EXHIBIT 10.78
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TITLE
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
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NAME OF PARTNERSHIP
TRIAD SENIOR LIVING I, L.P.
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PURPOSE
ACQUIRE, DEVELOP, OWN AND OPERATE SEVEN SENIOR LIVING AND
ASSISTED LIVING FACILITIES
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PARTNERS
General Partner: TRIAD SENIOR LIVING, INC.
Limited Partners: CAPITAL SENIOR LIVING PROPERTIES, INC.
LB TRIAD INC.
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DATE
AS OF DECEMBER 30, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I - ADDITIONAL DEFINITIONS.......................................................... 2
ARTICLE II - FORMATION; CONTINUATION; NAME AND OFFICE; PURPOSE.............................. 8
Section 2.1. Formation; Continuation................................................ 8
Section 2.2. Name, Registered Agent and Registered Office........................... 8
Section 2.3. Purpose................................................................ 8
ARTICLE III - TERM.......................................................................... 8
ARTICLE IV - INTERESTS OF THE GENERAL PARTNER AND LIMITED PARTNERS.......................... 8
Section 4.1. General Partner........................................................ 9
Section 4.2. Limited Partners....................................................... 9
ARTICLE V - CAPITAL CONTRIBUTIONS........................................................... 9
Section 5.1. Capital Contribution of the General Partner............................ 9
Section 5.2. Capital Contribution of the Limited Partners........................... 9
Section 5.3. Additional Capital Contributions....................................... 9
Section 5.4. Return or Withdrawal of Capital Contributions; Distributions........... 11
Section 5.5. Capital Accounts....................................................... 11
ARTICLE VI - LIMITED PARTNERS............................................................... 11
Section 6.1. Powers: Actions........................................................ 11
Section 6.2. Limitation of Liability................................................ 11
ARTICLE VII - GENERAL PARTNER............................................................... 12
Section 7.1. Powers; Actions........................................................ 12
Section 7.2. Restrictions on the General Partner.................................... 12
Section 7.3. Duties and Obligations of the General Partner.......................... 15
Section 7.4. Change of TSL's Interest from General to Limited Partner............... 16
Section 7.5. Annual Business Plan................................................... 17
Section 7.6. Option to Provide Financing to Partnership............................. 17
Section 7.7. Other Activities....................................................... 18
Section 7.8. Tax Matters Partner.................................................... 18
Section 7.9. Liability; Indemnification............................................. 18
Section 7.10. Fees to and Reimbursement of the General Partner....................... 19
ARTICLE VIII - ALLOCATIONS; DISTRIBUTIONS................................................... 19
Section 8.1. Allocations of Income and Loss......................................... 19
Section 8.2. Distributions of Net Cash Flow and Net Capital Transaction Proceeds.... 19
Section 8.3. Withholding Taxes with Respect to Partners............................. 20
ARTICLE IX - ASSIGNABILITY OF GENERAL PARTNER'S AND LIMITED
PARTNER'S INTERESTS; BUY-SELL OPTION; PURCHASE OPTION.................................. 21
Section 9.1. General................................................................ 21
Section 9.2. Permitted Transfers.................................................... 21
Section 9.3. Effect of Assignment; Documents........................................ 22
Section 9.4. Substitute Partner..................................................... 22
Section 9.5. Further Requirements................................................... 22
Section 9.6. Buy-Sell Provisions.................................................... 22
Section 9.7. Sale of Properties After Second Anniversary............................ 25
Section 9.8. CSL Purchase Option: TSL Partnership Interests......................... 26
Section 9.9. CSL Purchase Option: LB Partnership Interests.......................... 26
Section 9.10. Closing Documentation.................................................. 27
Section 9.11. Sale of Partnership Interests By LB.................................... 27
Section 9.12. Withdrawal of a Partner................................................ 28
Section 9.13. Death, Legal Incompetency, Bankruptcy or Dissolution of
Limited Partner...................................................... 28
ARTICLE X - DURATION, DISSOLUTION, TERMINATION, WINDING UP, REMOVAL OF
GENERAL PARTNER AND RESIGNATION OF GENERAL PARTNER..................................... 28
Section 10.1. Dissolution and Termination............................................ 28
Section 10.2. Continuation of Business............................................... 29
Section 10.3. Winding Up of the Partnership.......................................... 29
Section 10.4. Sale or Liquidation.................................................... 29
ARTICLE XI - REPRESENTATIONS, WARRANTIES AND COVENANTS...................................... 30
Section 11.1. Ownership of TSL....................................................... 30
Section 11.2. Ownership of CSL....................................................... 30
Section 11.3. Confidentiality........................................................ 30
Section 11.4. Limitation of LB Liability............................................. 30
Section 11.5. Limitation of CSL Liability............................................ 31
Section 11.6. Limitation of TSL Liability............................................ 31
Section 11.7. Representations of TSL Regarding Partnership and Related Matters....... 31
Section 11.8. Representations of CSL Regarding Partnership and Related Matters....... 32
Section 11.9. LB Losses From Breach of Representation................................ 32
Section 11.10. Notice of Loss......................................................... 34
Section 11.11. Right to Defend........................................................ 35
Section 11.12. Cooperation............................................................ 35
ARTICLE XII - ACCOUNTS AND RECORDS: ACCOUNTANTS............................................. 35
Section 12.1. Accounting Methods: Fiscal Year........................................ 35
Section 12.2. Records and Books of Account........................................... 36
Section 12.3. Annual Examination and Tax Returns..................................... 36
Section 12.4. Bank Accounts.......................................................... 36
Section 12.5. Reports to Partners.................................................... 37
ARTICLE XIII - GENERAL PROVISIONS........................................................... 37
Section 13.1. Recipient of Distributions and Payments................................ 37
Section 13.2. Communications......................................................... 37
Section 13.3. Entire Agreement; Applicable Law; Effect............................... 38
Section 13.4. Modification; Waiver or Termination.................................... 38
Section 13.5. Counterparts........................................................... 38
Section 13.6. Separability........................................................... 38
Section 13.7. Article and Section Headings........................................... 38
Section 13.8. Word Meanings.......................................................... 39
Section 13.9. Exhibits............................................................... 39
Section 13.10. Further Actions........................................................ 39
Section 13.11. Prohibition Against Partition.......................................... 39
Section 13.12. Agreements with Affiliates and the GMAC Loan........................... 39
Section 13.13. Non-Compete of General Partner......................................... 40
Section 13.14. Litigation Without Termination......................................... 40
Section 13.15. Attorneys' Fees........................................................ 40
Section 13.16. Cumulative Remedies.................................................... 41
EXHIBIT A - PROPERTY DESCRIPTIONS........................................................... A-1
EXHIBIT B - CAPITAL CONTRIBUTIONS........................................................... B-1
EXHIBIT C - CERTAIN TAX AND ACCOUNTING MATTERS.............................................. C-1
EXHIBIT D - ADJUSTMENTS IN LOAN AND CAPITAL................................................. D-1
EXHIBIT E - AGREED VALUE OF EACH PROPERTY................................................... E-1
EXHIBIT F - REPRESENTATIONS AND WARRANTIES OF TSL REGARDING
PARTNERSHIP AND RELATED MATTERS.................................................... F-1
EXHIBIT G - REPRESENTATIONS AND WARRANTIES OF CSL REGARDING
PARTNERSHIP AND RELATED MATTERS.................................................... G-1
EXHIBIT H - FORM OF MONTHLY REPORTING....................................................... H-1
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TRIAD SENIOR LIVING I, L.P.
(FORMERLY KNOWN AS TRI POINT COMMUNITIES, L.P.)
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is
dated effective as of December 30, 1999. The parties are TRIAD SENIOR LIVING,
INC., a Texas corporation ("TSL" or "General Partner") as the sole General
Partner, and CAPITAL SENIOR LIVING PROPERTIES, INC., a Texas corporation
("CSL") and LB TRIAD INC., a Delaware corporation ("LB"), as the Limited
Partners (CSL and LB are collectively referred to as the "Limited Partners"),
and XXXXX X. FAIL ("Fail" or "Withdrawing Limited Partner") as the Withdrawing
Limited Partner.
WHEREAS, Capital Retirement Group, Inc., a Texas corporation ("CRG"),
Xxxxxxx X. Xxxx ("Xxxx") and XXX Trust ("XXX") formed Tri Point Communities,
L.P. pursuant to the Certificate of Limited Partnership filed with the
Secretary of State of Texas on November 6, 1997 and that certain Limited
Partnership Agreement dated as of November 6, 1997 ("Original Agreement");
WHEREAS, CRG transferred all its partnership interest in the
Partnership to TSL and CRG withdrew from the Partnership pursuant to the terms
of that Amended and Restated Agreement of Limited Partnership dated April 1,
1998 ("First Restated Agreement");
WHEREAS, Xxxx and XXX transferred all their partnership interests in
the Partnership to Fail, and Xxxx and XXX withdrew from the Partnership
pursuant to the terms of the First Restated Agreement;
WHEREAS, pursuant to the terms of the First Restated Agreement, the
Partnership changed its name to "Triad Senior Living I, L.P.";
WHEREAS, Fail wishes to withdraw from the Partnership as a limited
partner and LB desires to be admitted as a limited partner of the Partnership
in Fail's place;
WHEREAS, the Withdrawing Limited Partner, TSL, LB, and CSL desire to
effect such withdrawal and admission, all as more fully set forth herein; and
WHEREAS, TSL, LB and CSL desire to continue the existence of the
Partnership, recapitalize the Partnership and to amend and restate the terms
and provisions of the Original Agreement, as amended by the First Restated
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, conditions and agreements hereinafter set forth, the parties hereby
agree as follows:
ARTICLE I
ADDITIONAL DEFINITIONS
As used herein, the following terms shall have the following meanings:
"ACCOUNTANT" means Lane, Gorman, Trubitt, L.L.P. or any other
independent firm of certified public accountants as may be engaged by the
General Partner for the Partnership with the approval of LB.
"AFFILIATE" means (a) a General Partner; (b) a Limited Partner; (c) a
member of the immediate family of the Withdrawing Limited Partner or of a
partner, shareholder or member of a General Partner or a Limited Partner; (d)
a legal representative of any Person referred to in the preceding clauses (a)
through (c); (e) a trustee for the benefit of any Person referred to in the
preceding clauses (a) through (c); (f) a corporation, joint venture,
partnership, limited liability company or other business entity which is
controlled by such person or entity and/or any one or more of the Persons
referred to in the preceding clauses (a) through (c); (g) a corporation, joint
venture, partnership, limited liability company or other business entity which
controls or is under common control with such person or entity, and/or with a
person or entity referred to in the preceding clauses (a) through (c); or (h)
the partners, officers, directors and key employees of such entity and/or any
corporation, joint venture, partnership, limited liability company or other
business entity referred to in the preceding clauses (a), (b), (c), (f) or (g).
"AGENCIES" shall mean federal, state municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
"AGREEMENT" or "THIS AGREEMENT" means this Second Amended and
Restated Agreement of Limited Partnership, as amended from time to time
pursuant to its terms.
"ANNUAL BUSINESS PLAN" means the strategic business and operating
plan adopted by TSL, LB and CSL and setting forth (a) the program (including a
timetable) for developing and constructing each Property, (b) progress and
status reports on construction not yet completed, (c) a marketing and leasing
plan for each Property, (d) the plan for operating each Property after it has
been completed, (e) in reasonable detail, the plan for initial services and
staffing to provide such services for each Property and any proposal for
materially changing such services or staffing, (f) any proposal for
refinancing or other capital transactions and (g) operating, capital
expenditure and other relevant budgets for each Property.
"ACQUISITION DATE" shall mean the date the Partnership acquired any
Property.
"BOT LOAN" means those certain loans from Lender to the Partnership
in the original aggregate principal amount of up to $50,000,000.00.
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"BUSINESS DAY" means Monday through Friday of each week, except that
a legal holiday recognized as such by the Government of the United States or
the States of New York or Texas shall not be regarded as a Business Day.
"CAPITAL CONTRIBUTION ACCOUNT" means a memorandum account, which
shall be maintained by the Partnership with respect to each Partner for
accounting purposes only, determined as follows: (a) the initial balance as of
the date of this Agreement of each Partner's Capital Contribution Account
shall be as set forth in EXHIBIT B; (b) the balance of such account shall be
increased as of the date of each contribution made by such Partner under
ARTICLE V hereof by the amount of such contribution; and (c) the balance of
such account shall be decreased (but not below zero) as of each date that a
distribution is made to such Partner pursuant to SECTION 8.2 (b), (d), (f) or
(i) as appropriate to such Partner by the amount of such distribution.
"CAPITAL CONTRIBUTIONS" means the gross amount of contributions
actually made to the capital of the Partnership by one or more Partners or all
the Partners, as the case may be. Loans to the Partnership by any Partner
shall not be considered a Capital Contribution.
"CERTIFICATE" means the Certificate of Limited Partnership of this
Partnership filed with the Secretary of State of the State of Texas, as such
Certificate has been or may be further amended and filed from time to time.
"CERTIFICATE OF OCCUPANCY" means the certificate of occupancy which
has been issued for any building at a Property.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CSL" means Capital Senior Living Properties, Inc., a Texas
corporation.
"CSL GUARANTY" means the Subsidiary Guaranty dated the date of this
Agreement, made by Capital Senior Living Corporation, an Affiliate of CSL, for
the benefit of the Partnership.
"DEVELOPMENT AGREEMENT" means the development agreements between the
Partnership and Capital Senior Development, Inc. relating to the Properties,
as such agreements may be amended from time to time.
"ENCUMBRANCES" shall mean any and all options, pledges, mortgages,
security interests, liens, charges, adverse claims, burdens and encumbrances
whatsoever.
"15% PREFERRED RETURN" means at any date, for each Partner, an amount
computed like interest equal to a cumulative annual return of 15%, compounded
monthly, on the average daily balance of the Partner's Capital Contribution
Account except as adjusted under Section 8.2(a) and (e).
"FISCAL YEAR" means the fiscal year of the Partnership as set forth
in Section 12.1 hereof.
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"GAAP" means generally accepted accounting principles, consistently
applied
"GENERAL PARTNER" means TSL, and any additional or successor General
Partner(s) designated in any case as such in accordance with the provisions of
this Agreement, and, from time to time, holding such position in accordance
with such provisions.
"GMAC LOAN" means those certain loans from Standby Lender to the
Partnership in the original aggregate principal amount of $50,000,000 which
will be used, in part, to replace the BOT Loan.
"GOVERNMENTAL AUTHORITY" shall mean the United States of America, the
state, county, city and other political subdivision in which each of the
Properties is located, and any agency, authority, court, department,
commission, board or instrumentality of any of them.
"GOVERNMENTAL REQUIREMENTS" shall mean all laws, ordinances,
statutes, codes, rules, regulations, orders and decrees of the United States,
the state, the county, the city, or any other political subdivision in which
any Property is located, and any other political subdivision, agency or
instrumentality exercising jurisdiction over the Partnership or any Property.
"GROSS RECEIPTS" mean all revenues received by the Partnership from
the operations of its business attributable to a particular period as
determined in accordance with the accrual method of accounting under GAAP, but
not including Capital Contributions and any loans from Partners and third
parties.
"HAZARDOUS MATERIALS" shall mean (i) any "HAZARDOUS WASTE" as defined
by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901
ET SEQ.), as amended from time to time, and regulations promulgated thereunder
("RCRA"); (ii) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601, ET SEQ.), as amended from time to time, and regulations
promulgated thereunder ("CERCLA") (including petroleum-based products as
described therein); (iii) other petroleum and petroleum-based products; (iv)
asbestos in any quantity or form which would subject it to regulation under
any applicable Hazardous Materials Law, (v) polychlorinated biphenyls; (vi)
any substance, the presence of which in or on the Property is prohibited by
any Hazardous Materials Law; (vii) any "extremely hazardous substance" or
"hazardous chemical" as those terms are defined in the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. Section 11001 ET SEQ.) as amended from
time to time, and regulations promulgated thereunder ("EPCRA"); (viii) any
"chemical substance" as that term is defined in the Toxic Substance Control
Act (15 U.S.C. Section 2601) as amended from time to time, and regulations
promulgated thereunder ("TSCA"), (ix) any hazardous substance identified under
the law of any State in which a Property is located; and (x) any other
substance which, by any Hazardous Materials Law, requires special handling in
its collection, storage, treatment, management or disposal, but excluding,
cleaning, office supplies and other similar products used in connection with
the routine conduct of business and for routine maintenance or repair of any
Property, provided such products are stored and used in compliance with
Hazardous Materials Laws.
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"HAZARDOUS MATERIALS CONTAMINATION" shall mean the presence of
Hazardous Materials at the Improvements, facilities, soil, groundwater, air or
other elements on or of any Property, or the presence of Hazardous Materials
at the buildings, facilities, soil, groundwater, air or other elements on or
of any other property as a result of Hazardous Materials at any time emanating
from any Property.
"HAZARDOUS MATERIALS LAWS" shall mean all Governmental Requirements,
including, without limitation, RCRA and CERCLA, relating to the handling,
storage, existence of or otherwise regulating any Hazardous Materials relating
to the removal or remediation of Hazardous Materials.
"HAZARDOUS SUBSTANCE ACTIVITY" shall mean any actual, proposed, or
threatened use, storage, holding, existence, location, or release, in each
case in violation of Hazardous Materials Laws including, without limitation,
any spilling, leaking (not to include oil, transmission, or other fluid leaks
from automobiles), leaching, pumping, pouring, emitting, emptying, dumping,
disposing into the environment, and the continuing migration into or through
soil, surface water, groundwater or any body of water, discharge, deposit,
placement, generation, processing, construction, treatment, abatement,
removal, disposal, disposition, handling, or transportation of any Hazardous
Materials from, under, in, into, or on any Property, including, without
limitation, the movement or migration of any Hazardous Materials from
surrounding property, surface water, groundwater or any body of water under,
in, into, or onto any Property and any residual Hazardous Materials
Contamination in, on, or under any Property.
"INTERNAL RATE OF RETURN" or "IRR" means, the discount rate,
compounded monthly, expressed as a percentage based on a year of 365 or 366
days, as the actual case may be, at which the net present value, as of the
date LB makes each Capital Contribution to the Partnership pursuant to this
Agreement, of all future distributions pursuant to Article VIII of this
Agreement equals the amount of each such Capital Contribution. LB shall be
deemed to have received a twenty-five percent (25%) IRR, compounded monthly,
with respect to a segment of Capital Contribution it made to the Partnership
upon its receipt of a cumulative amount of distributions pursuant to Article
VIII that causes (i) the net present value of the aggregate of all
distributions pursuant to Article VIII to LB with respect to the Capital
Contributions, discounted at an annual rate of twenty-five percent (25%),
compounded monthly, from the date of each such distribution back to the date
of such Capital Contributions reduced by (ii) the amount of such Capital
Contributions, to equal zero.
"LB" means LB Triad Inc., a Delaware corporation.
"LEASES" shall mean the interest of the Partnership in leases and
rental agreements with tenants occupying space situated at any Property in the
Improvements or otherwise having rights with regard to use of any Property and
all security deposits or like payments, if any, paid by tenants or other
security provided in connection therewith.
"LENDER" means Bank One, Texas, N.A., a national banking association,
as Agent for the Lenders (as defined therein) under the Master Loan Agreement
dated December 23, 1997 among the Partnership, Bank One Texas, N.A. and the
Lenders, as the same may be modified, amended or restated from time to time.
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"LIMITED PARTNERS" mean LB and CSL, and any additional or substitute
Limited Partner(s) as may be designated as such in accordance with the
provisions of this Agreement.
"LOAN DOCUMENTS" mean all documents evidencing, securing or otherwise
entered into in connection with the BOT Loan or the GMAC Loan, including,
without limitation, Note, Deed of Trust, Security Agreement, Assignment of
Rents and Financing Statement, Assignment of Leases and Rents, and UCC-1
Financing Statement.
"MANAGEMENT AGREEMENT" means the management agreements between the
Partnership and Capital Senior Living, Inc. relating to the Properties, as
such agreements may be amended from time to time.
"NET CAPITAL TRANSACTION PROCEEDS" mean the proceeds from (a) any
financing or refinancing of the Properties or any part thereof (but not
including the BOT Loan or the GMAC Loan), and (b) any sale or disposition not
in the ordinary course, taking or loss (including, but not limited to, the
proceeds from any eminent domain proceeding or conveyance in lieu thereof or
from title insurance or casualty insurance, other than rental income
insurance) of the Properties or any part thereof that in accordance with GAAP
are considered capital in nature, less payment of all costs and other expenses
related thereto, any amounts expended to repair or replace any part of the
Properties taken or destroyed, any reserves required by the Loan Documents or
approved by the Partners as a Major Decision pursuant to Section 7 and any
loans, debts or other obligations of the Partnership.
"NET CASH FLOW" means the amount, if any, by which Gross Receipts
plus cash reserves of the Partnership from the previous period that the
General Partner, with the approval of the Limited Partners as a Major Decision
pursuant to Section 7.2, determines are no longer required exceed Operating
Expenses for such particular period, to the extent the General Partner
determines, with the reasonable approval of LB and CSL, that cash is not
otherwise required for Partnership purposes, including the setting up or
continuing of a reasonable working capital reserve for the Partnership. "Net
Cash Flow" shall not include or reflect any proceeds received or expenses
incurred in the determination of Net Capital Transaction Proceeds
"OPERATING DEFICITS GUARANTY" means collectively, the Subsidiary
Guaranties dated as of December 30, 1999 made by Capital Senior Living
Corporation for the benefit of the Partnership to pay and perform fully and
promptly when due all of the covenants, agreements and other obligations
undertaken by Capital Senior Living, Inc. pursuant to Section VII of the
Property Management Agreements, as such Guaranty may be amended or restated
from time to time in accordance with its terms.
"OPERATING EXPENSES" means all expenditures of any kind or nature
incurred by the Partnership attributable to a particular period (including,
without limitation, principal, interest and other amounts payable with respect
to the BOT Loan and the GMAC Loan), as determined in accordance with the
accrual method of accounting in accordance with GAAP.
"PARTNER" or "PARTNERS" means the General Partner or the Limited
Partners, or any of them.
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"PARTNERSHIP" means the limited partnership evidenced by this
Agreement, as said limited partnership may from time to time be constituted,
amended and, if necessary, reconstituted, including any successor limited
partnership.
"PARTNERSHIP PROPERTY" means the Properties, and all other property
of whatever kind of nature owned by the Partnership from time to time.
"PERCENTAGE INTERESTS" mean the percentage set forth opposite the
name of such Partner under the column "Interest" in EXHIBIT B attached hereto
and made a part hereof for all purposes.
"PERMITTED ENCUMBRANCES" shall mean any mortgage, lien, security
interest, claim or encumbrance under or in connection with the BOT Loan or the
GMAC Loan.
"PERSON" means an individual, firm, corporation or other legal entity
"PERSONAL PROPERTY LEASES" shall mean the interest of the Partnership
in all leases covering furniture, fixtures and equipment located in or on or
about and used in connection with any Property or the operations thereon.
"PROPERTIES" mean those certain tracts of land which the Partners
have agreed in writing to acquire. Upon such written approval, the General
Partner shall attach the legal description for a Property hereto as EXHIBIT A.
"PROPERTY MANAGEMENT AGREEMENT" means collectively, the separate
amended and restated Management Agreements dated as of December 30, 1999
between the Partnership and Capital Senior Living, Inc., relating to the
Properties as each may be amended or restated in accordance with its terms.
"RENT ROLL" shall have the meaning set forth in paragraph 23 of
Exhibit F.
"RENTS" shall mean all of the rents, royalties, bonuses, issues,
profits, revenue, income, and other benefits derived from the Properties or
arising from the use or enjoyment of any portion thereof or from any lease or
agreement pertaining thereto and liquidated damages following default under
such leases, and all proceeds payable under any policy of insurance covering
loss of rents resulting from untenantability caused by damage to any part of
the Properties, together with any and all rights that the Partnership may have
against any tenant under such leases or any subtenants or occupants of any
part of the Properties.
"REVISED ACT" means the Texas Revised Limited Partnership Act, as
adopted and from time to time amended by the State of Texas.
"SERVICE CONTRACTS" shall mean the interest of the Partnership in all
(i) brokerage contracts, (ii) maintenance, repair, service and pest control
contracts (including but not limited to janitorial, elevator and landscaping
agreements), and (iii) other contracts pursuant to which services or goods are
provided to the Properties, not to include any management agreement affecting
any Property.
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"SERVICER" means Xxxxxxxx Philips, Inc., a Georgia corporation having
an address at 000 Xxxxxxxxx Xxxxxx Xxxxxx, Xxxxxxx Xxx Xxxxx, Xxxxx 0000,
Xxxxxxx, XX 00000, Attention Xxxxx Xxxxxxx.
"STANDBY LENDER" means GMAC Commercial Mortgage Association, a
California corporation.
"TSL" means Triad Senior Living, Inc., a Texas corporation.
ARTICLE II
FORMATION; CONTINUATION; NAME AND OFFICE; PURPOSE
Section 2.1. FORMATION; CONTINUATION
The Partnership commenced on November 6, 1997 as a Texas limited
partnership effective upon the filing of the Certificate with the Secretary of
State of the State of Texas pursuant to the provisions of the Revised Act, and
shall continue for the purpose and upon the terms and conditions herein set
forth.
Section 2.2. NAME, REGISTERED AGENT AND REGISTERED OFFICE
The name of the Partnership shall be Triad Senior Living I, L.P. or
such other name as the General Partner, with the approval of the Limited
Partners as a Major Decision pursuant to Section 7.2, shall hereafter
designate by notice to the Limited Partners and by amendment to the
Certificate properly filed with the Secretary of State of the State of Texas.
The principal place of business in Texas where books and records of the
Partnership will be kept and made available shall be 0000 Xxxxxxxxxxx Xxxx,
Xxxxxx, Xxxxx 00000, or such other place as the General Partner may from time
to time designate in a notice to the Limited Partners and by amendment to the
Certificate. The registered office of the Partnership and the registered agent
shall be as set forth in the Certificate, or such other registered agent and
registered office as the General Partner may from time to time designate in a
notice to the Limited Partners and by amendment to the Certificate.
Section 2.3. PURPOSE
The purpose of the Partnership shall be strictly limited to
activities relating to the acquisition, ownership, operation, and sale of the
Properties, and such other activities as are incidental thereto, including
without limitation, entering into the BOT Loan and the GMAC Loan and the
performance of the Partnership's obligations under the Loan Documents.
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ARTICLE III
TERM
The term of the Partnership commenced upon the filing of the
Certificate with the Secretary of State of the State of Texas, and shall
continue until December 31, 2050, on which date the Partnership shall
terminate, unless sooner dissolved upon the occurrence of any of the events
of dissolution or termination, as described in Article X.
ARTICLE IV
INTERESTS OF THE GENERAL PARTNER AND LIMITED PARTNERS
Section 4.1. GENERAL PARTNER
The General Partner is TSL, and it shall have a 1% interest in the
Partnership. Except as provided in Article IX of this Agreement, no other
Person shall become a General Partner in the Partnership. The address of the
General Partner is set forth on EXHIBIT B.
Section 4.2. LIMITED PARTNERS
The Limited Partners are LB and CSL, which shall have the interests
in the Partnership as shown on EXHIBIT B. Except as provided in Article IX of
this Agreement, no other Person shall become a Limited Partner or substitute
Limited Partner in the Partnership. The addresses of the Limited Partners are
set forth on EXHIBIT B.
ARTICLE V
CAPITAL CONTRIBUTIONS
Section 5.1. CAPITAL CONTRIBUTION OF THE GENERAL PARTNER
The General Partner has contributed to the Partnership the amount
set forth on EXHIBIT B. The General Partner shall not be obligated to pay any
Partnership expenses or make any capital contributions to the Partnership
except as provided in this Section 5.1 and Section 5.3 and in Section 2.2(d)
of Exhibit C hereof.
Section 5.2. CAPITAL CONTRIBUTION OF THE LIMITED PARTNERS
The Limited Partners have contributed or will contribute or be
deemed to have contributed on the date of this Agreement to the Partnership
the amounts set forth on EXHIBIT B. The Limited Partners shall not be
obligated to make any other capital contributions to the Partnership except
as provided in Section 5.3. The amount contributed by LB to the capital of
the Partnership shall be used by the Partnership to (i) repay $10,053,369.02
of the loan ("CSL Loan") made by CSL to the Partnership in the original
principal amount of $15,000,000 as shown in EXHIBIT D; (ii) redeem the
limited partner interest of the Withdrawing Limited Partner as shown on
EXHIBIT D; and (iii) pay
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certain expenses of the Partnership with respect to transactions contemplated
by this Agreement as shown in EXHIBIT D. The remaining balance and accrued
interest on the CSL Loan (which, when added to CSL's current Capital
Contribution shown in EXHIBIT D, equals $3,000,000) shall be treated as
having been repaid by the Partnership to CSL and then immediately contributed
by CSL to the capital of the Partnership, which shall increase its Capital
Contribution Account. Immediately after the transactions set forth in this
Section 5.2, the Partners agree that their respective Capital Accounts and
Capital Contribution Accounts shall be as set forth on EXHIBIT D.
Section 5.3. ADDITIONAL CAPITAL CONTRIBUTIONS
(a) If Net Cash Flow is not sufficient to pay Operating
Expenses or to avoid or cure a default under the Loan Documents or other
obligations of the Partnership and the Partnership has been unable to borrow
funds sufficient to pay such Operating Expenses (such Operating Expenses are
referred to as "Required Expenses"), CSL shall, on its own initiative or at
the request of any Limited Partner, cause its Affiliate, Capital Senior
Living, Inc., to contribute to the Partnership in accordance with the terms
of Article VII of the Property Management Agreement an amount equal to the
Required Expenses, which amount shall be treated as a Capital Contribution by
CSL. If Capital Senior Living, Inc. fails to fund the Required Expenses in
accordance with Article VII of the Property Management Agreement, then CSL
shall, on its own initiative or at the request of any Limited Partner, cause
its Affiliate, Capital Senior Living Corporation, to contribute to the
Partnership an amount equal to the Required Expenses in accordance with the
Operating Deficits Guaranty, which amount shall be treated as a Capital
Contribution by CSL. If Capital Senior Living Corporation fails to fund the
Required Expenses in accordance with the Operating Deficits Guaranty, then
LB, on its own behalf or on behalf of the Partnership, shall have the right
to commence any action, suit or proceeding against Capital Senior Living,
Inc. and/or Capital Senior Living Corporation in order to be entitled to
specific performance and all other available legal and equitable remedies
against Capital Senior Living, Inc. and/or Capital Senior Living Corporation,
including (without limitation) recovery of all losses, costs and expenses. If
LB commences an action or proceeding against Capital Senior Living, Inc.
and/or Capital Senior Living Corporation, LB shall have the right to sell the
Properties pursuant to the terms of Section 9.7 at any time. Any amounts
expended by LB in commencing any suit or proceeding against Capital Senior
Living, Inc. and/or Capital Senior Living Corporation for breach of Article
VII of the Property Management Agreement or the Operating Deficits Guaranty,
as the case may be, shall be added to the Capital Account and the Capital
Contribution Account of LB.
(b) If Capital Senior Living, Inc. and/or Capital Senior Living
Corporation shall fail for any reason to fund any amount described in
subsection (a), the General Partner or any Limited Partner shall have the
right to request that the Partners contribute additional capital to the
Partnership to pay Required Expenses. If the General Partner or any Limited
Partner exercises this right, it may request that the General Partner
contribute 1%, CSL contribute 19% and LB contribute 80% of the amount of
additional capital required within ten (10) days (or such shorter time as may
be appropriate under the circumstances, but in no event less than three (3)
Business Days) after the date of receipt of notice of the request for such
additional capital. Each Partner may, but shall not be obligated to make any
such additional capital contributions. Any amounts contributed to the capital
of the Partnership pursuant to this subsection (b) by any Partner shall be
added to the Capital Account and the Capital Contribution Account of that
Partner.
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(c) FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS. If any
Partner (a "Non-Contributing Partner") does not make any additional capital
contribution within the time specified, then the other Partners (each of
which is hereinafter referred to as a "Contributing Partner"), provided the
Contributing Partner is ready to contribute the funds requested pursuant to
subsection (b), may by written notice to each Non-Contributing Partner elect
to make capital contributions to the Partnership on behalf of itself and the
Non-Contributing Partner for the entire amount requested pursuant to Section
5.3(b). If a Contributing Partner makes such additional capital contributions
pursuant to this subsection (c), then the Contributing Partner shall receive
distributions with respect to such additional capital contributions as
described in Section 8.2. In no event shall any Partner's Percentage Interest
be increased or decreased as a result of capital contributions made pursuant
to this subsection (c).
(d) Except as may be agreed herein or hereafter agreed
voluntarily by all of the Partners (and not pursuant to Section 5.3(a), (b)
or (c)), no Partner shall be required to make any additional Capital
Contributions to the Partnership.
Section 5.4. RETURN OR WITHDRAWAL OF CAPITAL CONTRIBUTIONS; DISTRIBUTIONS
Except as otherwise expressly provided in this Agreement, none of
the Partners shall be entitled to demand a refund or return of any Capital
Contribution or to withdraw any part of its capital account or to receive any
distribution from the Partnership.
Section 5.5. CAPITAL ACCOUNTS
A capital account shall be established and maintained for each
Partner as set forth in EXHIBIT C attached hereto.
ARTICLE VI
LIMITED PARTNERS
Section 6.1. POWERS: ACTIONS
The Limited Partners shall neither participate in the management or
control of the Partnership's business nor shall they transact any business
for the Partnership, nor shall they have the power to sign for or bind the
Partnership, in each case except to the extent expressly authorized or stated
in this Agreement or approved as a Major Decision pursuant to Section 7.2.
Section 6.2. LIMITATION OF LIABILITY
(a) Anything to the contrary herein expressed or implied
notwithstanding, the Limited Partners shall not be personally liable for any
of the debts of the Partnership or any of the losses thereof in excess of
their respective shares of Partnership assets, capital contributions which
they have made or are obligated to make to the Partnership, and their share
of the Partnership's income and gains; PROVIDED, HOWEVER, that to the extent
required by applicable law, if a Limited Partner receives a distribution at a
time when it knew that, after giving effect to the distribution, all
liabilities
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of the Partnership, other than liabilities to the Partners with respect to
the partnership interests and liabilities for which the recourse of creditors
is limited to specific Partnership assets, exceed the fair value of the
Partnership's assets (except that the fair value of property that is subject
to a liability for which recourse of creditors is limited shall be included
in the Partnership's assets only to the extent that the fair value of that
property exceeds that liability), then the Limited Partner receiving such
distribution shall be liable for the return of such distribution.
(b) The Partners confirm and agree that (i) the voting and
other rights and powers given to each Limited Partner in this Agreement were
a material inducement to each Limited Partner's entering into this Agreement
and (ii) the existence or exercise of such rights and powers by a Limited
Partner shall not, to the fullest extent stated in Section 3.03(b) of the
Texas Revised Limited Partnership Act, constitute participation by that
Limited Partner in the control of the business of the Partnership or result
in that Limited Partner being liable or responsible as a general partner for
the debts or obligations of the Partnership.
ARTICLE VII
GENERAL PARTNER
Section 7.1. POWERS; ACTIONS
The General Partner shall manage and control the business and
affairs of the Partnership, but only in accordance with the Annual Business
Plan and the other Major Decisions adopted in accordance with Section 7.2 and
subject to Section 7.3 and all other terms and conditions of this Agreement.
Subject to the foregoing, the General Partner shall have full power to (i)
manage the day-to-day operations of the Partnership; (ii) execute such
documents as it may deem advisable for Partnership purposes, including,
without limitation, the Loan Documents and all documents necessary for the
acquisition, development, construction, financing, refinancing, ownership,
operation and sale of the Properties; (iii) acquire, sell, lease, transfer,
assign, convey, mortgage, refinance, or otherwise dispose of or deal with all
or any part of the Properties on such terms as it deems reasonable; (iv)
establish and maintain, to the extent Partnership funds are available,
reasonable reserves for anticipated and unanticipated expenses relating to
the activities of the Partnership; (v) perform or cause to be performed the
Partnership's obligations, and exercise or cause to be exercised all of the
Partnership's rights, under any agreement to which the Partnership or any
nominee of the Partnership is a party; and (vi) on behalf of the Partnership,
employ, engage, retain or deal with any Person, including any Affiliate, to
perform services in connection with the ownership and operation of the
Properties, provided in all such cases such services are deemed by the
General Partner to be advisable and the compensation therefor is reasonable.
The General Partner shall cause the Partnership to comply with all
requirements of the BOT Loan and the GMAC Loan.
Section 7.2. RESTRICTIONS ON THE GENERAL PARTNER
(a) Notwithstanding the foregoing in Section 7.1 or any other
provision of this Agreement, the Partnership shall be subject to the
following restrictions and the General Partner shall
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have no authority to take and shall not take any action on behalf of the
Partnership in violation of any of the following restrictions:
(i) No bankruptcy or insolvency filing or
similar proceeding for the Partnership may be commenced.
(ii) The Partnership and the General Partner are
prohibited from creating, incurring or assuming any
indebtedness other than the BOT Loan, the GMAC Loan and any
subordinate financing permitted under the Loan Documents.
(iii) The Partnership and the General Partner are
prohibited from liquidating or dissolving or consenting to the
liquidation or dissolution, in whole or in part, of either the
Partnership or the General Partner.
(iv) The Partnership and the General Partner may
not consolidate, merge, or enter into any form of combination
with or into any other entity or convey, transfer or lease its
assets substantially as an entirety to any entity, except for
a transfer of the Properties to the manager pursuant to the
purchase option in the Management Agreement or permit any
entity to consolidate, merge or enter into any form of
combination with or into the Partnership or the General
Partner, as the case may be, or convey, transfer or lease its
assets substantially as an entirety to the Partnership or the
General Partner, as the case may be.
(b) Notwithstanding anything in this Agreement to the contrary,
the General Partner shall not have the right or the power to make any
commitment or engage in any undertaking on behalf of the Partnership (i) in
respect of a Major Decision (as hereinafter defined) unless and until such
Major Decision has been approved in writing by all of the Limited Partners or
(ii) until and unless such act has already been authorized in the Annual
Business Plan then in effect . The term "Major Decision," as used in this
Agreement, means any decisions with respect to the following matters:
(i) All financing and refinancing decisions
pertaining to indebtedness owing, directly or indirectly, to
and/or by the Partnership.
(ii) Any amendment, modification, change or
restatement of this Agreement.
(iii) engagement by the Partnership in any
business other than as set forth in SECTION 2.3 above;
(iv) approval of each Annual Business Plan and
budget;
(v) approval of the terms and conditions of any
management, construction development or any similar agreement
relating to the Properties and of any material amendment or
modification to, or material waiver under, any such agreement
(the current Management Agreements and Development Agreements
are hereby approved);
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(vi) approval of any contract between the
Partnership and a Partner or any Affiliate of a Partner, and
approval of any amendment or modification to, or waiver of a
provision of, any such contract (the current Management
Agreements and Development Agreements are hereby approved);
(vii) except as contemplated by Sections 10.1 and
13.12, approval of the sale, financing, restructuring,
refinancing or disposition of all or substantially all of the
Partnership Property, the merger or consolidation of the
Partnership with any other entity or the liquidation or
dissolution of the Partnership;
(viii) acquisition of any additional real property
in addition to the Properties;
(ix) approval of forms of agreements for leasing
or rental of the Properties to tenants (the current forms of
which are hereby approved);
(x) acquisition of shares of capital stock of or
other equity interest in any corporation or other legal
entity;
(xi) formation by the Partnership of any
corporation, partnership, limited liability company or other
legal entity;
(xii) other than the creation of trade
receivables, making any loan, extending credit or acting as
guarantor or surety to, for or on behalf of any other Person;
(xiii) approval of the hiring or setting the
compensation for attorneys, consultants, contractors, board of
managers or other agents of the Partnership;
(xiv) changing the Accountants designated herein
or retaining or discharging accounting, financial or auditing
specialists to assist the Accountants;
(xv) commencing, settling, compromising or taking
any other material action with respect to any litigation or
legal proceeding of any type by, against or involving the
Partnership excluding routine property management matters;
(xvi) creation of any lien, security interest or
material encumbrance on the Properties not contemplated by the
BOT Loan or the GMAC Loan;
(xvii) issuance or sale of additional partnership
interests or admission of a new partner or member in this
Partnership other than in accordance with Article IX of this
Agreement or the appointment of an additional General Partner;
(xviii) filing any petition in bankruptcy or
reorganization or instituting any other type of bankruptcy,
reorganization or insolvency proceeding with respect to the
Partnership, consenting to the institution of involuntary
bankruptcy, reorganization
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or insolvency proceedings with respect to the Partnership,
the admission in writing by the Partnership of its inability
to pay its debts generally as they become due or the making
by the Partnership of a general assignment for the benefit
of its creditors;
(xix) taking any material action that is
inconsistent with the Annual Business Plan then in effect or
expending any funds in a manner that is inconsistent with any
budget set forth in the Annual Business Plan; PROVIDED,
HOWEVER, that the General Partner may, on behalf of the
Partnership: (A) expend funds for a budget category in excess
of the total expenditures budgeted for that budget category,
so long as such excess expenditures for any Fiscal Year do not
exceed 10% of that budget category; (B) in addition to the
expenditures in clause A above, apply amounts in any budget
category that the General Partner reasonably determines are
not required to be spent for that category to reduce or
eliminate a cost overrun in another budget category; and (C)
expend funds for matters which are non-discretionary (such as
real estate taxes, utilities and insurance premiums) even if
such amounts exceed any amounts budgeted for them;
(xx) except to the extent authorized by policies
or guidelines previously approved by TSL, LB and CSL, opening
or changing the terms of each bank account in the name of or
on behalf of the Partnership, or designating any Person to
withdraw funds from or sign checks drawn on any such account;
(xxi) approval of any action described in this
Agreement that refers to action by "TSL, LB and CSL" or "all
of TSL, LB and CSL" or contains language comparable to those
phrases;
(xxii) approval of any amendment, modification,
change or restatement of this Agreement or any act in
contravention of this Agreement;
(xxiii) approval of any capital expenditures in
excess of $50,000 on any Property that has already been
developed; and
(xxiv) with respect to any action or issue not
specifically described in this or another Section of this
Agreement, making any decision or taking any action that a
Partner exercising commercially reasonable judgment and acting
in good faith determines will or is reasonably expected
materially and adversely to affect the Partnership, any
Partner or the business or operations of the Partnership.
(c) Any Partner may request approval of a Major Decision by
written notice to the other Partners stating in reasonable detail the Major
Decisions to be made and including any supporting data necessary for a proper
understanding of the Major Decision to be made. Whenever TSL or CSL requests
approval of Major Decision, its request shall be communicated to both Xxxxx
X. Xxxxxxx and Xxxxx Xxxx (or such other individuals as designed by LB from
time to time) at their office by the best available means. Whenever a Partner
requests approval of a Major Decision, the other Partners shall notify the
requesting Partner of their approval or disapproval within a commercially
reasonable time (but not to exceed 10 Business Days) after the request is
made. If a Partner fails to
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respond to a request for approval of a Major Decision within the 10-Business
Day period described above, that Partner shall be deemed to have approved the
Major Decision so requested. If a Partner reasonably requests additional
information in order to respond to a request for a Major Decision, the
10-Business Day period for response shall run from the date that it receives
all the additional information requested. The requesting Partner shall
promptly provide to each other Partner such information as the other Partners
may reasonably request to assist them in making their decision.
Section 7.3. DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER
(a) The General Partner shall manage and control the
Partnership, its business and affairs as stated in Section 7.1. During the
continuance of the Partnership, the General Partner shall diligently and
faithfully devote such time to the management of the business of the
Partnership as it deems reasonably necessary.
(b) REMOVAL OF TSL AS GENERAL PARTNER. LB shall have the right
to remove TSL as General Partner of the Partnership for cause (as defined
below) by delivering to TSL a written notification of removal and stating the
cause for that action. The grounds for removal for cause shall mean one or
more of the following:
(i) any material failure by TSL to exercise
reasonable care in the discharge of its duties and obligations
as General Partner which is not cured at TSL's sole expense
(which shall not be deemed to be a capital contribution by TSL
to the Partnership) within 30 days after delivery of written
notice of such failure by LB to TSL;
(ii) any fraud, gross negligence or willful
misconduct in the performance by TSL of its obligations or
covenants under this Agreement or under any provision of
applicable law that LB determines in its reasonable discretion
is materially detrimental to the Partnership;
(iii) any material breach of the Partnership's
obligations to any lender that results from the willful
misconduct or material breach by TSL as described in
subsection (i) above and causes an event of default beyond
applicable grace periods under any loan documentation; or
(iv) any material breach by TSL or Fail of any
representation, warranty or covenant contained in Article XI
of this Agreement that LB determines in its reasonable
discretion is materially detrimental to the Partnership.
(c) LB shall have the right to remove TSL as General Partner of
the Partnership without cause at any time after the second anniversary of the
date of this Agreement by delivering to TSL a written notification of removal.
(d) LB or its designee (as reasonably approved by CSL) shall
act as General Partner on behalf of the Partnership after LB has removed TSL
as General Partner. If LB declines or fails for any reason to remove TSL as
the General Partner for one or more of the reasons stated above even
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though it has the right to do so, such failure to act at that time shall not
prevent or preclude LB from removing TSL as General Partner at a future time
for the same or a different reason.
Section 7.4. CHANGE OF TSL'S INTEREST FROM GENERAL TO LIMITED PARTNER
(a) If (1) a Bankruptcy Proceeding (as defined in subsection
(b)) has been commenced, (2) all or part of the Partnership interest in TSL
is transferred or otherwise disposed of in violation of Article IX or XI
hereof, or (3) TSL has been removed as the General Partner of the Partnership
pursuant to Section 7.3(b) or (c), the interest of TSL as General Partner of
the Partnership shall be automatically and immediately changed into a Limited
Partner interest. If Fail has died or is no longer actively involved in the
business and management of TSL for any reason, the interest of TSL as General
Partner of the Partnership shall, at the election of LB or CSL to be
effective upon written notice to TSL, be automatically and without further
action changed into a Limited Partner Interest.
(b) DEFINITIONS. For purposes of this Section:
(i) A "Bankruptcy Proceeding" means (1) the
filing by TSL of a petition for its bankruptcy or
reorganization under the U.S. Bankruptcy Code or comparable
state law, (2) the commencement against TSL with or without
its consent or approval of any proceeding seeking its
bankruptcy, liquidation or reorganization, appointment
of a receiver or trustee of its assets, or comparable relief,
that in each case is not stayed or dismissed within 120 days,
(3) the entry by a court of competent jurisdiction of a final
and unappealable order granting relief of the type described
in clause (1) or (2) above, (4) the admission in writing by
TSL of its inability to pay its debts generally as they become
due and (5) the making by TSL of a general assignment for the
benefit of its creditors.
(ii) Mr. Fail shall be deemed to be "no longer
actively involved in the business or management of TSL" if (1)
he has been discharged for any reason from employment by TSL,
(2) he has not devoted such time to the operations and
business affairs of the Partnership and the Properties as LB
reasonably determines is necessary because of illness or
physical disability, and such failure continues for more than
forty-five (45) days after written notice has been given to
him by either LB or CSL, or (3) he has died or become legally
incompetent or permanently disabled.
Section 7.5. ANNUAL BUSINESS PLAN
Promptly after the execution and delivery of this Agreement (but in
no event later than December 31, 1999), the General Partner shall prepare, in
cooperation with the Property Manager and submit to the Limited Partners for
approval as a Major Decision, pursuant to Section 7.2, an Annual Business
Plan and related budgets for the Properties for Fiscal Year 2000. At least 15
days prior to the commencement of each Fiscal Year beginning with Fiscal Year
2001, the Partnership shall adopt an Annual Business Plan, including an
operating budget and a capital budget, for the next Fiscal Year. Each such
Annual Business Plan and related budgets must be approved in writing as a
Major Decision as provided in Section 7.2. If the Partners fail for any
reason to approve a new
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Annual Business Plan, the existing Annual Business Plan shall remain in
effect for an additional sixty (60) days.
Section 7.6. OPTION TO PROVIDE FINANCING TO PARTNERSHIP
Whenever the Partnership proposes to obtain financing or refinancing
of any type (whether senior or junior debt or equity, but other than the GMAC
Loan) for any purpose, the Partnership shall give written notice to LB
describing the type, amount and material terms of the financing to be
obtained and copies of any term sheet, offer or other written material
delivered to or by the proposed lender. LB shall thereafter have the right
(but not the obligation) to cause one of its Affiliates to commit to provide
such financing on terms no less favorable to the Partnership than those that
are offered to the Partnership by another lender or investor as determined by
CSL and TSL (such determination to be made by TSL and CSL acting reasonably)
and the Partnership will accept such financing from the Affiliate of LB. LB
shall respond within fifteen (15) days to the written notice from the
Partnership described above. If LB elects not to provide such financing or
does not respond within fifteen (15) days, it shall be deemed to have waived
its right to do so. If LB elects to provide such financing, LB shall cause
one of its Affiliates to commit to provide such financing (subject to
standard mortgage loan documentation, including, without limitation, title,
survey, environmental, legal opinions and customary capital markets lending
requirements reasonably acceptable to LB or its Affiliate) by the date on
which the Partnership is required to submit its application, which commitment
letter shall contain all material terms of the proposed loan, or comparable
documentation to the lender. If the lender modifies the terms of its proposed
loan in any material respect, LB shall again have the right described in this
paragraph until the date that the Partnership is required to give to the
lender its response to the modification.
Section 7.7. OTHER ACTIVITIES
The General Partner shall devote a sufficient amount of time to
manage the Partnership. The Partners and Affiliates of the Partners may have
other business interests and may engage in other activities in addition to
those relating to the Partnership, including the making or management of
other investments. Without limitation on the generality of the foregoing,
each Partner recognizes that the Partners and Affiliates of all Partners each
have an interest in investing in, owning, operating, transferring, leasing
and otherwise using real property and interests therein for profit, and
engaging in any and all activities related or incidental thereto and that
each will make other investments consistent with such interests and the
requirements of any agreement to which they or their Affiliates are a party.
Except to the extent stated in this Agreement or in another agreement to
which a Partner is a party or by which it is bound: (1) neither the
Partnership nor any Partner shall have any right by virtue of this Agreement
or the relationship created hereby in or to any other ventures or activities
in which any Partner or its Affiliates are involved or to the income or
proceeds derived therefrom; (2) the pursuit of other ventures and activities
by the Partners or Affiliates of any Partner, even if competitive with the
business of the Partnership, is hereby consented to by all other Partners and
shall not be deemed wrongful or improper under this Agreement; and (3) no
Partner or its Affiliate shall be obligated to present any particular
investment opportunity to the Partnership, even if such opportunity is of a
character which, if presented to the Partnership, could be taken by the
Partnership, and each Partner and each Affiliate shall have the right to take
for its own account, or to recommend to others, any such particular
investment opportunity.
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Section 7.8. TAX MATTERS PARTNER
See Section 4.4 of EXHIBIT C attached hereto.
Section 7.9. LIABILITY; INDEMNIFICATION
The General Partner and its Affiliates shall not be liable to the
Partnership or the Limited Partners for any act or omission performed or omitted
by it pursuant to the authority granted to it by this Agreement, other than for
fraud, willful malfeasance or gross negligence as described in Section
7.3(b)(ii). The Partnership shall and hereby does indemnify and save harmless
the General Partner, the Limited Partners and their Affiliates to the greatest
extent permitted by the Revised Act from any loss, damage, claim or liability,
including but not limited to, reasonable attorney's fees and expenses, incurred
by them by reason of any act performed by the General Partner, the Limited
Partners or their Affiliates on behalf of the Partnership, including, without
limitation, their activities in winding up and liquidating the Partnership, or
in furtherance of the Partnership's interests, except that the General Partner
and its Affiliates shall not be indemnified for actions by the General Partner
or its Affiliates which constitute a breach of any of their obligations under
this Agreement, fraud, willful malfeasance or gross negligence. The indemnity
and save harmless provided for in the foregoing sentence shall be satisfied out
of Partnership assets only and no Partner shall have any personal liability on
account thereof.
Section 7.10. FEES TO AND REIMBURSEMENT OF THE GENERAL PARTNER
The Limited Partners acknowledge that the General Partner or its
Affiliates will continue to receive $5,833 per month as an asset management fee.
LB shall have the right to terminate payment of that fee if TSL has been removed
as the General Partner of the Partnership or at any time after the second
anniversary of the date of this Agreement; provided, however, that if payment of
that fee has been terminated and TSL has not been removed as General Partner,
TSL shall have the right at any time thereafter to convert its interest in the
Partnership to a Limited Partner interest effective immediately upon
notification of such conversion of the other Partners. The General Partner and
its Affiliates shall also be entitled to receive reimbursement of their expenses
to the extent payment thereof is authorized in the Annual Business Plan, but
shall not be entitled to receive any other fees. The General Partner and its
Affiliates shall receive reimbursement for all reasonable expenses advanced by
the General Partner and its Affiliates on behalf of the Partnership and all
expenses incurred during the operation of the Partnership.
ARTICLE VIII
ALLOCATIONS; DISTRIBUTIONS
Section 8.1. ALLOCATIONS OF INCOME AND LOSS
All items of income or loss of the Partnership shall be allocated to
the Partners in accordance with the provisions of EXHIBIT C attached hereto,
which are hereby incorporated by reference for all purposes of this Agreement.
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Section 8.2. DISTRIBUTIONS OF NET CASH FLOW AND NET CAPITAL TRANSACTION
PROCEEDS
Distributions of Net Cash Flow shall be made once each calendar quarter
and at such other times as is approved as a Major Decision pursuant to Section
7.2. Distributions of Net Capital Transaction Proceeds shall be made promptly
following the Partnership's receipt thereof. All such distributions shall be
made in the following order of priority, subject to the provisions of Section
11.9:
(a) First, to LB until there shall have been distributed to LB an
amount equal to the 15% Preferred Return calculated solely with respect to any
additional capital contributed pursuant to Section 5.3(b) or (c) hereof.
(b) Second, to LB until LB shall have received an amount equal to
the then existing balance in its Capital Contribution Account calculated solely
with respect to any additional capital contributed pursuant to Section 5.3(b) or
(c).
(c) Third, to LB, until there shall have been distributed to LB an
amount equal to the unpaid and accrued 15% Preferred Return on the remaining
amount (as reduced by Section 8.2(a)) in its Capital Contribution Account.
(d) Fourth, to LB, until it shall have received an amount equal to
the then remaining balance (as reduced by Section 8.2(b)) in its Capital
Contribution Account.
(e) Fifth, to TSL and CSL, PARI PASSU, until there shall have been
distributed to each of them an amount equal to the 15% Preferred Return
calculated solely with respect to additional capital contributed pursuant to
Section 5.3.
(f) Sixth, to TSL and CSL, PARI PASSU, until each of them shall
have received an amount equal to the then existing balance in its Capital
Contribution Account calculated solely with respect to additional capital
contributed pursuant to Section 5.3.
(g) Seventh, to LB in an amount equal to the greater of (i)
$3,000,000 (this amount to be reduced to $2,000,000 if the distributions under
this subsection (g) are distributed to LB within one year of the date of this
Agreement) or (ii) the amount that would give LB an Internal Rate of Return of
25% on its capital contributions (such calculation to take into account all
prior distributions to LB under this Section 8.2).
(h) Eighth, to TSL and CSL, PARI PASSU, until there shall have
been distributed to TSL and CSL, determined on a pro rata basis in accordance
with their respective Capital Contribution Accounts, an amount equal to the
unpaid and accrued 15% Preferred Return on the remaining amounts in their
respective Capital Contribution Accounts.
(i) Ninth, to TSL and CSL, PARI PASSU, until there shall have been
distributed to TSL and CSL amounts, determined on a pro rata basis in accordance
with their respective Capital Contribution Accounts, equal to the then remaining
balances in their respective Capital Contribution Accounts.
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(j) Tenth, if LB has not received in full all distributions
described in clauses (a) through (g) above on or before the second anniversary
of the date of this Agreement, 80% to LB, 19% to CSL and 1% to TSL, PARI PASSU.
If LB has received such amounts in full on or before the second anniversary of
the date hereof, 99% to CSL and 1% to TSL, PARI PASSU.
Section 8.3. WITHHOLDING TAXES WITH RESPECT TO PARTNERS
The Partnership shall comply with any withholding requirements under
federal, state and local law and shall remit any amounts withheld to, and file
required forms with, the applicable jurisdictions. All amounts withheld from
Partnership revenues or distributions by or for the Partnership pursuant to the
Code or any provision of any federal, state or local law, and any taxes, fees or
assessments levied upon the Partnership, shall be treated for purposes of this
Article VIII as having been distributed to those Partners who received tax
credits with respect to the withheld amounts, or whose identity or status caused
the withholding obligations, taxes, fees or assessments to be incurred. If the
amount withheld exceeded the affected Partner's actual share of cash available
for distribution, such Partner shall reimburse the Partnership for such
withholding. Each Partner agrees to furnish the Partnership with such
representations and forms as the General Partner shall reasonably request to
assist it in determining the extent of, and in fulfilling, the Partnership's
withholding obligations, if any. As soon as practicable after becoming aware
that any withholding requirement may apply to a Partner, the General Partner
shall advise such Partner of such requirement and the anticipated effect
thereof. Such Partner shall pay or reimburse to the Partnership all identifiable
costs or expenses of the Partnership caused by or resulting from withholding
taxes with respect to such Partner.
ARTICLE IX
ASSIGNABILITY OF GENERAL PARTNER'S AND LIMITED
PARTNER'S INTERESTS; BUY-SELL OPTION; PURCHASE OPTION
Section 9.1. GENERAL
(a) LB may at any time sell, assign, transfer, pledge, encumber or
hypothecate all or any part of its partnership interest to either any Affiliate
of LB, or a real estate investment trust controlled by LB or a securitization
pool controlled by LB. At any time after the second anniversary of the date
hereof, LB may sell, assign, transfer, pledge, encumber or hypothecate all or
any part of its partnership interests to any Person after complying with Section
9.11. Except as permitted in this Article, neither TSL nor CSL may, directly or
indirectly, sell, assign, transfer, pledge, encumber or hypothecate all or any
part of their partnership interest (including, but not limited to, their
interests in the capital or profits of the Partnership) without the prior
written consent of LB, which shall not be unreasonably withheld, delayed or
conditioned. Each sale, assignment, transfer, pledge, encumbrance or
hypothecation of a partnership interest shall at all times be subject to the
terms and conditions of the BOT Loan and the GMAC Loan.
(b) No sale, assignment, transfer, pledge, encumbrance,
hypothecation or issuance in violation of the provisions hereof shall be valid
or effective for any purpose, and no consent to one such transaction shall apply
to any other.
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(c) Upon the transfer of its entire partnership interest in the
Partnership and the admission of such Partner's transferee(s) as a substitute
Partner pursuant to Section 9.4, a Partner shall be deemed to have withdrawn
from the Partnership.
Section 9.2. PERMITTED TRANSFERS
(a) Notwithstanding the provisions of Section 9.1, but subject to
the limitations set forth in Sections 9.4 and 9.5, either TSL or CSL shall be
entitled, without the consent of the other Partners, to transfer all or any
portion of their interests in the Partnership to any Permitted Affiliate (as
hereinafter defined); provided, however, that no such transfer shall be
effective without the consent of LB required in Section 9.1(a) if it is part of
a series of transactions designed to effect a direct or indirect transfer to a
person or entity not described in this sentence.
(b) Any Partner may transfer all or any part of its partnership
interest to another Partner without the consent or approval of any other
Partner.
(c) "Permitted Affiliate" means, with respect to a Partner, (1)
any person directly or indirectly owning, controlling or holding with power to
vote 100% of the outstanding securities of or equity or beneficial interests in
such Partner as of the date hereof, (2) any person 100% of whose outstanding
securities or equity or beneficial interests are directly or indirectly owned,
controlled or held with power to vote by such Partner as of the date hereof, (3)
any person 100% of whose out standing securities or equity or other beneficial
interests are directly or indirectly owned, controlled or held with power to
vote by a Person or Persons directly or indirectly owning, controlling or
holding with power to vote 100% of the outstanding securities or equity or other
beneficial interests of such Partner with whom affiliate status is being tested,
or (4) with respect to TSL, the spouse, parents or children of Fail or trusts
established solely for the benefit of one or more of those Persons so long as
Fail at all times owns directly, indirectly or beneficially more than fifty
percent (50%) of the profit and other economic interests in TSL and has the sole
and exclusive power to direct the management and policies of TSL, whether by
ownership of Partnership or other equity interests, by proxy, by contract or
otherwise.
Section 9.3. EFFECT OF ASSIGNMENT; DOCUMENTS
In the event of any sale, assignment or transfer permitted hereunder,
the Partnership shall not be dissolved or wound up, but shall continue. No such
sale, assignment or transfer shall relieve the assignor from any of its
obligations under this Agreement accruing prior to such sale, assignment or
transfer. Notwithstanding the foregoing, as a condition to any sale, transfer or
assignment by a Partner, the transferee or assignee must execute a joinder to
this Agreement and agree to be bound by all of its terms and provisions.
Section 9.4. SUBSTITUTE PARTNER
The transferee of a partnership interest may be admitted to the
Partnership as a substitute Partner only if such transfer is made in compliance
with Sections 9.1, 9.2, 9.3 and 9.5. Unless a transferee of a partnership
interest is admitted as a substitute Partner under this Section 9.4, it shall
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have none of the powers of a Partner hereunder and shall have only such rights
of an assignee under the Revised Act as are consistent with the other terms and
provisions of this Agreement.
Section 9.5. FURTHER REQUIREMENTS
In addition to the other requirements of Sections 9.1, 9.2, 9.3 and
9.4, and unless waived or modified in whole or in part by the other Partners as
a Major Decision pursuant to Section 7.2, no transfer of all or any portion of a
partnership interest may be made unless the transferring Partner and the
transferee deliver an opinion of counsel reasonably acceptable to the
non-transferring Partners, that (a) the transfer will not cause the Partnership
to be treated as an association taxable as a corporation for Federal income tax
purposes, (b) the transfer will not cause the partnership to be treated as a
"publicly traded partnership" within the meaning of Section 7704 of the Code and
(c) the transfer will not violate the Securities Act of 1933, as amended, or any
other applicable Federal or state securities laws, rules or regulations.
Section 9.6. BUY-SELL PROVISIONS
If (i) LB has the right at any time to remove TSL as General Partner of
the Partnership for cause as a result of its fraud, gross negligence or willful
misconduct under the circumstances described in Section 7.3(b)(ii) of this
Agreement, whether or not LB has exercised that right, (ii) LB has the right on
behalf of the Partnership at any time to terminate one or more of the Management
Agreements for cause as a result of the fraud, gross negligence or willful
misconduct of Capital Senior Living, Inc. that constitutes a material breach by
it under Section IV (C)(1)(a) of any Management Agreement, whether or not LB has
exercised that right, (iii) LB determines that TSL or CSL has breached a
material representation in Article XI of this Agreement or (iv) LB has not
received in full all distributions described in Sections 8.2(a) through (g)
of this Agreement on or before December 30, 2001, LB shall be permitted (but
not obligated) to notify the other Partners of its intent to invoke the
procedures described in subsections A through D below. If (y) TSL has at any
time been removed as General Partner of the Partnership pursuant to Section
7.3(b) of this Agreement or (z) LB, TSL and CSL have been deadlocked for more
than thirty (30) days ending after December 30, 2000 over approval of a Major
Decision in accordance with Section 7.2, any Partner shall be permitted (but
not obligated) to notify the other Partners of its intent to invoke the
procedures described in subsections A through D below.
A. The Partner giving notice (the "Buy-Sell Notice")
shall specify a price (the "Offer Price") for the Properties and all
other assets of the Partnership, and indicate a willingness to be, at
the option of the other Partners, either the buyer or the seller. The
Buy-Sell Notice must be delivered with the words "Confidential/Urgent"
clearly visible from the exterior of the container in which the
Buy-Sell Notice is contained and must alert the other Partners to the
10-day limit for response as described below. Delivery of the Buy-Sell
Notice shall be in accordance with the notice provisions of this
Agreement.
B. The Partners receiving the Buy-Sell Notice shall have
ten (10) days from the receipt of the Buy-Sell Notice to elect by
written notice given to the Partner who gave the Buy-Sell Notice to be
either the seller or the buyer. If both Partners who receive the
Buy-Sell Notice elect to be buyer, they shall each be entitled to
purchase PRO RATA in accordance
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with their Percentage Interests the partnership interests held by
the Partner who gave the Buy Sell Notice. If one or both Partners
receiving the Buy-Sell Notice elect to be the buyer, their notice
shall constitute their legally binding obligation to complete the
purchase described in Section 9.6C and shall not be effective with
respect to each such Partner unless it also, within such 10-day
period, delivers in escrow to the attorneys for the Partner who gave
the Buy-Sell Notice cash in an amount equal to ten (10%) percent of
the amount it would be obligated to pay under Section 9.6C (the
"Deposit"). In the event both Partners receiving the Buy-Sell Notice
fail to respond, or elect to be the buying Partner but fail to
deliver the Deposit, within such 10-day period, then the Partner who
gave the Buy-Sell Notice shall be the buyer. That buyer shall then
deliver in escrow, within five (5) days of the end of such 30-day
period, to the attorneys for the other Partner cash in an amount
equal to the Deposit and such delivery of the Deposit shall
constitute its legally binding obligation to complete the purchase
described in Section 9.6C. If that buyer fails to pay the Deposit,
then the rights of the Partners under this Section shall be as they
were prior to the delivery of the Buy-Sell Notice.
C. Within ninety (90) days after the Buy-Sell Notice has
been given:
(1) If TSL and CSL are the sellers, LB shall pay
to TSL and CSL, in full payment for their interests in
Partnership, the amount TSL and CSL would have received as a
Partner of the Partnership if the Properties of the
Partnership had been sold for an amount equal to the Offer
Price on the date of such payment, and the proceeds of such
sale (net of liabilities, obligations and expenses that would
have been paid out of such proceeds, including without
limitation any amounts due to a Partner or its Affiliates, if
such sale had actually occurred) were distributed in the order
of priority described in Section 8.2 of this Agreement. TSL
and CSL shall thereupon cease to be Partners of the
Partnership.
(2) If LB and CSL are the sellers, TSL shall pay
to LB and CSL in full payment for their interests in
Partnership, the amount LB and CSL would have received as
Partners of the Partnership if the Properties of the
Partnership had been sold for an amount equal to the Offer
Price on the date of such payment, and the proceeds of such
sale (net of liabilities, obligations and expenses that would
have been paid out of such proceeds, including, without
limitation, any amounts due to a Partner or its Affiliates, if
such sale had actually occurred) were distributed in the order
of priority described in Section 8.2 of this Agreement. LB and
CSL shall thereupon cease to be Partners of the Partnership.
(3) If LB and TSL are the sellers, CSL shall pay
to LB and TSL in full payment for their interests in
Partnership, the amount LB and TSL would have received as
Partners of the Partnership if the Properties of the
Partnership had been sold for an amount equal to the Offer
Price on the date of such payment, and the proceeds of such
sale (net of liabilities, obligations and expenses that would
have been paid out of such proceeds, including, without
limitation, any amounts due to a Partner or its Affiliates, if
such sale had actually occurred) were distributed in the order
of priority described in Section 8.2 of this Agreement. LB and
TSL shall thereupon cease to be Partners of the Partnership.
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D. If the buyer fails to complete the transaction within
ninety (90) days after the Buy-Sell Notice was given as described above
for a reason other than default by the seller, the attorneys holding
the Deposit in escrow shall deliver to the sellers on a pro rata basis
in accordance with the purchase price each was to receive the full
amount of the Deposit and all interest earned thereon and sellers shall
(1) have the right (but not the obligation), to be exercised and
completed within one hundred fifty (150) days after the Buy-Sell Notice
was given, (x) to be the buyer on a pro rata basis as described above
at an Offer Price equal to at least ninety (90%) percent of that stated
in the Buy-Sell Notice, and/or (2) be entitled to specific performance
and all other available legal and equitable remedies against the buyer,
including (without limitation) recovery of all losses, costs and
expenses.
E. If none of the Partners has completed the exercise of
purchase rights within the time periods specified in this section, the
rights of the Partners shall be as they were before the Buy-Sell Notice
was given, subject to any rights that the non-defaulting Partners may
have hereunder, at law or at equity.
F. Notwithstanding the foregoing, upon receipt of a
Buy-Sell Notice from TSL or CSL, LB may, in lieu of electing to be
either the Seller or Buyer, offer the Properties for sale on behalf of
the Partnership in accordance with the procedures described in Sections
9.7.
G. Notwithstanding anything to the contrary stated in
this Section, in no event shall the amount to be paid to LB as seller
under this Section be less than the amounts that would be distributed
to LB pursuant to Section 8.2(a) through (e).
Section 9.7. SALE OF PROPERTIES AFTER SECOND ANNIVERSARY
At any time after December 30, 2001, LB may invoke the procedures
described in Paragraphs A through D below for any reason in its sole and
absolute discretion.
A. LB shall deliver a notice ("Sale Notice") to TSL and
CSL stating that it intends to cause one or more of the Properties to
be sold on behalf of the Partnership. The Sale Notice must contain a
proposed sale price for each such Property that LB has elected to sell
(the "Sale Price"). The Sale Notice must be delivered with the words
"Confiden tial/Urgent" clearly visible from the exterior of the
envelope in which the Sale Notice is contained and must alert TSL and
CSL to the 10-Business Day limit for response described in Paragraph B
below.
B. CSL shall have 10 Business Days from the receipt of
the Sale Notice to elect by written notice given to LB to purchase all
or part of LB's partnership interests in the Partnership at a purchase
price equal to the amount LB would have received as a Partner of the
Partnership if the Property or Properties of the Partnership had been
sold for an amount equal to the Sale Price on the date of such payment,
and the proceeds of such sale (net of liabilities, obligations and
expenses that would have been paid out of such proceeds, including,
without limitation, any amounts due to a Partner or its Affiliates, if
such sale had actually occurred) were distributed in the order of
priority described in Section 8.2 of this Agreement. If less than all
the Properties are to be sold, LB's partnership interests subject
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to sale under this Section shall be equal to the percentage obtained by
multiplying LB's partnership interest by a fraction, the numerator of
which shall be the agreed value of each Property to be sold set forth
in SCHEDULE E to this Agreement and the denominator of which shall be
the aggregate of the agreed value of all Properties stated in SCHEDULE
E. If CSL makes this election, its notice shall constitute its legally
binding obligation to complete such purchase and shall not be effective
unless it also delivers to the Partnership cash in an amount equal to
ten percent (10%) of the amount to be paid to LB pursuant to this
Section ("Deposit") which shall be held by the Partnership in an
interest-bearing, segregated account.
C. If CSL elects to purchase the partnership interests
of LB as described in Paragraph B, CSL shall within ninety (90) days
after the Sale Notice was given pay to LB the amount described in
Paragraph B. CSL shall thereafter be entitled to the same priority in
distributions pursuant to Section 8.2 as LB had with respect to the
partnership interests of LB sold under this Section.
D. If CSL fails to respond within such 10-Business Day
period, fails to pay the Deposit or notifies LB that it does not wish
to exercise the right described in Paragraph B above, then LB, in its
sole and absolute discretion, shall be entitled to offer the Properties
for sale on behalf of the Partnership at the price set forth in the
Sale Notice and on other terms no less favorable to the Partnership
than those terms stated in the Sale Notice. Such offer may be made
directly by LB or through investment bankers or real estate brokers for
a commission and on other terms that are "market" as reasonably
determined by LB. LB shall use commercially reasonable efforts to keep
TSL and CSL informed regarding the progress of the sale of the
Properties.
E. If CSL elects to purchase the LB partnership
interest, but fails for any reason to complete the transaction within
90 days after the Sale Notice was given as described above, LB (i)
shall retain the full amount of the Deposit as its sole and exclusive
remedy and (ii) shall have the right to sell the Properties being sold
within a period of 180 days after the Sale Notice was given at a Sale
Price equal to at least 90% of that stated in the Sale Notice and on
other terms no less favorable to the Partnership than those terms
stated in the Sale Notice.
F. LB shall thereafter have the right to complete the
sale of the Properties being sold on the terms no less favorable to
those described in the Sales Notice and to execute and deliver on
behalf of the Partnership all documentation and to take all other
actions that LB shall reasonably determine are necessary to complete
the sale of the Properties. If LB receives a bona fide offer to
purchase the Properties ("Property Offer"), LB shall, before completing
the sale of the Properties, deliver the Property Offer to CSL. CSL
shall then have the right to purchase the Properties on the same terms
and conditions as are set forth in the Property Offer. If CSL makes
this election, CSL shall both notify LB of its election and complete
the purchase of the Properties within 10 days (not Business Days) after
its receipt from LB of the Property Offer. If the Properties are not
sold within 180 days, then the rights of CSL shall be as they were
before the Sale Notice was given under this Section.
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G. If the Properties are sold under this Section, LB
shall be entitled to all distributions payable to LB as described in
Section 8.2(a), (b), (c) and (d) before any distributions are made to
CSL and TSL under Section 8.2(e) and (f).
Section 9.8. CSL PURCHASE OPTION: TSL PARTNERSHIP INTERESTS
At any time, CSL shall have the right, but not the obligation, to
purchase all, but not less than all, of the interests owned by TSL for an amount
equal to the amount of money that TSL paid for its interests in the Partnership,
plus non-compounding interest of 12% per annum from the date such amounts were
paid to the date the option described herein is exercised. The Partners, by
executing this Agreement, hereby agree that the future value of such interests
is speculative and that the formula set forth above is the Partners' best
estimate of the fair market value of such interests as of the date of the
exercise of such option.
Section 9.9. CSL PURCHASE OPTION: LB PARTNERSHIP INTERESTS
At any time, CSL shall have the right, but not the obligation to
purchase, all, but not less than all, of the partnership interests of LB for an
amount equal to the sum of (i) an amount equal to the balance in LB's Capital
Contributions Account, (ii) LB's accrued but unpaid 15% Preferred Return on its
Capital Contributions Account, (iii) the greater of (x) $3,000,000 and (y) an
amount that would give to LB a 25% Internal Rate of Return on its Capital
Contributions taking into account all prior distributions made to LB pursuant to
Section 8.2(a) through (d), and (iv) if such purchase is completed after the
second anniversary hereof, the amount that LB would have received pursuant to
Section 8.2 if all Properties had been sold at their fair market value as of the
end of the month prior to the payment hereunder, taking into account all amounts
set forth in (i), (ii) and (iii) above. In the event CSL completes the
purchase of LB's partnership interest pursuant to this Section 9.9 prior to
the first anniversary of the date hereof, the $3,000,000 amount above shall
be reduced to $2,000,000.
Section 9.10. CLOSING DOCUMENTATION
At the closing of any transaction described in Section 9.6, 9.7, 9.8 or
9.9, the seller(s) shall execute and deliver to the buyer(s) such instruments
and documents in form and substance reasonably satisfactory to the buyer(s) as
may be necessary or appropriate to transfer the Properties or partnership
interests of the seller(s) to the buyer(s) (or the designee of any buyer(s)),
free and clear of all liens, security interests, claims and encumbrances, other
than Permitted Encumbrances, against receipt by the seller(s), in immediately
available funds, of the consideration determined in accordance with Section 9.6,
9.7, 9.8 or 9.9, as the case may be.
Section 9.11. SALE OF PARTNERSHIP INTERESTS BY LB
(a) If LB wishes at any time for any reason to sell or otherwise
dispose of all or part of its partnership interest in this Partnership, it shall
give notice ("Sale Notice") to CSL and shall specify the price and other
material terms and conditions ("Sale Price") that it is seeking for sale of such
partnership interest. The Sale Notice must be delivered with the words
"Confidential/Urgent" clearly visible from the exterior of the container in
which the Sale Notice is contained and must alert
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CSL to the 10-day limit for response described below. Delivery of the Sale
Notice shall be in accordance with the notice provisions of this Agreement.
(b) CSL shall have ten (10) Business Days from the receipt of the
Sale Notice to elect by written notice given to LB to purchase at the Sale Price
the partnership interests of LB being sold. If CSL elects to purchase the
partnership interest of LB being sold, its notice shall constitute its legally
binding obligation to complete the purchase described in subsection (c) and
shall not be effective unless it also delivers to LB cash in an amount equal to
ten percent (10%) of the amount it would be obligated to pay under subsection
(c) below ("CSL Deposit"). If CSL (i) fails to respond to the Sale Notice within
such 10-Business Day period, (ii) fails to pay the CSL Deposit or (iii) notifies
LB that it does not wish to purchase such partnership interests of LB, then LB
shall be entitled to sell or otherwise dispose of such partnership interests in
this Partnership at a price and on other material terms and conditions no less
favorable to LB than the Sale Price stated in the Sale Notice for a period of
one hundred twenty (120) days after the Sale Notice was given to CSL.
(c) If CSL elects to purchase the partnership interests of LB, CSL
shall within ninety (90) days after the Sale Notice was given pay to LB the Sale
Price stated in the Sale Notice. CSL shall thereafter be entitled to the same
priority in distributions pursuant to Section 8.2 as LB had with respect to the
partnership interests of LB sold under this Section.
(d) If CSL elects to purchase such partnership interests of LB,
but fails for any reason other than a default by LB to complete the transaction
within ninety (90) days after the Sale Notice was given as described above, LB
(i) shall retain the full amount of the CSL Deposit, (ii) shall have the right
to sell such partnership interests within a period of two hundred ten (210) days
after the Sale Notice was given at a Sale Price equal to at least ninety percent
(90%) of that stated in the Sale Notice and on other terms no less favorable to
LB than those of the Sales Price stated in the Sale Notice and (iii) shall be
entitled to and all available legal remedies against CSL, including (without
limitation) recovery of all losses, costs and expenses. LB shall not,
however, be entitled to any consequential damages or any equitable remedies,
which are hereby waived.
Section 9.12. WITHDRAWAL OF A PARTNER
Except as otherwise specifically permitted by this Agreement, no
Partner shall be entitled to withdraw or retire from the Partnership.
Section 9.13. DEATH, LEGAL INCOMPETENCY, BANKRUPTCY OR DISSOLUTION OF
LIMITED PARTNER
The death, legal incompetency, bankruptcy, dissolution or other
disability of a Limited Partner shall not dissolve or terminate the Partnership.
Upon the death, legal incompetency, bankruptcy, dissolution or other disability
of a Limited Partner, the estate, personal representative, trustee, guardian or
other successor in interest, if applicable, of such Limited Partner shall have
all the rights and obligations and be liable for all the liabilities of the
Limited Partner in the Partnership to the extent of such Limited Partner's
interest therein, subject to the terms and conditions of this Agreement, and,
with the prior written consent of the General Partner which may be withheld at
its sole discretion, may be substituted for such Limited Partner.
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ARTICLE X
DURATION, DISSOLUTION, TERMINATION,
WINDING UP, REMOVAL OF GENERAL
PARTNER AND RESIGNATION OF GENERAL PARTNER
Section 10.1. DISSOLUTION AND TERMINATION
Subject to the provisions of Section 7.2(a)(iii) hereof, the
Partnership shall be dissolved only upon the occurrence of any of the following
events:
(a) The expiration of the fixed term of the Partnership;
(b) The withdrawal or removal of the General Partner, the
assignment by the General Partner of all its interest in the
Partnership, or any other event that causes the General Partner to
cease to be a general partner under the Revised Act, provided that any
such event shall not constitute a event of dissolution if the
Partnership is continued pursuant to Section 10.2;
(c) The sale or other disposition of all or substantially
all of the assets of the Partnership and the collection of the proceeds
therefrom; and
(d) The mutual consent of the Partners.
Section 10.2. CONTINUATION OF BUSINESS
The Partners hereby agree that notwithstanding any provision of the
Revised Act, the Partnership shall not dissolve prior to the occurrence of any
event set forth in Section 10.1 above. Upon the occurrence of any event set
forth in Section 10.1 above, the Partnership shall not be dissolved or required
to be wound up if (i) at the time of such event there is a remaining General
Partner and that General Partner carries on the business of the Partnership or
(ii) within ninety (90) days after such event all remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of such event, of one or more additional General
Partners
Section 10.3. WINDING UP OF THE PARTNERSHIP
Upon dissolution of the Partnership as provided in Section 10.1, the
Partnership shall be wound up, and the General Partner will take full account of
the Partnership's assets and liabilities, the assets will be liquidated as
promptly as is consistent with obtaining the fair market value thereof, and the
proceeds therefrom, to the extent sufficient therefor, will be applied and
distributed in accordance with the provisions of Section 10.4. Notwithstanding
the foregoing, the General Partner, with the consent of the other partners, may
determine not to sell all or any portion of the assets of the Partnership, in
which event there shall be distributed to each of the Partners its interest in
the remaining assets of the Partnership.
Section 10.4. SALE OR LIQUIDATION
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In the case of a sale or other disposition of all or substantially all
of the assets of the Partnership or termination and liquidation of the
Partnership, the net proceeds of such sale or liquidation, shall be applied and
distributed, after crediting or charging the Partners' Capital Accounts pursuant
to Article VIII and as cash is received by the Partnership in the following
order of priority on or before the end of the taxable year in which the
Partnership liquidates (or, if later, within 90 days after the date of such
liquidation):
(a) To the payment of the debts and liabilities of the
Partnership (other than debts of the Partnership to the Partners) and
the expenses of sale and liquidation.
(b) To the setting up of any reserves which LB determines
are reasonably necessary for any contingent or unforeseen liabilities
or obligations of the Partnership or of the Partners arising out of, or
in connection with, the Partnership. Such reserves may be held by LB
for the purpose of disbursing such reserves in payment of any of the
aforementioned contingencies, and at the expiration of such period as
LB may deem advisable, to distribute the balance thereafter remaining
as provided herein.
(c) To the Partners, in accordance with the provisions of
Section 8.2.
Should assets other than cash be distributed, the amount by which the
fair market value of the assets, if any, to be distributed exceeds or is less
than the Book Basis (as defined in Exhibit C) of such assets shall, to the
extent not otherwise recognized by the Partnership, be taken into account as
provided in Exhibit C for purposes of crediting or charging the Capital Accounts
of, and distributing proceeds to, the Partners.
ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 11.1. OWNERSHIP OF TSL
Xxxxx X. Fail ("Fail") represents and warrants to LB that, as of the
date of this Agreement, he and Permitted Affiliates own of record and
beneficially all of the outstanding equity interests in TSL. Fail agrees that,
unless LB has given its prior written consent (which shall not be unreasonably
withheld, delayed or conditioned), no Person other than a Permitted Affiliate
will, directly or indirectly, (i) own any equity interest in TSL, (ii) be
admitted as a stockholder of TSL, (iii) be granted any option or other
contractual right to acquire any equity interest in TSL, (iv) be granted the
right to vote or take other action with respect to the equity interest in TSL or
(v) hold or be granted any mortgage, lien, pledge, security interest or other
encumbrance on the equity interest in TSL.
Section 11.2. OWNERSHIP OF CSL
CSL represents and warrants to LB that, as of the date of this
Agreement, Capital Senior Living Corporation owns of record and beneficially all
of the outstanding equity interests in CSL, directly or indirectly. CSL agrees
that, unless LB has given its prior written consent (which shall
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not be unreasonably withheld, delayed or conditioned), no Person other than a
Permitted Affiliate will, directly or indirectly, (i) own any equity interest
in CSL, (ii) be admitted as a stockholder of CSL, (iii) be granted any option
or other contractual right to acquire any equity interest in CSL, (iv) be
granted the right to vote or take other action with respect to the equity
interest in CSL or (v) hold or be granted any mortgage, lien, pledge,
security interest or other encumbrance on the equity interest in CSL.
Section 11.3. CONFIDENTIALITY
The Partners shall not disclose the terms of this Agreement without the
consent of TSL, LB and CSL except (i) to their attorneys, accountants and other
advisors, (ii) to the extent required by law (including, without limitation, in
any required filing with the Securities and Exchange Commission), (iii) to
prospective assignees of partnership interests who agree to maintain the
confidentiality of the provisions of this Agreement, (iv) to prospective lenders
to the Partnership, (v) in connection with any transfer permitted herein by LB
of its partnership interest in the Partnership to a liquidating trust,
securitization pool or real estate investment trust as provided for in Section
9.1(a) or (vi) to prospective lenders to or investors in TSL or CSL.
Section 11.4. LIMITATION OF LB LIABILITY
Each of TSL, CSL and Fail, for themselves and on behalf of their
respective Affiliates (collectively, "TSL and CSL Claiming Parties"), hereby
agrees that if the TSL and CSL Claiming Parties, together or individually, make
any claim of any nature whatsoever, whether legal or equitable, including
(without limitation) claims based on federal or state law, against LB or its
Affiliates arising out of or relating to (1) this Agreement, (2) the formation
or operation of the Partnership, (3) any loans made to the Partnership, (4)
the negotiations and representations of the parties preceding or following
the execution of this Agreement, (5) any alleged breach of this Agreement or
(6) the proposed transactions described in this Agreement, then the following
limitations on the liability of LB and its Affiliates, and on the relief
available to the TSL and CSL Claiming Parties, shall apply: (a) under no
circumstances shall the TSL and CSL Claiming Parties be entitled to any form
of equitable relief (including injunctive relief) except to the extent
expressly stated in this Agreement, lost profits or consequential, special or
punitive damages and (b) any judgment against LB and its Affiliates shall be
enforceable against them only to the extent of the capital contributions of
LB to the Partnership.
Section 11.5. LIMITATION OF CSL LIABILITY
Each of TSL, LB and Fail, for themselves and on behalf of their
respective Affiliates (collectively, "TSL and LB Claiming Parties"), hereby
agrees that if the TSL and LB Claiming Parties, together or individually, make
any claim of any nature whatsoever, whether legal or equitable, including
(without limitation) claims based on federal or state law, against CSL or its
Affiliates arising out of or relating to (1) this Agreement, (2) the formation
or operation of the Partnership, (3) any loans made to the Partnership, (4) the
negotiations and representations of the parties preceding or following the
execution of this Agreement, (5) any alleged breach of this Agreement or (6) the
proposed transactions described in this Agreement, then the following
limitations on the liability of CSL and its Affiliates, and on the relief
available to the TSL and LB
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Claiming Parties, shall apply: (a) under no circumstances shall the TSL and
LB Claiming Parties be entitled to any form of equitable relief (including
injunctive relief) except to the extent expressly stated in this Agreement,
lost profits or consequential, special or punitive damages and (b) any
judgment against CSL and its Affiliates shall be enforceable against them
only to the extent of an amount equivalent to the capital contributions of LB
(and not CSL) to the Partnership.
Section 11.6. LIMITATION OF TSL LIABILITY
Each of CSL and LB, for themselves and on behalf of their respective
Affiliates (collectively, "CSL and LB Claiming Parties"), hereby agrees that if
the CSL and LB Claiming Parties, together or individually, make any claim of any
nature whatsoever, whether legal or equitable, including (without limitation)
claims based on federal or state law, against TSL or its Affiliates arising out
of or relating to (1) this Agreement, (2) the formation or operation of the
Partnership, (3) any loans made to the Partnership, (4) the negotiations and
representations of the parties preceding or following the execution of this
Agreement, (5) any alleged breach of this Agreement or (6) the proposed
transactions described in this Agreement, then the following limitations on the
liability of TSL and its Affiliates, and on the relief available to the CSL and
LB Claiming Parties, shall apply: (a) under no circumstances shall the CSL and
LB Claiming Parties be entitled to any form of equitable relief (including
injunctive relief) except to the extent expressly stated in this Agreement, lost
profits or consequential, special or punitive damages and (b) any judgment
against TSL and its Affiliates shall be enforceable against them only to the
extent of an amount equivalent to the capital contributions of LB (and not TSL)
to the Partnership.
Section 11.7. REPRESENTATIONS OF TSL REGARDING PARTNERSHIP AND RELATED MATTERS
In partial consideration of LB's agreement to become a Limited Partner
and to make the capital contributions described in Section 5.2, TSL makes to LB
the representations and warranties set forth in Exhibit F attached to this
Agreement.
Section 11.8. REPRESENTATIONS OF CSL REGARDING PARTNERSHIP AND RELATED MATTERS
In partial consideration of LB's agreement to become a Limited Partner
and to make the capital contributions described in Section 5.2, CSL makes to LB
the representations and warranties set forth in Exhibit G attached to this
Agreement.
Section 11.9. LB LOSSES FROM BREACH OF REPRESENTATION
(a) INDEMNIFICATION BY TSL. TSL agrees to indemnify and hold
harmless LB and its Related Parties (collectively, the "LB INDEMNIFIED PARTIES")
from, against, for and in respect of any and all damages (including, without
limitation, amounts paid in settlement with the consent of TSL), losses,
obligations, liabilities, claims, causes of action, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' fees and other
costs and expenses incident to any suit, action, investigation, claim or
proceeding and within the reasonable contemplation of the parties (collectively,
"LOSSES") suffered, sustained, incurred or required to be paid by any of LB
Indemnified Parties by reason of (i) any representation or warranty made by TSL
in this Agreement being untrue or incorrect in any material respect as of the
time made; (ii) any failure by TSL to observe or
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perform, in any material respect, their covenants and agreements set forth in
this Agreement in any material respect; or (iii) any failure by TSL or the
Partnership to satisfy and discharge any other liability or material
obligation of TSL or the Partnership accrued, incurred or outstanding on the
date of this Agreement and not expressly assumed by LB pursuant to this
Agreement. TSL further agrees that, in the event any Losses occur in
connection with (a) matters insured against under the terms of the Owner's
Title Policies (as defined in paragraph 32 of Exhibit F) and/or (b) any
matters relating to title to the Properties arising from the respective dates
of the Owner's Title Policies, whether disclosed or undisclosed in any of the
Updated Reports (as defined in paragraph 32 of Exhibit F), through and
including the date hereof, and (c) the failure or delay in obtaining all
proper zoning approvals from the appropriate governmental authorities,
including but not limited to the City of Fort Worth, necessary for full
zoning compliance of the facility located at Granbury Station, Fort Worth,
Texas, then TSL (y) will be liable for any and all such Losses and (z) shall
not look to LB or any LB Indemnified Party on the ground that LB as a Limited
Partner of the Partnership had knowledge of any matter in connection with
such Losses by reason of notice imputed to LB through its Partner TSL by
operation of law, it being the specific understanding and agreement of the
parties and the intent of this Section that neither LB nor any LB Indemnified
Party shall ever be liable to any third party, the Partnership or its
Partners, directly or indirectly, for any Loss that occurs in connection with
(aa) matters insured against under the terms of the Owner's Title Policies
and/or (bb) any matters relating to title to the Properties arising from the
respective dates of the Owner's Title Policies, whether disclosed or
undisclosed in any of the Updated Reports, through and including the date
hereof and/or (cc) the failure or delay in obtaining all proper zoning
approvals from the appropriate governmental authorities, including but not
limited to the City of Fort Worth, necessary for full zoning compliance of
the facility located at Granbury Station, Fort Worth, Texas. Notwithstanding
any provision in this Agreement to the contrary, (a) the amount of any
distribution otherwise payable to TSL pursuant to Section 8.2 shall secure
and be used to pay and satisfy in full any obligation or liability that TSL
has to LB under this Section, (b) the partnership interest of TSL in the
Partnership and any interest that TSL has in any asset of the Partnership
shall secure and be used to pay and satisfy in full any obligation or
liability that TSL has to LB under this Section and (c) LB shall have all
rights and benefits of a secured party under the Uniform Commercial Code with
respect to the distributions, partnership interest and assets referred to in
clauses (a) and (b) above.
(b) INDEMNIFICATION BY CSL. CSL agrees to indemnify, save and hold
harmless the LB Indemnified Parties from, against, for and in respect of any and
all Losses (including, without limitation, amounts paid in settlement with the
consent of CSL) suffered, sustained, incurred or required to be paid by any of
the LB Indemnified Parties by reason of (i) any representation or warranty made
by CSL in this Agreement being untrue or incorrect in any material respect as of
the time made; (ii) any failure by CSL to observe or perform, in any material
respect, its covenants and agreements set forth in this Agreement; or (iii) any
failure by CSL or the Partnership to satisfy and discharge any other liability
or material obligation of CSL or the Partnership accrued, incurred or
outstanding on the date of this Agreement and not expressly assumed by LB
pursuant to the Assignment. CSL further agrees that, in the event any Losses
occur in connection with (a) matters insured against under the terms of the
Owner's Title Policies (as defined in paragraph 8 of Exhibit G) and/or (b) any
matters relating to title to the Properties arising from the respective dates of
the Owner's Title Policies, whether disclosed or undisclosed in any of the
Updated Reports and/or (c) the failure or delay in obtaining all proper zoning
approvals from the appropriate governmental authorities, including but not
limited to the City of Fort Worth, necessary for full zoning compliance
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of the facility located at Granbury Station, Fort Worth, Texas, through and
including the date hereof, then CSL (y) will be liable for any and all such
Losses and (z) shall not look to LB or any LB Indemnified Party on the ground
that LB as a Limited Partner of the Partnership had knowledge of any matter
in connection with such Losses by reason of notice imputed to LB through its
Partner TSL by operation of law, it being the specific understanding and
agreement of the parties and the intent of this Section that neither LB nor
any LB Indemnified Party shall ever be liable to any third party, the
Partnership or its Partners, directly or indirectly, for any Loss that occurs
in connection with (aa) matters insured against under the terms of the
Owner's Title Policies and/or (bb) any matters relating to title to the
Properties arising from the respective dates of the Owner's Title Policies,
whether disclosed or undisclosed in any of the Updated Reports, through and
including the date hereof and/or (cc) the failure or delay in obtaining all
proper zoning approvals from the appropriate governmental authorities,
including but not limited to the City of Fort Worth, necessary for full
zoning compliance of the facility located at Granbury Station, Fort Worth,
Texas. Notwithstanding any provision in this Agreement to the contrary, (a)
the amount of any distribution otherwise payable to CSL pursuant to Section
8.2 shall secure and be used to pay and satisfy in full any obligation or
liability that CSL has to LB under this Section, (b) the partnership interest
of CSL in the Partnership and any interest that CSL has in any asset of the
Partnership shall secure and be used to pay and satisfy in full any
obligation or liability that CSL has to LB under this Section and (c) LB
shall have all rights and benefits of a secured party under the Uniform
Commercial Code with respect to the distributions, partnership interest and
assets referred to in clauses (a) and (b) above.
(c) LIMITATIONS ON INDEMNIFICATION. If prior to Closing LB shall
have been notified in writing by TSL or CSL, or LB shall have obtained actual
knowledge, of any failure of a warranty or representation made by TSL or CSL
herein or pursuant hereto to be true and correct when made and LB consummates
the transactions contemplated hereby, then LB shall also be deemed to have
waived any indemnification hereunder with respect to such failure. In no
event shall TSL or CSL be liable to the LB Indemnified Parties for (i) any
consequential, exemplary or punitive damages or (ii) amounts that exceed the
total amount of capital contributed by LB to the Partnership or (iii) amounts
that are less than $100,000 in the aggregate. The right of the LB Indemnified
Parties to seek indemnification for Losses suffered as a result of any matter
described in subsection (a) or (b) above shall expire thirty-six (36) months
following the date of this Agreement, except for any specific claim asserted
prior to such date, which claim shall survive such thirty-six (36) month
period. In addition, the amount of any Losses for which a LB Indemnified
Party is to be indemnified by TSL or CSL pursuant to this Section shall be
reduced by any amount actually recovered by such LB Indemnified Party from an
insurer or other party in respect of such Losses (a "THIRD PARTY
REIMBURSEMENT") to the extent such Third Party Reimbursement was not taken
into account in assessing the amount of Losses suffered or incurred by such
Indemnified Party. If, after receipt by any LB Indemnified Party of any
indemnification payment under this Section from TSL or CSL, such LB
Indemnified Party who received a Third Party Reimbursement in respect of the
same Losses for which indemnification was made (and such Third Party
Reimbursement was not taken into account in assessing the amount of Losses
suffered or incurred by such LB Indemnified Party), then such LB Indemnified
Party shall turn over promptly all of such Third Party Reimbursement to TSL
or CSL, as applicable. In no event shall (i) an Indemnified Party be
indemnified against its own willful misconduct or gross negligence or (ii) LB
or any other LB Indemnified Party be required to assert any claims against or
otherwise seek recovery of any amount from any insurer or other party in
respect of any Losses; provided, however, if LB elects not to pursue such
claim, LB shall assign
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such claim (to the extent assignable) to TSL or CSL, as applicable, who may
pursue such claims at its sole cost and expense.
Section 11.10. NOTICE OF LOSS
Notwithstanding anything herein contained, an indemnifying party
("INDEMNIFYING PARTY") shall not have any liability under the indemnity
provisions of this Agreement with respect to any fact or occurrence known by any
indemnified party ("INDEMNIFIED PARTY") with respect to a particular matter
unless a notice setting forth in reasonable detail the breach which is asserted
has been given to the Indemnifying Party and, in addition, if such matter arises
out of a suit, action, investigation or proceeding, such notice is given
promptly after the Indemnified Party shall have been given notice of the
commencement of a suit, action, investigation or proceeding. A failure to give,
or delay in giving, any such notice hereunder shall not affect the rights of an
Indemnified Party to indemnification hereunder except to the extent the
Indemnifying Party is materially prejudiced as a result of such failure or
delay. SECTIONS 11.9 AND 11.10 HEREOF ARE INTENDED TO INDEMNIFY THE INDEMNIFIED
PARTIES AGAINST THE RESULTS OF THEIR OWN NEGLIGENCE. AN INDEMNIFIED PARTY'S
FAILURE TO INVESTIGATE, OR A LACK OF DUE DILIGENCE OCCURRING FOR ANY REASON
WHATSOEVER, SHALL NOT (I) CONSTITUTE NEGLIGENCE, GROSS NEGLIGENCE OR WILFUL
MISCONDUCT FOR PURPOSES OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THIS
SECTION), (II) CONSTITUTE A DEFENSE TO ANY ACTION OR PROCEEDING BROUGHT BY THE
INDEMNIFIED PARTY TO ENFORCE HIS OR ITS RIGHTS UNDER THIS ARTICLE 11, (III)
EXCUSE PERFORMANCE BY THE INDEMNIFYING PARTY OF ITS OBLIGATIONS UNDER THIS
ARTICLE 11, OR (IV)ENTITLE THE INDEMNIFY ING PARTY TO ANY RIGHT OF SET OFF OR
COUNTERCLAIM AGAINST AMOUNTS OWED UNDER THIS ARTICLE 11.
Section 11.11. RIGHT TO DEFEND
Upon receipt of notice of any suit, action, investigation, claim or
proceeding for which indemnification might be claimed by an Indemnified Party,
the Indemnifying Party shall be entitled promptly to defend, contest or
otherwise protect against such suit, action, investigation, claim or proceeding
at its own cost and expense. The Indemnified Party shall have the right, but not
the obligation, to participate at its own expense in a defense thereof by
counsel of its own choosing, but the Indemnifying Party shall be entitled to
control the defense unless the Indemnified Party has relieved the Indemnifying
Party from liability with respect to the particular matter or the Indemnifying
Party fails to assume defense of the matter. In the event the Indemnifying Party
shall fail to defend, contest or otherwise protect in a timely manner against
any such suit, action, investigation, claim or proceeding, the Indemnified Party
shall have the right, but not the obligation, to defend, contest or otherwise
protect against the same and make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnifying Party including reasonable
attorneys' fees, disbursements and all amounts paid as a result of such suit,
action, investigation, claim or proceeding or the compromise or settlement
thereof. However, if the Indemnifying Party undertakes the defense of such
matters, the Indemnified Party shall not be entitled to recover from the
Indemnifying Party any legal or other expenses subsequently incurred by the
Indemnified Party
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in connection with the defense thereof other than the reasonable costs of
investigation undertaken by the Indemnified Party with the prior written
consent of the Indemnifying Party.
Section 11.12. COOPERATION
Each of the parties hereto and each of their affiliates, successors and
assigns shall cooperate with each other in the defense of any suit, action,
investigation, proceeding or claim by a third party, and, during normal business
hours, shall afford each other access to their books and records and employees
relating to such suit, action, investigation, proceeding or claim and shall
furnish each other all such further information that they have the right and
power to furnish as may be reasonably necessary to defend such suit, action,
investigation, proceeding or claim.
ARTICLE XII
ACCOUNTS AND RECORDS: ACCOUNTANTS
Section 12.1. ACCOUNTING METHODS: FISCAL YEAR
The books of account of the Partnership shall be kept on the accrual
method of accounting in accordance with GAAP. The fiscal year of the Partnership
shall end on December 31 of each year except upon termination.
Section 12.2. RECORDS AND BOOKS OF ACCOUNT
(a) The General Partner shall maintain, or cause to be maintain
complete and accurate records and books of account of all transactions of the
Partnership wherein shall be entered all transactions, matters and things
relating to the Partnership's business as are usually entered into books of
account kept by persons engaged in a business of a like character, all on the
method of accounting determined in accordance with Section 12.1, consistently
applied.
(b) All of such records and books of account together with all
other documents and files of the Partnership, including but not limited to
copies of all documents prepared by the General Partner and all correspondence,
shall, at all times, be kept at the main office of the Partnership or such other
place as may be designated by the General Partner and to which the Partners
shall have reasonable access as hereinafter provided, and all such records,
books of account, documents and files shall be the exclusive property of the
Partnership. In the event of the termination of the partnership interest of the
General Partner, all such records, books of account, documents and files shall
remain in the exclusive possession of the Partnership. At any time and from time
to time while the Partnership continues and until its complete liquidation (but
only during reasonable business hours), each Partner, including agents or
representatives of the Partner may, at its own expense and upon reasonable prior
written notice to the General Partner, fully examine, inspect, make copies of
the Partnership's books, records, accounts and assets, including but not limited
to bank balances and physical inspection of the Properties.
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LB, at its sole and absolute discretion, may retain Ernst & Young
LLP, at LB's expense, to review and approve all annual financial statements,
tax returns and other financial and tax data specified by LB.
Section 12.3. ANNUAL EXAMINATION AND TAX RETURNS
(a) The books of the Partnership shall be brought to date annually
each year by the General Partner or the Accountants. The General Partner or
the Accountants shall determine and prepare for such fiscal year, using GAAP,
such financial statements as are required by the BOT Loan or the GMAC Loan.
(b) The General Partner or the Accountants shall also prepare all
tax returns which the Partnership is required to file and the same shall be
filed by the General Partner within the time prescribed by law for the filing
of each such return.
(c) At the election of the General Partner and LB or CSL, the
Accountants shall perform an audit in accordance with generally accepted
auditing standards. The financial statements and audit report shall be
delivered to each Partner in the Partnership.
Section 12.4. BANK ACCOUNTS
The cash Capital Contributions of the Partners and other funds of the
Partnership shall be deposited in a bank account or accounts which shall be
separately owned by the Partnership and maintained by the General Partner.
Withdrawals shall be made only in the regular course of partnership business
on the signature of the General Partner or its designee. All funds not needed
in the operation of the business may be deposited, to the extent permitted by
applicable law, in interest bearing accounts or invested in short-term U.S.
Government obligations, U.S. Government guaranteed obligations, bank
certificates of deposit or other liquid high-grade investments, maturing, in
any event, within one year.
Section 12.5. REPORTS TO PARTNERS
As soon as reasonably practicable but no later than thirty (30) days
after the end of each month, the General Partner shall cause to be prepared
and furnished to the Limited Partners income statements and balance sheets for
such month in a format attached as EXHIBIT H. The General Partner shall also
cause the Partnership to send to each Partner and the Servicer, promptly after
they are sent to the Lender all financial, operating and other reports and
data required to be submitted to the Lender pursuant to the Loan Documents. As
soon as reasonably practicable but no later than seventy-five (75) days after
the end of each fiscal year, the General Partner shall cause to be prepared
and furnished to the Limited Partners the following: (i) all necessary tax
reporting information required by the Partners for preparation of their
respective income tax return and (ii) all information necessary for such
Limited Partners to comply with all reporting requirements imposed by the
securities laws of the United States or any state thereof. Upon the reasonable
request of the Limited Partners for further information with respect to any
matter with respect to the Partnership, the General Partner shall furnish such
information within ten (10) days after such request.
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ARTICLE XIII
GENERAL PROVISIONS
Section 13.1. RECIPIENT OF DISTRIBUTIONS AND PAYMENTS
All distributions and payments of cash or property to be made
pursuant to the provisions of this Agreement shall be made directly to the
parties who are entitled thereto at their respective addresses indicated on
EXHIBIT B or elsewhere in this Agreement or at such other address as shall
have been set forth in a notice sent pursuant to the provisions of Section
13.2.
Section 13.2. COMMUNICATIONS
Except as otherwise expressly provided in this Agreement, any offer,
acceptance, election, approval, consent, objection, certification, request
waiver, notice or other document required or permitted to be made or given
pursuant to any provisions of this Agreement shall be deemed duly made or
given, as the case may be, if in writing, signed by or on behalf of the person
making or giving the same, and shall be deemed completed when either
personally delivered (with receipt acknowl edged by the recipient) or three
days after deposited through the U.S. mail, registered or certified, first
class, postage prepaid, addressed to the person or persons to whom such offer,
acceptance, election, approval, consent, certification, request, waiver or
notice is to be made or given at their respective addresses indicated on
EXHIBIT B and, in the case of the Partnership, at the office of the
Partnership specified in Section 2.2 of this Agreement, or, in any case, at
such other address as shall have been set forth in a notice sent pursuant to
the provisions of this Section 13.2.
Section 13.3. ENTIRE AGREEMENT; APPLICABLE LAW; EFFECT
This Agreement contains the entire agreement by and among the parties
and supersedes any prior understandings and agreements among them respecting
the subject hereof. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED AND GOVERNED
IN CONFORMITY WITH THE LAWS OF THE STATE OF TEXAS, and within the County of
Dallas, State of Texas, without giving effect to principles of conflicts of
law, and whether in state or federal courts. This Agreement shall be binding
upon the parties hereto, their successors, heirs, devisees, permitted assigns,
legal representatives, executors and administrators but shall not be deemed
for the benefit of creditors or any other Persons.
Section 13.4. MODIFICATION; WAIVER OR TERMINATION
Except as otherwise expressly provided in this Agreement, no
modification, waiver, or termination of this Agreement, or any part hereof,
shall be effective unless made in writing signed by the party or parties to be
bound thereby, and no failure to pursue or elect any remedy shall constitute a
waiver of any default under or breach of any provision of this Agreement, nor
shall any waiver of any default under or breach of any provision of this
Agreement be deemed to be a waiver of any other subsequent or similar or
different default under or breach of such or any other provision or of any
election or remedies available in connection therewith. Receipt by any party
of any money
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or other consideration due under this Agreement, with or without knowledge of
any breach or default, shall not constitute a waiver of such breach or default
of any provision of this Agreement.
Section 13.5. COUNTERPARTS
This Agreement may be executed in one or more counterparts and,
notwithstanding that all of the parties did not execute the same counterpart,
each of such counterparts shall, for all purposes, be deemed to be an
original, and all of such counterparts shall constitute one and the same
instrument binding on all of the parties hereto.
Section 13.6. SEPARABILITY
Each provision of this Agreement shall be considered separable and
(a) if for any reason any provision or provisions herein are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement which are
valid, and (b) if for any reason any provision or provisions of this Agreement
would subject the Limited Partners to any personal liability for the
obligations of the Partnership under the laws of the State of Texas or any
other laws, as the same may now or hereafter exist, such provision or
provisions shall be deemed void and of no effect.
Section 13.7. ARTICLE AND SECTION HEADINGS
Article and Section titles or captions contained in this Agreement
are inserted only as a matter of convenience and for reference, and shall not
be construed in any way to define, limit, extend or describe the scope of any
of the provisions hereof.
Section 13.8. WORD MEANINGS
The words such as "herein," "hereinafter," "hereof," and "hereunder"
refer to this Agreement as a whole and not merely to a subdivision in which
such words appear unless the context otherwise requires. The singular shall
include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires.
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Section 13.9. EXHIBITS
All exhibits annexed hereto and any documents or instruments
delivered simultaneously herewith are expressly made a part of this Agreement,
as fully as though completely set forth herein, and all references to this
Agreement herein or in any of such writings or elsewhere shall be deemed to
refer to and include all such writings.
Section 13.10. FURTHER ACTIONS
Each of the Partners shall hereafter execute and deliver such further
instruments and do such further acts and things as may be required or useful
to carry out the intent and purpose of this Agreement and as are not
inconsistent with the revisions hereof.
Section 13.11. PROHIBITION AGAINST PARTITION
Each of the parties hereto does hereby permanently waive and
relinquish any and all rights it may have to cause the assets of the
Partnership to be partitioned, it being the intention of the parties to
prohibit any parties hereto from bringing a suit for partition against the
other parties hereto.
Section 13.12. AGREEMENTS WITH AFFILIATES AND THE GMAC LOAN
(a) DEVELOPMENT AGREEMENTS. The Partnership hereby ratifies and
agrees that the Properties shall be developed by Capital Senior Development,
Inc. ("Developer") pursuant to the existing Development Agreements with the
Partnership containing terms and conditions that have been approved by the
Partners. The Partnership also ratifies and agrees to the terms and conditions
in the Development and Turnkey Services Agreement by and between the
Partnership and Capital Senior Development, Inc. At its sole and absolute
discretion, LB, on its own behalf or on behalf of the Partnership, may
terminate and replace the Developer for cause, as defined in the relevant
Development Agreement.
(b) ASSET MANAGEMENT AND LEASING AGREEMENT. The Partnership hereby
ratifies and agrees that the Properties shall be managed and leased by Capital
Senior Living, Inc. ("Property Manager") pursuant to the existing Management
Agreements with the Partnership containing terms and conditions that have been
approved by the Partners. At its sole and absolute discretion, LB, on its own
behalf or on behalf of the Partnership, may terminate and replace a Property
Manager (i) at any time for cause as defined in each Management Agreement and
(ii) without cause in LB's sole and absolute discretion at any time after the
second anniversary of the date of this Agreement.
(c) GMAC LOAN. The Partners hereby ratify and agree that the
Partnership will borrow from the Standby Lender, the GMAC Loan of not more
than $50,000,000 pursuant to the Loan Documents for the purpose of refinancing
the cost of acquiring, developing and operating the Properties. The Partners
acknowledge and agree that the Partnership has previously executed a
commitment letter for each of the Properties (collectively, "Commitment
Letters") with the Standby Lender relating to the GMAC Loan secured by the
Properties. The Partners hereby ratify and approve the Commitment Letters and
agree that the General Partner shall have authority on behalf of the
Partnership to enter into, execute, deliver and perform the Loan Documents
with respect to
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the GMAC Loan. The terms, conditions and provisions of the Loan Documents, as
set forth in the Commitment Letters, are hereby approved as a Major Decision
under Section 7.2. TSL shall use its good faith efforts to cause the
Partnership to comply with all covenants or requirements of the Loan Documents
to the extent that the Partnership has the financial and other resources
available to do so. The Partners acknowledge and agree that LB shall have no
responsibility for providing any guaranties or other agreements in connection
with the GMAC Loan or other financing obtained by the Partnership.
Section 13.13. NON-COMPETE OF GENERAL PARTNER
TSL agrees that as long as it is the general partner of the
Partnership and for one (1) year after TSL is no longer the general partner of
the Partnership, neither TSL nor its Affiliates will acquire, own, develop,
complete the development of, or manage any senior living facility providing
the same or comparable level of services as any senior living facility owned
or leased by the Partnership within a seven and one-half mile radius of a
senior living facility owned or leased by the Partnership.
Section 13.14. LITIGATION WITHOUT TERMINATION
Each Partner shall be entitled to maintain, on its own behalf or on
behalf of the Partnership, any action or proceeding against any other Partner
or the Partnership (including, without limitation, any action for damages,
specific performance or declaratory relief) for or by reason of the breach by
such party of this Agreement or any other agreement entered into in connection
with this Agreement, notwithstanding the fact that any or all of the parties
to such proceeding may then be Partners in the Partnership, and without
dissolving the Partnership as a limited partnership.
Section 13.15. ATTORNEYS' FEES
If the Partnership or any Partner obtains a judgment against any
other Partner by reason of breach of this Agreement or failure to comply with
the provisions hereof, reasonable attorneys' fees as fixed by the court shall
be included in such judgment.
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Section 13.16. CUMULATIVE REMEDIES
No remedy conferred upon the Partnership or any Partner pursuant to
this Agreement is intended to be exclusive of any other remedy herein or by
law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute (subject, however, to the limitations expressly
herein set forth).
[REMAINDER OF PAGE LEFT BLANK]
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SIGNATURE PAGE TO SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF TRIAD SENIOR LIVING I, L.P.
GENERAL PARTNER:
Triad Senior Living, Inc.,
a Texas corporation
By: /s/ Xxxxx X. Fail
----------------------------------------
Name: Xxxxx X. Fail
----------------------------------------
Title: President
----------------------------------------
LIMITED PARTNERS:
LB Triad Inc.,
a Delaware corporation
By: /s/ Xxxxxxxxxxx X. XxXxxxx
----------------------------------------
Name: Xxxxxxxxxxx X. XxXxxxx
----------------------------------------
Title: Authorized Signatory
----------------------------------------
Capital Senior Living Properties, Inc.
a Texas corporation
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------------
Title: Vice President
----------------------------------------
WITHDRAWING LIMITED PARTNER:
/s/ Xxxxx X. Fail
-----------------------------------------------
Xxxxx X. Fail
The undersigned is signing this Agreement solely for the purpose of
signifying his agreement to comply with the provisions of Article XI of this
Agreement.
/s/ Xxxxx X. Fail
-----------------------------------------------
Xxxxx X. Fail
EXHIBIT A
PROPERTY DESCRIPTIONS
[SEE ATTACHED]
A-1
EXHIBIT B
CAPITAL CONTRIBUTIONS
REGULAR CONDITIONS STATED
PERCENTAGE IN SECTION 8.2(j)
CAPITAL CONTRIBUTIONS INTEREST HAVE BEEN SATISFIED
--------------------- ---------- -------------------
GENERAL PARTNER
Triad Senior Living, Inc. $1.00 1% 1%
0000 Xxxxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Fail
LIMITED PARTNERS
LB Triad Inc. $12,000,000 80% 0%
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Capital Senior Living Properties, Inc. $3,000,000 19% 99%
00000 Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
B-1
EXHIBIT C
CERTAIN TAX AND ACCOUNTING MATTERS
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. All capitalized terms used herein shall
have the meanings assigned to them in the Agreement of Limited Partnership of
Triad Senior Living I, L.P. Notwithstanding the foregoing, the following
definitions shall be applicable to the following terms as used in this EXHIBIT
C of the Agreement:
(a) "ADJUSTED NET INCOME OR LOSS" of the Partnership derived for
any Fiscal Year (or portion thereof) shall mean the excess or deficit, as the
case may be, of (i) the Gross Income of the Partnership for such period (not
including the amount of Gross Income (if any) allocated during such Fiscal
Year pursuant to SECTIONS 3.1(a), 3.1(b), 3.1(c), 3.1(d), and 3.1(p) hereof
for such period), over (ii) the Deductible Expenses of the Partnership for
such period (not including the amount of Deductible Expenses (if any)
allocated pursuant to SECTIONS 3.1(e), 3.1(f) and 3.1(p)) hereof for such
period) with the following modifications:
(i) Any Partnership income that is exempt from federal
income tax, and that is not otherwise taken into account in computing
Adjusted Net Income or Loss of the Partnership pursuant to this
SECTION 1.1(a), shall be treated as additional Gross Income and added
to the amount otherwise calculated as Adjusted Net Income or Loss
under this SECTION 1.1(a).
(ii) Any expenditures of the Partnership that are
described in section 705(a)(2)(B) of the Code (relating to
expenditures of the Partnership that are not deductible for federal
income tax purposes in computing taxable income and not properly
chargeable to capital), or treated as so described pursuant to
section 1.704-1(b)(2)(iv)(I) of the Regulations, and that are not
otherwise taken into account in computing Adjusted Net Income or Loss
of the Partnership pursuant to this SECTION 1.1(a), shall be treated
as additional Deductible Expenses and subtracted from the amount
otherwise calculated as Adjusted Net Income or Loss under this
SECTION 1.1(a).
(b) "ADJUSTED PROPERTY" shall mean any Partnership asset that has
a Book Basis different from its adjusted tax basis. Any asset that is
contributed to the Partnership by a Partner shall be an "ADJUSTED PROPERTY" if
its Agreed Value is not equal to the Partnership's initial tax basis in such
asset. In addition, once the Book Basis of a Partnership asset is adjusted
pursuant to SECTION 2.4 hereof, such asset shall thereafter be an "ADJUSTED
PROPERTY."
(c) "AGREED VALUE" of any asset contributed by a Partner to the
Partnership shall mean the fair market value thereof (determined without regard
to section 7701(g) of the Code) as of the date of such contribution and as
reasonably determined by the General Partner.
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(d) "BOOK BASIS" of any asset of the Partnership shall be
determined in accordance with the rules of SECTION 2.4.
(e) "BOOK DEPRECIATION" in respect of any Partnership asset for
any Fiscal Year shall mean the product of (i) the depreciation, cost recovery
or other amortization deduction allowable to the Partnership for federal
income tax purposes in respect of such asset for such Fiscal year, multiplied
by (ii) a fraction, the numerator of which is the Book Basis of such asset as
of the beginning of such Fiscal Year (or the date of acquisition if the asset
is acquired during such Fiscal Year) and the denominator of which is the
adjusted tax basis of such asset as of the beginning of such Fiscal Year (or
the date of acquisition if the asset is acquired during such Fiscal Year). If
the denominator of the fraction described in clause (ii) above is zero, "BOOK
DEPRECIATION" in respect of such asset shall be determined under any
reasonable method selected by the General Partner.
(f) "BOOK GAIN OR LOSS" realized by the Partnership in respect
of any asset of the Partnership in connection with the disposition of such
asset shall mean the excess (or deficit) of (i) the amount realized by the
Partnership in connection with such disposition (as determined under section
1001 of the Code) over (ii) the then Book Basis of such asset. If the Book
Basis is adjusted pursuant to SECTION 2.4, any increase or decrease in Book
Basis of the assets as a result of the adjustment shall be treated as Book
Gain or Book Loss, as the case may be, and shall be allocated among the
Partners pursuant to SECTION 3.1 of this EXHIBIT C.
(g) "CAPITAL ACCOUNT" shall have the meaning assigned such term
in SECTION 2.1 hereof.
(h) "DEDUCTIBLE EXPENSES" of the Partnership for any Fiscal Year
(or portion thereof) shall mean all items, as calculated for book purposes,
which are allowable as deductions to the Partnership during such period under
federal income tax accounting principles (including Book Depreciation).
(i) "FISCAL YEAR" shall mean the fiscal year of the Partnership
adopted under SECTION 8.1 of the Agreement.
(j) "GROSS INCOME" of the Partnership for any Fiscal Year (or
portion thereof) shall mean the gross income of the Partnership derived from
all sources (other than from capital contributions and loans to the
Partnership and other than Book Gain or Loss from a Terminating Capital
Transaction) during such period, as calculated for book purposes in accordance
with federal income tax accounting principles.
(k) "IRS" shall mean the United States Internal Revenue Service.
(l) "LIQUIDATION" of a Partner's interest in the Partnership
shall mean and shall be deemed to occur upon the earlier of (i) the date upon
which the Partnership is terminated under section 708(b)(1) of the Code; (ii)
the date upon which the Partnership ceases to be a going concern (even though
it may continue in existence for the limited purpose of winding up its
affairs, paying its debts and distributing any remaining Partnership assets to
the Partners); or (iii) the date upon which there is a liquidation of the
Partner's interest in the Partnership (but the Partnership is not terminated)
under section 1.761-1(d) of the Regulations.
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(m) "MODIFIED 752 SHARE OF RECOURSE DEBT" of any Partner shall
mean, as of any date, the amount (if any) of economic risk that such Partner
is treated, as of such date, as bearing with respect to Recourse Debt under
section 1.752-2 of the Regulations (assuming the Partnership constructively
liquidates on such date within the meaning of section 1.752-2(b) of the
Regulations except that, for purposes of such section 1.752-2(b), all of the
assets of the Partnership shall be deemed thereunder to be transferred in
fully taxable exchanges for an aggregate amount of cash consideration equal to
their respective Book Bases and such consideration shall be deemed thereunder
to be used, in the appropriate order of priority, in full or partial
satisfaction of the liabilities of the Partnership).
(n) "NONRECOURSE DEDUCTIONS" of the Partnership shall have the
meaning ascribed to such term in section 1.704-2(b)(1) of the Regulations.
(o) "NONRECOURSE LIABILITY" of the Partnership shall have the
meaning ascribed to such term in section 1.704-2(b)(3) of the Regulations.
(p) "NONRECOURSE MINIMUM GAIN" of the Partnership shall mean the
amount of "minimum gain" of the Partnership that is attributable to
Nonrecourse Liabilities (as determined under section 1.704-2(b)(2) of the
Regulations). A Partner's share of such "NONRECOURSE MINIMUM GAIN" shall be
calculated in accordance with the provisions of section 1.704-2(g) of the
Regulations.
(q) "OPERATIONS" shall mean all revenue producing activities of
the Partnership other than activities relating to a Capital Transaction that
occur in connection with the dissolution of the Partnership.
(r) "PARTNER MINIMUM GAIN" of the Partnership shall mean the
amount of "minimum gain" of the Partnership that is attributable to Partner
Nonrecourse Debt (as determined under section 1.704-2(i)(2) of the
Regulations). A Partner's share of such "PARTNER MINIMUM GAIN" shall be
calculated in accordance with the provisions of section 1.704-2(i)(5) of the
Regulations.
(s) "PARTNER NONRECOURSE DEBT" of the Partnership shall have the
meaning ascribed to such term in section 1.704-2(b)(4) of the Regulations.
(t) "PARTNER NONRECOURSE DEDUCTIONS" of the Partnership shall
have the meaning ascribed to such term in section 1.704-2(i)(2) of the
Regulations.
(u) "RECOURSE DEBT" of the Partnership shall mean any liability
(or portion thereof) of the Partnership that is neither a Nonrecourse
Liability nor a Partner Nonrecourse Debt.
(v) "REGULATIONS" shall mean the regulations promulgated by the
United States Department of the Treasury pursuant to and in respect of
provisions of the Code. All references herein to sections of the Regulations
shall include any corresponding provision or provisions of succeeding,
similar, substitute proposed or final Regulations.
(w) "RELATED PERSON" shall mean, as to any Partner, any person
who is related to such Partner (within the meaning of section 1.752-4(b) of
the Regulations).
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(x) "REVALUATION EVENT" shall mean any of the following
occurrences: (a) the contribution of money or other property (other than a de
minimis amount) by a new or existing Partner to the Partnership as
consideration for the issuance of an additional interest in the Partnership
and/or increase in Interests; (b) the distribution of money or other property
(other than a de minimis amount) by the Partnership to a retiring or
continuing Partner as consideration for an interest in the Partnership and/or
decrease in Interests; or (c) the liquidation of the Partnership within the
meaning of section 1.704-1(b)(2)(ii)(g) of the Regulations.
(y) "SECTION 704 CAPITAL ACCOUNT" shall have the meaning
assigned to such term in SECTION 2.3 hereof.
(z) "TAX DEPRECIATION" for any Fiscal Year shall mean the amount
of depreciation, cost recovery or other amortization deductions allowable to
the Partnership for federal income tax purposes for such Fiscal Year.
(aa) "TAX ITEM" with respect to any asset shall mean any item of
income, gain, loss or deduction (including depreciation, cost recovery or
amortization) in respect of such asset, as computed for federal income tax
purposes.
(bb) "TAX MATTERS PARTNER" shall have the meaning ascribed to such
term in SECTION 4.4(a) hereof.
(cc) "TAXABLE GAIN OR LOSS" shall mean gain or loss recognized by
the Partnership on the sale, exchange or other disposition of any asset of the
Partnership as computed for federal income tax purposes.
(dd) "TERMINATING CAPITAL TRANSACTION" means any transaction not
in the ordinary course of business, and that in accordance with GAAP is
capital in nature and is entered into in connection with or will result in the
dissolution, winding up and termination of the Partnership.
ARTICLE II
CAPITAL ACCOUNTS
AND
SECTION 704 CAPITAL ACCOUNTS
Section 2.1. CAPITAL ACCOUNTS. A separate "CAPITAL ACCOUNT" (herein
so called) shall be maintained for each Partner in accordance with the capital
accounting rules of section 1.704-1(b)(2)(iv) of the Regulations. Each
Partner shall have only one Capital Account, regardless of the number or
classes of interests in the Partnership owned by such Partner and regardless
of the time or manner in which such interests were acquired by such Partner.
Pursuant to the basic rules of section 1.704-1(b)(2)(iv) of the Regulations,
the balance of each Partner's Capital Account:
(a) shall be increased by the amount of money contributed by
such Partner (or such Partner's predecessor in interest) to the Partnership
(including but not limited to such Partner's
C-4
Capital Contributions described in ARTICLE V of the Agreement) and decreased
by the amount of money distributed to such Partner (or such Partner's
predecessor in interest);
(b) shall be increased by the fair market value (determined
without regard to section 7701(g) of the Code) of each property contributed by
such Partner (or such Partner's predecessor in interest) to the Partnership
(net of liabilities secured by such property that the Partnership is
considered to assume or take subject to under section 752 of the Code), and
decreased by the fair market value (determined without regard to section
7701(g) of the Code) of each property distributed to such Partner (or such
Partner's predecessor in interest) by the Partnership (net of liabilities
secured by such property that such Partner is considered to assume or take
subject to under section 752 of the Code);
(c) shall be increased by the amount of Adjusted Net Income or
item of income or gain or Book Gain allocated to such Partner (or such
Partner's predecessor in interest) pursuant to SECTION 3.1 hereof;
(d) shall be decreased by the amount of Adjusted Net Loss or
item of loss or deduction or Book Loss allocated to such Partner (or such
Partner's predecessor in interest) pursuant to SECTION 3.1 hereof; and
(e) shall be otherwise adjusted in accordance with the other
capital account maintenance rules of section 1.704-1(b)(2)(iv) of the
Regulations.
The foregoing provisions of this SECTION 2.1 and the other provisions of this
EXHIBIT C relating to the maintenance of Capital Accounts are intended to
comply with section 1.704-1(b) of the Regulations, and shall be interpreted
and applied in a manner consistent with such Regulations. The Partners shall
also make any appropriate modification if unanticipated events might otherwise
cause this EXHIBIT C and the Agreement not to comply with such Regulations. If
any Interest is transferred pursuant to the terms of the Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent the Capital Account is attributable to the transferred Interest.
Section 2.2. ADDITIONAL PROVISIONS REGARDING CAPITAL ACCOUNTS.
(a) If a Partner pays any indebtedness of the Partnership, such
payment shall be treated as a contribution by that Partner to the capital of
the Partnership and the Capital Account of such Partner shall be increased by
the amount so paid by such Partner.
(b) Except as specifically provided in the Agreement, no Partner
may contribute capital to, or withdraw capital from, the Partnership.
(c) A loan by a Partner to the Partnership shall not be
considered a contribution of money to the capital of the Partnership, and the
balance of such Partner's Capital Account shall not be increased by the amount
so loaned. No repayment of principal or interest on any such loan, or
reimbursement made a Partner with respect to advances or other payments made
by a such Partner on behalf of the Partnership or payments of fees to a
Partner or Related Person to such Partner
C-5
which are made by the Partnership shall be considered a return of capital or
in any manner affect the balance of such Partner's Capital Account.
(d) No Partner with a deficit balance in its Capital Account
shall have any obligation to the Partnership, any other Partner, or any third
party to restore said deficit balance. Notwithstanding any other provision of
this Agreement to the contrary, upon liquidation of a Partner's partnership
interest (whether or not in connection with a liquidation of the Partnership),
no Partner shall have any liability to restore any deficit in its Capital
Account except for, upon the liquidation of TSL's interest in the Partnership,
if TSL has a deficit balance in its Capital Account following such
liquidation, as determined after taking into account all adjustments to the
Capital Accounts for the taxable year during which such liquidation occurs,
TSL shall be required to immediately contribute cash to the Partnership in an
amount equal to the lesser of (i) such deficit capital account balance or (ii)
the amount of actual cash distributions to TSL during the term of the
Partnership (determined without taking into account any amounts paid to any
party pursuant to Section 7.10 of the Agreement). In addition, no allocation
to any Partner of any loss, whether attributable to depreciation or otherwise,
shall create any asset of or obligation to the Partnership, even if such
allocation reduces a Partner's Capital Account or creates or increases a
deficit in such Partner's Capital Account; it is also the intent of the
Partners that no Partner shall be obligated to pay any such amount to or for
the account of the Partnership or any creditor of the Partnership.
(e) No interest will be paid on any capital contributed to the
Partnership or the balance in any Partner's Capital Account.
Section 2.3. SECTION 704 CAPITAL ACCOUNTS. A "SECTION 704 CAPITAL
ACCOUNT" (herein so called) shall be determined and maintained for each
Partner throughout the term of the Agreement. The balance of a Partner's
Section 704 Capital Account shall be equal to such Partner's Capital Account
balance (as determined after giving effect to all adjustment attributable to
allocations of Partnership income, gain, loss, deduction and credits and
contributions and distributions of money and property effected prior to such
determination), modified as follows:
(a) decreased by the amount (if any) of cash that reasonably is
expected to be distributed to such Partner, but only to the extent that the
amount thereof exceeds any offsetting increase in such Partner's Section 704
Capital Account that reasonably is expected to occur during (or prior to) the
Fiscal Year during which such distribution reasonably is expected to be made
(as determined under section 1.704-1(b)(ii)(d) of the Regulations);
(b) decreased by the amount (if any) of loss and deduction that
reasonably is expected to be allocated to such Partner pursuant to section
704(e)(2) or 706(d) of the Code or section 1.704-1(b)(2)(ii) of the
Regulations (as determined under section 1.704-1(b)(2)(ii)(d) of the
Regulations);
(c) increased by the amount (if any) of such Partner's share of
the Nonrecourse Minimum Gain of the Partnership; and
(d) increased by the amount (if any) of such Partner's share of
the Partner Minimum Gain of the Partnership.
C-6
Section 2.4. ADJUSTMENT OF BOOK BASIS. Book Basis with respect to any
asset of the Partnership is the asset's adjusted tax basis for federal income
tax purposes, except as follows:
(a) The initial Book Basis of any asset contributed to the
Partnership by a Partner shall be the fair market value of the assets as of
the date of contribution as agreed upon by the contributing Partner and the
Partnership.
(b) The Book Basis of each asset shall be its respective fair
market value as reasonably determined by the General Partner, as of a
Revaluation Event.
(c) The Book Basis of each asset distributed to any Partner will
be the fair market value of the asset as reasonably determined by the General
Partner as of the date of determination.
(d) The Book Basis of each asset will be increased or decreased
to reflect any adjustment to the adjusted tax basis of the asset under section
734(b) or 743(b) of the Code, but only to the extent that the adjustment is
taken into account in determining Capital Account balances under section
1.704-1(b)(2)(iv)(M) of the Regulations, provided that the Book Basis will not
be adjusted hereunder to the extent that an adjustment under SECTION 2.4(b) is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment under this SECTION 2.4(d).
Book Basis will be adjusted by Book Depreciation, and Book Gain or Book Loss
on a disposition of any asset shall be determined by reference to such asset's
Book Basis as adjusted herein.
ARTICLE III
ALLOCATIONS OF PROFIT AND LOSS
Section 3.1. ALLOCATION OF ITEMS OF PROFIT AND LOSS. Subject to the
provisions of ARTICLE IV hereof, the Partnership's Gross Income, items of loss
or deduction and Adjusted Net Income or Loss and Book Gain or Loss for each
Fiscal Year shall be allocated to the Partners as follows and in the following
order of priority (after giving effect to all Capital Account adjustments
attributable to contributions and distributions of money and property, but
prior to distributions of money and property made pursuant to SECTION 10.4 of
the Agreement):
(a) Pursuant to section 1.704-2(f) of the Regulations (relating
to minimum gain chargebacks), if there is a net decrease in Nonrecourse
Minimum Gain of the Partnership for such Fiscal Year (or if there was a net
decrease in Nonrecourse Minimum Gain for a prior Fiscal Year and the
Partnership did not have sufficient amounts of income during prior Fiscal
Years to allocate to the Partners under this SECTION 3.1(a)), then Gross
Income shall be allocated, before any other allocation is made pursuant to the
succeeding provisions of this SECTION 3.1 for such Fiscal Year, to each
Partner in an amount equal to such Partner's share of the net decrease in such
minimum gain (as determined under section 1.704-2(g) of the Regulations).
(b) Pursuant to section 1.704-2(i)(4) of the Regulations
(relating to minimum gain chargebacks) if there is a net decrease in Partner
Minimum Gain of the Partnership for such Fiscal
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Year (or if there was a net decrease in Partner Minimum Gain for a prior
Fiscal Year and the Partnership did not have sufficient amounts of income
during prior Fiscal Years to allocate to the Partners under this SECTION
3.1(b)), then Gross Income shall be allocated, before any other allocation is
made pursuant to the succeeding provisions of this SECTION 3.1 for such Fiscal
Year, to each Partner with a share of such minimum gain as of the first day of
such Fiscal Year in an amount equal to such Partner's share of the net
decrease in such Partner Minimum Gain (as determined under section 1.704-
2(i)(5) of the Regulations).
(c) A Partner who unexpectedly receives any adjustment,
allocation or distribution described in section 1.704-1(b)(2)(ii)(d)(4), (5)
or (6) of the Regulations will be specially allocated items of income or gain
(after the allocations required by SECTION 3.1(a) and SECTION 3.1(b) hereof
but before any other allocations required by this SECTION 3.1) in an amount
and in the manner sufficient to eliminate any deficit balance in his Section
704 Capital Account (for this purpose, a Partner's Section 704 Capital Account
shall be increased by the amount (if any) that such Partner is treated as
being obligated to contribute subsequently to the capital of the Partnership
(as determined under section 1.704-1(b)(2)(ii)(c) of the Regulations) and,
without duplication of any amount previously described in this sentence, shall
be increased by the amount (if any) of such Partner's Modified 752 Share of
Recourse Debt) as quickly as possible; provided, however, that an allocation
shall be made pursuant to this SECTION 3.1(c) only if and to the extent that
such Partner would have a deficit balance in his Section 704 Capital Account
after all allocations in this SECTION 3.1 have been tentatively made as if
this SECTION 3.1(c) were not in this Exhibit. This SECTION 3.1(c) is intended
to satisfy the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
(d) Except as required by SECTION 3.1(a), SECTION 3.1(b) and
SECTION 3.1(c), each Partner who has a deficit balance in its Capital Account
(for this purpose, a Partner's Capital Account shall be increased by (A) the
amount (if any) that a Partner is obligated to contribute subsequently to the
capital of the Partnership under the Agreement or this Exhibit (including
SECTION 2.2(d) of this Exhibit) or is treated as being obligated to contribute
subsequently to the capital of the Partnership (as determined under section
1.704-1(b)(2)(ii)(c) of the Regulations); (B) the amount (if any) of such
Partner's share of the Nonrecourse Minimum Gain of the Partnership; and (C)
the amount (if any) of such Partner's share of the Partner Minimum Gain of the
Partnership) at the end of the taxable year will be specially allocated items
of income or gain in the amount of the deficit as quickly as possible;
provided, however, that an allocation shall be made pursuant to this SECTION
3.1(d) only if and to the extent that such Partner would have a deficit
balance in its Capital Account after all allocations in this SECTION 3.1 have
been tentatively made as if this SECTION 3.1(d) were not in this Exhibit and
SECTION 3.1(d) shall be applied before SECTION 3.1(c).
(e) All Partner Nonrecourse Deductions attributable to a Partner
Nonrecourse Debt shall be allocated to the Partner that is treated (under
section 1.704-2(b)(4) of the Regulations) as bearing the economic risk of loss
for such debt.
(f) All Nonrecourse Deductions of the Partnership shall be
allocated to the Partners, pro rata in accordance with their respective
Percentage Interests.
C-8
(g) Any Adjusted Net Income realized by the Partnership for such
year shall be allocated among the Partners as follows and in the following
order of priority:
(i) FIRST: Adjusted Net Income shall be allocated to the
General Partner until the aggregate Adjusted Net Income allocated
under this SECTION 3.1(g)(i) for the current and prior years equals
the aggregate amount of Adjusted Net Loss allocated to the General
Partner under SECTION 3.1(h)(ii) for the current and prior years; and
then
(ii) SECOND: To LB until the cumulative amount allocated under
this Section 3.1(g)(ii) for the current and prior years is equal to
the sum of the cumulative Adjusted Net Loss allocated to LB for all
prior years under Section 3.1(h)(viii); and then
(iii) THIRD: To LB until the aggregate amount allocated under
this Section 3.1(g)(iii) is equal to the sum of (A) the cumulative
15% Preferred Return distributable under Section 8.2(a) and (c) plus
(B) the cumulative Adjusted Net Loss allocated for all prior years
under Section 3.1(h)(vii); and then
(iv) FOURTH: To TSL and CSL, in proportion to and to the extent
of the excess, if any of their respective sum of (A) the cumulative
Adjusted Net Loss allocated to the Partner under Section 3.1(h)(vi)
for all prior years over (B) the cumulative Adjusted Net Income
allocated to the Partner under this Section 3.1(g)(iv) for the
current and all prior years; and then
(v) FIFTH: To TSL and CSL, in proportion to and to the extent
of the excess, if any, of (1) their respective sum of (A) the
cumulative 15% Preferred Return distributable to the Partner under
Section 8.2(e) plus (B) the cumulative Adjusted Net Loss allocated to
the Partner under Section 3.1(h)(v) for all prior years over (2) the
cumulative Adjusted Net Income allocated to the Partner under this
Section 3.1(g)(vi) for the current and all prior years; and then
(vi) SIXTH: To LB until the cumulative amount allocated under
this Section 3.1(h)(vi) is equal to the sum of (A) the cumulative
amount distributable to LB under Section 8.2(g) plus (B) the
cumulative Adjusted Net Loss allocated to LB under Section 3.1(h)(iv)
for the prior years; and then
(vii) SEVENTH: To TSL and CSL, in proportion to and to the extent
of the excess, if any of their respective sum of (A) the cumulative
Adjusted Net Loss allocated to the Partner under Section 3.1(h)(iii)
for all prior years over (B) the cumulative Adjusted Net Income
allocated to the Partner under this Section 3.1(g)(vii) for all
current and all prior years; and then
(viii) EIGHTH: To TSL and CSL, in proportion to and to the
extent of the excess, if any, of (1) their respective sum of (A) the
cumulative 15% Preferred Return distributable to the Partner under
Section 8.2(h) plus (B) the cumulative Adjusted Net Loss allocated to
the Partner under Section 3.1(h)(ii) for all prior years over (2) the
cumulative Adjusted Net
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Income allocated to the Partner under this Section 3.1(g)(viii) for
the current and all prior years; and then
(ix) NINTH: To the Partners in proportion to their respective
Percentage Interests.
For purposes of the allocation pursuant to this subsection, Percentage
Interests shall be determined as if cash distributions equal to all
allocations of net income have actually been made.
(h) Any Adjusted Net Loss realized by the Partnership for such year
shall be allocated among the Partners as follows and in the following order of
priority:
(i) FIRST: Adjusted Net Loss to the Partners, in proportion to
and to the extent of the excess, if any, of (1) the cumulative
Adjusted Net Income allocated to each Partner pursuant to Section
3.1(g)(ix) for all prior years, over (2) the cumulative Adjusted Net
Loss allocated to such Partner pursuant to this Section 3.1(h)(i) for
the current and all prior years; and then
(ii) SECOND: Adjusted Net Loss to TSL and CSL, in proportion to
and to the extent of the excess, if any, of (1) the cumulative
Adjusted Net Income allocated to each such Partner pursuant to
Section 3.1(g)(viii) for all prior years, over (2) the cumulative
Adjusted Net Loss allocated to such Partner pursuant to this Section
3.1(h)(ii) for the current and all prior years; and then
(iii) THIRD: Adjusted Net Loss to TSL and CSL, in proportion to
and to the extent of their respective positive Section 704 Capital
Account balances (reduced by any amount distributable under Section
8.2(e) and (f); and then
(iv) FOURTH: Adjusted Net Loss to LB in an amount equal to the
excess, if any, of the cumulative Adjusted Net Income allocated to LB
pursuant to Section 3.1(g)(vi) for all prior years over the
cumulative Adjusted Net Loss allocated to LB pursuant to this Section
3.1(h)(iv) for the current and all prior years; and then
(v) FIFTH: Adjusted Net Loss to TSL and CSL, in proportion to
and to the extent of the excess, if any, of (1) the cumulative
Adjusted Net Income allocated to each such Partner pursuant to
Section 3.1(g)(v) for all prior years, over (2) the cumulative
Adjusted Net Loss allocated to such Partner pursuant to this Section
3.1(h)(v) for all prior years; and then
(vi) SIXTH: Adjusted Net Loss to TSL and CSL in proportion to
and to the extent of their respective positive Section 704 Capital
Account balances until their respective positive Capital Account
balances are reduced to zero; and then
(vii) SEVENTH: Adjusted Net Loss to LB to the extent of the
excess, if any, of (1) the cumulative Adjusted Net Income allocated to
LB pursuant to Section 3.1(g)(iii) for all prior years, over (2) the
cumulative Adjusted Net Loss allocated to such Partner pursuant to
this Section 3.1(h)(vii) for all prior years; and then
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(viii) EIGHTH: Adjusted Net Loss to LB until its positive
Capital Account balance is reduced to zero; and then
(ix) NINTH: Adjusted Net Loss to the General Partner.
For purposes of the allocation pursuant to this subsection, Percentage
Interests shall be determined as if cash distributions equal to all
allocations of net income have actually been made.
(i) Notwithstanding any other provision of the Agreement or this
Exhibit, from the date that construction commences with respect to a Property
(the "Subject Property") to the earlier of (i) the date 18 months following
the date that the Partnership receives a Certificate of Occupancy for the
Subject Property or (ii) the date which is two years after the date of this
Agreement, if LB is still a Limited Partner, all Adjusted Net Loss from the
Subject Property shall be allocated under this SECTION3.1(i) to TSL. If LB is
a Limited Partner after the second anniversary of the date of the Agreement,
then notwithstanding any other provision of the Agreement or this Exhibit, all
Adjusted Net Losses from the Subject Property shall be allocated under this
SECTION 3.1(i) to LB. The provisions of this SECTION 3.1(i) shall be applied
to each Property of the Partnership on a property-by-property basis.
(j) Book Gain derived from a Terminating Capital Transactions shall
be allocated among the Partners as follows in the following order of priority
(after giving effect to all adjustments attributable to allocations made
pursuant to the preceding provisions of this SECTION 3.1 for such year):
(i) FIRST: Book Gain shall be allocated among the Partners
having deficit Capital Account balances to the least extent necessary
to cause their deficit Capital Account balances to be in the same
proportion to one another as are their respective Percentage
Interests.
(ii) SECOND: Book Gain shall be allocated among those Partners
having deficit Capital Account balances in accordance with their
respective Percentage Interests, to the least extent necessary to
cause their Capital Account balances to equal zero.
(iii) THIRD: After all allocations under Section 3.1(k)(i)
through (ii) but before any distributions under Section 8.2 as a
result of Section 10.4, Book Gain shall be allocated to LB until LB's
positive Capital Account balance is equal to the sum of amounts
distributable to LB under Section 8.2(a), (b), (c) and (d); and then
(iv) FOURTH: After all allocations under Section 3.1(k)(i)
through (iii) but before any distributions under Section 8.2 as a
result of Section 10.4, Book Gain shall be allocated to CSL and TSL
until each of TSL's and CSL's positive Capital Account balance is
equal to the sum of the amounts distributable under Section 8.2(e)
and (f); provided, however, that if there is not sufficient Book Gain
to allocate to cause each such Partner's positive Capital Account
balance to equal the sum of the amounts distributable under Section
8.2(e) and (f), then Book Gain shall be allocated among TSL and CSL
(to the extent possible and as necessary) so as to cause their
respective positive Capital Account balances to be in the same
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ratio to one another as their respective amounts distributable under
Section 8.2(e) and (f); and then
(v) FIFTH: After all allocations under Section 3.1(k)(i)
through (iv) but before any distributions under Section 8.2 as a
result of Section 10.4, Book Gain shall be allocated to LB until LB's
positive Capital Account balance is equal to the sum of the amounts
distributable to LB under Section 8.2(a) through (d) plus (g); and
then
(vi) SIXTH: After all allocations under Section 3.1(k)(i)
through (v) but before any distributions under Section 8.2 as a
result of Section 10.4, Book Gain shall be allocated to CSL and TSL
until each of TSL's and CSL's positive Capital Account balance is
equal to the sum of the amounts distributable to TSL and CSL under
Section 8.2(e) and (f) plus (h) and (i); provided, however, that if
there is not sufficient Book Gain to allocate to cause each such
Partner's positive Capital Account balance to equal the sum of the
amounts distributable under Section 8.2(e) and (f) plus (h) and (i),
then Book Gain shall be allocated among TSL and CSL (to the extent
possible and as necessary) so as to cause so much of their respective
positive Capital Account balances in excess of their amount
distributable under Section 8.2(e) and (f) to be in the same ratio to
one another as their respective amounts distributable under Section
8.2(h) and (i); and then
(vii) SEVENTH: To the Partners in their sharing ratios as set
forth in Section 8.2(j).
(k) Book Loss derived from a Terminating Capital Transactions shall
be allocated among the Partners as follows in the following order of priority
(after giving effect to all adjustments attributable to allocations made
pursuant to the preceding provisions of this SECTION 3.1 for such year):
(i) FIRST: Before any distributions under Section 8.2 as a
result of Section 10.4, Net Loss shall be allocated in the least
amount necessary and to the extent possible so that the Partners'
excess balances (as hereinafter defined) are as closely as possible in
the same ratio to one another as their sharing ratios as set forth in
Section 8.2(j), and then to all Partners in proportion to their excess
balances until the excess balances are zero. LB's excess balance is
defined as the amount, if any, by which its positive Capital Account
balance exceeds the sum of the amounts distributable under Section
8.2(a) through (d) and (g). TSL's and CSL's respective excess balance
is defined as the amount, if any, by which its positive Capital
Account balance exceeds the sum of the amounts distributable to such
Partner under Section 8.2(e), (f), (h) and (i); and then
(ii) SECOND: Before any distributions under Section 8.2 as a
result of Section 10.4 and after the allocations under Section
3.1(k)(i), Net Losses shall be allocated to TSL and CSL until their
respective positive Capital Account balance is equal to the amounts
distributable under Section 8.2(e) and (f); provided, however, that if
there is not sufficient Book Loss to allocate to cause each such
Partner's positive Capital Account balance to equal the sum of the
amounts distributable under Section 8.2(e) and (f), then Book Loss
shall be allocated among the Partners (to the extent possible and as
necessary) so as to cause so much of their respective positive Capital
Account balances in excess of the amount distributable
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under Section 8.2(e) and (f) to be in the same ratio to one another as
their respective amounts distributable under Section 8.2(h) and (i);
and then
(iii) THIRD: Before any distributions under Section 8.2 as a
result of Section 10.4 and after the allocations under Section
3.1(k)(i) through (ii), Net Losses shall be allocated to LB until its
positive Capital Account balance is equal to the amounts distributable
to it under Section 8.2(a) through (d); and then
(iv) FOURTH: Before any distributions under Section 8.2 as a
result of Section 10.4 and after the allocations under Section
3.1(k)(i) through (iii), Net Losses shall be allocated to TSL and CSL
until their respective positive Capital Account balance is equal to
zero; provided, however, that if there is not sufficient Book Loss to
allocate to cause each such Partner's positive Capital Account balance
to equal zero, then Book Loss shall be allocated among the Partners
(to the extent possible and as necessary) so as to cause their
respective positive Capital Account balances to be in the same ratio
to one another as their respective amounts distributable under
Section 8.2(e) and (f); and them
(v) FIFTH: Before any distributions under Section 8.2 as a
result of Section 10.4 and after the allocations under Section
3.1(k)(i) through (iv), Net Losses shall be allocated to LB until its
positive Capital Account balance is reduced to zero; and then
(vi) SIXTH: Before any distributions under Section 8.2 as a
result of Section 10.4 and after the allocations under Section
3.1(k)(i) through (v), Net Losses shall be allocated to the General
Partner.
(l) For purposes of determining the nature (as ordinary or capital)
of any Partnership profit allocated among the Partners for Federal income tax
purposes pursuant to this SECTION 3.1, the portion of such profit required to
be recognized as ordinary income pursuant to sections 1245 and/or 1250 of the
Code shall be deemed to be allocated among the Partners in accordance with
sections 1.1245-1(e)(2) and 1.1250-1(f) of the Regulations.
(m) The Partners agree that their Percentage Interests represent
their respective interest in Partnership profits for purposes of allocating
excess nonrecourse liabilities (as defined in section 1.752-3(a)(3) of the
Regulations) pursuant to section 1.752-3(a)(3) of the Regulations.
(n) Notwithstanding any other provision herein to the contrary, no
allocation of Adjusted Net Income, Adjusted Net Loss, Book Gain or Book Loss,
or items of income, gain, loss and deduction will be made to a Partner if the
allocation would not have "economic effect" under section 1.704-1(b)(2)(ii) of
the Regulations or otherwise would not be in accordance with the Partners'
interests in the Partnership within the meaning of section 1.704-1(b)(3) or
section 1.704-2(b)(1) of the Regulations. The General Partner will have the
authority to reallocate any item in accordance this SECTION 3.1(o); provided,
however, that (a) no such change shall have a material adverse effect upon the
amount of cash or other property distributable to any Partner, (b) each
Partner shall have 30 days prior notice of such proposed modification and (c)
if such proposed modification would be material, the Partnership shall have
received an opinion of tax counsel to the Partnership that such modification
is necessary to comply with section 704(b) of the Code.
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(o) The allocations set forth in SECTIONS 3.1(a)-(f) (the
"REGULATORY ALLOCATIONS") are intended to comply with certain requirements of
the Regulations. It is the intent of the Partners that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this SECTION 3.1(p).
Therefore, notwithstanding any other provision of this Article III (other than
the Regulatory Allocations), the General Partner shall make such offsetting
special allocations of Partnership income, gain, loss, or deduction in
whatever manner it determine(s) appropriate so that after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all Partnership
items were allocated pursuant to SECTIONS 3.1(g)-(l) hereof.
Section 3.2. ALLOCATION OF TAX ITEMS.
(a) Except as otherwise provided in the succeeding provisions of
this SECTION 3.2, each Tax Item shall be allocated to the Partners in the same
manner as each correlative item of income, gain, loss or deduction, as
calculated for book purposes, is allocated pursuant to the provisions of
SECTION 3.1 hereof.
(b) The Partners hereby acknowledge that all Tax Items in respect of
Adjusted Property are required to be allocated to the Partners in the same
manner as under section 704(c) of the Code (as specified in sections
1.704-1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g) and 1.704-3 of the Regulations),
and that the principles of section 704(c) of the Code require that such Tax
Items must be shared among the Partners so as to take account of the variation
between the adjusted tax basis and Book Basis of each such Adjusted Property.
Thus, notwithstanding anything in SECTIONS 3.1 or 3.2(a) hereof to the
contrary, the Partners' distributive shares of Tax Items in respect of each
Adjusted Property shall be separately determined and allocated to the Partners
following any permissible method under 1.704-3 of the Regulations reasonably
selected by the General Partner, and the Capital Account balances of the
Partners shall be adjusted solely for allocations of book items in respect of
such assets and shall not be adjusted for their distributive shares of any
corresponding Tax Items.
ARTICLE IV
SPECIAL RULES
Section 4.1. ALLOCATION OF PROFIT AND LOSS AND DISTRIBUTIONS IN
RESPECT OF INTERESTS TRANSFERRED.
(a) If any interest in the Partnership is transferred, or is
increased or decreased by reason of the admission of a new Partner or
otherwise, during any Fiscal Year, each item of Adjusted Net Income or Loss,
and other income and deductions and Book Gain and Book Loss of the Partnership
for such Fiscal Year shall be divided and allocated between the Partners in
question by taking account of their varying interests in the Partnership
during such Fiscal Year on a daily, monthly, or other basis, as determined by
the General Partner using any permissible method under section 706 of the Code
and the Regulations thereunder.
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(b) Distributions of Partnership assets in respect of an interest in
the Partnership shall be made only to the persons or entities who, according
to the books and records of the Partnership, are the holders of record of the
interests in the Partnership in respect of which such distributions are made
on the actual date of distribution. Neither the Partnership nor any Partner
shall incur any liability for making distributions in accordance with the
provisions of the preceding sentence, whether or not the Partnership or any
Partner has knowledge or notice of any transfer or purported transfer of
ownership of any interest in the Partnership.
(c) Notwithstanding any provision above to the contrary, Book Gain
or Loss of the Partnership realized in connection with a sale or other
disposition of any substantial part of the assets of the Partnership shall be
allocated solely to the parties owning interests in the Partnership as of the
date such sale or other disposition occurs.
Section 4.2. TAX RETURNS. The General Partner shall cause to be
prepared for each taxable year of the Partnership the federal, state and local
income tax returns and information returns, if any, which the Partnership is
required to file. Such returns shall be prepared and submitted to the Partners
for examination no later than ten (10) days prior to the required filing date
(including any extension thereof), together with such additional forms and
information as may be required by the Partners in order for the Partners to
file returns reflecting the Partnership's operations.
Section 4.3. TAX ELECTIONS. The Partnership shall make the following
elections on the appropriate tax returns:
(a) to the extent permitted by the Code, to adopt the calendar year
as the Partnership's fiscal year;
(b) to the extent permitted by the Code, to adopt the accrual method
of accounting and to keep the Partnership's books and records on the
income-tax method;
(c) if a distribution of Partnership property as described in
section 734 of the Code occurs or if a transfer of Interest as described in
section 743 of the Code occurs, on written request of any Partner, to elect,
pursuant to section 754 of the Code, to adjust the basis of Partnership
properties;
(d) to elect to amortize the organizational expenses of the
Partnership ratably over a period of sixty (60) months as permitted by section
709(b) of the Code; and
(e) any other election the General Partner with the prior written
consent of LB may deem appropriate and in the best interests of the Partners.
Neither the Partnership nor any Partner may make an election for the
Partnership to be excluded from the application of the provisions of
subchapter K of chapter 1 of subtitle A of the Code or any similar provisions
of applicable state law. The Partnership intends to be classified as a
partnership for federal income tax purposes under section 301.7701-3 of the
Regulations. Neither the Partnership nor any Partner may make an election
under section 301.7701-3(c) of the Regulations to treat the Partnership as an
association taxable as a corporation.
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Section 4.4. TAX MATTERS PARTNER.
(a) TSL is hereby designated the "Tax Matters Partner" as that term
is defined in section 6231(a)(7) of the Code.
(b) The Tax Matters Partner shall use its best efforts to comply
with the responsibilities outlined in sections 6222 through 6232 of the Code
and in doing so shall incur no liability to the other Partners. The Tax
Matters Partner shall give written notice to each other Partner of all
correspon dence and other communications with tax authorities, including the
commencement of any audit and the nature and amount of any audit adjustments,
and shall not agree or settle the amount of any audit adjustment without the
prior written consent of each Limited Partner. Notwithstanding the Tax Matters
Partner's obligation to use its best efforts in the fulfillment of its
responsibilities, the Tax Matters Partner shall not be required to incur any
expenses for the preparation for or pursuance of administrative or judicial
proceedings unless the Partners agree on a method for sharing such expenses.
(c) No Partner shall file, pursuant to section 6227 of the Code, a
request for an administrative adjustment of items for any Partnership taxable
year without first notifying the other Partners. If the other Partners agree
with the requested adjustment, then the Tax Matters Partner shall file the
request for administrative adjustment on behalf of the Partner. If unanimous
consent is not obtained within thirty (30) calendar days from such notice, or
within the period required to timely file the request for administrative
adjustment, if shorter, any Partner, including the Tax Matters Partner, may
file a request for administrative adjustment on its own behalf.
(d) Any Partner intending to file a petition under sections 6226,
6228, or other section of the Code with respect to any item or other matter
involving the Partnership shall notify the other Partners of such intention
and the nature of the contemplated proceeding. In the case where the Tax
Matters Partner is the Partner intending to file such petition on behalf of
the Partnership, such notice shall be given within a reasonable period of time
to allow the other Partners to participate in the choosing of the forum in
which such petition will be filed. If the Partners do not agree on the
appropriate forum, then the appropriate forum shall be decided by vote of a
majority in interest of the Partners. If such a majority cannot agree, then
the Tax Matters Partner shall choose the forum. If any Partner intends to seek
review of any court decision rendered as a result of a proceeding instituted
under the preceding provisions of this SECTION 4.4(d), then such Partner shall
notify the other Partners of such intended action.
(e) The provisions of this SECTION 4.4 shall survive the termination
of the Partnership or the termination of any Partners's interest in the
Partnership and shall remain binding on the Partners for a period of time
necessary to resolve with the IRS or the United States Treasury Department the
income taxation of the Partnership.
Section 4.5. INCONSISTENT TREATMENT OF PARTNERSHIP ITEMS. If any
Partner intends to file a notice of inconsistent treatment under section
6222(b) of the Code, then such Partner shall give reasonable notice under the
circumstances to the other Partners of such intent and the manner in which the
Partner's intended treatment of an item is (or may be) inconsistent with the
treatment of that item by the other Partners.
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XXXXXXX X
XXXXXXXXXXX XX XXXX XXX XXXXXXX
X-0
EXHIBIT E
AGREED VALUE OF EACH PROPERTY
E-1
EXHIBIT F
REPRESENTATIONS AND WARRANTIES OF TSL REGARDING
PARTNERSHIP AND RELATED MATTERS
1. EXISTENCE; AUTHORITY. The Partnership is a duly
organized and validly existing limited partnership under the laws of the State
of Texas and has all requisite partnership power and authority to own and
lease its properties and to carry on its business as it is currently being
operated and in the places where the Properties owned by the Partnership are
owned or leased and such business is conducted.
2. NO DEFAULT. Neither the entry into, nor the
performance of, nor the compliance with this Agreement, has resulted or will
result in any violation of, or invalidate, cancel or make inoperative, or
constitute a default under, result in the creation of an Encumbrance or other
charge upon any Property or create any rights of termination, cancellation or
acceleration in any person under, any charter, bylaw, partnership or joint
venture agreement, trust agreement, mortgage, deed of trust, contract,
indenture, credit agreement, franchise, permit, judgment, injunction, decree,
order, ordinance, statute, rule, regulation, easement, restriction, or other
charge, right, or interest applicable to TSL, the Partnership or any Property.
3. LITIGATION. There is no pending or, to the
knowledge of TSL, threatened litigation or administrative proceedings to which
TSL and/or the Partnership is a party and which could (i) adversely affect
title to any Property or any part thereof or the ability of any of the parties
hereto to perform any of its obligations hereunder or the ability of the
Partnership to conduct the business or operations presently conducted by the
Partnership or the use of any Property by the Partnership in the manner
currently being used by the Partnership; (ii) result in a material adverse
change in the business, operations, assets or results of operations of the
Partnership; or (iii) otherwise affect any Property in any material respect.
The Partnership is not subject to any continuing court or Agency order, writ,
injunction or decree applicable to any Property or the business operations of
the Partnership, and the Partnership is not in default with respect to any
order, writ, injunction or decree of any court or Agency with respect to any
Property or its operations.
4. ZONING. TSL has not received any written notice of
a violation by any Property of any applicable zoning ordinances, rules and
regulations, deed restrictions, restrictive covenants, building codes or any
other land use controls to which the Property is subject.
5. NO BROKERS OR COMMISSIONS. Other than as disclosed
on SCHEDULE F-5, TSL has not dealt with any broker, arranger, consultant,
agent or finder to whom any commissions or other fees are still owing and
there are no commissions or other fees payable to any such party in connection
with the transactions contemplated hereunder. Other than as disclosed on
SCHEDULE F-5 and except for finders fees or referral fees payable in the
ordinary course of operations of the Properties there are no commissions
payable to any party in connection with any purchase or lease of any of the
Properties, or otherwise relating to the Properties and there are no
agreements to pay such commissions with respect to any future transaction.
F-1
6. TRUE AND CORRECT COPIES. All copies of all
certificates and permits, and all other contracts or documents delivered or
made available by TSL to LB in connection with the transactions contemplated
hereby, the Partnership or any Property are true, correct and, to the extent
they purport to be complete, complete copies.
7. FINANCIAL INFORMATION. To the knowledge of TSL, all
financial statements and other financial information concerning the
Properties, the Partnership or TSL delivered to LB as listed in SCHEDULE F-7
fairly and accurately reflect the information purported to be represented
thereby. There exists no material liabilities or obligations affecting the
Properties or the Partnership or the operation thereof which are not disclosed
in the balance sheets attached hereto as SCHEDULE F-7, except for such
liabilities and obligations that are adequately covered by insurance or with
respect to which adequate reserves have been made.
8. EMPLOYMENT ARRANGEMENTS. The Partnership has no
employees. There exists no union contracts, collective bargaining agreements,
employment contracts, employee benefit plans or arrangements, or similar
contracts or agreements, oral or written, pertaining to the Partnership or the
Properties or any person employed in connection with the operation of the
Properties and under which the Partnership will be obligated.
9. NO UNTRUE STATEMENT. No document or certificate
prepared by or under the supervision of TSL or to the knowledge of TSL, no
document or certificate furnished or to be furnished by TSL pursuant hereto
and relating to the Partnership or the Properties contains or will contain, as
of the date furnished, any untrue statement of material facts or omits or will
omit, as of the date furnished, to state material facts necessary to make the
statements or facts contained therein not misleading.
10. BANKRUPTCY. There is not pending or, to the
knowledge of TSL threatened against any TSL or the Partnership a petition in
bankruptcy, whether voluntary or otherwise, any assignment for the benefit of
creditors, any petition seeking reorganization or arrangement under the
Federal bankruptcy laws of the United States or of any state thereof, or any
other action brought under the aforesaid bankruptcy laws.
11. FINANCIAL CONDITION. There has been no material
adverse change in the financial condition of the Partnership since the date of
the financial statements of the Partnership described on SCHEDULE F-7.
12. GOVERNMENTAL ACTION. TSL has not received any
written notice of any change in, nor to the knowledge of TSL, is any change
contemplated in, any Governmental Requirements applicable to any Property or
the Partnership; and TSL has not and to the knowledge of TSL, the Partnership
has not received any written notice of any judicial or administrative action
applicable to any Property or any action by adjacent landowners affecting any
Property, or any natural or artificial conditions upon any Property (or any
significant adverse fact or condition relating to any Property or its present
use); which in any such case has not been disclosed in writing to LB and which
would prevent or limit, impede or materially render more costly the use of
such Property as it is presently being used.
F-2
13. CONDITION OF PROPERTY. To the knowledge of TSL,
each Property is undamaged by fire or other hazards not covered by insurance,
except that the Thousand Oaks Property under construction in San Antonio,
Texas, recently burned and the loss was not fully insured.
14. DEFECTS; VIOLATIONS; CONDEMNATION PROCEEDINGS. TSL
has not, and to the knowledge of TSL, the Partnership has not received, with
respect to any Property, any notice from any insurance company agency or any
other party of, nor, to the knowledge of TSL are there any facts or
circumstances which give rise to, (i) any condition, defect, or inadequacy
affecting such Property that, if not corrected, would result in termination of
insurance coverage or increase its cost, (ii) any violation of any restrictive
covenant or deed restriction affecting such Property (iii) any pending or
threatened condemnation proceedings, or (iv) any proceedings that could or
would cause the change, redemption, or other modification of the zoning
classification or other legal requirements, applicable to such Property or any
part thereof. To the knowledge of TSL, there does not exist any court order or
any restriction or restrictive covenant (recorded or otherwise) or other
private or public limitation which might adversely affect the use of any
Property as it is presently being used except as set forth in the Owners'
Policies. TSL has disclosed to LB that there are restrictive covenants that
limit the use of certain Properties other than as independent living
facilities.
15. MECHANIC'S LIENS. As of the date of this Agreement,
there are no mechanics' or materialmen's or other statutory liens against any
of the Properties that are not adequately reserved for by the Partnership. TSL
has disclosed to LB that certain Properties are still under construction and
could be subjected to such liens in the future.
16. UTILITIES. To the knowledge of TSL, all water,
sewer, electric, natural gas, telephone, drainage facilities and all other
utilities required for the use of each Property are installed to such
Property, are connected with valid permits, comply in all material respects
with all Governmental Requirements and are adequate to service such Property
for its current use. To the knowledge of TSL, all utilities lines servicing
each Property (other than internal lines located within such Property) are (i)
located either within the boundaries of such Property or within lands
dedicated to the public use, or within recorded easements for such purpose and
(ii) are serviced and maintained by the appropriate public or quasi-public
entity. All bonds, deposits, and initial charges for such utilities have been
paid in full.
17. STREETS AND HIGHWAYS. TSL has not, and to the
knowledge of TSL, the Partnership has not received any notice of (a) any
existing and, except as set forth in SCHEDULE F-17, there are no proposed
plans to widen, modify or realign any street adjoining any Property or (b) any
pending or threatened governmental proceeding, or any other fact or condition
which would limit or result in the termination of any Property's access to and
from public roads.
18. PERMITS AND DEPOSITS. To the knowledge of TSL, all
permit, deposit or initial charges have been paid in full.
19. WASTE DISPOSAL. All garbage, trash or other solid
waste from or relating to each Property is being collected on a regular basis
and, to the knowledge of TSL, is being properly disposed of in accordance with
all applicable Governmental Requirements. All drains have been
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properly connected to the municipal storm or sanitary sewer lines with the
approval of each municipality or the state highway department, as applicable.
20. NO NUISANCE. There is no public or private nuisance
condition created by TSL or the Partnership currently existing on any
Property, and, to the knowledge of TSL, no other public or private nuisance
condition currently exists on any Property.
21. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. All
buildings, improvements, utilities and fixtures (including all streets, curbs,
sidewalks, sewers and other utilities) forming a part of the Properties and
existing on the date of this Agreement have been installed in compliance in
all material respects with all Governmental Requirements (other than those
pertaining to parking). Permanent certificates of occupancy, all licenses,
permits, authorizations and approvals required by all Governmental Authorities
having jurisdiction over the Properties which are completed, and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the buildings and improvements and
have been paid for and all of the foregoing are in full force and effect, or
if not issued, such failure will not have a material adverse effect on the
Properties which are completed.
22. PARKING. To the knowledge of TSL, the parking
available on each of the Properties is in accordance with all current
Governmental Requirements, or TSL or the Partnership shall have obtained all
necessary variances or other relief from such Governmental Requirements.
23. RENTS AND LEASES. The Rent Rolls for each Property
currently occupied, which have been initialed by TSL and delivered to LB
pursuant hereto (the "RENT ROLL"), contain a complete and correct list of all
Leases setting forth with respect to each of the Leases (i) the type and size
of unit covered thereby, (ii) the date thereof, (iii) the term thereof, (iv)
the rents and other charges payable thereunder, (v) any rents or other charges
in arrears or prepaid thereunder and the period for which such rents and other
charges are in arrears or have been prepaid, (vi) the amount of the security
deposit thereunder, (vii) the utilities which are furnished as part of the
rent, (viii) any brokerage fees or finder's fees payable thereunder and (ix)
any material amendments thereto. Except as disclosed in the Rent Roll, (A)
there are no other lease or rental agreements for the occupancy of any of the
units in the Improvements, (B) no tenant is entitled to any free rent or
similar concession other than in the ordinary course of business, (C) no
tenant has prepaid rent for more than one (1) month in advance, (D) no
material number of tenants are entitled to a refund of any rent or other sums
heretofore paid by such tenants (except for security deposits) or to assert
any such refund or claim therefor as an offset or defense against the payment
of rent hereafter coming due, (E) there are no Leases with an initial term in
excess of one (1) year or less than six (6) months, (F) to the knowledge of
TSL, all leased premises are actually occupied by the tenant under the lease
agreement covering such leased premise, and (G) there are not more than three
(3) units in the Improvements being leased to any one (1) person or entity. No
brokerage or leasing commission or other compensation will be due or payable
with respect to any of the leases at the Closing or thereafter, except for
finders fees or referral fees payable in the ordinary course of operations of
the Property. The Leases are in full force and effect and no material number
of defaults or breaches on the part of the landlord exists thereunder and to
the knowledge of TSL, there are no material number of defaults by the tenant
thereunder. The Partnership has good title to the Leases and Rents for each of
the
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Properties and no other person or entity has any right, title or interest
therein, except the rights of the existing lienholders.
24. OBLIGATIONS TO TENANTS UNDER LEASES. Except as
reflected in the Rent Rolls or in the ordinary course of ongoing activities,
there are no unperformed obligations to provide any tenant under any Lease
with any painting, repair, alteration, carpeting, appliance or any other
equipment or work of any kind, under any Lease or under any other oral or
written agreement whatsoever that would excuse such tenant from accepting its
premises under the terms of its Lease.
25. ENFORCEABILITY OF LEASES. Each of the Leases is in
full force and effect in accordance with its terms, provisions and conditions
and to the knowledge of TSL, constitutes the legal, valid, binding and
enforceable obligation of the tenant thereunder. To the knowledge of TSL, no
tenant is in material default thereunder, except as shown on the Rent Roll. To
the knowledge of TSL, no material number of tenants under the Leases has any
pending litigation, offsets or counterclaims against the Partnership which, if
successfully asserted, would reduce the rent payable thereunder or result in
the cancellation or termination thereof.
26. AGREEMENTS TO ACQUIRE OR POSSESS THE PROPERTY. No
person, firm, corporation or other entity except the Property Manager has any
right or option to acquire any Property, or any part thereof, from the
Partnership. Except as reflected within the Permitted Encumbrances, the
Partnership has not entered into any agreement with any person, firm,
corporation or entity granting the right to possess all or any portion of any
Property, other than tenants in possession pursuant to the Leases described in
the Rent Roll.
27. UNFULFILLED BINDING COMMITMENTS. TSL has no
knowledge of any commitments made by the Partnership or TSL to any
Governmental Authority, utility company, school board, church or other
religious body, or any homeowners or homeowners' association, or any other
organization, group or individual, relating to any Property which would impose
an obligation upon the Partnership or its successors or assigns to make any
contribution or dedications of money or land or to construct, install or
maintain any improvements of a public or private nature on or off such
Property. To the knowledge of TSL, no Governmental Authority has imposed any
requirement that any developer of any Property pay directly or indirectly any
fees or contributions relating to a specific Property or incur any expenses or
obligations in connection with any development of such Property or any part
thereof. The provisions of this SECTION shall not apply to any regular or
nondiscriminatory local real estate or school taxes assessed against any
Property.
28. SERVICE CONTRACTS, LEASES, ETC. TSL has provided LB
with complete and correct copies of all Service Contracts, Leases and Personal
Property Leases, in each case that involve payments by or to the Partnership
of more than $50,000 per year or that have a term of more than 12 months at
the time of the determination. There are no other contracts other than the
Service Contracts, the Leases, the Personal Property Leases and the Permitted
Encumbrances affecting the Properties or the operation thereof.
29. ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES.
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No Hazardous Materials have been released into the
environment, or deposited, discharged, placed or disposed of at, on, from or
under any Property by the Partnership, TSL, or, to the knowledge of TSL, by
any other party in violation of Hazardous Materials Laws, and to the knowledge
of TSL, there has occurred no such release, deposit, discharge, placement or
disposal in violation of Hazardous Materials Laws. Since the Partnership
acquired any Property, no portion of the Property has been used for the
disposal, storage, treatment, processing or other handling of Hazardous
Materials and no Hazardous Materials have been placed or located on any
Property by TSL, the Partnership or to the knowledge of TSL by any other
party. To the knowledge of TSL, prior to its acquisition by the Partnership,
no part of any Property has ever been used for the disposal, storage,
treatment, processing, manufacturing or other handling of Hazardous Materials.
No Hazardous Materials Contamination or Hazardous Substance Activity has
occurred on any Property since its acquisition by the Partnership, or to the
knowledge of TSL, prior to its acquisition by the Partnership.
To the knowledge of TSL, (i) no property adjoining any
Property has been used for the disposal, storage, treatment, processing,
manufacturing or other handling of Hazardous Materials, and (ii) no property
adjoining any Property is affected by Hazardous Materials Contamination.
No asbestos or asbestos-containing materials have been
placed on or in any Property by the Partnership or TSL or to the knowledge of
TSL, by any other party and to the knowledge of TSL, no asbestos or
asbestos-containing materials are present on or in any Property.
No polychlorinated biphenyls have been placed on any
Property by the Partnership or TSL and to the knowledge of TSL, no
polychlorinated biphenyls are present on any Property.
No underground storage tanks have been placed on or under
any Property by the Partnership or TSL, and to the knowledge of TSL, no
underground storage tanks are present on or under any Property.
TSL has not, and to the knowledge of TSL, the Partnership
has not received any written notice of any administrative order or notice,
consent order and agreement, litigation or settlement with respect to
Hazardous Materials or Hazardous Materials Contamination or Hazardous
Substance Activity with respect to any Property, nor to the knowledge of TSL,
is any such action proposed or threatened with respect to any Property. TSL
has not, and to the knowledge of TSL, the Partnership has not received any
written notice nor does TSL have any knowledge of any such action regarding
any property adjacent to any Property. To the knowledge of TSL, no
investigation with respect to the Hazardous Materials or Hazardous Materials
Contamination is proposed, threatened or anticipated with respect to any
Property. Neither the Partnership nor TSL has violated any Governmental
Requirement relating to Hazardous Materials with respect to any Property and
TSL has not, and to the knowledge of TSL, the Partnership has not received any
written notice that any other party has violated any Governmental Requirements
relating to Hazardous Materials with respect to any Property. To the knowledge
of TSL, no condition occurred on any Property prior to its Acquisition Date
which is or was in violation of any applicable Governmental Requirements
relating to Hazardous Materials. Neither the Partnership nor TSL has received
any communication from or on behalf of any Governmental Authority or any other
person or entity indicating that any applicable Governmental Requirements
relating to Hazardous Materials have been or may have been
F-6
violated with respect to any Property. To the knowledge of TSL, none of the
Properties is anticipated or threatened to be placed on any federal or state
"Superfund" or "Superlien" list. Neither the Partnership nor TSL has received
any notice of any third party claims regarding damage to property or persons
resulting from any Hazardous Materials Contamination or Hazardous Substance
Activity affecting any Property.
TSL has not, and to the knowledge of TSL, the Partnership
has not received any written notice from any tenants regarding the existence
of Hazardous Materials on any Property. TSL has not, and to the knowledge of
TSL, the Partnership has not received any written notice of a threat of
release of Hazardous Materials from or into any Property.
To the knowledge of TSL, the Partnership has obtained all
governmental approvals required by any applicable Hazardous Materials Laws for
the operation of the Properties owned by the Partnership.
TSL has not and to the knowledge of TSL, the Partnership has
not received any notice that either the Partnership or TSL (i) has any
liability for response or corrective action, natural resource damage, or other
liability pursuant to CERCLA, RCRA or any other Hazardous Materials Laws, and
(ii) is currently subject to or is currently required to give any notice of
any environmental claim or release of Hazardous Materials involving the
Partnership or its Properties.
To the knowledge of TSL, none of the Properties is subject
to any restriction on the ownership, occupancy, use or transferability of the
Property in connection with any (i) Hazardous Materials Laws or (ii) release,
threatened release, treatment, management, storage, handling, recycling or
disposal of a Hazardous Material.
Notwithstanding anything to the contrary contained in this
paragraph F-29, each of the representations and warranties contained in this
paragraph F-29 is qualified and limited by, and expressly made subject to the
information contained in the environmental reports (the "ENVIRONMENTAL
REPORTS") listed in SCHEDULE F-29 attached hereto. LB represents and warrants
to TSL that SCHEDULE F-29 lists all of the environmental reports received from
consultants engaged by LB in connection with its due diligence investigation
of the Properties and TSL warrants and represents to LB that SCHEDULE F-29
lists all of the environmental reports provided by TSL to LB for LB's review
and information.
30. DUE ORGANIZATION AND QUALIFICATION OF TSL. TSL is a
corporation duly organized and validly existing under the laws of the State of
Texas.
31. POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement and all other agreements by and among TSL and
other parties contemplated hereby that have been executed and delivered on or
before the date of this Agreement ("TSL Transaction Documents"), and the
consummation by TSL of the transactions contemplated hereby and thereby, have
been duly authorized and no further action or approval will be required in
order to permit TSL to perform such obligations and consummate the
transactions contemplated hereby and thereby. This Agreement constitutes, and
all other TSL Transaction Documents, when executed and delivered in accordance
with the terms thereof, will constitute the legal, valid and binding
obligations of TSL,
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enforceable in accordance with their terms. TSL has full power, authority and
legal right to enter into this Agreement and all other TSL Transaction
Documents, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and all other TSL Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof will not (i) violate
any order, writ, injunction or decree to which TSL is a party or by which any
of the Properties is bound or affected or (ii) result in the violation of any
provisions of law applicable to Fail or the Partnership.
32. TITLE. TSL has delivered to LB full and complete
copies of (i) all existing policies of title insurance issued in the name of
the Partnership for each Property, including all riders, schedules supplements
and endorsements thereto describing all Encumbrances on each Property and all
exceptions, limitations and qualifications with respect to such title
insurance (individually "Owner's Title Policy" and collectively "Owner's Title
Policies") and (ii) a current "date down" title report for each Property
showing the Partnership as the sole owner of such Property and specifically
identifying all Encumbrances against such Property that have been recorded in
the appropriate jurisdiction for each Property since the date of the
applicable Owner's Title Policy through and including the date hereof (the
"Updated Reports").
F-8
EXHIBIT G
REPRESENTATIONS AND WARRANTIES OF CSL REGARDING
PARTNERSHIP AND RELATED MATTERS
1. DUE ORGANIZATION AND QUALIFICATION OF CSL. CSL is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas.
2. POWER AND AUTHORITY OF CSL. The execution,
delivery and performance of this Agreement and all other agreements by and
among CSL and other parties contemplated hereby that have been executed and
delivered on or before the date of this Agreement ("CSL Transaction
Documents"), and the consummation by CSL of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate
action and no further action or approval will be required in order to permit
CSL to perform such obligations and consummate the transactions contemplated
hereby and thereby. This Agreement constitutes, and all other CSL Transaction
Documents, when executed and delivered in accordance with the terms thereof,
will constitute the legal and valid and binding obligations of CSL,
enforceable in accordance with their terms. CSL has full power, authority and
legal right to enter into this Agreement and all CSL Transaction Documents and
to consummate the transactions contemplated hereby and thereby.
3. NO CONFLICT OR DEFAULT. The execution, delivery and
performance of this Agreement and all other CSL Transaction Documents and the
consummation of the transactions contemplated hereby and thereby in accordance
with the terms hereof and thereof will not (i) conflict with the Certificate
of Incorporation or Bylaws of CSL, (ii) violate any order, writ, injunction or
decree to which CSL is a party, (iii) constitute a default under any mortgage,
lien, lease, indenture, agreement or instrument to which CSL is a party or
(iv) result in the violation of any provisions of any Governmental
Requirements applicable to CSL .
4. NO LITIGATION. There is no action, suit, proceeding
or investigation pending or, to the best of the knowledge of CSL, threatened
against CSL or the Partnership which questions the validity of this Agreement
or any action taken or to be taken pursuant hereto or which might have an
adverse effect upon the Partnership. CSL is not in default with respect to any
judgment, order, writ, injunction or decree of any court or Agency which might
have an adverse effect upon Partnership Interest or the ability of CSL to
consummate the transactions contemplated hereunder.
5. BREACH OF REPRESENTATIONS AND WARRANTIES. CSL (1)
has no knowledge that any representation or warranty contained in Article 2 is
not true and correct in any material respect or (ii) has received any written
notice, the receipt of which would cause a representation in Exhibit F not to
be true and correct if such notice had been received by a TSL Party.
6. NO BROKERS OR COMMISSIONS. Other than as disclosed
on SCHEDULE G-6, CSL has not dealt with any broker, arranger, consultant,
agent or finder, and there are no commissions or other fees payable to any
party with whom TSL has dealt, in each case in connection with the
transactions contemplated hereunder.
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7. LIMITATION OF REPRESENTATIONS BY CSL. LB
acknowledges and agrees that, with the exception of the representations and
warranties set forth in this Agreement and the documents delivered by CSL at
Closing, (a) the Limited Partnership Interest is being acquired by LB on a
basis that is without representation or warranty by CSL, including any
representation or warranty relating to the Properties, and (b) it has not
relied upon any representations, warranties or other statements, whether
express or implied, made by CSL or any of its agents, employees or other
representatives.
8. CSL (or TSL or the Partnership) has delivered to LB
full and complete copies of (i) all existing policies of title insurance
issued in the name of the Partnership for each Property, including all riders,
schedules supplements and endorsements thereto describing all Encumbrances on
each Property and all exceptions, limitations and qualifications with respect
to such title insurance (individually "Owner's Title Policy" and collectively
"Owner's Title Policies") and (ii) a current "date down" title report for each
Property showing the Partnership as the sole owner of such Property and
specifically identifying all Encumbrances against such Property that have been
recorded in the appropriate jurisdiction for each Property since the date of
the applicable Owner's Title Policy through and including the date hereof (the
"Updated Reports").
G-2
EXHIBIT H
FORM OF MONTHLY REPORTING
H-1
