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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d) of the Securities Exchange Act of 1934
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FORUM RETIREMENT PARTNERS, L.P.
(Name of Subject Company)
FORUM RETIREMENT, INC.
FORUM RETIREMENT PARTNERS, L.P.
(Name of Persons Filing Statement)
PREFERRED DEPOSITARY UNITS REPRESENTING
PREFERRED LIMITED PARTNERS' INTERESTS
(Title of Class of Securities)
349 851 105
(CUSIP Number of Class of Securities)
RICHARD A. HUBER
SECRETARY
FORUM RETIREMENT, INC.
11320 RANDOM HILLS ROAD
SUITE 400
FAIRFAX, VIRGINIA 22030
(703) 277-7000
(Name, address and telephone number of person authorized to receive notice
and communications on behalf of person filing statement)
With a copy to:
Jeffery B. Floyd, Esq.
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002
(713) 758-2222
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Forum Retirement Partners, L.P., a Delaware
limited partnership (the "Partnership"). The title and class of security to
which this Statement on Schedule 14D-9 (this "Statement") relates are preferred
depositary units representing preferred limited partners' interests (the
"Units") of the Partnership. The address of the principal executive offices of
the Partnership is 11320 Random Hills Road, Suite 400, Fairfax, Virginia
22030.
ITEM 2. TENDER OFFER OF FORUM GROUP.
This Statement relates to the tender offer made by Forum Group, Inc.,
an Indiana corporation ("Forum Group"), to purchase any and all of the issued
and outstanding Units not beneficially owned by it at a price of $2.83 per
Unit, without interest, net to the Seller in cash, on the terms and conditions
set forth in Forum Group's Offer to Purchase dated October 2, 1995 (the "Offer
to Purchase"), the Supplement dated October 16, 1995 to the Offer to Purchase
(the "Supplement"), and the related Letter of Transmittal (which together
constitute the "Offer") and disclosed in Forum Group's Tender Offer Statement
on Schedule 14D-1 dated October 2, 1995, as amended by Amendment No. 1 thereto
dated October 16, 1995 (as amended, the "Schedule 14D-1"), filed with the
Securities and Exchange Commission (the "Commission"). Copies of the Offer to
Purchase, the Supplement, and the related Letter of Transmittal are filed
herewith as Exhibits 1, 2, and 3, respectively. The address of the principal
executive offices of Forum Group as set forth in the Schedule 14D-1 is 11320
Random Hills Road, Suite 400, Fairfax, Virginia 22030. Holders of Units are
referred to herein as "Unitholders."
ITEM 3. IDENTITY AND BACKGROUND.
(a) This Statement is being filed by the Partnership and Forum
Retirement, Inc., the sole general partner of the Partnership and a Delaware
corporation (the "General Partner"). The address of the principal executive
offices of the General Partner is 11320 Random Hills Road, Suite 400, Fairfax,
Virginia 22030. The name and business address of the Partnership are set
forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and
understandings, and certain actual or potential conflicts of interest, between
the Partnership or the General Partner or their affiliates and (1) certain of
the Partnership's or the General Partner's executive officers, directors or
affiliates or (2) Forum Group, its executive officers, directors or affiliates,
are described below.
BACKGROUND.
A description of certain transactions between the Partnership and
Forum Group prior to the commencement of the Offer is set forth in the Offer to
Purchase under the heading "Background of the Offer," which section is
incorporated herein by reference.
AFFILIATIONS WITH FORUM GROUP.
Unitholders should be aware that Forum Group, the officers of the
General Partner, and certain members of the General Partner's Board of
Directors, have interests that are described below that present them with
actual or potential conflicts of interest in connection with the Offer.
Control of the General Partner. The General Partner is and has been a
wholly owned subsidiary of Forum Group since the Partnership's inception in
1986. Consequently, Forum Group has at all times had the ability, as a matter
of Delaware corporate law, to elect all of the directors of the General Partner
although, pursuant to the partnership agreement of the Partnership (the
"Partnership Agreement"), at least a majority of the members of the General
Partner's Board must be persons who are not directors, officers, employees,
affiliates, or greater than 1% shareholders of the General Partner or any of
its affiliates ("Independent Directors"). See "Item 8. Additional Information
to be Furnished - Certain Litigation against Forum Group and the General
Partner" for a discussion of certain litigation involving, among other things,
the propriety under the Partnership Agreement of the composition
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of the General Partner's Board. In addition, Donald J. McNamara, President and
Chairman of the Board of the General Partner, has various relationships, with
one of the two investment entities which together control a majority of Forum
Group's capital stock, and all of the other officers of the General Partner are
also officers of Forum Group. As a result of the foregoing circumstances,
Forum Group has an interest in the Offer that may be deemed to present an
actual or potential conflict of interest.
Ownership of Units. As of September 29, 1995, Forum Group
beneficially owned an aggregate of 9,427,791 Units, or 61.7% of the total
number of Units outstanding. According to Forum Group's Schedule 14D-1, as of
September 29, 1995, Brian C. Swinton, one of the executive officers of Forum
Group, beneficially owned 9,800 Units and Mr. Swinton shares voting and
dispositive power with respect to such Units with his spouse.
Management Agreement. Forum Group manages and operates each of the
Partnership's nine retirement communities (the "Properties") pursuant to a
long-term management contract entered into in connection with the formation of
the Partnership (as amended, the "Management Agreement"). The term of the
Management Agreement is coterminous with the term of the Partnership (which
continues in existence until December 31, 2087 or until its earlier termination
pursuant to the terms of the Partnership Agreement) unless the term of the
Management Agreement is sooner terminated as provided therein. Either party
may terminate the Management Agreement upon 30 days' prior written notice if
the other party fails substantially to perform in accordance with the terms
thereof through no fault of the terminating party and if the other party does
not cure the failure within that 30-day period. Additionally, the Management
Agreement provides that the Partnership may terminate the Management Agreement
without cause upon (i) the simultaneous withdrawal or removal of the General
Partner as the general partner of the Partnership and (ii) the affirmative vote
of at least 80% in interest of the Unitholders. As of September 29, 1995,
Forum Group beneficially owned an aggregate of 9,427,791 Units, or 61.7% of the
total number of Units outstanding. Accordingly, even absent the purchase of
additional Units pursuant to the Offer, Forum Group has sufficient voting power
to prevent any attempt by Unitholders to remove the General Partner or to
terminate the Management Agreement without cause. In addition, the Management
Agreement provides for the termination of the manager (presently Forum Group)
in certain circumstances involving monetary defaults under the then-outstanding
indebtedness of the Partnership's affiliated operating partnership which owns
substantially all of the Partnership's assets and the vote of the holders of at
least two-thirds of the principal amount of such indebtedness.
Pursuant to the Management Agreement, Forum Group is entitled to
receive management fees in respect of the Properties, payable quarterly, in an
amount equal to 8% of the Partnership's gross operating revenues. All
management fees payable since the formation of the Partnership in 1986 through
December 31, 1993 were deferred. At December 31, 1993, deferred management
fees totaled approximately $15,780,000. Management fees are no longer
deferrable from and after January 1, 1994 and unpaid management fees for such
periods bear interest at the rate of 12% per annum. Forum Group received
management fees totaling approximately $3,767,000 for calendar year 1994 and
$1,957,000 for the first six months of calendar year 1995. Deferred management
fees generally will be paid quarterly at a rate of 50% of any excess revenues
of the Partnership, after the deduction of operating expenses, capital
expenditures, provisions for fixed asset reserves and other reasonable cash
reserves, and a provision for a quarterly distribution at an annual rate of
$1.35 per Unit, and after payment of current management fees. Deferred
management fees are also payable to Forum Group out of net proceeds to the
Partnership from sales and refinancing of the Partnership's properties
("Capital Transaction Proceeds") after making distributions of Capital
Transaction Proceeds in an amount sufficient (i) to meet Limited Partners' tax
liabilities, (ii) together with all prior distributions of Capital Transaction
Proceeds, to repay Limited Partners' capital contributions, and (iii) together
with all prior distributions of Capital Transaction Proceeds and net cash flow,
to pay a 12% cumulative, simple annual return on the Limited Partners'
respective unrecovered capital contributions. As of the date of this
Statement, Forum Group has received no payments in respect of deferred
management fees.
In the event of the termination of the Management Agreement in
accordance with the terms thereof, whether in connection with the removal or
withdrawal of the General Partner or otherwise, Forum Group would be entitled
immediately upon termination to receive all unpaid management fees (plus
interest thereon as described above) for prior periods, including without
limitation any deferred management fees, together with any reimbursements then
due to it under the Management Agreement. Such fees would be due regardless of
the levels of distribution made to holders of Units and would constitute a
liability of the Partnership (and therefore be entitled to priority over equity
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interests upon the liquidation of the Partnership). The Management Agreement
is filed herewith as an exhibit and is incorporated herein by reference.
Option Agreement. Pursuant to an option agreement (the "Option
Agreement") entered into at the time of the Partnership's formation, Forum
Group has the option to purchase, for a price equal to the appraised fair
market value thereof, any of the properties which the Partnership determines to
sell. Accordingly, consummation of any transaction to sell any of the
properties would be subject to, among other limitations, the election of Forum
Group not to exercise such option. In addition, under the Partnership
Agreement any sale of all or substantially all of the assets of the Partnership
requires the affirmative vote of at least a majority in interest of the
Unitholders. As of September 29, 1995, Forum Group beneficially owned 61.7% of
the total number of Units outstanding. Accordingly, even absent the purchase
of additional Units pursuant to the Offer, Forum Group has sufficient voting
power to prevent any sale of all or substantially all of the Partnership's
assets. Under the Option Agreement, the Partnership also has an option,
subject to certain limitations and restrictions, to purchase up to 15
additional retirement communities developed by Forum Group or any wholly owned
(or in certain circumstances partly owned) affiliate of Forum Group at the
lower of the appraised value of the retirement communities or the sum of 115%
of the costs incurred in connection with development of the retirement
communities and an amount equal to net operating losses incurred between
completion and the purchase. The Option Agreement is filed herewith as an
exhibit and is incorporated herein by reference.
Other. Pursuant to the Partnership Agreement, the Partnership
reimburses Forum Group for general and administrative costs incurred on behalf
of the Partnership. The reimbursement has amounted to less than $200,000 for
each year since the Partnership's formation. In connection with the bankruptcy
proceedings of Forum Group and certain of its affiliates (not including the
Partnership or the General Partner), Forum Group rejected a lease agreement
between Forum Group and Forum Retirement Operations, L.P., which was then an
affiliated operating partnership of the Partnership ("Operations"), pursuant to
which Forum Group leased one of the Properties. The rejection was authorized
by the bankruptcy court on June 10, 1991, and on August 15, 1992, Operations
filed an application for allowance and payment of an administrative claim,
which was denied by the bankruptcy court on February 5, 1992. On February 14,
1992, Operations appealed. On February 5, 1993, a settlement agreement (the
"Settlement Agreement") was entered into by and among the Partnership,
Operations, the General Partner, and Forum Group providing for the payment to
the Partnership by Forum Group of $125,000 and the allowance by Forum Group of
a general unsecured claim in favor of the Partnership in the amount of
$1,237,609, which was satisfied by the issuance of 63,612 shares of common
stock of Forum Group to Operations. These shares of common stock were sold
pursuant to a tender offer effected in 1993 by three investment entities which
together controlled a majority of Forum Group's capital stock for cash in the
amount of $3.62 per share. The Settlement Agreement also provided that,
commencing with the last quarter of 1992, general and administrative costs
incurred by Forum Group on behalf of the Partnership would be reimbursed at a
rate of $180,000 per annum.
The Partnership Agreement provides that the General Partner and its
officers, directors, agents, and employees will not be liable to the
Partnership or any limited partner for any error in judgment or breach of
fiduciary duty that does not constitute (i) a breach of that person's duty of
loyalty to the Partnership, as that duty of loyalty may be specified in or
modified by the Partnership Agreement, (ii) an act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law,
or (iii) a transaction from which an improper personal benefit is derived. The
Partnership Agreement also provides that the Partnership will indemnify the
General Partner and its affiliates, directors, officers, employees, and agents,
to the full extent permitted by law, against liabilities, costs, and expenses
(including legal fees and expenses) incurred by the indemnified persons in
connection with litigation or threatened litigation as a result of its status
as the general partner of the Partnership or an affiliate, officer, employee,
or agent of the General Partner where (x) the indemnified person acted in good
faith and in a manner it believed in good faith to be in, or not opposed to,
the best interests of the Partnership and, with respect to a criminal
proceeding, had no reasonable cause to believe its conduct was unlawful and (y)
the indemnified person's conduct did not constitute willful misconduct. The
Partnership is authorized to purchase insurance against liabilities asserted
against and expenses incurred by the foregoing persons in connection with the
Partnership's activities, whether or not the Partnership would have the power
to indemnify those persons against those liabilities under the provisions
described above. The Partnership has purchased such insurance, the annual
premium for which was $170,000 for the current policy period. The Partnership
Agreement provides that the Partnership may enter into
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contracts with the foregoing persons or adopt written procedures pursuant to
which arrangements are made for the advancement of expenses, the funding of the
Partnership's indemnity obligations, and other procedures regarding
indemnification as are appropriate. As a result of such provisions, the
limited partners have more limited rights against the General Partner and its
affiliates than they would have absent the limitations in the Partnership
Agreement.
The General Partner has entered into indemnification agreements with
each of its directors (including the directors who serve on the Special
Committee described in Item 4). These indemnification agreements provide for,
among other things, (i) the indemnification by the General Partner of the
indemnified persons thereunder to the extent permitted by Delaware law, (ii)
the advancement of attorneys' fees and other expenses, and (iii) the
establishment, upon approval by the General Partner's Board, of trusts or other
funding mechanisms to fund the General Partner's indemnification obligations
thereunder. Forum Group has also entered into indemnification agreements with
each of the directors of the General Partner (including the directors who serve
on the Special Committee described in Item 4). These indemnification
agreements provide for, among other things (i) the indemnification by Forum
Group of the indemnified persons thereunder to the extent permitted by Indiana
law, (ii) the advancement of attorneys' fees and other expenses, and (iii) the
establishment, upon approval by the Board of Directors of Forum Group, of
trusts or other funding mechanisms to fund Forum Group's indemnification
obligations thereunder. The form of the Indemnification Agreements is filed
herewith an exhibit to this Statement, and is incorporated herein by reference.
Messrs. Sexton and Leslie are compensated for all services as a
director of the General Partner at the rate of $18,000 per year, payable
quarterly in advance, plus $1,500 for each Board or committee meeting attended
in person and $1,000 for each meeting attended telephonically. Mr. McNamara is
compensated for all services as a director at the rate of $15,000 per year,
payable quarterly in advance. During the year ended December 31, 1994, Messrs.
Sexton, Leslie and McNamara received $29,500, $29,500 and $15,000,
respectively, in total compensation for their service as a director of the
General Partner.
The Offer provides that upon acceptance for payment by Forum Group of
Units tendered pursuant to the Offer, each tendering Unitholder will be deemed
to have released Forum Group, the General Partner, and their respective
stockholders, affiliates, directors (including the directors who serve on the
Special Committee described in Item 4), officers, employees, agents, and
representatives from any and all claims, causes of action, and liabilities,
known or unknown, arising from or relating to the business affairs of, or any
transactions by or involving, or the purchase and ownership of securities of,
the Partnership, from the beginning of time through the date on which tendered
Units are accepted for payment, including without limitation, any claim, cause
of action, or liability arising from or relating to the subject matter of the
existing litigation described under "Item 8. Additional Information to be
Furnished - Certain Litigation against Forum Group and the General Partner."
This release may have the effect of releasing the directors of the General
Partner (including the directors who serve on the Special Committee described
in Item 4) from any liability for their actions as directors.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors of the General Partner, upon the
unanimous recommendation of a special committee of the Board of Directors
comprised of independent directors, has determined (with the director
affiliated with Forum Group abstaining) that the Offer is fair to the
Unitholders (other than Forum Group and its affiliates) and has recommended
that such Unitholders accept the Offer and tender all of their Units pursuant
to the Offer.
(b) Background of the Offer. Following certain conversations
between representatives of Forum Group and members of the General Partner's
Board, on August 28, 1995, Forum Group furnished the General Partner's Board
with a letter containing an analysis of the possible acquisition of additional
Units by Forum Group for $2.50 per Unit. The analysis contained in such letter
included information regarding historical trading prices for the Units, and two
hypothetical valuation cases showing valuations below the per Unit price being
offered in the Offer.
In response, on September 1, 1995, the Independent Directors of the
General Partner's Board furnished a letter to Forum Group, the text of which
was as follows:
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"As the independent directors of the general partner of Forum
Retirement Partners, L.P. (the "Partnership"), we have reviewed your
memorandum of August 28, 1995, and thought it appropriate to respond.
We certainly appreciate your willingness to apprise us of Forum
Group's thoughts regarding acquiring the Preferred Depositary Units
("Units") in the Partnership not currently owned by Forum Group. Your
memorandum states that you have not yet decided whether to pursue any
particular course of action but would like feedback prior to such a
decision. The board of directors of the general partner has not
undertaken any evaluation of your hypothetical case or any
alternatives that may be available to the Partnership in the event
that Forum Group decides to pursue a transaction of the type set forth
in your hypothetical. As a result we cannot provide any views on your
hypothetical.
Discussions with Forum Group of any proposal it decides to make to the
general partner of the Partnership, however, should only occur with a
special committee of the independent directors of the general partner.
This special committee should be empowered to evaluate the
Partnership's prospects and alternatives and should be furnished by
Forum Group, as manager of the Partnership's properties, all relevant
information and projections concerning the Partnership's properties
and operations. If Forum Group decides to pursue a transaction, we
stand prepared to serve as the special committee to evaluate the
Partnership's alternatives with the assistance of independent legal
and financial advisors."
On September 23, 1995, Forum Group delivered to the General Partner's
Board a letter stating in part as follows:
"We are pleased to advise you that Forum Group, Inc. has decided to
initiate a tender offer to acquire, subject to certain conditions,
preferred depositary units representing limited partners' interests in
Forum Retirement Partners, L.P. at $2.50 per unit, net to the seller
in cash. The decision was made at a meeting of the Executive
Committee of the FGI Board of Directors earlier this evening. We
expect to make a public announcement with respect thereto prior to the
commencement of trading on Monday, September 25th, and will furnish
your counsel the formal tender offer documentation as soon as
reasonably possible."
On September 25, 1995, Forum Group made a press release that included
the text of the September 23, 1995 letter to the General Partner's Board and
delivered a letter to the Partnership, requesting that the Partnership furnish
to Forum Group the Partnership's Unitholder list, non-objecting beneficial
owners list, and security position listing for the purpose of disseminating the
Offer to Unitholders.
The General Partner's Board held a special meeting on September 25,
1995, and appointed a special committee (the "Special Committee") consisting of
the two directors, James C. Leslie and John F. Sexton, who are unaffiliated
with Forum Group or its shareholders. The General Partner's Board, among other
things, authorized and empowered the Special Committee to (i) review and
evaluate the terms of the Offer, (ii) if deemed appropriate by the Special
Committee, seek, evaluate, and negotiate alternatives to such Offer and take
such actions on behalf of the Partnership in connection therewith as deemed
necessary or advisable by the Special Committee, (iii) report to the entire
Board of Directors as to the results of the Special Committee's actions and
conclusions as to the fairness to the Unitholders from a financial point of
view of the Offer and, if applicable, any transaction referenced to in clause
(ii) above, and (iv) select and retain legal counsel and financial advisors.
After the General Partner's Board meeting on September 25, 1995, the
Partnership published a press release recommending that Unitholders take no
action with respect to the Offer until the Special Committee had completed its
review of the Offer and the General Partner's Board communicated with
Unitholders.
On September 28, 1995, the Special Committee held a meeting at which
John F. Sexton was elected Chairman of the Special Committee, and the Special
Committee engaged legal counsel and retained ROBERT A. INNAMORATI & CO.
("RAI&Co") as its financial advisor (see Item 5 below). The Special Committee
also determined that, in accordance with the terms of the Partnership
Agreement, it would provide Forum Group with the Partnership's Unitholder
list, non-objecting beneficial owners list, and security position listings for
the purpose of disseminating the Offer to Unitholders as requested by Forum
Group.
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In the following days the Special Committee and its financial advisor
requested and received certain information from Forum Group and the General
Partner, including projections prepared with respect to the results of
operations and cash flows of the Partnership by officers of the General
Partner and Forum Group (the "Projections"). See "Item 8. Additional
Information to be Furnished - Certain Financial Projections."
At a meeting held on October 5, 1995, the Special Committee met with
its legal counsel to discuss the status of the Special Committee's evaluation
of the Offer. The Special Committee, its financial advisor and its legal
counsel then met with certain executives of Forum Group, including the Chief
Financial Officer. The Special Committee's financial advisor questioned the
executives as to the Projections previously provided to the Special Committee
and the future prospects of the Partnership, as to their view of industry
trends, and as to other matters. The Special Committee and its financial
advisor also discussed with the Forum Group executives the Partnership's
ongoing expansion of its Properties and the financing of capital expenditures
of the Partnership related to expansion and otherwise, as well as the existence
and terms of the deferred management fees under the Management Agreement. At
the meeting, Forum Group executives confirmed that Forum Group had no current
intention to waive or release any of its contractual rights with respect to the
Partnership or its assets, including the Management Agreement and the Option
Agreement.
During the period between October 6 and October 13, the members of the
Special Committee reviewed and discussed with the financial advisor certain
financial and other information from Forum Group and the General Partner
concerning the Partnership, and the financial advisor requested additional
information from Forum Group and the General Partner and had several
discussions with Forum Group executives regarding such information.
On the morning of October 13, 1995, the Special Committee met with its
financial advisor and its legal counsel. At the meeting the Special
Committee's financial advisor, RAI&Co, made a presentation of its preliminary
valuation analysis, after which the Special Committee discussed RAI&Co's
presentation and other considerations regarding the Offer. The Special
Committee decided that Mr. Sexton, as Chairman of the Special Committee, should
discuss the terms of the Offer with Forum Group representatives in an effort to
seek reasonable assurances that the offer price represented Forum Group's best
price.
Following the meeting, Mr. Sexton spoke with a representative of Forum
Group and expressed the view that the Special Committee, having heard the
presentation earlier from its financial advisor, did not expect to recommend
the Offer at $2.50 to Unitholders. Mr. Sexton communicated that a fairness
opinion would likely be given at a price of $2.75 per Unit but that he did not
believe the Special Committee would recommend the Offer at that price. Mr.
Sexton also stated that the Special Committee would like for the offer price to
be increased to at least $2.90 per Unit. Mr. Sexton then conveyed the results
of his conversation to the other member of the Special Committee and the
Special Committee's legal counsel and financial advisor.
On the afternoon of October 13, a representative of Forum Group
telephoned the members of the Special Committee and indicated that Forum Group
would increase the offer price per Unit to $2.75 if the General Partner's Board
intended to remain neutral with respect to the Offer but would increase the
offer price per Unit to $2.83 if the Special Committee would recommend the
Offer at such price to the Unitholders.
The Special Committee then convened a meeting to discuss Forum Group's
proposal and after discussions, including concerns that Unitholders have ample
time to decide whether to tender their Units, unanimously determined that the
Offer at $2.83 per Unit is fair to Unitholders (other than Forum Group and its
affiliates) and resolved to recommend the Offer at $2.83 per Unit to the
General Partner's Board, conditioned upon receipt of a fairness opinion from
the Special Committee's financial advisor and upon Forum Group's agreement to
extend the Offer until November 10, 1995.
At a meeting of the General Partner's Board convened on the afternoon
of October 13, the General Partner's Board, based upon the unanimous
recommendation of the Special Committee, determined (with the director
affiliated with Forum Group abstaining), subject to receipt of a fairness
opinion from the financial advisor, that the Offer at $2.83 per Unit is fair to
Unitholders (other than Forum Group and its affiliates) and resolved to
recommend that such Unitholders accept the Offer and tender all of their Units
pursuant to the Offer.
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Following the meeting of the General Partner's Board, the Special
Committee again met with its legal counsel and financial advisor and discussed
the outcome of the Special Committee's conversations with Forum Group and the
action of General Partner's Board. RAI&Co then made a presentation to the
Special Committee of its valuation analysis and orally delivered its opinion,
which was subsequently confirmed in writing as of that date, that the $2.83
cash consideration to be received by Unitholders (other than Forum Group and
its affiliates) pursuant to the Offer is fair to such Unitholders, from a
financial point of view.
Reasons for Recommendation. In making the determination and
recommendation set forth in paragraph (a) above, the Special Committee
considered various factors, including the following:
(i) the opinion of RAI&Co, delivered orally to the Special
Committee on October 13, 1995, and subsequently confirmed in writing as of that
date, that the cash consideration to be received by the Unitholders (other than
Forum Group and its affiliates) pursuant to the Offer is fair to such
Unitholders, from a financial point of view. A copy of the opinion of RAI&Co
(which Unitholders are urged to read carefully in its entirety) setting forth
certain of the assumptions made, matters considered, and limitations on the
review undertaken, is attached hereto as Annex A, and is incorporated herein by
reference;
(ii) the relationship between the price to be paid pursuant to the
Offer and the market prices and recent trading history of the Units on the
American Stock Exchange ("AMEX"), including the fact that the Offer will enable
Unitholders to realize a premium of approximately 42% over the closing sale
price of a Unit on the AMEX on September 22, 1995, the last trading day prior
to the press release announcing that Forum Group would commence the Offer, and
a price that is slightly above the 52-week high sales price of a Unit on the
AMEX;
(iii) the relationship between the price to be paid pursuant to the
Offer and the price paid in previous purchases by Forum Group;
(iv) the timing of the receipt of the cash consideration pursuant
to the Offer;
(v) the terms and conditions of the Offer, including Forum Group's
commitment to take any and all Units tendered and the fact that the Offer is
not conditioned on any minimum number of Units being tendered or upon any
merger or other transaction pursuant to which non-tendering Unitholders are
forced to convert their Units into cash or other consideration;
(vi) the possible reduction in the number of publicly-traded Units
upon completion of a tender offer and the resulting adverse effect on the
liquidity of the Units;
(vii) the Special Committee's knowledge of the business, results of
operations, properties, financial condition, and prospects of the Partnership;
(viii) the limited alternatives available to the Partnership due to
Forum Group's rights under the Management Agreement, the Option Agreement and
the Partnership Agreement; and
(ix) the economic limitations likely to be imposed on the
Partnership's operations, financing and future cash flows due to the fact that
the Partnership may possibly be taxed as an association taxable as a
corporation beginning in 1998.
In view of the wide variety of factors considered, the Special Committee did
not find it practical to, and did not, rank or otherwise attempt to assign
relative weights to the specific factors considered in making their
determination although the factors which received the greatest emphasis in the
Special Committee's discussions were the factors identified in paragraphs (i),
(ii), and (viii) above.
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Opinion of Financial Advisor. On October 13, 1995, RAI&Co orally
advised the Special Committee of such firm's opinion that the proposed cash
consideration of $2.83 per Unit to be received by Unitholders (other than Forum
Group and its affiliates) pursuant to the Offer is fair to such Unitholders,
from a financial point of view. RAI&Co delivered its written opinion
confirming such oral advice as of October 13, 1995. A copy of RAI&Co's written
opinion, which Unitholders are urged to read in its entirety, setting forth
certain of the assumptions made, matters considered, and limitations on the
review undertaken, is attached hereto as Annex A. RAI&Co did not make or seek
to obtain appraisals from third parties of the Partnership's assets in
connection with its analysis of the Partnership. No limitations were imposed
by the Special Committee or the Board of Directors of the General Partner upon
RAI&Co with respect to the investigations made or the procedures followed by
RAI&Co in rendering its opinion, and management of the General Partner and
Forum Group cooperated with RAI&Co in its analysis of the Partnership. For
purposes of its opinion, RAI&Co assumed and relied upon, without independent
verification, the accuracy and completeness of the financial and other
information obtained by RAI&Co from public sources and from the General Partner
or its affiliates and advisors.
At a meeting of the Special Committee on the morning of October 13,
1995, RAI&Co reviewed, on a preliminary basis, a discounted cash flow analysis,
a capitalization of net operating income analysis, a market comparison analysis
and an acquisition premium analysis of the Partnership. RAI&Co's preliminary
analyses were further refined, partially in response to questions from members
of the Special Committee, and RAI&Co presented its final analysis to the
Special Committee at its meeting on the afternoon of October 13. The following
is a summary of RAI&Co's analyses:
1. Discounted Cash Flow Analysis. RAI&Co performed a discounted cash
flow analysis for the purpose of determining the equity value per Unit
of the Partnership based on the Projections for the fiscal years
ending December 31, 1995 through 2004 that were prepared by the
General Partner in good faith solely for internal use and provided to
RAI&Co. See "Item 8. Additional Information to be Furnished -
Certain Financial Projections" for a discussion of the Projections,
the material assumptions underlying the Projections, and certain
qualifications in respect thereto. RAI&Co performed a sensitivity
analysis by applying various discount and terminal value
capitalization rate assumptions to the Projections through years five,
seven, and ten, respectively. Discount rates of 12%, 15%, 18%, and
20% and terminal value capitalization rates of 10%, 11%, and 12% were
used. The discount and capitalization rates used by RAI&Co were
selected based on conversations with industry experts and an industry
periodical as well as in consideration of the Partnership's prospects
and other market- related factors. The Projections reflect projected
revenues of $60.8 million and net operating income (adjusted in
1999 to add back capital expenditures related to the expansion plan in
such year) of $12.0 million for the fiscal year ending December 31,
1999. The resulting value of the Units based on the Projections for
the fiscal year ending December 31, 1999 ranged from $1.30 to $2.55.
The Projections reflect projected revenues of $68.7 million and net
operating income of $14.8 million for the fiscal year ending December
31, 2001. The resulting value of the Units based on the Projections
for the fiscal year ending December 31, 2001 ranged from $1.66 to
$3.37. The Projections reflect projected revenues of $75.5 million
and net operating income of $16.4 million for the fiscal year ending
December 31, 2004. The resulting value of the Units based on the
Projections for the fiscal year ending December 31, 2004 ranged from
$1.60 to $3.56. Thus, the above calculations produced a valuation
range for the Units of $1.30 to $3.56 per Unit.
2. Capitalization of Net Operating Income Analysis. In its
capitalization of net operating income analysis, RAI&Co performed its
analysis based on actual reported net operating income for the
Partnership for the twelve-month period ended June 30, 1995 and on the
net operating income for the twelve-month period ending December 31,
1995 based on the Projections. RAI&Co applied capitalization rates
of 8%, 9%, 10%, 11%, 12%, and 13% to net operating income of $7.6
million for the twelve months ended June 30, 1995 to arrive at a range
of hypothetical enterprise values. RAI&Co then subtracted the debt as
of June 30, 1995 from the hypothetical enterprise value and added the
cash as of June 30, 1995 in order to arrive at hypothetical equity
values ranging from $15.1 million to $51.5 million. This resulted in
per Unit values ranging from $0.98 to $3.37. RAI&Co applied
capitalization rates of 8%, 9%, 10%, 11%, 12%, and 13% to projected
net operating income of $7.9 million for the twelve-month period
ending December 31, 1995 based on the Projections
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<PAGE> 10
to arrive at a range of hypothetical enterprise values. RAI&Co then
subtracted from the hypothetical enterprise value the projected debt
as of December 31, 1995 based on the Projections and added the
projected cash as of December 31, 1995 based on conservations with
management in order to arrive at hypothetical equity values ranging
from $17.2 million to $55.0 million. This resulted in per Unit values
ranging from $1.12 to $3.60. RAI&Co selected the capitalization rates
used in its analysis based on conversations with industry experts as
well as from information from an industry periodical.
3. Analysis of Comparable Publicly-Traded Companies. In its market
comparison analysis, RAI&Co selected 11 companies engaged in lines of
business similar to that of the Partnership. The 11 companies were
Beverly Enterprises, Inc., Advocat Inc., Genesis Health Ventures,
Inc., The Multicare Companies, Inc., Summit Care Corporation,
Geriatric & Medical Companies, Inc., GranCare, Inc., Community Care of
America, Inc., Retirement Care Associates, Inc., Sun Healthcare Group,
Inc. and Forum Group, Inc. RAI&Co noted that it was difficult to
select publicly-traded companies that could be used to establish
meaningful comparisons with the Partnership. RAI&Co calculated the
enterprise value (defined as market capitalization plus long-term debt
minus cash) of the 11 comparable companies. Two market
capitalizations for each comparable company were calculated: current
market capitalization (defined as current number of shares outstanding
multiplied by the current market price per share) and twelve-month
average market capitalization (defined as the average price per share
for the period multiplied by the average shares outstanding). The two
enterprise values for each comparable company were converted into
multiples of revenues; of earnings before interest, taxes,
depreciation and amortization ("EBITDA"); of earnings before interest
and taxes ("EBIT"); and of net income for each of the last reported
fiscal year and the most recent twelve-month period, in each case as
derived from the company's public filings. An adjusted peer average
for each data set was determined by eliminating the high and low
observations. Valuations were then calculated by applying the
Partnership's results for the year ended December 31, 1994, the twelve
months ended June 30, 1995 and the twelve-month period ending December
31, 1995 based on the Projections to arrive at implied values of the
Partnership based on each data set. Based on this analysis, RAI&Co
arrived at a value per Unit ranging from $2.55 to $2.95.
4. Acquisition Premium Analysis. RAI&Co analyzed premiums paid in
selected tender offers for cash of the equity interest in 18 public
companies completed between January 1, 1994 and October 3, 1995.
RAI&Co noted that it was difficult to select transactions that could
be used to establish meaningful comparisons. Only one of the 18
transactions involved a company in the retirement center or nursing
home industry. The total value of the 18 transactions analyzed ranged
from $14.4 million to $49.0 million. Only six were in the $15 million
to $25 million total value range, none of which were considered by
RAI&Co to be directly comparable to the Partnership. RAI&Co further
observed that the range of values for the various financial
measurements had no concentrations, but rather, were vastly divergent.
RAI&Co determined that the premiums of these completed or pending
transactions in relation to the market price prior to the date of
announcement of such transactions ranged from 17% to 225% one day
prior to announcement, 19% to 265% one week prior to announcement,
and 12% to 225% four weeks prior to announcement. RAI&Co noted that
the $2.83 per Unit cash to be paid in connection with the Offer would
result in a premium of 42% over the market price of $2.00 per Unit one
day prior to the announcement that Forum Group proposed to acquire all
the Units that it did not own, a premium of 51% over the market price
of $1.88 per Unit one week prior to the announcement, and a premium of
42% over the market price of $2.00 four weeks prior to the date of the
announcement.
The summary set forth above describes the material points of the more
detailed analyses performed by RAI&Co in arriving at its fairness opinion.
RAI&Co believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create an incomplete view of the
processes underlying its opinion. The preparation of a fairness opinion is a
complex process involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description. In its analysis,
RAI&Co made a number of assumptions, which include that business and economic
conditions would remain essentially the same as those existing currently.
Further, RAI&Co assumed that current management would remain with the
Partnership and would continue to manage the Partnership as it had in the past.
Any estimates contained in such assumptions are not necessarily indicative of
actual values, which may be
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<PAGE> 11
significantly more or less favorable than is set forth within. Estimates of
values of companies do not purport to be appraisals or necessarily reflect the
prices at which companies may actually be sold. Because such estimates are
inherently subject to uncertainty, none of the Partnership, the General
Partner, RAI&Co, or their affiliates assumes any responsibility for their
accuracy.
A copy of certain summaries of the analyses prepared by RAI&Co in
connection with its fairness opinion has been filed as an exhibit to this
Statement, and will be made available for inspection and copying at the
principal executive offices of the General Partner during regular business
hours by any interested Unitholder or his representative who has been so
designated in writing.
RAI&Co was selected as financial advisor to the Special Committee
because its principals have substantial experience in providing financial
advisory services in connection with mergers and acquisition, leveraged
buyouts, business valuations, recapitalizations, and private placements.
Moreover, as a result of the 1993 engagement by a special committee of the
Board of Directors of the General Partner of Mr. Innamorati, one of the
principals of RAI&Co, while he was employed at another investment banking
company, the members of the Special Committee believe that RAI&Co had a unique
experience with, and knowledge of, the Partnership. Except for Mr.
Innamorati's engagement described above, to the Partnership's knowledge, RAI&Co
has not had any material relationship with the Partnership or its affiliates
during the past two years.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
By an engagement letter dated September 28, 1995, the Special
Committee retained the services of RAI&Co to act as financial advisor to the
Special Committee to assist the Special Committee in analyzing and evaluating
from a financial point of view the consideration offered by Forum Group and to
render a written fairness opinion with respect thereto. Under the engagement
letter, the General Partner agreed to pay RAI&Co a $15,000 non-refundable
engagement fee and a fee of $110,000 upon submission of its written opinion,
and to reimburse RAI&Co for certain expenses in an amount not to exceed
$15,000 without the prior written consent of the General Partner. In addition,
the engagement letter provides that the General Partner and the Partnership
will indemnify RAI&Co and its affiliates against certain liabilities arising
out of RAI&Co's engagement, including liabilities under the federal securities
laws.
Except as set forth above, none of the Special Committee, the General
Partner, the Partnership, or any persons acting on their behalf currently
intends to employ, retain, or compensate any person to make solicitations or
recommendations to the Unitholders.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the Partnership's knowledge, no transactions in the Units
have been effected during the past 60 days by the Partnership or the General
Partner, or by any director, executive officer, or affiliate thereof.
(b) To the Partnership's knowledge, none of the General Partner's
directors and officers own Units. In addition, according to Forum Group's
Schedule 14D-1, neither Forum Group nor any of its affiliates (except for Mr.
Swinton, an executive officer of Forum Group who presently intends to tender
his Units pursuant to the Offer) will tender any Units pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in Item 4 above, no negotiation is
underway or is being undertaken by the Partnership in response to the Offer
which relates to or would result in (i) an extraordinary transaction, such as a
merger or reorganization, involving the Partnership; (ii) a purchase, sale or
transfer of a material amount of assets by the Partnership; (iii) a tender
offer for or other acquisition of securities by or of the Partnership; or (iv)
any material change in the present capitalization or dividend policy of the
Partnership.
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<PAGE> 12
(b) Except as described in Item 4 above, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer, which relate to or would result in one or more of the
matters referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Certain Litigation against Forum Group and the General Partner. On
January 24, 1994, the Russell F. Knapp Revokable Trust ("Plaintiff") filed a
complaint (as amended, the "Iowa Complaint") in the United States District
Court for the Northern District of Iowa (the "Iowa District Court") against the
General Partner alleging breach of the Partnership Agreement, breach of
fiduciary duty, fraud, and civil conspiracy. On March 17, 1994, Plaintiff
amended the Iowa Complaint to add Forum Group as a defendant. The Iowa
Complaint alleged, among other things, that (i) Plaintiff held a substantial
number of Units, (ii) the General Partner's Board was not comprised of a
majority of Independent Directors as required by the Partnership Agreement and
as allegedly represented in the Partnership's 1986 Prospectus for its initial
public offering of the Units, (iii) the allegedly improper composition of the
General Partner's Board was a consequence of actions by Forum Group, (iv) the
General Partner's Board has approved and/or acquiesced in 8% management fees
being charged by Forum Group under the Management Agreement, whereas the Iowa
Complaint alleged that the "industry standard" for such fees was 4%, thereby
resulting in an "overcharge" to the Partnership estimated by Plaintiff at $1.8
million per annum, beginning in 1994, and (v) as a consequence of the allegedly
improper composition of the General Partner's Board, Forum Group and the
General Partner breached the Partnership Agreement and securities laws and
failed to discharge fiduciary duties. On April 4, 1995, the Iowa District
Court entered an order dismissing the Iowa Complaint for procedural reasons.
On June 15, 1995, the Plaintiff filed a complaint (the "Indiana
Complaint") in the United States District Court for the Southern District of
Indiana against Forum Group and the General Partner. The allegations set forth
in the Indiana Complaint are essentially the same as those included in the Iowa
Complaint, except that the Indiana Complaint omits the allegations of fraud (in
which Plaintiff claimed, in general, that Forum Group and the General Partner
knowingly made false representations that they would comply with the terms of
the Partnership's 1986 Prospectus and the Partnership Agreement with respect to
the selection of Independent Directors and with respect to the number of
directors on the General Partner's Board) included in the Iowa Complaint and
contains allegations of insider trading and oppression of minority Unitholders
(in which Plaintiff claims, in general, that Forum Group and the General
Partner have utilized their position of control and their access to inside
information to purchase Units at less than fair market value and engaged in a
course of conduct to force minority Unitholders to sell their Units at less
than fair market value) that were not included in the Iowa Complaint.
Plaintiff is seeking the restoration of certain former directors to
the General Partner's Board and the removal of certain other directors from the
General Partner's Board, an injunction prohibiting the payment of 8% management
fees, and unspecified compensatory and punitive damages.
The General Partner has previously stated that it believes there are
substantial defenses to the claims asserted by Plaintiff and that it intends
vigorously to defend against such claims. In accordance with the Partnership
Agreement, the Partnership reimbursed the General Partner for $68,000 and
$146,000 of litigation costs relating to those claims in the six months ended
June 30, 1995 and calendar year 1994, respectively.
Upon the acceptance for payment by Forum Group of Units tendered
pursuant to the Offer, each tendering Unitholder will be deemed to have
released Forum Group, the General Partner, and their stockholders, respective
affiliates, directors (including the directors serving on the Special
Committee), officers, employees, agents, and representatives from any and all
claims, causes of action, and liabilities, known or unknown, arising from or
relating to the business and affairs of, or any transactions by or involving,
or the purchase and ownership of securities of, the Partnership from the
beginning of time through the date on which tendered Units are accepted for
payment in accordance with the terms of the Offer, including without limitation
any claim, cause of action, or liability arising from or relating to the
subject matter of the litigation described above. Accordingly, tendering
Unitholders may be
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<PAGE> 13
waiving significant rights, including the right to participate in any judgment
for monetary damages or in any monetary or other settlement.
Certain Financial Projections. The Partnership does not as a matter
of course make public forecasts or projections as to future performance or
earnings. However, during the course of discussions with the Special
Committee's financial advisor, Forum Group and the General Partner participated
in the preparation of certain Projections relating to the Partnership's future
operations, which projections are not publicly available. The Projections were
prepared in good faith solely for internal use and not with a view to public
disclosure or compliance with published guidelines of the Securities and
Exchange Commission regarding projections or the guidelines established by the
American Institute of Certified Public Accountants regarding projections and
are included in this Statement only because such information was available to
Forum Group, the Special Committee and its financial advisor. The estimates
and assumptions underlying the Projections are inherently subject to
significant economic and competitive uncertainties and contingencies, all of
which are difficult to quantify and many of which are beyond the control of the
Partnership and the General Partner. Accordingly, there can be no assurance
that the Projections will be realized and it is likely that the Partnership's
future financial performance will vary from that set forth below, possibly by
material amounts. The General Partner and the Partnership do not presently
intend to update or publicly revise the Projections to reflect circumstances
existing or developments occurring after the preparation of such information or
to reflect the occurrence of unanticipated events. KPMG Peat Marwick, the
Partnership's independent auditor, has not examined, compiled, or otherwise
applied procedures to the Projections presented herein, and, accordingly, does
not express an opinion or any other form of assurance on the Projections.
SUMMARY OF TEN YEAR CONSOLIDATED FINANCIAL PROJECTIONS
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $49,138 $52,035 $55,112 $57,893 $60,821 $65,482 $68,710 $71,181 $73,316 $75,516
Operating
Expenses 35,335 37,003 38,541 40,420 42,067 44,871 46,384 47,961 49,400 50,882
Renewal and
Refurbish
Capital
Expenditures 2,558 1,715 3,231 3,555 4,382 4,329 4,459 4,593 4,730 4,872
Expansion
Capital
Expenditures 1,893 3,812 3,088 3,442 3,661 1,464 0 0 0 0
Management
Fees 3,931 4,163 4,409 4,631 4,866 5,239 5,497 5,694 5,865 6,041
Net Operating
Income 5,421 5,342 7,307 7,546 8,318 11,942 14,805 15,440 15,903 16,380
Total Debt
Service 5,844 5,844 5,844 5,844 5,844 5,844 5,844 5,844 5,844 5,844
Distributions 0 0 0 0 0 3,735 6,527 7,089 7,477 7,876
</TABLE>
The following assumptions were used in the preparation of the
Projections. Average occupancy is assumed to remain constant at 94% throughout
the periods shown. Average price per room per day is assumed to be $88.56
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<PAGE> 14
in 1995 and to increase 4.01% in 1996 and 3.00% per year thereafter. The
projections of expansion assume that 304 rooms are added and reflects funding
only from Partnership cash flows as available. These assumptions result in the
number of rooms available being projected as 1,622 in 1995; 1,717 in 1996; 1,722
in 1997; 1,790 in 1998; 1,812 in 1999; and 1,921 in 2000 and beyond. Operating
expenses (other than management fees) are assumed to be 71.91% of revenues in
1995 and 71.04% of revenues thereafter. Management fees are projected to equal
8.0% of revenues as provided by the Management Agreement. Capital expenditures
include amounts expected to be necessary for routine expenditures based on the
history of the Partnership's properties and for the Partnership's expansion
plan. The Partnership's debt balance is assumed to be $49,007,000 at December
31, 1995 with no additional borrowings during the ten-year period. The
Partnership's debt matures on January 1, 2001 and payments reflected in the
Projections through that date are in accordance with the Partnership's loan
covenants. Thereafter the Projections assume the same debt service amount.
The foregoing projections do not include income tax expense in that it
is assumed that the Partnership will continue to be treated as a partnership
and thus not subject to federal income taxes. The Internal Revenue Code of
1986, as amended, generally characterizes publicly traded partnerships that
conduct active trades or business as corporations for federal income tax
purposes. However, publicly traded partnerships existing on December 17, 1987
(such as the Partnership) were grandfathered and treated as partnerships for
federal income tax purposes until tax years beginning after December 31, 1997.
It is possible that the Partnership will be taxed as a corporation for federal
income tax purposes beginning in the 1998 tax year. In such case, its income,
gains, losses, deductions and credits would be reflected only on its tax return
rather than being passed through to the partners, and its net income would be
taxed as corporate rates. In addition, distributions made to partners would be
treated as taxable dividend income to the extent of the Partnership's current
and accumulated earnings and profits. On August 8, 1988, the General Partner was
authorized by the limited partners to do all things deemed necessary or
desirable to insure that the Partnership is not treated as a corporation for
federal income tax purposes. Assuming that the Partnership remains a publicly
traded partnership, alternatives available to avoid corporate taxation after
1998 include, among others, (i) selling or otherwise disposing of all or
substantially all of the Partnership's assets pursuant to a plan of liquidation,
(ii) converting the Partnership into a real estate investment trust or other
type of legal entity, and (iii) restructuring the Partnership to qualify as a
partnership primarily with passive rental income. While the Partnership
presently intends to seek to avoid being taxed as a corporation for federal
income tax purposes, there can be no assurance that it will be successful.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
1. - Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to Forum Group's Schedule 14D-1 dated October 2,
1995).
2. - Supplement to Offer to Purchase (incorporated by reference
to Exhibit (a)(9) to Forum Group's Amendment No. 1 to
Schedule 14D-1 dated October 16, 1995).
3. - Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to Forum Group's Schedule 14D-1 dated October 2,
1995).
4. - Letter to Unitholders dated October 16, 1995.
5. - Press release dated October 16, 1995 (incorporated by
reference to Exhibit (a)(10) to Forum Group's Amendment No.
1 to Schedule 14D-1 dated October 16, 1995).
6. - Fairness opinion of Robert A. Innamorati & Co. dated
October 13, 1995 (attached as Annex A hereto).
7. - Form of Indemnification Agreement between Forum Group and
the directors and officers of the General Partner.
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<PAGE> 15
8. - Form of Indemnification Agreement between Forum Retirement,
Inc. and its directors.
9. - Amended and Restated Agreement of Limited Partnership,
dated as of December 29, 1986, of the Partnership, as
amended (incorporated by reference to Exhibit 4(1) to the
Partnership's Registration Statement on Form S-2
(Registration No. 33-71498), dated November 10, 1993 (the
"Form S-2")).
10. - Depositary Agreement, dated as of December 29, 1986, by and
among the Partnership, Forum Retirement, Inc., the general
partner of the Partnership, as general partner and
attorney-in-fact of the limited partners, Manufacturers
Hanover Trust Company (which subsequently assigned its
interests thereunder to American Stock Transfer & Trust
Company) and all holders from time to time of depositary
receipts (incorporated by reference to Exhibit 10(6) to the
Form S-2).
11. - Recapitalization Agreement, dated as of October 6, 1994,
by and between Forum Group and the Partnership
(incorporated by reference to Exhibit 10(1) to the
Partnership's Current Report on Form 8-K dated
October 12, 1993).
12. - Letter Agreement, dated December 14, 1993, by and among
Forum Group, Forum A/H, Inc. and the Partnership
(incorporated by reference to Exhibit 2(3) of Amendment No.
1 to the Form S-2, dated December 21, 1993).
13. - Management Agreement, dated as of December 29, 1986 (the
"Management Agreement"), by and among the Partnership,
Forum Retirement Operations, L.P. ("Operations"), Forum
Health Partners 1-A, L.P., Foulk Manor Painters, L.P., and
Forum Group (incorporated by reference to Exhibit 10(1) to
the Form S-2).
14. - First Amendment to the Management Agreement, dated as of
September 20, 1986 (incorporated by reference to Exhibit
10(2) to the Form S-2).
15. - Second Amendment to the Management Agreement, dated as of
September 20, 1989 (incorporated by reference to Exhibit
10(3) to the Form S-2).
16. - Third Amendment to the Management Agreement, dated as of
May 27, 1992 (incorporated by reference to Exhibit 10(4) to
the Form S-2).
17. - Fourth Amendment to the Management Agreement, dated as of
November 9, 1993 (incorporated by reference to Exhibit
10(5) to the Form S-2).
18. - Option Agreement, dated as of December 29, 1986, by and
among Forum Group, Inc., the Partnership, and Operations
(incorporated by reference to Exhibit 2(1) to the Form
S-2).
19. - Presentation to the Special Committee of the Board of
Directors of the General Partner of the Partnership
delivered by Robert A. Innamorati & Co. on October 13,
1995.
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<PAGE> 16
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 16, 1995
FORUM RETIREMENT PARTNERS, L.P.
By: Forum Retirement, Inc.
its General Partner
By: /s/ Richard A. Huber
----------------------------
Richard A. Huber
Secretary
FORUM RETIREMENT, INC.
By: /s/ Richard A. Huber
----------------------------
Richard A. Huber
Secretary
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<PAGE> 17
ADDENDUM A
October 13, 1995
Special Committee of the Board of Directors
Forum Retirement, Inc.
8900 Keystone Crossing
Suite 200
P.O. Box 40498
Indianapolis, IN 46240
Attn : Mr. John Sexton
Mr. James Leslie
Gentlemen:
Forum Group, Inc. (the "Purchaser") has offered to purchase any and all of the
outstanding preferred depositary units (the "Units") representing preferred
limited partners' interests in Forum Retirement Partners, L.P. (the
"Partnership"), at a price of $2.83 per Unit net to the seller in cash (the
"Offer"). The Offer commenced on October 2, 1995 and is expected to be amended
no later than October 16, 1995 to reflect the foregoing price per Unit.
You have asked us whether, in our opinion, the proposed cash consideration to
be received by the holders of Units, other than the Purchaser and its
affiliates, (the "Unaffiliated Limited Partners") is fair to such
Unaffiliated Limited Partners, from a financial point of view.
In arriving at our opinion, we have reviewed the Offer to Purchase and
financial and other information that was publicly available or furnished to us
by Forum Retirement, Inc. (the "General Partner"), or its affiliates and
representatives, including certain financial projections for the Partnership
and information provided by the General Partner or its affiliates in
discussions therewith concerning the Partnership's business, operations and
future prospects. In addition, we have compared certain financial and
securities data of the Partnership with various other entities in similar
businesses whose securities are traded in public markets, reviewed other cash
tender offer transactions and conducted such other financial studies, analyses
and investigations as we deemed appropriate for purposes of this opinion.
In rendering the opinion set forth below, we have assumed and relied upon,
without independent verification: the accuracy and completeness of the
financial and other information obtained by us from public sources and that was
provided to us by the General Partner or its affiliates and representatives.
With respect to the financial projections supplied to us, we have assumed they
A-1
<PAGE> 18
Forum Retirement, Inc.
October 13, 1995
Page 2
have been reasonably prepared on the basis of the best currently available
estimates and judgments of the General Partner or its affiliates, and with
reasonable assumptions as to the future operating and financial performance of
the Partnership. We have neither made nor obtained any independent appraisal
of the assets or liabilities of the Partnership nor have we conducted any
physical inspection of the properties and facilities of the Partnership.
Our opinion is necessarily based on the status and condition of the Partnership
and economic, market, financial and other conditions as they exist on, and on
the information made available to us as of, the date of this letter. It should
be understood that, although subsequent developments may affect this opinion,
we do not have any obligation to update or revise this opinion.
This opinion is for the use of the General Partner's Special Committee and its
Board of Directors and is not to be quoted or referred to in whole or in part
in any written document, nor shall this letter be delivered to or relied upon
by any other person or used for any other purpose, except as provided and upon
the terms and conditions agreed to in the engagement agreement between the
General Partner and ROBERT A. INNAMORATI & CO., INC.
Based on the foregoing and such other factors as we deem relevant, we are of
the opinion that the proposed cash consideration to be received by the
Unaffiliated Limited Partners pursuant to the Offer is fair to such
Unaffiliated Limited Partners, from a financial point of view.
Very truly yours,
ROBERT A. INNAMORATI & CO., INC.
By:________________________________________
Robert A. Innamorati
President
A-2
<PAGE> 19
EXHIBIT INDEX
1. - Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to Forum Group's Schedule 14D-1 dated October 2,
1995).
2. - Supplement to Offer to Purchase (incorporated by reference
to Exhibit (a)(9) to Forum Group's Amendment No. 1 to
Schedule 14D-1 dated October 16, 1995).
3. - Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to Forum Group's Schedule 14D-1 dated October 2,
1995).
4. - Letter to Unitholders dated October 16, 1995.
5. - Press release dated October 16, 1995 (incorporated by
reference to Exhibit (a)(10) to Forum Group's Amendment No.
1 to Schedule 14D-1 dated October 16, 1995).
6. - Fairness opinion of Robert A. Innamorati & Co. dated
October 13, 1995 (attached as Annex A hereto).
7. - Form of Indemnification Agreement between Forum Group and
the directors and officers of the General Partner.
<PAGE> 20
8. - Form of Indemnification Agreement between Forum Retirement,
Inc. and its directors.
9. - Amended and Restated Agreement of Limited Partnership,
dated as of December 29, 1986, of the Partnership, as
amended (incorporated by reference to Exhibit 4(1) to the
Partnership's Registration Statement on Form S-2
(Registration No. 33-71498), dated November 10, 1993 (the
"Form S-2")).
10. - Depositary Agreement, dated as of December 29, 1986, by and
among the Partnership, Forum Retirement, Inc., the general
partner of the Partnership, as general partner and
attorney-in-fact of the limited partners, Manufacturers
Hanover Trust Company (which subsequently assigned its
interests thereunder to American Stock Transfer & Trust
Company) and all holders from time to time of depositary
receipts (incorporated by reference to Exhibit 10(6) to the
Form S-2).
11. - Recapitalization Agreement, dated as of October 6, 1994,
by and between Forum Group and the Partnership
(incorporated by reference to Exhibit 10(1) to the
Partnership's Current Report on Form 8-K dated
October 12, 1993).
12. - Letter Agreement, dated December 14, 1993, by and among
Forum Group, Forum A/H, Inc. and the Partnership
(incorporated by reference to Exhibit 2(3) of Amendment No.
1 to the Form S-2, dated December 21, 1993).
13. - Management Agreement, dated as of December 29, 1986 (the
"Management Agreement"), by and among the Partnership,
Forum Retirement Operations, L.P. ("Operations"), Forum
Health Partners 1-A, L.P., Foulk Manor Painters, L.P., and
Forum Group (incorporated by reference to Exhibit 10(1) to
the Form S-2).
14. - First Amendment to the Management Agreement, dated as of
September 20, 1986 (incorporated by reference to Exhibit
10(2) to the Form S-2).
15. - Second Amendment to the Management Agreement, dated as of
September 20, 1989 (incorporated by reference to Exhibit
10(3) to the Form S-2).
16. - Third Amendment to the Management Agreement, dated as of
May 27, 1992 (incorporated by reference to Exhibit 10(4) to
the Form S-2).
17. - Fourth Amendment to the Management Agreement, dated as of
November 9, 1993 (incorporated by reference to Exhibit
10(5) to the Form S-2).
18. - Option Agreement, dated as of December 29, 1986, by and
among Forum Group, Inc., the Partnership, and Operations
(incorporated by reference to Exhibit 2(1) to the Form
S-2).
19. - Presentation to the Special Committee of the Board of
Directors of the General Partner of the Partnership
delivered by Robert A. Innamorati & Co. on October 13,
1995.
<PAGE> 1
[FORUM RETIREMENT PARTNER, L.P. LETTERHEAD]
October 16, 1995
Dear Unitholder:
On October 2, 1995, Forum Group, Inc. ("Forum Group") commenced a
tender offer to purchase any and all outstanding preferred depositary units
representing preferred limited partners' interests ("Units") in Forum
Retirement Partners, L.P. (the "Partnership") not already beneficially owned by
it at $2.50 per Unit, net to the seller in cash, and on October 16, 1995,
increased the offer price to $2.83 per Unit, net to the seller in cash, on the
terms and subject to the conditions set forth in Forum Group's Offer to
Purchase dated October 2, 1995, the Supplement thereto dated October 16, 1995,
and the related Letter of Transmittal (which together constitute the "Offer").
Based upon the unanimous recommendation of a special committee (the
"Special Committee") comprised of the independent members of the Board of
Directors of Forum Retirement, Inc., the general partner of the Partnership
(the "General Partner"), the Board of Directors of the General Partner has
determined that the Offer is fair to the Unitholders (other than Forum Group
and its affiliates) and recommends that Unitholders accept the Offer and tender
all of their Units pursuant to the Offer.
Before making its recommendation to the Board of Directors of the
General Partner, the Special Committee carefully considered a number of
factors, including the opinion of Robert A. Innamorati & Co. that the
consideration to be received by Unitholders (other than Forum Group and its
affiliates) is fair to such Unitholders, from a financial point of view. The
factors considered by the Special Committee and other important information are
described in the attached Schedule 14D-9. You are urged to read it carefully.
Accompanying this letter, in addition to the attached Schedule 14D-9,
is Forum Group's Supplement dated October 16, 1995 to its Offer to Purchase,
which together with the Offer to Purchase dated October 2, 1995, and the
related Letter of Transmittal, set forth the terms and conditions of the Offer
and provide instructions as to how to tender your Units. These documents
contain important information that you should read carefully before making your
decision with respect to tendering your Units.
By Order of the Board of Directors of
Forum Retirement, Inc., the
General Partner of Forum
Retirement Partners, L.P.
<PAGE> 1
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the
____ day of ____________, 199_, by and between Forum Group, Inc., an Indiana
corporation (the "Company"), and ___________________________ (the
"Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or
an officer of the Company and/or, at the request of the Company, in an
Authorized Capacity (as defined below) of or for Another Entity (as defined
below). The Company desires the Indemnitee to continue in such capacity. The
Indemnitee is willing, subject to certain conditions including without
limitation the execution and performance of this Agreement by the Company, to
continue in that capacity.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Restated Articles of Incorporation of the Company (the
"Articles") and the Amended and Restated Code of By-Laws of the Company, as
amended ("By-Laws"), the Company has obtained and will endeavor to keep in
force, at its sole expense, insurance protecting its officers and directors and
certain other persons (including the Indemnitee) against certain losses arising
out of actual or threatened actions, suits or proceedings to which such persons
may be made or threatened to be made parties. However, as a result of
circumstances having no relation to, and beyond the control of, the Company and
the Indemnitee, there can be no assurance of the continuation or
<PAGE> 2
renewal of that insurance, or that any such insurance will provide coverage for
losses to which the Indemnitee may be exposed and for which he or she may be
permitted to be indemnified under the Indiana Business Corporation Law (the
"IBCL").
Accordingly, and in order to induce the Indemnitee to continue
to serve in his or her present capacity, the Company and Indemnitee agree as
follows:
1. Continued Service. The Indemnitee will continue to serve
as a director and/or an officer of the Company and/or in each such Authorized
Capacity of or for Another Entity in which he or she presently serves, in each
case so long as he or she is duly elected and qualified to serve in such
capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify the
Indemnitee when he or she was or is involved in any manner (including without
limitation as a party or as a deponent or witness) or is threatened to be made
so involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, formal or informal,
and any appeals therefrom (a "Proceeding") (other than a Proceeding by or in
the right of the Company), by reason of the fact that he or she is or was or
had agreed to become a director, officer, employee or agent of the Company, or
is or was serving or had agreed to serve at the request of the Company as a
director, officer, partner, member, trustee, employee or agent (each an
"Authorized Capacity") of another corporation (including
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<PAGE> 3
without limitation Forum Retirement, Inc.), partnership, joint venture, trust
or other enterprise (each "Another Entity"), or by reason of any action alleged
to have been taken or omitted in such capacity, against any and all judgments,
fines, amounts paid in settlement and reasonable costs, charges and expenses
(including attorneys' and others' fees) actually incurred by him or her in
connection with such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed, with respect to his or her conduct
as a director or officer of the Company, to be in the best interests of the
Company or, with respect to actions in an Authorized Capacity of or for Another
Entity, to be at least not opposed to the best interests of the Company, and,
with respect to any criminal Proceeding, the Indemnitee either (A) had
reasonable cause to believe his or her conduct was lawful or (B) had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any Proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent will not, of itself, create a presumption
that the Indemnitee did not meet the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company will indemnify the Indemnitee when he or she
was or is involved in any manner (including without limitation as a party,
deponent or witness) or is threatened to be made so involved in any Proceeding
by or in the right of the Company to procure a judgment in its favor by reason
of the fact that he or she is or was or had agreed to become a director,
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<PAGE> 4
officer, employee or agent of the Company, or is or was serving or had agreed
to serve at the request of the Company in an Authorized Capacity of or for
Another Entity, against any and all reasonable costs, charges and expenses
(including attorneys' and others' fees) actually incurred by him or her in
connection with the defense or settlement of such Proceeding if the Indemnitee
acted in good faith and in a manner that he or she reasonably believed, with
respect to his or her conduct as a director or officer of the Company, to be in
the best interests of the Company or, with respect to actions in an Authorized
Capacity of or for Another Entity, to be at least not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the Company unless, and only to the extent, that the court
in which the Proceeding was brought determines upon application that, despite
the adjudication of liability but in view of all circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such court deems proper.
(c) To the extent that the Indemnitee has been successful on
the merits or otherwise, including without limitation the dismissal of a
Proceeding without prejudice, in the defense of any Proceeding referred to in
Section 2(a) or Section 2(b) or in the defense of any claim, issue or matter in
any such Proceeding, the Company will indemnify him or her
-4-
<PAGE> 5
against any and all reasonable costs, charges and expenses, including without
limitation attorneys' and others' fees, actually incurred by him in connection
therewith.
(d) Any indemnification under Section 2(a) or Section 2(b)
(unless ordered by a court) will be made by the Company only as authorized in
the specific case upon a determination, in accordance with Section 4 or any
applicable provision of the Articles, the By-Laws, the IBCL, other agreement,
resolution or otherwise, that such indemnification is permissible in the
circumstances because the Indemnitee has met the applicable standards of
conduct set forth in Section 2(a) and Section 2(b) (the "Indemnification
Standards"). Such determination will be made in the manner set forth in
Section 4(b).
(e) Any and all reasonable costs, charges and expenses,
including without limitation attorneys' and others' fees, actually incurred by
the Indemnitee in defending any Proceeding will be paid by the Company in
advance of the final disposition of such Proceeding in accordance with the
procedure set forth in Section 4(e).
(f) Authorization of any indemnification under Section 2(a)
or Section 2(b) and any evaluation as to reasonableness of expenses will be
made at the same time and in the same manner as the determination that such
indemnification is permissible as provided in Section 2(d), except that if such
determination is made by special legal counsel, authorization of
indemnification under Section 2(a) or Section 2(b) and evaluation
-5-
<PAGE> 6
as to reasonableness of expenses will be made by the persons entitled under
Section 4(b) to select such counsel.
(g) Notwithstanding anything in this Agreement to the
contrary, the Indemnitee will not be entitled to indemnification or advancement
of expenses pursuant hereto in connection with any Proceeding initiated by the
Indemnitee against the Company (except for any Proceeding initiated by the
Indemnitee pursuant to Section 6) unless the Company has joined in or consented
to the initiation of such Proceeding.
(h) The provisions of this Section 2 will not affect the
rights or obligations of the parties under Section 3.
3. Additional Indemnification. (a) Pursuant to Section 15 of
Chapter 37 of the IBCL, without limiting any right which the Indemnitee may
have under Section 2, the Articles, the By-Laws, the IBCL, any policy of
insurance or otherwise, but subject to the limitations set forth in Section
2(g) and to any maximum permissible indemnity which may exist under applicable
law at the time of any request for indemnity hereunder as contemplated by this
Section 3(a), the Company will indemnify the Indemnitee against any amount
which he or she is or becomes legally obligated to pay relating to or arising
out of any claim made against him or her because of any act, failure to act or
neglect or breach of duty, including any actual or alleged error, misstatement
or misleading statement, which he or she commits, suffers, permits or
acquiesces in while acting in his or her capacity as a director or officer of
the Company, or, at the request of the Company, in an Authorized Capacity of or
for
-6-
<PAGE> 7
Another Entity. The payments which the Company is obligated to make pursuant
to this Section 3 will include without limitation damages, judgments,
settlements and reasonable charges, costs, expenses, expenses of investigation,
preparation and defense of Proceedings, and expenses of appeal, attachment or
similar bonds; provided, however, that the Company will not be obligated under
this Section 3(a) to make any payment in connection with any claim against the
Indemnitee:
(i) to the extent of any fine or similar governmental
imposition which the Company is prohibited by applicable law from
paying and which results from a final, nonappealable order; or
(ii) to the extent based upon or attributable to the
Indemnitee gaining in fact a personal profit to which he or she was
not legally entitled, including without limitation profits made from
the purchase and sale by the Indemnitee of equity securities of the
Company or an affiliate of the Company which are recoverable by the
Company or such affiliate pursuant to Section 16(b) of the Securities
Exchange Act of 1934, as amended, and profits arising from
transactions in publicly traded securities of the Company or any
affiliate of the Company which were effected by the Indemnitee in
violation of Section 10(b) of the Securities Exchange Act of 1934, as
amended, including Rule 10b-5 promulgated thereunder.
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) may, but shall not be
-7-
<PAGE> 8
required to, be made in accordance with Section 4(a). If that determination is
so made, it will be binding upon the Company and the Indemnitee for all
purposes.
(b) Any and all reasonable costs, charges and expenses,
including without limitation attorneys' and others' fees, actually incurred by
the Indemnitee in connection with any claim for which the Indemnitee may be
entitled to indemnification pursuant to Section 3(a) will be paid or reimbursed
by the Company in advance of the final disposition thereof in accordance with
the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
IBCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a sworn statement of request for indemnification substantially
in the form of Exhibit 1 attached hereto (the "Indemnification Statement")
averring that he or she believes that he or she is entitled to indemnification
pursuant to this Agreement, together with such documents supporting the request
as are reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). The Company will
promptly upon receipt of any Indemnification Statement advise the Board of
Directors of the
-8-
<PAGE> 9
Company (the "Board") in writing that the Indemnitee has requested
indemnification.
(b) The Indemnitee's entitlement to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, will be
determined not less than 30 calendar days after receipt by the Company of an
Indemnification Statement and Supporting Documentation and will be made in one
of the following ways: (i) by the Board, by a majority vote of a quorum
consisting of directors who are not at the time parties to such Proceeding
("Parties"), or (ii) if such quorum cannot be obtained, by a majority vote of a
committee (the "Committee") duly designated by the Board (in which designation
directors who are Parties may participate) consisting solely of two or more
directors who are not at the time Parties, or (iii) by written opinion of
special legal counsel (A) selected by the Board or the Committee in the manner
prescribed in (i) or (ii) above, or (B) if a quorum cannot be obtained and a
Committee cannot be designated under clauses (i) and (ii), selected by a
majority of the entire Board, in which selection directors who are Parties may
participate, or (iv) by the shareholders of the Company, voting together as a
single class, provided that shares owned by or voted under the control of
directors who are at the time Parties may not be voted on the determination, or
(v) as deemed to have been determined in accordance with Section 4(c). Special
legal counsel selected as described above will be a law firm or member of a law
firm (i) that neither at the time in question nor in the five years immediately
preceding such time has been retained to represent
-9-
<PAGE> 10
(A) the Company or the Indemnitee in any matter material to either such party
or (B) any other party to the Proceeding giving rise to a claim for
indemnification under this Agreement, (ii) that, under the applicable standards
of professional conduct then prevailing under the law of the State of Indiana,
would not be precluded from representing either the Company or the Indemnitee
in an action to determine the Indemnitee's rights under this Agreement, and
(iii) to which the Indemnitee does not reasonably object. The Company will pay
the fees and expenses of such special legal counsel.
(c) Submission of an Indemnification Statement and Supporting
Documentation to the Company pursuant to Section 4(b) will create a presumption
that the Indemnitee is entitled to indemnification under Section 2(a), Section
2(b) or Section 3(a), as the case may be, and thereafter the Company will have
the burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under Section
4(b) to determine the Indemnitee's entitlement to indemnification have not been
appointed or have not made a determination within 30 calendar days after
receipt by the Company of such Indemnification Statement and Supporting
Documentation, the Indemnitee will be deemed to be entitled to indemnification
unless within such 30-calendar day period the person or persons empowered under
Section 4(b) to determine entitlement to indemnification have made a
determination, based upon clear and convincing evidence (sufficient to rebut
the foregoing presumption), that the Indemnitee is not entitled to
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<PAGE> 11
such indemnification and the Indemnitee has received notice within such period
in writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination and (ii) be sworn
to by all persons who participated in the determination and voted to deny
indemnification. The provisions of this Section 4(c) are intended to be
procedural only and will not affect the right of the Indemnitee to
indemnification under this Agreement and any determination that the Indemnitee
is not entitled to indemnification and any failure to make the payments
requested in the Indemnification Statement will be subject to review as
provided in Section 6.
(d) If a determination is made or deemed to have been made
pursuant to this Section 4 that the Indemnitee is entitled to indemnification,
the Company will pay to the Indemnitee the amounts to which the Indemnitee is
entitled within two business days after such determination of entitlement to
indemnification has been made or deemed to have been made.
(e) For purposes of determining whether to authorize
advancement of expenses pursuant to Section 2(e), the Indemnitee will submit to
the Company a written undertaking substantially in the form of Exhibit 2
attached hereto, executed personally or on his or her behalf (the
"Undertaking"), (i) affirming his or her good faith belief that he or she has
met the Indemnification Standards, (ii) setting forth the costs, charges and
expenses (including without limitation attorneys' and others' fees) he or she
has incurred or will actually incur in defending a
-11-
<PAGE> 12
Proceeding, and (iii) agreeing to repay the advance if it is ultimately
determined that he or she did not meet the Indemnification Standards. Any
Undertaking will be an unlimited general obligation of the Indemnitee, but need
not be secured and will be accepted by the Company without reference to the
Indemnitee's financial ability to make repayment. Upon receipt of an
Undertaking requesting advancement of expenses pursuant to Section 2(e), the
Company will within 30 calendar days cause (i) a determination to be made as to
whether the facts then known to those making the decision would preclude
indemnification under the Chapter 37 of the IBCL and (ii) unless such
determination precludes such indemnification, the authorization of the payment
of the costs, charges and expenses stated in the Undertaking, in each case in
the manner set forth in Section 4(b). The Company will make such payment to
the Indemnitee within two business days after such authorization. For purposes
of requesting advancement of expenses pursuant to Section 3(b), the Indemnitee
may, but shall not be required to, submit an Undertaking or such other form of
request as he or she determines to be appropriate (an "Expense Request"). Upon
receipt of an Expense Request requesting advancement of expenses pursuant to
Section 3(b), the Company will within 30 calendar days make payment of the
costs, charges and expenses stated in the Expense Request.
5. Subrogation; Duplication of Payments. (a) In the event of
payment under this Agreement, the Company will be subrogated to the extent of
such payment to all of the rights of recovery of the Indemnitee, who will
execute all papers required
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<PAGE> 13
and will do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
(b) The Company will not be liable under this Agreement to
make any payment in connection with any claim made against the Indemnitee to
the extent the Indemnitee has actually received payment (under any insurance
policy, the Articles, the By-Laws, the IBCL or otherwise) of the amounts
otherwise payable hereunder.
6. Enforcement. (a) If a written claim for indemnification
or advancement of expenses made to the Company pursuant to Section 4 is not
timely paid in full by the Company as required by Section 4, the Indemnitee
will be entitled to seek judicial enforcement of the Company's obligations to
make such payments. In the event that a determination is made pursuant to
Section 4 that the Indemnitee is not entitled to indemnification or advancement
of expenses hereunder, (i) the Indemnitee may at any time thereafter seek an
adjudication of his or her entitlement to such indemnification or advancement
either, at the Indemnitee's sole option, in (A) an appropriate court of the
State of Indiana or any other court of competent jurisdiction or (B) an
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association; (ii) any such judicial proceeding or
arbitration will be de novo and the Indemnitee will not be prejudiced by reason
of such adverse determination; and (iii) in any such judicial proceeding
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<PAGE> 14
or arbitration the Company will have the burden of proving that the Indemnitee
is not entitled to indemnification or advancement of expenses under this
Agreement.
(b) The Company will be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to the provisions of
Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it will be a
defense to a claim for indemnification pursuant to Section 2(a) or Section 2(b)
(but not an action brought to enforce a claim for indemnification pursuant to
Section 3(a) or to enforce a claim for costs, charges and expenses incurred in
defending any Proceeding in advance of its final disposition where the
Undertaking, if any is required, has been tendered to the Company) that the
Indemnitee has not met the Indemnification Standards, but the burden of proving
such defense will be on the Company. Neither the failure of the Company
(including any person or persons empowered under Section 4(b) to determine the
Indemnitee's entitlement to indemnification) to have made a determination prior
to commencement of such action that indemnification of the Indemnitee is
permissible in the circumstances because he or she has met the Indemnification
Standards, nor an actual determination by the Company (including any person or
persons empowered under Section 4(b) to determine the Indemnitee's entitlement
to indemnification) that the
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<PAGE> 15
Indemnitee has not met the Indemnification Standards, will be a defense to the
action or create a presumption that the Indemnitee has not met such
Indemnification Standards.
(d) It is the intent of the Company that the Indemnitee not
be required to incur the expenses associated with the enforcement of his or her
rights under this Agreement by litigation or other legal action because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Indemnitee hereunder. Accordingly, if it should appear
to the Indemnitee that the Company has failed to comply with any of its
obligations under this Agreement, or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any action, suit or proceeding designed (or having the effect of
being designed) to deny, or to recover from, the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to time to retain counsel of his or her
choice, at the expense of the Company as hereafter provided, to represent the
Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Indemnitee's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the
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<PAGE> 16
Indemnitee acknowledge that a confidential relationship will exist between the
Indemnitee and such counsel. Regardless of the outcome thereof, the Company
will pay and be solely responsible for any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, incurred by the
Indemnitee (i) as a result of the Company's failure to perform this Agreement
or any provision hereof or (ii) as a result of the Company or any person
contesting the validity or enforceability of this Agreement or any provision
thereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Merger or Consolidation. In the event that the Company is
a constituent corporation in a consolidation, merger or other reorganization,
the Company will require: (a) if it is not the surviving, resulting or other
corporation therein, the surviving, resulting or acquiring corporation to agree
to
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<PAGE> 17
indemnify the Indemnitee to the full extent provided herein and (b) whether or
not the Company is the resulting, surviving or acquiring corporation in any
such transaction, the Indemnitee will also stand in the same position under
this Agreement with respect to the resulting, surviving or acquiring
corporation as he or she would have with respect to the Company if its separate
existence had continued.
9. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other rights to which the Indemnitee may be entitled under the
Articles, By-Laws, the IBCL, any other statute, insurance policy, agreement,
vote of shareholders or of directors or otherwise, both as to actions in his or
her official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that to the extent the Indemnitee otherwise
would have any greater right to indemnification and/or advancement of expenses
under any provision of the Articles or the By-Laws as in effect on the date
hereof, the Indemnitee will be deemed to have such greater right pursuant to
this Agreement; and, provided further, that to the extent that any change is
made to the IBCL (whether by legislative action or judicial decision), the
Articles and/or the By-Laws that permits any greater right to indemnification
and/or
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<PAGE> 18
advancement of expenses than that provided under this Agreement as of the date
hereof, the Indemnitee will be deemed to have such greater right pursuant to
this Agreement.
(b) The Company will not adopt any amendment to the Articles
or By-Laws the effect of which would be to deny, diminish or encumber the
Indemnitee's rights to indemnity pursuant to the Articles, By-Laws, this
Agreement, the IBCL or any other applicable law as applied to any act or
failure to act occurring in whole or in part prior to the date upon which any
such amendment was approved by the Board or the shareholders, as the case may
be. Notwithstanding the foregoing, in the event that the Company adopts any
amendment to the Articles or By-Laws the effect of which is to so deny,
diminish or encumber the Indemnitee's rights to such indemnity, such amendment
will apply only to acts or failures to act occurring entirely after the
effective date thereof.
(c) If any provision or provisions of this Agreement are held
to be invalid, illegal or unenforceable for any reason whatsoever: (i) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation all portions of any paragraph of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) will
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible, the provisions of this Agreement (including without limitation all
portions of any paragraph of this Agreement containing any such provision
-18-
<PAGE> 19
held to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) will be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
10. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Indiana, without giving
effect to the principles of conflict of laws thereof.
11. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
12. Certain Terms. For purposes of this Agreement,
references to "Another Entity" will include employee benefit plans; references
to "fines" will include any excise taxes assessed on Indemnitee with respect to
any employee benefit plan; and references to "serving at the request of the
Company" will include any service in any capacity which imposes duties on, or
involves services by, the Indemnitee with respect to an employee benefit plan,
its participants or beneficiaries; references to Sections or Exhibits are to
Sections or Exhibits of or to this
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<PAGE> 20
Agreement; references to the singular will include the plural and vice versa;
and if the Indemnitee acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan he or she will be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to herein.
13. Joint Defense. Notwithstanding anything to the contrary
contained herein, if (a) the Indemnitee elects to retain counsel in connection
with any Proceeding in respect of which indemnification may be sought by the
Indemnitee against the Company pursuant to this Agreement and (b) any other
director or officer of the Company or person serving at the request of the
Company in an Authorized Capacity of or for Another Entity may also be subject
to liability arising out of such Proceeding and in connection with such
Proceeding may seek indemnification against the Company pursuant to an
agreement similar to this Agreement, Indemnitee, together with such other
persons, will employ counsel to represent jointly the Indemnitee and such other
persons unless the Board, upon the written request of the Indemnitee delivered
to the Company (to the attention of the Secretary) setting forth in reasonable
detail the basis for such request, determines that such joint representation
would be precluded under the applicable standards of professional conduct then
prevailing under the law of the State of Indiana, in which case the Indemnitee
will be entitled to be represented by separate counsel. In the event that the
Board fails to act on such request within 30 calendar days after receipt
thereof by the Company, the Indemnitee will be deemed to be entitled to be
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<PAGE> 21
represented by separate counsel in connection with such Proceeding.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
FORUM GROUP, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
INDEMNITEE
---------------------------------------
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<PAGE> 22
Exhibit 1
INDEMNIFICATION STATEMENT
STATE OF _______________)
) SS
COUNTY OF ______________)
I, _________________, being first duly sworn, do depose and
say as follows:
1. This Indemnification Statement is submitted pursuant to
the Indemnification Agreement, dated as of ___________ __, 199_ (the
"Indemnification Agreement"), between Forum Group, Inc. (the Company"), an
Indiana corporation, and the undersigned.
2. I am requesting indemnification against judgments, fines,
amounts paid in settlement and costs, charges and expenses (including
attorneys' and others' fees), all of which (collectively, "Liabilities") have
been incurred by me in connection with a Proceeding (as defined in the
Indemnification Agreement) in which I was or am involved or am threatened to be
made involved.
3. With respect to all matters related to any such
Proceeding, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may
have, I am requesting indemnification against Liabilities which have or may
arise out of ___________________________________________________________________
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<PAGE> 23
________________________________________________________________________________
________________________________________________.
5. I have attached such documents supporting this request
as are reasonably available to me and are reasonably necessary to determine
whether and to what extent I am entitled to indemnification under the
Indemnification Agreement.
-----------------------------------
Name:
------------------------------
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this ____ day of __________, 199_.
-----------------------------------
[Seal]
My commission expires the ______ day of _____________, 199_.
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<PAGE> 24
Exhibit 2
UNDERTAKING
STATE OF _______________)
) SS
COUNTY OF ______________)
I, _________________, being first duly sworn do depose and say
as follows:
1. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated as of ________________, 199_ (the
"Indemnification Agreement"), between Forum Group, Inc. (the "Company"), an
Indiana corporation, and the undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement).
3. I have a good faith belief that I have met the
Indemnification Standards (as defined in the Indemnification Agreement) to the
extent applicable to such Proceedings.
4. I hereby undertake to repay this advancement of expenses
if it is ultimately determined that I did not meet the Indemnification
Standards.
5. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to _____________________________
________________________________________________________________________________
________________________________________________________________.
-----------------------------------
Name:
------------------------------
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<PAGE> 25
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this ____ day of _________, 199_.
-----------------------------------
[Seal]
My commission expires the _____ day of _____________, 199_.
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<PAGE> 1
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the
____ day of ___________, 199_, by and between Forum Retirement, Inc., a
Delaware corporation (the "Company"), and _____________________ (the
"Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or
an officer of the Company and/or, at the request of the Company, in an
Authorized Capacity (as defined below) of or for Another Entity (as defined
below). The Company desires the Indemnitee to continue in such capacity. The
Indemnitee is willing, subject to certain conditions including without
limitation the execution and performance of this Agreement by the Company, to
continue in that capacity.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Certificate of Incorporation of the Company (the
"Certificate") and the By-Laws of the Company, as amended (the "By-Laws"), the
Company has obtained and will endeavor to keep in force, at its sole expense,
insurance protecting its officers and directors and certain other persons
(including the Indemnitee) against certain losses arising out of actual or
threatened actions, suits or proceedings to which such persons may be made or
threatened to be made parties. However, as a result of circumstances having no
relation to, and beyond the control of, the Company and the Indemnitee, there
can be no assurance of the continuation or renewal of that insurance, or
<PAGE> 2
that any such insurance will provide coverage for losses to which the
Indemnitee may be exposed and for which he or she may be permitted to be
indemnified under the General Corporation Law of the State of Delaware (the
"DGCL").
Accordingly, and in order to induce the Indemnitee to continue
to serve in his or her present capacity, the Company and Indemnitee agree as
follows:
1. Continued Service. The Indemnitee will continue to serve
as a director and/or an officer of the Company and/or in each such Authorized
Capacity of or for Another Entity in which he or she presently serves, in each
case so long as he or she is duly elected and qualified to serve in such
capacity or until he or she resigns or is removed.
2. Initial Indemnity. (a) The Company will indemnify the
Indemnitee when he or she was or is involved in any manner (including without
limitation as a party or as a deponent or witness) or is threatened to be made
so involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, formal or informal,
and any appeals therefrom (a "Proceeding") (other than a Proceeding by or in
the right of the Company), by reason of the fact that he or she is or was or
had agreed to become a director, officer, employee or agent of the Company, or
is or was serving or had agreed to serve at the request of the Company as a
director, officer, partner, member, trustee, employee or agent (each an
"Authorized Capacity") of another corporation, partnership, joint venture,
trust or other enterprise (each
-2-
<PAGE> 3
"Another Entity"), or by reason of any action alleged to have been taken or
omitted in such capacity, against any and all costs, charges and expenses
(including attorneys' and others' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such Proceeding if the Indemnitee acted in good faith and in a manner that he
or she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, the Indemnitee had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any Proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent will not, of itself, adversely affect the
right of the Indemnitee to indemnification or create a presumption that the
Indemnitee did not meet the foregoing standard of conduct to the extent
applicable thereto.
(b) The Company will indemnify the Indemnitee when he or she
was or is involved in any manner (including without limitation as a party,
deponent or witness) or is threatened to be made so involved in any Proceeding
by or in the right of the Company to procure a judgment in its favor by reason
of the fact that he or she is or was or had agreed to become a director,
officer, employee or agent of the Company, or is or was serving or had agreed
to serve at the request of the Company in an Authorized Capacity of or for
Another Entity, against any and all costs, charges and expenses (including
attorneys' and others' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such Proceeding if
-3-
<PAGE> 4
the Indemnitee acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to the best interests of the Company, except
that no indemnification will be made in respect of any claim, issue or matter
as to which the Indemnitee shall have been adjudged to be liable to the Company
unless, and only to the extent, that the Court of Chancery or the court in
which the Proceeding was brought determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court deems proper.
(c) To the extent that the Indemnitee has been successful on
the merits or otherwise, including without limitation the dismissal of a
Proceeding without prejudice, in the defense of any Proceeding referred to in
Section 2(a) or Section 2(b) or in the defense of any claim, issue or matter in
any such Proceeding, the Company will indemnify him or her against any and all
costs, charges and expenses, including without limitation attorneys' and
others' fees, actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 2(a) or Section 2(b)
(unless ordered by a court) will be made by the Company only as authorized in
the specific case upon a determination, in accordance with Section 4 or any
applicable provision of the Certificate, the By-Laws, the DGCL, other
agreement, resolution or otherwise, that such indemnification is proper in the
circumstances because he or she has met the
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<PAGE> 5
applicable standards of conduct set forth in Section 2(a) and Section 2(b) (the
"Indemnification Standards"). Such determination will be made in the manner
set forth in Section 4(b).
(e) Any and all costs, charges and expenses, including
without limitation attorneys' and others' fees, actually and reasonably
incurred by the Indemnitee in defending any Proceeding will be paid by the
Company in advance of the final disposition of such Proceeding in accordance
with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to the
contrary, the Indemnitee will not be entitled to indemnification or advancement
of expenses pursuant hereto in connection with any Proceeding initiated by the
Indemnitee against the Company (except for any Proceeding initiated by the
Indemnitee pursuant to Section 6) unless the Company has joined in or consented
to the initiation of such Proceeding.
(g) The provisions of this Section 2 will not affect the
rights or obligations of the parties under Section 3.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the Certificate, the By-Laws, the DGCL, any policy of
insurance or otherwise, but subject to the limitations set forth in Section
2(f) and to any maximum permissible indemnity which may exist under applicable
law at the time of any request for indemnity hereunder as contemplated by this
Section 3(a), the Company will indemnify the
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<PAGE> 6
Indemnitee against any amount which he or she is or becomes legally obligated
to pay relating to or arising out of any claim made against him or her because
of any act, failure to act or neglect or breach of duty, including any actual
or alleged error, misstatement or misleading statement, which he or she
commits, suffers, permits or acquiesces in while acting in his or her capacity
as a director and/or officer of the Company, or, at the request of the Company,
in an Authorized Capacity of or for Another Entity. The payments which the
Company is obligated to make pursuant to this Section 3 will include without
limitation damages, judgments, settlements and reasonable charges, costs,
expenses, expenses of investigation, preparation and defense of Proceedings,
and expenses of appeal, attachment or similar bonds; provided, however, that
the Company will not be obligated under this Section 3(a) to make any payment
in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar governmental
imposition which the Company is prohibited by applicable law from
paying and which results from a final, nonappealable order; or
(ii) to the extent based upon or attributable to the
Indemnitee gaining in fact a personal profit to which he or she was
not legally entitled, including without limitation profits made from
the purchase and sale by the Indemnitee of equity securities of the
Company or an affiliate of the Company which are recoverable by the
Company or such affiliate pursuant to Section 16(b) of the Securities
-6-
<PAGE> 7
Exchange Act of 1934, as amended, and profits arising from
transactions in publicly traded securities of the Company or any
affiliate of the Company which were effected by the Indemnitee in
violation of Section 10(b) of the Securities Exchange Act of 1934, as
amended, including Rule 10b-5 promulgated thereunder.
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) may, but shall not be required to, be made in
accordance with Section 4(a). If that determination is so made, it will be
binding upon the Company and the Indemnitee for all purposes.
(b) Any and all costs, charges and expenses, including
without limitation attorneys' and others' fees, actually and reasonably
incurred by the Indemnitee in connection with any claim for which the
Indemnitee may be entitled to indemnification pursuant to Section 3(a) will be
paid or reimbursed by the Company in advance of the final disposition thereof
in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a sworn statement of request for indemnification substantially
in the form of Exhibit 1 attached hereto (the "Indemnification Statement")
averring that he or she believes
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<PAGE> 8
that he or she is entitled to indemnification pursuant to this Agreement,
together with such documents supporting the request as are reasonably available
to the Indemnitee and are reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification hereunder (the "Supporting
Documentation"). The Company will promptly upon receipt of any Indemnification
Statement advise the Board of Directors of the Company (the "Board") in writing
that the Indemnitee has requested indemnification.
(b) The Indemnitee's entitlement to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, will be
determined not less than 30 calendar days after receipt by the Company of an
Indemnification Statement and Supporting Documentation and will be made in one
of the following ways: (i) by the Board by a majority vote of a quorum
consisting of directors who are or were not parties to such Proceeding
("Disinterested Directors"), or (ii) by written opinion of independent legal
counsel selected by a majority of the Disinterested Directors (or, if there are
no Disinterested Directors or a majority vote thereof is not obtainable, by a
majority of the entire Board), if a quorum of the Board consisting of
Disinterested Directors is not obtainable or, even if obtainable, a quorum of
Disinterested Directors so directs, or (iii) by the stockholders of the Company
(but only if a majority of Disinterested Directors, if they constitute a quorum
of the Board, presents the issue of entitlement to indemnification to the
stockholders of the Company for their determination), or (iv)
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<PAGE> 9
as deemed to have been determined in accordance with Section 4(c). Independent
legal counsel selected as described above will be a law firm or member of a law
firm (i) that neither at the time in question nor in the five years immediately
preceding such time has been retained to represent (A) the Company or the
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding giving rise to a claim for indemnification under this
Agreement, (ii) that under the applicable standards of professional conduct
then prevailing under the law of the State of Delaware, would not be precluded
from representing either the Company or the Indemnitee in an action to
determine the Indemnitee's rights under this Agreement, and (iii) to which the
Indemnitee does not reasonably object. The Company will pay the fees and
expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement and Supporting
Documentation to the Company pursuant to Section 4(b) will create a presumption
that the Indemnitee is entitled to indemnification under Section 2(a), Section
2(b) or Section 3(a), as the case may be, and thereafter the Company will have
the burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under Section
4(b) to determine the Indemnitee's entitlement to indemnification have not been
appointed or have not made a determination within 30 calendar days after
receipt by the Company of such Indemnification Statement and Supporting
Documentation, the Indemnitee will be deemed to be entitled to
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<PAGE> 10
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination and (ii) be sworn
to by all persons who participated in the determination and voted to deny
indemnification. The provisions of this Section 4(c) are intended to be
procedural only and will not affect the right of the Indemnitee to
indemnification under this Agreement and any determination that the Indemnitee
is not entitled to indemnification and any failure to make the payments
requested in the Indemnification Statement will be subject to review as
provided in Section 6.
(d) If a determination is made or deemed to have been made
pursuant to this Section 4 that the Indemnitee is entitled to indemnification,
the Company will pay to the Indemnitee the amounts to which the Indemnitee is
entitled within two business days after such determination of entitlement to
indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses pursuant to
Section 2(e), the Indemnitee will submit to the Company a written undertaking
substantially in the form of Exhibit 2 attached hereto, executed personally or
on his or her behalf (the
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<PAGE> 11
"Undertaking"), stating that (i) he or she has incurred or will incur actual
expenses in defending a Proceeding and (ii) if and to the extent required by
law at the time of such advance, he or she undertakes to repay such amounts
advanced as to which it may ultimately be determined that the Indemnitee is not
entitled. In order to obtain advancement of expenses pursuant to Section 3(b),
the Indemnitee may, but shall not be required to, submit an Undertaking or such
other form of request as he or she determines to be appropriate (an "Expense
Request"). Upon receipt of an Undertaking or Expense Request, as the case may
be, the Company will within 30 calendar days make payment of the costs, charges
and expenses stated in the Undertaking or Expense Request. No security will be
required in connection with any Undertaking or Expense Request and any
Undertaking or Expense Request will be accepted without reference to the
Indemnitee's ability to make repayment.
5. Subrogation; Duplication of Payments. (a) In the event of
payment under this Agreement, the Company will be subrogated to the extent of
such payment to all of the rights of recovery of the Indemnitee, who will
execute all papers required and will do everything that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
(b) The Company will not be liable under this Agreement to
make any payment in connection with any claim made against the Indemnitee to
the extent the Indemnitee has actually received
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<PAGE> 12
payment (under any insurance policy, the Certificate, the By-Laws, the DGCL or
otherwise) of the amounts otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. In the event that a determination is made pursuant to Section 4 that
the Indemnitee is not entitled to indemnification or advancement of expenses
hereunder, (i) the Indemnitee may at any time thereafter seek an adjudication
of his or her entitlement to such indemnification or advancement either, at the
Indemnitee's sole option, in (A) an appropriate court of the State of Delaware
or any other court of competent jurisdiction or (B) an arbitration to be
conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association; (ii) any such judicial proceeding or arbitration will
be de novo and the Indemnitee will not be prejudiced by reason of such adverse
determination; and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
(b) The Company will be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to the provisions of
Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will
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<PAGE> 13
stipulate in any such court or before any such arbitrator that the Company is
bound by all the provisions of this Agreement.
(c) In any action brought under Section 6(a), it will be a
defense to a claim for indemnification pursuant to Section 2(a) or Section 2(b)
(but not an action brought to enforce a claim for costs, charges and expenses
incurred in defending any Proceeding in advance of its final disposition where
the Undertaking, if any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it permissible under
the DGCL for the Company to indemnify the Indemnitee for the amount claimed,
but the burden of proving such defense will be on the Company. Neither the
failure of the Company (including any person or persons empowered under Section
4(b) to determine the Indemnitee's entitlement to indemnification) to have made
a determination prior to commencement of such action that indemnification of
the Indemnitee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL, nor an actual
determination by the Company (including any person or persons empowered under
Section 4(b) to determine the Indemnitee's entitlement to indemnification) that
the Indemnitee has not met such applicable standard of conduct, will be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(d) It is the intent of the Company that the Indemnitee not
be required to incur the expenses associated with the enforcement of his or her
rights under this Agreement by
-13-
<PAGE> 14
litigation or other legal action because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Indemnitee hereunder. Accordingly, if it should appear to the Indemnitee that
the Company has failed to comply with any of its obligations under this
Agreement, or in the event that the Company or any other person takes any
action to declare this Agreement void or unenforceable, or institutes any
action, suit or proceeding designed (or having the effect of being designed) to
deny, or to recover from, the Indemnitee the benefits intended to be provided
to the Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee
from time to time to retain counsel of his or her choice, at the expense of the
Company as hereafter provided, to represent the Indemnitee in connection with
the initiation or defense of any litigation or other legal action, whether by
or against the Company or any director, officer, shareholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
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<PAGE> 15
this Agreement or any provision hereof or (ii) as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision thereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' or general partner's liability insurance, the Indemnitee will be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for a director or officer of the
Company or a person serving at the request of the Company in an Authorized
Capacity of or for Another Entity as the case may be. The Company may, but
shall not be required to, create a trust fund, grant a security interest or use
other means (including without limitation a letter of credit) to ensure the
payment of such amounts as may be necessary to satisfy its obligations to
indemnify and advance expenses pursuant to this Agreement.
8. Merger or Consolidation. In the event that the Company is
a constituent corporation in a consolidation, merger or other reorganization,
the Company will require: (a) if it is not the surviving, resulting or other
corporation therein, the surviving, resulting or acquiring corporation to agree
to indemnify the Indemnitee to the full extent provided herein and (b) whether
or not the Company is the resulting, surviving or acquiring corporation in any
such transaction, the Indemnitee will also stand in the same position under
this Agreement with respect to the resulting, surviving or acquiring
corporation as
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<PAGE> 16
he or she would have with respect to the Company if its separate existence had
continued.
9. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other rights to which the Indemnitee may be entitled under the
Certificate, By-Laws, the DGCL, any other statute, insurance policy, agreement,
vote of stockholders or of directors or otherwise, both as to actions in his or
her official capacity and as to actions in another capacity while holding such
office, and will continue after the Indemnitee has ceased to serve as a
director or officer of the Company or in an Authorized Capacity in or for
Another Entity and will inure to the benefit of his or her heirs, executors and
administrators; provided, however, that to the extent the Indemnitee otherwise
would have any greater right to indemnification and/or advancement of expenses
under any provision of the Certificate or the By-Laws as in effect on the date
hereof, the Indemnitee will be deemed to have such greater right pursuant to
this Agreement; and, provided further, that to the extent that any change is
made to the DGCL (whether by legislative action or judicial decision), the
Certificate and/or the By-Laws that permits any greater right to
indemnification and/or advancement of expenses than that provided under this
Agreement as of the date hereof, the Indemnitee will be deemed to have such
greater right pursuant to this Agreement.
(b) The Company will not adopt any amendment to the
Certificate or By-Laws the effect of which would be to deny,
-16-
<PAGE> 17
diminish or encumber the Indemnitee's rights to indemnity pursuant to the
Certificate, By-Laws, the DGCL or any other applicable law as applied to any
act or failure to act occurring in whole or in part prior to the date upon
which any such amendment was approved by the Board or the stockholders, as the
case may be. Notwithstanding the foregoing, in the event that the Company
adopts any amendment to the Certificate or By-Laws the effect of which is to so
deny, diminish or encumber the Indemnitee's rights to such indemnity, such
amendment will apply only to acts or failures to act occurring entirely after
the effective date thereof.
(c) If any provision or provisions of this Agreement are held
to be invalid, illegal or unenforceable for any reason whatsoever: (i) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation all portions of any paragraph of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) will
not in any way be affected or impaired thereby and (ii) to the fullest extent
possible, the provisions of this Agreement (including without limitation all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) will be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
-17-
<PAGE> 18
10. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflict of laws thereof.
11. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
12. Certain Terms. For purposes of this Agreement,
references to "Another Entity" will include employee benefit plans; references
to "fines" will include any excise taxes assessed on Indemnitee with respect to
any employee benefit plan; and references to "serving at the request of the
Company" will include any service in any capacity which imposes duties on, or
involves services by, the Indemnitee with respect to an employee benefit plan,
its participants or beneficiaries; references to Sections or Exhibits are to
Sections or Exhibits of or to this Agreement; references to the singular will
include the plural and vice versa; and if the Indemnitee acted in good faith
and in a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan he or
-18-
<PAGE> 19
she will be deemed to have acted in a manner "not opposed to the best interests
of the Company" as referred to herein.
13. Joint Defense. Notwithstanding anything to the contrary
contained herein, if (a) the Indemnitee elects to retain counsel in connection
with any Proceeding in respect of which indemnification may be sought by the
Indemnitee against the Company pursuant to this Agreement and (b) any other
director or officer of the Company or person serving at the request of the
Company in an Authorized Capacity of or for Another Entity may also be subject
to liability arising out of such Proceeding and in connection with such
Proceeding may seek indemnification against the Company pursuant to an
agreement similar to this Agreement, the Indemnitee, together with such other
persons, will employ counsel to represent jointly the Indemnitee and such other
persons unless the Board, upon the written request of the Indemnitee delivered
to the Company (to the attention of the Secretary) setting forth in reasonable
detail the basis for such request, determines that such joint representation
would be precluded under the applicable standards of professional conduct then
prevailing under the law of the State of Delaware, in which case the Indemnitee
will be entitled to be represented by separate counsel. In the event that the
Board fails to act on such request within 30 calendar days after receipt
thereof by the Company, the Indemnitee will be deemed to be entitled to be
represented by separate counsel in connection with such Proceeding.
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
FORUM RETIREMENT, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
INDEMNITEE
---------------------------------------
-20-
<PAGE> 21
Exhibit 1
INDEMNIFICATION STATEMENT
STATE OF _______________)
) SS
COUNTY OF ______________)
I, _________________, being first duly sworn, do depose and
say as follows:
1. This Indemnification Statement is submitted pursuant to
the Indemnification Agreement, dated as of ___________ __, 199_ (the
"Indemnification Agreement"), between Forum Retirement, Inc. (the Company"), a
Delaware corporation, and the undersigned.
2. I am requesting indemnification against costs, charges and
expenses (including attorneys' and others' fees), judgments, fines and amounts
paid in settlement, all of which (collectively, "Liabilities") have been
incurred by me in connection with a Proceeding (as defined in the
Indemnification Agreement) in which I was or am involved or am threatened to be
made involved.
3. With respect to all matters related to any such
Proceeding, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
-21-
<PAGE> 22
4. Without limiting any other rights which I have or may
have, I am requesting indemnification against Liabilities which have or may
arise out of ___________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
5. I have attached such documents supporting this request as
are reasonably available to me and are reasonably necessary to determine
whether and to what extent I am entitled to indemnification under the
Indemnification Agreement.
-----------------------------------
Name:
------------------------------
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this ____ day of __________, 199_.
-----------------------------------
[Seal]
My commission expires the ______ day of _____________, 199_.
-22-
<PAGE> 23
Exhibit 2
UNDERTAKING
STATE OF _______________)
) SS
COUNTY OF ______________)
I, _________________, being first duly sworn do depose and say
as follows:
1. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated as of __________ __ , 199__ (the
"Indemnification Agreement"), between Forum Retirement, Inc. (the "Company"), a
Delaware corporation, and the undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement).
3. I hereby undertake to repay this advancement of expenses
if it is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to _____________________________
________________________________________________________________________________
________________________________________________________________.
-----------------------------------
Name:
------------------------------
-23-
<PAGE> 24
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this ____ day of __________, 199_.
-----------------------------------
[Seal]
My commission expires the _____ day of _____________, 199_.
-24-
<PAGE> 1
FORUM RETIREMENT PARTNERS, L.P.
PRESENTATION TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
ROBERT A. INNAMORATI & CO.
INVESTMENT & MERCHANT BANKERS
OCTOBER 13, 1995
<PAGE> 2
FORUM RETIREMENT PARTNERS, L.P.
TABLE OF CONTENTS
I. OVERVIEW OF ENGAGEMENT
II. VALUATION METHODOLOGIES
A. DISCOUNTED CASH FLOW ANALYSIS
B. CAPITALIZATION OF NET OPERATING INCOME ANALYSIS
C. ANALYSIS OF COMPARABLE PUBLICLY-TRADED COMPANIES
D. ACQUISITION PREMIUM ANALYSIS
III. ADDITIONAL INFORMATION
A. PROPOSED ACQUISITION PRICE VS. HISTORIC TRADING PRICES
ROBERT A. INNAMORATI & CO OCTOBER 13,1995
<PAGE> 3
FORUM RETIREMENT PARINERS, L.P.
OVERVIEW OF ENGAGEMENT
- - ROBERT A. INNAMORATI & CO. ("RAI&Co") has been retained by the Special
Committee of the Board of Directors of Forum Retirement, Inc. ("FRI") for the
purpose of rendering a written opinion ("Opinion") as to the fairness, from a
financial point of view, to the unit holders of Forum Retirement Partners,
L.P. ("FRP") of the consideration to be received by such unit holders in the
proposed acquisition by Forum Group, Inc. of units of limited partnership
interest of FRP.
- - In arriving at its Opinion, RAI&Co relied upon and assumed the accuracy
of the following:
- Financial and other information concerning the business, operations and
prospects of FRP obtained by RAI&Co from FRP and its affiliates.
- The terms of the Offer to Purchase as provided by FRP.
- Publicly available information with respect to the securities
outstanding.
- Other information and data obtained by FRP from public sources.
- - In arriving at its Opinion, RAI&Co has not done the following:
- Made or obtained any independent evaluations or appraisals of the assets
or liabilities of FRP,
- Conducted any physical inspection of the properties and facilities of
FRR
ROBERT A. INNAMORATI & CO. October 13,1995
<PAGE> 4
FORUM RETIREMENT PARNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
BASED ON MANAGEMENT'S 10 - YEAR PROJECTIONS
<TABLE>
<CAPTION>
($'s in millions, except per unit and per room data) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Price Per Room $89 $95 $92 $98 $101 $107 $104 $110 $113 $117
Average Occupancy 94.0% 94.0% 94.0% 94.0% 94.0% 94.0% 94.0% 94.0% 94.0% 94.0%
Units in Place 1,617 1,617 1,617 1,617 1,617 1,617 1,617 1,617 1,617 1,617
Expansion Units 5 105 100 173 195 304 304 304 304 304
Total Revenues $49.1 $55.1 $52.0 $57.9 $60.8 $68.7 $65.5 $71.2 $73.3 $75.5
Net Operating Income $5.4 $7.3 $5.3 $7.5 $8.3 $14.8 $11.9 $15.4 $15.9 $16.4
Net Cash Flow Available For Distributions $0.0 $1.5 $0.0 $1.7 $2.5 $6.1 $9.6 $9.0 $10.1 $10.5
Percentage of Net Cash Flow Distributed 0.0% 0.0% 0.0% 0.0% 0.0% 72.8% 61.2% 73.9% 74.3% 74.8%
</TABLE>
Partnership Value
Assuming Capitalization Rate of 10% NOI Debt Cash in Terminal Year
- ----------------------------------- --- ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $54.4 $3.56 $16.4 $35.4 $6.7 $42.9
NPV @ 15% $127.2 $2.80
NPV @ 18% $34.0 $2.23
NPV @ 20% $29.3 $1.91
Partnership Value
Assuming Capitalization Rate of 11% NOI Debt Cash in Terminal Year
- ----------------------------------- --- ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $49.3 $3.22 $16.4 $35.4 $6.7 $112.3
NPV @ 15% $38.9 $2.55
NPV @ 18% $30.9 $2.02
NPV @ 20% $26.6 $1.74
Partnership Value
Assuming Capitalization Rate of 12% NOI Debt Cash in Terminal Year
- ----------------------------------- --- ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $45.1 $2.95 $16.4 $35.4 $6.7 $99.9
NPV @ 15% $35.6 $2.33
NPV @ 18% $28.3 $1.85
NPV @ 20% $24.4 $1.60
Notes:
(1) NPV = Net Present Value
(2) Per unit calculation assum es 15,285,248 units outstanding
(3) Projections w ere prepared by the General Partner
<PAGE> 5
FORUM RETIREMENT PARNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
BASED ON MANAGEMENT'S 7 - YEAR PROJECTIONS
<TABLE>
<CAPTION>
($'s in millions, except per unit and per room data) 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Price Per Room $89 $95 $92 $98 $101 $107 $104
Average Occupancy 94.0% 94.0% 94.0% 94.0% 94.0% 94.0% 94.0%
Units in Place 1,617 1,617 1,617 1,617 1,617 1,617 1,617
Expansion Units 5 105 100 173 195 304 304
Total Revenues $49.1 $55.1 $52.0 $57.9 $60.8 $68.7 $65.5
Net Operating Income $5.4 $7.3 $5.3 $7.5 $8.3 $14.8 $11.9
Net Cash Flow Available For Distributions $0.0 $1.5 $0.0 $1.7 $2.5 $6.1 $9.6
Percentage of Net Cash Flow Distributed 0.0% 0.0% 0.0% 0.0% 0.0% 72.8% 61.2%
</TABLE>
Partnership Value
Assuming Capitalization Rate of 10% NOI Debt Cash in Terminal Year
- ----------------------------------- --- ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $51.5 $3.37 $14.8 $41.2 $5.8 $103.4
NPV @ 15% $43.4 $2.84
NPV @ 18% $36.8 $2.41
NPV @ 20% $33.0 $2.16
Partnership Value
Assuming Capitalization Rate of 11% NOI Debt Cash in Terminal Year
- ----------------------------------- --- ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $45.1 $2.95 $14.8 $41.2 $5.8 $90.0
NPV @ 15% $38.0 $2.49
NPV @ 18% $32.2 $2.11
NPV @ 20% $28.9 $1.89
Partnership Value
Assuming Capitalization Rate of 12% NOI Debt Cash in Terminal Year
- ----------------------------------- --- ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $39.7 $2.60 $14.8 $41.2 $5.8 $78.7
NPV @ 15% $33.5 $2.19
NPV @ 18% $28.4 $1.85
NPV @ 20% $25.4 $1.66
Notes:
(1) NPV = Net Present Value
(2) Per unit calculation assum es 15,285,248 units outstanding
(3) Projections were prepared by the General Partner
<PAGE> 6
FORUM RETIREMENT PARNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
BASED ON MANAGEMENT'S 5 - YEAR PROJECTIONS
<TABLE>
<CAPTION>
($'s in millions, except per unit and per room data) 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average Price Per Room $89 $95 $92 $98 $101
Average Occupancy 94.0% 94.0% 94.0% 94.0% 94.0%
Units in Place 1,617 1,617 1,617 1,617 1,617
Expansion Units 5 105 100 173 195
Total Revenues $49.1 $55.1 $52.0 $57.9 $60.8
Net Operating Income $5.4 $7.3 $5.3 $7.5 $8.3
Net Cash Flow Available For Distributions $0.0 $1.5 $0.0 $1.7 $2.5
Percentage of Net Cash Flow Distributed 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
Partnership Value
Assuming Capitalization Rate of 10% NOI(1) Debt Cash in Terminal Year
- ----------------------------------- ------ ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $39.1 $2.55 $12.0 $44.2 $5.3 $65.0
NPV @ 15% $34.7 $2.27
NPV @ 18% $30.9 $2.02
NPV @ 20% $28.6 $1.87
Partnership Value
Assuming Capitalization Rate of 11% NOI(1) Debt Cash in Terminal Year
- ----------------------------------- ------ ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $32.5 $2.13 $12.0 $44.2 $5.3 $54.1
NPV @ 15% $28.9 $1.89
NPV @ 18% $25.7 $1.68
NPV @ 20% $23.8 $1.56
Partnership Value
Assuming Capitalization Rate of 12% NOI(1) Debt Cash in Terminal Year
- ----------------------------------- ------ ---- ---- -----------------
Value Per Unit
-----------------
NPV @ 12% $27.1 $1.77 $12.0 $44.2 $5.3 $45.1
NPV @ 15% $24.0 $1.57
NPV @ 18% $21.4 $1.40
NPV @ 20% $19.8 $1.30
Notes:
(1) NOI IN 1999 excludes the effect of capital expenditures
(2) NPV = Net Present Value
(3) Per unit calculation assum es 15,285,248 units outstanding
(4) Projections were prepared by the General Partner
<PAGE> 7
FORUM RETIREMENT PARNERS, L.P.
CAPITALIZATION OF NET OPERATING INCOME ANALYSIS
LAST 12 MONTHS ENDING JUNE 30, 1995
($'S IN THOUSANDS, EXCEPT PER UNIT DATA)
Net Operating Income (1): $7,5 74
<TABLE>
<CAPTION>
CAPITALIZATION RATES
---------------------------------------------------------------------
8.00% 9.00% 10.00% 11.00% 12.00% 13.00%
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hypothetical Enterp rise Value $94,675 $84,156 $75,740 $68,855 $63,117 $58,262
Minus LTD as of June 30, 1995 $49,482 $49,482 $49,482 $49,482 $49,482 $49,482
Plus Cash as of June 30, 1995 $6,273 $6,273 $6,273 $6,273 $6,273 $6,273
Hypothetical Equity Value $51,466 $40,947 $32,531 $25,646 $19,908 $15,053
Resulting Value Per Unit (2) $3.37 $2.68 $2.13 $1.68 $1.30 $0.98
</TABLE>
(1) Based on FRP's perform ance for the 12 m onths ended June 30, 1995. Net
operating income is defined as earnings before interest, taxes, depreciation
and amortization, less ordinary annual capital expenditures of $1,000 per
unit.
(2) Based on 15,285,248 units outstanding.
(3) LTD is long term debt including current maturities.
<PAGE> 8
FORUM RETIREMENT PARNERS, L.P.
CAPITALIZATION OF NET OPERATING INCOME ANALYSIS
LAST 12 MONTHS ENDING DECEMBER 31, 1995
($'S IN THOUSANDS, EXCEPT PER UNIT DATA)
Net Operating Income (1): $7,8 84
<TABLE>
<CAPTION>
CAPITALIZATION RATES
---------------------------------------------------------------------
8.00% 9.00% 10.00% 11.00% 12.00% 13.00%
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hypothetical Enterprise Value $98,550 $87,600 $78,840 $71,673 $65,700 $60,646
Minus LTD as of 12/31/95 (2) $49,007 $49,007 $49,007 $49,007 $49,007 $49,007
Plus Cash as of 12/31/95 (3) $5,500 $5,500 $5,500 $5,500 $5,500 $5,500
Hypothetical Equity Value $55,043 $44,093 $35,333 $28,166 $22,193 $17,139
Resulting Value Per Unit (4) $3.60 $2.88 $2.31 $1.84 $1.45 $1.12
</TABLE>
(1) Based on FRP's estim ated perform ance for the 12 months ended 12/31/95.
Net operating incom e is defined as earnings before interest, taxes,
depreciation and am ortization, less ordinary annual capital expenditures of
$1,000 per unit.
(2) LTD is long term debt including current m aturities.
(3) Management of FRP verbally estimated cash balance between $5 and $6 million
at 12/31/95.
(4) Based on 15,285,248 units outstanding.
<PAGE> 9
FORUM RETIREMENT PARNERS, L.P.
ANALYSIS OF COMPARABLE PUBLICLY-TRADED COMPANIES
COMPARABLE COMPANY DESCRIPTIONS
<PAGE> 10
FORUM RETIREMENT PARNERS, L.P.
ANALYSIS OF COMPARABLE PUBLICLY-TRADED COMPANIES
COMPARABLE COMPANY DESCRIPTIONS
<PAGE> 11
FORUM RETIREMENT PARNERS, L.P.
ANALYSIS OF COMPARABLE PUBLICLY-TRADED COMPANIES
COMPARABLE COMPANY DESCRIPTIONS
<PAGE> 12
FORUM RETIREMENT PARNERS, L.P.
ANALYSIS OF COMPARABLE PUBLICLY-TRADED COMPANIES
COMPARABLE VALUE SUMMARY
($'S IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
Based on FRP's
Based on FRP's
Valuation Method Last 12 Month Based on FRP's 1 2/31/94 FYE Results Results Ended 6 /3 0/9 5 1 2/31/95 FYE Forecast
<S> <C> <C> <C>
Applying Last 12 Months Operating Data of Comparables:
Current Market Capitalization (1) $71.8 $72.1 $77.4
12 Month Average Market Capitalization (2) $73.3 $73.7 $79.0
Applying Annual Historical Operating Data of Comparables:
Current Market Capitalization (1) $88.1 $88.5 $94.6
12 Month Average Market Capitalization (2) $91.6 $92.0 $98.4
Average Enterprise Value (3) $81.2 $81.6 $87.3
Value Per Unit Calculation:
Less Long Term Debt of $48.5 million (as of 6/30/95) (4) $32.7 $33.1 $38.8
Plus Cash and Equivalents (as of 6/30/95) $39.0 $39.3 $45.1
Partnership Equity Value per Unit (5) $2.55 $2.57 $2.95
</TABLE>
(1) Current Market Capitalization is defined as the current num ber of shares
outstanding m ultiplied by the current m arket price per share.
(2) The Twelve Month Average Market Capitalization is calculated by multiplying
the average price for the period by the average shares outstanding for the
period. Please note that the 12 Month Average Market Cap. for Community
Care is really for a 2 month period, the period since it went public.
(3) Enterprise Value is defined as market capitalization plus long term debt
less cash and equivalents.
(4) Long term debt excludes current maturities.
(5) Assuming 15,285,248 partnership units outstanding.
<PAGE> 13
FORUM RETIREMENT PARNERS, L.P.
ANALYSIS OF COMPARABLE PUBLICLY-TRADED COMPANIES
COMPARABLE VALUE SUMMARY
($'S IN THOUSANDS, EXCEPT PER UNIT DATA)
For the For the
For Fiscal Year Last Twelve Months Fiscal Year
Ended 12/31/94 Ended 6/30/9 5 Ended 12/31/95E
Net Revenues (1) $47.1 $48.9 $49.4
EBITDA (2) $9.2 $9.2 $9.5
$9.191
EBIT (3) $5.7 $5.7 $5.8
Net Income $0.3 $0.4 $1.4
(1) Other incom e in 12/31/95E assumed to be $240,000
(2) Earnings before interest, taxes, depreciation and amortization
(3) Earnings before interest and taxes
<PAGE> 14
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company FRP Alpine Meadow s of Tahoe Inc
Acquirer Providence Health Care Inc FGI(2) Pow dr Corp Multicare Cos Inc
<S> <C> <C> <C>
Date Announced 09/25/95 01/21/94 02/01/94
Completed/Pending ("C" / "P") P C C
Offer Price/Share (Unit) $2.83 $10.67 $7.50
Total Value (mil.) $16.6 (3) $37.2 $27.7
Stock Premium : Prior Periods
1 Day (%) 41.5% 64.2% 122.2%
1 Week (%) 50.9% 64.2%
4 Weeks (%) 130.8% 41.5% 64.2% 130.8%
Offer Price Per Share (Unit) $2.83 $10.67 $7.50
to EPS 116.6 x 35.5 x -
Stock Price 4 Weeks Prior $2.00 $6.50
to Book Value $3.25 0.8 x - 1.9 x
to EPS 82.4 x 21.7 x -
Total Equity Value (m il.) $39.0 $34.1
to Net Income $31.8 105.1 x 29.4 x
Long-Term Debt to -
Stockholder's Equity 1.3 x 0.9 x
Total Liabilities to 4.2 x
Stockholder's Equity 1.8 x 1.6 x
Stockholders' Equity 6.3 x
as a% of Total Assets 35.2% 37.9% 13.6%
Total Enterprise Value (m il.) $76.7 $49.4 $55.7
to Sales 1.6 x 1.5 x
to Cash Flow (EBITDA) 1.6 x 8.3 x - -
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of
$10 to $50 m illion.
(2) Based on LTM data available at 6/30/95.
(3) $2.50 x number of units not already owned by Forum Group, Inc.
ROBERT A. INNAMORATI & CO. October 13, 1995
<PAGE> 15
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company Banyan Mortgage Investors LP General Cable(Cie Gen de Eaux)
Acquirer Indianapolis New spapers THSP Inc W assall PLC Central New spapers Inc
<S> <C> <C> <C>
Date Announced 04/19/94 05/05/94
Com pleted/Pending ("C" / "P") 06/24/94 C C C
Offering Price/Share (Unit) $2.50 $6.00
Total Value (m il.) $10,000.00 $24.3 $35.9 $35.9
Stock Prem ium : Prior Periods
1 Day (%) - 17.1% -
1 Week (%) - 21.5%
4 Weeks (%) - - 11.6% -
Offer Price Per Share (Unit) $2.50 $6.00
to Book Value $10,000.00 - 0.6 x
to EPS - -
Stock Price 4 Weeks Prior - $5.38
to Book Value - 0.5 x
to EPS - - - -
Total Equity Value (m il.) $28.1 $77.8
to Net Income $57.7 - - -
Long-Term Debt to
Stockholder's Equity - 2.1 x -
Stockholder's Equity - 3.4 x
Stockholders' Equity -
as a% of Total Assets - 22.5% -
to Sales - 0.5 x
to Cash Flow (EBITDA) - - 16.2 x -
to Operating Income - 155.3 x -
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of
$10 to $50 m illion.
ROBERT A. INNAMORATI & CO. October 13, 1995
<PAGE> 16
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company R2 Medical System s Inc Service Fracturing Co
Acquirer Sam son Energy Co LP Cardiotronics System s Inc Now sco W ell Service Ltd Sam son Properties Inc
<S> <C> <C> <C>
Date Announced 08/15/94 08/25/94
Com pleted/Pending ("C" / "P") 09/02/94 C C C
Offering Price/Share (Unit) $6.50 $4.55
Total Value (m il.) $11.50 $14.4 $23.4 $41.3
Stock Prem ium : Prior Periods
1 Day (%) 225.0% 51.7% 29.6%
1 Week (%) 188.9% 30.0%
4 Weeks (%) 26.0% 225.0% 30.0% 24.3%
Offer Price Per Share (Unit) $6.50 $4.55
to Book Value $11.50 3.8 x 3.9 x 1.5 x
to EPS 130.0 x -
Stock Price 4 Weeks Prior 2.3 x $2.00 $3.50 $9.25
to Book Value 1.2 x 2.9 x
to EPS 1.2 x 40.0 x -13.0 x 1.9 x
Total Equity Value (m il.) $17.2 $24.3
to Net Income $53.7 131.5 x - 2.3 x
Long-Term Debt to
Stockholder's Equity - 0.0 x 0.1 x
Stockholder's Equity 0.1 x 0.2 x
Stockholders' Equity -
as a% of Total Assets 93.8% 24.2% 93.5%
to Sales 3.5 x 1.2 x
to Cash Flow (EBITDA) 1.4 x 28.9 x 30.3 x 1.7 x
to Operating Income 36.8 x - 2.4 x
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of $10 to
$50 m illion.
ROBERT A. INNAMORATI & CO. October 13, 1995
<PAGE> 17
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company Inform ation Am erica Inc Laser Precision Corp
Acquirer Providential W est Publishing Co GN Great Nordic Ltd W ilm ington Svgs Fund Society
<S> <C> <C> <C>
Date Announced 10/03/94 10/04/94
Com pleted/Pending ("C" / "P") 10/12/94 C C C
Offering Price/Share (Unit) $6.00 $8.00
Total Value (m il.) $4.00 $29.3 $38.7 $24.4
Stock Prem ium : Prior Periods
1 Day (%) 54.8% 36.2% 45.5%
1 Week (%) 65.5% 45.5%
4 Weeks (%) 60.0% 84.6% 39.1% 60.0%
Offer Price Per Share (Unit) $6.00 $8.00
to Book Value $4.00 1.7 x 1.9 x 9.3 x
to EPS - 26.6 x
Stock Price 4 Weeks Prior - $3.25 $5.75 $2.50
to Book Value 0.9 x 1.4 x
to EPS 6.3 x -23.2 x 19.2 x -0.4 x
Total Equity Value (m il.) $29.5 $39.8
to Net Income $373.2 - 27.1 x -
Long-Term Debt to
Stockholder's Equity 0.2 x - -
Stockholder's Equity 0.6 x 0.1 x
Stockholders' Equity 0.0 x
as a% of Total Assets 61.1% 88.1% 98.5%
to Sales 1.1 x 1.3 x
to Cash Flow (EBITDA) 66.2 x 6.7 x 9.6 x -
to Operating Income - 13.2 x -
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of $10 to
$50 m illion.
ROBERT A. INNAMORATI & CO. October 13, 1995
<PAGE> 18
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company Galveston-Houston Co Pet Products
Acquirer A Pea in the Pod Inc GHX Acquisition Co Hartz Mountain Corp(Hartz Grp) Mothers W ork Inc
<S> <C> <C> <C>
Date Announced 12/14/94 12/27/94
Com pleted/Pending ("C" / "P") 03/06/95 C C C
Offering Price/Share (Unit) $2.25 $5.25
Total Value (m il.) $5.50 $37.0 $17.3 $22.5
Stock Prem ium : Prior Periods
1 Day (%) 28.6% 200.0% 37.5%
1 Week (%) 38.5% 265.2%
4 Weeks (%) 83.3% 28.6% 162.5% 57.1%
Offer Price Per Share (Unit) $2.25 $5.25 $5.50
to EPS 75.0 x 43.7 x -
Stock Price 4 Weeks Prior $1.75 $2.00
to Book Value $3.50 0.7 x 0.8 x 1.7 x
to EPS 58.3 x 16.7 x -14.0 x
Total Equity Value (m il.) $38.2 $16.1
to Net Income $22.5 101.0 x 43.1 x
Long-Term Debt to -
Stockholder's Equity 0.1 x 0.2 x
Total Liabilities to -
Stockholder's Equity 0.4 x 0.6 x
Stockholders' Equity 1.0 x
as a% of Total Assets 72.9% 64.0% 49.7%
Total Enterprise Value (m il.) $42.7 $16.9 $25.3
to Sales 0.6 x 1.2 x
to Cash Flow (EBITDA) 0.8 x 8.9 x 16.7 x 113.3 x
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of $10 to
$50 m illion.
ROBERT A. INNAMORATI & CO. October 13, 1995
<PAGE> 19
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company Resource Recycling Techs Inc Paco Pharm aceutical Services
Acquirer NuVision Inc W aste Managem ent Inc W est Co Inc Am erican Vision Centers Inc
<S> <C> <C> <C>
Date Announced 03/17/95 03/24/95
Com pleted/Pending ("C" / "P") 04/28/95 C C C
Offering Price/Share (Unit) $11.50 $12.25
Total Value (m il.) $7.60 $30.8 $49.0 $20.5
Stock Prem ium : Prior Periods
1 Day (%) 37.3% 66.1% 32.2%
1 Week (%) 50.8% 66.1%
4 Weeks (%) 38.2% 46.0% 58.1% 35.1%
Offer Price Per Share (Unit) $11.50 $12.25
to Book Value $7.60 3.4 x 1.1 x 1.5 x
to EPS 34.3 x 21.8 x
Stock Price 4 Weeks Prior - $7.88 $7.75 $5.63
to Book Value 2.3 x 0.7 x
to EPS 1.1 x 23.5 x 13.8 x -11.9 x
Total Equity Value (m il.) $30.3 $49.0
to Net Income $20.5 33.8 x 21.4 x -
Long-Term Debt to
Stockholder's Equity 0.2 x 0.1 x -
Stockholder's Equity 1.0 x 0.3 x
Stockholders' Equity 0.4 x
as a% of Total Assets 48.6% 74.7% 70.7%
to Sales 0.8 x 0.8 x
to Cash Flow (EBITDA) 0.4 x 17.5 x 6.9 x 11.6 x
to Operating Income 33.1 x 15.8 x -
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of $10 to
$50 m illion.
ROBERT A. INNAMORATI & CO. October 13, 1995
<PAGE> 20
FORUM RETIREMENT PARNERS, L.P.
<TABLE>
<CAPTION>
Target Company Bestop Inc
_________ Acquirer _________________________________ Douglas & Lom ason Co
<S> <C> <C> <C>
Date Announced 05/04/95
Com pleted/Pending ("C" / "P") C
Offering Price/Share (Unit) $12.75
Total Value (m il.) $44.0
Stock Prem ium : Prior Periods
1 Day (%) 22.0%
1 Week (%) 18.6%
4 Weeks (%) 27.5%
Offer Price Per Share (Unit) $12.75
to Book Value 3.0 x
to EPS 10.8 x
Stock Price 4 Weeks Prior $10.00
to Book Value 2.4 x
to EPS 8.5 x
Total Equity Value (m il.) $44.0
to Net Income 10.9 x
Long-Term Debt to
Stockholder's Equity -
Stockholder's Equity 0.5 x
Stockholders' Equity
as a% of Total Assets 67.6%
to Sales 0.7 x
to Cash Flow (EBITDA) 5.8 x
to Operating Income 6.4 x
</TABLE>
(1) Data provided by Securities Data Company, Inc. Eighteen transactions were
identified for the period 1/1/94 to 10/3/95 in the total value range of
$10 to $50 m illion.
<PAGE> 21
FORUM RETIREMENT PARTNERS, L.P.
PROPOSED ACQUISITION PRICE VS. HISTORIC TRADING PRICES
FRP Prosposed Acquisition Price/Unit: $2.83
<TABLE>
<CAPTION>
Historical Information
<S> <C> <C> <C> <C>
FRP Price over 24 Months(1)
(9/25/93 - 9/25/95)
</TABLE>
<TABLE>
<CAPTION>
Selected Ratios (2)
<S> <C> <C> <C> <C>
Price to Bood ($2.50/unit):
Price to EBITDA ($0.60/unit):
Price to Revenues ($3.22/unit)
</TABLE>
