SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 7, 1999
Commission File Number: 0-18924
ILM II SENIOR LIVING, INC.
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(Exact name of registrant as specified in its charter)
Virginia 06-1293758
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(State of organization) (I. R.S. Employer
Identification No.)
8180 Greensboro Drive, Suite 850, McLean, Virginia 22102
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (888) 357-3550
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Exhibit Index Appears on Page 6
Item 5. Other Events
On February 7, 1999, ILM II Senior Living, Inc., a Virginia finite-life
corporation (the "Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Capital Senior Living Corporation, a Delaware
corporation ("CSLC"), Capital Senior Living Acquisition, LLC, a Delaware limited
liability company and wholly owned subsidiary of CSLC ("Merger Sub"), and
Capital Senior Living Trust I, a Delaware business trust and wholly owned
subsidiary of CSLC (the "Trust"). Upon the terms and subject to the conditions
of the Merger Agreement, the Company will be merged (in a fully taxable, foward
merger) with and into Merger Sub, and Merger Sub will be the surviving
corporation in such merger (the "Merger"). Pursuant to the Merger, among other
things, each share of the Company's common stock, $.01 par value ("Company
Common Stock"), outstanding immediately prior to the effective time of the
Merger (the "Effective Time"), other than shares of Company Common Stock owned
by the Company, CSLC, Merger Sub, the Trust (or any other subsidiary of the
Company or CSLC), automatically will be converted into the right to receive
merger consideration having an aggregate value of $14.30353684 (the "Merger
Consideration"). Holders of Company Common Stock will have the right to elect to
receive in respect of each of their shares, cash and/or shares of 8% Cumulative
Convertible Preferred Securities of the Trust having a stated liquidation
preference of $25 per share (the "Convertible Trust Securities"). Each share of
the Convertible Trust Securities elected to be received in the Merger will be
convertible into 1.56862745 shares of common stock, $.01 par value, of CSLC
("CSLC Common Stock"), at a conversion price of $15.9375 (subject to adjustment
under certain circumstances). The sole asset of the Trust will consist of 8%
Convertible Subordinated Debentures due 2009 of CSLC, and certain payments and
distributions in respect of the Convertible Trust Securities will be guaranteed
by CSLC.
On February 5, 1999, the last trading day next preceding the public
announcement of the Merger Agreement, the closing sale price per share of the
CSLC Common Stock as reported on the New York Stock Exchange, Inc. ("NYSE")
Composite Transactions was $12.75. Moreover, on such date 5,181,236 shares of
Company Common Stock were issued and outstanding and 19,717,347 shares of CSLC
Common Stock were issued and outstanding.
In accordance with the shareholder election procedures set forth in the
Merger Agreement, holders of Company Common Stock will have the right to elect
to receive in the Merger in respect of their shares, cash, Convertible Trust
Securities, or any combination thereof; provided that the aggregate cash
consideration to be paid in the Merger will not exceed $48,171,500 (the "Maximum
Aggregate Cash Consideration"), and the aggregate number of Convertible Trust
Securities to be issued in the Merger will not exceed 1,037,540 shares with an
aggregate stated liquidation preference of $25,938,500 (the "Maximum Aggregate
Convertible Securities Consideration"). If total cash elections exceed
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the Maximum Aggregate Cash Consideration or if total Convertible Trust
Securities elections exceed the Maximum Aggregate Convertible Securities
Consideration, such elections will be proportionately adjusted pursuant to the
proration provisions of the Merger Agreement, and holders of Company Common
Stock will receive prorated amounts of cash and Convertible Trust
Securities in respect of their elections. No fractional securities will be
issued in the Merger. Holders of Company Common Stock will have no dissenters'
rights in the Merger.
The Merger is intended to be reported as a fully taxable acquisition by
CSLC of the Company and will be recorded as a purchase by CSLC for accounting
purposes. The Merger Agreement provides that at the Effective Time CSLC's
Board of Directors will be increased in size to include the three current
directors of the Company.
The Merger Agreement includes various covenants of the parties in respect
of the operation of the business of CSLC and the Company and their ability to
enter into and consummate certain non-ordinary course transactions prior to the
Effective Time. Moreover, the Company has agreed that, immediately prior to the
Effective Time, it will cause its direct subsidiary, ILM II Holding, Inc. ("ILM
II Holding"), to exercise its contractual right to terminate the Facilities
Lease Agreement (the "Lease Agreement") dated September 1, 1995, between ILM II
Holding and ILM II Lease Corporation, an affiliate of the Company ("ILM II
LeaseCo"). The Lease Agreement provides, among other things, for the lease by
ILM II LeaseCo of the senior housing facilities owned by ILM II Holding and the
payment of certain rents and fees in respect of such lease. The Lease Agreement
presently expires by its terms on December 31, 2000 (December 31, 1999 in
respect of a certain California property), subject to earlier termination by
ILM II Holding in connection with the sale of the senior housing facilities to
an unaffiliated purchaser.
Upon termination of the Merger Agreement under certain circumstances,
CSLC would be entitled to receive up to $500,000 of transaction expenses, plus
liquidated damages of $2,964,400.
Consummation of the Merger (which presently is expected to occur in October
1999) is subject to certain conditions, including, without limitation, (i)
approval of the Merger Agreement and the Merger by the holders of not less than
66-2/3% of the outstanding Company Common Stock, (ii) approval of the increase
in the size of CSLC's Board of Directors by the holders of 66-2/3% of the
outstanding CSLC Common Stock, (iii) the receipt of all requisite consents and
approvals by public and governmental authorities, (iv) the listing on the NYSE
of the Convertible Trust Securities (and the shares of CSLC Common Stock
issuable upon the conversion thereof), (v) the transfer to the Company of the
senior housing facilities owned by ILM II Holding (together with the mortgages
thereon) and the liquidation of ILM II Holding pursuant to Section 332 of the
Internal Revenue Code of 1986, as amended, (vi) the absence of certain material
conditions and events, and (vii) certain other conditions to closing customary
in transactions such as the Merger.
In connection with the foregoing closing conditions, certain beneficial
owners of a majority of the outstanding CSLC Common Stock have entered into
Voting Agreements, whereby such owners have agreed to vote their shares
(at any
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meeting of the holders of such stock convened to vote in connection with the
Merger) in favor of the matters referred to in clause (ii) of the immediately
preceding paragraph.
Simultaneously with entering into the Merger Agreement, ILM Senior Living,
Inc., a Virginia finite-life corporation and an affiliate of the Company ("ILM
I"), entered into an agreement and plan of merger with CSLC, Merger Sub and the
Trust providing for the merger of ILM I with and into Merger Sub, for aggregate
merger consideration of $95,890,000 (i.e., a merger value of $12.75116022 per
outstanding share of ILM I common stock), payable in cash and convertible trust
securities. Consummation of the ILM I merger is not a condition to consummation
of the Merger. The ILM I merger has been structured substantially similar to the
Merger, including, without limitation, the shareholder election provisions
thereof. If the ILM I merger is consummated but the Merger is not consummated,
the Company has agreed to cause ILM II Holding to transfer its 75% interest in a
certain California senior housing facility to ILM I (or one of its wholly owned
subsidiaries) at the fair market value of such property. ILM I has made the
reciprocal agreement (with respect to its 25% interest in such property) in its
merger agreement with CSLC, Merger Sub and the Trust.
There can be no assurance whether the Merger (or any of the transactions
contemplated thereby) will be consummated or, if consummated, as to the timing
thereof.
The foregoing description is qualified in its entirety by the full text
of the Merger Agreement (including the exhibits and schedules thereto) filed
as Exhibit 2. hereto and incorporated herein by reference.
Item. 7 Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not Applicable
(b) Not Applicable
(c) The following Exhibits are filed as part of this Current Report on
Form 8-K:
2. Agreement and Plan of Merger dated February 7, 1999, among the
Company, CSLC, Sub and the Trust (including the exhibits and
schedules thereto).
9. Voting Agreements dated February 7, 1999, relating to CSLC
Common Stock.
99.1 Press Release by the Company dated February 8, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ILM II SENIOR LIVING, INC.
By: S/J. William Sharman, Jr.
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J. William Sharman, Jr.
Chairman of the Board and
President
Dated: February 22, 1999
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Exhibit Index
Page No.
2. Agreement and Plan of Merger dated February 7, 1999
among the Company, CSLC, Sub and the Trust
(including the schedules and exhibits thereto).
9. Voting Agreements dated February 7, 1999, relating
to CSLC Common Stock.
99.1. Press Release by the Company dated February 8, 1999.
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