subsection 4.2(c) hereof and this subsection 4.2(d) were not in this
Agreement.
(e) Nonrecourse Deductions for any Fiscal Year shall be
specially allocated to Partners as determined by the General Partner in
accordance with the Regulations. A Partner's share of nonrecourse
liabilities shall be determined in accordance with Section 1.752 of the
Regulations. The Partners hereby agree that: (i) in accordance with
Section 1.752-3(a)(2) of the Regulations, ZK, HA, JC and SC shall be
allocated a portion of the nonrecourse liabilities of the Partnership
equal to the amount of taxable gain that would be allocated to them under
Section 704(c) of the Code if the Partnership disposed of (in a taxable
transaction) any property contributed by them to the Partnership
(including under the Contribution Agreement), subject to the nonrecourse
liabilities encumbering such property in full satisfaction of such
liabilities and for no other consideration; and (ii) any excess
nonrecourse liabilities of the Partnership described in Section
1.752-3(a)(3) of the Regulations shall be allocated among the Partners
using any reasonable method selected by the General Partner that is
permitted under Section 1.752-3(a)(3) of the Regulations.
(f) Partner Nonrecourse Deductions for any Fiscal Year shall
be specially allocated to the Partner that bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable (as determined under Sections
1.704-2(b)(4) and 1.704.2(i)(1) of the Regulations).
(g) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Section 734(b) or Section 743(b) of the
Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in
determining the Capital Accounts, 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 Partner
in accordance with their respective Capital Account balances in a manner
consistent with the manner in which the Capital Accounts are required to
be adjusted pursuant to such sections of the Regulations.
(h) Notwithstanding anything to the contrary contained herein,
the General Partner (or if there is more than one General Partner, all of
the General Partners as a group) shall be allocated not less than 1% of
each material item of Partnership income, gain, loss, deduction and credit
at all times during the existence of the Partnership; provided, however,
that temporary nonconformance with the provisions of this Section 4.2(h)
shall be permitted to the extent permitted by Revenue Procedure 89-12 or
any successor provision.
4.3 Curative Allocations. The allocations set forth in Section 4.2
(the "Regulatory Allocations") are intended to comply with certain requirements
of the Regulations. The Partners intend that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of partnership income,
15
gain, loss or deduction pursuant to this Section 4.3. Therefore, notwithstanding
any other provision of this Article 4 (other than the Regulatory Allocations),
the General Partner shall make such offsetting special allocations of
Partnership income, gain, loss or deduction in whatever manner the General
Partner determines appropriate so that, to the extent possible, after such
offsetting allocations are made, each Partner's Capital Account balance is equal
to the Capital Account balance that Partner would have had if the Regulatory
Allocations were not part of this Agreement and all Partnership items were
allocated pursuant to Section 4.1 hereof. In exercising its discretion under
this Section 4.3, the General Partner shall take into account future Regulatory
Allocations under subsections 4.2(a) and (b) hereof that, although not yet made,
are likely to offset other Regulatory Allocations previously made under
subsections 4.2(e) and (f) hereof.
4.4 Tax Allocations.
(a) Subject to subsections 4.4(b), (c) and (d) hereof, items
of income, gain, loss and deduction and tax credits to be allocated for
federal income tax purposes (collectively, "Tax Items") shall be allocated
among the Partners as nearly as possible to the manner in which such items
are allocated for purposes of determining the Capital Account balances
pursuant to Section 4.1 hereof.
(b) If any portion of gain from a Sale or other sale of
Partnership property is treated as gain that is ordinary income by virtue
of the application of Sections 1245 or 1250 of the Code ("Affected Gain"),
then (i) such Affected Gain shall be allocated among the Partners in the
same proportion as the depreciation and amortization deductions giving
rise to the Affected Gain were allocated, and (ii) other Tax Items of gain
of the same character that would have been recognized but for the
application of Sections 1245 and/or 1250 of the Code shall be allocated
away from those Partners who are allocated Affected Gain pursuant to
clause (i) immediately above so that, to the extent possible, the other
Partners are allocated the same amount and type of capital gain as would
have been allocated to those Partners had Sections 1245 and/or 1250 of the
Code not applied. For purposes of this subsection 4.4(b), in order to
determine the proportionate allocations of depreciation and amortization
deductions for each Fiscal Year, such deductions shall be deemed allocated
on the same basis as Profits or Losses for such Fiscal Year.
(c) In accordance with Section 704(c) of the Code and the
Regulations thereunder, income, gain, loss and deduction with respect to
any property contributed to the capital of the Partnership shall, solely
for tax purposes, be allocated among the Partners so as to take account of
a variation between the adjusted basis of such property to the Partnership
for federal income tax purposes and its initial Gross Asset Value. In the
event the Gross Asset Value of any Partnership asset is adjusted,
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 section 704(c) of the Code and the Regulations
thereunder. Any and all elections or other decisions relating to such
allocations shall be made by the General Partner in any manner that
reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this subsection 4.4(c) 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
Profits, Losses, other similar items or distributions pursuant to any
provision of this Agreement. In addition, the General Partner may make
curative allocations for the purpose of offsetting the effect of the
"ceiling rule" in any manner permitted by the
16
Regulations, including, but not limited to, in the manner permitted by
Regulations Section 1.704-3(c) and Section 1.704-3T.
(d) Partnership tax credits and other similar items shall be
allocated to Partners in accordance with their respective Capital Account
balances to the extent permitted under Section 1.704-1(b)(4)(ii) of the
Regulations (or other applicable provisions of the Code and Regulations)
and otherwise in accordance with such provisions.
4.5 Varying Interests. In the event the number of Units outstanding
during a Fiscal Year changes, allocations pursuant to this Article 4 shall be
made by the General Partner so as to take such varying interests into account in
any reasonable manner permitted under the Code and the Regulations.
4.6 Allocations Between Transferor and Transferee. If a Partner
Transfers any part or all of such Partner's Partnership Interest during a Fiscal
Year and the transferee is admitted as a substitute Partner as provided herein,
the distributive shares of the various items of Profits, Losses and all other
items of Partnership income, gain, loss or deduction allocable among the
Partners with respect to such Fiscal Year shall be allocated between the
transferor Partner and the substitute Partner at the discretion of the General
Partner either (i) as if the applicable Fiscal Year had ended on the date of the
Transfer, or (ii) based on the number of days of such Fiscal Year that each was
a Partner without regard to the results of Partnership activities in the
respective portions of such Fiscal Year in which the transferor and the
transferee were Partners.
ARTICLE 5. Distributions
5.1 Distributions. The General Partner shall cause the Partnership
to distribute with respect to each Distribution Period, to the Partners who are
Partners on the Partnership Record Date with respect to such distribution and no
later than 30 days after the end of such Distribution Period, Partnership cash
as follows:
(a) First, 100% to the Limited Partner(s) (if there is more
than one Limited Partner, in proportion to their respective Capital
Account balances on such Partnership Record Date) until the Limited
Partner(s) have been distributed pursuant to this subsection 5.1(a) an
amount equal to the accrued and unpaid Preferred Return for such
Distribution Period and all prior Distribution Periods;
(b) Second, 100% to the Limited Partner(s) (if there is more
than one Limited Partner, in proportion to their respective Capital
Account balances on such Partnership Record Date) until the Limited
Partner(s) have been distributed pursuant to this subsection 5.1(b) an
amount equal to 8.65% of Cash Flow from Operations for such Distribution
Period;
(c) Third, if during such Distribution Period the Facility was
sold and the entire purchase price was paid to the Partnership at closing
either entirely in cash or through a combination of cash and assumption of
debt, 100% to the Limited Partner(s) (if there is more than one Limited
Partner, in proportion to their respective Capital Account balances on
such Partnership Record Date) until the Limited Partner(s) have been
distributed pursuant to this subsection 5.1(c) an amount equal to 8.65% of
the Gain on Sale resulting from the Sale, if any;
17
(d) Fourth, if during such Distribution Period any Sale
Proceeds were received in respect of a Sale in which the entire purchase
price was not paid to the Partnership at dosing either entirely in cash or
through a combination of cash and assumption of debt and the Sale Proceeds
so received, together with all Sale Proceeds received by the Partnership
in any prior Distribution Period, exceed the Sales Price, 100% to the
Limited Partner(s) (if there is more than one Limited Partner, in
proportion to their respective Capital Account balances on such
Partnership Record Date) until the Limited Partner(s) have been
distributed pursuant to this subsection an amount that, together with all
prior distributions made pursuant to this subsection 5.1(d) with respect
to prior Distribution Periods, equals 8.65% of the Gain on Sale, if any;
and
(e) Thereafter. 100% to the General Partner.
5.2 Certain Loans and Offset. If and to the extent that the
Partnership would not otherwise have available with respect to any Distribution
Period sufficient cash to distribute to the Limited Partner(s) cash in an amount
equal to the Preferred Return for that period, the Partnership shall borrow the
deficit amount from LTC. Each such loan shall be evidenced by a promissory note
in form and substance satisfactory to LTC and the General Partner, shall be
non-interest bearing and unsecured, and shall be due and payable to LTC on
demand but only from and to the extent of Partnership cash available for
distribution to the Partners in excess of the cash required to pay the Preferred
Return for the Distribution Period immediately preceding the Distribution Period
in which the demand is made.
5.3 REIT Distribution Requirements. Unless the General Partner
determines that such a distribution would not be in the best interests of the
Partnership, it is the intent, but not the obligation, of the Partnership that a
cash distribution shall be made for each Fiscal Year of the Partnership to
enable the General Partner to pay a dividend to LTC in an amount sufficient
(together with all other funds available to LTC for such purpose) to allow LTC
(i) to meet LTC's distribution requirement for qualification as a REIT as set
forth in Section 857(a)(l) of the Code, and (ii) to avoid the excise tax imposed
by Section 4981 of the Code.
5.4 Limitations on Distributions. Notwithstanding any other
provision of this Agreement:
(a) In no event may a Partner receive a distribution of cash
with respect to a Unit if such Partner is entitled to receive a dividend
out of the General Partner's share of such cash (as distributed to LTC)
with respect to a REIT Share for which all or a part of such Unit has been
exchanged pursuant to the Exchange Rights Agreement.
(b) Other than in connection with distributions made pursuant
to Section 5.5 hereof, no Partner shall be entitled to demand property
other than cash in connection with any distribution by the Partnership.
(c) No distribution shall be made that includes a return of
all or part of a Partner's Capital Contribution unless after giving effect
to the return of a Capital Contribution, all Partnership liabilities,
other than the liabilities to a Partner for the return of that Partner's
Capital Contribution, do not exceed the fair market value of the
Partnership's assets.
18
5.5 Distributions Upon Liquidation.
(a) Upon dissolution of the Partnership, concurrently with the
payment of the Partnership's debts, obligations and liabilities owing to
creditors and the expenses of dissolution and liquidation of the Partnership's
assets, the General Partner shall set up such reserves as the General Partner
deems necessary for the discharge of any and all liabilities or obligations of
the Partnership. Said reserves may be paid over by the General Partner to a
bank, to be held in escrow for the purpose of paying any such liabilities or
obligations, and at the expiration of such period as the General Partner may
deem advisable, such reserves shall be distributed to the Partners or their
assigns in the manner set forth below.
After payment of, or adequate provision for, debts, obligations and
liabilities of the Partnership (including all contingent liabilities and
obligations and all loans made by Partners, if any), all remaining assets of the
Partnership, or the proceeds therefrom, if any, shall be distributed to the
Partners in accordance with the positive balances in their respective Capital
Accounts. For purposes of this subsection 5.5(a), the Capital Account balances
shall be determined after all allocations, distributions and adjustments made in
accordance with Article 4 and Section 5.1 resulting from Partnership operations
and from any Sale and all other dispositions, if any, of all or any part of the
Partnership's assets.
(b) If upon the liquidation of the Partnership's assets and
distribution of the proceeds thereof as described above, the General Partner's
Capital Account has a deficit balance (after giving effect to all contributions,
distributions and allocations for all Fiscal Years, including the Fiscal Year
during which such liquidation occurs), such Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance
to zero in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(3), and such
cash shall be distributed by the Partnership in accordance with subsection
5.5(a) hereof.
(c) Notwithstanding anything contained in this Article 5 to the
contrary, to the extent that Partnership assets to be distributed to the
Partners upon liquidation consist of assets of a type or form other than cash,
the types and forms of such assets distributed shall be allocated in an
equitable manner among the Partners entitled thereto, in the proportions and
amounts provided for herein, such that each Partner shall, except for immaterial
variances, receive the same type or form of assets upon liquidation. At such
time as the distributions provided for in this Article 5 have been completed,
all then outstanding Units, if any shall be cancelled.
ARTICLE 6. Management of the Partnership
6.1 Rights, Powers and Duties of General Partner.
(a) The General Partner shall be responsible for the
management of the Partnership's assets, business and affairs. Except as
otherwise herein expressly provided, the General Partner shall have, and
is hereby granted, full and complete power and authority, and exclusive
discretion, to manage and control the business and affairs of the
Partnership and take any and all such actions for and on behalf of the
Partnership and in the Partnership's name as the General Partner shall
deem necessary or appropriate to conduct the Partnership's business and to
carry out the purposes for which the Partnership was organized. Without
limiting the generality of the foregoing, except as otherwise expressly
provided herein, the General Partner shall, on behalf of and at the
expense of the Partnership, have the right, power and authority:
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(i) to manage, control, invest, reinvest, acquire by
purchase, lease or otherwise, sell, contract to purchase or sell,
grant, obtain or exercise options to purchase, options to sell or
conversion rights, assign, transfer, convey, deliver, endorse,
exchange, pledge, mortgage, abandon, improve, repair, maintain,
insure, lease for any term and otherwise deal with any and all
property of whatsoever kind and nature, and wheresoever situated, in
furtherance of the business or purposes of the Partnership;
(ii) to acquire, directly or indirectly, interests in
real estate of any kind and of any type, and any and all kinds of
interests therein (including, without limitation, entities investing
therein), and to determine the manner in which title thereto is to
be held; to manage (directly or through property managers), insure
against loss, protect and subdivide any of the real estate,
interests therein or parts thereof; to improve, develop or redevelop
any such real estate; to participate in the ownership and
development of any property; to dedicate for public use, to vacate
any subdivision or part thereof, to re-subdivide, to contract to
sell, to grant options to purchase or lease, to sell on any terms;
to convey, mortgage, pledge or otherwise encumber said property, or
any part thereof; to lease said property or any part thereof from
time to time, upon any terms and for any period of time, and to
renew or extend leases, to amend, change or modify the terms and
provisions of leases and to grant options to lease and options to
renew leases and options to purchase; to partition or to exchange
said real property or any part thereof, for other real or personal
property; to grant easements or charges of any kind; to release,
convey or assign any right, title or interest in or about or
easement appurtenant to said property or any part thereof; to
construct and reconstruct, remodel, alter, repair, add to or take
from buildings on any property in which the Partnership owns an
interest; to insure any Person having an interest in or
responsibility for the care, management or repair of such property;
to direct the trustee of any land trust to mortgage, lease, convey
or contract to convey the real estate held in such land trust or to
execute and deliver deeds, mortgages, notes and any and all
documents pertaining to the property subject to such land trust or
in any matter regarding such trust; and to execute assignments of
all or any part of the beneficial interest in such land trust;
(iii) to employ, engage, indemnify or contract with or
dismiss from employment or engagement Persons to the extent deemed
necessary or appropriate by the General Partner for the operation
and management of the Partnership's business, including but not
limited to contractors, subcontractors, engineers, architects,
surveyors, mechanics, consultants, accountants, attorneys, insurance
brokers, real estate brokers and others;
(iv) to enter into contracts on behalf of the
Partnership, and to cause all administrative and operating costs and
expenses of the Partnership to be paid;
(v) to borrow or loan money, obtain or make loans and
advances from and to any Person for Partnership purposes and to
apply for and secure from or accept and grant to any Person credit
or accommodations; to contract liabilities and obligations
(including, without limitation, interest rate swaps, caps and
hedges) of every kind and nature with or without security; and to
repay, collect, discharge, settle, adjust, compromise or liquidate
any such loan, advance, obligation or liability;
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(vi) to grant security interests, mortgage, assign,
deposit, deliver, enter into sale and leaseback arrangements or
otherwise give as security or as additional or substitute security
or for sale or other disposition any and all Partnership property,
tangible or intangible, including, but not limited to, personal
property and real estate and interests in land trusts, and to make
substitutions thereof, and to receive any proceeds thereof upon the
release or surrender thereof; to sign, execute and deliver any and
all assignments, deeds, bills of sale and contracts and instruments
in writing; to authorize, give, make, procure, accept and receive
moneys, payments, property notices, demands, protests and authorize
and execute waivers of every kind and nature; to enter into, make,
execute, deliver and receive agreements, undertakings and
instruments of every kind and nature; and generally to do any and
all other acts and things incidental to any of the foregoing or with
reference to any dealings or transactions that the General Partner
may deem necessary, proper or advisable to effect or accomplish any
of the foregoing or to carry out the business and purposes of the
Partnership;
(vii) to acquire and enter into any contract of
insurance (including, without limitation, general partner liability
and partnership reimbursement insurance policies) that the General
Partner may deem necessary or appropriate;
(viii) to conduct any and all banking transactions on
behalf of the Partnership; to adjust and settle checking, savings
and other accounts with such institutions as the General Partner
shall deem appropriate; to draw, sign, execute, accept, endorse,
guarantee, deliver, receive and pay any checks, drafts, bills of
exchange, acceptances, notes, obligations, undertakings and other
instruments for or relating to the payment of money in, into or from
any account in the Partnership's name; to make deposits into and
withdrawals from the Partnership's bank accounts and to negotiate or
discount commercial paper, acceptances, negotiable instruments,
bills of exchange and dollar drafts;
(ix) to demand, sue for, receive and otherwise take
steps to collect or recover all debts, rents, proceeds, interests,
dividends, goods, chattels, income from property, damages and all
other property, to which the Partnership may be entitled or which
are or may become due the Partnership from any Person; to commence,
prosecute or enforce, or to defend, answer or oppose, contest and
abandon all legal proceedings in which the Partnership is or may
hereafter be interested; and to settle, compromise or submit to
arbitration any accounts, debts, claims, disputes and matters that
may arise between the Partnership and any other Person and to grant
an extension of time for the payment or satisfaction thereof on any
terms, with or without security;
(x) to acquire interests in and contribute money or
property to any limited or general partnerships, joint ventures,
subsidiaries or other entities as the General Partner deems
desirable;
(xi) to maintain or cause to be maintained the
Partnership's books and records;
(xii) to prepare and deliver, or cause to be prepared
and delivered, all financial and other reports with respect to the
operations of the Partnership, and preparation and filing of all tax
returns and reports;
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(xiii) to do all things that are in the determination of
the General Partner necessary or advisable for the protection and
preservation of the Partnership's business and assets, and to
execute and deliver such further instruments and undertake such
further acts as may be, in the judgement of the General Partner,
necessary or desirable to carry out the intent and purposes of this
Agreement and as are not inconsistent with the terms hereof; and
(xiv) in general, to exercise all of the general rights,
privileges and powers permitted to be had and exercised by a general
partner under the Act.
Without limiting the rights, powers and authority granted to the General Partner
pursuant to this subsection 6.1 (a), the General Partner shall give the Limited
Partner(s) not less than 20 calendar days notice in writing prior to any Sale
other than pursuant to Section 5.5 hereof.
(b) Notwithstanding any other provision of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of LTC to continue to
qualify as a REIT or (ii) to prevent LTC from incurring any taxes under Section
857 or Section 4981 of the Code, is expressly authorized under this Agreement
and is deemed approved by all of the Limited Partners; provided, however, that
nothing in this subsection 6.1(b) is intended or shall be construed to authorize
the General Partner to cause the Partnership to omit to distribute cash in the
amount of the Preferred Return as required by Section 5.1 hereof.
6.2 Delegation of Authority. The General Partner may delegate any or
all of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Partnership, which Person may, under supervision of the General Partner,
perform such one or more acts or services for the Partnership as the General
Partner may approve.
6.3 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
lease, encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any and all contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
as if it were the Partnership's sole party in interest, both legally and
beneficially. In no event shall any Person dealing with the General Partner or
its representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or its representatives. Each and every
contract, certificate, instrument or other document executed on behalf of the
Partnership by the General Partner shall be conclusive evidence in favor of any
and every Person relying thereon or claiming thereunder that (i) at the time of
the execution and delivery of such writing, this Agreement was in full force and
effect, (ii) the Person executing and delivering such writing had the power and
was duly authorized to do so for and on behalf of the Partnership, and (iii)
such writing was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
6.4 Limitation on Authority of the General Partner. Notwithstanding
anything contained herein to the contrary, without the consent of the Limited
Partner (or if there is more than one Limited Partner, a Majority-in-Interest of
the Limited Partners), the General Partner shall not have the authority to:
22
(a) do any act in contravention of this Agreement or the
Certificate;
(b) possess any Partnership property for other than a
partnership purpose;
(c) knowingly perform any act that would subject any Limited
Partner to liability as a general partner in any jurisdiction; or
(d) dissolve the Partnership, or do any other act that would
make it impossible to carry on the business of the Partnership.
In addition, the General Partner shall not, without the consent of a
Majority-in-Interest of the Limited Partners, take any action that would reduce,
or would be deemed for federal income tax purposes to have the effect of
reducing, the principal amount of "qualified debt" (as hereinafter defined) that
is allocable to the Limited Partners under Section 752 of the Code at any given
time (other than as a result of regularly scheduled amortization payments),
including, without limitation, by guaranteeing, acquiring or otherwise causing
the Partnership or an Affiliate of the Partnership to bear the economic risk of
loss (within the meaning of Section 752 of the Code and the regulations
thereunder) for qualified debt or prepaying or refinancing principal of
qualified debt other than with other qualified debt. For purposes of this
Agreement, the term "qualified debt" means any debt of the Partnership secured
by the Facility and held by a party that is not an Affiliate of the Partnership
that constitutes a nonrecourse liability of the Partnership under Code Section
752 and the regulations thereunder.
6.5 Payment of Partnership Expenses; Reimbursement of General
Partner. The Partnership shall pay directly all costs and expenses incurred or
payable by or on behalf of the Partnership in connection with the Partnership's
business. The Partnership also shall pay directly, or reimburse the General
Partner for, all expenses incurred by the General Partner in connection with the
performance of the General Partner's duties as General Partner or as Tax Matters
Partner (including, without limitation, salaries and other remuneration paid to
directors, officers and employees of the General Partner, the General Partner's
accounting and legal expenses, such portion of the general and administrative
costs and expenses of LTC as may be allocated to the General Partner in
accordance with GAAP and expenses incurred by the General Partner relating to
the issuance of additional Partnership Interests after the Closing Date), in
each case on a monthly basis or such other basis as the General Partner may
determine. The rights of the General Partner to reimbursement pursuant to this
Section 6.5 shall be in addition to, and not in limitation of, any rights to
payment or reimbursement the General Partner (or any Affiliate thereof) may be
entitled to receive under any agreement between the Partnership and the General
Partner or such Affiliate.
6.6 Compensation of the General Partner. Unless otherwise consented
to by the Limited Partner (or if there is more than one Limited Partner, a
Majority-in-Interest of the Limited Partners), except as expressly provided in
Articles 4 and 5 hereof regarding distributions and allocations to which the
General Partner may be entitled, the General Partner shall not receive any
compensation for its services as general partner of the Partnership.
6.7 Loans by Partners or Affiliates to the Partnership. In the event
the Partnership's funds are insufficient to meet the Partnership's costs,
expenses, obligations or liabilities, or to make any expenditure authorized by
this Agreement, the Partnership is hereby authorized to borrow such funds from a
Partner or an Affiliate of a Partner. The terms of each such loan, including the
interest rate, shall be fair and reasonable to the Partnership. Nothing
23
contained in this Section 6.7 shall be deemed to obligate any Partner, or any
Affiliate of a Partner, to make any such loan to the Partnership.
6.8 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby acknowledges and confirms that any Partnership assets
for which legal title is held in the name of the General Partner or any nominee
or Affiliate of the General Partner shall be held by the General Partner or such
nominee or Affiliate for the use and benefit of the Partnership in accordance
with the provisions of this Agreement; provided, however, that the General
Partner shall use its best efforts to cause beneficial and record title to such
assets to be vested in the Partnership as soon as reasonably practicable. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.
6.9 Liability of the General Partner.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary or other damages
to the Partnership, any of the Partners, or any assignee of any interest of any
Partner, for losses or damages sustained or liabilities incurred as a result of
any error or errors in judgment or of any act or omission if the General Partner
acted or failed to act without fraud, gross negligence or willful misconduct.
Except for any action or for failure to act, in either case in bad faith, or for
gross negligence or willful misconduct or for any action out of their scope of
authority or otherwise in violation of this Agreement, the Partnership hereby
agrees to indemnify and hold each of the General Partner and the Tax Matters
Partner, and each officer, director, employee, stockholder and agent of the
General Partner, the Tax Matters Partner or the Partnership (each of the
foregoing Persons an "Indemnitee"), harmless from and against any claim, loss,
damage, liability, expense, suit, action or proceeding (including, without
limitation, reasonable attorney's fees and other costs of defending any of the
foregoing) from such Indemnitee's action or failure to act under this Agreement
or on behalf of the Partnership or solely by reason of such Indemnitee's being a
Partner. The Partnership shall pay expenses as and when incurred by an
Indemnitee hereunder in defending any such claim, suit, proceeding or action in
advance of the final disposition thereof, upon receipt of a written undertaking
by such Indemnitee to repay such payment if there shall be an adjudication that
indemnification should not be provided hereunder.
(b) Any modification or repeal of this Section 6.9 or any provision
hereof shall be prospective only and shall not in any way affect the limitations
on the General Partner's liability to the Partnership and the Limited Partner(s)
under this Section 6.9 as in effect immediately prior to such modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such modification or repeal, regardless of when any
such claim may be asserted.
6.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, or other document reasonably believed by the General Partner to
be genuine and to have been signed or presented by the proper party or parties.
24
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by the General Partner, and any act taken or omitted to be
taken in reliance upon the advice or opinion of any such Person as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence and in accordance with such advice or opinion
shall be prima facie evidence that such actions have been done or omitted in
good faith.
(c) The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and any attorney or attorneys-in-fact duly appointed by the General
Partner. Each such attorney shall, to the extent provided by the General Partner
in the power of attorney, have full power and authority to do and perform all
and every act and duty that is permitted or required to be done by the General
Partner hereunder.
(d) The General Partner may exercise any of the powers granted to
the General Partner under this Agreement and perform any of the duties imposed
upon the General Partner hereunder either directly or by or through the General
Partner's agents. The General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by the General
Partner in good faith.
(e) Except as may be expressly provided to the contrary herein, all
determinations, judgments, consents, approvals and other decisions to be made by
the General Partner hereunder or otherwise in its capacity as General Partner
shall be made by the General Partner in its sole and absolute discretion.
6.11 Outside Activities. The General Partner and each officer,
director, employee, agent, Affiliate and shareholder of the General Partner
shall be entitled to, may have and in the case of LTC will have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities substantially similar
to or otherwise competitive with those of the Partnership, and the General
Partner and the other Persons described above shall have no obligation pursuant
to this Agreement to offer any interest in any such business interest or
activity to the Partnership or any Limited Partner, even if such opportunity is
of a character that, if presented to the Partnership or any Limited Partner,
could be taken by such Person. Neither the Partnership nor any Limited Partner
shall have any right by virtue of this Agreement or the partnership relationship
established hereby in any business interest or activity of the General Partner,
LTC or any other Person.
6.12 Limited Partner(s).
(a) No Limited Partner shall take part in the operation, management
or control (within the meaning of the Act) of the Partnership's business,
transact any business in the Partnership's name or have the power to sign
documents for or otherwise bind the Partnership; provided, however, that nothing
contained herein is intended to limit the ability of any Limited Partner who is
employed by the Partnership to discharge the express duties and responsibilities
of such employment.
(b) No Limited Partner shall be personally liable for any debt,
liability or obligation of the Partnership, whether to the Partnership, to the
General Partner, or to creditors of the Partnership, beyond the amount, if any,
contributed by such Limited Partner to the capital of the Partnership, such
Limited Partner's share of the accumulated but undistributed Profits of the
Partnership, or the amount of any distribution (including return of any Capital
Contribution)
25
made to such Limited Partner that must be returned to the Partnership pursuant
to applicable law.
(c) The Bankruptcy of any Limited Partner shall not cause a
dissolution of the Partnership, but the rights of such Limited Partner to share
in the Profits or Losses of the Partnership and to receive distributions of
Partnership funds shall, on the happening of such event, devolve on its
successors or assigns, subject to the terms and conditions of this Agreement,
and the Partnership shall continue as a limited partnership. In no event,
however, shall such assignee(s) become a substituted Limited Partner except in
accordance with Article 8 hereof.
(d) No Limited Partner shall at any time, either directly or
indirectly, own any stock or other interest in the General Partner, LTC or any
other Affiliate of the General Partner if such ownership, by itself or in
conjunction with other stock or other interests owned by other Limited Partners,
if any, would, in the opinion of counsel for the Partnership, jeopardize the
classification of the Partnership as a partnership for federal income tax
purposes. The General Partner shall be entitled to make such reasonable inquiry
of the Limited Partner(s) as is required to establish compliance by the Limited
Partner(s) with the provisions of this subsection 6.12(d).
ARTICLE 7. Books and Records: Tax Matters
7.1 Books and Records. The General Partner shall cause the
Partnership to maintain complete and correct books of account and other records
showing the assets, liabilities, costs, expenditures, receipts, Profits and
Losses of the Partnership and such other matters as the Partners and the
Accountant from time to time shall deem necessary or appropriate. Such books of
account and records shall be the property of the Partnership, and shall be
available for inspection and copying at all reasonable times by the Partners or
their duly authorized representatives for any purpose permitted under the Act.
7.2 Reports. The General Partner shall cause to be sent to each
Limited Partner (i) in no event later than 105 days after the close of each
Fiscal Year, a copy of the Partnership's financial statements (a balance sheet,
a statement of income, a statement of partners' equity and a statement of cash
flows) for that Fiscal Year, prepared in accordance with GAAP, and (ii) as
promptly as practicable, a copy of the Partnership's tax return for each Fiscal
Year. The Partnership shall also cause to be prepared such reports and/or
information as are necessary for LTC to determine its qualification as a REIT
and its compliance with the REIT Requirements.
7.3 Code Elections and Tax Audits. The General Partner shall be the
Tax Matters Partner of the Partnership. The Tax Matters Partner may, in its sole
and absolute discretion, make or revoke all elections permitted or required
under the Code or Regulations or any successor thereto. Without limiting the
generality of the foregoing, the Tax Matters Partner in particular may, in its
sole and absolute discretion, make or revoke the election referred to in Section
754 of the Code, or any similar provision enacted in lieu thereof, and the
transferee of any Partnership Interest or portion thereof Transferred while such
an election is in effect shall bear all expenses arising as a result of such
election as it relates to the Partnership Interest so Transferred. Each Partner
will, upon request, supply the information necessary to give proper effect to
such election. The Tax Matters Partner shall have the right:
(a) to extend the statute of limitations for assessment of tax
deficiencies against the Partnership with respect to adjustments to the
Partnership's federal, state or local tax returns;
26
(b) to the extent provided in Sections 6221 through 6231 of
the Code, to represent the Partnership and the Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting
the Partnership and the Partners; and
(c) to file any and all tax returns and execute any all
agreements or other documents relating to or affecting such tax matters,
including, but not limited to, agreements or other documents that bind the
Partners with respect to such tax matters or otherwise affect the rights
of the Partnership and the Partners.
All tax returns and other agreements or documents, if any, filed by any Limited
Partner that relate to or otherwise affect Partnership tax matters or the rights
and obligations of the Partners with respect thereto shall be filed by such
Limited Partner in a manner consistent with the tax returns, agreements and
documents filed by the General Partner.
The General Partner shall provide to each Limited Partner a draft of
the Partnership's tax return for each Fiscal Year prior to filing such tax
return with the Internal Revenue Service. Each Limited Partner shall, within 10
business days after such Limited Partner receives the draft return, notify the
General Partner of any questions or comments such Limited Partner may have with
respect to such draft return.
ARTICLE 8. Transfers of Partnership Interests; Admission of Substitute or
Additional Limited Partners
No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 8.
Any Transfer or purported Transfer of a Partnership Interest not made in
accordance with this Article 8 shall be null and void.
8.1 General Partner. The General Partner shall not withdraw from the
Partnership and shall not transfer all or any portion of the General Partner's
Partnership Interest or Units without the prior written consent of the Limited
Partner (or if there is more than one Limited Partner, a Majority-in-Interest of
the Limited Partners). Upon any assignment of the General Partner's Partnership
Interest in accordance with the provisions of this Section 8.1 to another
General Partner, the transferee General Partner shall be vested with the powers
and rights of the transferor General Partner, and shall be liable for all
obligations and responsible for all duties of the General Partner, at such time
as such transferee has executed such instrument or instruments as may be
necessary to effectuate such admission and to confirm the agreement of such
transferee to be bound by all the terms and provisions of this Agreement with
respect to the Partnership Interest so acquired. In connection with any such
permitted Transfer, the successor General Partner shall be deemed admitted as
such immediately prior to the effective time of the Transfer from the transferor
General Partner and shall continue the business of the Partnership without
dissolution.
8.2 Purchase for Investment. HA hereby acknowledges and represents
and warrants to the Partnership and the General Partner that:
(a) Such Limited Partner has a pre-existing personal and
business relationship with LTC and Andre Dimitriadis, the controlling
persons of the Partnership;
(b) Such Limited Partner has a current net worth (individually
or jointly with his spouse) in excess of $1,000,000; and
27
(c) Such Limited Partner is acquiring his Partnership Interest
as a principal for his own account, for investment purposes only and not
with a view to of for sale in connection with any distribution of such
Partnership Interest.
Each Limited Partner expressly agrees that such Limited Partner will
not sell, assign or otherwise Transfer his Partnership Interest or any fraction
thereof, whether voluntarily or by operation of law or at judicial sale or
otherwise, to any Person who does not make to the Partnership and the General
Partnership, concurrently with such Transfer, the representations and warranties
contained in paragraph (c) above and/or who does not similarly agree not to
Transfer such Partnership Interest or fraction thereof to any Person who does
not similarly represent, warrant and agree.
8.3 Restrictions on Transfer of Limited Partnership Interests.
(a) Other than Transfers to LTC made pursuant to the Exchange Rights
Agreement, to which Transfers the General Partner hereby consents, no Limited
Partner shall have the right, directly or indirectly, to Transfer all or any
part of such Limited Partner's Partnership Interest or Units to any Person
without the prior written consent of the General Partner.
Notwithstanding the immediately preceding sentence, if and to the
extent that any such Transfer otherwise complies with all of the remaining
provisions of this Section 8.3 (including, without limitation, obtaining all
additional consents required hereunder, if any), HA may Transfer all or any part
of such Limited Partner's Partnership Interest or Units: (i) as a gift into
joint tenancy with his wife (or as a reconveyance of such Units to HA as a
result of the termination of joint tenancy), or (ii) into a revocable trust
established by HA and the beneficiary or beneficiaries of which are such Limited
Partner and/or his wife, children or other Immediate Family members, provided
that HA is the sole trustee of, and has the sole power to revoke, such trust, or
the reconveyance from such a trust to the Transferring Limited Partner, or (iii)
to a corporation all of the issued and outstanding capital stock of which is
owned beneficially and of record by HA or any trust described in clause (ii)
above; in addition, HA may Transfer his Partnership Interest (or stock of a
corporation described in (iii) above), subject to this Section 8.3, (x) in the
event of his death, to the personal representative of his estate or his heir or
heirs or (y) in the event of his legal incompetency, to his guardian.
Notwithstanding the foregoing, no Transfer permitted hereunder shall affect the
Partnership's rights hereunder and any such transferee must, as a condition to
such Transfer, agree to comply with all provisions of this Agreement and the
Exchange Rights Agreement applicable to the Transferred Partnership Interest or
Units, including, without limitation, the provisions of this Article 8.
(b) Unless and until an assignee of a Limited Partner's Partnership
Interest is admitted to the Partnership as a substitute Limited Partner, such
assignee shall not be entitled to exercise any of the rights provided to a
Limited Partner under the laws of the State of Delaware or any other
jurisdiction purporting by statute to grant express rights to a limited partner
of a limited partnership, except that such assignee shall be entitled to
allocations under Article 4 hereof attributable to any Limited Partnership
Interest acquired by reason of an assignment in accordance with this Section
8.3, and all distributions, if any, made with respect thereto under Article 5
hereof arising after the effective date of the assignment. An assignee shall
have the right to be admitted to the Partnership as a substitute Limited Partner
only upon the satisfaction of the following conditions:
(i) Each of the conditions set forth in Section 8.2 hereof has
been satisfied;
28
(ii) The General Partner has consented in writing to such
substitution (which consent shall not be withheld as to any Transfer
described in the first sentence of the second paragraph of subsection
8.3(a) hereof if the condition set forth in the last sentence of such
second paragraph and each of the other conditions set forth in this
subsection 8.3(b) have been satisfied as to such Transfer);
(iii) If deemed necessary by the General Partner, an amended
Certificate has been duly executed and filed in the appropriate public
office(s); and
(iv) The assignor and assignee have executed and acknowledged
such other instruments, each in form and substance satisfactory to the
General Partner, as the General Partner may deem necessary or desirable to
effect such substitution.
(c) By executing this Agreement, each Limited Partner shall be
deemed to have consented to any Transfer consented to by the General Partner and
to the admission of an assignee as a substitute Limited Partner permitted by the
General Partner (including, without limitation, the Transfer of Partnership
Interests and Units to LTC pursuant to the Exchange Rights Agreement and the
admission of LTC as a Limited Partner). The General Partner is hereby authorized
on behalf of each of the Partners to amend this Agreement (including the
Schedule hereto) to reflect the admission of any transferee of a Partnership
Interest as a substituted Limited Partner in accordance with the provisions of
this Article 8. Upon request of the General Partner, each Limited Partner shall
execute and deliver such certificates or other documents and perform such acts
as the General Partner deems appropriate to preserve the status of the
Partnership as a limited partnership after the completion of any assignment of a
Limited Partnership Interest pursuant to the terms of this Agreement under the
laws of the jurisdiction in which the Partnership is doing business.
(d) No Limited Partner may withdraw from the Partnership without the
prior written consent of the General Partner.
8.4 Certain Restrictions on Transfer. In addition to any other
restrictions on Transfer herein contained, in no event may any Transfer of a
Partnership Interest or Units by any Person be made (i) to any person or entity
that lacks the legal right, power or capacity to own a Partnership Interest or
Units; (ii) in the event such Transfer would cause LTC to cease to comply with
the REIT Requirements; (iii) if such Transfer would cause a termination of the
Partnership for federal income tax purposes; (iv) if such Transfer would, in the
opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a Partnership for federal income tax purposes; (v) if such
Transfer would result in the Partnership being treated as a "publicly traded
partnership" or is effectuated through an established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code; (vi) in violation of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976; (vii) if the General Partner reasonably believes that
such Transfer may (A) cause any portion or all of the assets of the Partnership
to be deemed pursuant to United States Department of Labor Regulation Section
2510.3-101 or otherwise pursuant to ERISA or the Code to be for any purpose of
ERISA or Section 4975 of the Code assets of any Restricted Entity, or (B) cause
a "prohibited transaction" (as defined in Section 4975(c) of the Code or within
the meaning of Section 406 of ERISA) to occur, or (C) cause the Partnership to
become with respect to any Restricted Entity a "party in interest" (as defined
in Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(e) of the Code) or (D) cause the Partnership to be jointly and severally
liable for any obligation arising under ERISA or the Code with respect to any
"employee benefit plan" as defined in and subject to ERISA or any "plan" as
defined in Section 4975 of the Code; or (viii) if the
29
intended transferee is a Restricted Entity. Any purported Transfer described in
this Section 8.4 shall be void ab initio.
8.5 Effective Dates of Transfers.
(a) Transfers pursuant to this Article 8 may be made on any day, but
for purposes of this Agreement, the effective date of any such Transfer shall be
(i) the first day of the month in which such Transfer occurred if such Transfer
occurred on or prior to the fifteenth calendar day of a month, or (ii) the first
day of the month immediately following the month in which such Transfer
occurred, if such Transfer occurred after the fifteenth calendar day of a month,
or such other date determined by the General Partner pursuant to such convention
as may be administratively feasible and consistent with applicable law.
(b) If any Partnership Interest is Transferred in compliance with
the provisions of this Article 8 on any day other than the first day of a
calendar year, then Profits and Losses, each item thereof and all other items
attributable to such Partnership Interest for such year shall be allocated
between the transferor and (in the case of a Transfer other than a redemption)
the transferee by taking into account their varying interests during such year
in accordance with Section 706(d) of the Code, using any method permitted
thereunder. All distributions pursuant to Article 5 hereof attributable to such
Transferred Partnership Interest (A) with respect to which the Partnership
Record Date is before the effective date of such Transfer (other than a pledge,
mortgage or other encumbrance) shall be made to the transferor, (B) with respect
to the first Partnership Record Date after the effective date of such Transfer
(other than a pledge, mortgage or other encumbrance) shall be paid to the
transferor and to the transferee, ratably in accordance with their respective
periods of ownership of the Partnership Interest transferred during the period
with respect to which such distribution is made, and (C) all distributions after
those described in clauses (i) and (ii) immediately above shall be made to the
transferee.
ARTICLE 9. Dissolution, Liquidation and Winding-Up
9.1 Events of Dissolution; Winding Up.
(a) Unless the term of the Partnership is extended as provided in
subsection 9.1(b) hereof, the Partnership shall be dissolved upon the first to
occur of the following events:
(i) The dissolution, death, withdrawal or Bankruptcy of
the General Partner, or the happening of any other event that
results in the General Partner ceasing to be the General Partner,
unless the business of the Partnership is continued as hereinafter
provided;
(ii) the unanimous vote or written consent of the
Partners to dissolve the Partnership, or the exchange of the entire
Partnership Interest of HA pursuant to the Exchange Rights
Agreement;
(iii) the sale or other disposition of all or
substantially all of the assets of the Partnership unless the
General Partner elects to continue the Partnership business for the
purpose of receiving and collecting indebtedness or the collection
of any other consideration to be received in exchange for the assets
of the Partnership (which activities shall be deemed to be part of
the winding up of the affairs of the Partnership);
30
(iv) the entry of a decree of judicial dissolution of
the Partnership pursuant to Section 1532 of the Act, which decree is
final and not subject to appeal; or
(v) in any event, at the close of business on the
Termination Date.
(b) Notwithstanding the provisions of paragraph 9.1(a)(v) hereof,
the Termination Date may be extended by the General Partner for an additional
one-year period, upon prompt notice delivered by the General Partner to the
Partners, for the sole purpose of winding up the business of the Partnership and
liquidating the assets of the Partnership.
(c) Dissolution of the Partnership shall be effective on the day on
which the event giving rise to the dissolution occurs, but the assets of the
Partnership and the affairs of the Partners, as such, shall continue to be
governed by this Agreement. Upon dissolution, the General Partner shall
liquidate the assets of the Partnership and apply and distribute the proceeds
thereof as contemplated by this Agreement or, in the event such assets cannot be
sold, shall distribute the assets of the Partnership in kind as contemplated by
this Agreement.
9.2 Cancellation of Certificate of Limited Partnership. Upon
completion of the distributions provided for in Section 5.5 hereof, the General
Partner (i) shall cancel or cause to be cancelled the Certificate and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware, and (ii) shall take such other
actions as in the determination of the General Partner (or its trustee,
receiver, successor or legal representative) may be necessary to terminate the
Partnership.
9.3 Return of Capital. Except as otherwise provided in subsection
5.5(b) hereof, the General Partner shall not be personally liable for the return
of all or any part of any Capital Contribution or the Capital Account balance of
any Limited Partner, it being expressly agreed that any such return shall be
made solely from Partnership assets.
ARTICLE 10. Miscellaneous
10.1 Notices. All notices hereunder shall be in writing and shall be
given as follows:
(a) If to the Partnership, to:
LTC GP I, Inc.
c/o LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Mr. Jim Pieczynski
Facsimile: 805-981-8663
with a copy to the General Partner at the address provided in this Section
10.1 unless the General Partner is otherwise receiving a copy of such
notice in the General Partner's own name in the manner specified in this
Section 10.1.
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(b) If to HA, to:
Mr. Harvey J. Angell
c/o Karell Capital Ventures, Inc.
Two North LaSalle Street, Suite 1901
Chicago, IL 60602
Facsimile: 312-855-1684
Each party may change the address to which notices are to be given to that party
hereunder by a notice to that effect delivered to the other parties hereto.
Any notice shall be deemed to have been given if personally
delivered or if sent by facsimile, by Federal Express or other courier service
or by postage paid, United States certified, registered or express mail, return
receipt requested, and will be deemed received when actually received.
10.2 Successors and Assigns. Subject to the restrictions on Transfer
set forth herein, this Agreement and each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
heirs, executors, administrators, legal representatives, successors,
successors-in-title and assigns, and each and every such successor-in-interest
to any Partner, whether such successor acquires such interest by way of gift,
bequest, inheritance, purchase, foreclosure, or by any other method, shall hold
such interest subject to all of the terms and provisions of this Agreement.
10.3 Amendments. In addition to any and all amendments otherwise
authorized herein, amendments may be made to this Agreement from time to time
only by means of a written instrument duly authorized, executed and delivered by
the General Partner and the Limited Partner (or if there is more than one
Limited Partner, a Majority-in-Interest of the Limited Partners).
10.4 Waiver of Partition. No Partner or any successor-in-interest to
any Partner shall have the right, while this Agreement remains in effect, (i) to
have the property of the Partnership, or any portion thereof, partitioned, or
(ii) to file a complaint or institute any proceeding at law or in equity to have
any such property partitioned, and each Partner, for itself, its successors,
representatives, heirs and assigns, hereby waives any such right to the fullest
extent permitted by applicable law. The Partners intend that during the term of
this Agreement, the rights of the Partners and their successors-in-interest, as
among themselves, shall be governed by the terms of this Agreement, and that the
right of any Partner or any successor-in-interest to such Partner to transfer
such Partner's interest in any such property shall be subject to the limitations
and restrictions of this Agreement.
10.5 Waivers. The failure of any Partner to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Partner's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
10.6 Entire Agreement. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof.
32
10.7 Interpretation. Titles or captions of Articles and Sections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof. Whenever from the context it
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms. No provision hereof is to be interpreted for or
against any party because that party or that party's legal representative or
counsel drafted such provision.
10.8 Counterparts. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Partners notwithstanding that all Partners have
not signed the same counterpart.
10.9 Applicable Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted, construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of laws.
10.10 Partial Invalidity. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which such provision is held
invalid, shall not be affected thereby and shall be enforced to the greatest
extent permitted by law.
10.11 No Third Party Rights. The provisions of this Agreement are
for the exclusive benefit of the parties hereto, and no other Person, including
without limitation, creditors of any Partner or of the Partnership, shall have
any right or claim against the Partnership or any Partner by reason of those
provisions against the Partnership or any Partner.
10.12 Compliance with Laws. The Partners shall from time to time to
execute such certificates and documentation as may be required by applicable law
or reasonably requested by any Partner to enable such Partner to comply with the
requirements of any applicable law or the regulations promulgated under any such
law from time to time, including, without limitation, the Code or ERISA.
10.13 Confidentiality.
(a) Except as otherwise approved by the General Partner, each
Limited Partner shall keep confidential all agreements, evaluations and other
materials, writings and information relating to the business and affairs of the
Partnership (collectively, "Confidential Information"). Each Limited Partner
expressly agrees that Confidential Information will be used by them solely for
purposes relating to and in furtherance of the business and affairs of the
Partnership; provided, however, that each Limited Partner shall have the right
to disclose information relating to the Partnership to such Limited Partner's
accountants, attorneys and other professional advisors to the extent required in
connection with such Limited Partner's tax reporting, tax planning and other tax
obligations or such Limited Partner's legal affairs.
(b) As used in this Agreement, the term "Confidential Information"
does not include information that (i) becomes generally available to the public
other than as a result of a disclosure by a Limited Partner or any of its
representatives in violation of this Agreement, (ii) as of the date of this
Agreement was, or after the date hereof becomes, available to a Limited Partner
on a nonconfidential basis from a source other than the Partnership or another
Partner or any of their respective representatives, and which source is not
known by the disclosing
33
Limited Partner or its representatives to be prohibited from disclosing or
making available to the disclosing Limited Partner the information in question
by a contractual, fiduciary or other legal obligation. In the event that a
Limited Partner is requested or required (by oral questions, interrogatories,
request for information or documents, subpoena, civil investigation, demand, or
similar process) to disclose any Confidential Information, such Limited Partner
shall provide the Partnership and the General Partner with prompt notice of such
request such that the Partnership and the General Partner may seek an
appropriate order and/or waive compliance with the provisions of this Section
10.13. If in the absence of a protective order or the receipt of a waiver
hereunder, a Limited Partner is nonetheless legally required (as confirmed by
written opinion of counsel made available to the Partnership and the General
Partner) to disclose such Confidential Information to any tribunal or else stand
liable for contempt or suffer censure or penalty, such Limited Partner may
disclose such Confidential Information to such tribunal without liability
hereunder.
10.14 Valid and Binding Agreement. The General Partner hereby
represents and warrants to each Limited Partner that this Agreement has been
duly executed and delivered by the General Partner and is a valid and binding
obligation of the General Partner, enforceable against the General Partner in
accordance with this Agreement's terms.
The Limited Partner hereby represents and warrants to the General
Partner that this Agreement has been duly executed and delivered by such Limited
Partner and is a valid and binding obligation of such Limited Partner,
enforceable against such Limited Partner in accordance with this Agreement's
terms.
[remainder of page intentionally left blank]
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
or caused this Agreement to be executed on their behalf as of the date first
above written.
GENERAL PARTNER:
LTC GP I, INC.,
a Delaware corporation
By: /s/ James J. Pieczynski
---------------------------
James J. Pieczynski
Senior Vice President
LIMITED PARTNER:
/s/ Harvey Angell
-------------------------------
HARVEY ANGELL
Park Villa Corporation hereby withdraws from LTC Partners IV, L.P.,
a Delaware limited Partnership (the "Partnership"), as the original limited
partner thereof, and acknowledges that it has no claim or further right
whatsoever in respect of its interest in the Partnership as such original
limited partner.
PARK VILLA CORPORATION
By: /s/ James J. Pieczynski
---------------------------
Title: SVP & CEO
LTC Properties, Inc. hereby agrees to make each of the loan(s)
provided for in the first paragraph of Section 5.2 of the foregoing Amended and
Restated Agreement of Limited Partnership.
LTC PROPERTIES, INC.,
a Maryland corporation
By: /s/ Andre Dimitriadis
------------------------------------
Chairman and Chief Executive Officer
35
SCHEDULE A
List of Partners, Initial Capital Contributions and
Initial Capital Account Balances
Initial Gross Asset
Value of
Initial Capital Initial Capital
Name of Partner Contributions Account Balance Units
- --------------- ------------------- --------------- ------
LTC Subsidiary $1,835,863 $ 32,090 2,468
HA $ 451,009 $204,782 15,752
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (as from time to time amended, this
"Agreement") is made as of January 30, 1996, among LTC Properties, Inc., a
Maryland corporation ("LTC"), LTC Partners IV, L.P., a Delaware limited
partnership (the "Partnership"), LTC GP I, Inc., a Delaware corporation ("LTC
Subsidiary") and Mr. Harvey J. Angell ("HA"), a resident of the State of
Illinois.
WHEREAS, pursuant to that certain Amended and Restated Agreement of
Limited Partnership dated as of January 30, 1996 (the "Partnership Agreement"),
among LTC Subsidiary as General Partner and, inter alia, HA as Limited Partner,
LTC Subsidiary and HA are making capital contributions to the Partnership in
return for the issuance by the Partnership to LTC Subsidiary and HA of Units (as
defined in the Partnership Agreement); and
WHEREAS, the parties hereto are entering into this Agreement to
provide for the right of HA to tender Units in exchange for REIT Shares (as
defined herein) or cash, on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
Article 1. Definitions. For purposes of this Agreement:
"Acquisition Transaction" means a transaction in which (i) LTC sells
in one or a series of related transactions, or liquidates, all or substantially
all of LTC's assets and distributes the proceeds of such sale or liquidation (or
a portion of such proceeds) to the holders of the then outstanding shares of
Common Stock, or (ii) not less than a majority of the then outstanding shares of
Common Stock are changed into or sold or exchanged (whether pursuant to a
recapitalization, reorganization, merger, consolidation, tender or exchange
offer or otherwise) for a different kind of shares of common stock or other
securities (of LTC or of another corporation or other entity) or for property,
cash or any combination of securities, property or cash.
"Adjustment Event" means any of the following events:
(a) LTC (i) distributes to the holders of the then outstanding
shares of Common Stock shares of LTC's capital stock or other debt or
equity securities of LTC, (ii) subdivides the then outstanding shares of
Common Stock into a larger number of shares of Common Stock, (iii)
combines the then outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (iv) issues to the holders of the then
outstanding shares of Common Stock equity or debt securities of LTC in a
reclassification of the Common Stock other than a reclassification in
connection with an Acquisition Transaction; or
(b) LTC issues to all holders of the then outstanding shares
of Common Stock options, warrants, convertible or exchangeable securities
or other rights entitling the holders of such then outstanding shares of
Common Stock to subscribe for or purchase shares of LTC's capital stock or
other debt or equity securities of LTC.
"Capital Account" has the meaning ascribed to that term in the
Partnership Agreement.
"Cash Amount" has the meaning set forth in Section 4.1 hereof.
"Code" has the meaning ascribed to that term in the Partnership
Agreement.
"Common Stock" means the shares of Common Stock, par value $.01 per
share, of LTC.
"Exchange Notice" has the meaning set forth in Section 3.1 hereof.
"Exchange Notice Period" means (i) commencing January 1, 1997, the
following periods of each calendar year: January 1-15 and July 1-15; (ii) in the
event that LTC determines to engage in a Sale (as defined in the Partnership
Agreement), the period of 10 calendar days that begins on the date LTC notifies
the Limited Partner of such decision, as provided in the Partnership Agreement;
and (iii) in the event that LTC determines to sell all or substantially all of
LTC's assets, LTC enters into an agreement providing for another Acquisition
Transaction or an offer is made by a Person other than LTC or a subsidiary of
LTC to purchase not less than a majority of the then outstanding shares of
Common Stock (whether pursuant to a merger, consolidation, tender or exchange
offer or otherwise), the period of 15 calendar days that begins on the date LTC
publicly announces such determination or the date on which such offer is
commenced, as applicable.
"Exchange Right" has the meaning set forth in Article 2 hereof.
"Exchange Shares" has the meaning set forth in Section 4.1 hereof.
"Exchanging Holder" has the meaning set forth in Article 2 hereof.
"General Partner" has the meaning ascribed to that term in the
Partnership Agreement.
"Holder" means a Person that is both (i) a holder of record of any
one or more Units, other than the General Partner, and (ii) either a Limited
Partner or the executor, legal representative or heir of HA or the trustee or
beneficiary of a trust created by HA.
"Limited Partner" has the meaning ascribed to that term in the
Partnership Agreement.
"Market Value" means, as to any asset:
(i) If the asset is a security that is then Publicly Traded,
the closing price of such security on such day on the principal national
securities exchange on which such security is traded or on the
NADSAQ-National Market System, as applicable; or
(ii) If the asset is a security that is not then Publicly
Traded but is actively traded in the over-the-counter market, the closing
bid or sales price (whichever is applicable) of the security; and
(iii) If the asset is a security for which there is then no
active public market or if the asset is other than a security, the fair
market value of such asset as determined by LTC acting in good faith on
the basis of such quotations or valuations and other information as LTC
considers appropriate.
2
For purposes of paragraph (ii) of this definition, a security shall
be deemed to be "actively traded" if during the 90-day period preceding the
date, the aggregate number of shares (or other units) traded equals or exceeds
1% of the then outstanding shares (or other units).
"Partnership Interest" and "Person" have the respective meanings
ascribed to those terms in the Partnership Agreement.
"Private Acquiror" means an entity that as of the consummation of
the transaction in question is not a subsidiary of LTC and whose shares of
common stock (or equivalent equity security) are not, and the shares of common
stock (or equivalent equity security) of whose parent entity are not, Publicly
Traded.
"Public Acquiror" means an entity that as of the consummation of the
transaction in question (i) is not a subsidiary of LTC and (ii) either has
outstanding a class of equity security that is Publicly Traded or is a
subsidiary of an entity that has outstanding a class of equity security that is
Publicly Traded.
"Publicly Traded" means listed or admitted to trading on any
national securities exchange or through the NASDAQ-National Market System.
"REIT Requirements" has the meaning ascribed to that term in the
Partnership Agreement.
"REIT Share" means one share of Common Stock; provided, however:
that:
(a) If an Adjustment Event or an Acquisition Transaction
occurs, then except as otherwise provided in paragraph (b) immediately
below, from and after the consummation of such Adjustment Event or
Acquisition Transaction "REIT Share" shall mean the number and kind of
shares of stock or other securities, property or cash (or any combination
thereof) that the holder of a share of Common Stock was entitled to
receive in respect of such share, or into which such share of Common Stock
was changed or for which one share of Common Stock was sold or exchanged,
as applicable, as a result of such Adjustment Event or Acquisition
Transaction; and
(b) Notwithstanding the provisions of paragraph (a) of this
definition, if the Acquisition Transaction consists of the purchase by a
Public Acquiror of not less than a majority of the then outstanding shares
of Common Stock (whether pursuant to a merger, consolidation, tender or
exchange offer or otherwise) for consideration consisting solely of cash,
from and after the consummation of such Acquisition Transaction "REIT
Share" shall mean that number of shares of common stock (or equivalent
equity security) of the Public Acquiror (or if the common stock (or
equivalent equity security) of the Public Acquiror is not then Publicly
Traded, that number of shares of common stock (or equivalent equity
security) of the Public Acquiror's parent entity) equal to a fraction, the
numerator of which is the purchase price paid for one share of Common
Stock in the Acquisition Transaction and the denominator of which is the
Market Value of one share of common stock (or equivalent equity security)
of the Public Acquiror or, if the common stock (or equivalent equity
security) of the Public Acquiror is not then Publicly Traded, one share of
common stock (or equivalent equity security) of the Public Acquiror's
parent entity.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
3
Article 2. Right to Exchange Units. On the terms and subject to the
conditions of this Agreement, each Holder shall have the right (the "Exchange
Right") to tender to LTC (or its successor or assignee, as provided in Section
7.3 hereof) outstanding Units and to require LTC (or such successor or assignee)
to purchase such Units by delivering to the Holder tendering such Unit(s) (the
"Exchanging Holder") either REIT Shares or cash, as hereinafter provided.
Article 3. Exercise of Exchange Right.
3.1 Delivery of Exchange Notice. In order for the Exchange Right to
be validly exercised, a Holder shall deliver to LTC, at the address and in the
manner specified in Section 7.1 hereof and during an Exchange Notice Period, a
duly completed and duly executed notice of exchange in the form attached hereto
as Exhibit A (the "Exchange Notice"), and all documents, if any, required by the
Exchange Notice. Any and all determinations as to whether any tender of Units
complies with the terms and conditions of this Agreement shall be made by LTC,
and upon rejection of any tender of Units LTC shall give the Exchanging Holder
notice of such rejection, which notice shall include the reason(s) therefor.
3.2 Minimum Tender; Tender Irrevocable. A Holder may not exercise
the Exchange Right for less than 1000 Units or, if such Holder then holds less
than 1000 Units, all of the Units then held by such Holder. Unless otherwise
determined by LTC, tenders of Units pursuant to this Agreement shall be
irrevocable and shall not be subject to modification or withdrawal.
Article 4. Exchange Consideration.
4.1 Delivery of Exchange Shares; Payment of Cash Amount. If Units
are duly tendered pursuant to this Agreement, then within 10 days after such
tender LTC shall deliver or cause to be delivered to the Exchanging Holder, at
LTC's election, either:
(a) REIT Shares in an amount (the "Exchange Shares") equal to
the number of Units tendered; or
(b) Cash in an amount (the "Cash Amount") equal to (i) the
number of REIT Shares that otherwise would be deliverable pursuant to
subsection 4.1(a), multiplied by (ii) the sum of (x) the Market Value as
of the date the Exchange Notice is received by LTC of one REIT Share plus
(y) five cents ($.05).
Each tender of Units and delivery of Exchange Shares or payment of
the Cash Amount as aforesaid shall be treated by each of the Exchanging Holder,
the Partnership, the General Partner and LTC for federal and state income tax
purposes as a sale of the Exchanging Holder's Units and related Partnership
Interest to LTC, and for purposes of the Partnership Agreement LTC shall be
deemed as a result of such transaction to have acquired from the Exchanging
Holder the tendered Units and the Limited Partner's Partnership Interest equal
to (i) the number of Units so tendered, divided by the total number of Units
held by such Exchanging Holder immediately prior to the tender, multiplied by
(ii) the Capital Account balance of such Exchanging Holder immediately prior to
the tender.
4.2 No Fractional Shares; Transferability of Exchange Shares. No
fractional REIT Share or script representing a fractional REIT Share shall be
issued upon the exchange of Units pursuant to this Agreement. In lieu of any
fractional REIT Share that would otherwise be
4
deliverable upon exchange of a Unit, the Exchanging Holder shall be entitled to
receive cash in an amount equal to the same fraction of the Market Value of a
REIT Share on the day on which the Exchange Notice is given.
Any and all Exchange Shares shall be delivered to the Exchanging
Holder pursuant to a then effective registration statement under the Securities
Act or in such other manner as to cause such shares not to be "restricted
securities" as defined by Rule 144 (or equivalent rule or regulation) under the
Securities Act. Notwithstanding the foregoing, if at any time after any Units
are tendered by an Exchanging Holder pursuant hereto LTC is contemplating an
underwritten public offering of LTC's securities and LTC determines that
marketing factors require a limitation of the number of shares of Common Stock
available for sale in the market, LTC shall so advise the Holders, and no
Exchange Shares held by any Holder shall be sold in any public sale or other
distribution, without the prior written consent of LTC, for such period of time
before and after (not to exceed 30 days before and 60 days after) the effective
date of the registration statement relating to such public offering as LTC may
require.
4.3 Transfer Taxes. LTC shall pay all documentary, stamp or similar
issuer transfer taxes, if any, due as a result of the delivery of Exchange
Shares pursuant hereto. The Holder of the Units in respect of which such shares
are delivered, however, (i) shall pay to LTC on demand the amount of all
additional documentary, stamp or similar issuer transfer taxes, if any, due as a
result of the certificate or certificates evidencing such Exchange Shares being
issued in a name other than the name of the Exchanging Holder (or shall
establish to the satisfaction of LTC that any and all such additional taxes have
been paid), and (ii) shall be responsible for the payment of all income or other
taxes payable by the Exchanging Holder (or by any other Person to whom Exchange
Shares are delivered) as a result of such delivery of Exchange Shares or payment
of the Cash Amount in lieu thereof.
4.4 Ownership of REIT Shares. Each Holder shall provide to LTC,
within 10 days of any written request therefor, a statement describing the
number of REIT Shares actually or constructively owned by such Holder and all
direct and indirect owners of such Holder for purposes of the REIT Requirements
as determined under Section 318(a) of the Code as modified by Section 856(d)(5)
of the Code, or Section 544 of the Code as modified by Section 856(h) of the
Code.
4.5 Status of Exchanging Holder. Until the Holder of Units tendered
for exchange pursuant to this Agreement becomes a holder of record of the
Exchange Shares delivered in exchange therefor and/or has received in lieu
thereof the Cash Amount, such Holder shall continue to hold and own such Units
for all purposes of the Partnership Agreement. No Exchanging Holder shall have
any rights as a shareholder in respect of the Exchange Shares to be delivered to
such Holder unless and until such Holder becomes a holder of record of such
shares.
Article 5. Reservation of Shares. LTC shall reserve and shall at all
times have reserved under LTC's authorized but unissued REIT Shares, solely for
the purpose of effecting the exchange of Units pursuant to this Agreement,
sufficient REIT Shares to permit the exchange of all Units from time to time
outstanding and held other than by the General Partner. All REIT Shares that may
be issued as Exchange Shares shall be validly issued, fully paid and
nonassessable.
5
Article 6. Mandatory Exchange of Units. Notwithstanding the foregoing
provisions of this Agreement, no later than the 30th calendar day following the
consummation of an Acquisition Transaction that consists of the purchase by a
Private Acquirer of not less than a majority of the then outstanding shares of
Common Stock (whether pursuant to a merger, consolidation, tender or exchange
offer or otherwise) solely for cash, each Holder shall either (i) tender to such
Private Acquirer all of such Holders Units (including the related Partnership
Interests) against payment to such Holder of cash in an amount per Unit equal to
110% of the cash amount paid for each share of Common Stock in the Acquisition
Transaction, or (ii) deliver to such Private Acquirer a valid, binding and
enforceable waiver, duly executed by such Holder, of such Holder's Exchange
Right with respect to any and all Units held by such Holder as of the date of
such waiver.
Article 7. Miscellaneous
7.1 Notices. All notices, demands and other communications hereunder
("notices") shall be in writing and shall be given as follows:
(a) If to LTC, to:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Mr. Jim Pieczynski
Facsimile: 805-981-8663
(b) If to the Partnership, to:
LTC Partners IV, L.P.
c/o LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Mr. Jim Pieczynski
Facsimile: 805-981-8663
with a copy to the General Partner at the address provided in this Section
7.1 unless the General Partner is otherwise receiving a copy of such
notice in the General Partner's own name in the manner specified herein.
(c) If to the General Partner, to:
LTC GP I, Inc.
c/o LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Mr. Jim Pieczynski
Facsimile: 805-981-8663
6
(d) If to HA, to:
Mr. Harvey J. Angell
c/o Karell Capital Ventures, Inc.
Two North LaSalle Street, Suite 1901
Chicago, IL 60602
Facsimile: 312-855-1684
with a copy to:
Wayne S. Gilmartin, Esq.
Goldberg, Kohn, Bell, Black, Rosenbloom
& Moritz, Ltd.
55 East Monroe Street, Suite 3700
Chicago, IL 60603
Facsimile: 312-332-2196
Each party may change the address to which notices are to be given to that party
hereunder by a notice to that effect delivered to the other parties hereto.
Any notice given hereunder shall be deemed to have been given if
personally delivered or if sent by facsimile, by Federal Express or other
courier service or by postage paid, United States certified, registered or
express mail, return receipt requested, and shall be deemed given when actually
received at the above address, as evidenced by the applicable receipt.
7.2 Compliance with Laws. Each party shall from time to time execute
and deliver such certificates and additional documents as may be required by
applicable law or reasonably requested by any other party to enable such party
to comply with the requirements of applicable law.
7.3 Successors and Assigns. No Limited Partner may assign or
otherwise transfer any interest in this Agreement, or any right or remedy
hereunder, to any Person other than to another party hereto or to a Person (i)
to whom one or more Units held by such Limited Partner have been transferred in
accordance with the provisions of the Partnership Agreement and (ii) that has
become a Limited Partner (as such term is defined in the Partnership Agreement).
Subject to the immediately preceding sentence, this Agreement and each and every
provision hereof shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective heirs, executors, administrators, legal
representatives, successors and assigns. In the event LTC determines to enter
into an Acquisition Transaction with a Private Acquirer or a Public Acquirer,
LTC shall take all such steps as may be required to cause the terms and
provisions of this Agreement to be binding upon LTC's successors and assigns
resulting from such Acquisition Transaction.
7.4 Attorneys' Fees. If any party brings an action to enforce the
terms hereof or to declare rights hereunder, the prevailing party in any such
action shall be entitled to recover from the losing party all costs and
expenses, including but not limited to attorneys' fees and expenses, paid or
incurred by the prevailing party in connection with such enforcement or
declaration.
7
7.5 Amendments. This Agreement may be amended, supplemented or
otherwise modified only by means of a written instrument duly authorized,
executed and delivered by all of the parties hereto.
7.6 Waivers. The failure of any party to insist upon strict
performance of a covenant or other obligation of that party hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such party's right to demand strict compliance with such covenant
or other obligation in the future. No consent or waiver, express or implied, to
or of any breach or default in the performance of any obligation hereunder shall
be binding unless in writing and then shall not constitute a consent to or
waiver of any other breach or default in the performance of the same or any
other obligation hereunder.
7.7 Entire Agreement. This Agreement constitutes the full and
complete agreement of the parties with respect to the subject matter hereof.
7.8 Interpretation. Titles or captions of Articles and Sections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof. Whenever from the context it
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms. No provision hereof is to be interpreted for or
against any party because that party or that party's legal representative or
counsel drafted such provision.
7.9 Counterparts. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
agreement, binding on all the parties notwithstanding the fact that all parties
have not signed the same counterpart.
7.10 Applicable Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted, construed and
enforced in accordance with the laws of the State of California without regard
to that state's principles of conflicts of laws.
[remainder of page intentionally left blank]
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
LTC PROPERTIES, INC., LTC GP I, INC.,
a Maryland corporation a Delaware corporation
By: /s/ Andre Dimitriadis By: /s/ James J. Pieczynski
------------------------ ------------------------
Andre Dimitriadis James J. Pieczynski
Chairman and Chief Executive Officer Senior Vice President
LTC PARTNERS IV, L.P.
a Delaware limited partnership
By: LTC GP I, INC.,
General Partner
By: /s/ James J. Pieczynski /s/ Harvey J. Angell
------------------------- ----------------------------
James J. Pieczynski HARVEY J. ANGELL
Senior Vice President
9
EXHIBIT A
NOTICE OF EXERCISE OF EXCHANGE RIGHT
The undersigned hereby irrevocably (i) presents for exchange
_________ Units in LTC Partners IV, L.P. (the "Partnership") in accordance with
the terms of the Exchange Rights Agreement among LTC Properties, Inc., the
Partnership and Mr. Harvey J. Angell and the Exchange Right referred to therein,
(ii) surrenders such Units and all right, title and interest therein, and (iii)
directs that the Cash Amount or Exchange Shares (as determined by LTC)
deliverable upon exercise of the Exchange Right be delivered to the address
specified below, and if Exchange Shares are to be delivered, such Exchange
Shares be registered or placed in the name(s) and at the address(es) specified
below.
Dated:________________________
Name of Limited Partner: ____________________
________________________________
(Signature of Limited Partner)
________________________________
(Street Address)
________________________________
(City) (State) (Zip Code)
If Exchange Shares are to be
issued, issue to: _________________________________________________
(Name)
Please insert social security or
identifying number of person named above: __________________________