FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
TRIAD SENIOR LIVING II, L.P.
THIS FIRST AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
("Amendment") is dated effective as of July 31, 2000, by and among Triad
Partners II, Inc., a Texas corporation ("XX XX"), as general partner (the
"General Partner") and as a limited partner, and Capital Senior Living
Properties, Inc., a Texas corporation ("Capital Senior Living" and, together
with XX XX, the "Limited Partners").
WHEREAS, the parties hereto desire to amend that certain Agreement of
Limited Partnership ("Partnership Agreement"), dated September 23, 1998, of
Triad Senior Living II, L.P., a Texas limited partnership (the "Partnership").
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in the Partnership
Agreement.
2. Subordination Agreement Related Amendments to the Partnership
Agreement. The amendments to the Partnership Agreement set forth in this Section
2 shall apply upon the occurrence of the conversion of the subordinated
indebtedness as described in Section 8.1 of that certain Subordination
Agreement, dated as of December 30, 1998, as subsequently amended or modified,
by and between Key Corporate Capital, Inc. and Capital Senior Living (the
"Subordination Agreement").
(a) Definitions. The following definitions are hereby added to
"Article I - Additional Definitions" of the Partnership Agreement:
"Preferred Capital Contribution Account" means a memorandum account,
which shall be maintained by the Partnership with respect to Capital Senior
Living (or its successor in interest) for accounting purposes only, as
determined as follows: (a) the initial balance of the account shall be zero; (b)
the balance of such account shall be increased as of the date of the occurrence
of the conversion pursuant to the terms of Section 8.1 of that certain
Subordination Agreement by an amount equal to the sum of the principal amount of
the subordinated indebtedness plus all unpaid and accrued interest thereon), by
and between Key Corporate Capital, Inc., and Capital Senior Living; and (c) the
balance of such account shall be decreased (but not below zero) as of each date
that a distribution is made to Capital Senior Living pursuant to Section 8.2(b)
and Section 10.4(e) by the amount of such distribution. If Capital Senior Living
shall transfer its Partnership Interest, the
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transferee shall succeed to a proportionate part of the balance, if any, of the
Preferred Capital Contribution Account.
"Net Capital Transaction Proceeds" mean the proceeds from (a) any
financing or refinancing of the Properties or any part thereof, 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
generally accepted accounting principles 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
and any loans, debts or other obligations of the Partnership.
"Preferred Return" means at any date, for Capital Senior Living (or its
successor in interest), an amount computed like interest equal to a cumulative
annual return of 12%, compounded annually, on the average daily balance of the
Preferred Capital Contribution Account, reduced (but not below zero) by the
amount of distribution pursuant to Section 8.2(a) and Section 10.4(d) to Capital
Senior Living. If Capital Senior Living shall transfer its Partnership Interest,
the transferee shall succeed to a proportionate part of the balance, if any, of
the Preferred Return.
(b) Section 8.2. Section 8.2 of the Partnership Agreement is
hereby amended in its entirety to read as follows:
"Section 8.2 Distributions of Net Cash Flow and Net Capital Transaction
Proceeds
Except as otherwise agreed to by the Partnership in connection with the
Mezzanine Loan, distributions of Net Cash Flow shall be made periodically but
not less frequently than annually. Distributions of Net Capital Transaction
Proceeds (other than Net Capital Transaction Proceeds from transactions
described in Section 10.4) shall be made promptly following the Partnership's
receipt thereof. All such distributions shall be made in the following order or
priority:
(a) First, to Capital Senior Living until there shall
have been distributed to Capital Senior Living an
amount equal to the unpaid Preferred Return.
(b) Second, to Capital Senior Living until there shall
have been distributed to Capital Senior Living an
amount equal to then existing balance in its
Preferred Capital Contribution Account.
(c) Third, to the Partners in accordance with their
Percentage Interests."
(c) Section 10.4. Section 10.4 of the Partnership Agreement is hereby
amended by inserting the following as new provisions "(d)" and "(e)" and by
renumbering the current provisions (d) and (e) as "(f)" and "(g)", respectively:
"(d) To Capital Senior Living until there shall have been
distributed to Capital Senior Living an amount equal
to the Preferred Return; provided, however,
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that in no event shall any distribution under this
Section 10.4(d) exceed the positive balance of
Capital Senior Living's Capital Account.
(e) To Capital Senior Living until there shall have been
distributed to Capital Senior Living an amount equal
to then existing balance in its Preferred Capital
Contribution Account; provided, however, that in no
event shall any distribution under this Section
10.4(e) exceed the positive balance of Capital Senior
Living's Capital Account."
(d) Exhibit C. Exhibit C of the Partnership Agreement is hereby
amended by adding the following definition:
"(dd) "Terminating Capital Transaction" means any
transaction incurred in connection with or as part of
the sale or other disposition of all or substantially
all of the assets of the Partnership or termination
and liquidation of the Partnership under Section 10.4
of the Agreement."
(e) Exhibit C. Section 2.1(a) of Exhibit C of the Partnership
Agreement is hereby amended in its entirety to read as follows:
"(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 Capital Contributions
described in Article V of the
Agreement and upon the occurrence of the events
described in Section 8.1 of the Subordination
Agreement the sum of the principal amount of the
subordinated indebtedness converted pursuant to
Section 8.1 thereof plus any accrued and unpaid
interest thereon) and decreased by the amount of
money distributed to such Partner (or such Partner's
predecessor in interest);"
(f) Exhibit C. Section 3.1(g) and (h) of Exhibit C of the
Partnership Agreement are hereby amended in their entirety to read as follows:
"(g) Any Adjusted Net Income realized by the Partnership for such
year shall be allocated among the Partners as follows in the
following order of priority:
(i) First: Adjusted Net Income shall be allocated to the
General Partner until the cumulative Adjusted Net
Income allocated under this Section 3.1(g)(i) for the
current and prior years equals the aggregate amount
of the Adjusted Net Loss allocated to the General
Partner under Section 3.1(h) (v) for the current and
prior years; and then
(ii) Second: To Capital Senior Living until the cumulative
amount allocated under this Section 3.1(g)(ii) is
equal to the sum of the cumulative Adjusted Net Loss
allocated to Capital Senior Living for all prior
years under Section 3.1(h)(iv) for the current and
prior years; and then
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(iii) Third: To Capital Senior Living until the cumulative
allocated amount under this Section 3.1(g)(iii) for
all prior years and the current year is equal to the
sum of (A) the cumulative Preferred Return from the
inception of the Partnership to the end of the
applicable period plus (B) the cumulative Adjusted
Net Loss allocated for all prior years under Section
3.1(h)(iii); and then
(iv) Fourth: To the Partners 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)(ii) 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 prior years: and then
(v) Fifth: to the Partners in proportion to their
respective Percentage Interests.
(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)(v) for all prior years, over (2) the
cumulative Adjusted Net Loss allocated to such
Partner pursuant to this Section 3.1(h)(i) for all
current and prior years; and then
(ii) Second: Adjusted Net Loss to the Partners, in
proportion to and to the extent of their respective
positive Section 704 Capital Account balances
(reduced in the case of Capital Senior Living by the
amount of its Preferred Capital Contribution Account
and Preferred Return) until such balances are reduced
to zero; and then
(iii) Third: Adjusted Net Loss to Capital Senior Living in
an amount equal to the excess, if any, of the
cumulative Adjusted Net Income allocated to Capital
Senior Living pursuant to Section 3.1(g)(iii) for all
prior years over the cumulative Adjusted Net Loss
allocated to Capital Senior Living pursuant to this
Section 3.1(h)(iii) for the current and all prior
years; and then
(iv) Fourth: Adjusted Net Loss to Capital Senior Living
until its positive Section 704 Capital Account
balance is reduced to zero; and then
(v) Fifth: Adjusted Net Loss to the General Partner."
(g) Exhibit C. Section 3.1(k)(iii) and (iv) of Exhibit C of the
Partnership Agreement are hereby amended in their entirety to read as follows:
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"(iii) Third: After all allocations under Section 3.1(k)(i)
and (ii) but before any allocations under Section
3.1(k)(iv) through Section 3.1(k)(vi) and before any
distributions under Section 10.4, Book Gain shall be
allocated to Capital Senior Living until Capital
Senior Living's positive Capital Account balance is
equal to the sum of amounts distributable to Capital
Senior Living pursuant to Section 10.4(d) without
regard to the proviso thereof; and then
(iv) Fourth: After all allocations under Section 3.1(k)(i)
through (iii) but before any allocations under
Section 3.1(k)(v) through Section 3.1(k)(vi) and
before any distributions under Section 10.4, Book
Gain shall be allocated to Capital Senior Living
until Capital Senior Living's positive Capital
Account balance is equal to the sum of amounts
distributable to Capital Senior Living pursuant to
Section 10.4(d) and Section 10.4(e) without regard to
the provisos thereof; and then
(v) Fifth: After all allocations under Section 3.1(k)(i)
through Section 3.1(k)(iv) and after all
distributions required under Section 10.4(a) through
(e) but before any distributions under Section
10.4(f) and Section 10.4(g), Book Gain shall be
allocated to the Partners to the least extent
necessary so as to cause their positive Capital
Account balances to be in the same proportion to one
another as are their respective Percentage Interests;
and then
(vi) Sixth: After all allocations under Section 3.1(k)(i)
through Section 3.1(k)(v) and after all distributions
required under Section 10.4(a) through (f) but before
any distributions under Section 10.4(g), Book Gain
shall be allocated among the Partners in proportion
to their respective Percentage Interests."
(h) Exhibit C. Section 3.1(l)(i) and (ii) of Exhibit C of the
Partnership Agreement are hereby amended in their entirety to read as follows:
"(i) First: Before any distributions under Section 10.4,
Book 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 Percentage Interests, and then to
all Partners in proportion to their excess balances
until the excess balances are reduced to zero.
Capital Senior Living'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 10.4(d) and Section 10.4
(e) disregarding the provisos of such sections, and
any other Partner's excess balance shall be the
positive balance, if any, of its Capital Account; and
then
(ii) Second: Before any distributions under Section 10.4
and after the allocations under Section 3.1(l)(i),
Book Loss shall be allocated to Capital Senior Living
until its positive Capital Account balance is reduced
to zero; and then
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(iii) Third: All remaining Book Loss shall be allocated to
the General Partner."
3. Other Amendments to the Partnership Agreement. The amendments
to the Partnership Agreement set forth in this Section 3 shall apply upon the
effectiveness of this Amendment.
(a) Section 7.2. Section 7.2 of the Partnership Agreement
is hereby amended by adding the following as new Section 7.2(c):
"(c) Notwithstanding anything in this Agreement to the
contrary, the General Partner shall not have the right or power to make any
commitment or engage in any undertaking on behalf of the Partnership in respect
of any item set forth below unless and until such item has been approved in
writing by all of the Limited Partners:
(i) except for the construction loan of the
Partnership with Key Corporate Capital, Inc., pursuant to that certain
Construction Line of Credit Agreement, dated December 30, 1998, as amended
(which principal amount thereunder shall not be increased in any event),
evidences of indebtedness to a Limited Partner, and the rights of Capital Senior
Living to finance operating deficits at the Properties pursuant to the
Management Agreement, all financing decisions with respect to any of the
Properties;
(ii) all amendments or modifications to the Loan
and the Note;
(iii) all execution and subsequent amendments or
modifications of any management agreements or operating leases with respect to
any of the Properties (except for any management agreement which has been
approved by Lenders and to which Capital Senior Living is a party), except for
commercial leases for resident services incidental to the operation of any
Property (i.e., xxxxxx shop, beauty parlor), provided such commercial leases, in
the aggregate, shall not generate more than 20% of the gross income of such
Property; and
(iv) all distributions to the Partners of funds
received by the Partnership from that certain equity reserve held by the
Lenders.
The Partners hereby consent to the assignment of these consent rights
by any Limited Partner to Xxxxxx Financial Services, Inc., a Delaware
corporation (with its successors and assigns, "Xxxxxx"), in connection with the
loan by Xxxxxx (the "Mezzanine Loan") of funds to an affiliate of Capital Senior
Living. The provisions of this Section 7.2(c) shall automatically terminate and
be of no further force and effect upon the repayment of all obligations under
the Mezzanine Loan, and upon the release of collateral pledged to Xxxxxx in
accordance with the loan documents evidencing the Mezzanine Loan."
(b) Section 9.1 Section 9.1 of the Partnership Agreement is
hereby amended by adding the following in the first sentence of Section 9.1
after the word "hereof" and prior to the first comma:
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"and pursuant to the terms of any acknowledgments and consents executed
by the Partners in connection with the Mezzanine Loan"
(c) Section 9.1. Section 9.1 of the Partnership Agreement
is hereby amended by adding the following to the end of Section 9.1.
"Notwithstanding anything in this Agreement to the contrary,
the Partners acknowledge and consent to the assignment by Capital Senior Living
of a security interest in its interests in the Partnership to Xxxxxx. The
Partners further acknowledge and consent to the General Partner acting on the
written instructions of Xxxxxx pursuant to the terms of any acknowledgments and
consents executed by the Partners in connection with the Mezzanine Loan and the
Partners agree to be bound by the terms of such acknowledgments and consents
executed in accordance with the loan documents evidencing the Mezzanine Loan."
4. Miscellaneous.
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(a) Entire Agreement. This Amendment contains the entire agreement
by and among the parties related to the subject matter hereof and supersedes any
prior understandings and agreements among them respecting the subject hereof.
THIS AMENDMENT SHALL BE CONSTRUED, ENFORCED AND GOVERNED IN CONFORMITY WITH THE
LAWS OF THE STATE OF TEXAS, without giving effect to principles of conflicts of
law, and whether in state or federal courts. This Amendment 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.
(b) Counterparts. This Amendment 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.
(c) Separability. Each provision of this Amendment shall be considered
separable and (i) 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
Amendment which are valid, and (ii) if for any reason any provision or
provisions of this Amendment 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.
(d) No Amendment. Except as amended herein, all terms and
provisions of the Partnership Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
GENERAL PARTNER:
Triad Partners II, Inc.,
a Texas corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
LIMITED PARTNERS:
Triad Partners II, Inc.,
a Texas corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
Capital Senior Living Properties, Inc.,
a Texas corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
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