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- --------------------------------------------------------------------------------
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): August 13, 1999
Commission File Number: 0-18249
ILM SENIOR LIVING, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Virginia 04-3042283
- ----------------------- -------------------
(State of organization) (I.R.S. Employer
Identification No.)
8180 Greensboro Drive, Suite 850, McLean, Virginia 22102
- -------------------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (888) 357-3550
----------------------
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Item 5. Other Events
As previously reported by ILM Senior Living, Inc., a Virginia
finite-life corporation (the "Company"), Andrew A. Feldman & Jeri Feldman, as
trustees for the Andrew A. & Jeri Feldman Revocable Trust dated September 18,
1990, commenced an action on May 8, 1998 on behalf of that trust and a putative
class of all other shareholders of the Company and ILM II Senior Living, Inc., a
Virginia finite-life corporation and affiliate of the Company ("ILM II"),
against the Company, ILM II and the directors of each of the Company and ILM II.
On March 9, 1999, following the announcement of the execution of the Agreement
and Plan of Merger (the "Merger Agreement") dated February 7, 1999, among the
Company, Capital Senior Living, Inc., a Delaware corporation, ("Capital"),
Capital Senior Living Acquisition, LLC, a Delaware limited liability company and
wholly owned subsidiary of Capital ("Merger Sub"), and Capital Senior Living
Trust I, a Delaware business trust and wholly owned subsidiary of Capital (the
"Trust"), the plaintiffs filed a second amended complaint seeking to enjoin the
transactions contemplated by the Merger Agreement and, in the alternative,
seeking damages in an unspecified amount. In response to the Company's motion to
dismiss the second amended complaint on June 7, 1999, which motion addressed
only the pleadings, the United States District Court, the Southern District of
New York issued an order dismissing the plaintiffs' federal securities law
claims, but denying defendants' motion to dismiss plaintiffs' claims for breach
of fiduciary duty and judicial dissolution.
On June 21, 1999, the Company, ILM II and each of their directors
answered the second amended complaint and denied any and all liability to
plaintiffs or the putative class, and moved for reconsideration of the portion
of the Court's June 7, 1999 order denying their motion to dismiss. In response
to discovery requests, the Company, ILM II and other defendants produced
documents to the plaintiffs and the depositions of current and former
directors as well as others were taken. As of July 1, 1999, all discovery was
completed in this action.
On July 2, 1999, the parties to this action reached an agreement-in-
principle to settle the action. On August 11, 1999, the parties entered into a
Stipulation of Settlement (the "Stipulation") and on August 13, 1999, the Court
"so ordered" the Stipulation and provided for notice of the settlement to the
putative settlement class, which notice was mailed on August 16, 1999. The Court
scheduled a hearing for September 30, 1999 to determine whether the proposed
settlement is fair, reasonable and adequate, whether a final judgment should be
entered dismissing the action with prejudice to the plaintiffs and all members
of the putative settlement class, and whether an application to be made by
plaintiffs' counsel and the putative settlement class should be approved.
There can be no assurance that the Court will approve the Stipulation.
In the event that the Court does not approve the Stipulation, the Company
intends to continue to contest the action vigorously.
Pursuant to the Stipulation, among other matters, Capital has agreed
to increase the aggregate amount and modify the form of consideration to be
received by shareholders in the Merger Agreement by $1,128,000 to
Page 2 of 5 pages)
Exhibit Index Appears on Page 5
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$97,018,000 and provide each shareholder with the right to elect to receive
payment of the merger consideration in the form of all cash, or a combination of
cash and Capital Trust convertible preferred securities, (which securities will
ultimately be convertible into shares of Capital's common stock); provided,
that the preferred securities elections may not, in the aggregate, exceed 35% of
the total merger consideration.
To facilitate consummation of the Merger, Capital has also agreed to
amend the Merger Agreement to extend the previously scheduled October 31, 1999
outside termination date of the Merger to September 30, 2000. The Company also
generally has agreed to apprise class counsel of certain material developments
relating to extraordinary transactions involving the Company.
Pursuant to the Stipulation, if the Company and ILM II consummate an
extraordinary transaction with Capital, including, but not limited to, a
transaction of the type contemplated by the Merger Agreement, Capital has agreed
to pay the class action plaintiffs' attorneys' fees awarded by the Court an
amount not to exceed $1,500,000, as well as reimbursement of their out of pocket
expenses. If the Company and ILM II consummate extraordinary transactions with a
third party purchaser other than Capital, or the Company's and ILM II's Boards
of Directors ultimately approve extraordinary transactions with a third party
purchaser other than Capital, the Company and ILM II will, under the
Stipulation, be required to pay attorneys' fees awarded by the Court an
amount not to exceed $1,500,000, plus reimbursement of class counsel's out of
pocket expenses.
The foregoing description is qualified in its entirety by the full text
of the Stipulation filed as Exhibit 99. 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:
99. Stipulation of Settlement in the matter of Andrew A.
Feldman & Jeri Feldman, as trustees for the Andrew A. &
Jeri Feldman Revocable Trust dated 9/18/90, on behalf of
themselves and others similarly situated, as plaintiffs,
against, Lawrence A. Cohen, Jeffry R. Dwyer, J. William
Sharman, Jr., Carl J. Schramm, Julien G. Redele, ILM Senior
Living, Inc. and ILM II Senior Living, Inc., as defendants,
filed in the United States District Court for the Southern
District of New York, 98 Civ. 3789 (LAK).
Page 3 of 5 pages)
Exhibit Index Appears on Page 5
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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 SENIOR LIVING, INC.
By: /s/ J. William Sharman, Jr.
---------------------------
J. William Sharman, Jr.
Chairman of the Board and President
Dated: August 19, 1999
Page 4 of 5 pages)
Exhibit Index Appears on Page 5
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Exhibit Index
99. Stipulation of Settlement in the matter of Andrew A. Feldman & Jeri
Feldman, as trustees for the Andrew A. & Jeri Feldman Revocable Trust dated
9/18/90, on behalf of themselves and others similarly situated, as plaintiffs,
against, Lawrence A. Cohen, Jeffry R. Dwyer, J. William Sharman, Jr., Carl J.
Schramm, Julien G. Redele, ILM Senior Living, Inc. and ILM II Senior Living,
Inc., as defendants, filed in the United States District Court for the
Southern District of New York under docket, 98 Civ. 3789 (LAK).
Page 5 of 5 pages)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- --------------------------------------------------------------x
ANDREW A. FELDMAN & JERI FELDMAN, as trustees for the :
ANDREW A. & JERI FELDMAN REVOCABLE TRUST DATED 9/18/90, :
on behalf of themselves and others similarly situated, : 98 Civ.
: 3789 (LAK)
:
Plaintiffs, :
: STIPULATION
: OF SETTLEMENT
- against - : -------------
:
:
LAWRENCE A. COHEN, JEFFRY R. DWYER, J. WILLIAM SHARMAN, :
JR., CARL J. SCHRAMM, JULIEN G. REDELE, ILM SENIOR :
LIVING, INC., and ILM II SENIOR LIVING, INC., :
:
:
Defendants. :
:
- --------------------------------------------------------------x
The parties (the "Parties") to this stipulation, by their undersigned
counsel, this 11th day of August, 1999, enter into this Stipulation of
Settlement (the "Stipulation") of the above-captioned action (the "Action"),
providing for a full and final settlement of the Action on the following terms
and conditions, subject to the approval of the Court.
RECITALS
Capitalized terms not otherwise defined shall have the meanings set
forth in Article I of this Stipulation.
WHEREAS:
A. On May 8, 1998, plaintiffs, as trustees for the Andrew A. & Jeri
Feldman Revocable Trust Dated 9/18/90 ("Plaintiffs"), commenced an action in the
Supreme Court of the State of New York, County of New York, Index No. 98/602283,
which was removed to the United States District Court for the Southern District
of New York (the "Court") by way of a Notice of Removal to Federal Court dated
May 28, 1998;
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B. On about May 20, 1998, plaintiffs' counsel circulated a letter to
various operators of senior assisted and independent living facilities informing
them of the pendency of the Action, the relief sought therein and inviting them
to make an acquisition proposal;
C. By motions made on or about July 8, 1998, and April 8, 1999,
defendants moved to dismiss the Action, which motions, addressed to the
pleadings and not the merits of the Action, were denied by the Court in part by
orders dated December 8, 1998, and June 7, 1999;
D. On February 8, 1999, ILM Senior Living, Inc. ("ILM") and ILM II
Senior Living, Inc. ("ILM II", together the "REITs") announced that they had
entered into separate Agreements and Plans of Merger, each dated February 7,
1999, pursuant to which, upon the terms and subject to the conditions specified
therein, the REITs were to be merged into a wholly owned subsidiary of Capital
Senior Living Corporation ("Capital Senior") for cash and preferred trust
securities with a denominated aggregate value of $170,000,000 (the "Capital
Senior Acquisition");
E. On February 22, 1999, the REITs filed with the U.S. Securities and
Exchange Commission (the "SEC") their respective Current Reports on Form 8-K
disclosing the material terms of the Capital Senior Acquisition and making
publicly available the material agreements relating to the Capital Senior
Acquisition;
F. On March 9, 1999, Plaintiffs filed the Second Amended and
Supplemental Complaint (the "SAC"), on behalf of a putative class consisting of
all shareholders of the REITs who allegedly were or would be damaged by the
wrongdoing alleged in the SAC, excluding the defendants, and any person, firm,
trust, corporation or other entity related to or affiliated with any of the
defendants (the "Class"). The action was also brought on behalf of a subclass
alleging securities fraud claims, which claims were subsequently dismissed with
prejudice;
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G. The SAC sought, inter alia, equitable relief, including an injunction
preventing consummation of the Capital Senior Acquisition until the REITs'
Boards of Directors took all steps necessary to maximize shareholder value,
including a sale of the REITs' assets to the highest bidder pursuant to a fair
auction, or an orderly liquidation of the REITs. Alternatively, the SAC sought
damages, including punitive damages;
H. Defendants answered the SAC and denied any and all liability to
Plaintiffs or the putative class;
I. On about March 4, 1999, the Court entered an order which, inter alia,
set a trial date of July 13, 1999, and provided that the parties complete
discovery by June 26, 1999 (subsequently extended to July 1, 1999);
J. Thereafter, the parties engaged in expedited discovery which included
the production by the defendants and relevant third parties of thousands of
pages of documents, which plaintiffs' counsel represents it reviewed and
analyzed, and the following examinations: plaintiff Andrew Feldman, and
plaintiffs' expert, Kurt Kroboth of CFC Capital Corp.; defendants, Lawrence A.
Cohen, Jeffry R. Dwyer, J. William Sharman, Jr., Carl J. Schramm, and Julien G.
Redele; the REITs' investment advisors, Bradley Razook and Peter Pickette; James
Stroud of Capital Senior; David Carlson, an independent consultant to the REITs,
and third parties, Brookdale Living Communities, Inc. ("Brookdale") and Sunrise
Assisted Living, Inc;
K. On June 17, 1999, Brookdale submitted to the REITs' Boards of
Directors two draft Asset Purchase Agreements pursuant to which Brookdale
proposed to purchase the assets of the REITs and/or their affiliated companies
(but did not assume the liabilities), subject to Brookdale's completion of due
diligence, for $185,000,000 cash;
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L. A transaction with the REITs is presently being pursued by two known
potential purchasers, Brookdale and Capital Senior, and there is a potential for
other potential purchasers to pursue a transaction with the REITs;
M. The ILM defendants and the REITs intend to continue to pursue a
transaction relating to the REITs or their Properties, to the extent such a
transaction is in the best interests of the REITs and their shareholders;
N. On June 21, 1999, defendants moved for the Court to reconsider its
June 7, 1999, decision, which motion is being withdrawn without prejudice to
defendants' rights to renew such motion in the event that the Settlement is not
consummated, based on Plaintiffs' agreement that they will not assert that such
renewed motion is untimely;
O. In June 1999, the Parties commenced discussions concerning a possible
resolution of the Action;
P. These communications and negotiations continued until July 2, 1999,
at which time the Parties came to an agreement in principle on the terms of a
settlement of the Action, subject to approval by the boards of directors of the
REITs, which terms were memorialized in a term sheet circulated to all Parties
(including Capital Senior);
Q. By letter dated July 2, 1999, the Parties informed the Court that a
settlement-in-principle of the Action had been reached (the "Settlement" or the
"proposed Settlement") and, at a July 7, 1999 hearing, informed the Court of the
terms of the Settlement;
R. The Parties consider it desirable that the Action be settled on the
terms and conditions set forth in this Stipulation;
S. Based upon their investigation of the facts and the applicable law,
the Plaintiffs and Class Counsel (defined below) have concluded that the
proposed Settlement of the Action on
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the within terms and conditions is fair, reasonable and adequate and is in the
best interests of the Settlement Class (defined below), having taken into
account the risks and difficulties involved in attempting to establish a right
of recovery on behalf of the proposed Settlement Class, the expense and length
of time necessary to continue the litigation through the upcoming trial, and the
appeals that might follow, and the uncertainty inherent in any complex
litigation, such as the Action;
T. The defendants deny the allegations in the SAC, deny any fault,
wrongdoing, or liability relating in any way to the claims asserted in the SAC,
and deny any liability of any kind to the Plaintiffs or any member of the
proposed Settlement Class;
U. The proposed Settlement of the Action contemplated by this
Stipulation is the product of good faith and arm's-length negotiations between
Class Counsel and counsel for the defendants and counsel for Capital Senior.
NOW THEREFORE, in consideration of the foregoing Recitals and the
agreements, covenants, representations and warranties set forth herein, it is
stipulated and agreed by the Parties, subject to approval of the Court, that the
Action be settled on the following terms:
ARTICLE I
DEFINITIONS
Section 1.1. "Action" means the action entitled Feldman, et al. v.
Cohen, et al., 98 Civ. 3789 (LAK), pending in the United States District Court
for the Southern District of New York.
Section 1.2. "Class Counsel" shall mean Goodkind Labaton Rudoff &
Sucharow, LLP ("GLRS") and Chimicles & Tikellis LLP.
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Section 1.3. "Convertible Securities" means the 8% convertible trust
preferred securities constituting not more than 35% of the aggregate
consideration agreed to be paid to the REITs' shareholders pursuant to the
Capital Senior Acquisition.
Section 1.4. "Costs of Notice" shall mean the costs and expenses
incurred in connection with the preparation and mailing of the Notice, defined
below, all of which will be borne by the REITs.
Section 1.5. "Court" shall mean the United States District Court for
the Southern District of New York.
Section 1.6. "Defendant/Defendants" shall mean the following parties
named as defendants in the Action: Lawrence A. Cohen, Jeffry R. Dwyer, J.
William Sharman, Jr., Carl J. Schramm, Julien G. Redele, and the REITs.
Section 1.7. "Extraordinary Transaction" means any transaction
involving the REITs, and/or their affiliated companies, the Lease Cos. (defined
below) and the Holding Cos. (defined below), including, but not limited to, the
sale of all or substantially all of the REITs' assets or the assets of their
affiliated companies, the Lease Cos. and Holding Cos., and/or any merger,
consolidation, amalgamation or other similar transaction, which would result in
a change-in-control of the REITs and/or their affiliated companies, the Lease
Cos. and/or the Holding Cos.
Section 1.8. "Final Judgment and Order" shall mean the final judgment
entered by the Court as provided in Section 4.4 hereof, substantially in the
form as Exhibit C hereto, finally approving the proposed Settlement contained in
this Stipulation.
Section 1.9. "Holding Cos." means ILM Holding Co. and ILM II Holding
Co., direct wholly owned subsidiaries of the REITs.
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Section 1.10. "ILM Defendants" means all of the defendants except for
the REITs and Cohen and Redele.
Section 1.11. "ILM Defendants' Counsel" means Ronald W. Klenman, Esq.,
Greenberg Trauig, 1300 Connecticut Avenue, N.W., Washington, DC 20036, and Alan
Mansfield, Esq. and Stephen Saxl, Esq., Greenberg Traurig, 200 Park Avenue, New
York, New York, 10166.
Section 1.12. "Increased Consideration" means the increase and change
in the merger consideration from the Capital Senior Acquisition to the Revised
Capital Senior Acquisition to be offered by Capital Senior, as a consequence of
the Settlement.
Section 1.13. "Proxy" means any definitive proxy statements of the
REITs to be disseminated to the respective shareholders of the REITs in
connection with any required solicitation by the REITs of approval by such
shareholders of an Extraordinary Transaction.
Section 1.14. "Lease Cos." means ILM I Lease Corporation and ILM II
Lease Corporation.
Section 1.15. "Merger Agreements" means the two Agreements and Plans of
Merger executed on February 7, 1999, setting forth the terms and conditions of
the Capital Senior Acquisition.
Section 1.16. "Preliminary Order" shall mean the order of the Court as
described in Section 4.1 hereof, substantially in the form attached as Exhibit A
hereto.
Section 1.17. "Properties" means the thirteen senior assisted living
facilities for which the REITs hold first mortgages.
Section 1.18. "Released Claims" means the claims described in Section
3.1 hereof.
Section 1.19. "Released Persons" means the persons described in Section
3.1 hereof.
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Section 1.20. "Revised Merger Agreements" means the revised merger
agreements to be entered into by the REITs and Capital Senior, reflecting the
increased merger consideration and other terms negotiated between the REITs and
Capital Senior or required as a consequence of the Settlement.
Section 1.21. "Revised Capital Senior Acquisition" means the revised
merger terms, including the increase and change in merger consideration to be
provided to the REITs' shareholders, to which Capital Senior agreed as a
consequence of the Settlement.
Section 1.22. "SEC" means the United States Securities and Exchange
Commission.
Section 1.23. "Settlement" means the proposed settlement of the Action
pursuant to the terms of this Stipulation.
Section 1.24. "Settlement Class" means all persons or entities who were
record or beneficial holders of ILM or ILM II on May 8, 1998, and/or their
successors and assigns in interest, excluding the Defendants, and all Released
Persons (as defined below).
Section 1.25. "Settlement Effective Date" means the first date on which
the Final Judgment and Order entered by the Court, as described in Section 4.4
hereof, becomes a final order, i.e., upon the later of either of the following:
(i) if an appeal or review is not sought by any person from such Final Judgment
and Order, the 31st day after entry of such Final Judgment and Order, provided
that it is a business day, and if it is not, then the next succeeding business
day; or (ii) if an appeal or review is sought from such Final Judgment and
Order, the day after such judgment is affirmed or the appeal or review is
dismissed or denied and such judgment is no longer subject to further judicial
review.
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Section 1.26. "Settlement Hearing" means the fairness hearing held at
the time and place designated by the Court to consider final approval of the
Settlement, as provided in Section 4.3 hereof.
ARTICLE II
CONSIDERATION TO THE SETTLEMENT CLASS
Section 2.1. The ILM Defendants' Agreement With Regard to Brookdale's
Interest in Pursuing an Extraordinary Transaction. The ILM Defendants represent
that by letter dated July 9, 1999, ILM Defendants' counsel, at the direction of
the REITs' Boards of Directors, informed Brookdale's counsel that all
information and materials theretofore reasonably requested by and agreed by the
REITs to be made available to Brookdale to enable Brookdale to finalize a bona
fide, definitive superior offer for an Extraordinary Transaction involving the
REITs was so furnished or made available by the REITs to Brookdale and its legal
and financial advisors and requested that Brookdale immediately inform the REITs
if it had a reasonable basis to believe otherwise. If Brookdale notifies the
REITs in writing within three (3) business days of this Stipulation of
particular information and materials that Brookdale believes in good faith the
ILM Defendants agreed to furnish but have not yet made available, the ILM
Defendants agree to furnish all such previously agreed-upon information and
materials as promptly as practicable following receipt of such notice. The ILM
Defendants further represent that they have, through counsel, provided Brookdale
with their response to the two draft Agreements for the Purchase of Assets
submitted by Brookdale on June 17, 1999.
Section 2.2. The ILM Defendants' Agreement with Respect to the
Involvement of Class Counsel in the Ongoing Process. There has been and is
currently a process relating to an Extraordinary Transaction with the REITs
involving Brookdale and Capital Senior. With respect
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to this process, which may in the future include additional third parties
seeking to enter into and consummate an Extraordinary Transaction involving the
REITs, the ILM Defendants agree (in all cases through the ILM Defendants'
Counsel) to:
(1) keep Class Counsel informed on a timely periodic basis with regard
to material developments in the progress of the process and any negotiations, by
providing to Class Counsel a written or oral status report of material
developments in such negotiations and such process;
(2) timely provide Class Counsel with copies of all material documents
concerning the bidding and negotiating process for an Extraordinary Transaction
(subject to valid assertion of privilege), including all purchase or merger
agreements, all confidentiality and standstill agreements, all letters offering
to purchase all or substantially all of the Properties, the REITs, or their
shares and all responses thereto, all material written communications to any
bidder or potential bidder, preliminary and definitive proxy statements filed
with the SEC, and all SEC comments to any proposed proxy and other material
documentation concerning the bidding and negotiating process;
(3) consult with Class Counsel, through the ILM Defendants' counsel,
prior to and regarding any and all material decisions of the REITs' Boards of
Directors relating to any proposed Extraordinary Transaction, including, but not
limited, to the Revised Capital Senior Acquisition and any proposal for an
Extraordinary Transaction by Brookdale, so as to permit the REITs' Boards of
Directors to consider Class Counsel's meaningful input into the bidding and
negotiating process.
Nothing in this Stipulation shall require the ILM Defendants to provide
Class Counsel with any information or documents where prohibited by any
applicable state or federal law or regulation. In light of state and federal
laws and regulations governing tender offers, nothing in
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this Stipulation shall require the ILM Defendants to provide Class Counsel with
any information or documents specifically relating to the terms of any tender
offer other than that informing Class Counsel of the fact that a tender offer is
being pursued (any such information shall be kept strictly confidential by Class
Counsel).
Notwithstanding the above, nothing in Section 2.2 shall be construed as
limiting or modifying the REITs' Boards of Directors' deliberative or decision
making authority, or otherwise affecting their fiduciary duties under Virginia
law. In consideration of these obligations, Class Counsel agrees to be bound by
any confidentiality agreements reasonably requested by the ILM Defendants'
Counsel governing the material and information imparted to Class Counsel
(including the existence and prospects of any potential or pending Extraordinary
Transaction). However, nothing in any confidentiality agreement will prevent
Class Counsel from bringing matters to the attention of the Court, if necessary,
although any reports containing confidential information shall be filed under
seal. Moreover, nothing in any agreements between Capital Senior and the REITs
will be construed as limiting conversations and communications between Capital
Senior and Class Counsel other than the production to or discussion with Class
Counsel of "evaluation material" as that term is used in the Confidentiality
Agreement. Upon Brookdale's consent, nothing in the March 9, 1999
Confidentiality and Standstill agreements with Brookdale ("Confidentiality
Agreements") will be construed as limiting conversations and communications
between Brookdale and Class Counsel, other than the production to or discussion
with Class Counsel of "evaluation material" as that term is used in the
Confidentiality Agreements. The ILM Defendants will not require any other
potential bidder to agree to limiting conversations and communications with
Class Counsel, other than the production or discussion of "evaluation material"
as that term is used in existing Confidentiality Agreements. Nothing in
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this Stipulation shall require the ILM Defendants or a bidder to provide Class
Counsel with documents or information where a bidder or potential bidder or its
representative has voluntarily restricted the distribution of such documents or
information to Class Counsel.
Section 2.3. The Price Floor. Unless there is any material adverse
change or unless it is in the best interests of the REITs or their shareholders
to do otherwise, or unless Capital Senior, in accordance with the terms of the
Revised Capital Senior Acquisition, refuses to close on the Revised Capital
Senior Acquisition, the ILM Defendants will not approve an Extraordinary
Transaction which would provide the Settlement Class with consideration with a
value of less than $172,000,000, exclusive of Class Counsels' fees and expenses,
as awarded by the Court.
Section 2.4. Closing of the Capital Senior Acquisition. Consistent with
representations made at the July 7, 1999 hearing, Capital Senior will not close
the Revised Capital Senior Acquisition until the Settlement Hearing and the
Court's entry of the Final Order and Judgment, as referenced in Section 4.4,
infra, unless the Court orders otherwise.
Section 2.5. The REITs Will Pay the Costs of Notice. Defendants agree
that the REITs will pay the costs of printing and sending Notice, as defined
below, to the Settlement Class.
Section 2.6. The Action Resulted in a Benefit. Each of the Defendants
agrees that the consideration being provided through the Settlement has and will
result in material benefits to the Settlement Class.
Section 2.7. The Existence of Other Agreements. None of the obligations
of the ILM Defendants as set forth in this Stipulation will be construed as
requiring the ILM Defendants or the REITs to violate any other agreement to
which they may presently be parties.
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Section 2.8. Capital Senior's Obligations. Capital Senior agrees that
it will be bound by the following obligations. Capital Senior, as promptly as
reasonably practicable, will increase and change the consideration it is
presently offering to the Settlement Class in the Capital Senior Acquisition to
a transaction offering 100% cash consideration of $172,000,000 (the "Revised
Capital Senior Acquisition"). The Revised Capital Senior Acquisition will also
provide members of the Settlement Class with the right to elect to receive up to
35% of the transaction consideration in the form of the Convertible Securities.
Capital Senior, although not a party to the Action, will execute this
Stipulation to acknowledge its obligations in Sections 2.8 and 2.9, and agree to
be bound hereunder.
Section 2.9. Modification of the Merger Agreements. As soon as
reasonably practicable, the REITs and Capital Senior will enter into amendments
to the Merger Agreements to reflect the increased consideration, and a
modification of any deadlines to accommodate consummation of the Revised Capital
Senior Acquisition. However, absent further agreement among Capital Senior and
the REITs, the contractual deadlines for the consummation of the Revised Capital
Senior Acquisition will not be extended beyond September 30, 2000. Nothing in
this Stipulation shall require modification of Section 4.1(e) of the Merger
Agreements (the "No Solicitation" provision). Nothing in this Stipulation will
be construed as requiring any party or Capital Senior to take any steps which
would be a violation of the Revised Merger Agreements. Nothing in this
Stipulation shall restrict the rights of the REITs or Capital Senior to further
amend or modify the Merger Agreements or Revised Merger Agreements in their
discretion, except that Section 2.3 shall apply to any amendment that may affect
the value of an Extraordinary Transaction to shareholders of the REITs.
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Section 2.10 Proxy. The ILM Defendants shall propose for SEC
review that any definitive proxy statement to be disseminated to the REIT
shareholders in connection with the Revised Capital Senior Acquisition would
disclose in substance: (1) that the Convertible Securities component of the
merger consideration was determined on the date the original Merger Agreements
were signed (i.e., February 7, 1999) and was based, in part, on the closing sale
price of Capital Senior Common Stock (as reported on the NYSE Composite
Transactions) on the previous trading day; and (2) that in view of the inherent
fluctuations in such stock price from such date through and including the date
of the definitive proxy statements, any shareholder electing to receive part of
their merger consideration in the form of Convertible Securities should note
that the value of the Convertible Securities they will receive in the merger may
be more or less than their value on the date the Merger Agreements were
executed. In addition, the ILM Defendants shall also propose for SEC review that
(3) the proxy will contain a statement comparing the price of Capital Senior's
Common Stock on the date the Merger Agreements were signed to the price of
Capital Senior's Common Stock on the most recent available date preceding the
date of the definitive proxy statement and (4) the proxy will indicate that
before choosing the Convertible Securities option over the cash option,
shareholders should consider these and any further changes in the price of
Capital Senior Common Stock.
ARTICLE III
RELEASE OF CLAIMS
Section 3.1. Release of Claims by the Settlement Class. Upon the Settlement
Effective Date, each and every member of the proposed Settlement Class, on
behalf of himself, his heirs, estates, executors, administrators, successors,
and assigns, hereby releases all defendants in the
14
<PAGE>
Action, including for all such persons or entities, their directors, officers,
partners, principals, employees, agents, attorneys, financial advisors, parents,
subsidiaries, affiliates, divisions and predecessors or successors in interests,
and their respective heirs, executors, administrators, personal representatives,
successors and assigns (collectively, the "Released Persons"), from any and all
manner of actions, suits, demands, debts, liabilities, obligations, promises,
controversies, claims, causes of action, allegations or rights whatsoever,
whether class, individual or derivative in nature, whether in law or in equity,
whether based upon state or federal law (excluding claims arising from the
Proxy/Prospectus, which is anticipated to be distributed to shareholders), which
the members of the Settlement Class or any of them, have, ever had, or now have,
or which any of them brought, could have brought or could now bring derivatively
on behalf of the REITs against any of all of the foregoing Released Persons, by
reason of, based upon, or arising out of the facts and transactions identified
in the SAC or which have been or could have been asserted in the Action (the
"Released Claims").
ARTICLE IV
IMPLEMENTATION
Section 4.1. Preliminary Order.
As soon as practicable after the execution of the Stipulation, counsel for the
Parties shall jointly submit this Stipulation to the Court and shall jointly
request entry of the Preliminary Order, substantially in the form of Exhibit A,
appended hereto, inter alia, requesting approval for the mailing to the proposed
Settlement Class of a Notice of Pendency and Proposed Settlement and Hearing, in
substantially the form appended hereto as Exhibit B, hereto. At the time of the
Settlement Hearing, or at such other time as the Court directs, the Court shall
make a determination regarding whether to certify the proposed Settlement Class.
15
<PAGE>
Section 4.2. Notice to the Proposed Settlement Class. Upon entry of the
Preliminary Order, and as provided for therein, the ILM defendants shall cause
copies of the Notice to be sent by first class mail, postage prepaid, to the
proposed Settlement Class members at their last known addresses as appearing in
the records maintained by the REITs or any transfer agent. Reasonable costs of
printing and mailing the Notice shall be paid by the REITs. The Notice shall be
substantially in the form of Exhibit B, hereto. The terms of the Notice are
hereby incorporated by reference as a material part of this Stipulation. Within
five (5) days after the mailing of the Notice to the proposed Settlement Class
members, the counsel for the ILM defendants shall file with the Court an
affidavit of mailing confirming that the Notice was duly sent to all proposed
Settlement Class members in accordance with the Preliminary Order. The
Defendants shall exercise their right to terminate the Settlement in accordance
and for the reasons set forth in Section 5.1, infra, by notifying the Court and
Class Counsel in writing, which shall either be hand-delivered or mailed by
certified mail, so that it is received by the Court and Class Counsel within ten
(10) business days after the failure of any of the conditions set forth in
Section 5.1, infra, to occur.
Section 4.3. Settlement Hearing. The final Settlement Hearing shall be
held on September 30, 1999, at 9:00 a.m., or at such other time as the Court
directs, after the sending of Notice to each of the members of the proposed
Settlement Class by or before August 16, 1999. In connection with the Settlement
Hearing, the Parties hereto shall file with the Court all such papers as their
counsel believe to be necessary at least seven (7) days in advance of any final
settlement hearing. At the Settlement Hearing, the Court will be asked to
consider certification of the proposed Settlement Class, the fairness and
reasonableness of the terms of the Settlement and Class Counsel's fee request,
as further described in Section 7.1.
16
<PAGE>
Section 4.4. Entry of Final Judgment and Order. At or prior to the
Settlement Hearing, counsel for the Parties shall jointly submit to the Court a
proposed Final Judgment and Order, in substantially the form appended hereto as
Exhibit C. The Final Judgment and Order, shall provide for the following:
A. Approval of the Stipulation and the Settlement, and a
finding that, inter alia, the Settlement is fair, reasonable and adequate, and
that the Settlement is in the best interests of the Settlement Class and the
REITs, and directing consummation of the Settlement in accordance with the terms
and conditions of the Stipulation;
B. Certification of the proposed Settlement Class, appointment
of Plaintiffs as the Settlement Class representatives, and appointment of Class
Counsel as counsel for the Settlement Class;
C. Dismissing the Action and each and every cause of action
and claim set forth therein as to all defendants, and with prejudice to the
Settlement Class, extinguishing all claims, rights, demands and causes of action
that might have been asserted therein by the Plaintiffs on their own behalves,
or on behalf of the Settlement Class and/or the REITs, and discharging the
defendants and all Released Persons;
D. Permanently barring the Settlement Class members from
asserting the Released Claims against the Released Persons, and releasing the
Released Persons from the Released Claims;
E. Reserving jurisdiction in the Court over all matters
relating to the administration and consummation of this Stipulation and the
Settlement, and providing for a procedure which would allow Class Counsel to
give defendants notice, and thereafter to raise before the Court, any failure by
the defendants or any one of them to comply with any of the
17
<PAGE>
terms herein, and any failure to implement in good faith any part of this
Stipulation and Settlement.
If, at the Settlement Hearing, the Court finally approves the
Stipulation and the Settlement contemplated hereby, and the Settlement has not
been terminated for failure to satisfy any of the conditions set forth in
Article V hereof, then counsel for the Parties shall request entry by the Court
of such proposed Final Judgment and Order.
ARTICLE V
CONDITIONS
Section 5.1. Defendants' Conditions. The consummation of the Settlement
shall be contingent upon and subject to the fulfillment of each of the following
conditions:
A. The Preliminary Order shall have been entered by the Court
in substantially the form of Exhibit A, hereto.
B. The Final Judgment and Order shall have been entered by the
Court in substantially the form of Exhibit C hereto, and the Settlement
Effective Date has occurred.
Section 5.2. Termination. In the event that any of the conditions set
forth in Section 5.1 fails to occur, or any of the conditions precedent to entry
of the Final Judgment and Order has failed to occur, any of the Parties may
terminate the Stipulation and the Settlement without prejudice whereupon:
A. All Parties to the Action and to this Stipulation shall
return to the same position as prior to entering into this Stipulation, without
prejudice to any Parties' position;
B. Neither the Stipulation, the Preliminary Order, the Final
Judgment and Order nor any other documents, filings or representations relating
to any of the foregoing, shall be
18
<PAGE>
relied upon as evidence relating to the merits or legal sufficiency of the
allegations in the Action; and
C. No right, claim, obligation, liability or defense of any
person shall arise form or be affected by the negotiation or execution of the
Stipulation.
In the event that the Stipulation is terminated and the Final Judgment
and Order does not become effective, the Stipulation shall be of no further
force and effect, except for the provisions regarding the payment of the costs
and expenses of Notice.
ARTICLE VI
COVENANTS
Section 6.1. Entry of Order and Reasonable Efforts.
Counsel for all of the parties hereto shall use their best good faith
efforts to obtain the entry of the Final Judgment and Order. The parties hereto,
and their respective counsel, agree to use their best good faith efforts to
effectuate the Settlement and all other transactions attendant to the
Settlement, and to fulfill the conditions set forth in Article V hereof.
ARTICLE VII
ATTORNEYS' FEES AND EXPENSES
Section 7.1. Attorneys' Fees.
A. The procedure for and the allowance or disallowance of
attorneys' fees and expenses are to be considered by the Court separately from
the Court's consideration of the fairness, reasonableness and adequacy of the
Settlement, and any order or proceeding relating to any such fee application or
procedure shall not operate to terminate or cancel this Stipulation or affect
the finality of the Final Judgment and Order approving this Stipulation and the
Settlement. Class Counsel intend to seek an award of attorneys' fees in an
amount that will not exceed
19
<PAGE>
$1,500,000 and reimbursement of out of pocket expenses. The attorneys' fees
awarded by the Court will be paid as follows: (1) by Capital Senior, in the
event that an Extraordinary Transaction with Capital Senior is ultimately
consummated; or (2) by the REITs, if any other bidder, including Brookdale, is
the successful bidder and the ILMs' Boards of Directors ultimately approves an
Extraordinary Transaction with Brookdale or another third party bidder. The
defendants will not object to any application by Class Counsel for an award of
attorneys' fees of up to $1,500,000, plus reimbursement of out of pocket
expenses. Class Counsel will seek Court approval of their application at or
following the Final Settlement Hearing. Class Counsel's fee and expense award
will be paid by wire transfer of the approved amount to the account of Goodkind
Labaton Rudoff & Sucharow, LLP, no later than five (5) days after the closing of
any Extraordinary Transaction involving the REITs.
B. Except as provided for above, each Party shall pay all
legal fees incurred by it in connection with this Stipulation.
ARTICLE VIII
NONADMISSION OF LIABILITY
Section 8.1. Stipulation Not Admission.
Neither this Stipulation, nor any exhibit or document referenced herein,
nor any action taken to effectuate or further this Stipulation or the Settlement
set forth herein is, may be construed as, or may be used as an admission by or
against any other parties of any fault, wrongdoing or liability whatsoever, or
as a waiver or limitation of any defenses otherwise available to any of the
parties. Entering into or carrying out this Stipulation, the exhibits hereto,
and any negotiations or proceedings related thereto shall not in any event be
construed as, or deemed to be evidence of, an admission or concession by any of
the parties, or to be a waiver of
20
<PAGE>
any applicable defense, and shall not be offered or received in evidence in any
action or proceeding against any party hereto in any court, administrative
agency or other tribunal for any purpose whatsoever other than to enforce or
effectuate the provisions of this Stipulation or the provisions of any of the
exhibits to this Stipulation. The parties hereto each specifically reserve all
rights, claims, demands, defenses, actions or causes of action which each party
presently has, or claims to have, against any of the others and nothing
contained herein will be deemed to affect the same, until the Settlement
Effective Date, at which time the releases described in Article III hereof shall
become effective.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Captions.
The definitions and recitals set forth above are essential elements of
this Stipulation. The captions contained in this Stipulation are inserted only
as a matter of convenience and in no way define, limit, extend, or describe the
scope of this Stipulation or the intent of its provisions.
Section 9.2. Entire Agreement.
This Stipulation sets forth the entire agreement of the parties in
respect to the Settlement and supercedes all prior oral or written agreements,
arrangements, understandings, inducements, promises, and warranties, not
embodied or incorporated herein, relating to the subject matter of this
Stipulation. Prior discussions and negotiations are superseded by, and merged
into, this Stipulation.
Section 9.3. Counterparts.
This Stipulation may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
21
<PAGE>
Section 9.4. Modifications.
The provisions of this Stipulation (including any time periods specified
herein) may be modified by written agreement of counsel for all parties with the
consent of the Court and without further notice to the Settlement Class unless
the Court requires such notice. The terms and provisions of this Stipulation may
not be changed, waived, modified, or varied in any manner unless in writing duly
signed by counsel for all parties.
Section 9.5. Waiver.
The failure of any party hereto to enforce at any time any provision of
this Stipulation shall not be construed as a waiver of such provision, nor be
construed in any way to effect the validity of this Stipulation or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Stipulation shall be held to
constitute a waiver of any other breach.
Section 9.6. Successors.
This Stipulation shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. No party hereto may assign its
rights or obligations hereunder without the prior written consent of all of the
other parties hereto.
Section 9.7. Notices.
Any and all notices, requests, consents, directives or communications by
any party intended for any other party shall be in writing, shall be given
personally or by postage prepaid certified or registered mail, return receipt
requested, and shall be deemed delivered on the earlier of (a) the date received
and (b) the date four business days after the date of deposit in a depository of
the United States Postal Service, and shall be addressed as follows:
22
<PAGE>
(a) If to the Defendants:
Greenberg Traurig
MetLife Building
200 Park Avenue, 15th Fl.
New York, New York 10166
Attn.: Stephen L. Saxl, Esq.
- and -
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Attn.: Stuart L. Shapiro, Esq.
(b) If to the Plaintiffs:
Goodkind Labaton Rudoff & Sucharow LLP
100 Park Avenue
New York, New York 10017-5563
Attn.: Lynda J. Grant, Esq.
Any party may, from time to time, change the address to which such
written notice, requests, consents, directives or communications are to be
mailed, by giving the other parties ten (10) days' prior written notice of the
changed address in the manner hereinabove provided.
Section 9.8. Governing Law.
This Stipulation and the attached exhibits shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without reference to principles of choice or conflicts of laws. This Stipulation
(including, without limitation, its execution and consummation) shall be
enforced solely in the Court. The Defendants, the Plaintiffs and the Settlement
Class hereby waive any objection they may now or hereafter have to the venue or
forum of any such enforcement proceedings, and irrevocably consent to and
acknowledge jurisdiction and service of any and all process of the Court in any
such proceedings. However, nothing in this Stipulation shall be construed as
affecting the ILM Defendants' fiduciary duties under Virginia law.
23
<PAGE>
Section 9.9. Collaborative Effort.
The undersigned agree that no single party shall be deemed to have
drafted this Stipulation or any portion thereof. This Stipulation is the product
of the collaborative effort of the undersigned counsel.
IN WITNESS WHEREOF, the parties hereto, by their counsel, have executed
this Stipulation and Agreement of Settlement as of the day and year first above
written.
GOODKIND LABATON RUDOFF & SUCHAROW LLP
By: /s/ Lawrence A. Sucharow
----------------------------------
Lawrence A. Sucharow (LS-1726)
Lynda J. Grant (LG-4784)
Joel H. Bernstein (LB-0763)
100 Park Avenue
New York, New York 10017-5563
(212) 907-0700
Nicholas E. Chimicles
CHIMICLES & TIKELLIS LLP
One Haverford Centre
361 West Lancaster Avenue
Haverford, Pennsylvania 19041
(610) 642-8500
Attorneys for Plaintiffs
Andrew A. Feldman and Jeri Feldman, as
trustees for the Andrew A. & Jeri Feldman
Revocable Trust Dated 9/18/90
24
<PAGE>
GREENBERG TRAURIG
By: /s/ Stephen L. Saxl
----------------------------------
Alan Mansfield (AM-3266)
Stephen L. Saxl (SS-1028)
MetLife Building
200 Park Avenue, 15th Fl.
New York, New York 10166
(212) 801-9200
Ronald W. Kleinman
GREENBERG TRAURIG
1300 Connecticut Avenue, N.W.
Suite 1000
Washington, D.C. 20036
(202) 331-3100
Attorneys for Defendants Jeffry R. Dwyer,
J. William Sharman, Jr., Carl J. Schramm,
Julien G. Redele, ILM Senior Living, Inc.
and ILM II Senior Living, Inc.
SHAPIRO FORMAN & ALLEN LLP
By: /s/ Stuart L. Shapiro
----------------------------------
Stuart L. Shapiro (SS-0894)
380 Madison Avenue
New York, New York 10017
(212) 972-4900
Attorneys for Defendant
Lawrence A. Cohen
CAPITAL SENIOR LIVING CORPORATION
By: /s/ Lawrence A. Cohen
----------------------------------
Lawrence A. Cohen
Chief Executive Officer
So ordered
/s/ Sidney H. Stein
- ------------------------
Sidney H. Stein, USDJ
25
<PAGE>
EXHIBIT A
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------------------------x
ANDREW A. FELDMAN & JERI FELDMAN, as trustees for the ANDREW A. & :
JERI FELDMAN REVOCABLE TRUST DATED 9/18/90, on behalf of themselves :
and others similarly situated, : 98 Civ.
: 3789
Plaintiffs, : (LAK)
:
- against - :
:
LAWRENCE A. COHEN, JEFFRY R. DWYER, J. WILLIAM SHARMAN, JR., CARL J. :
SCHRAMM, JULIEN G. REDELE, ILM SENIOR LIVING, INC., and ILM II SENIOR :
LIVING, INC., :
:
Defendants. :
:
:
- ----------------------------------------------------------------------x
PRELIMINARY ORDER
WHEREAS, pending before the Court is a class action titled
Andrew A. Feldman & Jeri Feldman, as trustees, etc. v. Lawrence A. Cohen, et
al., No. 98 Civ. 3789 (LAK) (the "Action"); and
WHEREAS, the Parties having made application pursuant to
Federal Rule of Civil Procedure 23 in accordance with a Stipulation of
Settlement dated August 11, 1999 (the "Stipulation"), which together with the
exhibits annexed thereto sets forth the terms and conditions for the proposed
settlement ("Settlement") of the Action and for dismissal of the Action with
prejudice upon the terms and conditions set forth therein; the Court having
read and considered the application, Stipulation and the exhibits annexed
thereto; and
WHEREAS, all defined terms contained herein shall have the
same meanings as set forth in the Stipulation;
<PAGE>
NOW, THEREFORE, IT IS HEREBY ORDERED:
1. All definitions set forth in the Stipulation are hereby
adopted.
2. The Court hereby approves dissemination of the Notice
(defined below) to the proposed Settlement Class consisting of all record and
beneficial holders of shares of ILM Senior Living, Inc. ("ILM I") and ILM II
Senior Living, Inc. ("ILM II", together, the "REITs") as of May 8, 1998 (the
"Settlement Class"). Excluded from the Settlement Class are the Defendants and
the Released Persons as defined in the Stipulation.
3. A hearing (the "Settlement Hearing") shall be held on
September 30, 1999 at 9:00 a.m., before the Hon. Lewis A. Kaplan, at the
United States Courthouse, 500 Pearl Street, Courtroom 12D, New York, New York.
At that time, the Court shall determine whether to certify the proposed
Settlement Class; whether the proposed Settlement of the Action on the terms
and conditions provided for in the Stipulation is fair, reasonable and
adequate and should be approved; whether a judgment as provided in the
Stipulation should be entered herein; and the amount of fees and out of pocket
expenses that should be awarded to Class Counsel.
4. The Court approves, as to form and content, the Notice
of Pendency and Settlement of Action (the "Notice"), annexed as Exhibit B to
the Stipulation, and finds that the mailing and distribution of the Notice in
the manner and form set forth in paragraph 5 of this Order constitutes the
best notice practicable under the circumstances, and constitutes valid, due
and sufficient notice to all persons in the proposed Settlement Class and the
REITs, complying fully with the requirements of the Federal Rules of Civil
Procedure, the Constitution of the United States and any other applicable
laws.
5. No later than August 16, 1999, the ILM Defendants shall
cause copies of the Notice to be sent by first class mail, postage prepaid, to
the proposed Settlement Class
2
<PAGE>
members at their last known addresses, as they appear in the records
maintained by the REITs or any transfer agent. Reasonable costs of printing
and mailing the Notice shall be paid by the REITs. The Notice shall be
substantially in the form annexed as Exhibit B to the Stipulation. Within five
(5) days after the mailing of the Notice to the proposed Settlement Class
members, counsel for the ILM Defendants shall file with the Court an affidavit
of mailing confirming that the Notice was duly sent to all proposed Settlement
Class members in accordance with this Order.
6. In the event the Settlement is not approved by the
Court, or otherwise fails to become effective, funds advanced or incurred by
the REITs pertaining to the costs and expenses of Notice shall not be
recovered by the REITs.
7. Pending determination of whether the Settlement in the
Action should be approved, neither the Plaintiffs nor any member of the
proposed Settlement Class ("Settlement Class Member"), either directly,
representatively, or in any other capacity, shall commence or prosecute
against any of the Defendants, or any of the Released Persons, as defined in
the Stipulation, any action or proceeding in any court or tribunal asserting
any of the Released Claims, as defined in the Stipulation.
8. Any Member of the proposed Settlement Class may enter an
appearance in the Action, at his or her own expense, individually or through
counsel of his or her own choice. All members of the Settlement Class who do
not enter an appearance will be represented by Class Counsel.
9. Any Member of the proposed Settlement Class who wishes
to be heard in support of or in opposition to the Settlement and/or Class
Counsel's application for attorneys' fees and reimbursement of out of pocket
expenses shall, on or before September 17, 1999: (a)
3
<PAGE>
file with the Court a written notice of his or her intention to appear and/or be
heard at the Settlement Hearing, together with any other papers he or she wishes
to be considered at the Settlement Hearing, setting forth any such information
and/or objections and support for such objections. Such papers must refer to
Feldman, et al. v. Cohen, et al., No. 98 Civ. 3789 (LAK), state the full name of
the person or entity submitting the request to be heard, proof of the number of
shares owned by such person or entity as of May 8, 1998, and a statement of the
reasons why it is believed that the Court should find that the settlement is, or
is not, fair, reasonable and adequate or in the best interests of the Settlement
Class or the REITs, and/or why such person or entity supports or opposes Class
Counsel's application for attorneys' fees and expenses, and (b) serve copies of
the foregoing papers upon counsel for the Parties to the Settlement at the
addresses given below:
To the Defendants:
Greenberg Traurig
MetLife Building
200 Park Avenue, 15th Fl.
New York, New York 10166
Attn.: Stephen L. Saxl, Esq.
-and-
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Attn.: Stuart L. Shapiro, Esq.
To the Plaintiffs:
Goodkind Labaton Rudoff & Sucharow LLP
100 Park Avenue
New York, New York 10017-5563
Attn.: Lynda J. Grant, Esq.
Unless otherwise ordered by the Court, no written notice of intention to
appear by any Member of the proposed Settlement Class shall be valid unless it
is made within the time set forth and in
4
<PAGE>
the manner described in the Notice. Any Member of the proposed Settlement
Class who does not make his or her objection known in the manner provided in
the Notice shall be deemed to have waived such objection and shall forever be
foreclosed from making any objections unless otherwise ordered by the Court.
10. The Court reserves the right to adjourn the date of the
Settlement Hearing and any adjourned date thereof without further notice to
the Members of the proposed Settlement Class, and retains jurisdiction to
consider all further applications relating to the Settlement. The Court may
approve the Settlement, with such modifications as may be agreed to by the
parties to the Settlement, if appropriate, without further notice to the
Settlement Class.
SO ORDERED.
Dated: _________, 1999
----------------------------
Hon. Lewis A. Kaplan
United States District Judge
5
<PAGE>
EXHIBIT B
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------------------------------x
ANDREW A. FELDMAN & JERI FELDMAN, as trustees for the :
ANDREW A. & JERI FELDMAN REVOCABLE TRUST DATED 9/18/90, :
on behalf of themselves and others similarly situated, : 98 Civ. 3789 (LAK)
:
:
Plaintiffs, :
:
:
- against - :
:
LAWRENCE A. COHEN, JEFFRY R. DWYER, J. WILLIAM SHARMAN, :
JR., CARL J. SCHRAMM, JULIEN G. REDELE, ILM SENIOR :
LIVING, INC., and ILM II SENIOR LIVING, INC., :
:
:
Defendants. :
:
:
:
- -----------------------------------------------------------x
NOTICE OF PENDENCY AND SETTLEMENT OF ACTION
TO: ALL RECORD AND BENEFICIAL HOLDERS OF SHARES OF ILM SENIOR LIVING,
INC. ("ILM I") AND ILM II SENIOR LIVING, INC. ("ILM II", TOGETHER,
THE "REITs") AS OF MAY 8, 1998 (THE "SETTLEMENT CLASS").
PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO THE PROPOSED
SETTLEMENT OF A CLASS ACTION (THE "ACTION") DESCRIBED BELOW. IF YOU ARE A
SETTLEMENT CLASS MEMBER, IT CONTAINS IMPORTANT INFORMATION AS TO YOUR RIGHTS.
NOTICE IS HEREBY GIVEN pursuant to Federal Rule of Civil
Procedure 23 and an order of the United States District Court for the Southern
District of New York (the "Court") dated August 13, 1999, that a hearing will be
held before the Court at the United States Courthouse, 500 Pearl Street,
Courtroom 12D, New York, New York, on September 30, 1999, at 9:00 a.m., to
determine: (1) whether the proposed Settlement of the Action (the "Settlement")
<PAGE>
upon the terms set forth in the Stipulation of Settlement dated August 11, 1999
(the "Stipulation") is fair, reasonable and adequate; (2) whether a final
judgment should be entered dismissing the Action with prejudice to plaintiffs
("Plaintiffs") and all members of the Settlement Class; and (3) whether an
application to be made by counsel for the plaintiffs and the Settlement Class in
the Action ("Class Counsel") for the payment of attorneys' fees and
reimbursement of out of pocket expenses should be approved.
CLASS ACTION DETERMINATION
Additionally, the Court will consider whether to certify a
Settlement Class consisting of:
ALL PERSONS OR ENTITIES WHO WERE RECORD OR BENEFICIAL HOLDERS OF
SHARES OF EITHER ILM I OR ILM II ON MAY 8, 1998, AND/OR THEIR
SUCCESSORS AND ASSIGNS IN INTEREST, EXCLUDING THE DEFENDANTS, as
Defined below, AND ALL RELEASED PERSONS, AS DEFINED in the
stipulation.
The defendants are Lawrence A. Cohen ("Cohen"), Jeffry R. Dwyer
("Dwyer"), J. William Sharman, Jr. ("Sharman"), Carl J. Schramm ("Schramm"),
Julien G. Redele ("Redele", together, the "Individual Defendants") and the REITs
(together the "Defendants"). All Defendants except for Cohen, the REITs and
Redele are hereinafter referred to together as the "ILM Defendants."
COMMENCEMENT OF THE ACTION AND PRE-TRIAL PROCEEDINGS
On May 8, 1998, Plaintiffs, as trustees for the Andrew A. & Jeri
Feldman Revocable Trust Dated 9/18/90 ("Plaintiffs"), commenced an action in the
Supreme Court of the State of New York, County of New York, Index No. 98/602283,
which was subsequently removed to this Court. The original complaint alleged
that during the period of about July 1996
2
<PAGE>
to the present, the Individual Defendants had operated the REITs and their
affiliated companies in a manner directed at increasing the remuneration which
would be received by Cohen and Capital Senior Living Corporation ("Capital
Senior"), the manager of the REITs' properties (the "Properties"), pursuant to
certain management and development contracts between affiliates of the REITs and
Capital Senior. The REITs hold first mortgage loans for thirteen senior assisted
living facilities, the titles to which are held by an affiliate of the REITs.
The original complaint further alleged that the Individual
Defendants had taken steps contrary to the best interests of the REITs'
shareholders by, among other things, diverting the REITs' shareholders'
distributions for their own use and refusing to liquidate or sell the REITs or
the Properties in a timely manner. The original complaint sought dissolution of
the REITs, an appointment of a receiver, and other relief. Defendants moved to
dismiss the original complaint in July 1998, which motion, addressed to the
pleadings, was denied in part by an order dated December 8, 1998. In that order,
the Court further directed that plaintiffs file an amended complaint.
In May 1998, in an effort to test the market for the Properties
in the event of a sale or liquidation, Plaintiffs' counsel circulated a letter
to approximately twenty (20) operators of senior assisted and independent living
facilities, including Brookdale Living Communities, Inc. ("Brookdale") and
Sunrise Assisted Living, Inc. ("Sunrise"). This letter gave the operators notice
of the pendency of the Action, informed them that through the Action, Plaintiffs
sought to cause the liquidation of the REITs and/or have the Properties
auctioned, and invited the operators to make an acquisition proposal. Of the
twenty (20) operators contacted, during the following eight (8) months, only
Brookdale and Sunrise either formally or informally expressed an interest in
purchasing the REITs or the Properties to the REITs' boards of directors.
3
<PAGE>
Plaintiffs filed an amended complaint on January 22, 1999. On
February 8, 1999, the REITs announced that they had entered into Agreements and
Plans of Merger, dated February 7, 1999, pursuant to which the REITs were to be
merged into a wholly owned subsidiary of Capital Senior for cash and a newly
created preferred trust securities providing consideration with a denominated
aggregate value of $170,000,000 (the "Capital Senior Acquisition" or the
"Transaction").
In light of that announcement, and the subsequent public
disclosure of the terms of the Transaction, on March 9, 1999, plaintiffs filed a
Second Amended and Supplemental Class Action Complaint (the "SAC"). The SAC
alleged, among other things, that the Capital Senior Acquisition was a
self-interested transaction, which failed to provide the REITs' shareholders
with adequate consideration for their shares or the Properties, and that the
Capital Senior Acquisition was the product of a process in which the REITs'
shareholders had not been adequately protected from the Individual Defendants'
conflicts of interests. Plaintiffs further alleged that the actual value of the
Capital Senior Acquisition, which consisted in significant part of newly created
convertible securities whose value was tied to Capital Senior's stock price, was
substantially less than its stated value, making the total value of the
Transaction far less than $170,000,000. The SAC further alleged that the
Individual Defendants had breached their fiduciary obligations to the REITs'
shareholders by failing to take steps to maximize shareholder value, and by
failing to properly consider and pursue other, potentially more valuable
expressions of interest. The SAC sought, among other things, to enjoin the
Capital Senior Acquisition until the ILM Defendants held an auction for the
Properties or participated in some other process which would result in a
transaction providing the REITs' shareholders with maximum value.
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By motions addressed to the pleadings, made on about April 8,
1999, Defendants moved to dismiss the SAC. Specifically, Defendants argued that
the alleged conduct leading to the Transaction (even assuming the allegations to
be true) was not actionable under the law governing the fiduciary obligations of
directors of Virginia corporations, including Va. Code Ann. Sections 13.1-690
("Section 690") and 13.1-691 ("Section 691"), the law applicable here.
Defendants' motion focused in particular upon Section 690, a statute which
requires courts to act with extreme deference in determining whether directors
of Virginia corporations have breached their fiduciary obligations in making
decisions which impact a corporation, and which provides a safe-harbor for
directors' decisions made in good faith reliance upon the advice of independent
and credible advisors.
On March 4, 1999, the Court entered an order which, inter alia,
set a trial date of July 13, 1999, and provided that the parties complete
discovery by June 26, 1999 (subsequently extended to July 1, 1999). Thereafter,
the parties engaged in expedited discovery which included the production by the
Defendants and relevant third parties of thousands of pages of documents, which
were reviewed and analyzed by Class Counsel. Discovery also included the
following depositions: Plaintiff, Andrew A. Feldman; Plaintiffs' expert, Kurt
Kroboth of CFC Capital Corp.; all of the Individual Defendants; the REITs'
investment advisors Bradley G. Razook and Peter E. Pickette; James Stroud, one
of the founders of Capital Senior; C. David Carlson, an independent consultant
to the REITs; and third-parties, Brookdale and Sunrise.
In early June 1999, the parties commenced discussions concerning
a possible resolution of the Action but did not reach an agreement at that time.
On June 7, 1999, the Court granted in part and denied in part Defendants'
motions to dismiss the SAC (the "June 7 Decision"). In the June 7 Decision, the
Court held that the breach of fiduciary duty claim
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advanced in the SAC was properly pled. Thereafter, Defendants filed answers,
denying in material part, the allegations of the SAC and denying liability.
On June 21, 1999, Defendants moved the Court to reconsider the
June 7 Decision. Defendants' motion for reconsideration was based upon the
decision by the Supreme Court of Virginia in Willard v. Moneta Building Supply,
Inc., 515 S.E.2d 277 (Va. June 11, 1999) ("Willard"), which was issued four days
after the June 7 Decision. In the Willard case, the Supreme Court of Virginia
held that under Section 690, Virginia directors were not obligated to maximize
shareholder value, and that directors who are faced with competing bids for the
sale of a company do not have a duty to choose the highest bid, but may consider
factors other than price.
Given the Willard decision, and certain of the deposition
testimony which Class Counsel elicited during discovery, Class Counsel
re-evaluated whether they would be able to meet the very difficult threshold
which the Plaintiffs would have been required to meet in order to prove a breach
of Section 690 by the Individual Defendants. Class Counsel thus continued
settlement negotiations, arriving at an agreement in principle with defense
counsel on the terms of a settlement on July 2, 1999. By letter dated July 2,
1999, the parties informed the Court that a settlement-in-principle of the
Action had been reached and, at a July 7, 1999 hearing, informed the Court of
the terms of the Settlement. Counsel for the parties then engaged in protracted
negotiations concerning the final terms of the settlement, set forth in the
Stipulation.
At present, at least two potential purchasers, Brookdale and
Capital Senior, are pursuing or have indicated an interest in pursuing a
transaction with the REITs. Moreover, under the proposed Settlement there is an
opportunity for other potential purchasers to propose a transaction with the
REITs. The Settlement, as described below, sets a minimum floor price of
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$172,000,000 in cash for any purchase of the REITs or the Properties while
seeking to assure that the bidding and negotiation process for the REITs or
Properties continues in a fair manner until a transaction which is in the best
interests of the Class is consummated.
SUMMARY OF THE PROPOSED SETTLEMENT
The following is a summary of the proposed Settlement. Reference
is made to the Stipulation, which is on file with the Court, for a full
statement of the Settlement:
1. The Revised Capital Senior Offer. The Capital Senior
Acquisition consisted of $110,500,000 in cash and convertible preferred trust
securities (the "Convertible Securities") with a denominated value of
$59,500,000, and thus had a denominated aggregate value of $170,000,000 at the
time the Merger Agreements were signed on February 7, 1999. Up to 35% of the
total consideration of the Capital Senior Acquisition consisted of the
Convertible Securities, the value of which was tied to the price of Capital
Senior common stock. At the time of the settlement negotiations, Plaintiffs'
expert opined to Class Counsel that as a result of a decline in the price of
Capital Senior's common stock since the Merger Agreements were signed on
February 7, 1999, the value of the Capital Senior Acquisition as of July 2, 1999
was approximately $165,500,000. Defendants were not privy to Plaintiffs'
expert's analysis or opinion and do not necessarily agree with this calculation.
Subsequent fluctuations in the price of Capital Senior common stock may have
resulted in increases or decreases in the estimated value of the Transaction. As
a consequence of the Settlement, Capital Senior has agreed to increase and
change the consideration which it is offering to $172,000,000 in cash (the
"Revised Capital Senior Acquisition"), so that every Settlement Class member may
have the option of receiving his portion of the consideration in cash. Thus, the
revised Capital Senior Acquisition will provide every Settlement Class member
with the option of receiving his consideration in all
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cash, or, at his option, with the right to elect to receive cash and Convertible
Securities. However, in no event will more than 35% of the total consideration
to be paid to the Settlement Class be paid in the form of the Convertible
Securities.
2. Proxy. The ILM Defendants have agreed to propose that any
definitive proxy statement submitted for review to the United States Securities
and Exchange Commission, to be disseminated to shareholders of the REITs in
connection with the Revised Capital Senior Acquisition, disclose in substance:
(1) that the Convertible Securities component of the merger consideration was
determined on the date on which the original Merger Agreements were signed and
was based, in part, on the closing sale price of Capital Senior common stock on
the trading day prior to the February 7, 1999 execution date; (2) that in view
of the inherent fluctuations in such stock price from such date through and
including the date of the definitive proxy statements, any shareholder electing
to receive part of his merger consideration in the form of Convertible
Securities should note that the value of the Convertible Securities he will
receive in the merger may be more or less than the value of such Convertible
Securities on the date the Merger Agreements were executed; (3) a comparison of
the price of Capital Senior's common stock on the date the Merger Agreements
were signed to the price of Capital Senior's common stock on the most recent
available date preceding the date of the definitive proxy statement; and (4)
that before choosing to elect to receive a portion of his consideration in
Convertible Securities versus all cash, shareholders should consider these and
any further changes in the price of Capital Senior stock.
3. The Price Floor. Unless there is any material adverse
change, it is in the best interests of the REITs or their shareholders to do
otherwise, or unless Capital Senior, in accordance the terms of the Revised
Capital Senior Acquisition, refuses to close the
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Revised Capital Senior Acquisition, the ILM Defendants will not approve an
Extraordinary Transaction (as defined in the Stipulation) which would provide
the Settlement Class with consideration with a value of less than $172,000,000,
exclusive of Class Counsels' fees and expenses, as awarded by the Court.
4. The ILM Defendants' Agreement with Respect to the
Involvement of Class Counsel in the Ongoing Process. In order to provide
assurance that all bidders receive fair treatment, the ILM Defendants have
agreed to:
(a) keep Class Counsel informed on a timely, periodic basis
with regard to material developments in the progress of
the process and any negotiations with purchasers or
potential purchasers, by providing to Class Counsel a
written or oral status report of material developments
in such negotiations and process;
(b) timely provide Class Counsel with copies of all
material documents concerning the bidding and
negotiating process for an Extraordinary Transaction,
including all purchase or merger agreements, all
confidentiality and standstill agreements, all letters
offering to purchase all or substantially all of the
Properties, the REITs, or their shares and all
responses thereto, all material written communications
to any bidder or potential bidder, preliminary and
definitive proxy statements filed with the SEC, and all
comments by the SEC to any proposed proxy and other
material documentation concerning the bidding and
negotiating process;
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(c) consult with Class Counsel, through the ILM Defendants'
counsel, Greenberg Traurig, prior to and regarding any
and all material decisions relating to any proposed
Extraordinary Transaction, including but not limited
to, the Revised Capital Senior Acquisition and any
proposal for an Extraordinary Transaction by Brookdale,
so as to permit the REITs' Boards of Directors to
consider Class Counsel's meaningful input into the
bidding and negotiating process; and
(d) allow Class Counsel to speak to Brookdale or other
potential bidders with regard to any problems which it
may encounter during the negotiating process, and allow
Class Counsel to bring such problems to the attention
of the Court if they are not timely rectified by the
ILM Defendants.
CLASS COUNSEL BELIEVE THAT THE SETTLEMENT
IS FAIR, REASONABLE AND ADEQUATE
Class Counsel have investigated the facts and circumstances, and
have thoroughly briefed, argued and considered the legal issues applicable to
this Action. As described above, Class Counsel have conducted all necessary
pre-trial discovery, and have commenced trial preparation. Thus, they have had
the opportunity to carefully evaluate the expense and length of time necessary
to continue the Action to trial and through the appeals which would likely ensue
in the event that Plaintiffs were successful at trial. They have also had the
opportunity to consider the merits of the Defendants' potential defenses, the
likely outcome of Defendants' motion for reconsideration, the results of their
own efforts to test the market for the Properties
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and the REITs, the current "softening" market for the Properties and the REITs,
and the advantages of the Settlement which provides that Capital Senior
substantially increase its bid and revise its offer to allow all proposed
Settlement Class Members to receive their consideration in cash, while providing
mechanisms which would ensure that the ongoing process continues in a fair and
even-handed manner.
In light of the benefits which Class Counsel were able to
negotiate notwithstanding the Willard decision and other potential difficulties
in meeting their burden of proof at trial, Class Counsel have concluded that
further proceedings against the Defendants would be complex and expensive, and
would not likely result in a greater recovery for the proposed Settlement Class
given the significant benefits provided by the Settlement. Based upon the
consideration of these factors, Plaintiffs and Class Counsel have concluded that
it is desirable and in the best interests of the proposed Settlement Class and
the REITs to settle this Action and to release the claims against the
Defendants.
DEFENDANTS' DENIALS OF WRONGDOING
Defendants deny all allegations of wrongdoing and liability
against them arising out of any of the conduct, statements, acts or omissions
alleged, or that could have been alleged in the Action. Nonetheless, Defendants
have concluded that in order to avoid the burden, expense and uncertainties of
further litigation, it is preferable to settle the Action upon the terms and
conditions set forth in the Stipulation and summarized in this Notice.
RELEASE
Upon the Settlement Effective Date (as defined in the Stipulation), each
and every member of the proposed Settlement Class, on behalf of himself, his
heirs, estates, executors, administrators, successors, and assigns, hereby
releases all Defendants in the Action, including
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for all such persons or entities, their directors, officers, partners,
principals, employees, agents, attorneys, financial advisors, parents,
subsidiaries, affiliates, divisions and predecessors or successors in interests,
and their respective heirs, executors, administrators, personal representatives,
successors and assigns (collectively, the "Released Persons"), from any and all
manner of actions, suits, demands, debts, liabilities, obligations, promises,
controversies, claims, causes of action, allegations or rights whatsoever,
whether class, individual or derivative in nature, whether in law or in equity,
whether based upon state or federal law (excluding claims arising from the
Proxy/Prospectus, which is anticipated to be distributed to shareholders), which
the members of the proposed Settlement Class or any of them, have, ever had, or
now have, or which any of them brought, could have brought or could now bring
derivatively on behalf of the REITs against any or all of the foregoing Released
Persons, by reason of, based upon, or arising out of the facts and transactions
identified in the SAC, or which have been or could have been asserted in the
Action (the "Released Claims").
THE PROPOSED FINAL JUDGMENT
If the Settlement is approved by the Court, the Court will enter a Final
Order and Judgment (the "Judgment"), which will:
(a) Certify a Settlement Class consisting of all persons
or entities who were record or beneficial holders of shares of either ILM I or
ILM II on May 8, 1998, and/or their successors and assigns in interest,
excluding the defendants, as defined below, and all released persons, as defined
in the stipulation, appointing the Plaintiffs as the appropriate representatives
and appointing Class Counsel as the Class' Counsel;
(b) Approve the Stipulation and the Settlement, and find
that, inter alia, that the Settlement is fair, reasonable and adequate, and that
the Settlement is in the best
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interests of the Class and the REITs, and direct the consummation of the
Settlement in accordance with the terms and conditions of the Stipulation;
(c) Dismiss the Action and each and every cause of action
and claim set forth therein as to all Defendants, and with prejudice to the
Settlement Class, extinguish all claims, rights, demands and causes of action
that might have been asserted therein by the Plaintiffs on their own behalves,
or on behalf of the Settlement Class and/or the REITs, and discharge the
Defendants and all Released Persons;
(d) Permanently bar the Settlement Class members from
asserting the Released Claims against the Released Persons, and releasing the
Released Persons from the Released Claims; and
(e) Reserve jurisdiction in the Court over all matters
relating to the administration and consummation of the Stipulation and the
Settlement, and provide for a procedure which would allow Class Counsel to give
Defendants notice, and thereafter to raise before the Court, any failure by the
Defendants or any one of them to comply with any of the terms herein, and any
failure to implement in good faith any part of the Stipulation and Settlement.
THE SETTLEMENT HEARING
At the Settlement Hearing, the Court will determine whether: (1)
the Settlement Class should be certified, the Plaintiffs should be appointed as
the Class' representatives and Class Counsel appointed as the Class' Counsel;
(2) the Settlement described above is fair, reasonable and adequate, and whether
it should be finally approved by the Court; (3) the Action should be dismissed
on the merits and with prejudice and judgment entered as provided above, and (4)
consider Class Counsel's application for attorneys' fees and reimbursement of
out of
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pocket expenses. The Settlement Hearing may be continued or adjourned from time
to time by the Court at the hearing or any adjourned session thereof without
further notice.
If you are a member of the Settlement Class and you wish to be
heard in support of, or in opposition to, the Settlement and/or Class Counsel's
fee application (as further described below), you must on or before September
17, 1999: (a) file with the Court a written notice of your intention to appear
and/or be heard at the Settlement Hearing, together with any other papers you
wish to be considered at the Settlement Hearing, setting forth any such
information and/or objections and support for such objections. Such papers must
refer to Feldman, et al. v. Cohen, et al., 98 Civ. 3789 (LAK), state the full
name of the person or entity submitting the request to be heard, proof of the
number of shares owned by such person or entity as of May 8, 1998, and a
statement of the reasons why it is believed that the Court should find that the
Settlement is, or is not, fair, reasonable and adequate or in the best interests
of the Settlement Class or the REITs, and/or why such person or entity supports
or opposes Class Counsel's application for attorney's fees and expenses, and (b)
serve copies of the foregoing papers upon counsel for the parties to the
Settlement on or before September 17,1999, at the addresses given below:
To the Defendants:
Greenberg Traurig
MetLife Building
200 Park Avenue, 15th Fl.
New York, New York 10166
Attn.: Stephen L. Saxl, Esq.
- and -
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Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
Attn.: Stuart L. Shapiro, Esq.
To the Plaintiffs:
Goodkind Labaton Rudoff & Sucharow LLP
100 Park Avenue
New York, New York 10017-5563
Attn.: Lynda J. Grant, Esq.
Any Settlement Class member who does not make his or her
objection known in the manner provided herein shall be deemed to have waived
such objection and shall forever be foreclosed from making any objections unless
otherwise ordered by the Court.
CLASS COUNSEL'S APPLICATION FOR FEES
AND REIMBURSEMENT OF OUT OF POCKET EXPENSES
Class Counsel intend to seek an award of attorneys' fees in an
amount that will not exceed $1,500,000 plus the reimbursement of their out of
pocket expenses. The attorneys' fees awarded by the Court will be paid as
follows: (1) by Capital Senior, in the event that an Extraordinary Transaction
with Capital Senior is ultimately consummated; or (2) by the REITs, if any other
bidder is the successful bidder and the REITs' boards of directors ultimately
approve an Extraordinary Transaction with a third-party bidder. The Defendants
will not object to any application by Class Counsel for an award of attorneys'
fees of up to $1,500,000, plus the reimbursement of their out of pocket
expenses.
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EXAMINATION OF PAPERS AND INQUIRIES
For a more detailed statement of the matters involved in the
Action, reference is made to the pleadings, the Stipulation and other papers
filed in the Action, which may be inspected at the Office of the Clerk of the
Court, during business hours of each business day.
Inquiries regarding the Action should be in writing and addressed
to Class Counsel at the address given above.
PLEASE DO NOT TELEPHONE THE
COURT REGARDING THIS NOTICE.
Dated: August 13, 1999
By Order of the Hon. Lewis A. Kaplan,
United States District Judge
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EXHIBIT C
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------------------------x
ANDREW A. FELDMAN & JERI FELDMAN, as trustees for the ANDREW A. & :
JERI FELDMAN REVOCABLE TRUST DATED 9/18/90, on behalf of themselves :
and others similarly situated, : 98 Civ.
: 3789
Plaintiffs, : (LAK)
:
- against - :
:
LAWRENCE A. COHEN, JEFFRY R. DWYER, J. WILLIAM SHARMAN, JR., CARL J. :
SCHRAMM, JULIEN G. REDELE, ILM SENIOR LIVING, INC., and ILM II SENIOR :
LIVING, INC., :
:
Defendants. :
:
:
- ----------------------------------------------------------------------x
FINAL JUDGMENT AND ORDER
This cause coming to be heard by application of the Parties (as
defined in the Stipulation of Settlement ("Stipulation")); pursuant to th e
Stipulation; after due notice to the Settlement Class (as defined in the
Stipulation) and an opportunity to be heard; the Parties having appeared; the
Court being fully advised of the premises; and the Parties requesting that a
Final Judgment and Order be rendered;
It is hereby ADJUDGED and ORDERED that:
(1) The motion for final approval of the Settlement is hereby approved
by the Court as fair, reasonable and adequate to the Settlement Class (defined
below) and ILM Senior Living, Inc. and ILM II Senior Living, Inc. (the "REITs");
(2) The parties are hereby authorized to consummate the Settlement
according to the terms and conditions of the Stipulation;
<PAGE>
(3) The Plaintiffs (as defined in the Stipulation) are proper parties
to assert any and all claims in the Second Amended Class Action Complaint;
(4) The Settlement Class is defined as: All record and beneficial
holders of shares of ILM Senior Living, Inc, or ILM II Senior Living, Inc. as of
May 8, 1998, and their successors and assigns in interest, excluding the
Defendants (as defined in the Stipulation) and the Released Persons (as defined
in the Stipulation);
(5) The Court finds that the form, methods of notice and the content of
the Notice (as defined in the Stipulation) was the best notice practicable,
constituted due and sufficient notice of the Settlement Hearing to all persons
entitled to receive such Notice, and fully satisfied the requirements of due
process, the Federal Rules of Civil Procedure, and the United States
Constitution;
(6) The Action is dismissed in its entirety, on the merits, with
prejudice and without costs to any party (except for the cost of Notice which
will be borne by the REITs), and the Released Claims are released as against the
Defendants (as defined in the Stipulation) and the Released Persons;
(7) Plaintiffs and each member of
the Settlement Class are conclusively deemed to have released any and all
Released Claims and are barred and permanently enjoined from prosecuting any
and all Claims against any and all of the Defendants and Released Persons;
(8)
There is no just reason for delaying either the judgment or an appeal
therefrom;.
(9) Without affecting the finality of the judgment entered with respect
to the foregoing matters, this Court reserves jurisdiction over the
implementation, enforcement and administration of the Stipulation (including
exhibits) and Settlement. In the event that Class Counsel determines that any
defendant or other party to the Stipulation and Settlement has failed
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to comply with any of the terms of the Stipulation and Settlement, Class Counsel
will provide the ILM Defendants' Counsel with prompt written notice of such
failure, and the ILM Defendants' Counsel will provide Class Counsel with a
written response regarding any alleged failure within two (2) business days. In
the event that the ILM Defendants do not rectify the alleged failure to comply
to Class Counsel's satisfaction, Class Counsel will notify the ILM Defendants'
counsel and request a conference with the Court by letter. If the Court
concludes that a conference is warranted, the Court will hold a conference, and
if necessary, enter an appropriate order. The Court further reserves
jurisdiction over all other matters related or ancillary to the Stipulation and
Settlement.
SO ORDERED.
Dated: ___________, 1999
--------------------------------
Hon. Lewis A. Kaplan
United States District Judge
3
