AGREEMENT OF LIMITED PARTNERSHIP OF SAN ANTONIO SPECIALTY HOSPTIAL, LTD

Exhibit 3.40

 

AGREEMENT OF LIMITED

PARTNERSHIP

 

OF

 

SAN ANTONIO SPECIALTY HOSPITAL, LTD.

 

A Texas Limited Partnership

TABLE OF CONTENTS

 

 

 

 

 

AGREEMENT OF LIMITED PARTNERSHIP

OF

SAN ANTONIO SPECIALTY HOSPITAL, LTD.

 

THIS AGREEMENT OF LIMITED PARTNERSHIP (the “Agreement”) is made and entered into this                  day of July, 1997, by and among the parties hereto.

 

For and in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are, the parties hereto have agreed and do hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01 Certain Defined Terms . When used in this Agreement, the following capitalized words and phrases shall have the following meanings assigned to them:

 

Act . “Act” shall mean the Texas Revised Limited Partnership Act, as amended from time to time.

 

Additional Limited Partner . “Additional Limited Partner” shall mean a Person admitted to the Partnership as a Limited Partner pursuant to Article XIV.

 

Affiliate . “Affiliate” shall mean, when used with reference to a specified Person:

 

(i) Any Person that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with the specified Person;

 

(ii) Any Person which is an officer, partner, manager or director of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, partner, manager or director, or with respect to which the specified Person serves in a similar capacity;

 

(iii) Any Person, which, directly or indirectly, is the beneficial owner of ten percent (10%) or more of any class of voting equity securities of, or otherwise has a substantial beneficial interest in, the specified Person or of which the specified Person is directly or indirectly the owner of ten percent (10%) or more of any class of voting equity securities or in which the specified Person has a substantial beneficial interest; and

 

(iv) Any relative or spouse of the specified Person.

 

Agreement . “Agreement” shall mean this Agreement of Limited Partnership as set forth in the Preamble, as the same may be amended from time to time.

 

Available Cash . “Available Cash” shall have the meaning set forth in Section 8.01.

 

Assignee . “Assignee” shall mean a Person to whom a transferor has transferred all or a fractional part of the transferor’s Partnership Interest, whether by assignment or otherwise, in a manner permitted hereunder, but who has not become a Substitute Limited Partner.

 

Candidate . “Candidate” shall have the meaning set forth in Section 9.08(a).

 

Capital Contribution . “Capital Contribution” shall mean, with respect to each Partner, the initial amount contributed or to be contributed by such Partner to the capital of the Partnership, and any amounts contributed to the capital of the Partnership by such Partner thereafter; provided, that, for purposes of this Agreement, in the case of a Substitute Limited Partner, the cash sums previously contributed by the transferor Limited Partner with respect to the number of Units or fractional part thereof transferred to such Substitute Limited Partner shall be deemed to have been contributed to the capital of the Partnership by such Substitute Limited Partner for purposes of determining the Substitute Limited Partner’s Capital Contribution.

 

Certificate . “Certificate” shall mean that certain Certificate of Limited Partnership regarding the Partnership, filed with the office of the Secretary pursuant to the Act, as the same may be amended from time to time.

 

Code . “Code” shall mean the Internal Revenue Code of 1986, as amended and in effect on the date hereof, and, to the extent applicable, as subsequently amended.

 

Control . “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.

 

Deductions from Revenue . “Deductions from Revenue” shall mean all reductions in Gross Revenue resulting from the inability to collect payment of charges, including, but not limited to, reductions due to bad debts, discounts and other such revenue deductions, as determined by the General Partner in accordance with its normal accounting practices.

 

Dissolution . “Dissolution” shall mean the termination of the legal relationship among the parties as Partners except for matters of liquidation which are incomplete at the time of dissolution.

 

Dissolution Event . “Dissolution Event” shall have the meaning set forth in Section 12.01.

 

Gain on Sale or Loss on Sale . “Gain on Sale” or “Loss on Sale” shall mean the gain or loss recognized during any fiscal year by the Partnership on account of the condemnation, foreclosure, sale or other disposition of any portion of the property of the Partnership, or collections on any installment sale obligation received by the Partnership as a result of the sale of property of the Partnership. Such gain or loss shall be determined under applicable provisions of the Code, but without regard to any adjustment to basis of property of the Partnership pursuant to Section 743 of the Code.

 

General Partner . “General Partner” shall mean NCI - San Antonio, Inc., a Texas corporation, as well as any additional Person(s) admitted, as herein provided, to the Partnership in the capacity of a general partner.

 

Gross Revenue . “Gross Revenue” shall mean all gross revenue derived from and properly attributed to the operations of the Partnership.

 

Initial Capital Contribution . “Initial Capital Contribution” shall mean, with respect to each Limited Partner, the initial amount contributed or to be contributed by such Limited Partner to the capital of the Partnership in exchange for the Partnership Interests acquired by such Limited Partner pursuant to Section 6.01.

 

Limited Partners . “Limited Partners” shall mean NextCARE One and each Person admitted to the Partnership, as herein provided and as set forth on Schedule I or an addendum thereto, as an Additional Limited Partner or as a Substitute Limited Partner, and shown as a Limited Partner on the books and records of the Partnership, until NextCARE One or such Person shall withdraw from the Partnership in accordance with the provisions hereof or a Substitute Limited Partner or Partners are admitted with respect to all of such Person’s Partnership Interest. “Limited Partner” shall mean any one of the Limited Partners.

 

Liquidation . “Liquidation” shall mean the satisfaction of liabilities of the Partnership and the distribution of all of the remaining Partnership assets (whether cash or other assets) to the Partners as herein provided.

 

Liquidator . “Liquidator” shall mean the party or parties actually conducting the Liquidation of the Partnership in accordance with Article XIII, whether the General Partner or a Trustee-In-Liquidation.

 

Majority in Interest of Limited Partners . “Majority in Interest of Limited Partners” shall mean Limited Partners representing more than fifty percent (50%) of the Percentage Interests of the Limited Partners, excluding from such calculation Percentage Interests held as a Limited Partner by the General Partner or by an Affiliate of the General Partner.

 

Net Operating Revenues . “Net Operating Revenues” shall mean, when used with respect to a particular period, the Gross Revenue less Deductions from Revenue for such period.

 

Net Refinancing Proceeds . “Net Refinancing Proceeds” shall mean the cash proceeds received by the Partnership arising from a loan to the Partnership to the extent not applied, or to be applied, to the reduction of Partnership indebtedness (including any advances made by Partners).

 

NextCARE One . “NextCARE One” shall mean NextCARE One, Ltd., a Texas limited partnership.

 

Operating Loans . “Operating Loans” shall have the meaning set forth in Section 6.13.

 

Partners or Partner . “Partners” shall mean, at any time, collectively, the General Partner and any other general partner of the Partnership and each of the Limited Partners and “Partner” shall mean any one of the Partners.

 

Partnership Interest . “Partnership Interest” shall mean, as to any Partner or Assignee, all of the interest(s) of that Partner or Assignee in the Partnership, including, without limitation, for

 

purposes of illustration of such interest(s), as to any such Partner, such Partner’s (i) right to a distributive share of the profits and losses of the Partnership, (ii) right to a distributive share of property of the Partnership and (iii) right, if a General Partner, to participate in the management of the affairs of the Partnership.

 

Percentage Interest . “Percentage Interest” shall mean, as of a date of determination, (i) as to the General Partner, with respect to its interest as a general partner, one percent (1%) and (ii) as to a Limited Partner (including, if applicable, the General Partner with respect to its interest and status as a Limited Partner) or Assignee, the percentage set forth on Schedule I hereto. The sum of the Percentage Interests shall equal one hundred percent (100%).

 

Person . “Person” shall mean any individual, partnership, limited liability company, corporation, trust, pension, profit sharing or other plan, individual retirement account, or other entity or association.

 

Sale Proceeds . “Sale Proceeds” shall mean the net proceeds received by the Partnership on account of any sale of all or any portion of the property of the Partnership, or on account of any insured fire or casualty loss, condemnation, or other involuntary conversion (including losses covered by insurance) to the extent not applied, or to be applied, to the reduction of Partnership indebtedness (including any advances made by Partners).

 

Secretary of State . “Secretary of State” shall mean the Secretary of State of the State of Texas.

 

Specialty Hospital . “Specialty Hospital” shall mean a rehabilitation or long-term acute care hospital owned and/or operated by the Partnerships.

 

Specialty Hospital Lease . “Specialty Hospital Lease” shall mean a facility lease of space by the Partnership to be used as a rehabilitation or long-term acute care hospital.

 

Substitute Limited Partner . “Substitute Limited Partner” shall mean an Assignee admitted as a Limited Partner to the Partnership pursuant to Section 9.08 and who is shown as a Limited Partner on the books and records of the Partnership.

 

Tax Matters Partner . “Tax Matters Partner” shall have the meaning set forth in Section 3.09.

 

Transfer Agreement . “Transfer Agreement” shall have the meaning set forth in Section 9.03.

 

Treasury Regulation . “Treasury Regulation” shall mean a regulation issued by the Department of the Treasury under the Code.

 

Section 1.02 Other Defined Terms . Any capitalized term not specifically defined in Section 1.01 shall have the meaning provided for the term in the Section in this Agreement in which such term is first used.

 

Section 1.03 References . All references in this Agreement to “Sections” or “Articles” shall be to sections and articles of this Agreement unless otherwise noted. The words “hereof”, “herein”,

 

“hereby”, “hereinafter”, “heretofore”, “hereunder” and words of similar import shall also refer to material set forth in this Agreement as a whole and not to any particular subdivision unless expressly so limited.

 

ARTICLE II

 

ORGANIZATION OF THE PARTNERSHIP

 

Section 2.01 Formation of Partnership . The General Partner and the Limited Partner hereby form the Partnership pursuant to the provisions of the Act. The parties agree that the rights, duties and liabilities of the Partners shall be as provided herein and in the Act. In the event of a conflict between the rights, duties and liabilities of the Partners as provided herein and as provided in the Act, the terms of this Agreement shall control and govern to the extent permitted by applicable law. The General Partner shall promptly execute and file with the Secretary of State a certificate of limited partnership, and shall make any other filings with the appropriate authorities necessary to effectuate the purposes of this Partnership.

 

Section 2.02 Partnership Name . The name of the Partnership shall be San Antonio Specialty Hospital, Ltd. To the extent deemed necessary or advisable by the General Partner, the activities and business of the Partnership shall be conducted under such assumed or fictitious name(s) as the General Partner may choose from time to time. The General Partner shall cause to be executed and filed on behalf of the Partnership and the Partners any statement of assumed or fictitious name that may be required by law in order for the Partnership to engage in business in any state or political subdivision.

 

Section 2.03 Location of Place of Business . The principal place of business of the Partnership shall be at 8201 Ewing Halsell Drive, Suite 210, San Antonio, Texas 78229 or such other place or places as may be determined by the General Partner from time to time.

 

Section 2.04 Mailing Address . The mailing address of the Partnership shall be 7600 Chevy Chase Drive, Suite 116, Austin, Texas 78752 or such other place as the General Partner shall select.

 

Section 2.05 Registered Agent and Registered Office . The registered agent of the Partnership to receive service of process in Texas shall be Ray M. Branson and the address of the registered office of the Partnership in Texas shall be 7600 Chevy Chase, Suite 116, Austin, Texas 78752.

 

Section 2.06 Purpose and Intent . The principal business and purpose of the Partnership is to invest in, develop and/or operate one or more Specialty Hospitals, and in the furtherance of that business purpose, to (i) enter into and perform any Lease and (ii) take any other action, perform any other duties or engage in any and all lawful activities directly or indirectly related or incidental thereto or necessary therefor. The Partnership shall not engage in any other business without the prior unanimous written consent of the Partners.

 

Section 2.07 Effective Date and Term . The Partnership shall commence on and as of the date of the filing of the Certificate with the Secretary of State and shall continue until the first to occur of the following events:

 

(a) The unanimous written consent of the Partners agreeing to a Dissolution and termination of the Partnership; or

 

(b) The sale, condemnation, foreclosure or other disposition of all or substantially all of the assets of the Partnership, and conversion into cash of the proceeds of each disposition originally received in a form other than cash; or

 

(c) A Dissolution Event, as defined in Section 12.01; or

 

(d) December 31, 2087.

 

Section 2.08 Filings . The Partners shall from time to time execute or cause to be executed such certificates (including fictitious or assumed name certificates) or such documents and cause to be done all such findings, recordings, publishing and other acts as may be necessary or appropriate to comply on a continuing basis with the requirements for the existence and operation of a limited partnership under the laws of any and all jurisdictions in which the Partnership may from time to time conduct business or own or lease property, and for the purpose of establishing and protecting the limited liability of the Limited Partners thereunder. Although the General Partner is empowered to execute such instruments and to take such actions on behalf of all Partners pursuant to the power of attorney granted in Section 15.01, each of the Partners agrees that such Partner will execute any such instruments and take any such actions to effectuate such purposes as are requested by the General Partner.

 

ARTICLE III

 

MANAGEMENT OF PARTNERSHIP AFFAIRS

 

Section 3.01 Management and Control of the Business of the Partnership .

 

(a) Subject to the limitations set forth in this Agreement, the General Partner has the exclusive authority to manage the operations and affairs of the Partnership and to make all decisions regarding the business of the Partnership. Pursuant to the foregoing, and except as otherwise provided in this Agreement, it is understood and agreed that the General Partner shall have all of the rights and powers of a general partner as provided in the Act (or any successor act) and as otherwise provided by law, and any action taken by the General Partner shall constitute the act of and serve to bind the partnership. The General Partner shall, except as otherwise provided in this Agreement, be subject to all the restrictions and liabilities of a partner in a partnership without limited partners. It is further understood and agreed that, subject to the limitations set forth in this Agreement, any General Partner or authorized officer of a General Partner may act for and in the name of such General Partner in the exercise by such General Partner of any of its rights and powers hereunder.

 

(b) The General Partner shall be solely responsible for the day-to-day management of Partnership operations and performing or overseeing the performance of all acts needed to carry on the Partnership business on a daily basis. Its responsibilities shall include, without limitation, oversight of the Partnership’s acquisition, operation, lease and maintenance of the Specialty Hospital and/or property of the Partnership and management of Partnership

 

operations, the maintenance of financial and tax accounting records, preparation and filing of tax and securities jaws reports, dissemination and receipt of communications with Limited Partners, dissemination of distributions and management of working capital and cash reserves. The General Partner shall have the power and authority to execute, without the joinder of any other Partner, instruments evidencing matters approved of in accordance with the terms of this Agreement.

 

(c) Subject to the limitations set forth in Sections 3.02 and 3.05, the General Partner is hereby granted the right, power and authority to do on behalf of the Partnership all things which, in its sole judgment, are necessary, proper or desirable to carry out the aforementioned duties and responsibilities. Such right, power and authority shall include, but not be limited to, the right, power and authority:

 

(i) To incur reasonable expenditures;

 

(ii) To employ or engage, as appropriate, and dismiss from employment or engagement, as appropriate, any and all employees, agents, independent contractors, managers, attorneys and accountants;

 

(iii) To let or lease (for use by the Partnership or by a third party) all or any portion of any property of the Partnership for any purpose reasonably related to Partnership operations and without limitation as to the term thereof, whether or not such term (including renewal terms) shall extend beyond the date of the termination of the Partnership;

 

(iv) To enter into one or more contracts for the maintenance and servicing of the Specialty Hospital and/or other property of the Partnership;

 

(v) To do any and all of the foregoing at such price, rental or amount, for cash, securities or other property and upon such terms as the General Partner deems proper; and

 

(vi) To execute, acknowledge and deliver any and all instruments to effectuate any and all of the foregoing.

 

(d) In carrying out its management duties, subject to the general limitations in Sections 3.02 and 3.05, the authority of the General Partner shall include, specifically, the authority to:

 

(i) Execute on behalf of the Partnership the agreements and all other documents required for the Partnership to acquire, organize, own, operate, manage and dispose of the Specialty Hospital on such terms as the General Partner shall determine proper;

 

(ii) Cause the Partnership to borrow, subject to the limitations of Sections 3.02(c) and 6.13, funds from the General Partner, or any Affiliate thereof; and

 

(iii) Contract with any entity controlling, controlled by or under common control with the General Partner for the provision of services to the Partnership, excluding, however, any and all management, services for management of the Partnership (“Affiliate Management Services”); provided that no such entity shall be compensated for such services other than at a rate in excess of the rate at which the Partnership could reasonably expect to receive such services from an unrelated third party.

 

(e) Without limiting the generality of the foregoing, the General Partner, with unanimous consent of Limited Partners, shall have the power and authority to admit Additional Limited Partners as provided in Article XIV, to issue Partnership Interests if authorized in accordance with Section 4.07, and to admit in its stead a new General Partner pursuant to Section 10.01.

 

(f) The General Partner, without the consent of any Limited Partner, shall have the power to approve assignments of Limited Partners’ Partnership Interests or fractional parts thereof and the admission of Assignees as Substitute Limited Partners pursuant to Article IX.

 

(g) The specification in this Section 3.01 of actions which the General Partner is authorized to take shall in no way be construed as a limitation on the authority of the General Partner to manage the Partnership or to conduct the day-to-day business of the Partnership and to take all actions necessary therefor, and the General Partner may take such other actions, other than those actions specified in Section 3.02 and Section 3.05, as it deems appropriate without the approval of any of the Limited Partners.

 

Section 3.02 Restrictions on the Authority of the General Partner . Notwithstanding the generality of Section 3.01, without the prior approval of at least a Majority in Interest of Limited Partners, the General Partner shall not:

 

(a) Acquire any property (other than cash or promissory notes) in exchange for interests in the Partnership;

 

(b) Make, execute or deliver any adjustment, compromise or settlement of any claim against the Partnership other than in the ordinary course of business; or

 

(c) Encumber or grant a lien on any asset of the Partnership other than a lien to secure payment of any borrowing permitted under Section 3.01 and specifically Subsection 3.01(d)(ii).

 

Section 3.03 Authority and Reliance .

 

(a) Persons dealing with the Partnership are entitled to rely conclusively on the power and authority of the General Partner and the limitations thereon as set forth in this Agreement. In no event shall any Person dealing with the General Partner with respect to any business or property of the Partnership be obligated to ascertain that the terms of this Agreement have been complied with, or be obligated to inquire into the necessity or expedience of any act of the General Partner.

 

(b) Every contract, agreement, deed, promissory note, deed of trust, mortgage, security agreement, financing statement, or other instrument or document executed by the General Partner with respect to any business or property of the Partnership 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 thereof, this Agreement was in full force and effect; (ii) such instrument or document was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Partnership; and (iii) the General Partner was duly authorized and empowered to execute and deliver any and every such instrument or document for and on behalf of the Partnership.

 

Section 3.04 Time Devoted to Partnership .

 

(a) The General Partner shall devote such time to the business and affairs of the Partnership as it shall deem necessary to carry on the business of the Partnership; provided, that nothing in this Agreement shall preclude the employment of any Affiliate or agent of the General Partner (excluding Affiliate Management Services) or of a third-party to manage or provide services with respect to any property or business of the Partnership. Further, nothing contained herein shall preclude the General Partner from subcontracting certain of its duties hereunder to another Person, regardless of whether such Person is also an Affiliate of the General Partner; provided, however, that nothing contained herein shall be construed to permit or allow the General Partner to assign or subcontract its ultimate obligations and responsibilities to the Partnership to any Affiliate or other Person or to subcontract Affiliate Management Services.

 

(b) Subject to the provisions of Section 3.05, the General Partner may engage in other activities (including Ventures and activities that may be in competition with the Partnership except as otherwise prohibited in other contractual arrangements) in addition to those relating to the Partnership, subject only to any limitations imposed by law. Neither the Partnership nor any Partner shall have any right by virtue of this Agreement in or to any such other ventures or activities or to the income or proceeds derived therefrom, and the pursuit of any such other ventures or activities by the General Partner shall not be deemed wrong or improper. The General Partner shall have the right to take for its own account (individually or as trustee), or to recommend to others, any investment opportunity. The General Partner shall have the right to engage or invest in, pursue or recommend to others all business interests, investment opportunities and other activities without any liability for the breach of any duty owed to the Partnership or to the other Partners.

 

Section 3.05 Prohibited Actions . The General Partner shall not, without first obtaining the unanimous vote of the Limited Partners, do any of the following:

 

(a) Do any act in contravention of this Agreement;

 

(b) Possess property of the Partnership or assign the rights of the Partnership or its Partners in such property for other than a Partnership purpose;

 

(c) Make, execute or deliver for the Partnership any general assignment for the benefit of creditors, or any bond, guaranty, indemnity bond, surety bond of accommodation paper or accommodation endorsement;

 

(d) Do any act which would make it impossible to carry on the ordinary business of the Partnership except as otherwise permitted by another provision of this Agreement;

 

(e) Permit any Person who makes a loan to the Partnership to acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Partnership, other than as a secured creditor;

 

(f) Admit a new Partner to the Partnership, except as otherwise provided in this Agreement; or

 

(g) If the Partnership has entered into a Specialty Hospital Lease, the General Partner shall not, without the prior written approval of the Limited Partner, sell, lease, exchange, transfer, contract for, or grant an option for the sale of or liquidate the Partnership or enter into any Specialty Hospital Leases (other than the original Specialty Hospital Lease executed contemporaneously herewith, and any extensions or modifications thereof), or transfer any Limited Partnership Interest.

 

Section 3.06 Exculpation of General Partner . Neither the General Partner nor any of its employees, officers or directors shall be liable, responsible or accountable to the Partnership or to any Partner, in damages or otherwise, for any action the General Partner takes or any action it fails to take on behalf of the Partnership within the scope of the authority conferred on the General Partner by this Agreement or by law or in reliance in good faith on the opinion of legal counsel, unless such act or inaction was performed or omitted fraudulently or in bad faith or constituted gross negligence, willful misconduct or willful breach of any material provision of this Agreement on the part of the General Partner.

 

Section 3.07 Indemnification by the Partnership . The General Partner, its Affiliates and their respective its employees, officers and directors shall be indemnified and held harmless by the Partnership from and against any cost, loss, expense, liability, damage or injury suffered or sustained by them by reason of any acts or omissions arising out of their activities on behalf of the Partnership, including, but not limited to, any judgment, award, settlement,, attorneys’ and accountants’ fees, and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding, or claim if the acts or omissions upon which such actual or threatened action, proceeding or claim are based were not the result of fraudulent or bad faith conduct by or gross negligence or willful misconduct of the General Partner or such employees, officers or directors. Such right of indemnification shall include the power to purchase and maintain as an expense of the operations of the Partnership insurance or another such arrangement on behalf of any Person who is covered by this Section. The right of indemnification shall be satisfied solely to the extent of available Partnership assets (including proceeds of insurance) and the General Partner shall have no personal liability therefor.

 

Section 3.08 Tax Returns and Elections. The General Partner shall cause Partnership tax returns to be timely filed on behalf of the Partnership in any jurisdictions in which the Partnership

 

conducts operations and which require the filing of tax returns. All elections required or permitted to be made by the Partnership under the Code, including but not limited to, the election pursuant to Section 754 thereof shall be made by the General Partner, if at all, in such manner as in the General Partner’s reasonable judgment will be most advantageous to the Partners. Each Partner shall, upon request, supply the information necessary to properly give effect to any such election. For purposes of meeting the requirements of the Code, the Partners designate and empower the General Partner to act for each of the Partners and the Partnership in administrative and judicial proceedings relating to the Internal Revenue Service. The General Partner shall promptly furnish copies of all returns for each fiscal year to each Partner who requests such copies.

 

Section 3.09 Partnership Level Tax Audits . The General partner shall be the “tax matters partner” of the Partnership pursuant to Section 6231 (a)(7) of the Code (the “Tax Matters Partner”). The Tax Matters Partner shall take such action as may be necessary to cause all Partners to become “notice partners” within the meaning of Section 6222, et seq, of the Code and shall keep all other Partners informed of all matters which may come to its attention in its capacity as Tax Matters Partner by giving the other Partners notice thereof promptly after it becomes informed of any such matter. This provision is not intended to authorize the Tax Matters Partner to take any action which is left to the determination of an individual Partner under Sections 6222 through 6231 of the Code.

 

Section 3.10 Compensation of General Partner; Partnership Expenses .

 

(a) The General Partner shall be solely responsible for all costs and expenses, including legal, accounting and other fees related to the formation of the Partnership. The Partnership shall be responsible for all other obligations of the Partnership, including but not limited to any costs of amending this Agreement and any operating loans provided to the Partnership pursuant to Section 6.13 hereof. During the term of the Partnership, the General Partner (or an appropriate Affiliate thereof) shall be reimbursed for all direct costs and expenses of the General Partner (or such Affiliate) incurred for the benefit of the Partnership and attributable to the operation of the Partnership.

 

(b) Except with respect to expenses incurred prior to the commencement of operations of the Partnership and paid by the General Partner (or an Affiliate thereof) on behalf of the Partnership, all expenses of the Partnership shall be billed directly to and paid by the Partnership.

 

Section 3.11 Other Specific Rights and Duties of the General Partner .

 

(a) Notwithstanding the provisions of Section 15.03, the General Partner may amend the provisions of this Agreement to the minimum extent necessary in accordance with the advice of legal counsel to comply with any applicable federal or state legislation, rules, regulations or administrative interpretations thereof after the date of this Agreement.

 

(b) The General Partner shall have the right to restructure the Partnership’s activities to the extent the General Partner deems necessary or appropriate (after consulting with legal counsel) to comply with any regulations adopted by the United States Department of Health and Human Services regarding payment practices that will not be treated as a criminal offense under Section 1128B of the Social Security Act (the “SSA”) and will not

 

serve as the basis for an exclusion under Section 1128(b)(7) of the SSA as the same may be applicable to the activities of the Partnership.

 

(c) Notwithstanding anything in this Agreement to the contrary, in the event of any interpretation, enactment or issuance of any statute, law, ordinance, regulation, rule or order that prohibits, or calls into question the legality of, any agreement to which the Partnership is a party, the General Partner may without the consent of the Limited Partners and in its sole discretion (i) renegotiate and modify such agreement to the extent necessary to comply with such interpretation, enactment or issuance, (ii) assign the rights and obligations under such agreement to the General Partner or an Affiliate of the General Partner or (iii) take such other action as the General Partner may deem appropriate to comply with such interpretation, enactment or issuance. To the extent any interpretation, enactment or issuance of any statute, law, ordinance, regulation, rule or order materially and adversely affects any agreement to which the Partnership is a party, the General Partner and the Limited Partners shall in good faith negotiate to modify such agreement to the extent necessary to comply with such interpretation, enactment or issuance, unless the material and adverse effect is a mere change in reimbursement rates or methodology for the Partnership to which case any such agreement will remain unchanged.

 

(d) In addition to the other duties set forth in this Article III, the General Partner shall keep the books of account and records of the Partnership in accordance with Article XI, prepare and distribute financial information in accordance with Section 11.06, and cause the Partnership to retain a reserve in accordance with Section 6.02 and to make distributions in accordance with Article VIII.

 

ARTICLE IV

 

STATUS OF LIMITED PARTNERS

 

Section 4.01 General . Each Limited Partner shall have all of the rights, and be afforded the status, of a “limited partner” as set forth in the Act. Each Limited Partner expressly waives the right to require partition of all or any portion of the property of the Partnership. A Limited Partner may not grant a security interest in the Partnership Interest of such Limited Partner or in any distributions made or to be made hereunder to or on behalf of such Limited Partner.

 

Section 4.02 Limitation on Liability . Notwithstanding anything to the contrary herein expressed or implied, no Limited Partner shall be personally liable for any of the debts of the Partnership or any of the losses thereof in excess of such Limited Partner’s share of Partnership assets, the Capital Contribution which such Limited Partner has made or is obligated to make to the Partnership, and such Limited Partner’s share of the Partnership’s income and gains; provided, however, that to the extent required by applicable law, if any Limited Partner receives a distribution in partial or full return of such Limited Partner’s Capital Contribution to the Partnership that is not permitted under Section 6.07(a) of the Act, such Limited Partner shall be liable to the Partnership for such distribution if the Limited Partner knew that the distribution violated the prohibition of said Section 6.07(a).

 

Section 4.03 No Management Responsibility . No Limited Partner, in such capacity, shall: (i) take part in the control, management or administration of the Partnership, or transact any business of the Partnership or act as agent for the Partnership; or (ii) be paid any salary or have a drawing account on Partnership funds.

 

Section 4.04 No Authority to Act . No Limited Partner, as such, shall have the power to sign for or to bind the Partnership. All authority to act on behalf of the Partnership is vested in the General Partner.

 

Section 4.05 Priority . Except as otherwise provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to a distribution of Available Cash, Sales Proceeds or Net Refinancing Proceeds. Other than upon the dissolution of the Partnership as provided in this Agreement, the parties hereto have not agreed upon a time when the Capital Contribution of each Limited Partner may be returned.

 

Section 4.06 No Right of Withdrawal . No Limited Partner shall be entitled to withdraw, retire or resign from the Partnership except upon assignment by the Limited Partner of all of such Limited Partner’s Partnership Interest to one or more Assignees and the substitution thereof as Substitute Limited Partners of the Partnership in accordance with the provisions of Article IX.

 

Section 4.07 Additional Limited Partners . Without the unanimous approval of Limited