Exhibit 10.1

 

FIRST AMENDMENT TO THE

AGREEMENT OF LIMITED PARTNERSHIP OF

GLOBAL MEDICAL REIT L.P.

 

DESIGNATION OF 7.50% SERIES A

CUMULATIVE REDEEMABLE PREFERRED UNITS

 

September 14, 2017

 

Pursuant to Sections 4.02 and 11.01 of the Agreement of Limited Partnership of
Global Medical REIT L.P. (the “Partnership Agreement”), the General Partner
hereby amends the Partnership Agreement as follows in connection with the
issuance of up to 3,105,000 shares of 7.50% Series A Cumulative Redeemable
Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) of
the Parent REIT and the issuance to the Parent REIT of Series A Preferred Units
(as defined below) in exchange for the contribution by the Parent REIT of the
net proceeds from the issuance and sale of the Series A Preferred Stock:

 

1.             Designation and Number. A series of Preferred Units (as defined
below), designated the “7.50% Series A Cumulative Redeemable Preferred Units”
(the “Series A Preferred Units”), is hereby established. The number of
authorized Series A Preferred Units shall be 3,105,000.

 

2.             Defined Terms. Capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in the Partnership
Agreement. The following defined terms used in this Amendment to the Partnership
Agreement shall have the meanings specified below:

 

“Articles Supplementary” means the Articles Supplementary of the Parent REIT
filed with the State Department of Assessments and Taxation of the State of
Maryland, designating the terms, rights and preferences of the Series A
Preferred Stock.

 

“Base Liquidation Preference” shall have the meaning provided in Section 6.

 

“Business Day” shall have the meaning provided in the Articles Supplementary.

 

“Change of Control” shall have the meaning provided in the Articles
Supplementary.

 

“Change of Control Conversion Date” shall have the meaning provided in the
Articles Supplementary.

 

“Change of Control Conversion Right” shall have the meaning provided in Section
9(b).

 

“Common Stock” means shares of the Parent REIT’s common stock, par value $0.001
per share.

 

“Common Stock Price” shall have the meaning provided in the Articles
Supplementary.

 

“Common Stock Conversion Consideration” shall have the meaning provided in the
Articles Supplementary.

 

 

 

 

“Common Unit Economic Balance” shall have the meaning provided in Section 10(g).

 

“Conversion Consideration” shall have the meaning provided in Section 9(d).

 

“Distribution Record Date” shall have the meaning provided in Section 5(a).

 

“Economic Capital Account Balance” shall have the meaning provided in Section
10(g).

 

“Junior Units” shall have the meaning provided in Section 4.

 

“Liquidating Gains” shall have the meaning provided in Section 10(g).

 

“Loss” shall have the meaning provided in Section 10(h).

 

“Net Operating Income” shall have the meaning provided in Section 10(f).

 

“Original Issue Date” shall have the meaning provided in the Articles
Supplementary.

 

“Parity Preferred Units” shall have the meaning provided in Section 4.

 

“Partnership Agreement” shall have the meaning provided in the recital above.

 

“Preferred Units” means all Partnership Interests designated as preferred units
by the General Partner from time to time in accordance with Section 4.02 of the
Partnership Agreement.

 

“Profit” shall have the meaning provided in Section 10(h).

 

“Record Date” shall have the meaning provided in the Articles Supplementary.

 

“Redemption Date” shall have the meaning provided in Section 7(b)(iii).

 

“Regular Redemption Right” shall have the meaning provided in Section 7(b)(i).

 

“Series A Preferred Distribution Payment Date” shall have the meaning provided
in Section 5(a).

 

“Series A Preferred Return” shall have the meaning provided in Section 5(a).

 

“Series A Preferred Stock” shall have the meaning provided in the recital above.

 

“Series A Preferred Units” shall have the meaning provided in Section 1.

 

3.             Maturity. The Series A Preferred Units have no stated maturity
and will not be subject to any sinking fund or mandatory redemption.

 

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4.             Rank. The Series A Preferred Units will, with respect to
distribution rights and rights upon liquidation, dissolution or winding up of
the Partnership, rank (a) senior to all classes or series of Common Units and
LTIP Units of the Partnership and any class or series of Preferred Units
expressly designated as ranking junior to the Series A Preferred Units as to
distribution rights and rights upon liquidation, dissolution or winding up of
the Partnership (together with the Common Units and the LTIP Units, the “Junior
Units”); (b) on a parity with any class or series of Preferred Units issued by
the Partnership expressly designated as ranking on a parity with the Series A
Preferred Units, as to distribution rights and rights upon liquidation,
dissolution or winding up of the Partnership (the “Parity Preferred Units”); and
(c) junior to any class or series of Preferred Units issued by the Partnership
expressly designated as ranking senior to the Series A Preferred Units with
respect to distribution rights and rights upon liquidation, dissolution or
winding up of the Partnership. The term “Preferred Units” does not include
convertible or exchangeable debt securities of the Partnership, which will rank
senior to the Series A Preferred Units prior to conversion or exchange. The
Series A Preferred Units will also rank junior in right or payment to the
Partnership’s existing and future indebtedness.

 

5.             Distributions.

 

(a)          Subject to the preferential rights of holders of any class or
series of Preferred Units of the Partnership expressly designated as ranking
senior to the Series A Preferred Units as to distributions, the holders of
Series A Preferred Units shall be entitled to receive, when, as and if
authorized by the General Partner and declared by the Partnership, out of funds
of the Partnership legally available for payment of distributions, cumulative
cash distributions at the rate of 7.50% per annum of the Base Liquidation
Preference (as defined below) per unit (equivalent to a fixed annual amount of
$1.875 per unit) (the “Series A Preferred Return”) from and including the
Original Issue Date (or the first day following the end of the most recent
distribution period for which distributions on the Series A Preferred Units have
been paid). Distributions on the Series A Preferred Units shall accrue and be
cumulative from (and including) the Original Issue Date, and shall be payable
quarterly, in equal amounts, in arrears, on or about January 31, April 30, July
31, and October 31 of each year (or, if not a Business Day, the next succeeding
Business Day (each a “Series A Preferred Distribution Payment Date”) for the
period ending on such Series A Preferred Distribution Payment Date, commencing
on October 31, 2017. The amount of any distribution payable on the Series A
Preferred Units for any partial distribution period will be computed on the
basis of twelve 30-day months and a 360-day year (it being understood that the
distribution payable on October 31, 2017, will be for less than the full
quarterly period). Distributions will be payable to holders of record of the
Series A Preferred Units as they appear on the records of the Partnership on the
Record Date (each, a “Distribution Record Date”). The distributions payable on
any Series A Preferred Distribution Payment Date shall include distributions
accumulated from the most recent Series A Preferred Distribution Payment Date
(or, if none, the Original Issue Date) to, but not including, the next Series A
Preferred Distribution Payment Date. Distributions payable on the Series A
Preferred Units for each full distribution period will be computed by dividing
the applicable annual Series A Preferred Return by four. After full cumulative
distributions on the Series A Preferred Units have been paid or declared and
funds therefor set aside for payment with respect to a distribution period, the
holders of Series A Preferred Units will not be entitled to any further
distributions with respect to that distribution period.

 

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(b)          No distributions on the Series A Preferred Units shall be
authorized by the General Partner or declared, paid or set apart for payment by
the Partnership at such time as the terms and provisions of any agreement of the
General Partner or the Partnership, including any agreement relating to the
indebtedness of either of them, prohibits such authorization, declaration,
payment or setting apart for payment or provides that such declaration, payment
or setting apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration or payment shall be restricted or prohibited
by law.

 

(c)          Notwithstanding anything to the contrary contained herein,
distributions on the Series A Preferred Units will accrue whether or not the
restrictions referred to in Section 5(b) exist, whether or not the Partnership
has earnings, whether or not there are funds legally available for the payment
of such distributions and whether or not such distributions are authorized or
declared. No interest, or sum of money in lieu of interest, will be payable in
respect of any distribution on the Series A Preferred Units which may be in
arrears. When distributions are not paid in full upon the Series A Preferred
Units and any Parity Preferred Units (or a sum sufficient for such full payment
is not so set apart), all distributions declared upon the Series A Preferred
Units and any Parity Preferred Units shall be declared pro rata so that the
amount of distributions declared per Series A Preferred Unit and such Parity
Preferred Units shall in all cases bear to each other the same ratio that
accumulated distributions per Series A Preferred Unit and such Parity Preferred
Units (which shall not include any accrual in respect of unpaid distributions
for prior distributions periods if such Parity Preferred Units do not have a
cumulative distribution) bear to each other.

 

(d)          Except as provided in the immediately preceding paragraph, unless
full cumulative distributions on the Series A Preferred Units have been or
contemporaneously are declared and paid in cash or declared and a sum sufficient
for the payment thereof is set apart for payment for all past distribution
periods that have ended, no distributions (other than a distribution in Junior
Units or in options, warrants or rights to subscribe for or purchase any such
Junior Units) shall be declared and paid or declared and set apart for payment
nor shall any other distribution be declared and made upon the Junior Units or
the Parity Preferred Units, nor shall any Junior Units or Parity Preferred Units
be redeemed, purchased or otherwise acquired for any consideration (or any
monies be paid to or made available for a sinking fund for the redemption of any
such Units) by the Partnership (except (i) by conversion into or exchange for
Junior Units, (ii) the purchase of Series A Preferred Units, Junior Units or
Parity Preferred Units in connection with a redemption of stock pursuant to the
Articles Supplementary to the extent necessary to preserve the Parent REIT’s
qualification as a REIT or (iii) the purchase of Parity Preferred Units pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding Series A Preferred Units). Holders of the Series A Preferred Units
shall not be entitled to any distribution, whether payable in cash, property or
units, in excess of full cumulative distributions on the Series A Preferred
Units as provided above. Any distribution made on the Series A Preferred Units
shall first be credited against the earliest accrued but unpaid distribution due
with respect to such units which remains payable. Accrued but unpaid
distributions on the Series A Preferred Units will accrue as of the Series A
Preferred Distribution Payment Date on which they first become payable.

 

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(e)          For the avoidance of doubt, in determining whether a distribution
(other than upon voluntary or involuntary liquidation) by distribution,
redemption or other acquisition of the Partnership Units is permitted under
Delaware law, no effect shall be given to the amounts that would be needed, if
the Partnership were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon distribution of holders of Partnership Units whose
preferential rights are superior to those receiving the distribution.

 

6.             Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Partnership, the
holders of Series A Preferred Units are entitled to be paid out of the assets of
the Partnership legally available for distribution to its partners, after
payment of or provision for the Partnership’s debts and other liabilities, a
liquidation preference of $25.00 per unit (the “Base Liquidation Preference”),
plus an amount equal to any accrued but unpaid distributions (whether or not
authorized or declared) thereon to, but not including, the date of payment, but
without interest, before any distribution of assets is made to holders of Junior
Units. If the assets of the Partnership legally available for distribution to
partners are insufficient to pay in full the liquidation preference on the
Series A Preferred Units and the liquidation preference on any Parity Preferred
Units, all assets distributed to the holders of the Series A Preferred Units and
any Parity Preferred Units shall be distributed pro rata so that the amount of
assets distributed per Series A Preferred Unit and such Parity Preferred Units
shall in all cases bear to each other the same ratio that the liquidation
preference per Series A Preferred Unit and such Parity Preferred Units bear to
each other. Notice of any distribution in connection with any such liquidation,
dissolution or winding up of the affairs of the Partnership, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given not less than 30 nor more
than 60 days prior to the payment date stated therein, to each record holder of
the Series A Preferred Units at the respective addresses of such holders as the
same shall appear on the records of the Partnership. After payment of the full
amount of the liquidating distributions to which they are entitled, the holders
of Series A Preferred Units will have no right or claim to any of the remaining
assets of the Partnership. The consolidation or merger of the Partnership with
or into another entity, a merger of another entity with or into the Partnership,
a statutory exchange by the Partnership or a sale, lease, transfer or conveyance
of all or substantially all of the Partnership’s property or business shall not
be deemed to constitute a liquidation, dissolution or winding up of the affairs
of the Partnership.

 

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7.             Redemption.

 

(a)          The Series A Preferred Units are not redeemable except as otherwise
provided in this Section 7.

 

(b)          In connection with any redemption by the Parent REIT of any shares
of Series A Preferred Stock pursuant to Section 6 of the Articles Supplementary,
the Partnership shall redeem, on the date of such redemption, an equal number of
Series A Preferred Units held by the Parent REIT. As consideration for the
redemption of such Series A Preferred Units, the Partnership shall deliver to
the Parent REIT an amount of cash equal to the amount of cash paid by the Parent
REIT to the holder of such shares of Series A Preferred Stock in connection with
the redemption thereof.

 

8.             Voting Rights. Holders of the Series A Preferred Units will not
have any voting rights.

 

9.             Conversion.

 

(a)          The Series A Preferred Units are not convertible or exchangeable
for any other property or securities except as otherwise provided in this
Section 9.

 

(b)          In the event that a holder of Series A Preferred Stock of the
Parent REIT exercises its right to convert the Series A Preferred Stock into
Common Stock of the Parent REIT in accordance with the terms of the Articles
Supplementary, then, concurrently therewith, an equivalent number of Series A
Preferred Units of the Partnership held by the Parent REIT shall be
automatically converted into a number of Common Units of the Partnership equal
to the number of shares of Common Stock issued upon conversion of such Series A
Preferred Shares; provided, however, that if a holder of Series A Preferred
Stock of the Parent REIT receives cash or other consideration in addition to or
in lieu of Common Stock in connection with such conversion, then the Parent
REIT, as the holder of the Series A Preferred Units, shall be entitled to
receive cash or such other consideration equal (in amount and form) to the cash
or other consideration to be paid by the Parent REIT to such holder of the
Series A Preferred Stock. Any such conversion will be effective at the same time
the conversion of Series A Preferred Stock into Common Stock is effective.

 

(c)          No fractional units will be issued in connection with the
conversion of Series A Preferred Units into Common Units. In lieu of fractional
Common Units, the Parent REIT shall be entitled to receive a cash payment in
respect of any fractional unit in an amount equal to the fractional interest
multiplied by the Common Stock Price used in determining the Common Stock
Conversion Consideration under the Articles Supplementary.

 

10.           Allocation of Profit and Loss.

 

Section 5.01 of the Partnership Agreement is hereby deleted in its entirety and
the following new Section 5.01 is inserted in its place:

 

(a)         Profit. After giving effect to the special allocations set forth in
Section 5.01(c), (d), and (e) hereof, and subject to Section 5.01(f), Profit of
the Partnership for each fiscal year of the Partnership shall be allocated to
the Partners in accordance with their respective Percentage Interests.

 

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(b)          Loss. After giving effect to the special allocations set forth in
Section 5.01(c), (d), and (e) hereof, and subject to Section 5.01(f), Loss of
the Partnership for each fiscal year of the Partnership shall be allocated to
the Partners in accordance with their respective Percentage Interests.

 

(c)         Minimum Gain Chargeback. Notwithstanding any provision to the
contrary, (i) any expense of the Partnership that is a “nonrecourse deduction”
within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in
accordance with the Partners’ respective Percentage Interests, (ii) any expense
of the Partnership that is a “partner nonrecourse deduction” within the meaning
of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that
bears the “economic risk of loss” of such deduction in accordance with
Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in
Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1)
for any Partnership taxable year, then, subject to the exceptions set forth in
Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income
shall be allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j),
and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership
taxable year, then, subject to the exceptions set forth in Regulations Section
1.704(2)(g), items of gain and income shall be allocated among the Partners in
accordance with Regulations Section 1.704-2(i)(4) and the ordering rules
contained in Regulations Section 1.704-2(j). The manner in which it is
reasonably expected that the deductions attributable to nonrecourse liabilities
will be allocated for purposes of determining a Partner’s share of the
nonrecourse liabilities of the Partnership within the meaning of Regulations
Section 1.752-3(a)(3) shall be in accordance with a Partner’s Percentage
Interest.

 

(d)          Qualified Income Offset. If a Partner receives in any taxable year
an adjustment, allocation or distribution described in subparagraphs (4), (5) or
(6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a
deficit balance in such Partner’s Capital Account that exceeds the sum of such
Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g)
and 1.704-2(i), such Partner shall be allocated specially for such taxable year
(and, if necessary, later taxable years) items of income and gain in an amount
and manner sufficient to eliminate such deficit Capital Account balance as
quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).
After the occurrence of an allocation of income or gain to a Partner in
accordance with this Section 5.01(d), to the extent permitted by Regulations
Section 1.704-1(b), items of expense or loss shall be allocated to such Partner
in an amount necessary to offset the income or gain previously allocated to such
Partner under this Section 5.01(d).

 

(e)          Capital Account Deficits. Loss shall not be allocated to a Limited
Partner to the extent that such allocation would cause a deficit in such
Partner’s Capital Account (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of
such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain. Any Loss in excess of that limitation shall be allocated to the
General Partner. After the occurrence of an allocation of Loss to the General
Partner in accordance with this Section 5.01(e), to the extent permitted by
Regulations Section 1.704-1(b), Profit shall be allocated to such Partner in an
amount necessary to offset the Loss previously allocated to each Partner under
this Section 5.01(e).

 

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(f)         Priority Allocations With Respect To Preferred Units. After giving
effect to the allocations set forth in Sections 5.01(c), (d), and (e) hereof,
but before giving effect to the allocations set forth in Sections 5.01(a) and
5.01(b), Net Operating Income shall be allocated to the Parent REIT until the
aggregate amount of Net Operating Income allocated to the Parent REIT under this
Section 5.01(f) for the current and all prior years equals the aggregate amount
of the Series A Preferred Return paid to the Parent REIT for the current and all
prior years; provided, however, that the General Partner may, in its discretion,
allocate Net Operating Income based on accrued Series A Preferred Return with
respect to the January Series A Preferred Distribution Payment Date if the
General Partner sets the Distribution Record Date for such Series A Preferred
Distribution Payment Date on or prior to December 31 of the previous year. For
purposes of this Section 5.01(f), “Net Operating Income” means the excess, if
any, of the Partnership’s gross income over its expenses (but not taking into
account depreciation, amortization, or any other noncash expenses of the
Partnership), calculated in accordance with the principles of Section 5.01(h)
hereof.

 

(g)          Special Allocations Regarding LTIP Units. Notwithstanding the
provisions of Sections 5.01(a) and (b) hereof, Liquidating Gains shall first be
allocated to the LTIP Unitholders until their Economic Capital Account Balances,
to the extent attributable to their ownership of LTIP Units, are equal to (i)
the Common Unit Economic Balance, multiplied by (ii) the number of their LTIP
Units. For this purpose, “Liquidating Gains” means net capital gains realized in
connection with the actual or hypothetical sale of all or substantially all of
the assets of the Partnership, including but not limited to net capital gain
realized in connection with an adjustment to the value of Partnership assets
under Section 704(b) of the Code. The “Economic Capital Account Balances” of the
LTIP Unitholders will be equal to their Capital Account balances plus shares of
Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain (after
reduction to reflect the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to the extent attributable to their
ownership of LTIP Units. Similarly, the “Common Unit Economic Balance” shall
mean (i) the Capital Account balance of the Parent REIT, plus the amount of the
Parent REIT’s share of any Partner Nonrecourse Debt Minimum Gain or Partnership
Minimum Gain (after reduction to reflect the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)), in either case to the extent
attributable to the Parent REIT’s direct or indirect ownership of Common Units
and computed on a hypothetical basis after taking into account all allocations
through the date on which any allocation is made under this Section 5.01(g),
divided by (ii) the number of Common Units directly or indirectly owned by the
Parent REIT. Any such allocations shall be made among the LTIP Unitholders in
proportion to the amounts required to be allocated to each under this Section
5.01(g). The parties agree that the intent of this Section 5.01(g) is to make
the Capital Account balance associated with each LTIP Unit to be economically
equivalent to the Capital Account balance associated with Common Units directly
or indirectly owned by the Parent REIT (on a per-Unit basis).

 

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(h)          Definition of Profit and Loss. “Profit” and “Loss” and any items of
income, gain, expense or loss referred to in this Agreement shall be determined
in accordance with federal income tax accounting principles, as modified by
Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not
include items of income, gain and expense that are specially allocated pursuant
to Sections 5.01(c), 5.01(d), 5.01(e), or 5.01(f) hereof. All allocations of
income, Profit, gain, Loss and expense (and all items contained therein) for
federal income tax purposes shall be identical to all allocations of such items
set forth in this Section 5.01, except as otherwise required by Section 704(c)
of the Code and Regulations Section 1.704-1(b)(4). With respect to properties
acquired by the Partnership, the General Partner shall have the authority to
elect the method to be used by the Partnership for allocating items of income,
gain and expense as required by Section 704(c) of the Code with respect to such
properties, and such election shall be binding on all Partners.

 

(i)          Allocations Between Transferor and Transferee. If a Partner
transfers any part or all of its Partnership Interest, the various items of
Profit and Loss allocable among the Partners during such fiscal year of the
Partnership shall be allocated between the transferor and the transferee Partner
either (i) as if the Partnership’s fiscal year had ended on the date of the
transfer, or (ii) based on the number of days of such fiscal year that each was
a Partner without regard to the results of Partnership activities in the
respective portions of such fiscal year in which the transferor and the
transferee were Partners. The General Partner, in its sole and absolute
discretion, shall determine which method shall be used to allocate the various
items of Profit and Loss between the transferor and the transferee Partner.

 

11.           Except as modified herein, all terms and conditions of the
Partnership Agreement shall remain in full force and effect, which terms and
conditions the General Partner hereby ratifies and confirms.

 

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IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the date
first set forth above.

 

  GENERAL PARTNER:       GLOBAL MEDICAL REIT GP LLC,   a Delaware limited
liability company,       By: GLOBAL MEDICAL REIT INC.,   a Maryland corporation
        By: /s/ Jamie A. Barber   Name: Jamie A. Barber   Title: General Counsel
and Secretary

 

[Signature page for First Amendment to Partnership Agreement – September 2017]