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                                                                  Exhibit 10.77

                         CONSULTING/SEVERANCE AGREEMENT

         THIS CONSULTING/SEVERANCE AGREEMENT ("Agreement") is made and
entered into as of the 20th day of May, 1999, by and between Capital Senior
Living Corporation, a Delaware corporation ("CSLC"), and Jeffrey L. Beck, an
individual ("Beck").

         WHEREAS, Beck is a founder of CSLC and his leadership and commitment
has been instrumental in the success of CSLC, and he has prior to the date
hereof been the Chief Executive Officer, a director and Co-Chairman of CSLC;

         WHEREAS, Beck now desires for personal reasons to retire from his
positions with CSLC and its subsidiaries, and he and CSLC have determined to
terminate that certain Amended and Restated Employment Agreement, dated
October 8, 1997, by and between Beck and CSLC;

         WHEREAS, CSLC considers Beck's knowledge of CSLC, its business and
the senior living industry and his relationships with and knowledge of others
engaged in the senior living business to be of great strategic value to CSLC;
and

         WHEREAS, CSLC therefore desires to retain Beck as a strategic
consultant, and Beck is willing to agree to those arrangements;

         NOW, THEREFORE, in consideration of the premises and covenants
considered in this Agreement, the parties hereto agree as follows:

                                   AGREEMENTS

         1.       BECK'S OBLIGATIONS. During the term of this Agreement, Beck
shall consult in an advisory capacity to the Board of Directors of CSLC (the
"Board"). As consultant, Beck shall provide to the Board strategic advice and
recommendations affecting the general welfare and business of CSLC and, as an
"elder statesman" of the senior living industry, act as a goodwill ambassador
for CSLC. Beck shall provide such services at the Board's request, upon
reasonable notice, at such time or times and for such duration as shall be
mutually agreed upon in any instance. It is expressly agreed that neither the
Board's failure to request such services nor any failure or refusal by Beck
to agree to any particular time or times and duration shall constitute a
breach of this Agreement, whether such failures or refusals be in a
particular instance or series of instances, the Board reposing great trust in
Beck to determine whether or not advisory services or the timing thereof are
appropriate in any particular instance or series of instances. It is also
expressly agreed that neither CSLC nor the Board has any right under this
Agreement to require Beck to report to or spend any time at CSLC's offices or
other facilities or that he attend any particular Board meetings. In the
event Beck becomes disabled during the term of this Agreement and as a result
is unable to perform the services provided for in this Section 1, the
payments and other benefits provided for in this Agreement shall nonetheless
continue and all other terms and conditions of this Agreement shall remain in
full force and effect. In the event of a Fundamental Change (as defined in
Section 15(b)

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of this Agreement) during the term of this Agreement, Beck shall have no
further obligation to provide services under this Section 1, CSLC shall have
no further obligation to provide the benefits under Section 6, this Agreement
shall immediately and automatically without further action by any person
become solely a severance agreement and the payments and benefits to Beck
provided for in this Agreement shall continue and all other terms and
conditions of this Agreement shall remain in full force and effect.

         2.       CONFIDENTIALITY. Beck hereby acknowledges his understanding
that as a result of his prior employment by CSLC and the consultancy provided
for in this Agreement, he has had and may have access to, and possession of,
valuable and important confidential or proprietary data, documents and
information concerning CSLC, its operations and its future plans. Beck hereby
agrees that he will not, either during the term of this Agreement, or at any
time after the term of this Agreement with CSLC, divulge or communicate to
any person or entity, or use to the detriment of CSLC or for the benefit of
any other person or entity, or make or remove any copies of, such
confidential information or proprietary data or information, whether or not
marked or otherwise identified as confidential or secret. Upon any
termination of this Agreement for any reason whatsoever, Beck shall surrender
to CSLC any and all materials, including but not limited to drawings,
manuals, reports, documents, lists, photographs, maps, surveys, plans,
specifications, accountings and any and all other materials relating to CSLC
or any of its business, including all copies thereof, that Beck has in his
possession, whether or not such material was created or compiled by Beck, but
excluding, however, personal memorabilia belonging to Beck and notes taken by
him as a member of the Board of Directors ("Excluded Items"). With the
exception of the Excluded Items, Beck acknowledges that all such material is
solely the property of CSLC, and that Beck has no right, title or interest in
or to such materials. Notwithstanding anything to the contrary set forth in
this Section 2, the provisions of this Section 2 shall not apply to
information which: (i) is or becomes generally available to the public other
than as a result of disclosure by Beck, or (ii) is already known to Beck as
of the date of this Agreement from sources other than CSLC, or (iii) is
required to be disclosed by law or by regulatory or judicial process.

         3.       NON-COMPETITION; NON-SOLICITATION. Beck hereby agrees that
during the term of this Agreement and for a period of one (1) year after any
termination for any reason whatsoever of this Agreement, he will not and will
cause his Affiliates not to, directly or indirectly, acquire, develop or
operate senior living facilities anywhere in the United States. CSLC hereby
acknowledges and agrees that (i) Beck's or Beck's Affiliates' ownership of a
class of securities listed on a stock exchange or traded on the
over-the-counter market that represents five percent (5%) or less of the
number of shares of such class of securities then issued and outstanding, and
(ii) Beck's services to Capital Senior Living Communities, LP and direct or
indirect interests therein shall not constitute a violation of this Section
3. During the term of this Agreement and following the termination for any
reason of this Agreement, Beck shall not for himself or any third party,
directly or indirectly employ, solicit for employment, or recommend for
employment any person employed by CSLC or its affiliated companies during the
period of such person's employment and for a period of two (2) years
thereafter without CSLC's consent.

         The parties hereto have carefully considered the necessity for
protection of the goodwill and business of CSLC and the scope of such
protection. Beck acknowledges that the restrictions, prohibitions and other
provisions of this Section 3 are reasonable, fair and equitable in scope,
terms

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and duration, are necessary and essential to protect the legitimate business
interests and goodwill of CSLC, are a material inducement to CSLC to enter
into the transactions contemplated by this Agreement and that adequate
consideration has been and will be received under this Agreement by Beck for
such restrictions, prohibitions and other provisions.

         4.       WORK PRODUCT. Beck acknowledges that all innovations,
improvements, developments, methods, designs, analyses, reports and all
similar or related information which relates to CSLC's or any of its
subsidiaries' or affiliates' actual or anticipated business, or existing or
future products or services and which were conceived, developed or made by
Beck while employed by CSLC or during the term of this Agreement ("Work
Product") belong to CSLC or such subsidiary or affiliate. Beck will perform
all actions requested by the Board of Directors of CSLC to establish and to
confirm such ownership (including, without limitation, assignments, consents,
powers of attorney and other instruments).

         5.       COMPENSATION. CSLC shall pay to Beck consulting
compensation of $100,000 per year during the term of this Agreement, paid in
approximately equal installments no less frequently than twice a month. CSLC
shall not withhold or deduct from such compensation any amounts, Beck being
an independent contractor under this Agreement. CSLC shall also reimburse
Beck's reasonable and necessary business expenses incurred in providing
services to CSLC under this Agreement upon his presentation to CSLC of
itemized bills, vouchers or accountings.

         6.       OTHER BENEFITS. During the term of this Agreement and for
one year thereafter, CSLC, at CSLC's option, either shall continue to provide
health benefits made generally available by CSLC to its senior executives to
Beck and his dependents or shall reimburse Beck for the cost of obtaining
substantially equivalent benefits. During the term of this Agreement, CSLC
shall provide for Beck office facilities and furnishings identified on
Schedule A attached to this Agreement or substantially equivalent office
facilities. During the term of this Agreement, CSLC shall employ Rosemary
Papa for three days a week and shall assign Ms. Papa, as her sole and
exclusive duty, to provide administrative support to Beck; provided that
during the six months commencing with the execution and delivery of this
Agreement, Ms Papa will also be required to assist CSLC's management with
respect to insurance matters for CSLC and its affiliates. During such
assignment, Ms. Papa shall continue to be employed by CSLC with a benefits
package no less favorable than the one she now has, her compensation shall be
not less than 60% of the compensation she now receives, and she shall be
entitled to receive raises and additional benefits, including grants of stock
options, no less favorable than 60% of the higher of those provided to the
secretaries or administrative or executive assistants of the Chief Executive
Officer and the Chief Operating Officer of CSLC.

         7.       TERM OF AGREEMENT. Subject to the survival provisions of
Section 14 of this Agreement, the term of this Agreement shall be for a three
(3) year period commencing on the date of this Agreement. Beck may terminate
this Agreement at any time by written notice to CSLC, but any termination by
Beck shall not affect those parts of this Agreement the survival of which is
provided for in Section 14 of this Agreement. CSLC may terminate this
Agreement at any time by written notice to Beck, but any termination by CSLC
shall terminate only the rights of CSLC to consulting services under Section
1 of this Agreement and the obligations of Beck to provide such

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consulting services and shall not otherwise affect those parts of this
Agreement the survival of which is provided for in Section 14 of this
Agreement.

         8.       STOCK OPTIONS. All options for CSLC common stock granted by
CSLC to Beck and not exercised prior to the date of this Agreement, whether
or not presently vested and notwithstanding any other term thereof, shall
become fully vested upon the execution of this Agreement and shall be
exercisable at any time during the term of this Agreement and for one (1)
year after the expiration of the three-year term of this Agreement
(notwithstanding an earlier termination of this Agreement, if any).

         9.       REGISTRATION RIGHTS. Beck shall have the following
registration rights.

                  (a)      For purposes of this Section 9, the term "Registrable
         Securities shall mean any shares of CSLC common stock ("Common Stock")
         beneficially owned by Beck (directly or indirectly) plus all shares of
         Common Stock that Beck may acquire pursuant to the exercise of stock
         options.

                  (b)      If CSLC at any time proposes to register any of its
         securities under the Securities Act for sale to the public, whether for
         its own account or for the account of other security holders or both
         (except with respect to registration statements on Forms S-4 or S-8 or
         another form not available for registering the Registrable Securities
         for sale to the public), each such time it will give written notice to
         Beck of its intention so to do. Upon the written request of Beck,
         received by the Company within 30 days after the giving of any such
         notice by CSLC, CSLC will cause the Registrable Securities as to which
         registration shall have been so requested to be included in the
         securities to be covered by the registration statement proposed to be
         filed by CSLC, all to the extent requisite to permit the sale or other
         disposition by Beck (in accordance with its written request) of such
         Registrable Securities so registered; provided, however, that if the
         managing underwriter of CSLC's offering delivers in good faith a
         written opinion to Beck that either because of (i) the kind of
         securities which Beck or CSLC intends to include in the offering or
         (ii) the size of the offering which Beck or CSLC intend to make, the
         success of the offering or the market for CSLC's Common Stock would be
         materially and adversely affected by the inclusion of the Registrable
         Securities requested to be included (A) in the event that the size of
         the offering is the basis for the managing underwriter's opinion, the
         amount of the securities to be offered for the account of Beck and each
         other person registering securities of CSLC pursuant to similar
         incidental registration rights shall be reduced pro rata to the extent
         necessary to reduce the total amount of securities to be included in
         such offering to the amount reasonably recommended by such managing
         underwriter; and (B) in the event that the combination of securities to
         be offered is the basis of such managing underwriter's opinion (1) the
         Registrable Securities and other securities to be included in such
         offering shall be reduced as described in clause (A) above or, (2) if
         the actions described in Clause (A) would, in the reasonable judgment
         of the managing underwriter, be insufficient to substantially eliminate
         the material and adverse effect that inclusion of the Registrable
         Securities requested to be included would have on such offering, such
         Registrable Securities will be excluded from such offering.
         Notwithstanding the foregoing provisions, CSLC may withdraw any

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         registration statement referred to in this Section 9(b) without thereby
         incurring any liability to Beck.

                  (c)      If and whenever CSLC is required by Section 9(b) to
         effect a piggy back registration, CSLC shall as expeditiously as
         possible:

                           (i)      prepare and file with the Securities and
                  Exchange Commission ("Commission") a registration statement
                  (which, in the case of an underwritten public offering shall
                  be on Form S-1, Form S-2, Form S-3, any successor forms
                  thereto, or other form of general applicability satisfactory
                  to the managing underwriter selected as therein provided) with
                  respect to such securities and use its best efforts to cause
                  such registration statement to become and remain effective for
                  the period of the distribution contemplated thereby (as
                  determined hereinafter); provided, however, that CSLC may
                  postpone the filing, effectiveness, supplementing or amending
                  of the registration statement for up to 90 days if, in the
                  good faith opinion of CSLC's Board of Directors, the
                  registration or sale of Registrable Securities would adversely
                  affect a material financing, acquisition, disposition of
                  assets or stock, merger or other comparable transaction or
                  would require CSLC to make public disclosure of information
                  the public disclosure of which would have a material adverse
                  effect upon CSLC. During any time that CSLC defers amending or
                  supplementing the registration statement, the holders of
                  Registrable Securities shall discontinue disposing of
                  Registrable Securities;

                           (ii)     subject to the proviso in subsection (i),
                  prepare and file with the Commission such amendments and
                  supplements to such registration statement and the prospectus
                  used in connection therewith as may be necessary to keep such
                  registration statement effective for the period of
                  distribution and comply with the provisions of the Securities
                  Act with respect to the disposition of all Registrable
                  Securities covered by such registration statement in
                  accordance with the intended method of disposition set forth
                  in such registration statement for such period;

                           (iii)    furnish to Beck and to each underwriter such
                  number of copies of the registration statement and the
                  prospectus included therein (including each preliminary
                  prospectus) as such persons reasonably may request in order to
                  facilitate the public sale or other disposition of the
                  Registrable Securities covered by such registration statement;

                           (iv)     use its best efforts to register or qualify
                  the Registrable Securities covered by such registration
                  statement under the securities or "blue sky" laws of such
                  jurisdictions as Beck or, in the case of an underwritten
                  public offering, the managing underwriter reasonably shall
                  request, PROVIDED HOWEVER, that CSLC shall not for any such
                  purpose be required to qualify generally to transact business
                  as a foreign corporation in any jurisdiction where it is not
                  so qualified or to consent to general service of process in
                  any such jurisdiction;

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                           (v)      use its best efforts to list or qualify for
                  quotation the Registrable Securities covered by such
                  registration statement with any securities exchange or
                  inter-dealer quotation system on which the Common Stock is
                  then listed or quoted;

                           (vi)     notify Beck at any time when a prospectus
                  relating to Registrable Securities is required to be delivered
                  under the Securities Act or the happening of any event as a
                  result of which the prospectus included in such registration
                  statement contains an untrue statement of a material fact or
                  omits any fact necessary to make the statements therein not
                  misleading, and, at the request of Beck, CSLC will prepare a
                  supplement or amendment to such prospectus so that, as
                  thereafter delivered to the purchasers of such Registrable
                  Securities, such prospectus will not contain an untrue
                  statement of a material fact or omit to state any fact
                  necessary to make the statements therein not misleading,
                  provided that the 180-day period described below will be
                  tolled from the time a prospectus contains such a statement or
                  omission until a prospectus correcting such statement or
                  omission has been delivered to Beck and may be delivered to
                  the purchasers of such Registrable Securities in compliance
                  with the Securities Act;

                           (vii)    notify Beck immediately, and confirm the
                  notice in writing, (1) when the registration statement becomes
                  effective, (2) of the issuance by the Commission of any stop
                  order or of the initiation, or the threatening, of any
                  proceedings for that purpose, (3) of the receipt by CSLC of
                  any notification with respect to the suspension of
                  qualification of the Registrable Securities for sale in any
                  jurisdiction or of the initiation, or the threatening, of any
                  proceedings for that purpose, and (4) of the receipt of any
                  comments, or requests for additional information, from the
                  Commission or any state regulatory authority. If the
                  Commission or any state regulatory authority shall enter such
                  a stop order or order suspending qualification at any time,
                  CSLC will promptly use its best reasonable efforts to obtain
                  the lifting of such order; and

                           (viii)   otherwise use its best efforts to comply
                  with all applicable rules and regulations of the Commission,
                  and make available to its security holders as soon as
                  reasonably practicable, but not later than 15 months after the
                  effective date of the registration statement, a statement
                  covering a period of at least 12 months beginning after the
                  effective date of the registration statement, which earnings
                  statement shall satisfy the provisions of Section 11(a) of the
                  Securities Act.

         For purposes hereof, the period of distribution of Registrable
Securities in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Registrable Securities in any
other registration shall be deemed to extend until the earlier of the sale of
all Registrable Securities covered thereby or 180 days after the effective date
thereof.

         In connection with each registration hereunder, Beck will furnish to
CSLC in writing such information with respect to Beck as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.

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         In connection with each registration pursuant to this Section 9
covering an underwritten public offering, CSLC and Beck agree to use their best
efforts to select a managing underwriter (and any co-managers) and to enter into
a written agreement with the managing underwriter in such form and containing
such provisions as are customary in the securities business for such an
arrangement between such underwriter and companies of CSLC's size and investment
stature.

                  (d)      All expenses incurred by CSLC in complying with this
         Section 9, including, without limitation, all registration and filing
         fees, printing expenses, fees and disbursements of counsel and
         independent public accountants for CSLC, fees and expenses (including
         counsel fees) incurred in connection with complying with state
         securities or "blue sky" laws, fees of the National Association of
         Securities Dealers, Inc., transfer taxes, fees of transfer agents and
         registrars, costs of insurance, and fees and disbursements of one
         counsel for Beck but excluding any Selling Expenses, are called
         "Registration Expenses." All underwriting discounts and selling
         commissions applicable to the sale of Registrable Securities are called
         "Selling Expenses."

                           (i)      CSLC shall pay all Registration Expenses
                  attributable to the shares of Registrable Securities included
                  in the registration in connection with each registration
                  statement under this Section 9.

                           (ii)     All Selling Expenses in connection with each
                  such registration statement applicable to Registrable
                  Securities sold by Beck shall be borne by Beck.

                  (e)      Subject to applicable law, CSLC will indemnify each
         underwriter, Beck and each person controlling any of them, against all
         claims, losses, damages and liabilities, including legal and other
         expenses reasonably incurred, arising out of any untrue statement of a
         material fact contained in the registration statement, or any omission
         to state a material fact required to be stated in the registration
         statement or necessary to make the statements not misleading, or
         arising out of any violation by CSLC of the Securities Act, any state
         securities or "blue-sky" laws or any applicable rule or regulation.
         This indemnification will not apply to any claims, losses, damages or
         liabilities to the extent that they may have been caused by an untrue
         statement or omission based upon information furnished in writing to
         CSLC by such underwriter, Beck or controlling person, respectively,
         expressly for use in the registration statement. With respect to such
         untrue statement or omission in the information furnished in writing to
         CSLC by Beck, he will indemnify the underwriters, CSLC, its directors
         and officers, and each person controlling any of them against any
         losses, claims, damages, expenses or liabilities to which any of them
         may become subject as a result of such untrue statement or omission.

                  (f)      The registration rights of Beck under this Agreement
         may be transferred to any trust, family partnership or other family
         entity formed by Beck to hold shares of Common Stock and to any member
         of his family.

                  (g)      In the event of any merger, consolidation or share
         exchange pursuant to which CSLC is not the surviving or resulting
         corporation, CSLC's obligations under this Section 9 shall be assumed
         by such surviving or resulting corporation.

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                  (h)      The registration obligations of CSLC under this
         Section 9 shall terminate on the date when CSLC delivers to Beck a
         written opinion of a law firm with recognized securities law expertise,
         reasonably acceptable to Beck, addressed to Beck that he is permitted
         to sell all Registrable Securities to the public without registration
         under applicable law, other than pursuant to Rule 144 or any similar
         rule.

         10.      INDEMNIFICATION BY CSLC. CSLC shall and hereby does indemnify
Beck to the extent and in accordance with the terms of ATTACHMENT I to this
Agreement.

         11.      TERMINATION OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT. Beck
and CSLC hereby agree that the Amended and Restated Employment Agreement, dated
October 8, 1997, between Beck and CSLC shall be, subject to Section 12 below,
upon execution and delivery of this Agreement, cancelled and of no further force
and effect. Beck hereby resigns each and every directorship and officer position
held on or prior to the date hereof with CSLC and any subsidiary or affiliate of
CSLC.

         12.      NO EFFECT ON EMPLOYMENT COMPENSATION. Nothing in this
Agreement shall be construed to affect in any way employment compensation
amounts paid or payable to Beck by CSLC, whether or not determined on or prior
to the date of this Agreement, with respect to his employment by CSLC prior to
the date hereof. The parties hereto agree that no bonus payments are payable to
Beck with respect to his employment by CSLC prior to the date hereof.

         13.      MUTUAL RELEASE. CSLC and Beck have, simultaneously with the
execution and delivery of this Agreement, executed and delivered the mutual
release attached hereto as Attachment II. CSLC represents and warrants to Beck
that the release, attached as Attachment II hereto, this Agreement and the
Indemnity, attached as Attachment I hereto, have each been approved in good
faith by the Board of Directors of CSLC at a meeting, duly called and held in
accordance with CSLC's Restated Certificate of Incorporation, its Bylaws and
Delaware General Corporation Law, under the procedures provided in Delaware
General Corporation Law Section 144(a)(1) with respect to transactions between a
corporation and one or more of its directors or officers having a direct or
indirect financial interest in the transaction.

         14.      SURVIVAL OF CERTAIN PROVISIONS. Sections 1 (last two sentences
only), 2, 3 (to the extent provided therein), 6, 8, 9 and 10 (including
ATTACHMENT I to this Agreement), 13, this Section 14, and Sections 16 through 22
of this Agreement shall survive the expiration or termination of this Agreement.

         15.      CERTAIN TERMS DEFINED. For purposes of this Agreement, the
following defined terms have the meaning set forth below:

                  (a)      "Affiliate" with regard to Beck means any person
         controlled by or under common control with him. "Affiliate" with regard
         to CSLC means any person controlled by or under common control with
         CSLC. For purposes of these definitions, "Control" when used with
         respect to any person means the power to direct the management and
         policies of such person, whether through the ownership of voting
         securities, by contract or otherwise.

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                  (b)      "Fundamental Change" means any of the following: (i)
         a merger, consolidation, statutory share exchange or sale, lease,
         exchange or other transfer (in one transaction or a series of related
         transactions) of all or substantially all of the assets of CSLC that
         requires the consent or vote of the holders of the Common Stock, other
         than a consolidation, merger or share exchange of CSLC in which the
         holders of the Common Stock immediately prior to such transaction have
         the same proportionate ownership or control of Common Stock of the
         surviving corporation immediately after such transaction; (ii) the
         stockholders of CSLC approve any plan or proposal for the liquidation
         or dissolution of CSLC; (iii) the cessation of control (by virtue of
         their not constituting a majority of directors) of the Board of
         Directors of CSLC by the individuals (the "Continuing Directors") who
         (x) at the date of this Agreement were directors or (y) become
         directors after the date of this Agreement and whose election or
         nomination for election by CSLC's stockholders was approved by a vote
         of at least two-thirds of the directors then in office who were
         directors at the date of this Agreement or whose election or nomination
         for election was previously so approved; (iv) the acquisition of
         beneficial ownership (within the meaning of Rule 13d-3 under the
         Securities Exchange Act of 1934) of an aggregate of 20% or more of the
         voting power of CSLC's outstanding voting securities by any person or
         group (as such term is used in Rule 13d-5 under the Securities Exchange
         Act of 1934) who beneficially owned less than 15% of the voting power
         of CSLC's outstanding voting securities on the date of this Agreement,
         or the acquisition of beneficial ownership of an additional 5% of the
         voting power of CSLC's outstanding voting securities by any person or
         group who beneficially owned at least 15% of the voting power of CSLC's
         outstanding voting securities on the date of this Agreement; PROVIDED,
         HOWEVER, that notwithstanding the foregoing, an acquisition shall not
         constitute a Fundamental Change hereunder if the acquiror is (x) a
         trustee or other fiduciary holding securities under any employee
         benefit plan of CSLC and acting in such capacity, (y) a wholly-owned
         subsidiary of CSLC or a corporation owned, directly or indirectly, by
         the stockholders of CSLC in the same proportions as their ownership of
         voting securities of CSLC or (z) any other person whose acquisition of
         shares of voting securities is approved in advance by a majority of the
         Continuing Directors; or (v) in a Title 11 bankruptcy proceeding, the
         appointment of a trustee or the conversion of a case involving CSLC to
         a case under Chapter 7.

         16.      EQUITABLE REMEDY. In the event of a breach by Beck of the
provisions of Sections 2 or 3 of this Agreement, CSLC shall, in addition to any
other available remedies, be entitled to an injunction restraining Beck from
violating the terms of the applicable Section and Beck and CSLC agree that said
injunction is appropriate and proper relief for such violation.

         17.      BECK'S LEGAL FEES AND EXPENSES. It is the intent of CSLC that
Beck not be required to incur legal fees and the related expenses associated
with the interpretation, enforcement or defense of his rights under this
Agreement by litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to Beck
hereunder. Accordingly, if it should appear to Beck that CSLC has failed to
comply with any of its obligations under this Agreement or in the event that
CSLC or any other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, Beck the benefits provided or
intended to be provided to Beck hereunder, CSLC irrevocably authorizes Beck from
time to time to retain counsel

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of Beck's choice, at the reasonable expense of CSLC as hereafter provided, to
advise and represent Beck in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against CSLC
or any director, officer, stockholder or other person affiliated with CSLC,
in any jurisdiction. CSLC will advance and be solely financially responsible
for any and all reasonable attorneys' and related fees and reasonable
expenses incurred by Beck in connection with any of the foregoing; provided
that, if Beck is not successful on the merits or otherwise, Beck shall
reimburse CSLC for any advances and payments for his attorneys and related
fees and expenses under this Section 17.

         18.      NOTICES. All notices and other communications provided to
either party hereto under this Agreement shall be in writing and delivered by
hand delivery, overnight courier service or certified mail, return receipt
requested, to the party being notified at such party's address set forth
adjacent to such party's signature on this Agreement, or at such other address
as may be designated by a party in a notice to the other party given in
accordance with this Agreement. Notices given by hand delivery or overnight
courier service shall be deemed received on the date of delivery shown on the
courier's delivery receipt or log. Notices given by certified mail shall be
deemed received three (3) days after deposit in the U.S. Mail.

         19.      CONSTRUCTION. In construing this Agreement, if any portion of
this Agreement shall be found to be invalid or unenforceable, the remaining
terms and provisions of this Agreement shall be given effect to the maximum
extent possible without considering the void, invalid or unenforceable
provision. In construing this Agreement, no meaning or effect shall be given to
the captions of the paragraphs in this Agreement, which are inserted for
convenience of reference only.

         20.      CHOICE OF LAW. This Agreement shall be governed and construed
in accordance with the internal laws of the State of Texas without resort to
choice of law principles.

         21.      INTEGRATION; AMENDMENTS. This is an integrated Agreement. This
Agreement (including Attachment I hereto) constitutes and is intended as a final
expression and a complete and exclusive statement of the understanding and
agreement of the parties hereto with respect to the subject matter of this
Agreement. All negotiations, discussions and writings between the parties hereto
relating to the subject matter of this Agreement are merged into this Agreement,
and there are no rights conferred, nor promises, agreements, conditions,
undertakings, warranties or representations, oral or written, expressed or
implied, between the undersigned parties as to such matters other than as
specifically set forth herein. No amendment or modification of or addendum to,
this Agreement shall be valid unless the same shall be in writing and signed by
the parties hereto. No waiver of any of the provisions of this Agreement shall
be valid unless in writing and signed by the party against whom it is sought to
be enforced.

         22.      SUCCESSORS AND BINDING AGREEMENT:

                  (a)      CSLC will require any successor (whether direct or
         indirect, by purchase, merger, consolidation, reorganization or
         otherwise) to all or substantially all of the business or assets of
         CSLC, by agreement in form and substance reasonably satisfactory to
         Beck, expressly to assume and agree to perform this Agreement in the
         same manner and to the same extent CSLC would be required to perform if
         no such succession had taken place. This

                                      10
<PAGE>

         Agreement will be binding upon and inure to the benefit of CSLC and
         any successor to CSLC, including without limitation any persons
         acquiring directly or indirectly all or substantially all of the
         business or assets of CSLC whether by purchase, merger, consolidation,
         reorganization or otherwise, but will not otherwise be assignable,
         transferable or delegable by CSLC.

                  (b)      This Agreement will inure to the benefit of and be
         enforceable by Beck's personal or legal representatives, executors,
         administrators, successors, heirs, distributees, legatees and permitted
         assignees.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above to be effective as of the date specified in the preamble of
this Agreement.

                                       CAPITAL SENIOR LIVING CORPORATION
                                       a Delaware corporation

Address:
14160 Dallas Parkway, #300
Dallas, TX  75240                      By:     /s/ David R. Brickman
                                              ---------------------------------
                                       Its:    Vice President
                                              ---------------------------------

                                       JEFFREY L. BECK

Address:
6211 Raintree Court
Dallas, TX  75240                      /s/ Jeffrey L. Beck
                                       ----------------------------------------
                                       Jeffrey L. Beck

                                      11
<PAGE>

                                  ATTACHMENT I

                                    INDEMNITY

         1.       CAPITAL SENIOR LIVING CORPORATION (the "Corporation") will
indemnify JEFFREY L. BECK ("Indemnitee") in accordance with the following terms.

         2.       DEFINITIONS. As used in this Indemnity:

                  (a)      The term "Proceeding" shall include any threatened,
pending or completed investigation, claim, action, suit or proceeding, whether
of a civil, criminal, administrative or investigative nature (including without
limitation any action, suit or proceeding by or in the right of the Corporation
or Other Entity to procure a judgment in its favor), in which Indemnitee may be
or may have been or may be threatened to be made or to become involved in any
manner (including without limitation as a party or a witness) by reason of the
fact that Indemnitee has advised the Corporation (as an officer, director or
consultant of the Corporation) with respect to any matter, is alleged to have
advised Other Entities with respect to any matter in which the Corporation was
involved or related or by reason of anything actually or allegedly done or not
done by Indemnitee in any of such capacities, and whether such advice, action or
inaction occurred in the past or occurs after the date hereof. It is expressly
agreed that "Proceeding" shall include any claim, action, suit or proceeding
arising out of or related to the Corporation's business relationships with and
proposed mergers with ILM Senior Living, Inc. and ILM II Senior Living, Inc., in
connection with which the Corporation's Board of Directors in considering this
Agreement has determined Indemnitee's actions and advice were in good faith and
in the best interests of the Corporation. It is also expressly agreed that
"Proceeding" shall include any claim, action, suit or proceeding arising out of
allegations that Indemnitee's affiliates have engaged in transactions with the
Corporation in which Indemnitee had a financial or conflicting interest.

                  (b)      The term "Expenses" includes, without limitation,
reasonable attorneys' fees and disbursements and all other reasonable costs,
expenses and obligations actually and reasonably incurred by Indemnitee in
connection with (i) investigating, defending, being a witness in or otherwise
participating in, or preparing to defend, be a witness in or participate in, any
Proceeding, or (ii) establishing a right to indemnification under Paragraph 6 of
this Indemnity, but shall not include the amount of any judgments, fines or
penalties entered or assessed against Indemnitee or any amounts paid or payable
in settlement by Indemnitee.

                  (c)      The term "Other Entity" includes, without limitation,
any subsidiary or affiliate of the Corporation and any entity with which
Indemnitee has served or is serving as an officer or director or otherwise in
the general interest of the Corporation's business. It is expressly agreed that
Indemnitee's (i) service with Capital Realty Group Senior Housing, Inc., a Texas
corporation, and with its subsidiaries and partnerships in which it is a general
partner, (ii) service with Capital Senior Living Communities, LP, and its
general partner, Retirement Living Communities, L.P. and (iii) service with
Tri-Point Communities, L.P. were all undertaken by the Indemnitee for the
benefit of the Corporation, and all such entities and their affiliates are
hereby agreed to be Other Entities within the meaning of this definition.

                                       1
<PAGE>

         3.       SCOPE OF INDEMNIFICATION. Subject to Paragraph 7 of this
Indemnity, the Corporation shall indemnify Indemnitee in accordance with the
provisions of this Paragraph 3 if Indemnitee is or was or is threatened to be
made or to become involved in any manner, including without limitation as a
party or witness, in any Proceeding (including a Proceeding by or in the right
of the Corporation or Other Entity to procure a judgment in its favor) against
any and all Expenses and any and all judgments, fines and penalties entered or
assessed against Indemnitee, and any and all amounts reasonably paid or payable
in settlement by Indemnitee, in connection with such Proceeding, but only if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the Corporation's best interests and without gross
negligence. THIS INDEMNITY EXPRESSLY INDEMNIFIES INDEMNITEE AGAINST HIS OWN
NEGLIGENCE. The termination of any Proceeding by judgment, order of court,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption for purposes of any provision of this
Indemnity that Indemnitee did not act in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the Corporation's best interests,
or with gross negligence.

         4.       INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY; NO ADVERSE
PRESUMPTION. Notwithstanding any other provisions of this Indemnity, to the
extent that Indemnitee has been successful on the merits or otherwise, in
defense of any Proceeding or in defense of any claim, issue or matter therein,
including the dismissal of an action without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith.

         5.       ADVANCES OF EXPENSES. The Expenses incurred by Indemnitee
pursuant to Paragraph 3 in any Proceeding shall be paid by the Corporation in
advance, promptly upon the written request of the Indemnitee, if Indemnitee
shall undertake to repay such amount to the extent that it is ultimately
determined that Indemnitee is not entitled to indemnification. No security for
the performance of any such undertaking shall be required and any such
undertaking shall be accepted by the Corporation without regard to the financial
capacity of Indemnitee to perform his obligations thereunder.

         6.       RIGHT OF INDEMNITEE TO INDEMNIFICATION UPON APPLICATION:
PROCEDURE UPON APPLICATION. Without limiting the obligation of the Corporation
to promptly make payments in respect of Expenses in accordance with Paragraph 5,
any indemnification under Paragraph 3 shall be made no later than 45 days after
receipt by the Corporation of the written request of Indemnitee, unless a
determination is made within said 45-day period by (1) the Board of Directors of
the Corporation by a majority vote of a quorum consisting of Directors who are
not and were not parties to the relevant Proceeding, or (2) independent legal
counsel in a written opinion (which counsel shall be appointed if such a quorum
is not obtainable) that the Indemnitee has not met the relevant standards for
indemnification set forth in Paragraph 3.

         The right to indemnification or advances as provided by this Indemnity
shall be enforceable by Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification is not appropriate shall be on the
Corporation. Indemnitee's Expenses reasonably incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.

                                       2
<PAGE>

         7.       INDEMNIFICATION HEREUNDER NOT EXCLUSIVE; CONSTRUCTION. The
indemnification provided by this Indemnity shall not be deemed exclusive of any
other rights to which Indemnitee may be entitled under the General Corporation
Law of the State of Delaware, the Amended and Restated Certificate of
Incorporation and/or Bylaws of the Corporation, any other indemnity, any vote of
stockholders or disinterested Directors, or otherwise, either as to action in
his official capacity on, prior or after the date hereof or as to action in any
other capacity. The corporation hereby agrees and acknowledges that it will
continue to honor its indemnification obligations to Indemnitee set forth in its
Amended and Restated Certificate of Incorporation and/or Bylaws with respect to
any existing or future lawsuit against the Corporation and any other actions
pursuant to which Indemnitee would be entitled to indemnification.

         8.       PARTIAL INDEMNIFICATION. In the event that Indemnitee is
entitled under any provision of this Indemnity to indemnification by the
Corporation for a portion but less than the entire amount of any Expenses,
judgments, fines, penalties and/or amounts paid or payable in settlement, the
Corporation shall fully indemnify Indemnitee in accordance with the applicable
provisions of this Indemnity for such portion of such Expenses, judgments,
fines, penalties and/or amounts paid in settlement.

         9.       SUBROGATION. In the event that the Corporation provides any
indemnification or makes any payment to Indemnitee in respect of any matter in
respect of which indemnification or the advancement of expenses is provided for
herein, the Corporation shall be subrogated to the extent of such
indemnification or other payment to all of the related rights of recovery of
Indemnitee against other persons or entities. Indemnitee shall execute all
papers reasonably required and shall do everything that may be reasonably
necessary to secure such rights and enable the Corporation effectively to bring
suit to enforce such rights (with all of Indemnitee's reasonable costs and
expenses, including attorneys' fees and disbursements, to be reimbursed by or,
at the option of Indemnitee, advanced by the Corporation).

         10.      NO DUPLICATION OF PAYMENTS. The Corporation shall not be
obligated under this Indemnity to provide any indemnification or make any
payment to which Indemnitee is otherwise entitled hereunder to the extent, but
only to the extent, that such indemnification or payment hereunder would be
duplicative of any amount actually received by Indemnitee pursuant to any
insurance policy, the General Corporation Law of the State of Delaware, the
Amended and Restated Certificate of Incorporation and/or the Bylaws of the
Corporation or otherwise. With respect to the Corporation's indemnity
obligations concerning Other Entities, the Corporation shall have no obligation
hereunder until and unless Beck has first sought all available insurance
coverage benefitting such Other Entities and indemnity available from such Other
Entities and such insurance coverage and indemnity has been exhausted or has
been denied.

         11.      SAVING CLAUSE. If any provision of this Indemnity or the
application of any provision hereof to any circumstance is held illegal, invalid
or otherwise unenforceable, the remainder of this Indemnity and the application
of such provision to any other circumstance shall not be affected, and the
provision so held to be illegal, invalid or otherwise unenforceable shall be
reformed to the extent (but only to the extent) necessary to make it legal,
valid and enforceable.

                                       3
<PAGE>

         12.      NOTICE. Indemnitee shall give to the Corporation notice in
writing as soon as practicable of any claim made against him or her for which
indemnification will or could be sought under this Indemnity, provided, however,
that any failure to give such notice to the Corporation will relieve the
Corporation from its obligations hereunder only if, and to the extent that, such
failure results in the forfeiture of substantial rights and defenses. Notice to
the Corporation shall be directed to the Corporation (to the attention of the
Chief Executive Officer, with a copy to the General Counsel) at its principal
executive office or such other address as the Corporation shall designate in
writing to Indemnitee. Notice shall be deemed received when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally
confirmed), or three calendar days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or one
business day after having been sent for next-day delivery by a nationally
recognized overnight courier. In addition, Indemnitee shall give the Corporation
such information and cooperation as it may reasonably require and shall be
within Indemnitee's power. The Corporation shall give prompt notice to
Indemnitee of any potential claims against Indemnitee of which the Corporation
becomes aware.

         13.      APPLICABLE LAW. This Indemnity shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.

         14.      SUCCESSORS. This Indemnity shall be binding upon the
Corporation and its successors, including without limitation any person
acquiring directly or indirectly all or substantially all of the business or
assets of the Corporation whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
"Corporation" for purposes of this Indemnity), but will not otherwise be
assignable, transferable or delegable by the Corporation. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Corporation, to assume and agree in writing to perform
this Indemnity, expressly for the benefit of Indemnitee, in the same manner and
to the same extent the Corporation would be required to perform if no such
succession had taken place.

Dated:  May 20, 1999               CAPITAL SENIOR LIVING CORPORATION

                                       By:      /s/ David R. Brickman
                                                -------------------------------
                                       Title:            Vice President
                                                -------------------------------

                                       4<PAGE>

                                                                   EXHIBIT 10.78

--------------------------------------------------------------------------------

                                      TITLE

                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP

--------------------------------------------------------------------------------

                               NAME OF PARTNERSHIP

                           TRIAD SENIOR LIVING I, L.P.

--------------------------------------------------------------------------------

                                     PURPOSE

            ACQUIRE, DEVELOP, OWN AND OPERATE SEVEN SENIOR LIVING AND
                           ASSISTED LIVING FACILITIES

--------------------------------------------------------------------------------

                                    PARTNERS

        General Partner:                  TRIAD SENIOR LIVING, INC.

        Limited Partners:                 CAPITAL SENIOR LIVING PROPERTIES, INC.
                                          LB TRIAD INC.

--------------------------------------------------------------------------------

                                      DATE

                             AS OF DECEMBER 30, 1999

--------------------------------------------------------------------------------

<PAGE>

                                       TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
<S>                                                                                         <C>
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

<PAGE>

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

<PAGE>

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
</TABLE>

<PAGE>

                           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 BLAKE N. FAIL ("Fail" or "Withdrawing Limited Partner") as the Withdrawing
Limited Partner.

         WHEREAS, Capital Retirement Group, Inc., a Texas corporation ("CRG"),
Jeffrey L. Beck ("Beck") and JAS Trust ("JAS") 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, Beck and JAS transferred all their partnership interests in
the Partnership to Fail, and Beck and JAS 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:

<PAGE>

                                    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.

                                    -2-

<PAGE>

         "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.

                                    -3-

<PAGE>

         "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.

                                    -4-

<PAGE>

         "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.

                                    -5-

<PAGE>

         "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.

                                    -6-

<PAGE>

         "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.

                                    -7-

<PAGE>

         "SERVICER" means Hatfield Philips, Inc., a Georgia corporation having
an address at 285 Peachtree Center Avenue, Marquis Two Tower, Suite 2300,
Atlanta, GA 30303, Attention James Philips.

         "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 4312 Mockingbird Lane,
Dallas, Texas 75205, 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.

                                    -8-
<PAGE>
                                  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

                                       -9-

<PAGE>

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.

                                       -10-

<PAGE>

         (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

                                       -11

<PAGE>

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

                                       -12

<PAGE>

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);

                                       -13-

<PAGE>

                           (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

                                       -14

<PAGE>

                  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 Karen
E. Blakely and David Chan (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

                                       -15-

<PAGE>

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

                                       -16-

<PAGE>

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

                                       -17-

<PAGE>

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.

                                       -18-

<PAGE>

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.

                                    -19-
<PAGE>

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.

                                    -20-
<PAGE>

         (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.

                                    -21-
<PAGE>

         (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

                                    -22-
<PAGE>

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

                                    -23-
<PAGE>

         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.

                                    -24-
<PAGE>

                  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

                                    -25-
<PAGE>

         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.

                                    -26-
<PAGE>

                  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

                                    -27-
<PAGE>

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.

                                    -28-
<PAGE>

                                    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

                                    -29-
<PAGE>

         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

         Blake N. 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

                                    -30-
<PAGE>

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

                                    -31-
<PAGE>

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

                                    -32-
<PAGE>

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

                                    -33-
<PAGE>

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

                                    -34-
<PAGE>

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

                                    -35-
<PAGE>

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.

                                    -36-
<PAGE>

         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.

                                    -37-

<PAGE>

                                  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

                                    -38-

<PAGE>

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.

                                    -39-

<PAGE>

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

                                    -40-

<PAGE>

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.

                                    -41-

<PAGE>

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]

                                    -42-

<PAGE>

                  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/ Blake N. Fail
                                       ----------------------------------------
                                Name:  Blake N. Fail
                                       ----------------------------------------
                                Title: President
                                       ----------------------------------------

                                LIMITED PARTNERS:

                                LB Triad Inc.,
                                a Delaware corporation

                                By:    /s/ Christopher S. McKenna
                                       ----------------------------------------
                                Name:  Christopher S. McKenna
                                       ----------------------------------------
                                Title: Authorized Signatory
                                       ----------------------------------------

                                Capital Senior Living Properties, Inc.
                                a Texas corporation

                                By:    /s/ David R. Brickman
                                       ----------------------------------------
                                Name:  David R. Brickman
                                       ----------------------------------------
                                Title: Vice President
                                       ----------------------------------------

                                WITHDRAWING LIMITED PARTNER:

                                /s/ Blake N. Fail
                                -----------------------------------------------
                                Blake N. 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/ Blake N. Fail
                                -----------------------------------------------
                                Blake N. Fail

<PAGE>

                                    EXHIBIT A

                              PROPERTY DESCRIPTIONS

                                 [SEE ATTACHED]

                                       A-1

<PAGE>

                                    EXHIBIT B

<TABLE>
<CAPTION>

                              CAPITAL CONTRIBUTIONS

                                                                     REGULAR       CONDITIONS STATED
                                                                    PERCENTAGE     IN SECTION 8.2(j)
                                           CAPITAL CONTRIBUTIONS     INTEREST     HAVE BEEN SATISFIED
                                           ---------------------    ----------    -------------------
<S>                                        <C>                      <C>           <C>
GENERAL PARTNER

Triad Senior Living, Inc.                          $1.00                1%                1%
4312 Mockingbird Lane
Dallas, Texas 75205
Attention: Blake N. Fail

LIMITED PARTNERS

LB Triad Inc.                                   $12,000,000             80%               0%
3 World Financial Center
New York, New York 10285
Attention: Karen E. Blakely

Capital Senior Living Properties, Inc.          $3,000,000              19%               99%
14160 Dallas Parkway
Suite 300
Dallas, Texas  75240
Attention:  David R. Brickman, Esq.

</TABLE>

                                                        B-1

<PAGE>

                                    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.

                                     C-1

<PAGE>

         (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.

                                     C-2

<PAGE>

         (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).

                                     C-3

<PAGE>

         (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

<PAGE>

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

<PAGE>

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

<PAGE>

         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

                                     C-7

<PAGE>

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

<PAGE>

         (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

                                    C-9

<PAGE>

         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

                                    C-10

<PAGE>

              (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

                                    C-11

<PAGE>

         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

                                    C-12

<PAGE>

         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.

                                    C-13

<PAGE>

         (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.

                                    C-14

<PAGE>

         (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.

                                    C-15

<PAGE>

         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.

                                    C-16

<PAGE>

                                    EXHIBIT D

                         ADJUSTMENTS IN LOAN AND CAPITAL

                                    D-1

<PAGE>

                                    EXHIBIT E

                          AGREED VALUE OF EACH PROPERTY

                                    E-1

<PAGE>

                                    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

<PAGE>

                  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

<PAGE>

                  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

                                     F-3

<PAGE>

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

                                     F-4

<PAGE>

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.

                                     F-5

<PAGE>

                  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

<PAGE>

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,

                                     F-7

<PAGE>

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

<PAGE>

                                    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.

                                     G-1

<PAGE>

                  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

<PAGE>

                                    EXHIBIT H

                            FORM OF MONTHLY REPORTING

                                     H-1

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