July 28, 1999
VIA FACSIMILE AND FEDERAL EXPRESS
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Mr. J. William Sharman, Jr.
Chairman of the Board, President and Chief Executive Officer
ILM Senior Living, Inc.
ILM II Senior Living, Inc.
8180 Greensboro Drive, Suite 850
McLean, Virginia 22102
Re: Amendments to Merger Agreements
Dear Bill:
Reference is made to each of that certain (i) Agreement and Plan of
Merger (the "ILM I Merger Agreement") dated February 7, 1999, among ILM Senior
Living, Inc., a Virginia corporation ("ILM I"), Capital Senior Living
Corporation, a Delaware corporation ("Capital"), Capital Senior Living
Acquisition LLC, a Delaware limited liability company and wholly-owned
subsidiary of Capital ("Capital Acquisition"), and Capital Senior Living Trust
I, a Delaware business trust and wholly-owned subsidiary of Capital ("Capital
Trust") and (ii) Agreement and Plan of Merger (the "ILM II Merger Agreement,"
and together with the ILM I Merger Agreement, the "Merger Agreements") dated
February 7, 1999, among ILM II Senior Living, Inc., a Virginia Corporation ("ILM
II", and together with ILM I, the "ILMs"), Capital, Capital Acquisition and
Capital Trust.
Upon the terms and subject to the conditions set forth in the Merger
Agreements (including, without limitation, the provisions of Articles II
thereof), each of the ILM I and ILM II has agreed to merge with and into Capital
Acquisition (the "Mergers") for consideration consisting of cash and convertible
trust preferred securities.
Due to the recent developments since the date on which the Merger
Agreements were entered into and because Capital and the ILMs continue to desire
to consummate the Mergers as promptly as reasonably practicable upon terms and
conditions that are fair to and in the best interests of their respective
stockholders, each of Capital and the ILMs, hereby agree as follows:
1. Capital and the ILMs, upon the advice of their respective legal and
financial advisors, shall undertake to enter into as promptly as
reasonably practicable after the date hereof appropriate amendments to
or restatements of the Merger Agreements (the "Amended Merger
Agreements") to provide, among other things, that all holders of the
common stock, $.01 par value, of each of ILM I and ILM II (together,
the "ILM Common Stock"), shall have the right to elect to receive in
the Merger in respect of their shares, consideration payable entirely
in cash representing total aggregate cash consideration to be paid by
Capital in the Mergers of approximately $172.0 million. The Amended
Merger Agreements will further provide that in lieu of such all-cash
consideration, all holders of the ILM Common Stock shall have the
right to elect to receive in the Mergers in respect of their shares up
to 35% of the consideration to be paid by Capital and Capital Trust in
the form of 8.0% convertible trust preferred securities of Capital
Trust, and upon further conversion, into shares of Capital Common
Stock.
2. The outside termination date set forth in Section 7.1(e) of the Merger
Agreements will be extended to September 30, 2000.
3. The execution and delivery of the Amended Merger Agreements will be
subject to approval thereof by the Board of Directors of each of ILM
I, ILM II and Capital.
If the foregoing correctly sets forth our mutual understanding as to
the subject matter set forth above, kindly so confirm by executing the enclosed
duplicate of this letter in the space provided below for such purposes.
Very truly yours,
CAPITAL SENIOR LIVING CORPORATION
By: /s/ James A. Stroud
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Name: James A. Stroud
Title: Chairman of the Company
ACCEPTED AND CONFIRMED as of the 29th day of July, 1999.
ILM SENIOR LIVING, INC.
By: /s/ J. William Sharman, Jr.
----------------------------
Name: J. William Sharman, Jr.
Title: Chairman of the Board, President and
Chief Executive Officer
ILM II SENIOR LIVING, INC.
By: /s/ J. William Sharman, Jr.
---------------------------
Name: J. William Sharman, Jr.
Title: Chairman of the Board, President and
Chief Executive Officer