AGREEMENT OF LIMITED PARTNERSHIP

Exhibit 3.38

 

STATE OF LOUISIANA

 

PARISH OF CADDO

 

AGREEMENT OF LIMITED PARTNERSHIP

OF

LIFECARE MEDICAL ARTS HOSPITAL. L.P.

 

This Agreement of Limited Partnership of LifeCare Medical Arts Hospital, L.P. is made and entered into as of the 1st day of February, 1998 by and among LifeCare Holding Company of Texas, L.L.C., a Nevada limited liability company, whose mailing address is 504 Texas Street, Suite 600, Shreveport, Louisiana 71101 (hereinafter “General Partner”) and the undersigned limited partner(s) (hereinafter sometimes referred to as “Limited Partner” or collectively as “Limited Partners” when there is more than one).

 

RECITALS:

 

The General Partner and the Limited Partners desire to own and/or operate certain hospitals and healthcare facilities.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements hereinafter set forth, the General Partner and Limited Partners hereby enter into the following agreement of limited partnership:

 

ARTICLE I.

THE LIMITED PARTNERSHIP

 

Section

1.1 Formation

 

a. The parties hereby form a limited partnership (referred to as the “Partnership”) pursuant to the provisions of the Texas Revised Limited Partnership Act.

 

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b. In connection with the formation of this Partnership, the General Partner shall prepare and execute a certificate of limited partnership which shall be filed with the Secretary of State of Texas. The Partners shall execute and record any supplemental or amended certificate of limited partnership and other documents for the Partnership as may from time to time be required by Texas law.

 

c. The Partners’ interests in the Partnership shall be personal property for all purposes. All property (including real and personal property and tangible and intangible property) owned by the Partnership shall be deemed to be owned by the Partnership as an entity, and none of the Partners shall be deemed to own any of that property.

 

Section

1.2 Purpose

 

The purpose of this Partnership shall be to acquire, own and/or operate hospitals and other healthcare facilities, together with related properties, and to conduct all activities in connection therewith.

 

Section

1.3 Name

 

The Partnership shall operate under the name of LifeCare Medical Arts Hospital, L.P.

 

Section

1.4 Principal Place of Business and Registered Agent

 

The principal place of business and mailing address of the Partnership shall be at 504 Texas Street, Suite 600, Shreveport, Louisiana 71101. The business of the Partnership may also be conducted at such other or additional place or places as may be designated by the General Partner. The registered agent for service of process on the Partnership in the State of Texas shall be Capitol

 

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Corporate Services, Inc. The address of the registered office of the Partnership in the State of Texas shall be located at 1212 Guadalupe, Suite 102, Austin, Texas 78701.

 

Section

1.5 Term

 

The Partnership shall commence as of the date of filing of the certificate of limited partnership with the Secretary of State of Texas, and shall continue until terminated as hereinafter provided.

 

Section

1.6 Assumed or Firm Name Certificate

 

Prior to engaging in business in any state, the Partnership shall comply with the laws of such state with respect to notice of operations as a limited partnership and with respect to operating or doing business under an assumed, fictitious or firm name, and the parties hereto agree to execute, file and record all proper instruments that may be required to enable the Partnership to establish and maintain its status and conduct business in its name at any place and at any time as designated by the General Partner.

 

ARTICLE II.

CERTAIN DEFINITIONS

 

Section

2.1 General Partner

 

Unless the context otherwise requires as a result of the operation of Sections 9.1, 9.2 or 9.3, the term “General Partner” shall mean LifeCare Holding Company of Texas, L.L.C., a Nevada limited liability company, or its substitute or substitutes, pursuant to the terms of this Agreement.

 

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Section

2.2 Limited Partners/Limited Partner

 

The term “Limited Partners” shall mean at any time the persons who are Limited Partners as provided in this Agreement, collectively; and the term “Limited Partner” shall mean at any time any one of the then Limited Partners.

 

Section

2.3 Partners/Partner

 

The term “Partners” shall mean at any time the General Partner and the Limited Partners, collectively; and the term “Partner” shall mean at any time any one of the then Partners.

 

Section

2.4 More than Fifty Percent (50%) in Interest of the Partners

 

The term “More than Fifty Percent (50%) in Interest of the Partners” shall mean the one or more of the Partners who at the time are entitled to more than fifty percent (50%) of the capital of the Partnership.

 

Section

2.5 More than Seventy-Five Percent (75%) in Interest of the Limited Partners

 

The term “More than Seventy-Five Percent (75%) in Interest of the Limited Partners” shall mean the one or more of the Limited Partners who at the time are entitled to more than seventy-five percent (75%) of the capital of the Partnership owned by the Limited Partners.

 

Section

2.6 Vote

 

The term “Vote” means the written approval of a proposed action affecting the Partnership signed by a Partner or his authorized representative.

 

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ARTICLE III.

CAPITAL CONTRIBUTIONS

 

Section

3.1 Initial Capital Contributions

 

The total initial capital of the Partnership shall be contributed in cash and/or mineral properties in the amounts and in the percentages set forth below:

 

 

Section  3.2 Form and Timing

 

The initial capital contribution of Partners shall consist of cash.

 

ARTICLE IV.

ACCOUNTING FOR THE PARTNERSHIP

 

Section

4.1 Annual Statements

 

The General Partner shall cause annual financial statements of the operations of the Partnership to be prepared and distributed to each Limited Partner. Such financial statements need not be audited.

 

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Section

4.2 Access to Accounting Records

 

Any Limited Partner shall have reasonable access to the accounting records of the Partnership during regular business hours of the Partnership.

 

Section

4.3 Books and Records

 

The Partnership shall maintain appropriate books and records with respect to the Partnership’s business. The books of the Partnership shall be kept in accordance with generally accepted accounting principles, except that the General Partner may elect to use a cash receipts and disbursements method of accounting.

 

Section

4.4 Fiscal Year

 

The fiscal year of the Partnership shall be the calendar year.

 

Section

4.5 Income Tax Information

 

The General Partner shall provide to each Limited Partner information on the Partnership’s taxable income or loss and each item of income, gain, loss, deduction or credit that is relevant to reporting partnership income. The information shall also show each Partner’s distributive share of each item of income, gain, loss, deduction or credit. This information shall be furnished to each Limited Partner within ninety (90) days of the close of the Partnership’s taxable year. The General Partner shall file or arrange for the filing of all tax returns and reports required by applicable law or regulations to be filed by the Partnership.

 

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Section

4.6 Tax Matters Partner

 

The General Partner shall serve as the Tax Matters Partner for the Partnership pursuant to §6231(a)(7) of the Internal Revenue Code. The Tax Matters Partner shall take such action as may be necessary to cause each other Partner to become a “notice partner” within the meaning of §6223(g) of the Internal Revenue Code. The Tax Matters Partner shall notify each other Partner on a reasonably timely basis of all significant matters that may come to his attention in his capacity as Tax Matters Partner. The General Partner is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith.

 

Section

4.7 Accounting Decisions

 

All decisions as to accounting principles and tax elections, including but not limited to any election pursuant to Section 754 of the Code, shall be made by the General Partner using generally accepted accounting or tax principles (as the case may be) consistently applied, except that the General Partner may elect to use a cash receipts and disbursements method of accounting.

 

Section

4.8 Bank Accounts

 

All receipts, funds and income of the Partnership shall be deposited in the name of the Partnership in such bank or banks as the General Partner shall determine. Every withdrawal from such banks shall require the signature only of such person or persons as the General Partner may determine. There shall be no commingling of the monies and funds of the Partnership with monies

 

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and funds of any other entity, and such monies and funds shall be maintained in separate and distinct accounts of the Partnership.

 

ARTICLE V.

PROFITS AND LOSSES

 

Section

5.1 Determination

 

The net profits or net losses of the Partnership shall be determined in accordance with the method of accounting elected by the General Partner consistently applied.

 

Section

5.2 Profits and Losses

 

The profits and losses of the Partnership shall be shared by the Partners (General Partner and Limited Partners) in the percentages of their initial capital contributions as set forth in Section 3.1, as adjusted in accordance with the provisions set forth in Sections 6.1 and 6.2.

 

Section

5.3 Tax Allocations for Contributed Property

 

In accordance with Internal Revenue Code Section 704(c) 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 any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its fair market value as of the date of its contribution to the Partnership. Allocations pursuant to this Section 5.3 are solely for purposes of federal and state income taxes and shall not affect, or in any way be taken into account in computing, any Partner’s book capital account or share of profits and losses pursuant to any provisions of this Agreement.

 

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ARTICLE VI.

CAPITAL ACCOUNTS

 

Section

6.1 Individual Capital Account

 

An individual capital account shall be maintained for each Partner. The capital account shall be maintained in accordance with the principles of the Treasury Regulations promulgated under Section 704(b) of the Internal Revenue Code, including the following general principles:

 

a.

Each Partner’s capital account shall be increased by (i) the amount of money contributed by the Partner to the Partnership, (ii) the fair market value of property contributed by the Partner to the Partnership (net of liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Internal Revenue Code) and (iii) allocations to the Partner of profits of the Partnership in accordance with Section 5.2 and the Section 704(b) Regulations;

 

b.

Each Partner’s capital account shall be decreased by: (i) the amount of money distributed to the Partner by the Partnership, (ii) the fair market value of property distributed to the Partner by the Partnership (net of liabilities secured by such distributed property that such Partner is considered to assume or take subject to under Section 752 of the Internal Revenue Code), and (iii) allocations of Partnership loss as determined in accordance with Section 5.2 and the Section 704(b) Regulations.

 

Section

6.2 Additional Contributions to Capital

 

It is recognized and anticipated that the Partnership may require additional capital from time to time in order to accomplish the purposes and continue the business for which it is formed, and it is hereby agreed that the General Partner, in its sole discretion, may determine whether the capital of the Partnership shall be increased from time to time; provided, that such right is strictly personal to the General Partner and shall not be susceptible of exercise by creditors or other successors in interest thereto. In the event that the General Partner determines that an increase in capital is necessary, such determination shall be submitted in writing to each Limited Partner

 

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and, within thirty (30) days following receipt of such notice, each Limited Partner shall notify the General Partner of his approval or disapproval of such increase, and failure to respond timely shall constitute disapproval. In the event that More than Fifty Percent (50%) in Interest of the Partners approve such increase, then the Partnership capital shall be increased pro rata in the ratio of the respective Partners’ capital accounts. If such increase is approved as set forth above and any Partner refuses or fails to contribute his portion of such additional capital within fifteen (15) days following written notice of approval of the increase, the remaining Partners shall have the right to contribute in proportion to their respective capital accounts the additional amounts necessary to total the recommended increased capital; provided further that the respective proportionate interest of each Partner shall be adjusted in proportion to his resulting capital account, it being the intention of this paragraph that all Partners shall have the right to contribute additional capital in proportion to their respective capital accounts; but, in the event that one or more fail or refuse thus to contribute, then, in order to compensate those who make additional capital contributions in excess of their ratable responsibility, their respective Partnership interests shall be increased in proportion to their additional contributions; provided further, however, that there shall be no obligation of any Partner to contribute additional capital even if More than Fifty Percent (50%) in Interest of the Partners approve of such increase in capital.

 

In the event that the General Partner determines that capital shall be reduced or decreased, no approval of the Limited Partners shall be required. Any resulting changes in the Partners’ proportionate interests shall be reflected in a properly executed amendment of this Agreement of limited partnership.

 

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ARTICLE VII.

CASH FLOW

 

Section

7.1 Distributions

 

Cash flow which in the opinion of the General Partner is in excess of that required for operating expenses, any necessary reserve, and reinvestment may be distributed at any time in cash or in kind. Such distributions shall be made in the proportions set forth in Section 5.2.

 

Section

7.2 Limitation Upon Distributions

 

No distribution shall be made to Partners if such distributions would cause the Partnership to become insolvent or otherwise unable to pay its creditors, or that would violate limitations set forth in Section 6.07(a) of the Texas Revised Limited Partnership Act or is otherwise prohibited by applicable Texas law.

 

ARTICLE VIII.

ADMINISTRATIVE PROVISIONS

 

Section

8.1 Management

 

Subject only to the restrictions set forth in Section 8.2, all of the business of the Partnership shall be under the exclusive management of the General Partner who is authorized to exercise the broadest powers permitted under any applicable state law for general partners of limited partnerships. The authority of the General Partner, not by way of limitation, shall include the power to:

 

a.

To execute and deliver any and all agreements, contracts, documents, certifications and instruments necessary or convenient in connection with the business and affairs of the Partnership;

 

b.

To execute and deliver, in furtherance of any or all of the purposes of the Partnership, any deed, lease, bill of sale, mortgage, mortgage note, option, listing

 

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agreement, contract or other instrument purporting to convey, encumber, exchange, lease, option or list for sale or lease all or any part of the movable and immovable, corporeal or incorporeal property of the Partnership;

 

c.

To borrow money and issue evidences of indebtedness and assume existing indebtedness necessary, convenient or incidental to the accomplishment of the purposes of the Partnership;

 

d.

To deal with, or otherwise engage in business with, or provide services to any person who provides any services to, lends money to, sells property to or purchases property from the Partnership;

 

e.

To designate an account or accounts into which Partnership funds may be deposited; to endorse for deposit in or for collection by any bank or corporate institution wherever situated, drafts, checks or other bills of exchange made payable to the Partnership and to withdraw, by check or otherwise, money or deposit in the Partnership