SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
Preliminary information statement
X Definitive information statement
______________________
FORUM GROUP, INC.
(Name of Registrant as Specified in Its Charter)
FORUM GROUP, INC.
(Name of Person(s) Filing Information Statement)
______________________
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii) or 14c-5(g).
Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11.
(1) Title of each class of securities to which transaction
applies: Not Applicable
(2) Aggregate number of securities to which transaction
applies: Not Applicable
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11: Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid: Not Applicable
(2) Form, schedule or registration statement no.: Not
Applicable
(3) Filing party: Not Applicable
(4) Date filed: Not Applicable
<PAGE>
FORUM GROUP, INC.
8900 Keystone Crossing, Suite 200
Post Office Box 40498
Indianapolis, Indiana 46240-0498
Telephone: (317) 846-0700
Dear Shareholder:
You are cordially invited to attend the 1994 Annual Meeting
of Shareholders of Forum Group, Inc., which will be held at
Wyndham Checkers, 535 South Grand Avenue, Los Angeles,
California, on Tuesday, September 13, 1994, at 9:00 a.m., Los
Angeles time. All holders of the Company's outstanding Common
Stock as of July 29, 1994 are entitled to vote at the Annual
Meeting.
Enclosed for your information are the Company's Information
Statement and the Company's Form 10-K Annual Report for the
fiscal year ended March 31, 1994, as amended and restated. We
hope that you find these materials to be informative.
We hope you will be able to attend the Annual Meeting. We
are not asking you for a proxy and you are requested not to send
us a proxy.
/s/ Robert A. Whitman
ROBERT A. WHITMAN,
Chairman of the Board
August 19, 1994
<PAGE>
FORUM GROUP, INC.
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 13, 1994
----------
The Annual Meeting of Shareholders of Forum Group, Inc. (the
"Company") will be held at Wyndham Checkers, 535 South Grand
Avenue, Los Angeles, California, on Tuesday, September 13, 1994,
at 9:00 a.m., Los Angeles time, for the following purposes:
1. To elect eleven directors to serve for one-year terms
expiring in 1995;
2. To consider and vote upon the deletion of certain
provisions of the Company's Restated Articles of Incorporation
(the "Articles of Incorporation") which prohibit the issuance of
nonvoting equity securities;
3. To consider and vote upon an amendment to the Articles
of Incorporation relating to the indemnification of directors and
officers of the Company;
4. To consider and vote upon an amendment to the Articles
of Incorporation relating to the definition of "Continuing
Director";
5. To consider and vote upon the approval of the Equity
Incentive Plan;
6. To consider and vote upon the ratification of the
appointment of independent accountants for the Company's fiscal
year ending March 31, 1995; and
7. To transact any other business which may be properly
brought before the Annual Meeting.
The close of business on July 29, 1994 has been fixed as the
record date for determining the shareholders entitled to notice
of, and to vote at, the Annual Meeting.
By Order of the Board of Directors,
/s/ John H. Sharpe
JOHN H. SHARPE,
Secretary
August 19, 1994
<PAGE>
FORUM GROUP, INC.
INFORMATION STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
September 13, 1994
Introduction
This Information Statement is being furnished by Forum
Group, Inc. (the "Company") in connection with its 1994 Annual
Meeting of Shareholders (the "Annual Meeting") to be held in Los
Angeles, California on September 13, 1994. This Information
Statement is first being mailed to shareholders on or about
August 19, 1994.
Shares Entitled to Vote
Holders of shares of the common stock of the Company
("Common Stock") outstanding at the close of business on July 29,
1994 (the "Record Date") are entitled to notice of the Annual
Meeting and to vote such shares at the Annual Meeting. At the
close of business on the Record Date, there were 22,500,109
shares of Common Stock outstanding and entitled to vote at the
Annual Meeting. Each such share of Common Stock is entitled to
one vote at the Annual Meeting. A majority of such shares of
Common Stock represented in person or by proxy is necessary to
provide a quorum at the Annual Meeting.
Apollo FG Partners, L.P. ("AFG"), Forum Holdings, L.P.
("Forum Holdings"), Healthcare Resources I, L.P. ("Healthcare
Resources") and their respective affiliates (collectively, the
"Investors") together possess voting power with respect to
approximately 73.0% of the shares of Common Stock outstanding at
the close of business on the Record Date. See "Certain
Relationships and Transactions -- 1993 Recapitalization" and
"Security Ownership of Certain Beneficial Owners and Management."
The Investors presently intend to vote all such shares for the
election of the nominees for directors identified below, for the
deletion of certain provisions of the Company's Restated Articles
of Incorporation (the "Articles of Incorporation") which prohibit
the issuance of nonvoting equity securities (the "Section 1123
Deletion Amendment"), for the adoption of the amendment to the
Articles of Incorporation relating to the indemnification of
directors and officers of the Company (the "Indemnification
Amendment"), for the adoption of the amendment to the Articles of
Incorporation relating to the definition of "Continuing Director"
(the "Continuing Director Amendment"), for the adoption of the
Equity Incentive Plan and for the ratification of the appointment
of independent public accountants. Accordingly, in such
circumstances, such matters would receive the requisite vote
regardless of whether or the manner in which shares of Common
Stock owned by any other shareholder are voted at the Annual
Meeting.
THE COMPANY IS NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND THE COMPANY A PROXY.
Tabulation of Votes
Abstentions and broker non-votes will be included in
determining the number of shares present or represented at the
Annual Meeting and any adjournment thereof for purposes of
determining whether a quorum exists. Except as described below,
abstentions and broker non-votes with respect to any matter
brought to a vote at the Annual Meeting or any adjournment
thereof will be treated as shares not voted for purposes of
determining whether the requisite vote has been obtained, and
therefore will have no effect on the outcome of the vote on any
such matter. The Continuing Director Amendment requires the
affirmative vote of holders of at least 66-2/3% of the shares of
Common Stock entitled to vote at the Annual Meeting and actually
voted thereon, but in any event not less than the affirmative
vote of holders of a least a majority of the shares of Common
Stock entitled to vote at the Annual Meeting. For purposes of
determining whether the required 66-2/3% vote has been obtained
with respect to the Continuing Director Amendment, abstentions
and broker non-votes will be treated as shares not voted and
therefore will have no effect, and for purposes of determining
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whether the requisite majority vote has been obtained with
respect of the adoption of the Continuing Director Amendment,
abstentions and broker non-votes will have the effect of a
negative vote. The approval of the Equity Incentive Plan
requires the affirmative vote of holders of a majority of the
shares of Common Stock present, or represented, and entitled to
vote thereon. For purposes of determining whether the requisite
vote has been obtained with respect to the approval of the Equity
Incentive Plan, abstentions will have the effect of a negative
vote and broker non-votes will be treated as shares not entitled
to vote and thus will have no effect.
ELECTION OF DIRECTORS
Eleven directors of the Company are to be elected at the
Annual Meeting to serve until the next Annual Meeting of
Shareholders and until their respective successors shall have
been elected and qualified. The Board of Directors of the
Company (the "Board") has nominated the persons listed below for
election as directors at the Annual Meeting. All such persons
are directors of the Company now in office and are nominees for
re-election.
A plurality of all votes cast at the Annual Meeting or any
adjournment thereof is required to elect each of the nominees as
directors. Each of the nominees has consented to being named in
this Information Statement and to serve if elected.
Name of Nominee, Principal Served as a
Occupation and Business Experience Director Since Age
---------------------------------- -------------- ---
Robert A. Whitman 1993 41
President, Chief Executive Officer
and Chairman of the Board of the
Company, since 1993; President and
Co-Chief Executive Officer of The
Hampstead Group, a privately held
investment company, since 1991;
theretofore Managing Partner and
Chief Executive Officer of Trammell
Crow Ventures, the real estate
investment, banking and investment
management unit of Trammell Crow
Company, and Chief Financial Officer
of Trammell Crow Company, since prior
to 1989.
Peter P. Copses 1993 36
An officer of Apollo Capital
Management, Inc. and Lion Capital
Management, Inc., respectively,
general partners of Apollo Advisors,
L.P., which acts as managing general
partner of certain securities
investment funds, and Lion Advisors,
L.P., which serves as financial
advisor and representative for
certain institutional investors with
respect to securities investments,
since 1990; theretofore employed by
Donaldson, Lufkin and Jenrette
Securities Corporation, an investment
firm, in 1990; and theretofore
employed by Drexel Burnham Lambert
Incorporated, an investment firm,
since prior to 1989; director of
Lamonts Apparel, Inc., a company
owning clothing and department
stores; Calton, Inc., a homebuilder
with operations in New Jersey,
California and Florida; and Zales
Corporation, a company owning jewelry
stores.
2
<PAGE>
Name of Nominee, Principal Served as a
Occupation and Business Experience Director Since Age
---------------------------------- -------------- ---
Daniel A. Decker 1993 41
Managing Director and General Counsel
of The Hampstead Group, a privately
held investment company, since 1990;
theretofore a partner in the law firm
of Decker, Hardt, Munsch and Dinan,
P.C., since prior to 1989.
James E. Eden 1993 56
Owner of James E. Eden & Associates,
a consulting firm specializing in the
senior living and long-term care
industry, President of Eden &
Associates, Inc.. a company engaged
in the senior living and long-term
care industry, Chairman and Chief
Executive Officer of Oakwood Living
Centers, Inc., a company which owns
and operates nursing homes and
rehabilitation centers, since 1992;
theretofore employed by Marriott
Corporation, a company which owns and
operates senior living facilities, in
various capacities including
Executive Vice President and Vice
President and General Manager, Senior
Living Services Division, since prior
to 1989.
Asher O. Pacholder 1992 55
Chairman of the Board of Pacholder
Associates, Inc., an investment
banking and advisory firm, and
Chairman and President of USF&G
Pacholder Fund, Inc., a publicly held
closed-end investment company, since
prior to 1989; director of AM
International, Inc., a company
engaged in the manufacture and
marketing of business graphics
equipment; ICO, Inc., a company
engaged in the oil field services
industry; United Gas Holding Corp., a
company engaged in the gas line
transmission industry; The Southland
Corporation, a company engaged in the
convenience store industry; and
Trump's Castle Associates, L.P., a
company engaged in the casino
industry.
William G. Petty, Jr. 1993 48
President and Chief Executive Officer
of Evergreen Healthcare, Inc., a
company engaged in the healthcare
industry, since prior to 1989.
Antony P. Ressler 1993 33
Officer of Apollo Capital Management,
Inc. and Lion Capital Management,
Inc., respectively, general partners
of Apollo Advisors, L.P., which acts
as managing general partner of
certain securities investment funds,
and Lion Advisors, L.P., which serves
as financial advisor and
representative for certain
institutional investors with respect
to securities investments, since
1990; theretofore Senior Vice
President of Drexel Burnham Lambert
Incorporated, an investment company,
since prior to 1989; director of
Cherokee, Inc., a company engaged in
the manufacture of apparel; Family
Restaurants, Inc., a company engaged
in the restaurant industry; Lamonts
Apparel, Inc., a company owning
3
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Name of Nominee, Principal Served as a
Occupation and Business Experience Director Since Age
---------------------------------- -------------- ---
clothing and department stores;
Gillett Holdings,Inc., a company
which owns the Vail and Beaver Creek
ski resorts and meat packing concern;
PRI Holdings, Inc., a company engaged
in the manufacture of packaging
materials; and United International
Holdings, Inc., a company engaged in
the cable television industry.
D. Ellen Shuman 1993 39
Director of Investments - Real Estate
for Yale University Investments
Office, since prior to 1989.
Eric B. Siegel 1993 36
An officer of Apollo Capital
Management, Inc. and Lion Capital
Management, Inc., respectively,
general partners of Apollo Advisors,
L.P., which acts as managing general
partner of certain securities
investment funds, and Lion Advisors,
L.P., which serves as financial
advisor and representative for
certain institutional investors with
respect to securities investments,
since 1990; theretofore a principal
in the law firm of Cogut, Taylor,
Siegel and Engelman since 1989;
theretofore a partner in the law firm
of Irell and Manella, since prior to
1989; director of Interco,
Incorporated, a company engaged in
shoe and furniture manufacturing and
distribution, and Sun International
Hotels, Limited, a company which owns
and operates hotels.
Merlin C. Spencer 1992 55
President and Chief Executive Officer
of TSI, Inc., a company engaged in
the manufacture of fuel handling
equipment, and Garsite, Inc., a
company engaged in the manufacture of
aircraft refuelers, since 1993;
principal of Spencer & Associates,
Inc., a Shawnee Mission, Kansas,
management consulting firm
specializing in the retirement
community industry, since prior to
1989.
George D. Woodard 1992 47
Owner of George D. Woodard, CPA,
Carmel, Indiana, a company which
provides accounting and tax services
to the business community and the
general public, since prior to 1989.
4
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
The management of the Company is under the direction of the
Board. The Board held 17 meetings during the Company's fiscal
year ended March 31, 1994. Each director attended at least 75%
of the meetings of the Board held while he or she was a director,
and each director appointed to serve on one or more committees of
the Board attended at least 75% of the meetings of such committee
or committees held while he or she was a member thereof. During
the fiscal year ended March 31, 1994, the Board also took action
by written consent in lieu of a meeting on several occasions.
Board Committees
The Board has established an Executive Committee, which has
the authority, subject to applicable legal restrictions, to
exercise all of the powers of the Board in the oversight of the
management of the business and affairs of the Company. Messrs.
Copses, Petty and Whitman serve on the Executive Committee.
During the fiscal year ended March 31, 1994, the Executive
Committee met approximately 42 times following the establishment
of such committee on June 14, 1993.
The Board has authorized the Executive Committee to perform
the functions of a nominating committee. Accordingly, the
Executive Committee is responsible for considering and making
recommendations to the Board regarding nominees for election to
the Board and Board committee assignments. The Executive
Committee will consider recommendations for nominees for election
to the Board which may be submitted by shareholders to the
Secretary of the Company.
The Board has established a Compensation Committee, which
reviews executive salaries, administers the bonus, incentive
compensation and stock option plans of the Company and approves
salaries and other benefits of the executive officers of the
Company. In addition, the Compensation Committee consults with
the Company's management regarding pension and other benefit
plans, and compensation policies and practices of the Company.
Messrs. Decker, Pacholder, Petty and Ressler presently serve on
the Compensation Committee, which met two times during the fiscal
year ended March 31, 1994.
The Board has established an Audit Committee, which reviews
the professional services provided by the Company's independent
auditors and the independence of such auditors from management of
the Company. This Committee also reviews the scope of the audit
by the Company's independent accountants, the annual financial
statements of the Company, the Company's system of internal
accounting controls and such other matters with respect to the
accounting, auditing and financial reporting practices and
procedures of the Company as it finds appropriate or as are
brought to its attention, and meets from time to time with
management. Messrs. Copses, Spencer and Woodard presently serve
on the Audit Committee, which met once during the fiscal year
ended March 31, 1994.
The Board has established a Standing Committee of
Independent Directors, which reviews proposed transactions
between the Company and any of the Investors involving payments
aggregating in excess of $100,000 in any fiscal year (unless (i)
the proposed transaction includes an offer to each shareholder of
the Company to participate pro rata therein or (ii) a "fairness
opinion" has been obtained from a nationally recognized
investment banking firm). The purpose of such review is to
assure that any such transactions are fair and reasonable to the
Company and its shareholders. Messrs. Pacholder, Woodard and
Spencer, none of whom are affiliated with any of the Investors,
presently serve on the Standing Committee of Independent
Directors, which met three times during the fiscal year ended
March 31, 1994.
Director Compensation
The Company pays each director an annual retainer of
$15,000, payable quarterly, for his or her services as a director
of the Company. In addition, each such director generally
receives $500 for each meeting of any Board committee attended by
such director. All directors are reimbursed for their
out-of-pocket expenses incurred in connection with attendance at
meetings of, and other activities relating to, serving on the
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Board and any Board committee. No payments, however, have been
made for, or in respect of expenses incurred in connection with
attendance at, meetings of the Executive Committee.
See "Certain Relationships and Transactions" and
"Compensation Committee Interlocks and Insider Participation" for
a discussion of certain relationships and transactions between
the Company and certain of the directors or their affiliates.
DELETION OF CERTAIN PROVISIONS OF THE
ARTICLES OF INCORPORATION WHICH PROHIBIT
THE ISSUANCE OF NONVOTING EQUITY SECURITIES
General
Section 6.1 of the Articles of Incorporation, as presently
in effect, provides that the Company will not issue nonvoting
equity securities. The Board has adopted, and recommends that
the Company's shareholders approve, an amendment to the Articles
of Incorporation which would delete Section 6.1 thereof in its
entirety. The Section 1123 Deletion Amendment is intended to
enable the Company to issue nonvoting equity securities of the
Company, to the extent otherwise authorized under the Articles of
Incorporation and applicable law, at such time, and from time to
time, as the Board may determine that the issuance of such
securities would be in the best interests of the Company and its
shareholders.
Purposes and Effect of the Proposed Nonvoting Equity Amendment
Section 6.1 of the Articles of Incorporation, as presently
in effect, was included in the Articles of Incorporation solely
to comply with the provisions of Section 1123 of the United
States Bankruptcy Code (the "Bankruptcy Code") in connection with
the Company's Plan of Reorganization (the "Plan of
Reorganization"). The Company's reorganization under the
Bankruptcy Code became effective on April 2, 1992, and all equity
securities that have been or will be distributed pursuant to the
Plan of Reorganization are voting securities. Accordingly, the
Board believes that Section 6.1 of the Articles of Incorporation
has fully served the purpose for which it was intended, and is
concerned that the provisions thereof could unnecessarily
restrict the Company's financial flexibility in the future.
As noted above, under Section 6.1 of the Articles of
Incorporation, as presently in effect, the Company is prohibited
from issuing any nonvoting equity securities. The Section 1123
Deletion Amendment would enable the Company to issue nonvoting
equity securities of the Company to the extent otherwise
authorized under the Articles of Incorporation and applicable
law, at such time, and from time to time, as the Board may
determine that the issuance of such securities would be in the
best interests of the Company and its shareholders. The Board
has no present plans, arrangements, commitments or understandings
with respect to the issuance of nonvoting equity securities.
Vote Required for Approval
The affirmative vote of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting and
actually voted is required to approve the Section 1123 Deletion
Amendment.
AMENDMENT TO ARTICLES OF INCORPORATION RELATING TO THE
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
General
Section 9.1 of the Articles of Incorporation, as presently
in effect, provides generally that (i) the Company is authorized,
but not required, to indemnify persons who are, or are threatened
to be made, a party to a suit or other proceeding by reason of
the fact that he or she is or was a director, officer, employee
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or agent of the Company, upon a determination that the person
seeking indemnification has met certain specified standards of
conduct, (ii) the Company is required to indemnify such persons
only to the extent they are successful on the merits or otherwise
in such a suit or proceeding, and (iii) the Company is
authorized, but not required, to pay expenses incurred by such
persons in defending such a suit or proceeding in advance of a
final disposition thereof.
The Board has adopted, and recommends that the Company's
shareholders approve, an amendment to Section 9.1 of the Articles
of Incorporation which would delete the existing provisions
thereof and to substitute therefor provisions requiring the
Company to indemnify the directors and officers of the Company to
the fullest extent permitted by the Indiana Business Corporation
Law (the "IBCL") or any other applicable law currently or
hereafter in effect and to advance expenses in connection
therewith. The Indemnification Amendment is intended to conform
the Company's director and officer indemnification provisions to
those believed to be the prevailing norm in the area, thereby
enhancing the Company's ability to attract and retain qualified
directors and officers and the ability of the Company's directors
and officers to make the best business decisions of which they
are capable. The Company has not, however, experienced
difficulties in attracting and retaining qualified directors and
officers by reason of its existing director and officer
indemnification provisions.
Purposes and Effects of the Indemnification Amendment
Under the Indemnification Amendment, each person who is or
was or had agreed to become a director or officer of the Company,
and each such person who is or was serving or had agreed to serve
at the request of the Board or an officer of the Company as an
employee or agent of the Company or as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other entity, whether or not for profit
(including the heirs, executors, administrators or estate of such
person), will be indemnified by the Company to the full extent
permitted by the IBCL or any other applicable law as currently or
hereafter in effect and will be entitled to advancement of
expenses in connection therewith. Such right of indemnification
and of advancement of expenses (i) will not be exclusive of any
other rights to which any person seeking indemnification or
advancement of expenses under the Articles of Incorporation may
otherwise be entitled, including without limitation pursuant to
any contract approved by a report of the entire Board (whether or
not the directors approving such contract are or are to be
parties to such contract or similar contract), and (ii) will be
applicable to matters otherwise within the scope of Section 9.1
of the Articles of Incorporation (as modified by the
Indemnification Agreement) whether or not such matters arose or
arise before or after the adoption of the Indemnification
Amendment. Under the Indemnification Amendment, Section 9.1 of
the Articles of Incorporation will expressly provide that (i) the
Company may adopt by-laws or enter into one or more agreements
with any person, which provide for indemnification and/or
advancement of expenses greater or different than that provided
in the Articles of Incorporation or the IBCL and (ii) in the
event that the Company enters into an agreement with any person
providing for indemnification and/or advancement of expenses, in
respect of the retention of counsel to represent the indemnified
person, the provisions of such agreement will exclusively govern
the Company's obligations in respect of the indemnification for
and advancement of fees of counsel. Finally, under the
Indemnification Amendment Section 9.1 of the Articles of
Incorporation will provide that no amendment or repeal of, or
adoption of any provision inconsistent with, such Section will
adversely affect any right or protection existing thereunder, or
arising out of facts occurring prior to such amendment, repeal or
adoption and no such amendment, repeal or adoption will affect
the legality, validity or enforceability of any contract entered
into or right granted prior to the effective date of such
amendment, repeal or adoption.
The Indemnification Amendment is intended to enhance the
Company's ability to attract and retain qualified directors and
officers and the ability of the Company's directors and officers
to make the best business decisions of which they are capable.
The Board believes that the indemnification provisions
contemplated by the Indemnification Amendment are substantially
similar to those in effect for many publicly held companies and
that the adoption of the Indemnification Amendment is in the best
interests of the Company and its shareholders.
The Indemnification Amendment has two principal effects.
First, the Indemnification Amendment makes the indemnification of
directors and officers by the Company and the advancement of
expenses mandatory. Under Section 9.1 of the Articles of
Incorporation, as presently in effect, except in certain limited
circumstances the Company is authorized but not required to
indemnify directors and officers and to advance their expenses.
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Second, under the Indemnification Amendment Section 9.1 of the
Articles of Incorporation will simply provide for the
indemnification of the Company's directors and officers to the
full extent permitted by applicable law, rather than attempting
to specify in advance the circumstances under which the Company
will indemnify its directors and officers as Section 9.1 does
presently.
Vote Required for Approval
The affirmative vote of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting and
actually voted is required to approve the Indemnification
Amendment.
AMENDMENT TO THE ARTICLES OF INCORPORATION
RELATING TO THE DEFINITION OF "CONTINUING DIRECTOR"
General
Article 10 of the Articles of Incorporation provides
generally that, in addition to any other vote required by law or
the Articles of Incorporation, the affirmative vote of the
holders of at least 66-2/3% of the voting power of all shares of
the Company entitled to vote generally on the election of
directors ("Voting Stock"), voting together as a single class,
that have voted, and in any event not less than a majority of the
voting power of the Voting Stock, is required for the approval of
any Business Combination with any Interested Shareholder or an
affiliate thereof. For purposes of Article 10 of the Articles of
Incorporation, the term "Business Combination" is broadly defined
to include mergers, dispositions including assets of the Company
having an aggregate fair market value of $1.0 million or more,
issuances of securities of the Company for consideration having a
fair market value of $1.0 million or more and certain other
specified transactions, and the term "Interested Shareholder"
means generally any person or group which is the beneficial owner
of 10% or more of the Voting Stock.
The provisions of Article 10 of the Articles of
Incorporation are inapplicable to any particular Business
Combination if either (i) the Business Combination is approved by
a majority of the "Continuing Directors" or (ii) the value of any
consideration to be received by each shareholder in the Business
Combination meets certain specified requirements. For purposes
of Article 10 of the Articles of Incorporation, the term
"Continuing Director" is defined as any member of the Board "who
is (i) unaffiliated with the Interested Shareholder, and
(ii) either was a member of the Board on March 31, 1992, or was
recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the Board." Under Article 10 of the
Articles of Incorporation, the Continuing Directors also have the
power to make certain determinations, including whether a person
is an Interested Shareholder, the number of shares of Voting
Stock beneficially owned by any person, whether a person is an
affiliate of another, and whether the assets which are the
subject of any Business Combination have, or the consideration to
be received upon the issuance of securities by the Company in any
Business Combination has, an aggregate fair market value of $1.0
million.
The Board has adopted, and recommends that the Company's
shareholders approve, an amendment to Article 10 of the Articles
of Incorporation which would delete from the definition of
"Continuing Director" the requirement that such a Continuing
Director have been a member of the Board on March 31, 1992 or
have been recommended to succeed a Continuing Director by a
majority of the Continuing Directors then on the Board. The
Continuing Director amendment is intended to clarify the
definition of "Continuing Director" so as to avoid a circumstance
in which there would arguably be no person on the Board who
qualifies as a Continuing Director.
Purposes and Effects of the Continuing Director Amendment
The Board believes that the definition of "Continuing
Director" contained in Section 10 of the Articles of
Incorporation, as presently in effect, requires clarification.
As presently in effect, such definition could be construed to
mean that only directors who were members of the Board on
March 31, 1992 and persons recommended by such directors (or
persons recommended by them) could be Continuing Directors for
purposes of Article 10 of the Articles of Incorporation. If the
definition were to be so construed and all of the directors
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meeting such requirements (presently Messrs. Pacholder, Spencer
and Woodard) were to leave office without first recommending
their successors, it could be argued (whether or not such
argument would have merit) that no director of the Company would
qualify as a Continuing Director for purposes of Article 10 of
the Articles of Incorporation and thus there would be no director
who could approve a Business Combination with an Interested
Shareholder, even if such transaction were in the best interests
of the Corporation and its shareholders, or make the other
determinations required to be made of the Continuing Directors
under Article 10. While the Company believes that any such
argument would not ultimately prevail, the Continuing Director
Amendment is intended to eliminate any ambiguity in this regard.
The purpose of Article 10 of the Articles of Incorporation
is to provide assurance that the Company's shareholders will
receive fair treatment in a Business Combination involving an
Interested Shareholder or its affiliates. The Board believes
that the only requirement necessary to ensure that this purpose
is served is that the Continuing Directors be unaffiliated with
the Interested Shareholder involved in any proposed Business
Combination. Accordingly, under the Continuing Director
Amendment, a Continuing Director with respect to any particular
Interested Shareholder will be a member of the Board who is not,
and within the past 12 months has not been, individually or as a
member or employee of a firm or other entity, employed, retained
or engaged by, an officer or director of, or an owner of more
than 10% of the capital stock of, such Interested Shareholder or
an affiliate of such Interested Shareholder.
The effect of the Continuing Director Amendment would be to
eliminate the possibility of a circumstance in which it might be
argued that no person on the Board qualifies as a Continuing
Director because no such person was either a director on
March 31, 1992 or a person recommended by such directors or their
successors.
Vote Required for Approval
The affirmative vote of the holders of 66-2/3% of shares of
Common Stock entitled to vote at the Annual Meeting and actually
voted, but in no event less than a majority of the shares of
Common Stock entitled to vote at the Annual Meeting, is required
to approve the Continuing Director Amendment.
APPROVAL OF EQUITY INCENTIVE PLAN
General
The Board has adopted the Forum Group, Inc. Equity Incentive
Plan (the "Incentive Plan"), subject to approval by the
shareholders of the Company at the Annual Meeting.
The purpose of the Incentive Plan is to enable the Company
to attract and retain qualified officers and other salaried
employees and provide them with appropriate incentives. The
Incentive Plan affords the Compensation Committee, which has been
authorized by the Board to administer the Incentive Plan, the
flexibility to respond to changes in the competitive and legal
environments, thereby protecting and enhancing the Company's
current and future ability to attract and retain officers and
other salaried employees and consultants.
The Incentive Plan authorizes the granting of options to
purchase shares of Common Stock ("Option Rights"), stock
appreciation rights ("Appreciation Rights"), restricted shares
("Restricted Shares"), deferred shares ("Deferred Shares"),
performance shares ("Performance Shares") and performance units
("Performance Units"). The terms applicable to these various
types of awards, including those terms that may be established by
the Compensation Committee when making or administering
particular awards, are set forth in detail in the Incentive Plan.
Summary of the Incentive Plan
The following general description of certain features of the
Incentive Plan is qualified in its entirety by reference to the
Incentive Plan, which is attached as Appendix A.
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Shares and Performance Units Available under the Incentive
Plan. Subject to adjustment as provided in the Incentive Plan,
the number of shares of Common Stock that may be issued or
transferred and covered by outstanding awards granted under the
Incentive Plan shall not in the aggregate exceed 2,250,000
shares, which may be shares of original issuance or treasury
shares or a combination thereof.
Eligibility. Officers, including officers who are members of
the Board, and other salaried employees of and consultants to the
Company and its subsidiaries may be selected by the Compensation
Committee to receive benefits under the Incentive Plan. The
Compensation Committee has not yet selected the individuals who
will be eligible to participate in the Incentive Plan, although
it is not anticipated that any individuals who are full-time
employees of the Investors or any of their affiliates will be
granted Option Rights or other awards under the Incentive Plan
(except that the Company reserves the right to award equity
interests to all directors as part of their annual compensation
in the future).
Option Rights. The Compensation Committee may grant Option
Rights that entitle the optionee to purchase shares of Common
Stock at a price equal to or greater or less than market value on
the date of grant. Option Rights granted to participants who are
or could be subject to the $1.0 million limitation on the
deduction of certain executive compensation will be made at a
price not less than the market value on the date of grant.
Subject to adjustment as provided in the Incentive Plan, no
participant shall be granted Option Rights for more than
1,000,000 shares during any one fiscal year. The Compensation
Committee may provide that the option price is payable at the
time of exercise (i) in cash, (ii) by the transfer to the Company
of nonforfeitable, nonrestricted shares of Common Stock that are
already owned by the optionee, (iii) with any other legal
consideration the Compensation Committee may deem appropriate or
(iv) by any combination of the foregoing methods of payment. Any
grant may provide for deferred payment of the option price from
the proceeds of sale through a bank or broker on the date of
exercise of some or all of the shares of Common Stock to which
the exercise relates. Any grant may provide for automatic grant
of reload option rights upon the exercise of Option Rights,
including reload option rights, for shares of Common Stock or any
other noncash consideration authorized under the Incentive Plan;
provided, however, that the term of any reload option right shall
not extend beyond the term of the Option Right originally
exercised. The Compensation Committee has the authority to
specify at the time Option Rights are granted that shares of
Common Stock will not be accepted in payment of the option price
until they have been owned by the optionee for a specified
period; however, the Incentive Plan does not require any such
holding period and would permit immediate sequential exchanges of
shares of Common Stock at the time of exercise of Option Rights.
Option Rights granted under the Incentive Plan may be Option
Rights that are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or Option Rights that are not
intended to so qualify. Any grant may provide for the payment of
dividend equivalents to the optionee on a current, deferred or
contingent basis or may provide that dividend equivalents be
credited against the option price.
No Option Right may be exercised more than 10 years from the
date of grant. Each grant must specify the period of continuous
employment with, or continuous engagement of consulting services
by, the Company or any subsidiary that is necessary before the
Option Rights will become exercisable and may provide for the
earlier exercise of the Option Rights in the event of a change of
control of the Company or other similar transaction or event.
Successive grants may be made to the same optionee regardless of
whether Option Rights previously granted to him or her remain
unexercised.
Appreciation Rights. Appreciation Rights granted under the
Incentive Plan may be either free-standing Appreciation Rights or
Appreciation Rights that are granted in tandem with Option
Rights. An Appreciation Right represents the right to receive
from the Company the difference (the "Spread"), or a percentage
thereof not in excess of 100%, between the basic price per share
of Common Stock in the case of a free-standing Appreciation
Right, or the option price of the related Option Right in the
case of a tandem Appreciation Right, and the market value of the
Common Stock on the date of exercise of the Appreciation Right.
Tandem Appreciation Rights may only be exercised at a time when
the related Option Right is exercisable and the Spread is
positive, and the exercise of a tandem Appreciation Right
requires the surrender of the related Option Right for
cancellation. A free-standing Appreciation Right must specify a
base price, which may be equal to or greater or less than the
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fair market value of a share of Common Stock on the date of
grant, must specify the period of continuous employment, or
continuous engagement of consulting services, that is necessary
before the Appreciation Right becomes exercisable (except that it
may provide for its earlier exercise in the event of a change in
control of the Company or other similar transaction or event) and
may not be exercised more than 10 years from the date of grant.
Any grant of Appreciation Rights may specify that the amount
payable by the Company upon exercise may be paid in cash, Common
Stock or a combination thereof and may either grant to the
recipient or retain in the Compensation Committee the right to
elect among those alternatives. The Compensation Committee may
provide with respect to any grant of Appreciation Rights for the
payment of dividend equivalents thereon in cash or Common Stock
on a current, deferred or contingent basis.
Restricted Shares. An award of Restricted Shares involves
the immediate transfer by the Company to a participant of
ownership of a specific number of shares of Common Stock in
consideration of the performance of services. The participant is
entitled immediately to voting, dividend and other ownership
rights in the shares. The transfer may be made without
additional consideration or for consideration in an amount that
is less than the market value of the shares on the date of grant,
as the Compensation Committee may determine. The Compensation
Committee may condition the award on the achievement of specified
performance objectives ("Management Objectives").
Restricted Shares must be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a
period to be determined by the Compensation Committee. An
example would be a provision that the Restricted Shares would be
forfeited if the participant ceased to serve the Company as an
officer or other salaried employee during a specified period of
years. In order to enforce these forfeiture provisions, the
transferability of Restricted Shares will be prohibited or
restricted in a manner and to the extent prescribed by the
Compensation Committee for the period during which the forfeiture
provisions are to continue. The Compensation Committee may
provide for a shorter period during which the forfeiture
provisions are to apply in the event of a change in control of
the Company or other similar transaction or event.
Deferred Shares. An award of Deferred Shares constitutes an
agreement by the Company to deliver shares of Common Stock to the
participant in the future in consideration of the performance of
services, subject to the fulfillment of such conditions during
the Deferral Period (as defined in the Incentive Plan) as the
Compensation Committee may specify. During the Deferral Period,
the participant has no right to transfer any rights covered by
the award and no right to vote the shares covered by the award.
On or after the date of any grant of Deferred Shares, the
Compensation Committee may authorize the payment of dividend
equivalents thereon on a current, deferred or contingent basis in
either cash or additional shares of Common Stock. Grants of
Deferred Shares may be made without additional consideration or
for consideration in an amount that is less than the market value
of the shares on the date of grant. Deferred Shares must be
subject to a Deferral Period, as determined by the Compensation
Committee on the date of grant, except that the Compensation
Committee may provide for a shorter Deferral Period in the event
of a change in control of the Company or other similar
transaction or event.
Performance Shares and Performance Units. A Performance
Share is the equivalent of one share of Common Stock, and a
Performance Unit is the equivalent of $1.00. A participant may
be granted any number of Performance Shares or Performance Units.
The participant will be given one or more Management Objectives
to meet within a specified period (the "Performance Period").
The specified Performance Period may be subject to earlier
termination in the event of a change in control of the Company or
other similar transaction or event. A minimum level of
acceptable achievement will also be established by the
Compensation Committee. If by the end of the Performance Period
the participant has achieved the specified Management Objectives,
the participant will be deemed to have fully earned the
Performance Shares or Performance Units. If the participant has
not achieved the Management Objectives but has attained or
exceeded the predetermined minimum level of acceptable
achievement, the participant will be deemed to have partly earned
the Performance Shares or Performance Units in accordance with a
predetermined formula. To the extent earned, the Performance
Shares or Performance Units will be paid to the participant at
the time and in the manner determined by the Compensation
Committee in cash, shares of Common Stock or any combination
thereof.
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Management Objectives may be described in terms of either
Company-wide objectives or objectives that are related to the
performance of the division, subsidiary, department or function
within the Company or a subsidiary in which the participant is
employed or with respect to which the participant provides
consulting services. The Compensation Committee may adjust any
Management Objectives and the related minimum level of acceptable
achievement if, in its judgment, transactions or events have
occurred after the date of grant that are unrelated to the
participant's performance and result in distortion of the
Management Objectives or the related minimum level of acceptable
achievement.
Transferability. No Option Right, Appreciation Right or
other "derivative security" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is transferable by a participant except by will
or the laws of descent and distribution. Option Rights and
Appreciation Rights may not be exercised during a participant's
lifetime except by the participant or, in the event of the
participant's incapacity, by the participant's guardian or legal
representative acting in a fiduciary capacity on behalf of the
participant under state law and court supervision.
The Compensation Committee may specify at the date of grant
that all or any part of the shares of Common Stock that are to be
issued or transferred by the Company upon the exercise of Option
Rights or Appreciation Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment
under any grant of Performance Shares or Performance Units, or
are to be no longer subject to the substantial risk of forfeiture
and restrictions on transfer referred to in Section 6 of the
Incentive Plan with respect to Restricted Shares, shall be
subject to further restrictions on transfer.
Adjustments. The maximum number of shares that may be
issued or transferred under the Incentive Plan, the number of
shares covered by outstanding Option Rights or Appreciation
Rights and the option prices or base prices per share applicable
thereto, and the number of shares covered by outstanding grants
of Deferred Shares and Performance Shares, are subject to
adjustment in the event of stock dividends, stock splits,
combinations of shares, recapitalizations, mergers,
consolidations, spin-offs, reorganizations, liquidations,
issuances of rights or warrants, and similar transactions or
events. In the event of any such transaction or event, the
Compensation Committee may in its discretion provide in
substitution for any or all outstanding awards under the
Incentive Plan such alternative consideration as it may in good
faith determine to be equitable in the circumstances and may
require the surrender of all awards so replaced. The
Compensation Committee may also make or provide for such
adjustments in the numbers of shares specified in Section 3(a)
and Section 4(a) of the Incentive Plan as the Compensation
Committee may determine to be appropriate in order to reflect any
transaction or event described in Section 10 of the Incentive
Plan.
Administration and Amendments. The Incentive Plan is to be
administered by a committee consisting of not less than two
nonemployee directors who are "disinterested persons" within the
meaning of Rule 16b-3 under the Exchange Act. In connection with
its administration of the Incentive Plan, the Compensation
Committee is authorized to interpret the Incentive Plan and
related agreements and other documents. The Compensation
Committee may make grants to participants under any or a
combination of all of the various categories of awards that are
authorized under the Incentive Plan and may condition the grant
of awards on the surrender or deferral by the participant of the
participant's right to receive a cash bonus or other compensation
otherwise payable by the Company or a subsidiary to the
participant.
The Incentive Plan may be amended from time to time by the
Compensation Committee, but without further approval by the
shareholders of the Company, no such amendment may (i) increase
the aggregate number of shares of Common Stock that may be issued
or transferred and covered by outstanding awards or increase the
number of shares which may be granted to any participant in any
one fiscal year, or (ii) otherwise cause Rule 16b-3 under the
Exchange Act to cease to be applicable to the Incentive Plan.
Incentive Plan Benefits
It is presently anticipated that, during the Company's
fiscal year ending March 31, 1995, the Company will grant (under
the Incentive Plan or otherwise) to executive officers of the
Company (other than those affiliated with the Investors), among
other possible awards, stock options entitling the optionees to
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purchase an aggregate of up to 1,800,000 shares of Common Stock
at exercise prices as low as $4.00 per share or other types of
awards, or a combination of stock options and such other types of
awards, having similar economic value to such persons. The New
CEO is expected to be awarded options to acquire 800,000 of
Common Stock at an exercise price of $5.875 per share. On
August 12, 1994, the closing bid quotation for the Common Stock
as reported by the National Association of Securities Dealers
Automated Quotation System (the "NASDAQ") was $6.25 per share.
The types of awards and amounts thereof that would have been
granted to the Company's officers for the fiscal year ended
March 31, 1994 if the Incentive Plan had been in effect during
such period are not determinable.
The Incentive Plan is not intended to be the exclusive means
by which the Company may grant equity-based incentive awards, and
the adoption thereof will in no way limit the ability of the
Company to grant equity-based awards outside the Incentive Plan.
Federal Income Tax Consequences
The following is a brief summary of certain of the federal
income tax consequences of certain transactions under the
Incentive Plan based on federal income tax laws in effect on
January 1, 1994. This summary is not intended to be exhaustive
and does not describe state or local tax consequences.
Tax Consequences to Participants
Nonqualified Option Rights. In general: (i) no income will
be recognized by an optionee at the time a nonqualified Option
Right is granted; (ii) at the time of exercise of a nonqualified
Option Right, ordinary income will be recognized by the optionee
in an amount equal to the difference between the option price
paid for the shares and the fair market value of the shares if
they are nonrestricted on the date of exercise; and (iii) at the
time of sale of shares acquired pursuant to the exercise of a
nonqualified Option Right, any appreciation (or depreciation) in
the value of the shares after the date of exercise will be
treated as either short-term or long-term capital gain (or loss)
depending on how long the shares have been held.
Incentive Stock Options. No income generally will be
recognized by an optionee upon the grant or exercise of an
incentive stock option. If shares of Common Stock are issued to
an optionee pursuant to the exercise of an incentive stock option
and no disqualifying disposition of the shares is made by the
optionee within two years after the date of grant or within one
year after the transfer of the shares to the optionee, then upon
the sale of the shares any amount realized in excess of the
option price will be taxed to the optionee as long-term capital
gain and any loss sustained will be a long-term capital loss.
If shares of Common Stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of
either holding period described above, the optionee generally
will recognize ordinary income in the year of disposition in an
amount equal to any excess of the fair market value of the shares
at the time of exercise (or, if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option
price paid for the shares. Any further gain (or loss) realized
by the optionee generally will be taxed as short-term or
long-term gain (or loss) depending on the holding period.
Appreciation Rights. No income will be recognized by a
participant in connection with the grant of an Appreciation
Right. When the Appreciation Right is exercised, the participant
normally will be required to include as taxable ordinary income
in the year of exercise an amount equal to the amount of any
cash, and the fair market value of any nonrestricted shares of
Common Stock, received pursuant to the exercise.
Restricted Shares. A recipient of Restricted Shares
generally will be subject to tax at ordinary income rates on the
fair market value of the Restricted Shares reduced by any amount
paid by the recipient at such time as the shares are no longer
subject to a substantial risk of forfeiture or restrictions on
transfer for purposes of Section 83 of the Code. However, a
recipient who so elects under Section 83(b) of the Code within 30
days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to
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the excess of the fair market value of the shares (determined
without regard to the risk of forfeiture or restrictions on
transfer) over any purchase price paid for the shares. If a
Section 83(b) election has not been made, any dividends received
with respect to Restricted Shares that are subject at that time
to a substantial risk of forfeiture and restrictions on transfer
generally will be treated as compensation that is taxable as
ordinary income to the recipient.
Deferred Shares. No income generally will be recognized
upon the grant of Deferred Shares. The recipient of a grant of
Deferred Shares generally will be subject to tax at ordinary
income rates on the fair market value of nonrestricted shares of
Common Stock on the date that the Deferred Shares are transferred
to him or her, reduced by any amount paid by him or her, and the
capital gains or loss holding period for the Deferred Shares will
also commence on that date.
Performance Shares and Performance Units. No income
generally will be recognized upon the grant of Performance Shares
or Performance Units. Upon payment in respect of the earn-out of
Performance Shares or Performance Units, the recipient generally
will be required to include as taxable ordinary income in the
year of receipt an amount equal to the amount of cash received
and the fair market value of any nonrestricted shares of Common
Stock received.
Special Rules Applicable to Officers and Directors. In
limited circumstances where the sale of stock that is received as
the result of a grant of an award could subject an officer or
director to suit under Section 16(b) of the Exchange Act, the tax
consequences to the officer or director may differ from the tax
consequences described above. In these circumstances, unless a
special election has been made, the principal difference usually
will be to postpone valuation and taxation of the stock received
so long as the sale of the stock received could subject the
officer or director to suit under Section 16(b) of the Exchange
Act, but not longer than six months.
Tax Consequences to the Company or Subsidiary
To the extent that a participant recognizes ordinary income
in the circumstances described above, the Company or subsidiary
for which the participant performs services will be entitled to a
corresponding deduction provided that, among other things,
(i) the income meets the test of reasonableness, is an ordinary
and necessary business expense and is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is
not disallowed by the $1.0 million limitation on certain
executive compensation and (ii) any applicable withholding
obligations are satisfied.
Vote Required
The affirmative vote of holders of a majority of the shares
of Common Stock present, or represented, and entitled to vote at
the Annual Meeting is necessary for approval of the Incentive
Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has appointed KPMG Peat Marwick as independent
accountants to examine the consolidated financial statements of
the Company for the fiscal year ending March 31, 1995.
Shareholders are being asked to ratify this appointment at the
Annual Meeting. KPMG Peat Marwick has served the Company in this
capacity since 1984. The Company has been informed that neither
KPMG Peat Marwick nor any of its partners has any direct
financial interest or any material indirect financial interest in
the Company or has had any connection during the past three years
with the Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee.
One or more representatives of KPMG Peat Marwick are
expected to be present at the Annual Meeting with the opportunity
to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.
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OTHER BUSINESS
The Board does not know of any business to be presented for
consideration at the Annual Meeting or any adjournment thereof
other than as stated in the Notice of Annual Meeting. The
affirmative vote of the holders of a majority of the shares of
Common Stock represented at the Annual Meeting or any adjournment
thereof and actually voted would be required with respect to any
such matter brought to a shareholder vote.
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EXECUTIVE OFFICERS
The executive officers of the Company, their positions and
offices, business experience, terms of office and ages are as
follows:
Served as an
Name, Positions and Offices, Executive Officer
and Business Experience Since Age
---------------------------- ----------------- ---
Robert A. Whitman 1993 41
President, Chief Executive Officer
and Chairman of the Board of the
Company, since 1993; President and Co-
Chief Executive Officer of The
Hampstead Group, a privately held
investment company, since 1991;
theretofore Managing Partner and
Chief Executive Officer of Trammell
Crow Ventures, the real estate
investment, banking and investment
management unit of Trammell Crow
Company, and Chief Financial Officer
of Trammell Crow Company, since prior
to 1989.
Paul A. Shively, CPA 1974 51
Senior Vice President of the Company
since 1993 and from prior to 1989 to
1993; Treasurer and Chief Financial
Officer of the Company, since prior
to 1989; President and Chief
Executive Officer of the Company from
1992 to 1993; director of the Company
from 1988 to 1992; director and
Secretary of Capital Industries,
Inc., a company engaged in the sale,
installation and service of heavy-
duty truck parts (formerly a wholly-
owned subsidiary of the Company).
Brian C. Swinton 1994 49
Senior Vice President - Product
Development, Research and Marketing
of the Company, since 1994;
theretofore Vice President, Senior
Living Services Division of Marriott
Corporation, a company which owns and
operates senior living facilities,
since prior to 1989.
Robert A. DeVoss 1990 47
Vice President - Operations of the
Company, since 1992; theretofore Vice
President - Support Services of the
Company, since 1990; theretofore
Senior Director of Operations of the
Company, since prior to 1989.
David A. Lewis 1989 42
Vice President - Sales of the
Company, since 1989; theretofore
Senior Director of Sales of the
Company, since prior to 1989.
John H. Sharpe 1992 44
Vice President, General Counsel
and Secretary of the Company,
since 1992; theretofore Assistant
General Counsel of the Company,
since prior to 1989.
Richard A. Huber 1993 33
Vice President - Operations Finance
of the Company, since 1993;
theretofore Director - Operations
Accounting and Analysis, Senior
Living Services Division of Marriott
Corporation, a company which owns and
operates senior living facilities,
since prior to 1989.
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The Company has been engaged in a search to identify a
new Chief Executive Officer of the Company ("New CEO") since the
Investors acquired a majority interest in the Company in 1993.
The Company has identified a candidate to serve as the New CEO,
but as of the date of this Information Statement the Company was
prohibited from disclosing the candidate's identity. It is
anticipated that, if and when the New CEO commences employment,
he will become a member of the Board and its Executive Committee,
but that Mr. Whitman, who has served on an interim basis as Chief
Executive Officer of the Company since the Investors acquired a
majority interest in the Company in 1993, will continue to serve
as Chairman of the Board, at least for an interim period while
the New CEO becomes integrated into the Company's management.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Summary
The following table summarizes the compensation of the Chief
Executive Officer of the Company and each of the other four most
highly compensated executive officers of the Company
(collectively, the "Named Executives") for the Company's last
three fiscal years for services rendered in all capacities to the
Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Name and Fiscal Year Annual Compensation All Other
Principal Position Ended March 31, Salary($) Bonus($) Compensation($)(1)(2)
- - ------------------ --------------- --------- -------- ---------------------
Robert A. Whitman, 1994(3) -0- -0- -0-
President and Chief 1993 -- -- --
Executive Officer 1992 -- --
Paul A. Shively, 1994 230,000 82,500 3,049
Senior Vice President, 1993 169,583 -0- 208,057(5)
Chief Financial Officer 1992 151,200 30,000
and Treasurer (4)
Robert A. DeVoss, 1994 124,891 37,080 1,169
Vice President - 1993 112,970 7,500 -0-
Operations 1992 97,660 -0-
David A. Lewis, 1994 127,248 37,080 309
Vice President - Sales 1993 130,294 7,500 -0-
1992 140,028 -0-
John H. Sharpe, 1994 118,765 50,250 1,965
Vice President, General 1993 96,155 15,000 -0-
Counsel and Secretary 1992 88,462 14,167
____________________
(1)Pursuant to transition provisions published by the Securities
and Exchange Commission (the "SEC"), information regarding
"All Other Compensation" is not presented for the fiscal year
ended March 31, 1992.
(2)The amounts shown for the fiscal year ended March 31, 1994
represent employer contributions in the following amounts
made on behalf of the Named Executives to the Company's
401(k) Savings Plan and the Company's Employee Stock Purchase
Plan, respectively: Mr. Whitman, $0 and $0; Mr. Shively,
$1,925 and $1,124; Mr. DeVoss, $598 and $571; Mr. Lewis, $0
and $309; and Mr. Sharpe $1,716 and $249.
(3)Mr. Whitman became Chairman of the Board and President and
Chief Executive Officer of the Company on July 19, 1993.
Prior to that time, he was not an officer of the Company.
Mr. Whitman received no compensation from the Company for
services rendered by him as President and Chief Executive
Officer of the Company during the fiscal year ended March 31,
1994. Mr. Whitman was paid $11,250 as a retainer for his
services as a director of the Company during the fiscal year
ended March 31, 1994. See "The Board of Directors and its
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Committees -- Director Compensation." See also "Certain
Relationships and Transactions -- Certain Other Relationships
and Transactions" for a discussion of certain payments by the
Company to Forum Holdings in respect of various general and
administrative services provided to the Company by Forum
Holdings and its representatives, including, among others,
Mr. Whitman's services as President and Chief Executive
Officer of the Company.
(4)Mr. Shively served as the President and Chief Executive
Officer of the Company during the fiscal year ended on
March 31, 1994, but only until July 19, 1993.
(5)Includes $170,689 paid in connection with the termination of
Mr. Shively's former employment agreement as of December 31,
1992, and $37,368 representing the fair market value of
shares of Common Stock issued pursuant to the Plan of
Reorganization in settlement of Mr. Shively's claim under the
Company's former deferred compensation plan.
Severance Pay Policy
The Company's Severance Pay Policy is its primary means of
providing severance benefits to employees, including the Named
Executives (other than Mr. Whitman). Under the Severance Pay
Policy, severance pay will be granted to eligible employees if
the termination of their employment is initiated by the Company
as the result of any one of certain qualifying events, including
reductions-in-force, position elimination and the inability to
meet the requirements of a position, but not as a result of
voluntary resignation, retirement, merger into or acquisition by
another organization (if the employee is offered employment with
the successor organization), discharge for misconduct and certain
other specified reasons. Under the Severance Pay Policy,
eligible employees are entitled to receive severance pay as
follows: for hourly employees, two weeks' regular straight time
pay, plus one additional week's regular pay for each year of
continuous service, up to a maximum of six months' pay; for
salaried employees below the level of manager, one month's pay,
plus one additional week's pay for each year of continuous
service, up to a maximum of six months' pay; and for salaried
employees at the level of manager or above (including the Named
Executives, other than Mr. Whitman), one month's pay plus two
additional weeks' pay for each year of continuous service, up to
a maximum of eight months' pay.
Supplemental Retirement Agreements
The Company has supplemental retirement agreements with each
of Messrs. DeVoss and Lewis. Pursuant to those agreements, upon
retirement at age 65 or older, each covered officer or his estate
will be paid, for a term certain of fifteen years, an amount per
year equal to 50% of his average annual compensation for the five
compensation years which yield the highest average annual
compensation. Also pursuant to those agreements, upon disability
or death prior to retirement and without regard to years of
service, each covered officer or his estate will be paid, for a
term certain of ten years, a disability or death benefit
calculated with reference to the officer's annual compensation as
described above. Payments are not reduced for Social Security or
other benefits received by covered officers or their estates.
The estimated annual retirement benefits at normal retirement age
of Messrs. DeVoss and Lewis, assuming their present salaries
remained unchanged, would be $52,436 and $76,165, respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee was established by the Board on
June 14, 1993. Prior to that time decisions relating to
compensation were made by the Board. To the extent that such
decisions were made by the Board, rather than by the Compensation
Committee, the discussion thereof set forth below is based upon
information provided to the Compensation Committee by persons who
were members of the Board at the respective times at which such
decisions were made.
The principal components of the compensation of the
Company's executive officers (including the Named Executives,
other than Mr. Whitman) for services performed during the fiscal
year ended March 31, 1994 were cash salary and cash bonus. The
base compensation of each executive officer of the Company for
the fiscal year ended March 31, 1994 was established using a
number of subjective criteria, including level of responsibility,
level of experience, individual performance, overall corporate
performance and competitive pay practices. Decisions with
respect to cash bonuses for the fiscal year ended March 31, 1994
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were based on these same criteria. Individual salary and bonus
decisions with respect to compensation for the fiscal year ended
March 31, 1994 were not based on specific performance criteria
and no specific weights were ascribed to the factors considered
in making such decisions.
Mr. Whitman has been serving as President and Chief
Executive Officer since July 19, 1993, and has received no
compensation from the Company for services rendered by him in
that capacity. Mr. Whitman does receive certain payments from
the Company for his services as a director. See "The Board of
Directors and its Committees -- Director Compensation." See also
"Certain Relationships and Transactions -- Certain Other
Relationships and Transactions" for a discussion of certain
payments by the Company to Forum Holdings in respect of various
general and administrative services provided to the Company by
Forum Holdings and its representatives, including, among others,
Mr. Whitman's services as President and Chief Executive Officer
of the Company.
Prior to July 19, 1993, Mr. Shively served as President and
Chief Executive Officer. Mr. Shively was compensated for
services rendered by him in such capacity pursuant to an
agreement which provided for his employment in such capacity for
a period from January 1, 1993 until June 30, 1993 at a base
salary for such period of $115,000.
Section 162(m) of the Code does not apply to executive
officer compensation reported and discussed above for the fiscal
year ended March 31, 1994 and, accordingly, the Company did not
have a policy on qualifying executive officer compensation for
deductibility under that Section for such year. The Compensation
Committee believes that deductibility is only one factor of any
compensation decision and reserves the right to make compensation
decisions regardless of deductibility in any particular instance.
The Compensation Committee believes that the nature and
level of the compensation of the Company's executive officers for
services performed during the fiscal year ended March 31, 1994
are reasonable and appropriate in light of the Company's
financial and operational performance and other factors during
such period. A majority of the members of the Compensation
Committee is comprised of directors whose principal employment is
with the Investors. The Investors, in the aggregate,
beneficially own a majority of the Company's outstanding Common
Stock. See "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Transactions."
The Compensation Committee is in the process of reviewing
the Company's compensation policies and practices and expects to
adopt and implement for the fiscal year ending March 31, 1995 and
subsequent fiscal years a comprehensive executive compensation
program, principally intended to (i) provide appropriate
incentives to aid in assuring the accomplishment of the Company's
performance and financial objectives, (ii) help ensure that the
Company is able to attract and retain top-quality management
personnel, and (iii) ensure that an appropriate portion of
executive compensation is variable and dependent upon the
accomplishment of specific short- and long-term performance and
financial objectives, as well as increases in shareholder value.
It is anticipated that the Incentive Plan, if adopted by the
Company's shareholders at the Annual Meeting, will be a key
component of the new compensation program.
Respectfully submitted by the
Compensation Committee,
Daniel A. Decker
Asher O. Pacholder
William G. Petty, Jr.
Anthony P. Ressler
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COMPARISON OF TOTAL SHAREHOLDER RETURN
The following graphs show (i) the annual cumulative
shareholder return on the Common Stock of the Company for the
periods from March 31, 1989 through April 2, 1992 and April 3,
1992 through March 31, 1994, assuming investments of $100 in
shares of Common Stock on each of March 31, 1989 and April 3,
1992, respectively, and (ii) the quarterly cumulative total
shareholder return on the Common Stock of the Company since
April 3, 1992, assuming an investment of $100 on that date. In
each case, the cumulative shareholder return on the Common Stock
of the Company is compared with the NASDAQ Stock Market U.S.
Index and the NASDAQ Health Services Index.
On February 19, 1991, the Company and certain of its
affiliates commenced proceedings under chapter 11 of the
Bankruptcy Code to reorganize and restructure their liabilities.
On April 2, 1992, the Company emerged from bankruptcy pursuant to
the Plan of Reorganization. All shares of Common Stock of the
Company that were outstanding during the period from March 31,
1989 through April 2, 1992 (i.e., the date on which such shares
ceased to be quoted on the NASDAQ) (the "Pre-Reorganization
Common Stock") were cancelled pursuant to the Plan of
Reorganization, and under the Plan of Reorganization shares of
new Common Stock were issued to the unsecured creditors of the
Company and holders of shares of Pre-Reorganization Common Stock.
Under the Plan of Reorganization, a holder of Common Stock who
invested $100 in Pre-Reorganization Common Stock on March 31,
1989 and made no other investment in Pre-Reorganization Common
Stock would have received no shares of new Common Stock.
20
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COMPARISON OF CUMULATIVE TOTAL RETURN
ON COMMON STOCK BEFORE AND AFTER EMERGENCE FROM BANKRUPTCY WITH THE
NASDAQ STOCK MARKET U.S. INDEX AND THE NASDAQ HEALTH SERVICES INDEX
Measurement Period Forum Group, NASDAQ STOCK NASDAQ HEALTH
Fiscal Year Covered Inc. MARKET U.S. SERVICES
- - ------------------- ------------ ------------ -------------
Pre-reorganization
Common Stock
Measurement Point 100 100 100
3/31/89
FYE 3/31/90 54 109 147
FYE 3/31/91 5 124 273
FYE 3/31/92 3 159 371
4/2/92 0 159 371
New Common Stock
Measurement Point 100 100 100
4/3/92
FYE 3/31/93 79 115 96
FYE 3/31/94 171 123 129
COMPARISON OF CUMULATIVE TOTAL RETURN ON NEW COMMON STOCK
BY QUARTER SINCE APRIL 3, 1992, WITH THE NASDAQ STOCK MARKET U.S. INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
Measurement Period Forum Group, NASDAQ STOCK NASDAQ HEALTH
Fiscal Year Covered Inc. MARKET U.S. SERVICES
- - ------------------- ------------ ------------ -------------
Measurement Point 100 100 100
4/3/92
6/30/92 43 93 90
9/30/92 43 97 95
12/31/92 50 113 110
3/31/93 79 115 98
6/30/93 96 117 103
9/30/93 114 127 111
12/31/93 121 129 127
3/31/94 171 123 129
21
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
1993 Recapitalization
In June 1993, the Company consummated a recapitalization
(the "1993 Recapitalization") pursuant to a series of agreements
(collectively, the "Acquisition Agreement") with the Investors.
As a result of the 1993 Recapitalization, including the tender
offer described below, the Investors acquired approximately 71.7%
of the outstanding shares of Common Stock. The principal
components of the 1993 Recapitalization included, among others,
(i) the issuance and sale by the Company to Forum Holdings on
February 1, 1993 of 25,000 shares of preferred stock for an
aggregate purchase price of $5.0 million and the subsequent
exchange of such shares of preferred stock on June 14, 1993 for
2,500,000 newly issued shares of Common Stock, (ii) the issuance
and sale by the Company to the Investors on June 14, 1993 of
7,098,200 shares of Common Stock, together with warrants (the
"Investor Warrants") exercisable to purchase at a nominal price
an aggregate of 1.1555 shares of Common Stock for each share of
Common Stock issued on or after June 14, 1993 under the Plan of
Reorganization for the payment of pre-reorganization general
unsecured claims, for an aggregate purchase price of $20.0
million, and (iii) the issuance and sale by the Company to
certain affiliates of AFG and the limited partners of Forum
Holdings on June 14, 1993 of $40.0 million aggregate principal
amount of senior subordinated notes (the "Senior Subordinated
Notes"). Pursuant to the Acquisition Agreement, the Investors
commenced a tender offer on July 27, 1993 whereby the Investors
offered to purchase any and all outstanding shares of Common
Stock for $3.62 per share (the "Liquidity Transaction").
Pursuant to the Liquidity Transaction, which expired on
August 31, 1993, the Investors purchased an additional 1,345,543
shares of Common Stock, including 513,993 shares of Common Stock
which were tendered by a subsidiary of the Company. Funds
required to pay for the shares of Common Stock acquired by AFG in
connection with the 1993 Recapitalization were obtained from the
working capital of certain of AFG's affiliates; funds required to
pay for the shares of Common Stock acquired by Forum Holdings in
connection with the 1993 Recapitalization were obtained from
equity contributions of the partners in Forum Holdings; and funds
required to pay for the shares of Common Stock acquired by
Healthcare Resources in connection with the 1993 Recapitalization
were obtained from equity contributions of the partners in
Healthcare Resources.
Pursuant to the Acquisition Agreement, in connection with
the 1993 Recapitalization the Board was reconstituted to consist
of eleven directors. On June 14, 1993, certain persons then
serving as directors of the Company submitted their resignations
as directors, leaving Messrs. Pacholder, Spencer and Woodard as
the only directors then in office. Seven persons, three of whom
were designated by affiliates of AFG (Messrs. Copses, Ressler and
Siegel), three of whom were designated by Forum Holdings (Messrs.
Decker and Whitman and Ms. Shuman) and one of whom was designated
by Healthcare Resources (Mr. Petty), were elected as directors of
the Company effective as of the close of business on June 16,
1993. Mr. Eden (whose election to the Board was approved by each
of the Investors) was elected to the Board on July 19, 1993. See
also "Election of Directors."
Pursuant to the Acquisition Agreement, the Company agreed,
among other things, to indemnify the Investors against certain
losses arising out of or in connection with the Acquisition
Agreement and actions taken pursuant thereto and to reimburse the
Investors for all fees, costs and expenses incurred in connection
with the Acquisition Agreement or the transactions contemplated
thereby. In connection with the 1993 Recapitalization, the
Company also entered into an Equity Registration Rights
Agreement, dated as of June 14, 1993 (the "Equity Registration
Rights Agreement"), with the purchasers of shares of Common Stock
and Investor Warrants and a Debt Registration Rights Agreement,
dated as of June 14, 1993, with the purchasers of Senior
Subordinated Notes, which agreements provide the security holders
party thereto with certain demand and piggyback registration
rights.
In connection with the 1993 Recapitalization, on April 29,
1993 Forum/Classic, L.P. ("Forum Classic"), Dalfort Corporation
("Dalfort"), Diamond Investments, Ltd. and Morris Weiser
(collectively, the "Forum/Classic Plaintiffs") filed suit in the
Superior Court of Marion County, Indiana, against the Company,
the persons who then comprised the Board (the "Director
Defendants"), and certain of the Investors (collectively, the
"Investor Defendants"). The Forum/Classic Plaintiffs alleged,
among other things, that the Director Defendants breached their
fiduciary duties by entering into the Acquisition Agreement (as
originally in effect) and that the Investor Defendants knowingly
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participated in such alleged breaches of fiduciary duties. The
Forum/Classic Plaintiffs further alleged that the Company
breached an alleged contract to enter into certain transactions
proposed by Forum/Classic and Dalfort and that the Investor
Defendants induced such breach and interfered with an alleged
business relationship between Forum/Classic and Dalfort and the
Company. The Forum/Classic Plaintiffs sought on behalf of
themselves and alleged other similarly situated shareholders
various forms of relief, including injunctive relief,
compensatory damages, recovery of attorneys' fees and expenses.
On June 4, 1993, the presiding court entered an order (the
"Order") enjoining the defendants from taking certain actions but
permitting the defendants to proceed with the transactions
contemplated by the Acquisition Agreement, provided that it was
modified to provide for the Liquidity Transaction. The court
also concluded that (i) the decision by the Board to enter into
the agreement in principle relating to the 1993 Recapitalization
was made in good faith after reasonable investigation, the
agreement in principle was conclusively presumed to be valid, and
the Company was bound thereby and (ii) no contract existed
between the Company and Forum/Classic or Dalfort. On June 11,
1993, the Forum/Classic Plaintiffs filed a motion (the "Contempt
Motion") to find the Company and the Investor Defendants in
contempt of the Order. The court denied the Contempt Motion but
it amended the Order to clarify that the Liquidity Transaction
had to provide for the payment of $3.62 per share of Common
Stock, without adjustment. On May 24, 1994, the Forum/Classic
Plaintiffs requested permission from the trial court to file a
supplemental complaint alleging, among other things, that certain
aspects of the agreement in principle and the Acquisition
Agreement were unlawful and that the Director Defendants breached
their fiduciary duties in entering into and consummating the
transaction with the Investor Defendants and seeking compensatory
and punitive damages. Pursuant to a letter agreement dated
June 8, 1994, the Forum/Classic Plaintiffs have agreed, subject
to obtaining all necessary court approvals and the execution of
all necessary documentation, to a dismissal with prejudice of all
claims against all defendants in the above-described litigation
in return for the payment and reimbursement of a portion, not to
exceed $500,000, of Forum/Classic Plaintiffs' attorneys' fees.
On July 9, 1994, the parties to this litigation filed a
stipulation of settlement with the court. Pursuant to the
stipulation, the Company's shareholders have been notified in
writing of the terms of the settlement and that a hearing to
determine whether such settlement should be approved is scheduled
to be held on August 29, 1994.
FRP Recapitalization
On October 6, 1993, Forum Retirement Partners, L.P., a
limited partnership of which a wholly owned subsidiary of the
Company is the sole general partner ("FRP"), and the Company
entered into an agreement (the "FRP Recapitalization Agreement")
providing for the recapitalization of FRP (the "FRP
Recapitalization"). In addition to being the parent company of
FRP's general partner, the Company has a long-term management
contract with FRP and, prior to the FRP Recapitalization, had a
substantial equity interest in FRP. Pursuant to the FRP
Recapitalization Agreement, a subsidiary of the Company provided
additional equity capital to FRP through the purchase of
6,500,000 newly issued units of limited partners' interests
("Units") from FRP for an aggregate purchase price of $13.0
million or $2.00 per Unit. The acquisition by the Company's
subsidiary of the 6,500,000 Units of FRP was financed by proceeds
from the sale of 3,466,666 additional shares of Common Stock to
the Investors for an aggregate purchase price of approximately
$13.0 million or $3.75 per share. As a result of the purchase of
3,466,666 additional shares of Common Stock by the Investors, the
Investors increased their aggregate beneficial ownership from
12,757,016 shares of Common Stock (including 5,760 shares
purchasable upon exercise of the Investor Warrants), or 71.7% of
the shares outstanding prior thereto, to 16,223,682 shares of
Common Stock (including 5,760 shares purchasable upon exercise of
the Investor Warrants), or approximately 76.3% of the total
number of shares outstanding. Pursuant to the agreements
pursuant to which the Investors purchased the 3,466,666 shares of
Common Stock (the "Stock Purchase Agreements") and the Equity
Registration Rights Agreement, the Investors have certain demand
and piggyback registration rights with respect to such shares.
Pursuant to the Stock Purchase Agreements, on March 10,
1994, the Company commenced a subscription offering (the "Forum
Subscription Offering") permitting shareholders of record as of
October 18, 1993 (other than the Investors) ("Eligible
Shareholders") the opportunity to purchase additional shares of
Common Stock at a purchase price of $3.75 per share, the same
price paid by the Investors, and thereby avoid dilution as a
result of the issuance of the 3,466,666 shares of Common Stock to
the Investors. Pursuant to the Forum Subscription Offering,
which expired on April 11, 1994, Eligible Shareholders purchased
23
<PAGE>
1,238,484 newly issued shares of Common Stock, resulting in the
Investors owning beneficially approximately 72.1% of the shares
of Common Stock outstanding immediately following the completion
of the Forum Subscription Offering.
Certain Other Relationships and Transactions
During the Company's fiscal year ended March 31, 1994, the
Company paid Spencer & Associates, Inc., a corporation of which
Dr. Spencer is the principal, $199,000 for services as a
consultant to the Company. Additionally, Dr. Spencer has
submitted invoices to the Company for consulting services in the
approximate amount of $37,500 for the period preceding July 1,
1994.
During its fiscal year ended March 31, 1994, the Company
paid Mr. Eden $150,000 for services as a consultant to the
Company.
On February 1, 1994, $30.0 million aggregate principal
amount of the Senior Subordinated Notes held by certain
affiliates of AFG and the limited partners of Forum Holdings was
prepaid by the Company. While under the terms thereof the Senior
Subordinated Notes cannot be prepaid or redeemed by the Company
before April 15, 1996, the Company was able to obtain the ability
to prepay the $30.0 million aggregate principal amount of Senior
Subordinated Notes at a price equal to 110% of the principal
amount. This transaction was approved by the Standing Committee
of Independent Directors. See "The Board of Directors and its
Committees -- Board Committees."
In July 1994, the Company paid $750,000 to Forum Holdings in
respect of various general and administrative services provided
to the Company by Forum Holdings and its representatives. Such
services include, among others, arranging for and negotiating the
Company's debt refinancing which was completed in February 1994
and negotiating the co-investment agreement which was entered
into by the Company and National Guest Homes, LLC in July 1994.
Services covered by such payment also include Mr. Whitman's
services as President and Chief Executive Officer of the Company.
The $750,000 payment was approved by the Standing Committee of
Independent Directors. See "The Board of Directors and its
Committees -- Board Committees."
In 1992, Ms. Shuman sought and obtained a discharge under
chapter 7 of the Bankruptcy Code of a mortgage loan secured by
her former residence in a deteriorating inner-city neighborhood.
The only creditor adversely affected by these proceedings was the
mortgage lender, which had refused Ms. Shuman's offer of title to
the property and cash in an amount equal to the difference
between the remaining loan balance and the then-current appraised
value of the property.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On January 11, 1993, the Company entered into an agreement
(the "January Winton Agreement") with Winton Associates, Inc.
("Winton"), a wholly owned subsidiary of Pacholder Associates,
Inc., to provide the Company with certain investment banking
services. The principal of Pacholder Associates, Inc. is Mr.
Pacholder, a director of the Company and a member of the
Compensation Committee. The January Winton Agreement, as
amended, provided for a flat fee of $1.0 million and reasonable
out-of-pocket expenses. In accordance with the January Winton
Agreement, (i) on February 4, 1993, Winton was paid $100,000 and
(ii) on June 18, 1993, Winton was paid an additional $450,000, in
each case in respect of transactions occurring as part of the
1993 Recapitalization. On June 14, 1993, Real Vest Management
Services, Inc. commenced litigation against Mr. Pacholder,
Pacholder Associates, Inc., Winton and the Company, asserting,
among other things, its entitlement to one-half of the fee due
under the January Winton Agreement. Pursuant to an agreement
among the parties to this litigation, the Company deposited the
funds at issue ($450,000) with the presiding court and the claims
against the Company were thereafter dismissed with prejudice.
On October 6, 1993, the Company entered into an agreement
with Winton (the "October Winton Agreement") to provide certain
financial advisory services to the Standing Committee of
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Independent Directors with respect to the purchase by the
Investors of additional shares of Common Stock in conjunction
with the FRP Recapitalization as discussed above. Winton was
paid $25,000 pursuant to the October Winton Agreement.
On December 13, 1993, the Company entered into an agreement
with Winton (the "December Winton Agreement") to provide certain
financial advisory services to the Standing Committee of
Independent Directors with respect to the prepayment of $30.0
million aggregate principal amount of Senior Subordinated Notes
held by affiliates of AFG and limited partners of Forum Holdings
as discussed above. Winton was paid $25,000 pursuant to the
December Winton Agreement.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the
beneficial ownership of each person known to the Company, as of
August 12, 1994, to own more than 5% of the Company's outstanding
Common Stock.
Amount and Nature Percent of
Name and Address of Beneficial Owner of Beneficial Ownership(1) Class (2)
------------------------------------ -------------------------- ----------
Apollo FG Partners, L. P. 7,068,171 (3) 31.4%
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars,
Suite 1900
Los Angeles, California 90067
Kevin E. Foley 1,202,246 (4) 5.3%
Deputy Superintendent
of Insurance of
the State of New York
As Rehabilitator of
Executive Life
Insurance Company of New York
Jericho, New York 11753-2167
Forum/Classic, L.P. 2,333,219 (5) 10.4%
200 West Madison Street
39th Floor
Chicago, Illinois 60606
Forum Holdings, L.P. 7,068,171 (6) 31.4%
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
Healthcare Resources I, L.P. 2,293,208 (7) 10.2%
184 Shuman Boulevard, Suite 200
Naperville, Illinois 60563
____________________
(1)The amounts shown represent shares of Common Stock with
respect to which the named person has sole dispositive power.
As a result of the provisions of the shareholders' agreement
described below, each of AFG, Forum Holdings and Healthcare
Resources may be deemed to have shared voting power with
respect to, and thus to beneficially own, all of the
16,429,550 shares of Common Stock owned by such persons in
the aggregate (constituting 73.0% of shares of Common Stock
treated as outstanding as described in Note 2 below).
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(2)The percentages shown are based on 22,505,869 shares of
Common Stock outstanding. This number includes the 5,760
shares of Common Stock presently issuable upon exercise of
the Investor Warrants, but excludes 149,607 shares of Common
Stock presently issuable at a nominal purchase price upon the
exercise of certain warrants held by Citicorp USA, Inc. and
550,537 shares of Common Stock presently issuable at a
purchase price equal to $3.37 per share (subject to
adjustment) upon the exercise of certain other warrants held
by Citicorp USA, Inc.
(3)According to Amendment No. 5 to a Schedule 13D dated July 12,
1994, and filed with the SEC by AFG. The number of shares
listed includes 2,304 shares of Common Stock presently
purchasable by AFG upon exercise of Investor Warrants. The
general partner of AFG is Apollo Investment Fund, L.P., the
managing general partner of Apollo Investment Fund, L.P. is
Apollo Advisors, L.P., and the general partner of Apollo
Advisors, L.P. is Apollo Capital Management, Inc. By reason
of various relationships between Messrs. Copses, Ressler and
Siegel and AFG and its affiliates, Messrs. Copses, Ressler
and Siegel may be deemed to beneficially own the shares of
Common Stock owned by AFG. Each of Messrs. Copses, Ressler
and Siegel disclaims beneficial ownership of such shares.
(4)According to a Schedule 13G dated June 17, 1992, and filed
with the SEC by Mr. Foley.
(5)According to a Schedule 13D dated April 8, 1993, and filed
with the SEC by Forum/Classic, L.P., Forum/Classic, L.P.
beneficially owned 1,834,246 shares of Common Stock as of
such date. Forum Group has been informed that, since such
date, Forum/Classic L.P. has acquired an additional 498,973
shares of Common Stock.
(6)According to Amendment No. 10 to a Schedule 13D dated
July 12, 1994 (the "Forum Holdings 13D"), and jointly filed
with the SEC by Forum Holdings, HRP Management II, Ltd., HH
Genpar Partners, Hampstead Associates, Inc., RAW Genpar Inc.
and InCap, Inc. (collectively, the "Forum Holdings Reporting
Persons"). The number of shares listed includes 2,304 shares
of Common Stock presently purchasable by Forum Holdings upon
exercise of Investor Warrants. According to the Forum
Holdings 13D, each of the Forum Holdings Reporting Persons
may, by reason of certain control relationships, be deemed to
beneficially own all of the shares of Common Stock owned
directly by Forum Holdings. By reason of various
relationships between Messrs. Decker and Whitman and the
Forum Holdings Reporting Persons, Messrs. Decker and Whitman
may be deemed to beneficially own the shares of Common Stock
owned by the Forum Holdings Reporting Persons. Each of
Messrs. Decker and Whitman disclaims beneficial ownership of
such shares.
(7)According to Amendment No. 8 to a Schedule 13D dated December
29, 1993 (the "Healthcare Resources 13D"), and jointly filed
with the SEC by Healthcare Resources, Evergreen Healthcare,
Inc., and EH Resources, Inc. (collectively, the "Healthcare
Resources Reporting Persons"). The number of shares listed
includes 1,152 shares of Common Stock presently purchasable
by Healthcare Resources upon exercise of Investor Warrants.
According to the Healthcare Resources 13D, the Healthcare
Resources Reporting Persons may, by reason of certain control
relationships, be deemed to beneficially own all of the
shares of Common Stock owned directly by Healthcare
Resources. By reason of various relationships between Mr.
Petty and the Healthcare Resources Reporting Persons, Mr.
Petty may be deemed to beneficially own the shares of Common
Stock owned by the Healthcare Resources Reporting Persons.
Mr. Petty disclaims beneficial ownership of such shares.
Pursuant to a shareholders' agreement (the "Shareholders'
Agreement") entered into among the Investors, the Investors have
agreed that, at all times prior to the 1996 Annual Meeting of the
Shareholders of the Company (the "1996 Annual Meeting"), the
Board will consist of eleven persons: (i) three persons
nominated by AFG, (ii) three persons nominated by Forum Holdings,
(iii) one person nominated by Healthcare Resources, and (iv) four
persons acceptable to each of the Investors. The Investors
further agreed that from and after the 1996 Annual Meeting, the
right to nominate seven of the Company's directors will be
allocated among the Investors in proportion to their relative
percentages of share ownership, and that the remaining four
directors will be persons acceptable to each of the Investors.
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The Shareholders' Agreement provides for the establishment
and maintenance of the Executive Committee. Each of the
Investors has agreed to use its respective best efforts to cause
the Executive Committee to consist of at least three Investor
designees (consisting of one designee designated by each
Investor) and such additional directors of the Company, if any,
as shall be acceptable to each of the Investors.
Subject to certain exceptions, the Shareholders' Agreement
requires that any Investor that desires to sell all or any
portion of its shares of Common Stock must first give notice to
the other Investors, which will then have the right to purchase
such shares at the price and on the other terms specified in such
notice. If no other Investor exercises its right to purchase
such shares, the Investor desiring to sell such shares will be
free to do so on the terms and subject to the conditions set
forth in the Shareholders' Agreement (and, under certain
circumstances, will be required to allow one or more of the other
Investors to participate in such sale).
The Shareholders' Agreement will terminate on June 14, 1998
or, under certain circumstances, earlier with respect to all or
some of the parties thereto.
So long as the Investors beneficially own a majority of the
outstanding Common Stock of the Company, the Investors acting
together will have the power to cause their nominees to be
elected and re-elected to the Board and to approve any action
requiring shareholder approval, such as the adoption of
amendments to the Articles of Incorporation (subject to limited
exceptions) and certain mergers, sales of all or substantially
all of the Company's assets or certain going-private
transactions.
Security Ownership of Management
The following table sets forth information as of the close
of business on the Record Date with respect to shares of Common
Stock beneficially owned by (i) each director, (i) each Named
Executive, and (iii) all directors and executive officers of the
Company as a group. All shares of Common Stock listed below are
beneficially owned directly by the person indicated in the table,
except as noted below.
Amount and Nature Percent of
Name of Beneficial Owner of Beneficial Ownership Class (1)
- - ------------------------ ----------------------- ----------
Robert A. Whitman (2) 0 *
Peter P. Copses (3) 0 *
Daniel A. Decker (2) 0 *
James E. Eden 0 *
Asher O. Pacholder 0 *
William G. Petty (4) 0 *
Antony P. Ressler (3) 0 *
D. Ellen Shuman 0 *
Eric B. Siegel (3) 0 *
Merlin C. Spencer 151 *
George C. Woodard 3,068(5) *
Paul A. Shively 1,075 *
Robert A. DeVoss 680 *
Davis A. Lewis 330 *
John H. Sharpe 783 *
All directors and executive 23,587 *
officers as a group
___________________
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(1)The percentages shown are based on 22,505,869 shares of
Common Stock outstanding. This number includes the 5,760
shares of Common Stock presently issuable upon exercise of
the Investor Warrants, but excludes 149,607 shares of Common
Stock presently issuable at a nominal purchase price upon the
exercise of certain warrants held by Citicorp USA, Inc. and
550,537 shares of Common Stock presently issuable at a
purchase price equal to $3.37 per share (subject to
adjustment) upon the exercise of certain other warrants held
by Citicorp USA, Inc.
(2)By reason of various relationships between Messrs. Decker and
Whitman and the Forum Holdings Reporting Persons, Messrs.
Decker and Whitman may be deemed to beneficially own the
shares of Common Stock owned by the Forum Holdings Reporting
Persons. Each of Messrs. Decker and Whitman disclaims
beneficial ownership of such shares.
(3)By reason of various relationships between Messrs. Copses,
Ressler and Siegel and AFG and its affiliates, Messrs.
Copses, Ressler and Siegel may be deemed to beneficially own
the shares of Common Stock owned by AFG. Each of Messrs.
Copses, Ressler and Siegel disclaims beneficial ownership of
such shares.
(4)By reason of various relationships between Mr. Petty and the
Healthcare Resources Reporting Persons, Mr. Petty may be
deemed to beneficially own the shares of Common Stock owned
by the Healthcare Resources Reporting Persons. Mr. Petty
disclaims beneficial ownership of such shares.
(5)Of the 3,068 shares of Common Stock shown to be owned by Mr.
Woodard, 1,272 shares are owned by his spouse. Mr. Woodard
disclaims beneficial ownership of such shares.
* Less than 1%.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires directors and
executive officers of the Company, and persons who own more than
10% of the issued and outstanding shares of Common Stock, to file
reports of ownership and changes in ownership with the SEC.
Directors, executive officers and greater than 10% shareholders
are required by SEC regulation to furnish the Company copies of
all Section 16(a) forms they file.
Based solely on review of those copies or written
representations that no Forms 5 were required, the Company
believes that, during its fiscal year ended March 31, 1994, all
Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10% shareholders were
complied with.
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APPENDIX A
FORUM GROUP, INC.
EQUITY INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to attract and
retain qualified officers and other salaried employees of Forum
Group, Inc. (the "Corporation") and its Subsidiaries and to
provide such persons with appropriate incentives.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to
Section 5 of this Plan, including a Free-standing Appreciation
Right and a Tandem Appreciation Right.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-standing
Appreciation Right.
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the committee described in Section 14(a)
of this Plan.
"Common Shares" means (i) shares of the Common Stock,
without par value, of the Corporation and (ii) any security into
which Common Shares may be converted by reason of any transaction
or event of the type referred to in Section 10 of this Plan.
"Date of Grant" means the date specified by the Committee on
which a grant of Option Rights, Appreciation Rights or
Performance Shares or Performance Units or a grant or sale of
Restricted Shares of Deferred Shares shall become effective,
which shall not be earlier than the date on which the Committee
takes action with respect thereto.
"Deferral Period" means the period of time during which
Deferred Shares are subject to deferral limitations under
Section 7 of this Plan.
"Deferred Shares" means an award pursuant to Section 7 of
this Plan of the right to receive Common Shares at the end of a
specified Deferral Period.
"Free-standing Appreciation Right" means an Appreciation
Right granted pursuant to Section 5 of this Plan that is not
granted in tandem with an Option Right or similar right.
"Incentive Stock Option" means an Option Right that is
intended to qualify as an "incentive stock option" under
Section 422 of the Code or any successor provision thereto.
"Management Objectives" means the achievement of performance
objectives established pursuant to this Plan for Participants who
have received grants of Performance Shares or Performance Units
or, when so determined by the Committee, Restricted Shares.
"Market Value per Share" means the fair market value of the
Common Shares as determined by the Committee from time to time.
"Nonqualified Option" means an Option Right that is not
intended to qualify as a Tax-qualified Option.
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"Optionee" means the person so designated in an agreement
evidencing an outstanding Option Right.
"Option Price" means the purchase price payable upon the
exercise of an Option Right.
"Option Right" means the right to purchase Common Shares
from the Corporation upon the exercise of a Nonqualified Option
or a Tax-qualified Option granted pursuant to Section 4 of this
Plan.
"Participant" means a person who is selected by the
Committee to receive benefits under this Plan and (i) is at that
time an officer, including without limitation an officer who may
also be a member of the Board, or other salaried employee of or a
consultant to the Corporation or any Subsidiary or (ii) has
agreed to commence serving in any such capacity.
"Performance Period" means, in respect of a Performance
Share or Performance Unit, a period of time established pursuant
to Section 8 of this Plan within which the Management Objectives
relating thereto are to be achieved.
"Performance Share" means a bookkeeping entry that records
the equivalent of one Common Share awarded pursuant to Section 8
of this Plan.
"Performance Unit" means a bookkeeping entry that records a
unit equivalent of $1.00 awarded pursuant to Section 8 of this
Plan.
"Reload Option Rights" means additional Option Rights
automatically granted to an Optionee upon the exercise of Option
Rights pursuant to Section 4(f) of this Plan.
"Restricted Shares" means Common Shares granted or sold
pursuant to Section 6 of this Plan as to which neither the
substantial risk of forfeiture nor the restrictions on transfer
referred to in Section 6 hereof has expired.
"Rule 16b-3" means Rule 16b-3, as promulgated and amended
from time to time by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor rule to the
same effect.
"Spread" means, in the case of a Free-standing Appreciation
Right, the amount by which the Market Value per Share on the date
when the Appreciation Right is exercised exceeds the Base Price
specified therein or, in the case of a Tandem Appreciation Right,
the amount by which the Market Value per Share on the date when
the Appreciation Right is exercised exceeds the Option Price
specified in the related Option Right.
"Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in which the
Corporation has a direct or indirect ownership or other equity
interest; provided, however, for purposes of determining whether
any person may be a Participant for purposes of any grant of
Incentive Stock Options, "Subsidiary" means any corporation in
which the Corporation owns or controls directly or indirectly
more than 50% of the total combined voting power represented by
all classes of stock issued by such corporation at the time of
the grant.
"Tandem Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is granted in
tandem with an Option Right or any similar right granted under
any other plan of the Corporation.
"Tax-qualified Option" means an Option Right that is
intended to qualify under particular provisions of the Code,
including without limitation an Incentive Stock Option.
3. Shares and Performance Units Available under the Plan.
(a) Subject to adjustment as provided in Section 10 of this Plan,
the number of Common Shares issued or transferred and covered by
outstanding awards granted under this Plan shall not in the
aggregate exceed 2,250,000 Common Shares, which may be Common
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Shares of original issuance or Common Shares held in treasury or
a combination thereof. For the purposes of this Section 3(a):
(i) Upon payment in cash of the benefit provided by
any award granted under this Plan, any Common Shares that
were covered by that award shall again be available for
issuance or transfer hereunder.
(ii) Common Shares converted by any award granted under
this Plan shall be deemed to have been issued or
transferred, and shall cease to be available for future
issuance or transfer in respect of any other award granted
hereunder, at the earlier of the time when they are actually
issued or transferred or the time when dividends or dividend
equivalents are paid thereon; provided, however, that
Restricted Shares shall be deemed to have been issued or
transferred at the earlier of the time when they cease to be
subject to a substantial risk of forfeiture or the time when
dividends are paid thereon.
(b) Notwithstanding anything in Section 3(a) hereof, or
elsewhere in this Plan, to the contrary, the aggregate number of
Common Shares actually issued or transferred by the Corporation
upon the exercise of the Incentive Stock Options shall not exceed
2,250,000 Common Shares.
4. Option Rights. The Committee may from time to time
authorize grants to Participants of options to purchase Common
Shares upon such terms and conditions as the Committee may
determine in accordance with the following provisions:
(a) Each grant shall specify the number of Common
Shares to which it pertains; provided, however, that no
participant shall be granted Option Rights for more than
1,000,000 Common Shares during any one fiscal year, subject
to adjustment as provided in Section 10 of this Plan.
(b) Each grant shall specify an Option Price per
Common Share, which shall be equal to or greater or less
than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration
to be paid in satisfaction of the Option Price and the
manner of payment of such consideration, which may include
(i) cash in the form of currency or check or other cash
equivalent acceptable to the Corporation,
(ii) nonforfeitable, unrestricted Common Shares, which are
already owned by the Optionee, (iii) any other legal
consideration that the Committee may deem appropriate,
including without limitation any form of consideration
authorized under Section 4(d) below, or such basis as the
Committee may determine in accordance with this Plan and
(iv) any combination of the foregoing.
(d) Any grant of a Nonqualified Option may provide
that payment of the Option Price may also be made in whole
or in part in the form of Restricted Shares or other Common
Shares that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by
the Committee on or after the Date of Grant, whenever any
Option Price is paid in whole or in part by means of any of
the forms of consideration specified in this Section 4(d),
the Common Shares received by the Optionee upon the exercise
of the Nonqualified Option shall be subject to the same
risks of forfeiture or restrictions on transfer as those
that applied to the consideration surrendered by the
Optionee; provided, however, that such risks of forfeiture
and restrictions on transfer shall apply only to the same
number of Common Shares received by the Optionee as applied
to the forfeitable or restricted Common Shares surrendered
by the Optionee.
(e) Any grant may provide for deferred payment of the
Option Price from the proceeds of sale through a broker of
some or all of the Common Shares to which the exercise
relates.
(f) Any grant may provide for the automatic grant to
the Optionee of Reload Option Rights upon the exercise of
Option Rights, including Reload Option Rights, for Common
Shares or any other noncash consideration authorized under
Sections 4(c) and (d) above; provided, however, that the
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term of any Reload Option Right shall not extend beyond the
term of the Option Right originally exercised.
(g) Successive grants may be made to the same Optionee
regardless of whether any Option Rights previously granted
to the Optionee remain unexercised.
(h) Each grant shall specify the period or periods of
continuous employment, or continuous engagement of the
consulting services, of the Optionee by the Corporation or
any Subsidiary that are necessary before the Option Rights
or installments thereof shall become exercisable, and any
grant may provide for the earlier exercise of the Option
Rights in the event of a change in control of the
Corporation or other similar transaction or event.
(i) Option Rights granted pursuant to this Section 4
may be Nonqualified Options or Tax-qualified Options or
combinations thereof.
(j) Any grant of an Option Right may provide for the
payment to the Optionee of dividend equivalents thereon in
cash or Common Shares on a current, deferred or contingent
basis, or the Committee may provide that any dividend
equivalents shall be credited against the Option Price.
(k) No Option Right granted pursuant to this Section 4
may be exercised more than 10 years from the Date of Grant.
(l) Each grant shall be evidenced by an agreement,
which shall be executed on behalf of the Corporation by any
officer thereof and delivered to and accepted by the
Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
5. Appreciation Rights. The Committee may also authorize
grants to Participants of Appreciation Rights. An Appreciation
Right shall be a right of the Participant to receive from the
Corporation an amount, which shall be determined by the Committee
and shall be expressed as a percentage (not exceeding 100%) of
the Spread at the time of the exercise of an Appreciation Right.
Any grant of Appreciation Rights under this Plan shall be upon
such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Any grant may specify that the amount payable upon
the exercise of an Appreciation Right may be paid by the
Corporation in cash, Common Shares or any combination
thereof and may (i) either grant to the Participant or
reserve to the Committee the right to elect among those
alternatives or (ii) preclude the right of the Participant
to receive and the Corporation to issue Common Shares or
other equity securities in lieu of cash; provided, however,
that no form of consideration or manner of payment that
would cause Rule 16b-3 to cease to apply to this Plan shall
be permitted.
(b) Any grant may specify that the amount payable upon
the exercise of an Appreciation Right shall not exceed a
maximum specified by the Committee on the Date of Grant.
(c) Any grant may specify (i) a waiting period or
periods before Appreciation Rights shall become exercisable
and (ii) permissible dates or periods on or during which
Appreciation Rights shall be exercisable.
(d) Any grant may specify that an Appreciation Right
may be exercised only in the event of a change in control of
the Corporation or other similar transaction or event.
(e) Any grant may provide for the payment to the
Participant of dividend equivalents thereon in cash or
Common Shares on a current, deferred or contingent basis.
(f) Each grant shall be evidenced by an agreement,
which shall be executed on behalf of the Corporation by any
officer thereof and delivered to and accepted by the
Optionee and shall describe the subject Appreciation Rights,
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identify any related Option Rights, state that the
Appreciation Rights are subject to all of the terms and
conditions of this Plan and contain such other terms and
provisions as the Committee may determine consistent with
this Plan.
(g) Regarding Tandem Appreciation Rights only: Each
grant shall provide that a Tandem Appreciation Right may be
exercised only (i) at a time when the related Option Right
(or any similar right granted under any other plan of the
Corporation) is also exercisable and the Spread is positive
and (ii) by surrender of the related Option Right (or such
other right) for cancellation.
(h) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of
each Free-standing Appreciation Right a Base Price per
Common Share, which shall be equal to or greater or
less than the Market Value per Share on the Date of
Grant;
(ii) Successive grants may be made to the
same Participant regardless of whether any
Free-standing Appreciation Rights previously granted to
the Participant remain unexercised;
(iii) Each grant shall specify the
period or periods of continuous employment, or
continuous engagement of the consulting services, of
the Participant by the Corporation or any Subsidiary
that are necessary before the Free-standing
Appreciation Rights or installments thereof shall
become exercisable; and any grant may provide for the
earlier exercise of the Free-standing Appreciation
Rights in the event of a change in control of the
Corporation or other similar transaction or event; and
(iv) No Free-standing Appreciation Right
granted under this Plan may be exercised more than 10
years from the Date of Grant.
6. Restricted Shares. The Committee may also authorize
grants or sales to Participants of Restricted Shares upon such
terms and conditions as the Committee may determine in accordance
with the following provisions:
(a) Each grant or sale shall constitute an immediate
transfer of the ownership of Common Shares to the
Participant in consideration of the performance of services,
entitling such Participant to dividend, voting and other
ownership rights, subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred
to.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a
payment by the Participant that is less than the Market
Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the
Restricted Shares covered thereby shall be subject to a
"substantial risk of forfeiture" within the meaning of
Section 83 of the Code for a period to be determined by the
Committee on the Date of Grant, and any grant or sale may
provide for the earlier termination of such period in the
event of a change in control of the Corporation or other
similar transaction or event.
(d) Each grant or sale shall provide that, during the
period for which such substantial risk of forfeiture is to
continue, the transferability of the Restricted Shares shall
be prohibited or restricted in the manner and to the extent
prescribed by the Committee on the Date of Grant. Such
restrictions may include without limitation rights of
repurchase or first refusal in the Corporation or provisions
subjecting the Restricted Shares to a continuing substantial
risk of forfeiture in the hands of any transferee.
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(e) Any grant or sale may require that any or all
dividends or other distributions paid on the Restricted
Shares during the period of such restrictions be
automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be
subject to the same restrictions as the underlying award or
such other restrictions as the Committee may determine.
(f) Each grant or sale shall be evidenced by an
agreement, which shall be executed on behalf of the
Corporation by an officer thereof and delivered to and
accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with
this Plan. Unless otherwise directed by the Committee, all
certificates representing Restricted Shares, together with a
stock power that shall be endorsed in blank by the
Participant with respect to the Restricted Shares, shall be
held in custody by the Corporation until all restrictions
thereon lapse.
7. Deferred Shares. The Committee may also authorize
grants or sales of Deferred Shares to Participants upon such
terms and conditions as the Committee may determine in accordance
with the following provisions:
(a) Each grant or sale shall constitute the agreement
by the Corporation to issue or transfer Common Shares to the
Participant in the future in consideration of the
performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may
specify.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a
payment by the Participant that is less than the Market
Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Deferred
Shares covered thereby shall be subject to a Deferral
Period, which shall be fixed by the Committee on the Date of
Grant, and any grant or sale may provide for the earlier
termination of the Deferral Period in the event of a change
in control of the Corporation or other similar transaction
or event.
(d) During the Deferral Period, the Participant shall
not have any right to transfer any rights under the subject
award, shall not have any rights of ownership in the
Deferred Shares and shall not have any right to vote the
Deferred Shares, but the Committee may on or after the Date
of Grant authorize the payment of dividend equivalents on
the Deferred Shares in cash or additional Common Shares on a
current, deferred or contingent basis.
(e) Each grant or sale shall be evidenced by an
agreement, which shall be executed on behalf of the
Corporation by any officer thereof and delivered to and
accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with
this Plan.
8. Performance Shares and Performance Units. The
Committee may also authorize grants of Performance Shares and
Performance Units, which shall become payable to the Participant
upon the achievement of specified Management Objectives, upon
such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance
Shares or Performance Units to which it pertains, which may
be subject to adjustment to reflect changes in compensation
or other factors.
(b) The Performance Period with respect to each
Performance Share or Performance Unit shall be determined by
the Committee on the Date of Grant and may be subject to
earlier termination in the event of a change in control of
the Corporation or other similar transaction or event.
(c) Each grant shall specify the Management Objectives
that are to be achieved by the Participant, which may be
described in terms of Corporation-wide objectives or
objectives that are related to the performance of the
individual Participant or the Subsidiary, division,
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department or function within the Corporation or Subsidiary
in which the Participant is employed or with respect to
which the Participant provides consulting services.
(d) Each grant shall specify in respect of the
specified Management Objectives a minimum acceptable level
of achievement below which no payment will be made and shall
set forth a formula for determining the amount of any
payment to be made if performance is at or above the minimum
acceptable level but falls short of full achievement of the
specified Management Objectives.
(e) Each grant shall specify the time and manner of
payment of Performance Shares or Performance Units that
shall have been earned, and any grant may specify that any
such amount may be paid by the Corporation in cash, Common
Shares or any combination thereof and may either grant to
the Participant or reserve to the Committee the right to
elect among those alternatives; provided, however, that no
form of consideration or manner of payment that would cause
Rule 16b-3 to cease to apply to this Plan shall be
permitted.
(f) Any grant of Performance Shares may specify that
the amount payable with respect thereto may not exceed a
maximum specified by the Committee on the Date of Grant.
Any grant of Performance Units may specify that the amount
payable, or the number of Common Shares issued, with respect
thereto may not exceed maximums specified by the Committee
on the Date of Grant.
(g) On or after the Date of Grant of Performance
Shares, the Committee may provide for the payment to the
Participant of dividend equivalents thereon in cash or
additional Common Shares on a current, deferred or
contingent basis.
(h) The Committee may adjust Management Objectives and
the related minimum acceptable level of achievement if, in
the sole judgment of the Committee, events or transactions
have occurred after the Date of Grant that are unrelated to
the performance of the Participant and result in distortion
of the Management Objectives or the related minimum
acceptable level of achievement.
(i) Each grant shall be evidence by an agreement,
which shall be executed on behalf of the Corporation by any
officer thereof and delivered to and accepted by the
Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Plan.
9. Transferability. (a) No Option Right or other
derivative security (as that term is used in Rule 16b-3) granted
under this Plan may be transferred by a Participant except by
will or the laws of descent and distribution. Option Rights and
Appreciation Rights granted under this Plan may not be exercised
during a Participant's lifetime except by the Participant or, in
the event of the Participant's legal incapacity, by his guardian
or legal representative acting in a fiduciary capacity on behalf
of the Participant under state law and court supervision.
(b) Any grant made under this Plan may provide that all or
any part of the Common Shares that are to be issued or
transferred by the Corporation upon the exercise of Option Rights
or Appreciation Rights or upon the termination of the Deferral
Period applicable to Deferred Shares or in payment of Performance
Shares or Performance Units, or are no longer subject to the
substantial risk of forfeiture and restrictions on transfer
referred to in Section 6 of this Plan, shall be subject to
further restrictions upon transfer.
10. Adjustments. The Committee may make or provide for
such adjustments in the number of Common Shares covered by
outstanding Option Rights, Appreciation Rights, Deferred Shares
and Performance Shares granted hereunder, the Option Prices per
Common Share or Base Prices per Common Share applicable to any
such Option Rights and Appreciation Rights, and the kind of
shares (including shares of another issuer) covered thereby, as
the Committee may in good faith determine to be equitably
required in order to prevent dilution or expansion of the rights
of Participants that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Corporation or
(b) any merger, consolidation, spin-off, spin-out, split-off,
split-up, reorganization, partial or complete liquidation or
other distribution of assets, issuance of warrants or other
rights to purchase securities or any other corporate transaction
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or event having an effect similar to any of the foregoing. In
the event of any such transaction or event, the Committee may
provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require
in connection therewith the surrender of all awards so replaced.
Moreover, the Committee may on or after the Date of Grant provide
in the agreement evidencing any award under this Plan that the
holder of the award may elect to receive an equivalent award in
respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar
effect, or the Committee may provide that the holder will
automatically be entitled to receive such an equivalent award.
The Committee may also make or provide for such adjustments in
the maximum number of Common Shares specified in Section 3(a) of
this Plan and the maximum number of Common Shares specified in
Section 4(a) of this Plan as the Committee may in good faith
determine to be appropriate in order to reflect any transaction
or event described in this Section 10.
11. Fractional Shares. The Corporation shall not be
required to issue any fractional Common Shares pursuant to this
Plan. The Committee may provide for the elimination of fractions
or for the settlement thereof in cash.
12. Withholding Taxes. To the extent that the Corporation
is required to withhold federal, state, local or foreign taxes in
connection with any payment made or benefit realized by a
Participant or other person under this Plan, and the amounts
available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such
payment or the realization of any such benefit that the
Participant or such other person make arrangements satisfactory
to the Corporation for payment of the balance of any taxes
required to be withheld. At the discretion of the Committee, any
such arrangements may without limitation include relinquishment
of a portion of any such payment or benefit or the surrender of
outstanding Common Shares. The Corporation and any Participant
or such other person may also make similar arrangements with
respect to the payment of any taxes with respect to which
withholding is not required.
13. Certain Terminations of Employment or Consulting
Services, Hardship, and Approved Leaves of Absence.
Notwithstanding any other provision of this Plan to the contrary,
in the event of termination of employment or consulting services
by reason of death, disability, normal retirement, early
retirement with the consent of the Corporation, termination of
employment or consulting services to enter public or military
service with the consent of the Corporation or leave of absence
approved by the Corporation, or in the event of hardship or other
special circumstances, of a Participant who holds an Option Right
or Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial
risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, any Deferred Shares as to which the Deferral
Period is not complete, any Performance Shares or Performance
Units that have not been fully earned, or any Common Shares that
are subject to any transfer restriction pursuant to Section 9(b)
of this Plan, the Committee may take any action that it deems to
be equitable under the circumstances or in the best interests of
the Corporation, including without limitation waiving or
modifying any limitation or requirement with respect to any award
under this Plan.
14. Administration of the Plan. (a) This Plan shall be
administered by the Compensation Committee of the Board, which
shall be composed of not less than two members of the Board, each
of whom shall be a "disinterested person" within the meaning of
Rule 16b-3. A majority of the Committee shall constitute a
quorum, and the acts of the members of the Committee who are
present at any meeting thereof at which a quorum is present, or
acts unanimously approved by the members of the Committee in
writing, shall be the acts of the Committee.
(b) The interpretation and construction by the Committee of
any provision of this Plan or any agreement, notification or
document evidencing the grant of Option Rights, Appreciation
Rights, Restricted Shares, Deferred Shares. Performance Shares
or Performance Units, and any determination by the Committee
pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No
member of the Committee shall be liable for any such action taken
or determination made in good faith.
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15. Amendments and Other Matters. (a) This Plan may be
amended from time to time by the Committee; provided, however,
except as expressly authorized by this Plan, no such amendment
shall increase the maximum number of Common Shares specified in
Section 3(a) hereof, increase the number of Common Shares
specified in Section 4(a) hereof or otherwise cause this Plan to
cease to satisfy any applicable condition of Rule 16b-3, without
the further approval of the shareholders of the Corporation.
(b) The Committee may condition the grant of any award or
combination of awards authorized under this Plan on the surrender
or deferral by the Participant of his or her right to receive a
cash bonus or other compensation otherwise payable by the
Corporation or a Subsidiary to the Participant.
(c) This Plan shall not confer upon any Participant any
right with respect to continuance of employment or other service
with the Corporation or any Subsidiary and shall not interfere in
any way with any right that the Corporation or any Subsidiary
would otherwise have to terminate any Participant's employment or
other service at any time.
(d) (i) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as a
Tax-qualified Option from so qualifying, any such provision shall
be null and void with respect to any such Option Right; provided,
however, that any such provision shall remain in effect with
respect to other Option Rights, and there shall be no further
effect on any provision of this Plan.
(ii) Any award that may be made pursuant to an amendment to
this Plan that shall have been adopted without the approval of
the shareholders of the Corporation shall be null and void if it
is subsequently determined that such approval was required in
order for this Plan to continue to satisfy the applicable
conditions of Rule 16b-3.
16. Termination of the Plan. No further awards shall be
granted under this Plan after the passage of 10 years from the
date on which the Plan is first approved by the shareholders of
the Corporation.
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