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SUPPORT AGREEMENT This Support Agreement, dated

Key Takeaway: This Support Agreement, dated March 7, 2017 (this "Agreement"), is by and among Capital Senior Living Corporation (the "Company"), Arbiter Partners Capital Management LLC, Arbiter Partners QP, LP, Paul J. Isaac and Ross B. Levin (collectively, the "Arbiter Signatories", and toget

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This Support Agreement, dated March 7, 2017 (this "Agreement"), is by and among Capital Senior Living Corporation (the "Company"), Arbiter Partners Capital Management LLC, Arbiter Partners QP, LP, Paul J. Isaac and Ross B. Levin (collectively, the "Arbiter Signatories", and together with certain other persons referenced on Exhibit A and previously identified to the Company, the "Arbiter Group").
In consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Arbiter Group Voting and Related Items. Upon execution of this Agreement, the Arbiter Signatories hereby irrevocably: (i) agree not to, and agree to use their reasonable best efforts to cause the other members of the Arbiter Group not to, directly or indirectly, nominate any person for election to the board of directors of the Company (the "Board") at the Company's 2017 Annual Meeting of its stockholders (the "2017 Annual Meeting") or, prior to the end of the Restricted Period, at any special meeting of stockholders of the Company (each, a Special Meeting"), submit any proposal for consideration at, or bring any other business before, the 2017 Annual Meeting or, prior to the end of the Restricted Period, any Special Meeting, or initiate, encourage or participate in any "withhold" or similar campaign with respect to the 2017 Annual Meeting or, prior to the end of the Restricted Period, any Special Meeting and (ii) agree to, and agree to use their reasonable best efforts to cause the other members of the Arbiter Group to, appear in person or by proxy and cause all shares of Company common stock ("Common Stock") over which they have the right to vote or direct the voting to be present for quorum purposes and voted (or consent to be given (if applicable)) at the 2017 Annual Meeting and at any Special Meeting that may be held prior to the end of the Restricted Period, (w) in favor of all nominees for director and any other proposals recommended by the Board (except regarding any Extraordinary Transaction (as defined below)), (x) against any nominees for director and any other proposals not recommended by the Board (except regarding any Extraordinary Transaction), (y) against any stockholder proposals to remove any director and (z) in favor of (A) the Company's "say-on-pay" proposal and (B) the Company's proposal for ratification of the appointment of the Company's independent registered public accounting firm. The Arbiter Signatories shall, and shall cause their respective Affiliates (as defined below) to, and shall use their reasonable best efforts to cause the other members of the Arbiter Group and such other members' respective Affiliates to, take each of the required actions (or refrain from taking each of the prohibited actions) set forth in this Section 1, as applicable, and shall not, and shall cause their respective Affiliates not to, and shall use their reasonable best efforts to cause the other members of the Arbiter Group and such other members' respective Affiliates not to, publicly or privately encourage or support any other stockholder of the Company to take any action in violation of this Section 1.
3. Standstill. From the date of this Agreement to the Expiration Date (the "Restricted Period"), without the prior written consent of the Board, the Arbiter Signatories shall not, and shall not permit any of their respective Affiliates, or any of the Arbiter Signatories' or their respective Affiliates' directors, officers, employees, consultants or representatives to, and shall use their reasonable best efforts to not permit any other members of the Arbiter Group or any of such other members' respective Affiliates, or any of such other members' or such other members' respective Affiliates' directors, officers, employees, consultants or representatives, to, directly or indirectly, alone or in concert with any person:
The Arbiter Signatories, jointly and severally, agree to be responsible for any action or omission by any of the following that would constitute a breach of this Agreement if directly or indirectly taken or omitted by any member of the Arbiter Group: any consultants, agents, representatives, attorneys, Affiliates and advisors of the Arbiter Signatories, to the extent such persons are directly or indirectly acting on behalf of the Arbiter Signatories. For the avoidance of doubt, nothing in this Agreement shall limit the ability of the Arbiter Designees to act in accordance with their fiduciary duties in their individual capacities as directors of the Company.
4. Representations and Warranties of All Parties; Representations and Warranties of the Arbiter Group. Each of the parties represents and warrants to the other party that: (a) such party has all requisite corporate or limited liability company power (or legal capacity, as applicable) and authority to execute and deliver this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly and validly authorized, executed and delivered by it and is a valid and binding obligation of such party, enforceable against such party in accordance with its terms; (c) this Agreement will not result in a violation of any terms or conditions of any agreements to which such person is a party or by which such party may otherwise be bound or of any law, rule, license, regulation, judgment, order or decree governing or affecting such party; and (d) there is currently no pending or outstanding litigation between the Arbiter Group and the Company or any of its subsidiaries. The Arbiter Signatories hereby represent and warrant to the Company, on their own behalf and on behalf of the other members of the Arbiter Group, that as of the date hereof, (i) the Arbiter Group beneficially owns in the aggregate 4,490,769 shares of Common Stock, of which 4,190,814 shares are owned by the Arbiter Signatories; and (ii) neither the Arbiter Group nor any of its Affiliates is a member of a "partnership, limited partnership, syndicate, or other group" with any person or entity outside of the Arbiter Group within the meaning of Section 13(d) of the Exchange Act.
5. Press Release; Non-Disparagement. The parties agree that the Company and the Arbiter Group shall jointly issue a press release promptly following the execution of this Agreement announcing the entry into this Agreement, in the form attached hereto as Exhibit B, and none of the parties to this Agreement shall issue any other press release with respect to the matters specified herein. During the Restricted Period, each party hereto agrees that it will not, and will cause its Affiliates, Associates (as defined below), directors, officers and employees not to, and will direct its agents, representatives, attorneys and advisors not to, make, or cause to be made, any statement or announcement that constitutes an ad hominem attack on, or otherwise disparages, impugns or is reasonably likely to damage the reputation of, (i) in the case of statements or announcements made by the Arbiter Group, the Company or any of its current or former officers, directors or employees, or (ii) in the case of statements or announcements made by the Company, the Arbiter Group or any of its current or former officers, directors, partners, employees or advisors, in each of the cases in clauses (i) or (ii), in any public communication or in any communication that would reasonably be
expected to enter the public domain. The foregoing shall not restrict the ability of any person to (i) comply with any subpoena or other legal process or respond to a request for information from any governmental authority with jurisdiction over the party from whom information is sought or (ii) make private statements to directors of the Board in a manner in which public dissemination of such statements would not be reasonably anticipated.
6. Definitions. As used in this Agreement, the term (a) "person" shall be interpreted broadly to include, among others, any individual, general or limited partnership, corporation, limited liability or unlimited liability company, joint venture, estate, trust, group, association or other legal entity of any kind or structure; (b) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act, and as to any person shall include persons who become Affiliates of such person subsequent to the date of this Agreement; (c) "Associate" shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act, and as to any person shall include persons who become Associates of such person subsequent to the date of this Agreement; (d) "Voting Securities" shall mean the shares of the Common Stock and any other securities of the Company entitled to vote in the election of directors, or securities convertible into, or exercisable or exchangeable for, such shares or other securities, whether or not subject to the passage of time or other contingencies; (e) "business day" shall mean any day other than a Saturday, Sunday or a day on which the Federal Reserve Bank of New York is closed; (f) "beneficially own", "beneficially owned" and "beneficial ownership" shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act; and (g) "Expiration Date" means the earlier of (i) the first date after the Notification Deadline that none of the Arbiter Designees serves on the Board; or (ii) the date of the 2018 Annual Meeting.
7. No Waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
8. Further Assurances. From and after the execution of this Agreement until the end of the Restricted Period the parties shall cooperate with each other in good faith in order to implement and carry out the intent of this Agreement.
9. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and may be amended only by an agreement in writing executed by the parties hereto.
10. Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be in writing and shall be deemed validly given, made or served, if (a) given by email, when such email is sent to the email address set forth below and the appropriate
confirmation is received or (b) if given by any other means, when actually received during normal business hours at the address specified in this subsection:
Capital Senior Living Corporation
14160 Dallas Parkway, Suite 300
Dallas, Texas 75254
Attention: David R. Brickman
Senior Vice President, Secretary and General Counsel
Email: dbrickman@capitalsenior.com
If to the Arbiter Group:
Arbiter Partners Capital Management, LLC
530 Fifth Avenue 20th Floor
New York, New York 10036
Attention: Joshua Musher
Email: jmusher@arbiterpartners.net
11. Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon the legality or enforceability of any other provision of this Agreement.
12. Counterparts. This Agreement may be executed in two or more counterparts (and may be delivered in portable document format (.pdf)), all of which together shall constitute a single agreement.
13. Successors and Assigns. This Agreement shall not be assignable or assigned, directly or indirectly, by operation of law or otherwise, by any of the parties to this Agreement.
14. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and is not enforceable by any other persons.
15. Fees and Expenses. Except as otherwise specified herein, each party shall bear its own fees, costs and expenses with respect to the negotiation, drafting and execution of this Agreement, including the fees, costs and expenses of its financial advisors, accountants and counsel.
16. Remedies; Forum and Governing Law. The parties hereto recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each party agrees that in addition to other remedies
that any other party shall be entitled to at law or equity, such other party shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement exclusively in the Court of Chancery or other federal or state courts of the State of Delaware. In the event that any action shall be brought in equity to enforce the provisions of this Agreement, no party shall allege, and each party hereby waives the defense, that there is an adequate remedy at law. Furthermore, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the Court of Chancery or other federal or state courts of the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the Court of Chancery or other federal or state courts of the State of Delaware, and each of the parties irrevocably waives the right to trial by jury, (d) agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief and (e) irrevocably consents to service of process by a reputable overnight delivery service, signature requested, to the address of such party's principal place of business or as otherwise provided by applicable law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
17. Interpretation and Construction. Each party and its counsel cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto exchanged among the parties shall be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this Agreement shall be decided without regards to events of drafting or preparation. The term "including" shall be deemed to mean "including without limitation" in all instances.
[Signature Pages Follow]
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused the same to be executed by its duly authorized representative, as of the date first above written.
Very truly yours,
CAPITAL SENIOR LIVING CORPORATION
By: /s/ Lawrence A. Cohen
Name: Lawrence A. Cohen
Title: Chief Executive Officer
[Signature Page to Support Agreement]
Accepted and agreed as of the date first written above:
ARBITER PARTNERS CAPITAL MANAGEMENT LLC
By: /s/ Paul J. Isaac
Name: Paul J. Isaac
Title: Managing Member
ARBITER PARTNERS QP, LP
By: /s/ Paul J. Isaac
Name: Paul J. Isaac
Title: Portfolio Manager
PAUL J. ISAAC
/s/ Paul J. Isaac
Paul J. Isaac
ROSS B. LEVIN
/s/ Ross B. Levin
Ross B. Levin
[Signature Page to Support Agreement]
*Arbiter Partners Capital Management LLC Managed by Arbiter Partners Capital Management:
*Arbiter Partners QP LP
Third-party managed account client (to the extent of securities held from time to time in managed accounts managed by Arbiter Partners Capital Management LLC)
Principals of Arbiter Partners Capital Management:
*Paul J. Isaac
*Ross B. Levin
Certain Additional Persons Who May Be Deemed Affiliates or Associates of Arbiter Partners Capital Management:
Certain persons previously identified to the Company
* Indicates joint and several liability, in accordance with Section 3.
Capital Senior Living Corporation Appoints Paul J. Isaac
and Ross B. Levin as New Independent Directors
DALLAS, Texas-March 8, 2017-Capital Senior Living Corporation (the "Company" NYSE:CSU), one of the nation's largest operators of senior housing communities, announced today the appointment of Paul J. Isaac and Ross B. Levin of Arbiter Partners Capital Management, LLC ("Arbiter") to its Board of Directors, effective March 7, 2017. The appointments of Messrs. Isaac and Levin fill the vacant Board seat following the passing of Board member Keith Johannessen in December 2016, and expand the Board to 10 directors, nine of whom are independent. Arbiter and related parties currently own approximately 4.49 million shares of Capital Senior Living, representing approximately 14.95% of the total shares outstanding, making the Arbiter group the Company's largest shareholder.
Paul Isaac is the founder and CEO of Arbiter and has a broad range of investment experience. He currently serves as a director of Irex Corporation (North Lime Holdings). Ross Levin is the Director of Research for Arbiter, currently serves as a director of Mood Media Corporation, and is a former director of American Community Properties Trust and Presidential Life Corporation.
Lawrence A. Cohen, Chief Executive Officer and Vice Chairman of Capital Senior Living, stated, "We welcome Paul and Ross to the Board. Both are accomplished investors who complement the extensive expertise and talent of our existing board members, and who bring with them the important perspective of a large shareholder. We look forward to leveraging Paul and Ross' insights as we continue to execute on our long-term, real estate strategy and enhance value for all shareholders."
"Ross and I are honored to join the Board at this opportune time in the Company's history," said Mr. Isaac. "Capital Senior Living is executing a differentiated real estate strategy to drive growth and shareholder value. We believe the Company is uniquely positioned for continued success in a fragmented market. We look forward to working closely with our colleagues on the Board to achieve our mutual goal of generating additional value for Capital Senior Living shareholders."
The Board appointments are pursuant to a Support Agreement (the "Agreement") entered into between Capital Senior Living Corporation and Arbiter. The Agreement will remain in effect for a one year term, and includes customary standstill and voting commitments. The full Agreement will be included as an exhibit to a Current Report on Form 8-K and filed by the Company with the Securities Exchange Commission.
Capital Senior Living Corporation is one of the nation's largest operators of residential communities for senior adults. The Company's operating strategy is to provide value to residents by providing quality senior housing services at reasonable prices. The Company's communities emphasize a continuum of care, which integrates independent living, assisted living, and home care services, to provide residents the opportunity to age in place. The Company operates 129 senior housing communities in geographically concentrated regions with an aggregate capacity of approximately 16,500 residents.
The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including, but not without limitation to, the Company's ability to find suitable acquisition properties at favorable terms, financing, refinancing, community sales, licensing, business conditions, risks of downturns in economic conditions generally, satisfaction of closing conditions such as those pertaining to licensure, availability of insurance at commercially reasonable rates, and changes in accounting principles and interpretations among others, and other risks and factors identified from time to time in our reports filed with the Securities and Exchange Commission.
For information about Capital Senior Living, visit www.capitalsenior.com.
Contact Carey Hendrickson, Chief Financial Officer, at 972-770-5600 for more information.
Last updated: Mar 7, 2017