-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A9qf81BOtgsafwNmcprAZa3d+J2X9mKBtib8VIEe/ZTL/xLD30FoObzqdiqwrp0j tp5oY68/ehr5l+AJn85g0A== 0000911420-01-000010.txt : 20010223 0000911420-01-000010.hdr.sgml : 20010223 ACCESSION NUMBER: 0000911420-01-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010208 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILM II SENIOR LIVING INC /VA CENTRAL INDEX KEY: 0000861880 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 061293758 STATE OF INCORPORATION: VA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-18942 FILM NUMBER: 1543076 BUSINESS ADDRESS: STREET 1: 8180 GREENSBORO DRIVE STREET 2: STE 850 CITY: MCLEAN STATE: VA ZIP: 22102 BUSINESS PHONE: 8883573550 MAIL ADDRESS: STREET 1: 1300 CONNECTICUT AVE NW STREET 2: STE 1000 CITY: WASHINGTON STATE: DC ZIP: 20036 FORMER COMPANY: FORMER CONFORMED NAME: PAINE WEBBER INDEPENDENT LIVING MORTGAGE INC II DATE OF NAME CHANGE: 19971103 FORMER COMPANY: FORMER CONFORMED NAME: ILM II SENIOR LIVING INC DATE OF NAME CHANGE: 19970905 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER INDEPENDENT LIVING MORTGAGE INC II DATE OF NAME CHANGE: 19930511 8-K 1 0001.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 8, 2001 Commission File Number: 0-18942 ILM II SENIOR LIVING, INC. -------------------------- (Exact name of registrant as specified in its charter) Virginia 06-1293758 - --------------------------------------- ----------------------- (State of organization) (I.R.S. Employer Identification No.) 1750 Tysons Boulevard, Suite 1200 Tysons Corner, Virginia 22102 - --------------------------------------- ----------------------- (Address of principal executive office) (Zip Code) (888) 257-3550 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS On February 8, 2001, ILM II Senior Living, Inc. (the "Company") received a notice from representatives of Capital Senior Living Corporation ("Capital") terminating the Amended and Restated Agreement and Plan of Merger dated October 19, 1999, as amended (the "Merger Agreement"), among the Company, Capital and Capital's acquisition subsidiary, which agreement had provided for the merger of the Company with and into Capital's acquisition subsidiary. As stated in their termination letter, Capital terminated the Merger Agreement because of concerns it has relating to the Company's claimed election in 1996 to defer built-in gains taxes upon conversion from a C-corporation to a Real Estate Investment Trust. As previously reported in the Company's public filings, the Company claimed this election based upon the advice of its outside tax accountants, has operated since 1996 under the belief that such election was validly perfected, and is pursuing administrative relief with the Internal Revenue Service to ensure the availability of the Company's election to defer such corporate level built-in gains taxes. The Company believes that it has a legitimate basis to claim the election based, in part, and with reliance upon the advice of its outside tax accountants. Ultimate resolution of this matter is at the discretion of the Internal Revenue Service. An adverse determination by the Internal Revenue Service would result in the payment of interest and penalties due on tax payments which were deferred since 1996. The Company cannot estimate with certainty the timing of such resolution nor can there be any assurance as to the outcome of this matter. A copy of the termination letter is filed herewith as Exhibit 99.1 and the complete text thereof is incorporated by reference in this Item 5. As previously reported, pursuant to the Company's organizational instruments it is required to liquidate its properties not later than December 31, 2001. The Company's Board of Directors and management are working diligently with outside legal counsel and with Cohen & Steers Capital Advisors LLC, the Company's financial advisors, to identify, formulate and pursue all strategic alternatives to maximize shareholder value, including, without limitation, putting the Company up for sale as a going-concern and liquidating the Company's senior living properties by means of public auction, privately negotiated sale or otherwise. The Company intends to contact and invite prospective purchasers to submit bona fide offers to acquire the Company's stock or assets upon terms and conditions in the best interests of shareholders. 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: 99.1 Letter dated February 8, 2001. 99.2 Press Release of ILM II Senior Living, Inc. dated February 14, 2001. 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 hereunto duly authorized. ILM II SENIOR LIVING, INC. By: /s/ J. William Sharman, Jr. ---------------------------- J. William Sharman, Jr. Chairman of the Board of Directors, President and Chief Executive Officer Dated: February 14, 2001 EXHIBIT INDEX Page No. 99.1 Letter dated February 8, 2001. 5 99.2 Press Release of ILM II Senior Living, Inc. 8 dated February 14, 2001. EX-99.1 2 0002.txt LETTER EXHIBIT 99.1 [Jenkens & Gilchrist Letterhead] Winston W. Walp II (214) 855-4354 wwalp@jenkens.com February 8, 2001 ILM II Senior Living, Inc. VIA FAX 28 State Street, Suite 1100 Boston, Massachusetts 02109 Attention: J. William Sharman Chairman and Chief Executive Officer Re: ILM II/Capital Merger Gentlemen: We are writing this letter on behalf of Capital Senior Living Corporation and Capital Senior Living Acquisition, LLC (collectively, "Capital") in connection with the Amended and Restated Agreement and Plan of Merger among Capital and ILM II Senior Living, Inc. ("ILM II"), as amended by First Amendment thereto dated April 18, 2000 and Second Amendment thereto dated November 28, 2000 (as amended, the "Merger Agreement"). Representatives of ILM II have recently orally informed Capital about an issue relating to the so-called "built-in gain tax" to which ILM II is subject. This issue is described in the Form 10-K Annual Report of ILM II filed with the Securities and Exchange Commission on January 31, 2001. Footnote 2 to the audited financial statement of ILM II filed as part of its Form 10-K states in pertinent part as follows: "Based upon advice from the Company's financial advisors, commencing in 1996, the Company has acted as though it had made an election in its 1996 tax return to allow the Company to avoid a corporate level tax upon its conversion from a C-Corporation to a Real Estate Investment Trust. Because proof of a formal election has not been obtained, the Company is pursuing administrative relief with the Internal Revenue Service to ensure the availability of the benefits of this election. Although the Company believes that it had a legitimate basis to make this election, in part, based upon the advice of its financial advisors, ultimate resolution of this matter is at the discretion of the Internal Revenue Service. If unsuccessful, the Company could be liable for up to $2.7 million of additional penalties and interest." Jenkens & Gilchrist A PROFESSIONAL CORPORATION ILM II Senior Living, Inc. February 8, 2001 Page 2 The referenced $2.7 million of additional penalties and interest are in addition to the built in gain tax of "as such $2.3 million" as stated in ILM II's Form 10-K. Furthermore, if the IRS does not grant the relief sought, in the merger with ILM II, Capital would be unable to offset the built in gain tax with approximately $4.2 million of net operating losses that were incurred after the conversion of ILM II Holding, Inc. to REIT status. Under Section 7.1(d) of the Merger Agreement, ILM II may terminate the Merger Agreement if the Merger has not been consummated by March 31, 2001. ILM II has on several occasions indicated that it would not extend this March 31, 2001 date. Capital has been actively working on financing to complete the Merger by March 31, 2001 and has obtained a commitment for this financing. Capital has already expended significant funds relating to this financing and is now at a point where Capital must commit to even more significant expenditures in order to complete the financing by March 31, 2001. In addition to these significant expenditures about to be incurred, Capital will be placed at significant risk of liability to parties involved in the financing if the financing is not completed by March 31, 2001. Capital is extremely concerned with the tax issue which has now been revealed in ILM II's Form 10-K. As stated in the Form 10-K, successful resolution of this tax issue is subject to the discretion of the Internal Revenue Service ("IRS"). If the IRS does not grant the relief sought, the additional tax liability and inability by Capital to use the net operating losses as an offset would represent a material adverse change which would have a Material Adverse Effect (as defined in the Merger Agreement). In ordinary circumstances, Capital would put its financing on hold and would await the resolution from the IRS of this issue. Capital has been told by the accountants for ILM II that the IRS resolution of this issue may take anywhere from 2 to 4 weeks to 3 months or longer after formal submission to the IRS, which formal submission has not yet been made by ILM II. However, awaiting the IRS resolution would certainly make completion by Capital of its financing by March 31, 2001 impossible. Thus Capital has been put in an untenable position by this tax issue to which ILM II is subject. In light of the above circumstances, Capital believes that it has no other choice than to terminate the Merger Agreement. Therefore, Capital hereby notifies ILM II that Capital hereby terminates the Merger Agreement pursuant to Section 7.l(i)(i) of the Merger Agreement as a result of the occurrence and existence of events, changes, set of circumstances or conditions having or which reasonably could be likely to have a Material Adverse Effect. Sincerely, /s/ Winston W. Walp II ----------------------- Winston W. Walp II Jenkens & Gilchrist A PROFESSIONAL CORPORATION ILM II Senior Living, Inc. February 8, 2001 Page 3 cc: Greenberg Traurig (via fax) The Met Life Building 200 Park Avenue, 15th Floor New York, New York 10166 Attention: Clifford E. Neimeth, Esq. Mr. Jeffry R. Dwyer (via fax) Mr. James A. Stroud (via fax) Mr. Lawrence A. Cohen (via fax) David R. Brickman, Esq. (via fax) EX-99.2 3 0003.txt PRESS RELEASE EXHIBIT 99.2 ILM II SENIOR LIVING, INC. RECEIVES TERMINATION LETTER FROM CAPITAL SENIOR LIVING CORPORATION February 14, 2001, Tyson's Corner, Virginia: ILM II Senior Living, Inc. today announced that on February 8, 2001, it received notice from representatives of Capital Senior Living Corporation (NYSE: CSU), terminating the merger agreement among ILM II, Capital and a subsidiary of Capital which agreement had provided for the merger of ILM II with and into Capital's subsidiary. As stated in their termination letter, Capital terminated the merger agreement because of concerns it has relating to ILM II's claimed election in 1996 to defer built-in gains taxes upon its conversion from a C-corporation to a Real Estate Investment Trust. As previously reported in ILM II's public filings, ILM II claimed this election based upon the advice of its outside tax accountants, has operated since 1996 under the belief that such election was validly perfected, and is pursuing administrative relief with the Internal Revenue Service to ensure the availability of ILM II's election to defer such corporate level built-in gains taxes. ILM II believes that it has a legitimate basis to claim the election based, in part, and with reliance upon the advice of its outside tax accountants. Ultimate resolution of this matter is at the discretion of the Internal Revenue Service. An adverse determination by the Internal Revenue Service would result in the payment of interest and penalties due on tax payments which were deferred since 1996. ILM II cannot estimate with certainty the timing of such resolution nor can there be any assurance as to the outcome of this matter. As previously reported, pursuant to ILM II's organizational instruments it is required to liquidate its properties not later than December 31, 2001. ILM II's Board of Directors and management are working diligently with their outside legal counsel and with Cohen & Steers Capital Advisors LLC, ILM II's financial advisors, to identify, formulate and pursue all strategic financial alternatives to maximize shareholder value, including, without limitation, putting ILM II up for sale as a going-concern and liquidating ILM II's senior living properties by means of public auction, privately negotiated sale or otherwise. ILM II intends to contact and invite prospective purchasers to submit bona fide offers to acquire ILM II's stock or assets upon terms and conditions in the best interests of shareholders. Contact: J. William Sharman, Jr. (888) 257-3550 THIS PRESS RELEASE CONTAINS "FORWARD-LOOKING STATEMENTS" BASED ON OUR CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES WHICH COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE ANTICIPATED AND CERTAIN OF WHICH ARE BEYOND OUR CONTROL. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. -----END PRIVACY-ENHANCED MESSAGE-----