Document:

EXHIBIT 10.5

EXHIBIT 10.5

AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP

OF

GRIFFIN-AMERICAN HEALTHCARE REIT III HOLDINGS, LP

This Amendment to Agreement of Limited Partnership (the “Amendment”) of GRIFFIN-AMERICAN HEALTHCARE REIT III HOLDINGS, LP (the “Partnership”) is entered into as of the 9th day of April, 2013, by GRIFFIN-AMERICAN HEALTHCARE REIT III, INC., a Maryland corporation (the “General Partner”), as general partner of the Partnership, and GRIFFIN-AMERICAN HEALTHCARE REIT III ADVISOR, LLC, a Delaware limited liability company (hereinafter sometimes referred to as the “Advisor”).

BACKGROUND INFORMATION
WHEREAS, each of the Partners has previously executed that certain Agreement of Limited Partnership of Griffin-American Healthcare REIT III Holdings, LP dated January 11, 2013 (the “Partnership Agreement”). The Partners desire to amend the Partnership Agreement as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment, and other good and valuable consideration, the parties covenant and agree as follows:
1.    Capitalized Terms.  All capitalized terms used in this Amendment, not otherwise defined, have the meaning specified for such terms in the Partnership Agreement.
2.     Amendments to Section 1.  Section 1 of the Partnership Agreement is amended by deleting the definition of “8% Return” and replacing it with the following:
“7% Return” means, with respect to the General Partner and Limited Partners (other than the Initial Limited Partner) with respect to Partnership Units issued in connection with the acquisition of the Included Assets, an amount calculated like simple interest at the rate of seven percent (7%) per annum calculated on the varying daily balances of, in the case of the General Partner, Invested Capital, and in the case of such Limited Partners, the Partnership Units issued in connection with the acquisition of the Included Assets, in each case during the period to which the 7% Return relates, and determined on the basis of a 360-day year/30-day month, cumulative for the period for which such 7% Return is being determined.
Section 1 of the Partnership Agreement is further amended by deleting the definition of “8% Return Account” and replacing it with the following:
“7% Return Account” means, with respect to the General Partner, as of any relevant date, an amount equal to the excess of (i) the 7% Return that has accrued with respect to the Invested Capital of the General Partner through such date, over (ii) the sum of (A) the cumulative distributions of Available Operating Cash and Net Sales Proceeds made to the General Partner prior to such relevant date pursuant to Section 5.1 hereof, and (B) the cumulative amounts paid to the General Partner in redemption of its Partnership Units pursuant to Section 8.6(g) as of such date, other than such distributions and payments that are applied to reduce the Unrecovered Contribution Account of the General Partner. All amounts distributed and paid to the General Partner pursuant to Sections 5.1 and 8.6(g) shall first be applied to reduce the Unrecovered Contribution Account of the General Partner until the balance of such Unrecovered Contribution Account equals zero ($0), and then shall be applied to reduce the 7% Return Account of the General Partner. 

        

Section 1 of the Partnership Agreement is further amended by deleting the definition of “Unrecovered Contribution Account” and replacing it with the following:
“Unrecovered Contribution Account” means, with respect to the General Partner, as of any relevant date, the excess of (i) the aggregate amount of cash contributed or deemed contributed by the General Partner to the Partnership pursuant to the provisions of Section 4 as of such date, over (ii) the sum of (A) the cumulative distributions of Available Operating Cash and Net Sales Proceeds made to the General Partner prior to such relevant date pursuant to Section 5.1 hereof, and (B) the cumulative amounts paid to the General Partner in redemption of its Partnership Units pursuant to Section 8.6(g) as of such date. All amounts distributed and paid to the General Partner pursuant to Sections 5.1 and 8.6(g) shall first be applied to reduce the Unrecovered Contribution Account of the General Partner until the balance of such Unrecovered Contribution Account equals zero ($0), and then shall be applied to reduce the 7% Return Account of the General Partner.
3.    Amendment to Section 5.1.  Section 5.1 is hereby deleted and replaced in its entirety with the following:
5.1.    Distributions.
(a)    General. Subject to the provisions of Sections 5.3, 5.4, 8.6(b), 11.6(d), and 13.2, the General Partner shall cause the Partnership to distribute to the Partners as of the applicable Partnership Record Date, at such times as the General Partner shall determine, amounts of Available Operating Cash and Net Sales Proceeds in the manner set forth in this Section 5.1.
(b)    Available Operating Cash. Available Operating Cash shall be distributed to the Partners as determined by the General Partner in its sole and absolute discretion in accordance with their respective Percentage Interests as of the applicable Partnership Record Date. 
(c)    Net Sales Proceeds. Net Sales Proceeds shall be distributed to the Partners as determined by the General Partner in its sole and absolute discretion in accordance with their respective Percentage Interests as of the applicable Partnership Record Date until the Unrecovered Contribution Account and 7% Return Account of the General Partner have been reduced to zero ($0). Thereafter, 15% of any Net Sales Proceeds shall be distributed to the Advisor (in its capacity as Partner) (such distributions, the “Advisor Participation in Sales Proceeds”), and 85% of such Net Sales Proceeds shall be distributed to the Partners as determined by the General Partner in its sole and absolute discretion in accordance with their respective Percentage Interests as of the applicable Partnership Record Date.
(d)    Distribution to Advisor Upon Listing.
(i)    Upon a Listing Event, the Advisor shall no longer be entitled to any distributions of the Advisor Participation in Sales Proceeds under Section 5.1(c). If the Advisor has not been terminated under the Advisory Agreement as of the Listing Date, the Advisor (in its capacity as Partner) shall receive a distribution (“Listing Amount”), which shall be paid within five (5) Business Days of the determination of amount, if any, by which (A) the Market Value plus the cumulative distributions made to the General Partner from the inception of the Partnership through the Listing Date exceeds (B) the sum of (1) the Invested Capital of the General Partner as of the Listing Date, and (2) the 7% Return that has accrued with respect to the Invested Capital of the General Partner from the inception of the Partnership through the Listing Date.
(ii)    The Listing Amount shall be paid, as determined by the General Partner’s board of directors, including a majority of the independent directors, either in the form of cash or REIT Stock with a per share Listed Market Price equal in the aggregate to the Listing Amount. The Advisor agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Stock if the Listing Amount is paid in the form of REIT Stock as provided herein.

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(e)    Distribution to Advisor Upon Termination.
(i)    Upon a Termination Event, the Advisor shall no longer be entitled to any distributions of the Advisor Participation in Sales Proceeds under Section 5.1(c). If a Listing Event has not occurred as of the date of a Termination Event, then the Advisor (in its capacity as Partner) shall receive a distribution (the “Termination Amount”), which shall be paid within five (5) Business Days of the date of such Termination Event, in an amount equal to 15% of the amount, if any, by which (A) the Appraised Value of all of the Partnership Assets as of the date of the Termination Event, less any indebtedness secured by such assets, plus the cumulative distributions made to the General Partner from the inception of the Partnership through the date of the Termination Event, exceeds (B) the sum of (1) the Invested Capital of the General Partner as of such date, and (2) the 7% Return that has accrued with respect to the Invested Capital of the General Partner from the inception of the Partnership through the date of the Termination Event; provided, however, that upon a Termination Event the Advisor, in its sole discretion, may elect, within five (5) Business Days of the date of such Termination Event, to forego a distribution of the Termination Amount upon such Termination Event and instead elect (“Deferred Payment Election”) to receive a deferred termination amount (as calculated below, the “Deferred Termination Amount”), which, notwithstanding any other provisions herein to the contrary, shall exclude the impact of any new Partnership Assets acquired and/or owned by the General Partner or the Partnership (either directly or through third parties) after such Termination Event, other than the Included Assets (such new Partnership Assets other than Included Assets acquired after the Termination Date, the “Separate Asset Value”). The Deferred Termination Amount, if any, shall be paid within five (5) Business Days of the first to occur of (x) a Listing Event or (y) an Other Liquidity Event, in an amount equal to:
(A)    if in connection with a Listing Event, 15% of the amount, if any, by which (I) the Appraised Value as of the Listing Date of the Included Assets, less any indebtedness secured by such assets as of the Listing Date, plus the cumulative distributions made to the General Partner and to any Limited Partners (other than the Initial Limited Partner) with respect to Partnership Units issued in connection with the acquisition of the Included Assets from the inception of the Partnership through the Listing Date, exceeds (II) the sum of (1) the Invested Capital of the General Partner as of the Listing Date (excluding Invested Capital relating to the Separate Asset Value), (2) the capital value of any Partnership Units issued in connection with the acquisition of the Included Assets to the Limited Partners (other than the Initial Limited Partner) as valued by the General Partner as of the date of such issuance, and (3) the 7% Return that has accrued with respect to such Invested Capital of the General Partner and that has accrued to any Limited Partners (other than the Initial Limited Partner) with respect to Partnership Units issued in connection with the acquisition of the Included Assets for the period from the inception of the Partnership through the Listing Date; or
(B)    if in connection with an Other Liquidity Event (except in connection with a Merger, which is addressed in Section 5.1(e)(i)(C) below), after the Unrecovered Contribution Account and 7% Return Account of the General Partner and similar accounts of each Limited Partner (other than the Initial Limited Partner), in each case as of the date of the Other Liquidity Event, have been reduced to zero ($0), 15% of any Net Sales Proceeds received from the Sale of Included Assets shall be distributed to the Advisor (in its capacity as Partner), and 85% of such Net Sales Proceeds shall be distributed to the Partners as determined by the General Partner in its sole and absolute discretion in accordance with their respective Percentage Interests as of the applicable Partnership Record Date; or
(C)    if in connection with an Other Liquidity Event involving a Merger, 15% of the amount, if any, by which (I) the gross agreed upon value of the Partnership’s Included Assets pursuant to any agreement effecting such Merger, less any indebtedness secured by such assets as of the date of the Merger, plus the cumulative distributions made to the General Partner and to any Limited Partners (other than the Initial Limited Partner) with respect to Partnership Units issued in connection with the acquisition of the Included Assets from the inception of the Partnership through the date of the Merger, exceeds (II) the sum of (1) the Invested Capital of the General Partner as of the date of the 

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Merger (excluding Invested Capital relating to the Separate Asset Value), (2) the capital value of any Partnership Units issued in connection with the acquisition of the Included Assets to the Limited Partners (other than the Initial Limited Partner) as valued by the General Partner as of the date of such issuance, and (3) the 7% Return that has accrued with respect to such Invested Capital of the General Partner and that has accrued to any Limited Partners (other than the Initial Limited Partner) with respect to Partnership Units issued in connection with the acquisition of the Included Assets for the period from the inception of the Partnership through the date of the Merger;
Provided further that if the Advisor makes a Deferred Payment Election, the Advisor shall not be entitled to receive any other amounts under Sections 5.1(c) or 5.1(d) following the date of such election.
Notwithstanding any other provisions herein to the contrary, the Advisor acknowledges and agrees that: (i) the Advisor has not received and the General Partner has not provided any assurance or representation of any kind relating to the Deferred Termination Amount; (ii) the Advisor does not have any expectation of any minimum level of the Deferred Termination Amount; (iii) the Advisor shall not have any rights or interests of any kind with respect to the Separate Asset Value; (iv) neither the General Partner nor any director, officer, shareholder, partner, member, employee, trustee, representative or agent of the General Partner shall have any liability or responsibility to the Advisor for any act or omission performed or failed to be performed by it, or for any losses, claims, costs, damages, or liabilities arising from any such act or omission relating to the acquisition, management, operation, or disposition of the Partnership Assets; (v) the General Partner shall have full power, authority, discretion and control with respect to the Partnership Assets; (vi) the Deferred Termination Amount, if any, is and shall be deemed to be a contingent interest; (vii) nothing herein shall in any way limit or restrict the General Partner’s rights to pursue a follow-on offering; and (viii) any rights of the Advisor to the Deferred Termination Amount, if any, are personal to the Advisor and, notwithstanding any other provisions herein to the contrary, may not be assigned by the Advisor except to an Affiliate or successor entity. Nothing herein shall limit the Advisor’s (or its Affiliates’) rights to pursue and engage in other offerings in the same or other asset class(es), subject to the Advisory Agreement. The foregoing provisions are of material importance to the General Partner. The Advisor acknowledges and agrees that the General Partner has agreed to payment of the Deferred Termination Amount (subject to the provisions herein), if any, in reliance of the Advisor’s agreement to the foregoing provisions.
(ii)    Any Termination Amount or Deferred Termination Amount, if any and as applicable, shall be paid, as determined by the General Partner’s board of directors, including a majority of the independent directors, either in the form of cash or the issuance to the Advisor of an interest-bearing promissory note (the “Termination Note”) in an amount equal to the Termination Amount or the Deferred Termination Amount, as applicable; provided, however, in connection with a Merger, the General Partner shall have the right, at its sole discretion, to pay the Deferred Termination Amount, if any, in the form of REIT Stock prior to such Merger or in the form of the stock of the surviving company traded on a national securities exchange, in connection with such Merger. Interest on the Termination Note will accrue beginning on the date that the Termination Amount or Deferred Termination Amount, as applicable, would otherwise be due and payable, at a rate deemed fair and reasonable by the General Partner. In the event the Termination Amount or the Deferred Termination Amount, as applicable, is paid in the form of the Termination Note, the Partnership shall repay the Termination Note using Net Sales Proceeds prior to making any distributions under Section 5.1(c) until the Termination Note is paid in full, including all accrued but unpaid interest. If the Termination Note has not been paid in full within five (5) years after the date of the issuance of the Termination Note, then the General Partner (as determined by the General Partner’s board of directors, including a majority of the independent directors) shall purchase the Termination Note from the Advisor in exchange for either cash or shares of REIT Stock with a Value equal to the aggregate amount outstanding under the Termination Note, including principal and accrued but unpaid interest. The Advisor agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Stock if the Termination Note is purchased with REIT Stock as provided herein.

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(iii)    For the sake of clarity, no special distribution, compensation or remuneration shall be payable by the Partnership (or the General Partner) to the Advisor or any of its Affiliates in connection with any internalization by the Partnership (or the General Partner) of management functions from the Advisor. 
4.    Reaffirmation.  In all other respects, the Partnership shall be governed by the terms and conditions of the Partnership Agreement and its Certificate, as amended, all of which are ratified and confirmed.
5.    Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of such counterparts shall constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto, after first being duly sworn, have affixed their hands and seals the day and year first above written.

	
		
	 
	GENERAL PARTNER:

Griffin-American Healthcare REIT III, Inc.,
a Maryland corporation

By:  /s/ Jeffrey T. Hanson
Name:  Jeffrey T. Hanson
Title:  Chief Executive Officer

	 

	 
	INITIAL LIMITED PARTNER/ADVISOR:
Griffin-American Healthcare REIT III Advisor, LLC, a Delaware limited liability company

By:  /s/ Mathieu B. Streiff
Name:  Mathieu B. Streiff
Title:  Executive Vice President

6syk10.1

2825 Airview Boulevard
Kalamazoo, MI 49002

April 4, 2013

William R. Jellison
1610 Wyndham Drive South
York, PA  17403

Dear Bill,

It is with pleasure that I confirm Stryker Corporation's (“Stryker”) employment offer to you as Vice President and Chief Financial Officer, reporting to Kevin A. Lobo, President and Chief Executive Officer.  As this position is a Corporate Officer role, this offer is subject to final approval by Stryker's Board of Directors.

Your official start date is April 22, 2013.  This letter summarizes your compensation, eligibility for benefits and other required employment documentation.

Your starting annual base salary will be $525,000 payable semi-monthly in accordance with Stryker's regular payroll practices.  Applicable payroll deductions as required by State and Federal law will be withheld from your paycheck, along with any voluntary deductions that you authorize.  

You are scheduled to receive a performance review in March 2014.  You will not receive a merit increase in 2013, but will be eligible to receive a merit increase associated with subsequent reviews, which are conducted on an annual basis.  

Commencing in 2013, you will be eligible for (but not guaranteed) an annual performance bonus based on performance to specific objectives for a given calendar year.  Your full year 2013 bonus potential is 70% of your base salary ($367,500).  For 2013 your bonus will be prorated based on your start date, and is based upon performance to specific objectives for the year.  You and Kevin will develop your 2013 objectives together soon after you begin your employment.  Bonuses are paid in March following the respective bonus year period.  The Compensation Committee of the Board of Directors may choose to apply positive or negative discretion to the total bonus weightings of some or all of the bonus goals.  Any award above the 100% potential is at the Company's discretion and you must be employed on December 31 of the applicable year to receive any portion of this bonus.  You will also receive a hire-on bonus payment of $67,500 (one quarter of the target bonus at your current employer) on July 15, 2013 to compensate you for a prorated portion of any bonus opportunity from your current employer forfeited in 2013.  This hire-on bonus payment will be paid in full upon any termination by the Company without Cause or voluntary termination for Good Reason prior to July 15, 2013.  The hire-on bonus payment includes a requirement that you payback the entire amount of the hire-on bonus payment if you voluntarily terminate prior to two years from April 22, 2013.

In addition, Stryker's President and CEO will recommend that our Board of Directors approve an award to you of stock options and performance stock units (PSUs) under Stryker's Long-Term Incentive Plan in February 2014.  The target amount granted to you under this recommendation will be approximately $1,250,000 in total grant date fair value, comprised of 50% in stock options and 50% in PSUs.  We will also recommend to the Board a one-time, hire-on award to be approved April 30, 2013 with a target amount of approximately $2,100,000 in total grant date fair value, comprised of 50% in stock options and 50% in restricted stock units (RSUs).

Stryker determines grant date fair value for stock options as the number of options times the grant price times a recent accounting valuation of option grants (recently averaging about 25% of the amount resulting from multiplying the number of options times the grant price).  PSUs and RSUs grant date fair value is calculated as the number of units times the grant price.  The grant price will be the closing price on the trading day prior to the grant 

date(s) as required by Stryker's Long-Term Incentive Plan.  Under this recommendation, stock options would have a ten-year term and vest as to 20% of the underlying shares on each of the first five anniversary dates of the grant date.  Vesting of any PSUs occurs on March 21 of the year following the three-year performance cycle with the amount of shares earned subject to the achievement of pre-established performance goals.  The vesting schedule for RSUs will be a three-year “cliff vesting” (100% after the third anniversary of the grant date).  Any outstanding stock awards you have at the time of termination will be subject to the terms and conditions of Stryker's Long-Term Incentive Plans, as amended from time to time by the Company. 

We anticipate that the Board of Directors would consider these recommendations at the next Board meeting following your start date, which is planned for April 30, 2013, and assumes you commence employment with Stryker at least one week prior to that meeting.  If the Board of Directors approves these recommendations at the meeting at their sole discretion, the grant date for your hire-on stock awards would be April 30, 2013.

You are eligible to receive relocation benefits in accordance with Stryker's U.S. Domestic Mobility Program #5, which will include, in addition to other relocation benefits, a lump sum payment in the amount of $18,000.  A summary of these relocation benefits are included within your offer package.  You will be contacted by NEI, Stryker's relocation partner, to provide you with a high level overview of your relocation benefits eligibility.  Please note that initiating your relocation process and services is contingent upon your signing and returning a Relocation Repayment Agreement that will be provided to you by NEI.

As a Stryker employee, you will be eligible to participate in our comprehensive package of Company benefits as detailed on the enclosed “Benefits Summary” sheet, pursuant to the terms and conditions of the guiding benefit plans.  This package includes, among other things, the following benefits:

		
	1.
	Comprehensive health insurance plan, including medical, dental and prescription drug coverage;   (provided you return your enrollment information within 30 days of your hire date).

		
	2.
	Basic Term Life Insurance paid by the Company in the amount of $425,000, with an additional $425,000 in Accident Insurance; effective on your date of hire.  Supplemental life insurance is available to purchase through Stryker with a maximum of $1,000,000.

		
	3.
	Eligibility to participate in the Stryker 401(k) Savings and Retirement Plan.  After the close of each year, Stryker will match all or a portion of your contributions according to the terms of the 401(k) Plan guidelines.  Stryker will contribute $0.50 for every $1.00 you contribute, up to a maximum of 4% of your eligible earnings.  Additionally, Stryker may contribute a percentage of your eligible earnings as a discretionary contribution.  Historically, 7% of eligible earnings have been contributed.

		
	4.
	Participation in Stryker's Supplemental Savings and Retirement Plan in accordance with the terms of such plan subject to your start date and pending Board approval.  Participation commences for 2014.

		
	5.
	Eleven paid holidays annually; prorated for 2013, based on date of hire.

		
	6.
	Four weeks of vacation annually beginning in 2013; prorated for 2013, based on date of hire.

		
	7.
	Eligibility to participate in the Stryker Employee Stock Purchase Plan.

This offer is contingent upon there being no contractual impediments or obligations which would restrict your acceptance of this offer and upon your execution of Stryker's Confidentiality, Intellectual Property, Non-Competition and Non-Solicitation Agreement.  Furthermore, this offer is made with the understanding that you will not bring with you to Stryker confidential or proprietary information belonging to any of your previous employers and that you will refrain from disclosing to us, or using while employed by us, any such confidential or proprietary information.  Pursuant to Company policy, you are expected to comply with any non-disclosure, non-compete, non-solicitation and other provisions of agreements with your previous employers.

This offer is also contingent upon the satisfactory completion of pre-employment reference and background check.  Failure to do so may prevent you from starting on the date listed above.

On your first day of employment, we will review and complete the forms you must fill out as part of your orientation process.  The Immigration Reform and Control Act (IRCA) require us to verify that you are authorized 

to work in the United States.  Accordingly, we ask that on your first day you bring appropriate verification documents, as set forth on the enclosed list.

To protect the interests of the Company and its customers, all employees are required to acknowledge receipt and understanding of the Company's Code of Conduct and Employee Handbook by reading and signing the appropriate forms.  Within your first week of employment, please return acknowledgment of the Code of Conduct and your signed Employee Handbook Receipt, which will be enclosed in your orientation materials packet.  In accepting employment with us, you agree to abide by the guidelines set forth in the Handbook, as well as any changes to it, which may be communicated to you.  You also acknowledge that you are aware of Stryker's at-will employment relationship with you.

While this letter is intended to summarize our offer, it shall not be used to interpret or in any way govern the terms of your employment relationship with Stryker.  The aforementioned statements of Company policy, practices, and benefits do not constitute the terms of an employment contract, either expressed or implied.  Further, the Company maintains the right to change its policies and procedures without notice.  Please take a few moments to review the enclosed new hire paperwork.  Completion of all necessary paperwork will ensure a smooth transition into your new role with us. 

Bill, we look forward to you joining us and hope that you find your employment with us enjoyable and professionally rewarding.  To accept this offer, please sign this letter on the space provided below and return it via fax to (269) 385-4011 no later than April 9, 2013.  If you have any questions, please feel free to contact me.  You may bring the original copy of the signed letter on your first day of employment.  Again, congratulations Bill and welcome to Stryker.

Sincerely,

Steven A. Benscoter
Vice President, Human Resources

           
I accept this offer of employment with Stryker and agree to the terms and conditions outlined in this letter:

_____________________________________________________      4 /  5  / 2013
William R. Jellison                                       Date

encls:      Total Rewards Statement                Benefits Summary
Non-Compete Agreement                Payback Agreement
Stryker U.S. Domestic Mobility Summary Program 5    I-9 List of Acceptable Documents
Background Check Authorization Form
c:     Kevin A. Lobo

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