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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 3, 1998
Commission File Number: 001-13807
ElderTrust
(Exact name of registrant as specified in its declaration of trust)
Maryland 23-2932973
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
101 East State Street, Suite 100, Kennett Square, Pennsylvania 19348
(Address of principal executive offices)
(zip code)
(610) 925-4200
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
On September 3, 1998, ElderTrust (the "Company"), through its
subsidiary, ElderTrust Operating Limited Partnership (the "Operating
Partnership"), acquired a 99% limited partnership interest in ET Sub-Meridian
Limited Partnership, L.P. ("ET Sub-Meridian"). The 1% general partner interest
is owned by a limited liability company of which Edward B. Romanov, Jr., the
Company's President and Chief Executive Officer, is the sole member.
ET Sub-Meridian was formed to acquire the leasehold and purchase option
rights to seven skilled nursing facilities located in Maryland and New Jersey
from Meridian Healthcare, Inc. ("Meridian Healthcare"), a wholly owned
subsidiary of Genesis Health Ventures, Inc. ("Genesis"). On September 3, 1998,
ET Sub-Meridian paid Meridian Healthcare $35.5 million in cash and $8.5 million
in the form of a five-year promissory note for these rights. The purchase
options are exercisable by ET Sub-Meridian in September, 2008 for a cash
exercise price of $66.53 million. ET Sub-Meridian has subleased the facilities
to Meridian Healthcare for an initial ten-year period with a ten-year renewal
exercisable by Meridian Healthcare. Genesis has guaranteed the Meridian
Healthcare subleases.
The Operating Partnership made a $1.98 million capital contribution in
ET Sub-Meridian in exchange for its 99% limited partnership interest and Mr.
Romanov contributed $20,000 for his 1% general partner interest. The Operating
Partnership also made an $18.5 million subordinated demand loan bearing interest
at 12.0% per annum to ET Sub-Meridian in connection with the transaction. These
funds were borrowed by the Operating Partnership under its Bank Credit Facility.
The current owners of the skilled nursing facilities provided $17.7 million of
additional financing to ET Sub-Meridian, representing the balance of funds used
by ET Sub-Meridian to consummate the transaction.
As part of the transaction, the Operating Partnership entered into an
Indemnification Agreement (the "Indemnification Agreement") in favor of the
current owners of the skilled nursing facilities and guaranteed the $8.5 million
promissory note of ET-Sub Meridian payable to Meridian Healthcare. Under the
Indemnification Agreement, the Operating Partnership agreed to indemnify the
current property owners for the loss of deferral of tax benefits in the event
that one or more of the facilities were foreclosed upon prior to August 31, 2008
due to a default under a Meridian Healthcare sublease or if a cure to a default
by Meridian Healthcare results in a taxable event to the owners. The Operating
Partnership also entered into an Indemnification Consent and Acknowledgment
Agreement in favor of Genesis, pursuant to which the Operating Partnership
agreed to indemnify Genesis against any amounts expended by Genesis under a
back-up indemnity provided by Genesis to the current owners against any such
loss of deferral to tax benefits or default resulting in a taxable event to the
owners.
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ET Sub-Meridian is an unconsolidated subsidiary of the Operating
Partnership. Accordingly, the Company's investment, through the Operating
Partnership, in ET Sub-Meridian is accounted for using the equity method of
accounting.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements.
Supplemental financial information for Genesis is included in
the Company's Form 10-Q for the quarter ended June 30, 1998,
in accordance with Staff Accounting Bulletin No. 71.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit No. Description of Exhibit
10.1 Subordinated Promissory Note of ET
Sub-Meridian payable to the Operating
Partnership in the amount of $18.5 million
10.2 Agreement of Limited Partnership of ET
Sub-Meridian
10.3 Indemnification Agreement dated September 3,
1998 in favor of the persons and entities
listed on Exhibit B thereto
10.4 Indemnification Consent and Acknowledgment
Agreement dated September 3, 1998 between the
Operating Partnership and Genesis
10.5 Guarantee Agreement dated September 3, 1998
between Operating Partnership and ET
Sub-Meridian
10.6 Subordinated Promissory Note of ET
Sub-Meridian payable to Genesis in the amount
of $8.5 million
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELDERTRUST
(Registrant)
/s/ D. Lee McCreary, Jr.
------------------------------------
D. Lee McCreary, Jr.
Senior Vice President and
Chief Financial Officer
Date: September 18, 1998
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INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
----------- ---------------------- --------
10.1 Subordinated Promissory Note of ET
Sub-Meridian payable to the Operating
Partnership in the amount of $18.5 million
10.2 Agreement of Limited Partnership of ET
Sub-Meridian
10.3 Indemnification Agreement dated September 3,
1998 in favor of the persons and entities
listed on Exhibit B thereto
10.4 Indemnification Consent and Acknowledgment
Agreement dated September 3, 1998 between the
Operating Partnership and Genesis
10.5 Guarantee Agreement dated September 3, 1998
between Operating Partnership and ET
Sub-Meridian
10.6 Subordinated Promissory Note of ET
Sub-Meridian payable to Genesis in the amount
of $8.5 million
<PAGE>
EXHIBIT 10.1
SUBORDINATED PROMISSORY NOTE
$18,500,000 September 3, 1998
FOR VALUE RECEIVED, ET SUB-MERIDIAN LIMITED PARTNERSHIP,
L.L.P., a Virginia limited liability partnership (the "Company"), hereby
promises to pay ON DEMAND to the order of ElderTrust Operating Limited
Partnership, or its assigns (the "Payee"), in lawful money of the United States
of America in immediately available funds, at such location in the United States
of America as the Payee shall from time to time designate, the principal amount
of Eighteen Million Five Hundred Thousand Dollars ($18,500,000), together with
interest on the unpaid principal amount hereof in like money at said office from
the date hereof until paid in full, said interest to be due and payable on the
15th day of October, 1998, and on the 15th day of each succeeding month, at a
rate per annum (computed on the basis of a 360 day year and applied to the
actual number of days elapsed in each interest calculation period) equal to
12.00%.
Upon the commencement of any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar proceeding of any jurisdiction relating to the Company,
the unpaid principal amount hereof shall become immediately due and payable
without presentment, demand, protest or notice of any kind in connection with
this Promissory Note.
Pursuant to that certain Credit Agreement, dated as of January
30, 1998, among ElderTrust, ElderTrust Operating Limited Partnership, the
financial institutions from time to time party thereto, Deutsche Bank AG, New
York Branch, as Issuing Bank, and German American Capital Corporation, as
Administrative Agent and Collateral Agent (as amended, modified or supplemented
from time to time, the "Credit Agreement"), this Promissory Note shall be
pledged by the Payee pursuant to the Pledge Agreement (as defined in the Credit
Agreement). The Company hereby acknowledges and agrees that the Pledgee pursuant
to and as defined in the Pledge Agreement, as in effect from time to time, may
exercise all rights provided therein with respect to this Promissory Note.
All payments under this Promissory Note shall be made without
offset, counterclaim or deduction of any kind.
The Company hereby waives presentment, demand, protest or
notice of any kind in connection with this Promissory Note.
Payee agrees that the obligation of Maker to repay this Note shall be
subject and subordinate to the obligation of Maker to repay that certain
promissory note to the order of Genesis Health Ventures, Inc. of even date
herewith in the amount of $8,500,000.
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THIS PROMISSORY NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA (BUT NOT INCLUDING THE
CHOICE OF LAW RULES THEREOF).
MAKER:
ET SUB-MERIDIAN LIMITED PARTNERSHIP, L.L.P.
By: ET MERIDIAN, L.L.C.,, General Partner
By: /s/ D. Lee McCreary, Jr.
----------------------------
Name: D. Lee McCreary, Jr.
Title: Vice President
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EXHIBIT 10.2
AGREEMENT OF LIMITED PARTNERSHIP
OF
ET SUB - MERIDIAN LIMITED PARTNERSHIP, L.L.P.
RECITALS
THIS AGREEMENT OF LIMITED PARTNERSHIP (as it may be amended or
supplemented from time to time, the "Agreement") is entered into as of August 7,
1998 by and among ET Meridian, L.L.C., a Delaware limited liability company as
the general partner (the "General Partner"), and ElderTrust Operating Limited
Partnership, a Delaware limited partnership as the limited partner (the "Limited
Partner"), and any other persons or entities who shall in the future execute and
deliver this Agreement as additional partners pursuant to the provisions hereof
(the General Partner, the Limited Partner and any such additional partners are
referred to herein collectively as the "Partners").
WHEREAS, the General Partner and the Limited Partner have
formed a partnership pursuant to the provisions of the Virginia Revised Uniform
Limited Partnership Act (Va. Code Ann. ss. 50-73.1 et seq.) as amended from time
to time, and any successor thereto (the "Virginia RULPA") under the name ET Sub
- - Meridian Limited Partnership, L.L.P. (the "Partnership");
WHEREAS, (i) pursuant to the Virginia RULPA, the General
Partner has filed a Certificate of Limited Partnership relating to the
Partnership and (ii) pursuant to the Virginia RULPA and the Virginia Uniform
Partnership Act (1996) (Va. Code Ann. ss. 50-73.79 et seq.), as amended from
time to time, and any successor thereto (the "Virginia UPA"), the General
Partner has filed a Statement of Registration as a limited liability partnership
relating to the Partnership; and
WHEREAS, the General Partner and the Limited Partner desire to
continue the business of the Partnership pursuant to this Agreement.
NOW, THEREFORE, in consideration for the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
1. CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, the terms
defined in this Section 1 shall, for the purposes of this Agreement, have the
meanings herein specified. Unless otherwise specified, all references herein to
Sections or Schedules are to Sections of, or Schedules attached to, this
Agreement.
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Adjusted Basis: The basis for determining gain or loss for
federal income tax purposes from the sale or other disposition of property, as
defined in Section 1011 of the Code.
Affiliate: With respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii) or (iii) above. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Agreed Value: (i) In the case of any property contributed to
the Partnership by a Partner, the 704(c) Value of such property as of the time
of its contribution to the Partnership, reduced by any liabilities either
assumed by the Partnership upon such contribution or to which such property is
subject when contributed and (ii) in the case of any property distributed to a
Partner by the Partnership, the Partnership's Carrying Value of such property at
the time such property is distributed, reduced by any indebtedness either
assumed by such Partner upon such distribution or to which such property is
subject at the time of distribution as determined under Section 752 of the Code
and the Regulations thereunder. The aggregate Agreed Value of all property
contributed to the Partnership by a Partner shall be set forth next to such
Partner's name on Schedule A.
Agreement: As defined in the Recitals.
Book Tax Gain and Book Tax Loss: The amount of taxable gain or
loss that would result from a Capital Transaction if the Adjusted Basis at the
time of the Capital Transaction of the Partnership Assets with respect to which
such Capital Transaction occurs were equal to the Carrying Value of such
Partnership Assets at such time.
Business Day: Monday through Friday of each week, except that
a legal holiday recognized as such by the Government of the United States or the
State of Maryland or the State of New Jersey shall not be regarded as a Business
Day.
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Capital Account: The capital account established and
maintained for each Partner pursuant to Section 5.3.
Capital Contribution: Any property (including cash)
contributed to the Partnership by or on behalf of a Partner.
Capital Transaction: (i) A transaction pursuant to which the
Partnership borrows funds, receives Capital Contributions from a new Partner
upon its admission to the Partnership, or receives a distribution from any
partnership or joint venture in which the Partnership is a participant as a
result of a capital transaction with respect to that partnership or joint
venture; (ii) a sale, condemnation, exchange, abandonment casualty not followed
by reconstruction, or other disposition, whether by foreclosure or otherwise, of
Partnership Assets (other than a disposition of personal property that is, or is
to be, replaced), or (iii) an insurance recovery with respect to Partnership
Assets, or other transaction that, in accordance with generally accepted tax
accounting principles, is considered capital in nature.
Carrying Value: (i) With respect to any asset contributed or
deemed to be contributed to the Partnership or revalued on the Partnership's
books, the fair market value of such asset at the time of contribution or
revaluation (as determined by the Partners) reduced, but not below zero, by all
deductions for depreciation, amortization, cost recovery and expense in lieu of
depreciation debited to the Capital Accounts of the Partners in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g) with respect to such asset since the
time of contribution or last revaluation up to the time the Carrying Value is to
be determined; and (ii) with respect to any other asset of the Partnership, the
Adjusted Basis of such asset as of the time the Carrying Value is to be
determined.
Cash Flow: As defined in Section 6.1.
Certificate: The Certificate of Limited Partnership, and any
and all amendments thereto or restatements thereof, filed on behalf of the
Partnership with the Recording Office as required under the Virginia RULPA.
Code: The Internal Revenue Code of 1986, as in effect and
hereafter amended, and, unless the context otherwise requires, applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
Excess Negative Balance: The negative balance, if any, in a
Partner's Capital Account as of the end of a Fiscal Year after crediting the
Partner's Capital Account for the amount of any negative balance in such Capital
Account that the Partner is obligated to restore or is treated as obligated to
restore pursuant to Regulations sections 1.704-1(b)(2)(ii) (b)(3) and
1.704-1(b)(2)(ii)(c) and the amount of such Partner's share of the Partnership's
Minimum Gain, determined pursuant to Regulations sections 1.704-1T(b)(4)(iv)(f)
and 1.704-1T(b)(4)(iv)(h)(5); and debiting the Partner's Capital Account for any
adjustment, allocation, or distribution described in paragraph (4), (5), or (6)
of Regulations section 1.704-1(b)(2)(ii)(d).
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Fiscal Year: The fiscal year of the Partnership for financial
accounting purposes, and for federal, state and local income tax purposes, which
shall be the calendar year unless changed by the General Partner in accordance
with Section 8.8.
General Partner: As defined in the Recitals or any other
Person admitted to the Partnership as a general partner.
Limited Partner: As defined in the Recitals or any other
Person admitted to the Partnership as a limited partner.
Minimum Gain: The amount determined by computing, with respect
to each Nonrecourse Debt of the Partnership, the amount of Book Tax Gain (of
whatever character), if any, that the Partnership would realize if it disposed
of (in a taxable transaction) the Partnership Assets subject to such Nonrecourse
Debt in full satisfaction thereof and for no other consideration, and by then
aggregating the amounts so computed. For purposes of computing the amount of
Minimum Gain, (i) the Carrying Value of a Partnership Asset subject to two or
more Nonrecourse Debts of equal priority shall be allocated among such
Nonrecourse Debts in proportion to the outstanding principal balances of such
Nonrecourse Debts; (ii) the Carrying Value of a Partnership Asset subject to two
or more Nonrecourse Debts of unequal priority shall be allocated to the
Nonrecourse Debts of an inferior priority (in accordance with (i) above) only to
the extent of the excess, if any, of the Carrying Value of the Partnership Asset
over the aggregate outstanding balance of the Nonrecourse Debts of superior
priority; and (iii) only the portion of a Partnership Asset's Carrying Value
allocated to Nonrecourse Debts of the Partnership shall be used in computing the
Minimum Gain.
Net Income and Net Loss: For any taxable period, (i) the gross
income of the Partnership from all sources, other than any income or loss
recognized with respect to a Terminating Capital Transaction during such period,
as calculated for federal income tax purposes by the Partnership, plus (ii) any
income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing gross income for federal income tax
purposes, reduced by (iii) Depreciation (as defined below), further reduced by
(iv) all other items of expense or deduction that are allowable as deductions to
the Partnership under the Code for such period but excluding any item of expense
or deduction attributable either to Depreciation (as defined below) or to a
Terminating Capital Transaction, as calculated for federal income tax purposes
by the Partnership, and further reduced by (v) any expenditures of the
Partnership described in section 705(a)(2)(b) of the Code or treated as
expenditures described in section 705(a)(2)(b) of the Code pursuant to
Regulations section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing taxable income. "Depreciation" means, for each taxable period, an
amount equal to the depreciation, amortization, or other cost recovery
deductions allowable with respect to Partnership Assets for such period for
federal income tax purposes computed (using the same method used by the
Partnership in computing depreciation, amortization, or other cost recovery
deductions in preparing its federal income tax returns) as if the Adjusted Basis
of such Partnership Assets were equal to their Carrying Values. All items of
income, gain, loss, deduction, and credit recognized by the Partnership for
federal income tax purposes and allocated to the Partners in accordance with the
provisions of Section 0 shall be determined without regard to any election that
may be made by the Partnership under Code section 754 except as expressly
contemplated under Regulations section 1.704-1(b)(2)(iv)(m)(4); provided,
however, that such allocations, once made, shall be adjusted as necessary to
take into account those adjustments authorized under sections 734 and 743 of the
Code.
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Net Proceeds of a Capital Transaction: As defined in Section
6.1.
Nonrecourse Debt: Any liability that is considered nonrecourse
for purposes of Regulations section 1.1001-2 (without regard to whether such
liability is a recourse liability under Regulations section 1.752-1T(d)(2)) and
any other liability for which the creditor's right to repayment is limited to
one or more of the assets of the Partnership (within the meaning of Regulations
section 1.752-1T(d)(3)(ii)(b)(4)(ii).
Nonrecourse Liability: Any Nonrecourse Debt (or portion
thereof) for which no Partner bears (or is deemed to bear) the economic risk of
loss within the meaning of Regulations section 1.704-1T(b)(4)(iv)(k)(3).
Partner: As defined in the Recitals.
Partner Nonrecourse Debt: Any Nonrecourse Debt (or portion
thereof) for which a Partner bears (or is deemed to bear) the economic risk of
loss within the meaning of Regulations section 1.704-1T(b)(4)(iv)(k)(1).
Partnership: As defined in the Recitals.
Partnership Assets: All assets and property, whether tangible
or intangible and whether real, personal or mixed, at any time owned by or held
for the benefit of the Partnership.
Partnership Interest: As to any Partner, all of the interest
of that Partner in the Partnership, including, without limitation, such
Partner's (i) right to a distributive share of the income, gain, losses and
deductions of the Partnership in accordance herewith, (ii) right to a
distributive share of Partnership Assets, and (iii) rights, if a General
Partner, with respect to the management of the business and affairs of the
Partnership and (iv) rights, if a Limited Partner, to consent to approve of
certain actions as provided in Section 7.4.
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Percentage Interest: As defined in Section 6.1.
Person: Any individual, corporation, association, partnership,
limited partnership, limited liability company, joint venture, trust, estate or
other legal or commercial entity or organization.
Recording Office: The office of the State Corporation
Commission of the Commonwealth of Virginia.
Regulations: The regulations issued by the United States
Department of the Treasury under the Code, as now in effect and as they may be
amended from time to time, and any successor regulations.
704(c) Value: With respect to any property contributed to the
Partnership by a Partner, the fair market value of such property at the time of
contribution as determined by the General Partner using such reasonable method
of valuation as it may adopt; provided, however, that the General Partner shall,
in its sole and absolute discretion, use such method as it deems reasonable and
appropriate to allocate the aggregate of the 704(c) Values of properties
contributed to the Partnership in a single or integrated transaction among each
separate property on a basis proportional to its fair market value.
Statement of Registration: The Statement of Registration as a
registered limited liability partnership, and any and all amendments thereto and
restatements thereof, filed on behalf of the Partnership with the Recording
Office as required under the Virginia UPA.
Terminating Capital Transaction: Any Capital Transaction
involving all or substantially all of the then remaining Partnership Assets
and/or any other transaction which will result in a dissolution of the
Partnership.
Termination Date: December 31, 2096.
Unrealized Gain: As to any Partnership Asset, the Book Tax
Gain, if any, that would be realized if such Partnership Asset were sold for its
fair market value on the date of determination.
Unrealized Loss: As to any Partnership Asset, the Book Tax
Loss, if any, that would be realized if such Partnership Asset were sold for its
fair market value on the date of determination.
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Unrecovered Capital: As to any Partner, the aggregate Capital
Contributions of such Partner reduced, as and when made, by the previous
distributions to such Partner pursuant to Section 6.6(a)(ii).
Virginia RULPA: As defined in the Recitals.
Virginia UPA: As defined in the Recitals.
Working Capital Reserve: The reserve for working capital
established by the General Partner pursuant to Section 7.5.
2. FORMATION; NAME; PLACE OF BUSINESS
2.1 Formation of Partnership; Filing of Certificate and Statement
of Registration
The General Partner has filed the Certificate and the
Statement of Registration with the Recording Office. The General Partner and the
Limited Partner hereby execute this Agreement for the purpose of continuing the
existence of the Partnership, admitting the Limited Partner and establishing the
rights, duties and relationship of the Partners. If the laws of any jurisdiction
in which the Partnership transacts business so require, the General Partner also
shall file, with the appropriate office in that jurisdiction, a copy of the
Certificate or the Statement of Registration as filed with the Recording Office
or any other documents necessary for the Partnership to qualify to transact
business and to establish and maintain the Partners' limited liability under the
Virginia RULPA and the Virginia UPA. The Partners further agree and obligate
themselves to execute, acknowledge and cause to be filed for record, in the
place or places and manner prescribed by law, any amendments to the Certificate
or the Statement of Registration as may be required, either by the Virginia
RULPA or the Virginia UPA, by the laws of a jurisdiction in which the
Partnership transacts business or by this Agreement, to reflect changes in the
information contained therein or otherwise to comply with the requirements of
law for the continuation, preservation and operation of the Partnership as a
registered limited liability partnership under the Virginia RULPA and the
Virginia UPA.
2.2 Name of Partnership
The name under which the Partnership shall conduct its
business is "ET Sub - Meridian Limited Partnership, L.L.P." The business of the
Partnership may be conducted under any other name permitted by the Virginia
RULPA and the Virginia UPA that is deemed necessary or desirable by the General
Partner, in its sole and absolute discretion, except that such other name may
not include the name of any Limited Partner unless such is also the name of the
General Partner. The General Partner promptly shall execute, file and record any
assumed or fictitious name certificates required by the laws of the Commonwealth
of Virginia or any jurisdiction in which the Partnership conducts business and
shall take such other actions as the General Partner determines are required by
the laws of the Commonwealth of Virginia, or any other jurisdiction in which the
Partnership conducts business to use the name or names under which the
Partnership conducts business.
<PAGE>
2.3 Place of Business
The principal place of business of the Partnership shall be
located at 101 East State Street, Suite 100, Kennett Square, Pennsylvania 19348.
The General Partner may hereafter change the principal place of business of the
Partnership to such other place or places within the United States as the
General Partner may from time to time determine, in its sole and absolute
discretion, provided that the General Partner shall give written notice thereof
to the Limited Partners within 30 days after the effective date of any such
change and, if necessary, shall amend the Certificate and the Statement of
Registration in accordance with the applicable requirements of the Virginia
RULPA and the Virginia UPA. The General Partner may, in its sole and absolute
discretion, establish and maintain such other offices and additional places of
business of the Partnership, either within or without the Commonwealth of
Virginia, as it deems appropriate.
2.4 Registered Office and Registered Agent
The street address of the registered office of the Partnership
shall be 5511 Staples Mill Road, Richmond, Virginia 23228, and the Partnership's
registered agent at such address shall be Mr. Edward R. Parker, Esq.
3. PURPOSES AND POWERS OF PARTNERSHIP
3.1 Purposes
The purposes of the Partnership shall be:
(a) to engage in the business of acquiring a fee or leasehold
interest in and subleasing to licensed operators those skilled nursing
facilities listed on Schedule 3.1 hereto,
<PAGE>
(b) to acquire, hold, own, operate, manage, maintain, improve,
repair, replace, reconstruct, sell, or otherwise dispose of and otherwise use
the Partnership Assets, and
(c) to enter into any lawful transaction and engage in any
lawful activities in furtherance of the foregoing purposes.
3.2 Business
The business of the Partnership shall be:
(a) to acquire a fee or leasehold interest and sublease to
licensed operators those skilled nursing facilities listed on Schedule 3.1
hereto,
(b) to acquire, hold, own, operate, manage maintain, improve,
repair, replace, reconstruct, sell, or otherwise dispose of and otherwise use
the Partnership Assets, and
(c) to enter into any lawful transaction and engage in any
lawful activities in furtherance of the purposes of the Partnership.
3.3 Powers
The Partnership shall have the power to do any and all acts
and things necessary, appropriate, advisable, or convenient for the furtherance
and accomplishment of the purposes of the Partnership, including, without
limitation, the following:
(a) to borrow (on a secured or unsecured basis) money and
issue evidences of indebtedness, and to secure the same by mortgages, deeds of
trust, security interests, pledges, or other liens on all or any part of the
Partnership Assets;
(b) to secure and maintain insurance against liability or
other loss with respect to the activities and assets of the Partnership
(including, without limitation, insurance against liabilities under Section
7.10);
(c) to employ or retain such persons as may be necessary or
appropriate for the conduct of the Partnership's business, including permanent,
temporary, or part-time employees and independent attorneys, accountants,
consultants, and contractors;
(d) to acquire, own, hold, maintain, use, lease, sublease,
manage, operate, sell, exchange, transfer, or otherwise deal in assets and
property as may be necessary or convenient for the purposes of the Partnership;
<PAGE>
(e) to incur expenses and to enter into, guarantee, perform,
and carry out contracts, agreements, leases, subleases, and commitments of any
kind, to assume obligations, and to execute, deliver, acknowledge, and file
documents in furtherance of the purposes of the Partnership;
(f) to pay, collect, compromise, arbitrate, litigate, or
otherwise adjust, contest, or settle any and all claims or demands of or against
the Partnership;
(g) to establish and maintain one or more bank accounts in the
name of the Partnership at such banks as may be selected by the General Partner,
to deposit in such account(s) the funds received from time to time by or on
behalf of the Partnership, and to pay the debts, expenses, and obligations of
the Partnership by checks drawn on such accounts and signed by the General
Partner or by such other signatory as the General Partner shall designate;
(h) to invest in interest-bearing accounts and short-term
investments, including, without limitation, obligations of federal, state, and
local governments and their agencies, mutual funds (including money market
funds), commercial paper, time deposits, and certificates of deposit of
commercial banks, savings banks, or savings and loan associations; and
(i) to engage in any kind of activity and to enter into and
perform obligations of any kind necessary to or in connection with, or
incidental to, the accomplishment of the purposes of the Partnership, so long as
said activities and obligations may be lawfully engaged in or performed by a
limited partnership under the Virginia RULPA.
4. TERM OF PARTNERSHIP
The Partnership commenced on the date upon which the
Certificate is duly filed with the Recording Office and shall continue until the
Termination Date, unless dissolved and liquidated before the Termination Date in
accordance with the provisions of Section 12.
5. CAPITAL
5.1 Capital Contribution of the General Partner
As of the date of this Agreement, the General Partner has made
a Capital Contribution to the Partnership with an Agreed Value as set forth on
Schedule A. Except to the extent required under the Virginia RULPA, the General
Partner shall not be required to make any additional Capital Contributions to
the Partnership.
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5.2 Capital Contributions of Limited Partners
As of the date of this Agreement, the Limited Partner has made
a Capital Contribution to the Partnership with an Agreed Value as set forth
opposite its name on Schedule A. Upon its admission to the Partnership, each
additional Limited Partner shall make a Capital Contribution to the Partnership
with an Agreed Value as determined by the General Partner and agreed to by such
Limited Partner. The Limited Partners shall not be required to make any Capital
Contributions to the Partnership other than as set forth in this Section 5.2 or
to the extent required under the Virginia RULPA.
5.3 Capital Accounts
A separate Capital Account shall be established and maintained
for each Partner in all events in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv), as amended from time to time.
5.4 No Interest on Capital Contributions or Amounts in Capital Account
No Partner shall be entitled to receive any interest on its
Capital Contributions or its outstanding Capital Account balance.
5.5 Liability of Limited Partners
Except as provided in the Virginia RULPA, no Limited Partner
shall be liable personally for the obligations of the Partnership.
5.6 Return of Capital
Except upon the dissolution of the Partnership or as may be
specifically provided in this Agreement, no Partner shall have the right to
demand or to receive the return of all or any part of its Capital Account or its
contributions to the capital of the Partnership.
6. ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS OF CASH FLOW AND
CERTAIN PROCEEDS
6.1 Certain Definitions
"Cash Flow" shall mean and refer to the sum of the following:
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(i) the taxable income (or loss) of the Partnership for
federal income tax purposes as shown on the books of the Partnership for the
period for which such determination is being made, excluding taxable income,
gain, or loss from any Terminating Capital Transactions, increased by (A) the
amount of cost recovery, depreciation, or amortization deductions or similar
deductions in lieu thereof deductible by the Partnership in computing such
taxable income, and any other non-cash accruals deductible in determining
federal taxable income or loss, for such period, and (B) any non-taxable income
or receipts of the Partnership for such period (including, without limitation,
any amounts received during such period that were included in taxable income in
a prior period and the proceeds of any loans to the Partnership) except Capital
Contributions to the Partnership pursuant to Section 5; and reduced by (AA)
payments from the sum of the foregoing upon the principal of any loan to the
Partnership, (BB) expenditures from the sum of the foregoing for the
acquisition, improvement, development, or replacement of property not financed
through Capital Contributions to the Partnership or any reserves previously set
aside by the Partnership for such purposes, and for the payment of items
attributable to the acquisition, improvement, development, or replacement of
property which are not deductible in determining federal taxable income when
paid, and (CC) any amounts included in determining gross income for such period
that were not received by the Partnership during such period.
(ii) any other funds (including amounts previously set aside
as reserves by the General Partner if and to the extent the General Partner no
longer regards such reserves as reasonably necessary in the efficient conduct of
the business of the Partnership) deemed available for distribution and
designated as Cash Flow by the General Partner.
"Net Proceeds of a Capital Transaction" means the proceeds
received by the Partnership in connection with a Capital Transaction, after (i)
the payment of all costs and terminating expenses of any kind or nature incurred
by the Partnership in connection with such Capital Transaction, (ii) the
utilization of any such proceeds in connection with the discharge of debts and
other obligations of the Partnership (including any loans to the Partnership
made by Partners and any accrued but unpaid interest thereon) required or
intended (as determined by the General Partner, in its sole and absolute
discretion) to be discharged with the proceeds of such Capital Transaction, and
(iii) the retention of such proceeds or a portion of such proceeds in connection
with creation of or addition to a reserve established pursuant to Section 6.6
(as determined by the General Partner in its sole and absolute discretion). "Net
Proceeds of an Interim Capital Transaction" and "Net Proceeds of a Terminating
Capital Transaction" mean the amount of Net Proceeds received by the Partnership
with respect to an Interim Capital Transaction or a Terminating Capital
Transaction, as the case may be.
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"Percentage Interests" Percentage Interests of the General
Partner and the Limited Partners are as follows:
General Partner -- 1% percent
Limited Partners -- 99% percent
6.2 Allocation of Net Income or Net Loss
(a) Subject to Section 6.7, the Net Income of the Partnership,
if any, for each Fiscal Year (or portion thereof) shall be allocated to the
Partners (after reducing their Capital Accounts for all Cash Flow distributed
during such Fiscal Year or to be distributed with respect to such Fiscal Year)
shall be allocated to the Partners, pro rata, in proportion to their Percentage
Interests.
(b) Subject to Section 6.7, the Net Loss of the Partnership,
if any, for each Fiscal Year during the term of this Agreement shall be
allocated to the Partners in proportion to their Percentage Interests.
6.3 Allocation of Gains and Losses from Capital Transactions
(a) Subject to Section 6.7, any Book Tax Gain of the
Partnership resulting from a Capital Transaction shall be allocated to the
Partners, pro rata, in proportion to their Percentage Interests.
(b) Subject to Section 6.7, any Book Tax Loss of the
Partnership resulting from a Capital Transaction shall be allocated to the
Partners in proportion to their Percentage Interests.
6.4 Allocation of Income and Loss With Respect to Partnership
Interests Transferred
If any Partnership Interest is transferred during any Fiscal
Year, the Net Income or Net Loss attributable to such Partnership Interest for
such Fiscal Year shall be divided and allocated proportionately between the
transferor and the transferee based upon the number of days during such calendar
year for which each party was the owner of the interest transferred.
Notwithstanding any provision herein to the contrary, any Book Tax Gain or Book
Tax Loss of the Partnership realized in connection with a Capital Transaction
shall be allocated only to Persons who are holders of Partnership Interests as
of the date such Capital Transaction occurs.
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6.5 Distributions of Cash Flow
(a) Cash Flow of the Partnership shall be determined for each
Fiscal Year. Cash Flow as so determined shall be distributed in cash to the
Partners as follows and in proportion to their Percentage Interests.
Distributions of Cash Flow made within the first seventy-five
(75) days of a subsequent Fiscal Year and designated by the General Partner as
made with respect to the immediately prior Fiscal Year shall be considered made
with respect to such prior Fiscal Year for purposes of this Section 6.5(a) and
Sections 6.2 and 6.3.
(b) Cash Flow, if any, shall be distributed at least quarterly
within thirty (30) days after the end of each calendar quarter, commencing with
the calendar quarter ending September 30, 1998. Cash Flow also may be
distributed, in the sole and absolute discretion of the General Partner, at such
other time or times during any Fiscal Year in anticipation of the year-end
determination thereof, and such distributions shall be subject to year-end
adjustment. The Partners agree that, within thirty (30) days after determination
by the Partnership that an overpayment was made to any Partner for any Fiscal
Year pursuant to this Section 6.5, such Partner shall repay, allow as a credit
against future distributions, or make such other adjustments as the General
Partner determines to be appropriate to remedy such overpayment. Likewise,
appropriate adjustment shall be made to remedy any underpayment.
6.6 Distribution of Proceeds from Capital Transactions; Liquidation
Distributions
(a) The Net Proceeds of an Interim Capital Transaction shall
be distributed to the Partners in accordance with the Partners' Percentage
Interests.
(b) The Net Proceeds of a Terminating Capital Transaction and
any other remaining assets of the Partnership to be distributed to the Partners
in connection with dissolution and liquidation of the Partnership pursuant to
Section 11, after payment of all debts and liabilities of the Partnership
(including, without limitation, all amounts owing to a Partner under this
Agreement (other than this Section 0) or under any agreement between the
Partnership and a Partner entered into by the Partner other than in its capacity
as a Partner in the Partnership), the payment of expenses of liquidation of the
Partnership, and the establishment of a reasonable reserve (including, without
limitation, an amount estimated by the General Partner to be sufficient to pay
any amount reasonably anticipated to be required to be paid pursuant to Section
7.9), shall be distributed to the Partners, pro rata, in accordance with their
respective Percentage Interests. Distributions pursuant to this Section 6.6(b)
shall be made by the end of the Fiscal Year in which such Terminating Capital
Transaction occurs or, if later, within ninety (90) days of such Terminating
Capital Transaction.
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(c) Notwithstanding any provision in this Section 6.6 to the
contrary, in the event that the Net Proceeds of the Terminating Capital
Transaction are to be paid to the Partnership in more than one installment, each
such installment (including any interest thereon) shall be allocated among the
Partners in accordance with their respective "Installment Percentages". The
"Installment Percentage" of each Partner shall be (i) the aggregate amount of
cash that would have been distributed to that Partner under this Section 6.6 had
the Net Proceeds of the Terminating Capital Transaction been paid in one lump
sum divided by (ii) the total Net Proceeds that would have been distributed to
all of the Partners under that Section.
6.7 Special Allocation Rules
The following allocation rules shall apply notwithstanding any
other provisions of Sections 6.2 and 6.3, and the other provisions of Sections
6.2 and 6.3 shall be applied only after giving effect to the following rules. In
the event there is a conflict between any of the following rules, the earlier
listed rule shall govern.
(a) If in any Fiscal Year there is a net increase during such
year in the amount of Minimum Gain attributable to Partner Nonrecourse Debts,
the Partner(s) that bear the economic risk of loss with respect thereto (within
the meaning of Regulations section 1.704-1T(b)(4)(iv)(k)(1)) shall be specially
allocated items of Partnership loss or deduction in an amount equal to the
excess of (i) the amount of such net increase, over (ii) the aggregate amount of
any distributions during such Fiscal Year to such Partner(s) of the proceeds of
such debt that are allocable to such increase in Minimum Gain. Items to be so
allocated shall be determined in accordance with Regulations section
1.704-1T(b)(4)(iv)(h).
(b) If in any Fiscal Year there is a net decrease in the
Partnership's Minimum Gain attributable to Nonrecourse Liabilities during such
Fiscal Year, each Partner shall be specially allocated items of Partnership
income and gain for such Fiscal Year (and, if necessary, for subsequent Fiscal
Years) in proportion to, and to the extent of, an amount equal to the greater of
the following:
(i) the portion of such Partner's share of the net
decrease in such Minimum Gain during such Fiscal Year (as such share is
determined pursuant to Regulations section 1.704-1T(b)(4)(iv)(f)) that is
allocable to the disposition of Partnership property subject to one or more
Nonrecourse Liabilities (as such allocable portion is determined pursuant to
Regulations section 1.704-1T(b)(4)(iv)(e)(2)); or
<PAGE>
(ii) such Partner's Excess Negative Balance at the
end of such Fiscal Year (determined before any allocation for such Fiscal Year
of any items of income, gain, loss, or deduction described in section
705(a)(2)(B) of the Code).
Items to be so allocated shall be determined and the
allocation made in accordance with Regulations section 1.704-1T(b)(4)(iv)(e).
(c) If in any Fiscal Year there is a net decrease in the
Partnership's Minimum Gain attributable to Partner Nonrecourse Debts during such
Fiscal Year, the Partner(s) that bear the economic risk of loss with respect to
such Partner Nonrecourse Debts (within the meaning of Regulations section
1.704-1T(b)(4)(iv)(k)(1)) shall be specially allocated items of Partnership
income and gain for such Fiscal Year (and, if necessary, for subsequent Fiscal
Years) in an amount equal to the greater of the following:
(i) the net decrease in such Minimum Gain during such
Fiscal Year that is allocable to the disposition of Partnership property subject
to one or more Partner Nonrecourse Debts (as such allocable portion is
determined pursuant to Regulations section 1.704-1T(b)(4)(iv)(h)(6)); or
(ii) such Partner's (Partners') Excess Negative
Balance at the end of such Fiscal Year (determined before any allocation for
such Fiscal Year of any items of income, gain, loss, or deduction described in
section 705.1.(2)(B) of the Code).
Items to be so allocated shall be determined and the
allocation made in accordance with Regulations section 1.704-1T(b)(4)(iv)(h)(6).
(d) For purposes of allocating Partnership Nonrecourse
Liabilities among the Partners pursuant to Regulations section
1.752-1T(a)(2)(i), the respective interests of the Partners in Partnership
profits shall be equal to their respective Percentage Interests.
(e) A Partner shall not be allocated any amount of deduction
or loss (including Net Loss and Book Tax Loss) to the extent such allocation
would give rise to or increase an Excess Negative Balance in such Partner's
Capital Account.
(f) In the event a Partner receives with respect to a Fiscal
Year an adjustment, allocation, or distribution described in subparagraphs (4),
(5), and (6) of Regulations section 1.704-1(b)(2)(ii)(d) that results in such
Partner having an Excess Negative Balance in its Capital Account, such Partner
shall be allocated for such Fiscal Year (and, if necessary, for subsequent
Fiscal Years) items of income or gain in an amount and manner sufficient to
eliminate such Excess Negative Balance as promptly as possible, as provided in
Regulations section 1.704-1(b)(2)(ii)(d).
<PAGE>
(g) In the event that any fees, interest, or other amounts
paid to a Partner or affiliate of a Partner pursuant to the Agreement or to any
agreement between the Partnership and the Partner or affiliate providing for the
payment of such amounts, and deducted by the Partnership, whether in reliance on
sections 162, 163, 707(a), and/or 707(c) of the Code or otherwise, on its
federal income tax return are disallowed as deductions to the Partnership in or
with respect to the Fiscal Year for which such amounts are claimed and are
treated as Partnership distributions, then:
(i) the Net Income or Net Loss, as the case may be,
for the Fiscal Year in or with respect to which such fees, interest, or other
amounts were paid shall be increased or decreased, as the case may be, by the
amount of such deduction that is so disallowed and treated as a Partnership
distribution; and
(ii) there shall be allocated to the Partner who
received (or whose affiliate received) such payments, prior to the allocations
pursuant to Sections 6.2(a) and 6.3(b), an amount of gross income of the
Partnership for the Fiscal Year in or with respect to which such claimed
deduction was disallowed, equal to the amount of such deduction that was so
disallowed and treated as a Partnership distribution.
(h) Except as otherwise specifically provided in this
Agreement and as provided in the next sentence below, the distributive share of
a Partner of each specific deduction and item of income, gain, loss, and credit
of the Partnership for federal income tax purposes for any Fiscal Year shall be
the same as such Partner's proportionate share (determined as set forth in
Section 6.2 and 6.3) of Net Income, Net Loss, Book Tax Gain, or Book Tax Loss,
as the case may be, for such Fiscal Year. Notwithstanding the foregoing, any
income recognized pursuant to sections 1245 and 1250 of the Code and any
investment credit recapture recognized pursuant to section 47 of the Code shall
be allocated among the Partners in the same proportions as the depreciation
deductions and investment credits giving rise to such income or recapture were
allocated among such Partners and their respective predecessors in interest.
(i) It is the intent of the Partners that each Partner's
distributive share of income, gain, loss, and credit (or items thereof) shall be
determined and allocated in each Fiscal Year in accordance with this Section 6.7
to effect the distributions in the manner contemplated by Sections 6.5 and 6.6
to the extent permitted by Code section 704(b) and the applicable Regulations.
In order to achieve the contemplated distributions provided for in Sections 6.5
and 6.6, the General Partner is authorized and directed to allocate income,
gain, loss, and credit (or items thereof) with respect to any Fiscal Year in a
manner different from that otherwise provided for in this Section 6.7 if, and to
the extent that, allocating income, gain, loss, and credit (or items thereof) in
a manner provided for in this Section 6.7 either would not achieve the intended
economic result desired by the Partners or would not be respected under Code
section 704(b) (referred to as a "new allocation"). The General Partner is
authorized to make a new allocation under this Section 6.7(i) only after having
determined both (i) that the new allocation either more accurately effects the
distributions contemplated by the Partners as set forth in Section 6.5 and 6.6
or is not inconsistent with those distributions and (ii) that the new allocation
will not have a material adverse effect on the economic interests of the
Partners (including, without limitation, causing them to recognize income that
they would not otherwise be required to recognize or to lose the benefit of
deductions that they otherwise would have been permitted to recognize). New
allocations by the General Partner in accordance with this Section 6.7(i) shall
not require the consent of the other Partners.
<PAGE>
6.8 Contributed Property; Revaluations Pursuant to Section 704(b)
Regulations
In the event that any property contributed to the Partnership
or revalued pursuant to the provisions of Regulations section
1.704-1(b)(2)(iv)(f) has a Carrying Value that differs from the Adjusted Basis
of such property at the time of its contribution or revaluation, any income,
depreciation, gain, or loss with respect to such property shall, solely for tax
purposes, be allocated among the Partners in a manner that takes such difference
into account and is consistent with Code section 704(c), the Regulations
thereunder, and Regulations section 1.704-1(b)(2)(iv)(f)(4),
1.704-1(b)(2)(iv)(g), and 1.704-1(b)(4)(i). The allocations made pursuant to
this Section 6.8 shall be made solely for tax purposes and shall not affect or
in any way be taken into account in computing any Partner's Capital Account or
share of Net Income, Net Loss, Book Tax Gain, Book Tax Loss, or other
allocations or distributions under this Agreement.
6.9 Withholding Taxes and Reporting Obligations.
(a) The Partnership is authorized and directed to withhold
from or pay on behalf of any Partner the amount of federal, state, local, or
foreign taxes that General Partner reasonably determines that the Partnership is
required to withhold or pay with respect to any amount distributable or
allocable to such Partner pursuant to this Agreement, including, without
limitation, any taxes required to be paid by the Partnership pursuant to section
1441, 1442, 1445, or 1446 of the Code. Any amount so withheld or paid on behalf
of a Partner shall constitute an advance by the Partnership to such Partner that
shall be secured by the Partner's Partnership Interest. An advance to a Partner
pursuant to this Section 6.9(a) shall be repaid to the Partnership, in whole or
in part, as reasonably determined by General Partner in its sole discretion,
either (i) out of any distributions from the Partnership which the Partner may
be or become entitled to receive, or (ii) by the Partner in cash upon demand by
the Partnership.
<PAGE>
(b) The Partners agree to cooperate fully with all efforts of
the Partnership to comply with its tax withholding and information reporting
obligations and to provide the Partnership with such information as General
Partner may reasonably request from time to time in connection with such
obligations. Any Partner or permitted transferee of a Partnership Interest that
fails to comply with this Section 6.9(b) shall be liable to the Partnership for
the amount of any taxes, penalties, and interest for which the Partnership
becomes liable as a result of any such failure.
7. MANAGEMENT
7.1 Management and Control of Partnership Business
Except as otherwise expressly provided or limited by the
provisions of this Agreement, the General Partner shall have full, exclusive,
and complete discretion to manage and control the business and affairs of the
Partnership, to make all decisions affecting the business and affairs of the
Partnership, and to take all such actions as it deems necessary or appropriate
to accomplish the purposes of the Partnership as set forth herein. The General
Partner shall use reasonable efforts to carry out the purposes of the
Partnership and shall devote to the management of the business and affairs of
the Partnership such time as the General Partner, in its reasonable discretion,
shall deem to be reasonably required for the operation thereof. Except as
otherwise expressly set forth in this Agreement, the Limited Partners shall not
have any authority, right, or power to bind the Partnership, or to manage or
control, or to participate in the management or control of, the business and
affairs of the Partnership in any manner whatsoever.
7.2 Powers of General Partner
Subject to the limitations of Section 7.4, the General Partner
(acting on behalf of the Partnership) shall have the right, power, and
authority, in the management of the business and affairs of the Partnership, to
do or cause to be done any and all acts, at the expense of the Partnership,
deemed by the General Partner to be necessary or appropriate to effectuate the
purposes of the Partnership. The power and authority of the General Partner
pursuant to this Agreement shall be liberally construed to encompass all acts
and activities in which a partnership may engage under the Virginia RULPA and
the Virginia UPA. The power and authority of the General Partner shall include,
without limitation, the power and authority on behalf of the Partnership:
<PAGE>
(a) to do any acts or things that the Partnership has power to
do pursuant to Section 3.3;
(b) to purchase and maintain, in its sole and absolute
discretion and at the expense of the Partnership, liability, indemnity, and any
other insurance, sufficient to protect the Partnership, the General Partner, its
officers, directors, employees, agents, and Affiliates, or any other Person,
from those liabilities and hazards which may be insured against in the conduct
of the business and the management of the business and affairs of the
Partnership;
(c) to make, execute, assign, acknowledge, and file on behalf
of the Partnership any and all documents or instruments of any kind which the
General Partner may deem necessary or appropriate in carrying out the purposes
of the Partnership, including, without limitation, powers or attorney,
agreements of indemnification, sales contracts, deeds, options, loan
obligations, mortgages, deeds of trust, notes, documents, or instruments of any
kind or character, and amendments thereto (and no person, firm or corporation
dealing with the General Partner shall be required to determine or inquire into
the authority or power of the General Partner to bind the Partnership or to
execute, acknowledge, or deliver any and all documents in connection therewith);
and
(d) To possess and exercise any additional rights and powers
of a general partner under the partnership laws of Virginia (including, without
limitation, the Virginia RULPA and the Virginia UPA) and any other applicable
laws, to the extent not inconsistent with this Agreement.
7.3 Power of Attorney
(a) In furtherance of the foregoing, each of the Limited
Partners hereby irrevocably makes, constitutes, appoints and empowers the
General Partner, and the President, any Vice President and the Treasurer of the
General Partner, and any successor of the General Partner as general partner of
the Partnership, acting singly or jointly, in each case with full power of
substitution, 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
and for such Limited Partner's use and benefit, to make, execute, verify,
consent to, acknowledge, swear to, make oath as to, publish, file and/or record
all instruments and documents, and to take all such actions, necessary or
advisable in connection with carrying out the intention and purposes and terms
of this Agreement, including, without limitation, executing, acknowledging,
swearing to, filing and/or recording the following:
<PAGE>
(i) any and all amendments to this Agreement and the
Certificate that may be required by this Agreement or the laws of the
Commonwealth of Virginia, including, without limitation, amendments necessary or
advisable to effect the admission to the Partnership of additional Partners.
(ii) any certificate of dissolution or cancellation
of the Certificate that may be necessary to effectuate the dissolution and
termination of the Partnership pursuant to the provisions hereof;
(iii) any business certificate, any assumed or
fictitious name certificate, any certificate of limited partnership, any
amendment thereto, or other instrument or document of any kind necessary to
accomplish the purposes of the Partnership, to give effect to the provisions of
this Agreement and to preserve the character of the Partnership as a limited
partnership;
(iv) any instrument required to continue the
business of the Partnership pursuant to Section 11.3; and
(v) all other instruments as the attorney-in-fact
may deem necessary or desirable fully to carry out the provisions of this
Agreement in accordance with its terms.
The execution and delivery by said attorney-in-fact of any
such agreements, amendments, consents, certificates or other instruments shall
be conclusive evidence that such execution and delivery was authorized hereby.
(b) No person designated as an attorney-in-fact in this
Section 0 shall take any action as an attorney-in-fact for any Limited Partner
which would in any way increase the liability of the Limited Partner beyond the
liability expressly set forth in this Agreement or reduce the Percentage
Interest of the Limited Partner without the prior written consent of such
Limited Partner.
(c) The foregoing appointment by each Limited Partner of the
General Partner as attorney-in-fact shall be deemed to be a Special Power of
Attorney coupled with an interest in recognition of the fact that each Partner
under this Agreement will be relying upon the power of the General Partner to
act pursuant to this power of attorney for the orderly administration of the
affairs of the Partnership. The foregoing power of attorney is irrevocable and
shall survive the death or insanity of any Partner who is an individual or (in
the case of any Limited Partner which is not an individual) the dissolution,
liquidation or termination of each Limited Partner, and the assignment by any
Limited Partner of the whole or any part of such Limited Partner's Partnership
Interest.
7.4 Limitation on Authority of the General Partner
Notwithstanding anything in this Agreement to the contrary,
the General Partner shall not without the prior written consent of the holders
of a majority of the Percentage Interests of the Limited Partners cause or
permit the Partnership to:
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(a) dissolve and wind-up the affairs of the Partnership,
except as provided in Section 11;
(b) merge or consolidate with any other partnership or other
entity;
(c) sell, assign, lease or otherwise dispose of twenty percent
(20%) or more of the Partnership Assets;
(d) enter into any transaction the effect of which would be to
increase the fair market value (exclusive of encumbrances) of assets owned by
the Partnership by twenty percent (20%) or more; or
(e) modify the terms of its Limited Liability Company
Agreement dated as of August 7, 1998.
7.5 [INTENTIONALLY DELETED]
7.6 Other Activities of Partners
Any Partner may have other business interests or may engage in
other business ventures of any nature or description whatsoever, whether
currently existing or hereafter created, and may compete, directly or
indirectly, with the business of the Partnership. No Partner or Affiliate
thereof shall incur any liability to the Partnership as a result of such
Partner's or Affiliate's pursuit of such other business interest, ventures and
competitive activity, and neither the Partnership nor the other Partners shall
have any right to participate in such other business ventures or to receive or
share in any income or profits derived therefrom.
7.7 Transactions with General Partner or Affiliates
The Partnership is expressly permitted in the normal course of
its business to enter into transactions with the General Partner or with any
Affiliate of the General Partner provided that the price and other terms of such
transactions are fair to the Partnership and that the price and other terms of
such transactions are not less favorable to the Partnership than those generally
prevailing with respect to comparable transactions between unrelated parties.
<PAGE>
7.8 [INTENTIONALLY DELETED]
7.9 Liability of General Partner and Affiliates to Partnership
and Limited Partners
Neither the General Partner nor any of its Affiliates shall be
liable to the Partnership or to the Limited Partners for any losses sustained or
liabilities incurred as a result of any act or omission of any of such Persons,
unless such Person: (i) failed to account to the Partnership and hold as trustee
for it any property, profit or benefit derived by such Person in the conduct and
winding up of the Partnership business or derived from a use by such Person of
Partnership property, including the appropriation of a Partnership opportunity;
(ii) dealt with the Partnership in the conduct or winding up of the Partnership
business as or on behalf of a party having an interest adverse to the
Partnership; (iii) competed with the Partnership in the conduct of the
Partnership business before the dissolution of the Partnership; or (iv) engaged
in grossly negligent or reckless conduct, intentional misconduct or a knowing
violation of law in the conduct and winding up of the Partnership business;
provided, however, that neither the General Partner nor any of its Affiliates
shall be deemed to have violated the duties or obligations of such Person under
the Virginia RULPA or this Agreement merely because such Person's conduct
furthers such Person's own interest.
7.10 Limitation on Liability of General Partner and Affiliates;
Indemnification
Except as provided in the Virginia RULPA and the Virginia UPA,
neither the General Partner nor any of its Affiliates shall be, solely by reason
of being the General Partner or an Affiliate of the General Partner, liable,
directly or indirectly, including by way of indemnification, contribution,
assessment or otherwise, for debts, obligations or liabilities of, or chargeable
to, the Partnership, whether sounding in tort, contract or otherwise.
<PAGE>
The Partnership shall indemnify and hold harmless the General
Partner, its Affiliates and any officers, employees or agents of the Partnership
(individually, in each case, an "Indemnitee"), to the fullest extent permitted
by law from and against any and all losses, claims, demands, costs, damages,
liabilities (joint or several), expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, whether
threatened, pending or completed and whether civil, criminal, administrative,
arbitrative or investigative, including, without limitation, any appeal to any
such claim, demand, action, suit or proceeding and any inquiry or investigation
that could lead to such claim, demand, action, suit or proceeding, arising out
of or incidental to the ordinary course of business of the Partnership or the
preservation of its business or properties and in which any such Indemnitee may
be, or may have been, involved, or threatened to be involved, as a party or
otherwise, by reason of the fact that he, she or it (i) is or was the General
Partner, an Affiliate of the General Partner or an officer, employee or agent of
the Partnership or (ii) is or was serving at the request of the Partnership as a
director, officer, member, general or limited partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
corporation, limited liability company, joint venture, partnership, limited
partnership, sole proprietorship, trust, employee benefit plan or other
enterprise, to the fullest extent permitted under the Virginia RULPA, regardless
of whether the Indemnitee continues to be the General Partner, an Affiliate of
the General Partner or an officer, employee or agent of the Partnership, at the
time any such liability or expense is paid or incurred; provided, however, that
this provision shall not eliminate or limit the liability of an Indemnitee for
any breach of the Indemnitee's duties to the Partnership or its Limited Partners
as set forth in Section 7.1 hereof. Any right of an Indemnitee under this
Section 7.10 shall be a contract right and as such shall run to the benefit of
such Indemnitee. Any repeal or amendment of this Section 7.10 shall be
prospective only and shall not limit the rights of any such Indemnitee or the
obligations of the Partnership with respect to any claim arising from or related
to the status or the services of such Indemnitee in any of the foregoing
capacities prior to any such repeal or amendment to this Section 7.10. Such
right shall include the right to be paid by the Partnership expenses incurred in
investigating or defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the Virginia RULPA. If a claim
for indemnification or advancement of expenses hereunder is not paid in full by
the Partnership within sixty (60) days after a written claim has been received
by the Partnership, the claimant may at any time thereafter bring suit against
the Partnership to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted under the
Virginia RULPA, but the burden of proving such defense shall be on the
Partnership. Neither the failure of the Partnership to have made its
determination prior to the commencement of such action that indemnification of,
or advancement of costs of defense to, the Indemnitee is permissible in the
circumstances nor an actual determination by the Partnership that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any Indemnitee, such right shall inure
to the benefit of his or her heirs, executors, administrators and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any Indemnitee may have or hereafter acquire under any statute,
resolution, agreement or otherwise. If authorized by the General Partner, the
Partnership may purchase and maintain insurance on behalf of any Indemnitee to
the full extent permitted by the Virginia RULPA.
<PAGE>
7.11 No Management by Limited Partners
No Limited Partner shall take part in the day-to-day
management, operation or control of the business and affairs of the Partnership
or have any right, power, or authority to act for or on behalf of or to bind the
Partnership or transact any business in the name of the Partnership. The Limited
Partners shall have no rights other than those specifically provided herein or
granted by law where consistent with a valid provision hereof. In the event any
laws, rules or regulations applicable to the Partnership, or to its sale or
issuance of interests in the Partnership, require a Limited Partner, or any
group or class thereof, to have certain rights, options, privileges or consents
not granted by the terms of this Agreement, then such Limited Partners shall
have and enjoy such rights, options, privileges and consents so long as (but
only so long as) the existence thereof does not result in a loss of the
limitation on liability enjoyed by the Limited Partners under the Delaware RULPA
or the applicable laws of any other jurisdiction.
8. BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS; TAXES; FISCAL YEAR
8.1 Bank Accounts
All funds of the Partnership shall be deposited in its name in
such checking and savings accounts, time deposits or certificates of deposit, or
other accounts at such banks, as shall be designated by the General Partner from
time to time, and the General Partner shall arrange for the appropriate conduct
of such account or accounts.
8.2 Books and Records
The General Partner shall keep, or cause to be kept, accurate,
full and complete books and accounts showing assets, liabilities, income,
operations, transactions and the financial condition of the Partnership. Such
books and accounts shall be prepared on the accrual basis of accounting. For any
proper purpose, the Limited Partners, or their respective designees, shall have
access thereto at any reasonable time during regular business hours and shall
have the right to copy said records at their expense.
8.3 Financial Statements and Information
(a) All financial statements prepared pursuant to this Section
8.3 shall be accurate and complete in all material respects, shall present
fairly the financial position and operating results of the Partnership, and
shall be prepared on the accrual basis as provided in Section 8.2 for each
Fiscal Year of the Partnership during the term of this Agreement.
<PAGE>
(b) Within 45 days after the end of each quarterly period (the
"Fiscal Quarter") of each Fiscal Year, commencing with the first full Fiscal
Quarter after the date of this Agreement, the General Partner shall prepare and
submit or cause to be prepared and submitted to the Limited Partners an
unaudited statement of profit and loss for the Partnership for such Fiscal
Quarter and an unaudited balance sheet of the Partnership dated as of the end of
such Fiscal Quarter, in each case prepared in accordance with generally accepted
accounting principles.
(c) Within 90 days after the end of each Fiscal Year during
the term of this Agreement, the General Partner shall prepare and submit or
cause to be prepared and submitted to the Limited Partners (i) an audited
balance sheet, together with audited statements of profit and loss, Partners'
equity and changes in financial position for the Partnership during such Fiscal
Year; (ii) a report of the activities of the Partnership during the Fiscal Year.
(d) The General Partner shall provide to the Limited Partners
such other reports and information concerning the business and affairs of the
Partnership as may be required by the Virginia RULPA or by any other law or
regulation of any regulatory body applicable to the Partnership.
8.4 Accounting Decisions
All decisions as to accounting matters, except as specifically
provided to the contrary herein, shall be made by the General Partner.
8.5 Where Maintained
The books, accounts and records of the Partnership at all
times shall be maintained at the Partnership's principal office or, at the
option of the General Partner, at the principal place of business of the General
Partner.
8.6 Tax Returns
The General Partner shall, at the expense of the Partnership,
cause to be prepared and delivered to the Partners, in a timely fashion after
the end of each Fiscal Year, copies of all federal and state income tax returns
for the Partnership for such Fiscal Year, one copy of which shall be filed by
the General Partner. Such returns shall be prepared on the accrual basis, and
shall accurately reflect the results of operations of the Partnership for such
Fiscal Year. The General Partner is designated as the "tax matters partner" (as
defined in the Code) of the Partnership and is authorized and required to
represent the Partnership (at the expense of the Partnership) in connection with
all examinations of the affairs of the Partnership by any federal, state, or
local tax authorities, including any resulting administrative and judicial
proceedings, and to expend funds of the Partnership for professional services
and costs associated therewith. Each Partner agrees to cooperate with the
General Partner and to do or refrain from doing any or all things reasonably
required by the General Partner in connection with the conduct of such
proceedings; provided, however, that in no event shall any Limited Partner be
required to do or refrain from doing anything which would cause such Limited
Partner to be deemed a general partner of the Partnership.
<PAGE>
8.7 Federal Income Tax Elections
If there is a distribution of any Partnership Assets or other
property as described in section 734 of the Code, or if there is a transfer of
an interest in the Partnership as described in Section 743 of the Code, then,
upon the request of any Partner, the General Partner shall cause the Partnership
to file a Section 754 Election.
8.8 Fiscal Year
The Fiscal Year of the Partnership for financial and Federal,
state and local income tax purposes shall initially be the calendar year. The
General Partner shall have authority to change the beginning and ending dates of
the Fiscal Year if the General Partner, in its sole and absolute discretion,
deems such change to be necessary or appropriate to the business of the
Partnership, and the General Partner shall give written notice of any such
change to the Limited Partners within thirty (30) days after the occurrence
thereof.
9. TRANSFER OF INTERESTS
9.1 Transfer
(a) The term "transfer", when used in this Section 9 with
respect to a Partnership Interest, shall include any sale, assignment, gift,
pledge, hypothecation, mortgage, exchange, or other disposition, except that
such term shall not include any pledge, mortgage, or hypothecation of or
granting of a security interest in a Partnership Interest in connection with any
financing obtained on behalf of the Partnership.
(b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Section 9. Any transfer or purported transfer of any Partnership Interest not
made in accordance with this Section 9 shall be null and void.
<PAGE>
9.2 Transfer of Interest of General Partner
If the General Partner desires to sell or transfer all or any
portion of such General Partner's Partnership Interest as a general partner to a
Person who is not a General Partner, such transfer shall be permitted if (and
only if):
(a) such transfer (i) would not violate the then applicable
Federal and state securities laws and rules and regulations of the Securities
and Exchange Commission, state securities commissions and any other governmental
authorities with jurisdiction over such disposition, (ii) would not result in
the Partnership being classified for federal income tax purposes as an
"association taxable as a corporation" rather than as a partnership, (iii) would
not prejudice or affect the continuity of the Partnership for the purposes of
section 708 of the Code, and (iv) would not affect the Partnership's existence
as a limited partnership under the Delaware RULPA.
(b) a successor General Partner is admitted to the Partnership
in accordance with Section 10.2; and
(c) such transfer and the admission of the transferee as a
General Partner of the Partnership is approved by Limited Partners whose
Percentage Interests represent a majority of the total Percentage Interests of
all Limited Partners.
9.3 Transfer of Interest of Limited Partner
If a Limited Partner desires to transfer all or any portion of
its Partnership Interest as a limited partner such transfer shall be permitted
if (and only if):
(a) such transfer (i) would not violate the then applicable
federal and state securities laws and rules and regulations of the Securities
and Exchange Commission, state securities commissions and any other governmental
authorities with jurisdiction over such disposition, (ii) would not result in
the Partnership being classified for federal income tax purposes as an
"association taxable as a corporation" rather than as a partnership, (iii) would
not prejudice or affect the continuity of the Partnership for the purposes of
Section 708 of the Code, and (iv) would not affect the Partnership's existence
as a limited partnership under the Delaware RULPA; and
<PAGE>
(b) the transferee is admitted as a limited partner of the
Partnership in accordance with Section 10.1.
9.4 Right to Purchase Interest of General Partner
Upon the termination of the employment of Edward B. Romanov,
Jr. as an officer of ElderTrust, a Maryland real estate investment trust, for
any reason (including, but not limited to, death, disability or voluntary
separation), ElderTrust Operating Limited Partnership (or its successors,
assigns or designee(s)) will have the right to purchase the General Partner's
Partnership Interest for cash within the later of (x) sixty (60) days after the
date of his termination and (y) thirty (30) days after his successor is elected
or appointed. The purchase price of the General Partner's Partnership Interest
will be the fair market value of the General Partner's Partnership Interest, as
agreed to between ElderTrust Operating Limited Partnership and the General
Partner (or if they cannot agree, as determined by a national accounting firm
selected by ElderTrust Operating Limited Partnership and the General Partner).
10. ADMISSION OF ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS; REMOVAL OF
GENERAL PARTNER
10.1 [INTENTIONALLY DELETED]
10.2 Admission of a Successor General Partner
A transferee of all or any portion of the Partnership Interest
of the General Partner pursuant to Section 9.2 shall be admitted to the
Partnership as a General Partner (in the place, in whole or in part, of the
transferor or former General Partner), effective as of the date that an
amendment of the Certificate, adding the name of such successor General Partner
and other required information, is recorded pursuant to Section 2.1 (which date,
in the event the successor General Partner is in the place in whole of the
transferor or former General Partner, shall be contemporaneous with the
withdrawal of such transferor or former General Partner), and upon receipt by
the Partnership of all of the following:
(a) the successor General Partner's acceptance of, and
agreement to be bound by, all of the terms and provisions of this Agreement, in
form and substance satisfactory to the Partnership;
(b) evidence of the authority of such successor General
Partner to become a General Partner and to be bound by all of the terms and
conditions of the Agreement;
(c) the written agreement of the successor General Partner to
continue the business of the Partnership in accordance with the terms and
provisions of the Agreement; and
(d) such other documents or instruments as may be required in
order to effect the admission of the successor General Partner as a General
Partner under this Agreement.
<PAGE>
10.3 Withdrawal of General Partner
The General Partner may withdraw from the Partnership only
upon a transfer of all of such General Partner's Partnership Interest as a
General Partner in accordance with Section 9. The General Partner shall have no
liability to the Partnership or the Partners on account of any withdrawal in
accordance with the terms of this Section 10.3.
10.4 Withdrawal of Limited Partner
A Limited Partner may withdraw from the Partnership at any
time upon a transfer of all of such Limited Partner's Partnership Interest as a
Limited Partner in accordance with Section 9.
10.5 Removal of General Partner
(a) The General Partner may be removed as a general partner of
the Partnership for "cause" (as hereinafter defined), upon the affirmative vote
of Limited Partners whose Percentage Interests represents more than 50% of the
total Percentage Interests of all Limited Partners. Any such action by the
Limited Partners must also provide for the election of a successor General
Partner and shall become effective only upon the admission of the successor
General Partner pursuant to Section 10.2. As used herein, "cause" shall mean
actual fraud, negligence, bad faith or willful misconduct.
(b) Written notice of removal of the General Partner pursuant
to this Section 10.5 shall be provided to the General Partner at the address set
forth on Schedule A.
(c) Notwithstanding Section 10.5(a), the General Partner may
not be removed pursuant to Section 10.5(a) until such time as the Partnership
shall have received an opinion of legal counsel that the removal (i) may be
taken without the concurrence of all Partners, (ii) would not cause the loss of
limited liability of the Limited Partners under this Agreement, and (iii) would
not cause the Partnership to be treated as an association taxable as a
corporation for federal income tax purposes.
<PAGE>
(d) In the event the General Partner is removed pursuant to
this Section 10.5, within 30 days after the Business Day on which such
withdrawal becomes effective:
(i) if the General Partner had a positive balance in
its Capital Account as of the effective date of its withdrawal, it shall be
entitled to receive cash in an amount equal to such positive balance; or
(ii) if the General Partner had a negative balance in
its Capital Account as of the effective date of its withdrawal, it shall be
required to pay to the Partnership an amount equal to such negative balance.
(e) Any successor General Partner elected pursuant to Section
10.5(a) shall, at the effective date of its admission to the Partnership as the
General Partner, make a Capital Contribution to the Partnership in an amount
equal to $20,000.
11. DISSOLUTION AND LIQUIDATION
11.1 No Dissolution
The Partnership shall not be dissolved by the admission of
additional Partners.
11.2 Events Causing Dissolution
The Partnership shall be dissolved and its affairs wound up
upon the occurrence of any of the following events:
(a) The election in writing of the General Partner and the
holders of 66-2/3% of the Percentage Interests of the Limited Partners to
dissolve and wind up the affairs of the Partnership;
(b) The sale or other disposition by the Partnership of all or
substantially all of the Partnership Assets and the collection of all amounts
derived from any such sale other disposition, including all amounts payable to
the Partnership under any promissory notes or other evidences of indebtedness
taken by the Partnership in connection with such sale or other disposition
(unless the General Partner shall elect to distribute such indebtedness to the
Partners in liquidation);
(c) the "Bankruptcy" (as hereinafter defined) of a
General Partner;
(d) the Termination Date; or
<PAGE>
(e) The occurrence of any event that, under the Virginia
RULPA, would cause the dissolution of the Partnership or that would make it
unlawful for the business of the Partnership to be continued.
For the purposes of this Agreement, the term "Bankruptcy"
shall mean, and the General Partner shall be deemed "Bankrupt" upon, (i) the
entry of a decree or order for relief of the General Partner by a court of
competent jurisdiction in any involuntary case involving the General Partner
under any bankruptcy, insolvency, or other similar law now or hereafter in
effect; (ii) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or other similar agent for the General Partner or for any
substantial part of the General Partner's assets or property; (iii) the ordering
of the winding up or liquidation of the General Partner's affairs; (iv) the
filing with respect to the General Partner of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a period of 90 days or
which is dismissed or suspended pursuant to Section 305 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law); (v) the commencement by the General Partner of a voluntary case
under any bankruptcy, insolvency, or other similar law now or hereafter in
effect; (vi) the consent by the General Partner to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar agent for the General Partner or for any
substantial part of the General Partner's assets or property; (vii) the making
by the General Partner of any general assignment for the benefit of creditors;
or (viii) the failure by the General Partner generally to pay its debts as such
debts become due.
11.3 Right to Continue Business of Partnership
Upon an event described in Sections 11.2(c), 11.2(d) or
11.2(e) (but not an event described in Section 11.2(e) that makes it unlawful
for the business of the Partnership to be continued), the Partnership thereafter
shall be dissolved and liquidated unless, within 90 days after the event
described in any of such Sections, an election to continue the business of the
Partnership shall be made in writing by all remaining Partners. If such an
election to continue the Partnership is made, then:
(a) if the General Partner is "Bankrupt" (as defined in
Section 11.2(c) or has been removed or has withdrawn from the Partnership, the
remaining Limited Partners shall appoint a successor General Partner and the
Partnership Interest of the General Partner shall be transferred to such
successor General Partner in the manner provided in Section 12;
(b) the Partnership shall continue until another event causing
dissolution in accordance with this Section 12 shall occur;
<PAGE>
(c) all necessary steps shall be taken to amend this Agreement
and the Certificate to reflect the continuation of the business of the
Partnership; and
11.4 Dissolution
Except as otherwise provided in Section 11.3, upon the
dissolution of the Partnership, the Certificate shall be canceled in accordance
with the provisions of the Virginia RULPA, and the General Partner (or other
person responsible for winding up the affairs of the Partnership) shall promptly
notify the Partners of such dissolution.
11.5 Liquidation
(a) Upon the dissolution of the Partnership, the General
Partner (or other person responsible for winding up the affairs of the
Partnership) shall proceed without any unnecessary delay to sell or otherwise
liquidate the Partnership Assets and pay or make due provision for the payment
of all debts, liabilities and obligations of the Partnership.
(b) After adequate provision has been made for the payment of
all debts, liabilities and obligations of the Partnership, the General Partner
(or other person responsible for winding up the affairs of the Partnership)
shall distribute the net liquidation proceeds and any other liquid assets of the
Partnership to the Partners in accordance with Section 6.6.
11.6 Reasonable Time for Winding Up
A reasonable time shall be allowed for the orderly winding up
of the business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 0 in order to minimize any losses otherwise attendant upon
such a winding up.
11.7 Termination of Partnership
Except as otherwise provided in this Agreement, the
Partnership shall terminate when all of the assets of the Partnership shall have
been converted into cash, the net proceeds therefrom, as well as any other
liquid assets of the Partnership, after payment of or due provision for the
payment of all debts, liabilities and obligations of the Partnership, shall have
been distributed to the Partners as provided for in Sections 6.6 and 11.5
hereof, and the Certificate shall have been canceled in the manner required by
the Virginia RULPA.
<PAGE>
12. MISCELLANEOUS PROVISIONS
12.1 Severability
The invalidity of any one or more provision hereof or of any
other agreement or instrument given pursuant to or in connection with this
Agreement shall not affect the remaining portions of this Agreement or any such
other agreement or instrument or any part thereof, all of which are inserted
conditionally on their being held valid in law; and in the event that one or
more of the provisions contained herein or therein should be invalid, or should
operate to render this Agreement or any such other agreement or instrument
invalid, this Agreement and such other agreements and instruments shall be
construed as if such invalid provisions had not been inserted.
12.2 Survival
It is the express intention and agreement of the Partners that
all covenants, agreements, statements, representations, warranties and
indemnities made in this Agreement shall survive the execution and delivery of
this Agreement.
12.3 Waivers
Neither the waiver by a Partner of a breach of or a default
under any of the provisions of this Agreement, nor the failure of a Partner, on
one or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, remedy or privilege hereunder shall thereafter be construed
as a waiver of any subsequent breach or default of a similar nature, or as a
waiver of any such provisions, rights, remedies or privileges hereunder.
12.4 Exercise of Rights
No failure or delay on the part of a Partner or the
Partnership in exercising any right, power or privilege hereunder and no course
of dealing between the Partners or between a Partner and the Partnership shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly provided are cumulative and not exclusive of any other
rights or remedies which a Partner or the Partnership would otherwise have at
law or in equity or otherwise.
<PAGE>
12.5 Binding Effect
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the Partners
and their respective heirs, devises, executors, administrators, legal
representatives, successors and assigns.
12.6 Limitation on Benefits of this Agreement
It is the explicit intention of the Partners that no person or
entity other than the Partners and the Partnership is or shall be entitled to
bring any action to enforce any provision of this Agreement against any Partner
or the Partnership, and that the covenants, undertakings and agreements set
forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the Partners (or their respective successors and assigns as
permitted hereunder) and the Partnership.
12.7 Amendment Procedure
The Partners may at any time and from time to time amend this
Agreement by executing a written amendment signed by authorized representatives
of all Persons who are Partners at such time.
12.8 Entire Agreement
This Agreement (including the Schedule hereto) contains the
entire agreement among the Partners with respect to the transactions
contemplated herein, and supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein
and therein.
12.9 Pronouns
All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
12.10 Headings
Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
<PAGE>
12.11 Governing Law
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia (but not
including the choice of law rules thereof).
12.12 Execution in Counterparts
To facilitate execution, this Agreement may be executed in as
many counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Agreement to be duly executed on their behalf, as
of the day and year first hereinabove set forth.
GENERAL PARTNER:
ET MERIDIAN, L.L.C.
By: /s/ Edward B. Romanov, Jr.
-----------------------------------
Edward B. Romanov, Jr.
Sole Member
LIMITED PARTNER:
ELDERTRUST OPERATING LIMITED
PARTNERSHIP
By: ElderTrust, General Partner
By: /s/ Edward B. Romanov, Jr.
-----------------------------------
Name: Edward B. Romanov, Jr.
Title: President and
Chief Executive Officer
<PAGE>
SCHEDULE A
To Agreement
Limited
Partnership of
ET Sub - Meridian
Limited Partnership,
L.L.P.
NAMES, ADDRESSES AND CAPITAL CONTRIBUTIONS OF PARTNERS
AGREED VALUE OF
CAPITAL CONTRIBUTIONS
GENERAL PARTNER:
ET Meridian, L.L.C.
101 East State Street, Suite 100
Kennett Square, Pennsylvania 19348 $ 20,000.00
LIMITED PARTNER:
ElderTrust Operating Limited Partnership
101 East State Street, Suite 100
Kennett Square, Pennsylvania 19348 1,980,000.00
--------------
TOTAL: $2,000,000.00
<PAGE>
SCHEDULE 3.1
To Agreement
of Limited
Partnership of
ET Sub - Meridian
Limited Partnership,
L.L.P.
List of Skilled Nursing Facilities
1. La Plata Center
One Magnolia Drive
La Plata, Maryland 20646
2. Voorhees Center
3001 Evesham Road
Voorhees, New Jersey 08043
3. Corsica Hills Center
205 Armstrong Avenue
Centerville, Maryland 21617
4. Heritage Center
7232 German Hill Road
Dundalk, Maryland 21222
5. Multi-Medical Center
7700 York Road
Towson, Maryland 21204
6. Severna Park Center
24 Truck House Rd.
Severna Park, Md. 21146
7. Westfield Center
1515 Lamberts Mill Rd.
Westfield, NJ 07090
<PAGE>
EXHIBIT D
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
ET SUB-MERIDIAN LIMITED PARTNERSHIP, L.L.P.
Dated: August 7, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. CERTAIN DEFINITIONS...........................................................................1
2. FORMATION; NAME; PLACE OF BUSINESS............................................................7
2.1. Formation of Partnership; Filing of Certificate and Statement of Registration.........7
2.2. Name of Partnership...................................................................7
2.3. Place of Business.....................................................................8
2.4. Registered Office and Registered Agent................................................8
3. PURPOSES AND POWERS OF PARTNERSHIP............................................................8
3.1. Purposes..............................................................................8
3.2. Business..............................................................................9
3.3. Powers................................................................................9
4. TERM OF PARTNERSHIP...........................................................................10
5. CAPITAL.......................................................................................10
5.1. Capital Contribution of the General Partner...........................................10
5.2. Capital Contributions of Limited Partners.............................................10
5.3. Capital Accounts......................................................................11
5.4. No Interest on Capital Contributions or Amounts in Capital Account....................11
5.5. Liability of Limited Partners.........................................................11
5.6. Return of Capital.....................................................................11
6. ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS OF CASH FLOW AND CERTAIN PROCEEDS.............11
6.1. Certain Definitions...................................................................11
6.2. Allocation of Net Income or Net Loss..................................................13
6.3. Allocation of Gains and Losses from Capital Transactions..............................13
6.4. Allocation of Income and Loss With Respect to Partnership Interests Transferred.......13
6.5. Distributions of Cash Flow............................................................13
6.6. Distribution of Proceeds from Capital Transactions; Liquidation Distributions.........14
6.7. Special Allocation Rules..............................................................15
6.8. Contributed Property; Revaluations Pursuant to Section 704(b) Regulations.............18
6.9. Withholding Taxes and Reporting Obligations...........................................18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
7. MANAGEMENT....................................................................................19
7.1. Management and Control of Partnership Business........................................19
7.2. Powers of General Partner.............................................................19
7.3. Power of Attorney.....................................................................20
7.4. Limitation on Authority of the General Partner........................................21
7.5. INTENTIONALLY DELETED.................................................................22
7.6. Other Activities of Partners..........................................................22
7.7. Transactions with General Partner or Affiliates.......................................22
7.8. [INTENTIONALLY DELETED]...............................................................22
7.9. Liability of General Partner and Affiliates to Partnership and Limited Partners.......22
7.10. Limitation on Liability of General Partner and Affiliates; Indemnification...........23
7.11. No Management by Limited Partners....................................................24
8. BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS; TAXES; FISCAL YEAR..............................25
8.1. Bank Accounts.........................................................................25
8.2. Books and Records.....................................................................25
8.3. Financial Statements and Information..................................................25
8.4. Accounting Decisions..................................................................26
8.5. Where Maintained......................................................................26
8.6. Tax Returns...........................................................................26
8.7. Federal Income Tax Elections..........................................................26
8.8. Fiscal Year...........................................................................27
9. TRANSFER OF INTERESTS.........................................................................27
9.1. Transfer..............................................................................27
9.2. Transfer of Interest of General Partner...............................................27
9.3. Transfer of Interest of Limited Partner...............................................28
9.4. Right to Purchase Interest of General Partner.........................................28
10. ADMISSION OF ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS; REMOVAL OF GENERAL PARTNER.........29
10.1. [INTENTIONALLY DELETED]..............................................................29
10.2. Admission of a Successor General Partner.............................................29
10.3. Withdrawal of General Partner........................................................29
10.4. Withdrawal of Limited Partner........................................................30
10.5. Removal of General Partner...........................................................30
11. DISSOLUTION AND LIQUIDATION..................................................................31
11.1. No Dissolution.......................................................................31
11.2. Events Causing Dissolution...........................................................31
11.3. Right to Continue Business of Partnership............................................32
11.4. Dissolution..........................................................................32
11.5. Liquidation..........................................................................32
11.6. Reasonable Time for Winding Up.......................................................33
11.7. Termination of Partnership...........................................................33
12. MISCELLANEOUS PROVISIONS.....................................................................33
12.1. Severability.........................................................................33
12.2. Survival.............................................................................34
12.3. Waivers..............................................................................34
12.4. Exercise of Rights...................................................................34
12.5. Binding Effect.......................................................................34
12.6. Limitation on Benefits of this Agreement.............................................34
12.7. Amendment Procedure..................................................................35
12.8. Entire Agreement.....................................................................35
12.9. Pronouns.............................................................................35
12.10. Headings............................................................................35
12.11. Governing Law.......................................................................35
12.12. Execution in Counterparts...........................................................
</TABLE>
<PAGE>
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of September 3, 1998 by
ELDERTRUST OPERATING LIMITED PARTNERSHIP, a Delaware limited
partnership, having an address of 101 East State Street, Kennett
Square, Pennsylvania 19348 ("Operating Partnership")
for the benefit of:
Those persons and entities listed on Exhibit B attached hereto and
hereby made a part hereof all having an address c/o Fairmount
Associates, Inc., 515 Fairmount Avenue, Suite 900, Towson, Maryland
21286 (collectively "Beneficiaries").
RECITALS
A. The Beneficiaries are the ultimate principals of seven Maryland
limited partnerships (the "Limited Partnerships") which are the owners of real
property in Maryland and New Jersey on which are situate seven skilled care
nursing homes (the "Facilities") and the Limited Partnerships. The Facilities
are leased by the Limited Partnerships to Meridian Healthcare, Inc. ("MHI") a
subsidiary of Genesis Health Ventures, Inc., a Pennsylvania company, having an
address of 101 East State Street, Kennett Square, Pennsylvania 19348
("Genesis").
B. Operating Partnership and MHI have requested that MHI be permitted
to assign the leases to ET Sub-Meridian Limited Partnership, L.L.P., an
affiliate of Operating Partnership, and sublease the Facilities back to MHI.
Operating Partnership has also requested that the Limited Partnerships enter
into a financing with German American Capital Corporation ("GACC") aggregating
$66,050,000 and involving six separate loans, enter into a $6,800,000 financing
with The First National Bank of Bank ("FNB"), and modify an arrangement under
which FNB provides credit support for a certain bond transaction. (GACC and FNB
are collectively called the "Lenders".) The loans from the Lenders and the
modifications of the bond related transaction are collectively called the
"Loans." All of the matters referred to in this recital are collectively called
the "1998 Transaction."
C. As part of the 1998 Transaction, the Limited Partnerships will
execute certain Promissory Notes, Loan Agreements, Mortgages, and Deeds of
Trusts with the Lenders.
D. Should any of the Loans be accelerated by one of the Lenders as a
result of a default or should there be any exercise of remedies (including
foreclosure) under any of the Mortgages, Deeds of Trust, or other loan
documents, the Beneficiaries may incur the loss of the deferral of substantial
Federal and State income tax liability.
E. It is a condition to the entering into of the 1998 Transaction by
the Beneficiaries that Operating Partnership enter into this Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, this Agreement witnesseth that, in consideration of the
aforesaid and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, Operating Partnership, for itself
and its successors and assigns, agrees as follows:
1. Indemnification.
A. Operating Partnership hereby indemnifies and holds harmless the
Beneficiaries and their successors, personal representatives, and assigns (all
hereinafter collectively referred to as the "Indemnitees") for (a) the present
value of the loss of the deferral of their Federal and State income tax
liabilities which they incur because of the Loans going into default and being
accelerated, or because of a foreclosure sale or deed in lieu of foreclosure or
other exercise of a remedy under any of the Loans by the Lenders or their
successors or assigns which may cause recognition of taxable income on the sale,
transfer, or disposition of property; (b) any prepayment penalty or premium or
any late charge or other fee under either of the Loans or the interest rate
"swap" which is a part of the Loans (any of the events described in Section
1A(a) or Section 1(b) is referred to as a "Triggering Event"); and (c) all of
Indemnitees' fees and expenses, including without limitation reasonable legal
fees in connection with the enforcement of this Agreement. Notwithstanding the
foregoing, Operating Partnership shall have any liability hereunder in
connection with an "Excluded Act," defined below.
B. When used herein, the term "Excluded Act" means a voluntary or
involuntary action or omission by one or more of the Beneficiaries; that is, as
between the Beneficiaries on the one hand and Operating Partnership and MHI on
the other, an action or omission in the sole control of the Beneficiaries and
not in the control of Operating Partnership or MHI that causes any of the Loans
to be in default; e.g., failure of the Limited Partnerships to maintain their
single purpose status as required by the Loans. Operating Partnership shall
notify Beneficiaries immediately upon the occurrence of any Triggering Event.
The parties have stipulated and agreed that the present value of the loss of the
deferral of their amount of Federal and State tax liabilities referred to in
Section 1A(a) are as set forth on Exhibit A attached hereto and hereby made a
part hereof, for the applicable periods of time shown thereon. The Exhibit A
amounts shall be binding whether or not the actual Federal and State tax
liabilities are higher or lower than the indicated amounts and shall be due and
payable whether or not Operating Partnership claims there may be defenses or
offsets to the tax liabilities. Notwithstanding anything to the contrary
contained herein, the amount set forth in Exhibit A shall be adjusted (i) if a
Triggering Event occurs with respect to one or more, but not all, of the Loans
so that fewer than all of the Facilities are affected thereby, the amount due by
Operating Partnership pursuant to Section 1A(a) shall be determined by
multiplying the Cash Amount for the applicable period, as shown on Exhibit A, by
the sum of the decimal equivalents of the percentages shown for the Facilities
affected, as shown on Exhibit A; (ii) in the event a reimbursement under Section
1C is required; or (iii) in the event of a credit pursuant to Section 2H hereof.
C. After payment to Beneficiaries of the amounts set forth in Exhibit
A, Beneficiaries' accountants shall provide letters (the "Letters") to Operating
Partnership that Beneficiaries have not reinvested proceeds of condemnation or
casualty which enables such Beneficiaries to avoid gain, within fifteen (15)
days after filing of the federal income tax returns of Beneficiaries with
respect to the year in which the Triggering Event occurs and annually thereafter
for two subsequent years. In the event that Operating Partnership does not
receive such Letters within such period of time, Operating Partnership may write
to Beneficiaries and request such Letters, and if Operating Partnership does not
receive such Letters within an additional period of fifteen (15) days, or in the
event that the Letters indicate that proceeds have been so reinvested in order
to continue the deferral of Federal and State taxes, Operating Partnership shall
be entitled to demand payment from such of the Beneficiaries who did not provide
such Letters (or who provided Letters indicating reinvestments) in the amount of
the portion of the amount paid by Operating Partnership hereunder as such
Beneficiaries had received (or the amount paid hereunder and reinvested by such
Beneficiaries).
<PAGE>
2. Special Indemnification.
A. Operating Partnership hereby indemnifies and holds harmless the
Indemnitees for (i) the present value of the loss of the deferral of their
Federal and State income tax liabilities which they incur because of the
substitution of property permitted under the loan documents executed in
connection with the 1998 Transaction as a result of casualty, condemnation, or a
non-monetary default under the GACC loan documents (an "Exchange Event") that
causes the recognition of income (such as Exchange Event is called a "Payment
Event"); and (ii) all of Indemnitees' fees and expenses, including without
limitation reasonable legal fees in connection with the enforcement of this
Agreement. Operating Partnership shall notify Beneficiaries immediately upon the
occurrence of any Exchange Event. The parties have stipulated and agreed that
the present value of the loss of the deferral of their amount of Federal and
State tax liabilities referred to in Section 2A(i) are as set forth on Exhibit C
attached hereto and hereby made a part hereof, for the applicable periods of
time shown thereon. The Exhibit C amounts shall be binding whether or not the
actual Federal and State tax liabilities are higher or lower than the indicated
amounts and shall be due and payable upon the occurrence of a Payment Event
whether or not Operating Partnership claims there may be defenses or offsets to
the tax liabilities.
B. Upon the occurrence of an Exchange Event, Beneficiaries shall
determine whether they believe that they will recognize income as a result
thereof. If Beneficiaries believe that the applicable Limited Partnership is
likely to recognize income or gain for federal income tax purposes as a result
thereof ("Beneficiaries' Belief"), they shall so advise Operating Partnership.
Unless Operating Partnership advises Beneficiaries in writing within fifteen
(15) days after notice from Beneficiaries that Operating Partnership disagrees
with Beneficiaries' Belief, there shall thereupon be deemed to be a "Payment
Event."
C. If Operating Partnership advises Beneficiaries in writing within
fifteen (15) days after notice from Beneficiaries that Operating Partnership
disagrees with Beneficiaries' Belief, Beneficiaries shall engage a nationally
recognized accounting firm or a law firm to render an opinion as to whether the
applicable Limited Partnership is more likely than not to recognize income or
gain for federal income tax purposes as a result of the Exchange Event. If the
firm is not a "Big 5" accounting firm (or a successor thereto), Beneficiaries
shall so notify Operating Partnership, and Operating Partnership shall be
entitled to consent to the selection of such firm, and such consent shall not be
unreasonably withheld or delayed and shall be deemed given if Operating
Partnership does not notify Beneficiaries to the contrary within fifteen (15)
days of the notice from Beneficiaries. Operating Partnership shall pay the fees
of the firm.
D. In the event such firm renders an opinion that it is more likely
than not that the applicable Limited Partnership will not recognize income or
gain for federal income tax purposes, Beneficiaries shall file tax returns that
do not recognize income. In the event that it is later determined by the
Internal Revenue Service or a court of competent jurisdiction that
Beneficiaries' should have recognized income as a result of the Exchange Event,
there shall be deemed to be a Payment Event. Operating Partnership shall also be
liable for all interest and penalties imposed on Beneficiaries as a result of a
Payment Event.
<PAGE>
E. In the event such firm renders an opinion that it is more likely
than not that the applicable Limited Partnership will recognize income or gain
for federal income tax purposes, Beneficiaries shall file tax returns that
recognizes income, and a Payment Event shall be deemed to have occurred.
F. Operating Partnership shall be entitled to engage counsel and
accountants, who must be approved by Beneficiaries, which approval shall not be
unreasonably withheld or delayed, at the expense of Operating Partnership, to
defend the position that the occurrence of an Exchange Event is not a Payment
Event.
G. Notwithstanding anything to the contrary contained herein, if a
Payment Event occurs with respect to one or more, but not all, of the Loans so
that fewer than all of the Facilities are affected thereby, the amount due by
Operating Partnership pursuant to Section 2(a) shall be determined by
multiplying the Cash Amount for the applicable period, as shown on Exhibit C, by
the sum of the decimal equivalents of the percentages shown for the Facilities
affected, as shown on Exhibit C.
H. Any amount paid pursuant to Exhibit C shall reduce the amount
payable under Exhibit A on a dollar for dollar basis.
3. Timing. The amounts due by Operating Partnership pursuant to Section
1 shall be due and payable thirty (30) days after the occurrence of any
Triggering Event, subject to the provisions of Section 17.
4. No Duty to Mitigate. Operating Partnership agrees that Indemnitees
shall have no duty to mitigate damages associated with the matters set forth in
Sections 1 or 2, including without limitation any duty to expend any funds or to
take any action to prevent or defer a default or acceleration under the Loans,
other than in connection with an Excluded Act; provided, however, that nothing
herein contained shall alter any obligations of the Limited Partnerships under
any other documents between or among the Limited Partnerships, MHI, and
Operating Partnership.
5. Maryland Law. Operating Partnership agrees that this Agreement and
the rights and obligations of Indemnitees and Operating Partnership hereunder
shall in all respects be governed by, and construed in accordance with, the laws
of the State of Maryland (excluding Maryland conflicts of laws).
6. Confession of Judgment. IF THE AMOUNTS DUE UNDER THIS AGREEMENT ARE
NOT PAID WHEN DUE, OR ANY OTHER DEFAULT SHALL OCCUR HEREUNDER, OPERATING
PARTNERSHIP DOES HEREBY AUTHORIZE ANY CLERK OF ANY COURT OF RECORD OR ANY
ATTORNEY TO ENTER IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF
MARYLAND OR ANY OTHER STATE OR TERRITORY OF THE UNITED STATES JUDGMENT BY
CONFESSION AGAINST OPERATING PARTNERSHIP AND IN FAVOR OF BENEFICIARIES FOR THE
ENTIRE AMOUNT DUE UNDER THIS AGREEMENT, TOGETHER WITH ATTORNEY'S FEES OF FIFTEEN
PERCENT (15%) AND COURT COSTS, WITHOUT STAY OF EXECUTION OR RIGHT OF APPEAL.
OPERATING PARTNERSHIP EXPRESSLY WAIVES THE BENEFIT OF ALL EXEMPTION LAWS AND ALL
IRREGULARITY OR ERROR IN ENTERING SAID JUDGMENT OR THE EXECUTION THEREON, AND
FOR SO DOING, THIS AGREEMENT OR A COPY OF IT VERIFIED BY AFFIDAVIT SHALL BE
SUFFICIENT WARRANT. NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS
JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE
SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THE POWER SHALL
CONTINUE UNDIMINISHED, AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS
BENEFICIARIES SHALL ELECT, UNTIL SUCH TIME AS BENEFICIARIES SHALL HAVE RECEIVED
PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS AGREEMENT BY OPERATING PARTNERSHIP
TO BENEFICIARIES.
<PAGE>
7. Invalidity of Any Part. If any provision or part of any provision of
this Agreement shall for any reason be held invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provisions or the remaining part of any effective provisions of
this Agreement, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability.
8. Amendment or Waiver. This Agreement may be amended only by a writing
duly executed by Operating Partnership and the Indemnitees. No waiver by the
Indemnitees of any of the provisions of this Agreement or any of the rights or
remedies of the Indemnitees with respect hereto shall be considered effective or
enforceable unless in writing, duly executed by Indemnitees. Such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given.
9. Notices. Any notice required or permitted by or in connection with
this Agreement shall be in writing and shall be made by facsimile or by hand
delivery, by overnight delivery service, or by certified mail, unrestricted
delivery, return receipt requested, postage prepaid, addressed to the
Beneficiaries or Operating Partnership at the appropriate address set forth
above or to such other address as may be hereafter specified by written notice
by the Indemnitees or Operating Partnership. Notice shall be considered given as
of the date of the facsimile or the hand delivery, one (1) calendar day after
delivery to the overnight delivery service, or three (3) calendar days after the
date of mailing, independent of the date of actual delivery or whether delivery
is ever in fact made, as the case may be, provided the giver of notice can
establish that notice was given as provided herein. Notwithstanding the
foregoing, any notice in fact received shall be effective as of the time of
receipt.
10. Binding Nature. This Agreement shall inure to the benefit of and be
enforceable by the Indemnitees and the Indemnitees's successors and assigns and
any other person to whom the Indemnitees may grant an interest in the
obligations of Operating Partnership to the Indemnitees, and shall be binding
upon and enforceable against Operating Partnership and their successors and
assigns.
11. Final Agreement. This Agreement contains the final and entire
agreement between the Indemnitees and Operating Partnership with respect to the
obligations of OPERATING PARTNERSHIP described above to the Indemnitees. There
is no separate oral or written understanding between the Indemnitees and
Operating Partnership with respect thereto. Beneficiaries and Operating
Partnership recognize that Genesis has executed a certain Secondary
Indemnification Agreement on even date herewith in favor of Beneficiaries.
Nothing contained in such Secondary Indemnification Agreement shall on any way
affect the provisions hereof, the rights of Beneficiaries, or the obligations of
Operating Partnership hereunder.
12. No Third Party Benefit. The terms and provisions of this Agreement
are for the benefit of the Indemnitees and no other person shall have any right
or cause of action on account thereof.
<PAGE>
13. Number, Gender, Captions. As used herein, the plural includes the
singular, and the singular includes the plural. The use of any gender applies to
any other gender. All captions are for the purpose of convenience only.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall together constitute one and
the same instrument.
15. Time of the Essence. Time is of the essence to each and every
provision of this Agreement.
16. Incorporation of Recitals. The recitals are incorporated herein and
are hereby made an integral part of this Agreement.
17. Submission to Jurisdiction; Waiver of Jury Trial.
(A) OPERATING PARTNERSHIP, TO THE FULL EXTENT PERMITTED BY
LAW, HEREBY KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY, WITH AND UPON THE ADVICE
OF COMPETENT COUNSEL: (I) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF
MARYLAND OVER ANY SUIT, ACTION, OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THIS AGREEMENT, (II) AGREES THAT ANY SUCH ACTION, SUIT, OR
PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF MARYLAND, (III) SUBMITS TO THE JURISDICTION OF SUCH
COURTS, (IV) WAIVES THE DOCTRINE OF FORUM NON CONVENIENS OR SIMILAR OBJECTION TO
VENUE, AND (V) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT
BRING ANY ACTION, SUIT, OR PROCEEDING IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
OTHER FORUM).
(B) OPERATING PARTNERSHIP AND BENEFICIARIES, BY THEIR
ACCEPTANCE OF THIS AGREEMENT, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTELLIGENTLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, WAIVES, RELINQUISHES, AND FOREVER FOREGO THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATED TO THIS AGREEMENT OR ANY CONDUCT, ACT, OR OMISSION OF OPERATING
PARTNERSHIP OR BENEFICIARIES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS, OR ATTORNEYS, OR ANY OTHER PERSON
AFFILIATED WITH OPERATING PARTNERSHIP, OR BENEFICIARIES, IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. OPERATING
PARTNERSHIP HEREBY CONSENTS AND AGREES TO SERVICE OR ANY SUMMONS, COMPLAINT, OR
OTHER LEGAL PROCESS, IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING ARISING
FROM OR RELATING TO THIS AGREEMENT BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID TO OPERATING PARTNERSHIP AT ITS ADDRESS SET FORTH ABOVE.
18. Credit. Notwithstanding anything to the contrary herein contained,
Operating Partnership shall be entitled to a dollar for dollar credit for any
amounts due hereunder for any proceeds received by the Limited Partnerships from
a foreclosure sale of any of the Facilities pursuant to Section 9 of the Three
Party Agreement of even date herewith among the Limited Partnerships, ET
Sub-Meridian Limited Partnership, L.L.P., and Meridian Healthcare, Inc.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, Indemnitor has caused this Agreement to be executed
as of the day and year first above written.
WITNESS: ELDERTRUST OPERATING
LIMITED PARTNERSHIP
By: ELDERTRUST, a Maryland real estate
investment trust, General Partner
By: /s/ D. Lee McCreary, Jr.
- ------------------------------- ------------------------------------
D. Lee McCreary, Jr.,
Chief Financial Officer
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
I HEREBY CERTIFY that on this _____ day of September, 1998, before me,
the undersigned officer, personally appeared D. Lee McCreary, Jr.,2, who
acknowledged himself to be the Chief Financial Officer of Hampstead Investments,
Inc., a corporation and manager of Bedrock Holdings Partners, a partnership,
managing member of Bedrock Hotel Partners, L.L.C.ELDERTRUST, a real estate
investment trust, general partner of ElderTrust Operating Limited Partnership, a
Delaware limited partnership, and that he, in such capacity, being authorized to
do so, executed the foregoing instrument for the purposes therein contained, by
signing the name of the trust as such officer on behalf of such trust and such
partnership.
IN WITNESS WHEREOF, I hereunto set my hand and Notarial Seal.
-----------------------------
Notary Public
My Commission expires:
<PAGE>
EXHIBIT A
September 1 to August 31 Cash Amount
of the indicated years:
1. 1998 to 1999 $13,880,000
2. 1999 to 2000 $13,170,000
3. 2000 to 2001 $12,350,000
4. 2001 to 2002 $11,520,000
5. 2002 to 2003 $10,620,000
6. 2003 to 2004 $9,650,000
7. 2004 to 2005 $8,640,000
8. 2005 to 2006 $7,570,000
9. 2006 to 2007 $6,420,000
10. 2007 to 2008 $5,220,000
2008 and thereafter $-0-
Facility Percentage
Corsica Hills 12.80%
Heritage 17.23%
Charlesmead 11.74%
Multi-Medical 4.91%
Severna 16.55%
Cherry Hill 15.69%
Westfield 21.08%
TOTAL 100.00%
<PAGE>
EXHIBIT B
List of Beneficiaries
Michael J. Batza, Jr.
Earl L. Linehan
Roger C. Lipitz
Arnold I. Richman
Edward A. Burchell
Howard S. Brown and Brenda B. Rever, Trustees u/a dtd 12/31/95
Earl L. Linehan and Stanard T. Klinefelter, Successor Trustees u/a dtd
12/21/83 f/b/o The Batza Family
Rosemary Burchell and Stanard T. Klinefelter, Trustees u/a/ dtd
12/24/80 f/b/o Michael Burchell and Edward Burchell, Jr.
Stanard T. Klinefelter, Successor Trustee u/a dtd 12/23/82 f/b/o ELL
1982 Descendants' Trust (Linehan Descendants)
Alison Richman and Stanard T. Klinefelter, Successor Trustees u/a dtd
12/19/85 f/b/o Jonathan Lipitz, Amanda Lipitz and Eugene Lipitz
Alison Richman and Stanard T. Klinefelter, Successor Trustees u/a/ dtd
12/24/80 f/b/o The Richman Children
Stanard T. Klinefelter, Trustee u/a dtd 12/21/83 f/b/o The Batza Family
Trust
Stanard T. Klinefelter, Trustee u/a dtd 12/24/80 f/b/o The Batza
Children
Stanard T. Klinefelter, Trustee u/a dtd 12/24/80 f/b/o The Linehan
Children
Charlesmead Meridian Limited Partnership
Cherry Hill Meridian Limited Partnership
Corsica Hills Associates Limited Partnership
Heritage Associates Limited Partnership
Multi-Medical Meridian Limited Partnership
Severna Associates Limited Partnership
Westfield Meridian Limited Partnership
<PAGE>
EXHIBIT C
September 1 to August 31 Cash Amount
of the indicated years:
1. 1998 to 1999 $2,192,000
2. 1999 to 2000 2,044,000
3. 2000 to 2001 1,884,000
4. 2001 to 2002 1,710,000
5. 2002 to 2003 1,521,000
6. 2003 to 2004 1,316,000
7. 2004 to 2005 1,094,000
8. 2005 to 2006 853,000
9. 2006 to 2007 592,000
10. 2007 to 2008 308,000
2008 and thereafter $-0-
Facility Percentage
Corsica Hills 11.18%
Heritage 13.25%
Charlesmead 7.17%
Multi-Medical 11.71%
Severna 13.57%
Cherry Hill 22.71%
Westfield 20.40%
TOTAL 100.00%
<PAGE>
EXHIBIT 10.4
INDEMNIFICATION CONSENT AND ACKNOWLEDGMENT AGREEMENT
THIS AGREEMENT is made as of the 3rd day of September, 1998 by and
between ELDERTRUST OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership
("Operating Partnership"), having an address at c/o Elder Trust, 101 East State
Street, Suite 100, Kennett Square, Pennsylvania 19348, to and for the benefit of
GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation ("Genesis"), having an
address at 101 East State Street, Kennett Square, Pennsylvania 19348.
W I T N E S S E T H:
WHEREAS, as of even date herewith, Meridian Healthcare, Inc., a
Pennsylvania corporation ("MHI"), a wholly owned subsidiary of Genesis, assigned
to ET Sub-Meridian Limited Partnership, L.L.P., a Virginia limited liability
partnership ("ET"), an affiliate of Operating Partnership, among other things,
all of its right, title and interest as tenant and purchase option holder under:
(a) those certain lease agreements naming MHI as tenant, each dated November 30,
1993, as amended by Amendment No. 1 to Lease Agreement dated August 1, 1994, and
Amendment No. 2 to Lease Agreement dated August 1, 1994 (the "Leases"), and (b)
those certain option agreements naming MHI as option holder, each dated November
30, 1993 (the "Option Agreements"), with respect to seven (7) skilled nursing
facilities locating in: Towson, Baltimore County, Maryland; Dundalk, Baltimore
County, Maryland; Severna Park, Anne Arundel County, Maryland; Centreville,
Queen Anne's County, Maryland; LaPlata, Charles County, Maryland; Westfield,
Union County, New Jersey; and Voorhees, Burlington County, New Jersey
(hereinafter called the "Facilities"); an
WHEREAS, as part of the foregoing transaction, ET subleased the
Facilities to MHI pursuant to the terms and provisions of seven (7) certain
sublease agreements, all dated as of even date herewith; and
WHEREAS, the Leases were amended on even date herewith pursuant to
certain Amendments No. 3 to Lease Agreement, and the Option Agreements were
amended pursuant to certain First Amendments to Option Agreement dated as of
even date herewith; and
WHEREAS, in connection with the foregoing transaction, Operating
Partnership has been required to deliver to the ultimate principals of the seven
(7) Maryland limited partnerships which are the owners of the Facilities and
such limited partnerships (the "Beneficiaries"), a certain Indemnification
Agreement dated as of even date herewith (the "ET Indemnification Agreement")
pursuant to which Operating Partnership indemnifies the Beneficiaries, and their
successors and assigns, from and against any loss suffered by reason of the
deferral of substantial Federal and State income tax liability; and
WHEREAS, the Beneficiaries have required that Genesis enter into a
certain Secondary Indemnification Agreement dated as of even date herewith (the
"Genesis Indemnification Agreement") pursuant to which Genesis also indemnifies
the Beneficiaries for the same matters set forth in the ET Indemnification
Agreement in the event Operating Partnership fails to perform pursuant to its
obligations under the ET Indemnification Agreement; and
WHEREAS, as a condition to Genesis' agreement to execute and deliver
the Genesis Indemnification Agreement, Genesis has required that Operating
Partnership execute and deliver this Agreement which sets forth Genesis' redress
against Operating Partnership in the event Genesis is required to perform the
obligations set forth in the Genesis Indemnification Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements herein contained, Operating Partnership, intending to
be legally bound, hereby agrees with and confirms the following to Genesis:
1. Liability of Genesis is Secondary. The liability of Genesis with
regard to the matters described in the ET Indemnification Agreement and the
Genesis Indemnification Agreement is secondary, and it is intended that
Operating Partnership shall be the party with the primary liability and
responsibility to pay the Beneficiaries for the matters covered by the ET
Indemnification Agreement.
<PAGE>
2. Right of Reimbursement. If Genesis is required to pay the
Beneficiaries pursuant to the Genesis Indemnification Agreement, then Genesis
shall be entitled to seek full and complete reimbursement from Operating
Partnership for all costs and expenses associated therewith, including, without
limitation, reasonable attorneys' fees and costs. IF THE AMOUNTS DUE TO GENESIS
BY OPERATING PARTNERSHIP UNDER THIS AGREEMENT ARE NOT PAID WHEN DUE, OPERATING
PARTNERSHIP DOES HEREBY AUTHORIZE ANY CLERK OF ANY COURT OF RECORD OR ANY
ATTORNEY TO ENTER IN ANY COURT OF COMPETENT JURISDICTION IN EITHER THE STATE OF
MARYLAND OR THE COMMONWEALTH OF PENNSYLVANIA, OR ANY OTHER STATE OF TERRITORY OF
THE UNITED STATES JUDGMENT BY CONFESSION AGAINST OPERATING PARTNERSHIP AND IN
FAVOR OF GENESIS FOR THE ENTIRE AMOUNT DUE UNDER THIS AGREEMENT, TOGETHER WITH
ATTORNEYS' FEES OF FIFTEEN PERCENT (15%) AND COURT COSTS, WITHOUT STAY OF
EXECUTION OR RIGHT OF APPEAL. OPERATING PARTNERSHIP EXPRESSLY WAIVES THE BENEFIT
OF ALL EXEMPTION LAWS AND ALL IRREGULARITY OR ERROR IN ENTERING SAID JUDGMENT OR
THE EXECUTION THEREON, AND FOR SO DOING, THIS AGREEMENT OR A COPY OF IT VERIFIED
BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. NO SINGLE EXERCISE OF THE FOREGOING
POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT
ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID,
BUT THE POWER SHALL CONTINUE UNDIMINISHED, AND IT MAY BE EXERCISED FROM TIME TO
TIME AS OFTEN AS GENESIS SHALL ELECT, UNTIL SUCH TIME AS GENESIS SHALL HAVE
RECEIVED PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS AGREEMENT BY OPERATING
PARTNERSHIP TO GENESIS.
3. Security Interest. THIS AGREEMENT SHALL ALSO CONSTITUTE A SECURITY
AGREEMENT. As collateral security for Operating Partnership's obligations
hereunder and under the ET Indemnification Agreement, ET hereby collaterally
assigns to Genesis all of its right, title and interest in and to the Option
Agreements. ET agrees to execute upon request from Genesis such other documents
and instruments as may be necessary to perfect Genesis' security interest in the
Option Agreements.
4. Governing Law; Venue; Waiver of Jury Trial.
A. Operating Partnership and ET agree that this Agreement and
the rights and obligations of Operating Partnership hereunder shall in all
respects be governed by, and construed in accordance with, the laws of the State
of Maryland (excluding Maryland conflicts of laws).
B. ELDERTRUST, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL: (I) SUBMITS TO PERSONAL JURISDICTION IN THE COMMONWEALTH OF
PENNSYLVANIA OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THIS AGREEMENT; (II) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF PENNSYLVANIA, (III) SUBMITS TO THE JURISDICTION OF SUCH COURTS,
(IV) WAIVES THE DOCTRINE OF FORUM NON CONVENIENS OR SIMILAR OBJECTION TO VENUE,
AND (V) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING
ANY ACTION, SUIT OR PROCEEDING IN ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
FORUM).
C. OPERATING PARTNERSHIP AND GENESIS, BY THEIR ACCEPTANCE OF
THIS AGREEMENT, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTELLIGENTLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FOREGO THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATED TO
THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF OPERATING PARTNERSHIP,
GENESIS, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS,
EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSON AFFILIATED WITH OPERATING
PARTNERSHIP OR GENESIS, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. OPERATING PARTNERSHIP HEREBY CONSENTS AND AGREES TO
SERVICE OR ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS, IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING ARISING FROM OR RELATING TO THIS AGREEMENT BY
REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, BY HAND DELIVERY WITH
RECEIPT, OR BY DELIVERY BY A NATIONALLY RECOGNIZED OVERNIGHT DELIVERY SERVICE,
TO OPERATING PARTNERSHIP AT THE ADDRESS SET FORTH ABOVE.
5. Time of the Essence. Time is of the essence to each and every
provisions of this Agreement.
6. Incorporation of Recitals. The recitals are incorporated herein and
are hereby made an integral part of this Agreement.
<PAGE>
7. Notices. Any notice required or permitted by or in connection with
this Agreement shall be in writing and shall be made by facsimile, by hand
delivery, by overnight delivery service, or by certified mail, unrestricted
delivery, return receipt requested, postage prepaid, addressed to Genesis or
Operating Partnership at the appropriate address set forth above or to such
other address as may be hereafter specified by written notice by Operating
Partnership and Genesis. Notice shall be considered given as of the date of the
facsimile or the hand delivery, one (1) calendar day after delivery to the
overnight delivery service, or three (3) calendar days after the date of
mailing, independent of the date of actual delivery or whether delivery is ever
in fact made, as the case may be, provided the giver of notice can establish
that notice was given as provided herein. Notwithstanding the foregoing, any
notice in fact received shall be effective as of the time or receipt.
8. Binding Nature. This Agreement shall inure to the benefit of and be
enforceable by Genesis, its successors and assigns, and shall be binding upon
and enforceable against Operating Partnership and its successors and assigns.
9. Number, Gender, Captions. As used herein, the plural includes the
singular, and the singular includes the plural. The use of any gender applies to
any other gender. All captions are for the purpose of convenience only.
10. Invalidity. If any provision or part of any provision of this
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions or the remaining part of any effective provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality or unenforceability.
11. Amendment or Waiver. This Agreement may be amended only by a
writing duly executed by Operating Partnership and Genesis. No waiver by Genesis
of any of the provisions of this Agreement or any of the rights or remedies of
Genesis with respect hereto shall be considered effective or enforceable unless
in writing, duly executed by Genesis. Such waiver or consent shall be effective
only in the specific instance and for the purpose for which it was given.
12. Entire Agreement. This Agreement contains the final and entire
agreement between Operating Partnership and Genesis with respect to the
obligations of Operating Partnership described above to Genesis. There is no
separate oral or written understanding between Operating Partnership and Genesis
with respect thereto.
IN WITNESS WHEREOF, Operating Partnership has executed this Agreement
as of the date first set forth above.
ELDERTRUST OPERATING LIMITED PARTNERSHIP, a
Delaware limited partnership
By: ELDERTRUST,
a Maryland real estate investment
trust
By: /s/ D. Lee McCreary, Jr.
--------------------------------
D. Lee McCreary, Jr.,
Chief Financial Officer
ET Sub-Meridian Limited Partnership, L.L.P., a Virginia limited
liability partnership, hereby executes this Agreement for purposes of confirming
its consent to the provisions of Paragraph 3 of the Agreement, and its agreement
to comply with the provisions thereof.
ET SUB-MERIDIAN LIMITED PARTNERSHIP, L.L.P.,
a Virginia limited liability partnership
By: ET Meridian, L.L.C.
General Partner
By: /s/ D. Lee McCreary, Jr.
--------------------------------
Name: D. Lee McCreary, Jr.
Title: Vice President
<PAGE>
EXHIBIT 10.5
GUARANTY OF NOTE
THIS GUARANTY OF NOTE is made as of September 3, 1998 by ELDERTRUST
OPERATING LIMITED PARTNERSHIP, a Delaware limited partnership ("Guarantor")
having an address of: 101 East State Street, Kennett Square, Pennsylvania,
19348, to and for the benefit of MERIDIAN HEALTHCARE, INC., a Pennsylvania
corporation (the "Holder") having an address of: 101 East State Street, Suite
100, Kennett Square, Pennsylvania, 19348.
RECITALS:
A. Holder has made a loan (the "Loan") in the original principal amount
of Eight Million Five Hundred Thousand Dollars ($8,500,000.00) to ET
Sub-Meridian Limited Partnership, L.L.P., a Virginia limited liability
partnership ("ET Sub"), evidenced by a Promissory Note (the "Note") of even date
herewith in the foregoing amount.
B. A majority of the ownership interests in ET Sub are owned directly
or indirectly by Guarantor, and therefore Guarantor is materially benefited by
the Note.
C. The undertaking by Guarantor to execute and deliver this Guaranty is
a material inducement to Holder to make the Loan, and, except for this Guaranty,
Holder would not make the Loan to ET Sub.
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor agrees with Holder as follows:
1. Guaranty. Guarantor hereby guarantees and agrees to be personally
liable for any and all sums payable under the Note and for the full performance
and observance of each and every covenant and agreement of ET Sub contained in
the Note to the same extent as if Guarantor were the maker under the Note and
had executed and delivered the Note. Guarantor unconditionally and irrevocably
guarantees that all sums stated in the Note will be promptly paid in full when
due in accordance with the Note and that ET Sub will perform and observe each
and every covenant and agreement in the Note. This Guaranty is irrevocable,
unconditional and absolute, and if for any reason any such sums shall not be
paid promptly when due, Guarantor will promptly after notice thereof and within
the time period set forth in the Note for the making of payment of any such
sums, pay the same to the person entitled thereto pursuant to the Note
regardless of (a) whether Holder shall have taken any steps to enforce any
rights against ET Sub or any other person liable therefor to collect such sum or
any part thereof, (b) the termination of the Note as a result of the default of
ET Sub thereunder, or (c) any other condition or contingency which would not
exonerate Guarantor from liability under the Note if it were the maker
thereunder. Guarantor also agrees to pay to Holder such further amounts as shall
be sufficient to cover the cost and expense of collecting such sums or any part
thereof or of otherwise enforcing this Guaranty, including, without limitation,
reasonable attorneys' fees.
2. No Impairment. The obligations, covenants and agreements of
Guarantor under this Guaranty shall in no way be affected or impaired by reason
of the happening from time to time of any of the following, although without
notice to or the further consent of Guarantor:
(a) the waiver by Holder of the performance or observance by
Guarantor, ET Sub or any other party of any of the agreements, covenants or
conditions contained in the Note or this Guaranty;
(b) the extension, in whole or in part, of the time for
payment by Guarantor or ET Sub of any sums owing or payable under the Note or
this Guaranty, or of any other sums or obligations under or arising out of or on
account of the Note or this Guaranty, or the renewal of the Note or this
Guaranty;
(c) the modification or amendment (whether material or
otherwise) of any of the obligations of Guarantor or ET Sub under the Note or
this Guaranty;
(d) the doing or the omission of any of the acts referred to
in the Note or this Guaranty (including, without limitation, the giving of any
consent referred to therein);
<PAGE>
(e) any failure, omission or delay on the part of Holder to
enforce, assert or exercise any right, power or remedy conferred on or available
to Holder in or by the Note or this Guaranty, or any action on the part of
Holder granting indulgence or extension in any form whatsoever;
(f) the voluntary or involuntary liquidation, dissolution,
sale of all or substantially all of the assets, marshaling of assets and
liabilities, receivership, conservatorship, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition or
readjustment of, or other similar proceeding affecting ET Sub or Guarantor or
any of their respective assets; or
(g) the release of Guarantor or ET Sub from the performance or
observance of any of the agreements, covenants, terms or conditions contained in
the Note or this Guaranty by operation of law.
3. Warranties and Representations. Guarantor warrants and represents to
Holder for the express purpose of inducing Holder to enter into the Note and to
accept this Guaranty, as follows:
(a) Organization and Qualification. Guarantor is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. Guarantor has the requisite power and authority to
carry on its business as it is now being conducted and to deliver this Guaranty.
Guarantor has made available to Holder complete and correct copies of the
governing documents of Guarantor, with all amendments as in effect on the date
of this Guaranty. Guarantor is qualified to do business and is in good standing
in each jurisdictions where the character of its property owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have a material
adverse effect on the business or financial condition of Guarantor or on this
Guaranty.
(b) Authority Relative to this Guaranty. All action necessary
to authorize the execution, delivery and performance of this Guaranty by
Guarantor has been taken, and no other proceedings are necessary to authorize
the execution and delivery by Guarantor of this Guaranty and the Guarantor's
performance hereunder.
Neither the execution and delivery of this Guaranty
by Guarantor, nor the compliance by Guarantor with any of the provisions hereof
will (i) conflict with or result in any breach of any provisions of the
organizational documents of Guarantor, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, permit, contract, Guaranty, restriction or other
instrument or obligation to which Guarantor is a party or by which Guarantor may
be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Guarantor, except in the case of (ii) or (iii) for
violations, breaches, or defaults which would not in the aggregate have a
material adverse effect on the business or financial condition of Guarantor.
(c) Binding Obligation. This Guaranty has been duly and
validly executed and delivered by Guarantor to Holder and constitutes a valid
and binding Guaranty of Guarantor, enforceable against Guarantor in accordance
with its terms, except that such enforcement may be subject to bankruptcy,
conservatorship, receivership, insolvency, moratorium or similar laws affecting
creditors' rights generally or the rights of creditors of Guarantor and to
general principles of equity.
(d) Solvency. Guarantor is solvent and is not rendered
insolvent by the obligations undertaken in this Guaranty. Guarantor is not
contemplating either the filing of a petition or proceeding under any state or
federal bankruptcy or insolvency or reorganization laws or the liquidating of
all or a major portion of Guarantor's property, and Guarantor has no knowledge
of any such petition or proceeding being filed against such Guarantor.
4. Governing Law. This Guaranty shall be construed in accordance with
the laws of the State of Maryland (but not including the choice of law rules
thereof).
5. No Oral Change. This Guaranty may not be modified or amended except
by a written agreement duly executed by Guarantor and Holder.
<PAGE>
6. Primary Liability. Guarantor's liability hereunder shall be primary
and not secondary, and shall be joint and several with that of ET Sub. Holder
may proceed against Guarantor under this Guaranty without initiating or
exhausting its remedy or remedies against ET Sub, and may proceed against
Guarantor and/or ET Sub separately or concurrently.
7. Waivers.
(a) Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any obligations or liabilities contracted or incurred by
ET Sub.
(b) Guarantor may not assert any claim, right or remedy which
Guarantor may now have or hereafter acquire against ET Sub that arises hereunder
and/or from the performance by Guarantor hereunder including, without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim, right
or remedy of Holder against the ET Sub or any security which Holder now has or
hereafter acquires, whether or not such claim, right or remedy arises in equity,
under contract, by statute, under common law or otherwise, prior to the
expiration or earlier termination of the Note and the satisfaction in full of
all obligations of ET Sub under the Note; provided, that Guarantor may give to
ET Sub any notices necessary to preserve such claims, rights or remedies.
(c) Guarantor waives (a) any right to require Holder to
proceed against ET Sub to obtain payment; (b) any right to require Holder to
proceed against or exhaust any security held from ET Sub; (c) any right to
require Holder to pursue any other remedy in Holder's power; (d) any right to
receive any notices in connection with the existence, creation or nonpayment of
any sums due under the Note including, without limitation, any notice of
acceptance by Holder; (e) presentment, demand, notice of dishonor and protest;
(f) any defense arising by reason of any disability or by reason of the
cessation of the liability of ET Sub for any reason; (g) any benefit of and any
right to participate in any security held by Holder now or in the future; (h)
any defense based upon diligence in collection of or realization upon sums due
under the Note; (i) any defense arising by reason of any disability incapacity,
lack of authority or death of any other person or the failure of Holder to file
or enforce a claim against the estate (in administration, bankruptcy, or any
other proceeding) of any other person; and (j) any defense based upon an
election of remedies based upon any notice or demand of any kind that may be
required to be given by any statute or rule of law, or by any of the agreements
between ET Sub and Holder.
8. Notices. Any notice which Holder may elect to send to Guarantor
shall be binding upon Guarantor if mailed to Guarantor at the address set forth
above or such other address as Guarantor may, in writing, make known to Holder,
by United States Certified or Registered Mail, Return Receipt Requested by
overnight mail or by hand delivery with signed receipt.
9. Parties Bound. This Guaranty shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns.
10. Termination of Guaranty. Notwithstanding any contrary provision of
this Guaranty, this Guaranty shall terminate and be of no further force and
effect upon the payment in full of the Note.
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed
as of the date first above written.
WITNESS: GUARANTOR:
ELDERTRUST OPERATING LIMITED PARTNERSHIP
By: ElderTrust, a Maryland real estate
investment trust
By: /s/ D. Lee McCreary, Jr.
-----------------------------------------
D. Lee McCreary, Jr.
Chief Financial Officer
STATE OF NEW YORK: _________ )
_________ ) to-wit:
COUNTY OF NEW YORK: _________ )
The foregoing instrument was acknowledged before me this 3d day of
September, 1998, by D. Lee McCreary as Chief Financial Officer of ElderTrust,
general partner of Eldertrust Operating Limited Partnership, a Delaware limited
partnership, on behalf of the partnership.
----------------------------------
Notary Public
My Commission Expires:
-----------------------------------------------
<PAGE>
EXHIBIT 10.6
PROMISSORY NOTE
$8,500,000 September 3, 1998
FOR VALUE RECEIVED, ET SUB-MERIDIAN LIMITED PARTNERSHIP,
L.L.P., a Virginia limited partnership ("Maker"), promises to pay to the order
of Meridian Healthcare, Inc. ("Holder") at 148 West State Street, Kennett
Square, Pennsylvania 19348 or at such other place as Holder of this Note may
from time to time designate, the principal amount of EIGHT MILLION FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($8,500,000), together with interest on the unpaid
principal amount hereof from the date hereof until paid in full, payable in the
manner and at the times as hereinafter provided.
1. Payment of Interest; Principal and Maturity Date. This Note shall
bear interest on the unpaid principal amount hereof at a rate per annum
(computed on the basis of a 360 day year and of the actual number of days
elapsed) as follows (the "Applicable Interest Rate"):
(i) for the period commencing on the date
hereof and ending on September 3, 1999, a
rate per annum equal to eight percent (8%);
(ii) for the period commencing on September
1, 1999 and ending on September 3, 2000, a
rate per annum equal to nine percent (9%);
and
(iii) from and after September 3, 2000, a
rate per annum equal to ten percent (10%).
From and after the date hereof, through and including the day on which this Note
is paid in full, Maker shall pay to Holder monthly in arrears commencing on the
first day of October, 1998 and on the first day of each and every month
thereafter (such date in any particular month being referred to as the "Due
Date"), payments of interest only in the amount of interest accrued for the
preceding month on the unpaid principal amount at the Applicable Interest Rate.
Maker shall repay the outstanding principal balance of this Note as follows: (i)
on September 3, 1999, Maker shall pay to Holder the sum of Three Million Five
Hundred Thousand Dollars ($3,500,000) as a prepayment of the outstanding
principal balance hereof and (ii) the entire unpaid principal balance of this
Note, together with all accrued and unpaid interest shall be due and payable in
full on September 3, 2003 (the "Maturity Date"). All payments hereunder shall be
made in lawful money of the United States of America, without offset.
2. Prepayment. The unpaid principal amount of this Note may be prepaid
in whole or in part on any Due Date, without premium or penalty. Principal paid
or prepaid shall not be advanced again by Holder to Maker. No prepayment shall
entitle any person to be subrogated to the rights of Holder unless and until
this Note has been paid in full.
3. Default. The failure to pay the principal, any interest or any other
sum payable hereunder (whether upon the Maturity Date hereof, upon any interest
payment date, upon acceleration or otherwise) within five (5) days after written
notice from Holder of failure to pay any such sum when due shall constitute an
event of default ("Event of Default") hereunder.
Upon the occurrence of any such Event of Default hereunder, at the option of
Holder, the entire principal amount hereof, and all accrued and unpaid interest
thereon, shall be accelerated and shall be immediately due and payable without
demand or notice, interest shall be due on such overdue amounts (including
overdue interest) from its due date to the date on which it is paid at a rate
equal to the Applicable Interest Rate plus two percent (2%) (the "Default
Rate"), and in addition thereto, and not in substitution therefor, Holder shall
be entitled to exercise any one or more of the rights and remedies provided by
applicable law. Failure to exercise such option or to pursue such other remedies
shall not constitute a waiver of such option or such other remedies or of the
right to exercise any of the same in the event of any subsequent Event of
Default hereunder.
<PAGE>
4. Late Charges; Costs and Expenses. In the event Maker fails to fully
pay any installment of interest or otherwise fails to repay this Note within
five (5) business days of the Maturity Date, Maker agrees to pay Holder, at
Holder's option, on demand a late charge of five percent (5%) of the scheduled
payment. Holder may, at its option, apply any late payment (either full or
partial) in the following manner: first to interest, then to principal, and
finally to any late charges.
5. No Waiver by Holder. No single or partial exercise by Holder of any
right hereunder, or under any agreement given as security for this Note or
pertaining hereto, shall preclude any other or further exercise thereof or the
exercise of any other rights. No delay or omission on the part of Holder in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note.
6. Interest Not to Exceed Maximum Permitted by Law. This Note and all
agreements between Maker and Holder relating hereto are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of acceleration
or otherwise, shall the amount paid or agreed to be paid to Holder for the use,
forbearance or detention of money hereunder exceed the maximum amount
permissible under applicable law. If from any circumstance whatsoever
fulfillment of any provision hereof, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then, ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity, and if from any such circumstance Holder shall ever
receive interest, or any thing which might be deemed interest under applicable
law, which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal amount
owing on account of this Note and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of this Note, such
excess shall be refunded to Maker; and if any clause or provision contained in
this Note operates or would prospectively operate to invalidate this Note, then
such clause or provision only shall be held ineffective as though not herein
contained, and the remainder of this Note shall remain operative and in full
force and effect. All sums paid or agreed to be paid to Holder for the use,
forbearance or detention of the indebtedness of Maker to Holder shall, to the
extent permitted by applicable law, be deemed to be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of such indebtedness is
uniform throughout the term thereof. The terms and provisions of this paragraph
shall control and supersede every other provision of this Note and all other
agreements between Maker and Holder.
7. Date of Performance. Any payment on this Note coming due on a
Saturday, a Sunday, or a day which is a legal holiday in the place at which a
payment is to be made hereunder shall be made on the next succeeding day which
is a business day in such place, and any such extension of the time of payment
shall be included in the computation of interest hereunder.
8. Use of Proceeds. Maker hereby declares, represents and warrants that
the proceeds of the indebtedness evidenced hereby will be used only for business
purposes.
9. References. Whenever used herein, the words "Maker" and "Holder"
shall be deemed to include their respective successors and assigns.
10. Governing Law. This Note shall be governed by and construed under
and in accordance with the laws of the State of Maryland (but not including the
choice of law rules thereof).
<PAGE>
11. Limitation of Recourse. Holder agrees that no partner or member of
Maker (other than ElderTrust, a Maryland real estate investment trust
("ElderTrust"), the general partner of Maker) will have any personal or
corporate liability to Holder with respect to this Note or any obligation or
liability arising therefrom or in connection therewith. Holder shall not seek a
deficiency judgment against any partner (other than ElderTrust) or member of
Maker (in its personal or corporate capacity) or against any officer, director,
shareholder, employee, partner or member of a partnership, corporation or
limited liability company which is a partner or member in Maker and will not
seek or have recourse to the personal or corporate assets of any partner or
member of Maker (other than Eldertrust) or of any officer, director,
shareholder, employee or partner of a partnership or corporation which is a
partner or member in Maker.
12. Waiver. Maker and all sureties, endorsers, guarantors and any other
party now or hereafter liable for the payment of this Note in whole or in part,
hereby severally (i) waive demand, presentment for payment, notice of dishonor
and of nonpayment, protest, notice of protest, notice of intent to accelerate,
notice of acceleration and all other notices (except any notices which are
specifically required by this Note), filing of suit and diligence in collecting
this Note or enforcing any of the security herefor; (ii) agree to any
substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon; (iii) agree that
the holder hereof shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or to
perfect or enforce its rights against them or any security herefor; (iv) consent
to any extensions or postponements of time of payment of this Note for any
period or periods of time and to any partial payments, before or after maturity,
and to any other indulgences with respect hereto, without notice thereof to any
of them; (v) waive the benefit of all homestead and similar exemptions as to
this Note; (vi) agree that their liability under this Note shall not be affected
or impaired by any determination that any security interest or lien taken by
Holder to secure this Note is invalid or unperfected; and (viii) hereby
subordinate any and all rights against Maker and any of the security for the
payment of this Note, whether by subrogation, agreement or otherwise, until this
Note is paid in full
[SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed as of the day and year first hereinabove set forth.
MAKER:
ET SUB-MERIDIAN LIMITED PARTNERSHIP, L.L.P.
By: ET Meridian, L.L.C.,
General Partner
By: /s/ D. Lee McCreary, Jr.
---------------------------------
D. Lee McCreary, Jr.
Vice President
