Life Care Communities of America, Ltd., A Florida Limited Partnership, Robert W. McMichael, A Partner Other Than The Tax Matters Partner - Page 3

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          Village ran the daily operations and the management company                 
          provided sales and management services.  Petitioner was managing            
          partner of the partnership, president of FMS, vice president of             
          the management company, and president of Bentley Village.                   
               In July 1985, Smith and Fowler used their combined voting              
          power to remove petitioner from his managerial positions and                
          exclude him from all further business activities.  In addition,             
          Smith and Fowler transferred the contracts held by the management           
          company to Constellation Services, Inc., an entity controlled by            
          Smith and Fowler.  In response, in 1987, petitioner filed a                 
          lawsuit, against Smith and Fowler alleging civil theft,                     
          conversion of assets, and embezzlement.                                     
               The lawsuit settled pursuant to an agreement, dated January            
          12, 1989 (1989 agreement).  As part of the 1989 agreement,                  
          petitioner received $200,000.  During settlement negotiations,              
          the parties agreed that petitioner would either sell his interest           
          to Smith and Fowler or purchase Smith and Fowler’s interests.  To           
          effect the change in ownership of the partnership and the other             
          entities, the 1989 agreement provided the following options:  (1)           
          Petitioner had until September 30, 1989, to purchase Smith and              
          Fowler’s interests for $8 million (i.e., $4 million each); (2)              
          Smith and Fowler could, prior to September 30, 1989, terminate              
          petitioner’s option by purchasing petitioner’s interest for $4              
          million; or (3) if petitioner did not exercise his option to                

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