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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)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FORUM GROUP, INC.
(NAME OF SUBJECT COMPANY)
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FORUM GROUP, INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS OF SECURITIES)
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349841304
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MARK L. PACALA, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
FORUM GROUP, INC.
11320 RANDOM HILLS ROAD
SUITE 400
FAIRFAX, VIRGINIA 22030
(703) 277-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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COPIES TO:
ROBERT A. PROFUSEK
JONES, DAY, REAVIS & POGUE
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Forum Group, Inc. (the "Company"). The
address of the principal executive offices of the Company is 11320 Random
Hills Road, Suite 400, Fairfax, Virginia 22030. The class of equity securities
to which this Statement relates is Common Stock, without par value, of the
Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated
February 23, 1996 (the "Commencement Date") by FG Acquisition Corp.
("Purchaser"), an Indiana corporation and wholly owned indirect subsidiary of
Marriott International, Inc., a Delaware corporation ("Parent"), to purchase
all of the outstanding Shares at a purchase price of $13.00 per Share, net to
the seller in cash (as paid pursuant to the Offer, the "Offer Consideration"),
without interest thereon, on the terms and subject to the conditions to the
Offer (the "Conditions"), dated the Commencement Date (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together, as
amended and supplemented from time to time, constitute the "Offer Documents").
The Offer to Purchase states that the address and principal executive offices
of Purchaser and Parent are 10400 Fernwood Road, Bethesda, Maryland 20817.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 15, 1996 (the "Merger Agreement"), among Parent, Purchaser and
the Company. See Item 3(b)(2) for a description of the Merger Agreement. A
copy of the Merger Agreement is filed as Exhibit 1 hereto and is incorporated
herein by this reference. A copy of the press release issued jointly by Parent
and the Company relating to the Merger Agreement is filed as Exhibit 2 hereto
and is incorporated herein by this reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) Name and Address of the Company. The name and business address of the
Company, which is the person filing this Statement, are set forth in Item 1
above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements,
arrangements or understandings nor any actual or potential conflicts of
interest between the Company and its affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) Parent, its executive
officers, directors and affiliates. Reference is also made to Items 4 and 5
and Schedule I for additional information in response to this Item.
(b)(1) Certain Contracts, Etc. Certain contracts, agreements, arrangements
or understandings between the Company or its affiliates and certain of its
directors and executive officers are described under the captions "Director
Compensation," "Compensation of Executive Officers," "Compensation Committee
Report on Executive Compensation," "Certain Relationships and Transactions"
and "Security Ownership of Certain Beneficial Owners and Management" on pages
4, 6-11, 14-17 of the Company's Proxy Statement, dated August 4, 1995, for the
Company's 1995 Annual Meeting of Shareholders (the "1995 Annual Meeting Proxy
Statement"), a copy of which was previously furnished to shareholders. A copy
of such portions of the 1995 Annual Meeting Proxy Statement is filed as
Exhibit 3 hereto and is incorporated herein by this reference.
As described in the 1995 Annual Meeting Proxy Statement, the Company is
presently a party to an employment agreement with Mark L. Pacala, Chairman and
Chief Executive Officer of the Company, a copy of which is filed as Exhibit 4
hereto and incorporated herein by this reference. Such agreement provides for
the payment of certain severance benefits in the event Mr. Pacala terminates
his employment, or his employment is terminated, within 12 months following
the occurrence of certain change-in-control events (which would include the
consummation of the Offer and/or the Merger). The Company is also presently a
party to a letter agreement with Dennis L. Lehman, Senior Vice President and
Chief Financial Officer of the Company, a copy of which is filed as Exhibit 5
hereto and incorporated herein by this reference. Such agreement provides for
the payment of certain severance benefits in the event Mr. Lehman's employment
is terminated for any reason other than for cause. The Company estimates that
the maximum amount payable pursuant to such agreements is approximately
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$1.2 million. The Merger Agreement provides that the Company will honor and,
on and after the effective time of the Merger (the "Effective Time"), Parent
will cause the surviving corporation in the Merger (the "Surviving
Corporation") to honor, all employment, severance, termination, consulting and
retirement agreements to which the Company or any of its subsidiaries is a
party on the date of the Merger Agreement, subject to the right of the
Surviving Corporation to amend or otherwise modify the terms and provisions of
any such agreements in accordance with the terms thereof. The Company believes
that the foregoing covenant would apply to the agreements between the Company
and each of Messrs. Pacala and Lehman.
Pursuant to the Merger Agreement, Parent has agreed to adopt effective
immediately following the Effective Time a severance plan, a copy of which is
filed as Exhibit 6 hereto and incorporated herein by this reference.
Pursuant to the Merger Agreement, all options and other rights to acquire
Shares ("Stock Options") granted to employees under any stock option plan,
program or similar arrangement of the Company or any subsidiary of the Company
(each as amended, an "Option Plan"), whether or not then exercisable, will be
cancelled by the Company immediately prior to the earlier of (x) the purchase
of Shares pursuant to the Offer (sometimes referred to herein as the
"consummation of the Offer") and (y) the Effective Time, and the holders
thereof will be entitled to receive from the Company, for each Share subject
to such Stock Option, an amount in cash equal to the difference between the
Merger Price (as defined in the Merger Agreement) and the exercise price per
share of such Stock Option, which amount will be paid at the time the Stock
Option is cancelled. All applicable withholding taxes attributable to such
payments will be deducted from the amounts payable and all such taxes
attributable to the exercise of Stock Options will be withheld from the
proceeds received in respect of Shares issuable on such exercise. Except as
provided in the Merger Agreement or as otherwise agreed to by the parties and
to the extent permitted by the Option Plans, the Option Plans will terminate
as of the Effective Time and the provisions in any other plan providing for
the issuance or grant by the Company of any interest in respect of the capital
stock of the Company will be deleted as of the Effective Time.
The Company entered into a letter agreement with each of Investors GenPar,
Inc. and Apollo Investment Fund, each dated as of October 3, 1995 (the "Letter
Agreements") (copies of which are filed as Exhibits 7 and 8 hereto and
incorporated herein by this reference), confirming that the Company will
indemnify such parties and their affiliates in connection with certain
litigation arising out of the 1993 recapitalization of the Company. Such
confirmation of the Company's obligation to provide such indemnification is
subject to the consummation of the Offer, the Merger or a similar transaction
prior to March 31, 1997.
(b)(2) The Merger Agreement. The following is a summary of certain
provisions of the Merger Agreement, a copy of which is filed as Exhibit 1
hereto and is incorporated herein by this reference. For purposes of this Item
3(b)(2), except as set forth herein with respect to certain terms the meaning
of which may not be readily apparent, capitalized terms used and not otherwise
defined herein have the meanings given to such terms in the Merger Agreement.
The following summary is qualified in its entirety by reference to the Merger
Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. Subject only to the Conditions, the Purchaser has agreed to accept
for payment and pay for all Shares tendered pursuant to the Offer as soon as
practicable following the Expiration Date (as defined below). The Merger
Agreement provides that the Purchaser, subject only to the Conditions, will
extend the period of time during which the Offer is open until the first
business day following the date on which the Conditions are satisfied or
waived; provided, that the Purchaser shall be permitted but shall not be
obligated to extend the time the Offer is open if either (x) the Company is in
breach in any material respect of its covenants or agreements contained in the
Merger Agreement or (y) there is a reasonable likelihood that one or more of
the Conditions cannot be satisfied; and provided, further, that the Purchaser
shall in no event be permitted or obligated to extend the period of time the
Offer is open beyond July 15, 1996. The Purchaser will not otherwise extend
the period of time during which the Offer is open beyond the twentieth
business day following commencement of the Offer unless any of the Conditions
shall not have been satisfied. The term "Expiration Date" means 12:00
midnight, New York City time, on Thursday, March 21, 1996, unless and until
the Purchaser, subject to the terms of the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by the Purchaser, shall expire.
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The obligation of the Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to (i) the tender and non-withdrawal
of Shares which, when added to the Shares then beneficially owned by Parent,
constitute two-thirds of the outstanding Shares and represent two-thirds of
the voting power of the outstanding Shares on a Fully Diluted Basis (as
defined below), and (ii) the satisfaction of the other Conditions. The
Purchaser has agreed that, without the written consent of the Company, no
amendment to the Offer may be made which changes the form of consideration to
be paid or decreases the price per Share or the number of Shares sought in the
Offer or which imposes additional conditions to the Offer other than the
Conditions or amends any other term of the Offer in any manner adverse to
holders of Shares. "Fully Diluted Basis" means as of any date of determination
a basis that includes all outstanding Shares, together with all Shares
issuable upon exercise of vested Stock Options and warrants.
The Merger. The Merger Agreement provides that, as soon as practicable
following the purchase of Shares pursuant to the Offer, and the satisfaction
or waiver of the other conditions to the Merger, or on such other date as the
parties thereto may agree (such agreement to require the approval of the
majority of the Continuing Directors (as defined below), if at that time there
shall be any Continuing Directors), the Purchaser will be merged with and into
the Company. The Merger shall become effective by filing with the Secretary of
State of Indiana articles of merger in accordance with the relevant provisions
of the Indiana Business Corporation Law (the "IBCL") at such time (the time
the Merger becomes effective being the "Effective Time").
At the Effective Time, (i) each Share issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive $13.00
in cash, or any higher price paid per Share in the Offer, without interest
thereon (the "Merger Price"); (ii) (a) each Share held in the treasury of the
Company or held by any wholly owned subsidiary of the Company and each Share
held by Parent or any wholly owned subsidiary of Parent immediately prior to
the Effective Time will be cancelled and retired and cease to exist; provided,
that Shares held beneficially or of record by any plan, program or arrangement
sponsored or maintained for the benefit of employees of Parent or the Company
or any subsidiaries thereof will not be deemed to be held by Parent or the
Company regardless of whether Parent or the Company has, directly or
indirectly, the power to vote or control the disposition of such Shares; and
(b) each Share held by any holder who has perfected any dissenters' rights
under the IBCL, if applicable (the "Dissenting Shares"), will not be converted
into or be exchangeable for the right to receive the Merger Price; and (iii)
each share of common stock of the Purchaser issued and outstanding immediately
prior to the time of the Effective Date will be converted into and
exchangeable for one share of common stock of the Surviving Corporation.
The Merger Agreement provides that the Articles of Incorporation and By-laws
of the Purchaser as in effect at the Effective Time shall be the Articles of
Incorporation and By-laws of the Surviving Corporation until amended in
accordance with applicable law. The Merger Agreement also provides that (i)
the directors of the Purchaser at the Effective Time will be the initial
directors of the Surviving Corporation, (ii) the officers of the Company at
the Effective Time will be the initial officers of the Surviving Corporation,
and (iii) the initial officers and directors of the Surviving Corporation will
hold office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and By-laws of the Surviving Corporation, or as otherwise
provided by applicable law.
Recommendation. In the Merger Agreement, the Company states that the Board
of Directors of the Company (the "Board" or "Board of Directors") has
unanimously (i) determined that the Offer and the Merger are fair to and in
the best interests of the shareholders of the Company and (ii) subject to the
fiduciary duties of the Board, resolved to recommend acceptance of the Offer
and approval and adoption of the Merger Agreement and the Merger by the
shareholders of the Company.
Interim Agreements of Parent, the Purchaser and the Company. Except as
contemplated by the Merger Agreement, the Company has covenanted and agreed
that, during the period from the date of the Merger Agreement to the
consummation of the Offer and, if Parent makes a request pursuant to Section
1.4 of the Merger Agreement, until such time as the directors designated by
Parent in accordance with the Merger Agreement
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constitute in their entirety a majority of the Board (the "Board
Reorganization"), the Company and its subsidiaries will each conduct its
operations according to its ordinary course of business, consistent with past
practice, and will use all reasonable efforts to (i) preserve intact its
business organization, (ii) maintain its material rights and franchises, (iii)
keep available the services of its officers and key employees, and (iv) keep
in full force and effect insurance comparable in amount and scope of coverage
to that maintained as of the date of the Merger Agreement.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by the Merger Agreement ,prior to the
consummation of the Offer and the Board Reorganization, neither the Company
nor any of its subsidiaries will, without the prior written consent of Parent:
(a) amend its charter, by-laws or other governing documents; (b) authorize for
issuance, issue, sell, deliver or agree to commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or amend any of the terms of any such securities or
agreements (subject to certain exceptions); (c) split, combine or reclassify
any shares of its capital stock, declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock or redeem or otherwise acquire any of
its securities or any securities of its subsidiaries; (d) (i) pledge or
otherwise encumber shares of capital stock of the Company or any of its
subsidiaries; or (ii) incur, assume or prepay any long-term debt; or (iii)
except in the ordinary course of business and consistent with past practices,
(A) incur, assume, or prepay letters of credit or any material short-term
debt, (B) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for any material obligations of
any other person except wholly owned subsidiaries of the Company, or (C) make
any material loans, advances or capital contributions to, or investments in,
any other person; or (iv) change the practices of the Company and its
subsidiaries with respect to the timing of payments or collections; or (v)
mortgage or pledge any assets or create or permit to exist any lien thereupon
except certain permitted liens; (e) except (i) for arrangements entered into
in the ordinary course of business consistent with past practices, (ii) as
required by law or (iii) as specifically contemplated in the Merger Agreement,
enter into, adopt or materially amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans,
funds or other arrangements of or for the benefit or welfare of any Company
employee (or any other person for whom the Company or its subsidiaries will
have any liability), or (except for normal increases in the ordinary course of
business that are consistent with past practices) increase in any manner the
compensation or fringe benefits of any Company employee (or any other person
for whom the Company or its subsidiaries will have any liability) or pay any
benefit not required by any existing plan and arrangement (including the
granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing; (f) (i) transfer, sell, lease,
license or dispose of any lines of business, subsidiaries, divisions,
operating units or facilities (other than facilities that have been closed or
are currently proposed to be closed) outside the ordinary course of business,
(ii) enter into any material joint venture agreements, acquisition agreements
or partnership agreements or (iii) enter into any other material agreement,
commitment or transaction outside the ordinary course of business; (g) acquire
or agree to acquire, by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or by any other manner, (i) any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets of any other person, in each case where such action would be material
to the Company and its subsidiaries taken as a whole or (ii) any facility or
site upon which the Company intends to locate any facility; (h) except as may
be required by law, take any action to terminate or materially amend any of
its pension plans or retiree medical plans; (i) modify, amend, terminate or
waive any rights under any material contract except in the ordinary course of
business consistent with past practice (other than an arrangement, agreement
or contract proposal previously submitted by the Company or a subsidiary
thereof which proposal, upon acceptance thereof, cannot be revised or
withdrawn); (j) effect any change in any of its methods of accounting in
effect as of December 31, 1995, except as may be required by law or generally
accepted accounting principles; (k) enter into any material arrangement,
agreement or contract that, individually or in the aggregate with other
material arrangements, agreements and contracts entered into after the date of
the Merger Agreement, would have or
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constitute a Material Adverse Effect (as defined below) after the date of the
Merger Agreement; and (l) enter into a legally binding commitment with respect
to, or any agreement to take, any of the foregoing actions; provided, that
with respect to Forum Retirement Partners, L.P. ("FRP") and Forum Retirement,
Inc., the general partner of FRP ("FRI"), the Company is obligated only to use
its reasonable efforts to cause FRP to comply with the foregoing provisions of
the Merger Agreement (subject to the fiduciary duties of FRI, if then
applicable). The parties to the Merger Agreement have agreed upon certain
specific actions and transactions the Company may undertake prior to
consummation of the Offer and the Board Reorganization upon consultation but
without the prior consent of Parent, and certain other actions and
transactions requiring the prior written consent of Parent.
As used in the Merger Agreement with respect to the Company and its
subsidiaries, "Material Adverse Effect" means any change, effect or
circumstance that has had or could reasonably be expected to have a material
adverse effect on (i) the business, results of operations, financial condition
or prospects of the Company and its subsidiaries taken as a whole, or (ii) the
ability of the Company to perform its material obligations under the Merger
Agreement. In determining whether any change, effect or circumstance is or
constitutes a Material Adverse Effect, effect will be given to any reserves
set forth on the financial statements contained in the Company Quarterly
Report on Form 10-Q for the quarter ending December 31, 1995 that specifically
relates to the change, effect or circumstance in question. When used with
respect to Parent or the Purchaser, however, the term "Material Adverse
Effect" means any change, effect or circumstance that has had or could
reasonably be expected to have a material adverse effect on (i) the business,
results of operations, financial condition or prospects of Parent and its
subsidiaries taken as a whole, or (ii) the ability of Parent or the Purchaser
to perform its material obligations under the Merger Agreement.
Acquisition Proposals. In the Merger Agreement, the Company has agreed that
it and its officers, directors, employees, representatives and agents will
immediately cease any existing discussions or negotiations with any parties
conducted prior to the date of the Merger Agreement (subject to exceptions
described below) with respect to any Acquisition Proposal (as defined below).
The Company and its subsidiaries may not, and will use their best efforts to
cause their respective officers, directors, employees and investment bankers,
attorneys, accountants or other agents retained by the Company or any of its
subsidiaries not to, (i) solicit, directly or through an intermediary, any
inquiries with respect to, or the making of, any Acquisition Proposal, or (ii)
except as permitted below, engage in negotiations or discussions with, or
furnish any confidential information relating to the Company or its
subsidiaries to any Third Party (as defined below) relating to an Acquisition
Proposal (other than the transactions contemplated by the Merger Agreement).
Notwithstanding anything to the contrary contained in the Merger Agreement,
the Company (and any person referred to above) may furnish information to, and
participate in discussions or negotiations with, any Third Party which submits
an unsolicited written Acquisition Proposal to the Company if the Board by a
majority vote determines, based as to legal matters upon the advice of legal
counsel, that furnishing such information or participating in such discussions
or negotiations is required by applicable law (including fiduciary principles
thereof); provided, that nothing in the Merger Agreement shall prevent the
Board from taking, and disclosing to the Company's shareholders, a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") with regard to any
tender offer; and provided further, that the Company shall not enter into a
written agreement with respect to a Third Party Proposal (as defined below)
except concurrently with or after the termination of the Merger Agreement
(except with respect to confidentiality agreements to the extent expressly
provided therein). The Company shall promptly provide Parent with a reasonable
description of any Acquisition Proposal received (including a summary of all
material terms of such Acquisition Proposal and, unless it is prohibited from
disclosing the same, the identity of the person making such Acquisition
Proposal). The Company shall promptly inform Parent of the status and content
of any discussions regarding any Acquisition Proposal with a Third Party. In
no event shall the Company provide material, non-public information to any
Third Party making an Acquisition Proposal unless such party enters into a
confidentiality or similar agreement containing provisions believed by the
Company to reasonably protect the confidentiality of such information.
Promptly after entering into any confidentiality or similar agreement with any
person on or after February 6, 1996, the Company shall notify Parent of such
event and identify the person with whom the agreement was executed.
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"Acquisition Proposal" means any proposal, whether in writing or otherwise,
made by a Third Party to enter into a Third Party Transaction. "Third Party
Transaction" means the acquisition of beneficial ownership of all or a
material portion of the assets of, or a majority equity interest in, the
Company pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, tender offer or exchange
offer or other business acquisition or combination transaction involving the
Company and its subsidiaries, including any single or multi-step transaction
or series of related transactions which is structured to permit such Third
Party to acquire beneficial ownership of any material portion of the assets
of, or a majority of the equity interest in, the Company (other than the
transactions contemplated by the Merger Agreement). "Third Party" means any
person other than Parent, the Purchaser or any affiliate thereof.
Notwithstanding any provision to the contrary in the foregoing, none of the
Company, its subsidiaries and their respective officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents
shall engage in negotiations or discussions with, or furnish any information
to, either (x) any person (each such person, together with its affiliates, a
"Pre-February 6 Party") (i) with whom the Company or any representatives or
agents entered into a confidentiality agreement, (ii) with whom the Company or
any of its representatives or agents have held substantive discussions
regarding a Third Party Transaction or (iii) to whom the Company or its
representatives or agents furnished non-public information, in any such case,
prior to February 6, 1996, or (y) any person who first expressed an interest
in making an Acquisition Proposal or first requested confidential information
regarding the Company and its Subsidiaries after the twentieth business day
after the Offer is actually commenced. With respect to persons (other than
Pre-February 6 Parties) who first expressed interest in making an Acquisition
Proposal or first requested confidential information regarding the Company and
its subsidiaries prior to the twentieth business day after the Offer is
actually commenced, none of the Company, its subsidiaries and their respective
officers, directors, employees, representatives, investment bankers,
attorneys, accountants or other agents shall engage in negotiations or
discussions with, or furnish any information to, such persons after the
twentieth business day after the Offer was actually commenced.
Board Representation. The Merger Agreement provides that in the event that
the Purchaser acquires at least a majority of the Shares outstanding on a
Fully Diluted Basis pursuant to the Offer, Parent will be entitled to
designate for appointment or election to the Board, upon written notice to the
Company, such number of persons (each, a "Designated Director") so that such
designees of Parent constitute the same percentage (but in no event less than
a majority) of the Board (rounded up to the next whole number) as the
percentage of Shares acquired in connection with the Offer. Prior to the
consummation of the Offer, the Company will use reasonable best efforts to
increase the size of the Board or to obtain the resignation of such number of
directors as is necessary to enable such number of Parent designees to be so
elected. In connection therewith, the Company will mail to the shareholders of
the Company the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder unless such information has previously been provided to
such shareholders in the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"). Parent and the Purchaser will provide
to the Company in writing, and be solely responsible for, any information with
respect to such companies and their nominees, officers, directors and
affiliates required by such Section and Rule. Notwithstanding the foregoing,
the parties to the Merger Agreement will use their respective reasonable best
efforts to ensure that at least three of the members of the Board will, at all
times prior to the Effective Time, be Continuing Directors (as defined below).
See Schedule I.
"Continuing Director" means (a) any member of the Board as of the date of
the Merger Agreement, (b) any member of the Board who is unaffiliated with,
and not a Designated Director or other nominee of, Parent or the Purchaser or
their respective subsidiaries, and (c) any successor of a Continuing Director
who is (i) unaffiliated with, and not a Designated Director or other nominee
of, Parent or the Purchaser or their respective Subsidiaries and (ii)
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then on the Board.
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Miscellaneous Agreements. Pursuant to the Merger Agreement, if required under
applicable law in order to consummate the Merger, the Company, acting through
its Board, will, in accordance with applicable law, its amended and restated
articles of incorporation and its by-laws: (a) duly call, give notice of,
convene and hold a special meeting of its shareholders as soon as practicable
following the consummation of the Offer for the purpose of considering and
taking action on the Merger Agreement (the "Shareholders' Meeting"); (b)
subject to its fiduciary duties under applicable laws as advised as to legal
matters by counsel, include in the proxy statement or information statement
prepared by the Company for distribution to shareholders of the Company in
advance of the Shareholders' Meeting in accordance with Regulation 14A or
Regulation 14C promulgated under the Exchange Act (the "Proxy Statement") the
recommendation of its Board referred to above; and (c) use its reasonable
efforts to (i) obtain and furnish the information required to be included by it
in the Proxy Statement and, after consultation with Parent, respond promptly to
any comments made by the Securities and Exchange Commission (the "Commission")
with respect to the Proxy Statement and any preliminary version thereof and
cause the Proxy Statement to be mailed to its shareholders following the
consummation of the Offer and (ii) obtain the necessary approvals of the Merger
Agreement by its shareholders. Parent will provide the Company with the
information concerning Parent and the Purchaser required to be included in the
Proxy Statement and will vote, or cause to be voted, all Shares owned by it or
its subsidiaries in favor of approval and adoption of the Merger Agreement.
Indemnification. In the Merger Agreement, Parent has agreed that, for six
years after the Effective Time, Parent will cause the Surviving Corporation to
indemnify, defend and hold harmless the present and former officers, directors,
employees, agents and representatives of the Company and its subsidiaries
(including financial and legal advisors to the Company in respect of the Merger
Agreement and the transactions contemplated thereby), and each person that is
an affiliate of the foregoing and has or may have liability in respect of any
of the foregoing under respondeat superior, agency, controlling person or any
other theory of liability for actions or failure to take action by another such
person (the foregoing persons and entities, collectively, "Indemnified
Parties"), against all losses, claims, damages or liabilities arising out of
(i) any action, suit or proceeding based in whole or in part on the Merger
Agreement or the transactions contemplated thereby and (ii) without limiting
the generality or effect of the foregoing, any actions or omissions occurring
on or prior to the Effective Time to the full extent permitted or required
under Indiana law, the Articles of Incorporation and By-Laws of the Company in
effect at the date of the Merger Agreement and under all agreements to which
the Company is a party as of the date of the Merger Agreement set forth in
Schedule 6.10 to the Merger Agreement, including provisions relating to
advances of expenses incurred in the defense of any action or suit (including
attorneys' fees of counsel selected by the Indemnified Party); provided that
(x) no Indemnified Party shall be entitled to indemnification for acts or
omissions that constitute gross negligence, bad faith or willful misconduct,
and (y) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under Indiana
law, the Articles of Incorporation or By-Laws of the Company or under the
Merger Agreement will be made by independent counsel selected by the
Indemnified Party and reasonably satisfactory to the Surviving Corporation.
Nothing in the Merger Agreement will diminish or impair the rights of any
Indemnified Party under the Articles of Incorporation or By-Laws of the Company
or any agreement set forth on Schedule 6.10 to the Merger Agreement. The
Surviving Corporation will maintain the Company's existing officers' and
directors' liability insurance ("D&O Insurance") in full force and effect
without reduction of coverage for a period of three years after the Effective
Time; provided that the Surviving Corporation will not be required to pay an
annual premium therefor in excess of 150% of the last annual premium paid prior
to the date of the Merger Agreement (the "Current Premium"); and, provided,
further, that if the existing D&O Insurance expires, is terminated or cancelled
during the 3-year period, the Surviving Corporation will use reasonable efforts
to obtain as much D&O Insurance as can be obtained for the remainder of such
period for a premium on an annualized basis not in excess of 150% of the
Current Premium.
Reasonable Efforts; Consents and Certain Arrangements. Subject to the terms
and conditions of the Merger Agreement, each of the parties thereto has agreed
to use all reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement (including (i) cooperating in
the preparation and filing of the Schedule 14D-1, the Schedule 14D-9,
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the Proxy Statement and any amendments to any thereof; (ii) cooperating in
making available information and personnel in connection with presentations,
whether in writing or otherwise, to prospective lenders to Parent and the
Purchaser that may be asked to provide financing for the transactions
contemplated by the Merger Agreement; (iii) taking all action reasonably
necessary, proper or advisable to secure any necessary consents or waivers
under existing debt obligations of the Company and its subsidiaries or amend
the notes, indentures or agreements relating thereto to the extent required by
such notes, indentures or agreements or redeem or repurchase such debt
obligations; (iv) contesting any pending legal proceeding relating to the
Offer or the Merger; and (v) executing any additional instruments necessary to
consummate the transactions contemplated by the Merger Agreement). In case at
any time after the Effective Time any further action is necessary to carry out
the purposes of the Merger Agreement, the proper officers and directors of
each party thereto shall use all reasonable efforts to take all such necessary
action. Each of the Company, Parent and the Purchaser shall cooperate and use
their respective reasonable efforts to make all filings and obtain all
consents and approvals of governmental authorities and other third parties
necessary to consummate the transactions contemplated by the Merger Agreement.
Each of the parties thereto will furnish to the other party such necessary
information and reasonable assistance as such other persons may reasonably
request in connection with the foregoing. As soon as practicable after the
date of the Merger Agreement, Parent, the Purchaser and the Company will cause
a motion to be filed with the United States Bankruptcy Court for the Southern
District of Indiana, Indianapolis Division (the "Bankruptcy Court"),
requesting, and thereafter use their reasonable efforts to obtain, the
issuance of an order relating to the Company's Third Amended and Restated
Joint Plan of Reorganization, dated January 17, 1992, as amended (the "Plan of
Reorganization") that, among other things, requires the Company to replace
Shares presently reserved for certain disputed claims with a cash reserve to
be held in a segregated account, with the amount of the initial reserve to be
equal to (i) the number of Shares to which holders of the remaining disputed
claims would have been permitted under the Plan of Reorganization if the
claims had been allowed in full, multiplied by (ii) the Merger Price. Further,
the Company will, upon the specific request of the Purchaser, use reasonable
efforts to (i) exempt the Company, the Offer and the Merger from the
requirements of any state takeover law by action of its Board and (ii) assist
in any challenge by the Purchaser to the validity or applicability to the
Offer or the Merger of any state takeover law.
In addition to and without limiting the agreements of Parent and the
Purchaser described in the preceding paragraph, Parent, the Purchaser and the
Company will (i) take promptly all actions necessary to make the filings
required of Parent, the Purchaser or any of their affiliates under the
applicable Antitrust Laws, (ii) comply at the earliest practicable date with
any request for additional information or documentary material received by
Parent, the Purchaser or any of their affiliates from the Federal Trade
Commission ("FTC") or the Antitrust Division of the Department of Justice
("Antitrust Division") pursuant to the Antitrust Laws, and (iii) cooperate
with the Company in connection with any filing of the Company under applicable
Antitrust Laws and in connection with resolving any investigation or other
inquiry concerning the transactions contemplated by the Merger Agreement or
any ancillary agreements commenced by any of the FTC, the Antitrust Division
or any state attorney general.
In furtherance and not in limitation of the covenants of Parent and the
Purchaser described above, Parent, the Purchaser and the Company shall each
use all reasonable efforts to resolve such objections, if any, as may be
asserted with respect to the Offer or the Merger under any Antitrust Law. If
any administrative, judicial or legislative action or proceeding is instituted
(or threatened to be instituted) challenging the Offer or the Merger as
violative of any Antitrust Law, Parent, the Purchaser and the Company shall
each cooperate and use reasonable efforts to contest and resist any such
action or proceeding, and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary or
permanent) (any such decree, judgment, injunction or other order is hereafter
referred to as an "Order") that is in effect and that restricts, prevents or
prohibits consummation of the Offer or the Merger, including by pursuing all
reasonable avenues of administrative and judicial appeal. The entry by a court
of an Order permitting the Offer or the Merger, but requiring that any of the
businesses, product lines or assets of the Company be held separate
thereafter, or an offer of settlement substantially to the foregoing effect in
any actual or threatened action, suit or proceeding, will not be deemed a
failure of the Condition requiring that the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or
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been terminated, so long as such action is, in the good faith judgment of
Parent, unlikely to have a material impact on the benefits Parent anticipates
from the transactions contemplated by the Merger Agreement.
Each of the Company, Parent and the Purchaser shall promptly inform the
other party of any material communication received by such party from the FTC,
the Antitrust Division, the Commission or any other governmental or regulatory
authority regarding any of the transactions contemplated by the Merger
Agreement. Parent and/or the Purchaser will promptly advise the Company with
respect to any understanding, undertaking or agreement (whether oral or
written) which it proposes to make or enter into with any of the foregoing
parties with regard to any of the transactions contemplated by the Merger
Agreement.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal and state statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade.
Employee Benefits; Employees. Until December 31, 1996, Parent has agreed to
cause the Surviving Corporation to continue in all material respects the (i)
employee benefit plans (including all employee benefit plans within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended), practices and policies which provide employee benefits to
employees of the Company or any of its subsidiaries ("Company Employees") and
(ii) compensation arrangements, programs and plans providing employee or
executive compensation or benefits, to Company Employees; provided that no
individual plan or plans must be maintained by the Surviving Corporation so
long as, in the aggregate, a substantially equivalent level of compensation or
benefits is maintained.
Parent has also agreed that the Company will honor and, on and after the
Effective Time, Parent will cause the Surviving Corporation to honor, without
offset, deduction, counterclaims, interruptions or deferment (other than
withholdings under applicable law), all employment, severance, termination,
consulting and retirement agreements to which the Company or any of its
subsidiaries is presently a party ("Benefit Agreements"), subject in all
respects to the right of the Company to amend or otherwise modify the terms
and provisions of any such Benefit Agreements in accordance with the terms
thereof. The parties have agreed that the Company will take certain actions
with respect to severance and other employment-related matters.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of the parties including representations by the
Company as to organization, capitalization, authority relative to the Merger
Agreement, consents and approvals, absence of certain changes concerning the
Company's business, undisclosed liabilities, reports, offer documents,
defaults, litigation and compliance with law, employee benefit plans, assets,
real property and intellectual property, certain contracts and arrangements,
taxes, labor matters, licenses and permits and certain fees.
Conditions to Merger. Pursuant to the Merger Agreement, the respective
obligations of each of Parent, the Purchaser and the Company to effect the
Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions: (a) the Merger Agreement shall have been adopted by
the affirmative vote of the shareholders of the Company by the requisite vote
in accordance with applicable law, if required by applicable law; (b) no
statute, rule, regulation, order, decree, ruling or injunction shall have been
enacted, entered, promulgated, enforced or deemed applicable by any court or
governmental authority which prohibits the consummation of the Merger; (c) any
waiting period applicable to the Merger under the HSR Act shall have
terminated or expired; and (d) the Offer shall not have been terminated or
expired in accordance with its terms and the terms of the Merger Agreement
prior to the purchase of any Shares.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer, or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligations
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of the Company to effect the Merger are further subject to the satisfaction at
or prior to the Effective Time of the following conditions: (a) the
representations and warranties of Parent and the Purchaser contained in the
Merger Agreement shall be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time; and (b) each of
Parent and the Purchaser shall have performed in all material respects its
obligations under the Merger Agreement required to be performed by it at or
prior to the Effective Time pursuant to the terms thereof.
Except if the Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer, or fails to accept for payment any Shares
pursuant to the Offer in violation of the terms thereof, the obligations of
Parent and the Purchaser to effect the Merger are further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations and warranties of the Company contained in the Merger
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as such time; and (b) the Company shall have
performed in all material respects each of its obligations under the Merger
Agreement required to be performed by it at or prior to the Effective Time
pursuant to the terms thereof.
Termination. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the shareholders of the Company) prior to the Effective Time: (a) by mutual
written consent of Parent, the Purchaser and the Company; (b) by Parent, the
Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise prohibiting the consummation of the Offer or the Merger and such
order, decree, ruling or other action is or shall have become nonappealable;
(c) by Parent and the Purchaser if due to an occurrence or circumstance which
would result in a failure to satisfy any of the Conditions, but subject to the
terms of the Merger Agreement, the Purchaser shall have (i) failed to commence
the Offer within the time required by Regulation 14D under the Exchange Act,
(ii) terminated the Offer or (iii) failed to pay for Shares pursuant to the
Offer on or prior to July 15, 1996; (d) by the Company if (i) there shall not
have been a material breach of any representation, warranty, covenant or
agreement on the part of the Company and the Purchaser shall have (A) failed
to commence the Offer within the time required by Regulation 14D under the
Exchange Act, (B) terminated the Offer or (C) failed to pay for Shares
pursuant to the Offer on or prior to July 15, 1996 or (ii) prior to the
twentieth business day after the Offer was actually commenced, a Third Party
other than a Pre-February 6 Party shall have made an offer that the Board
determines, based as to legal matters on the advice of legal counsel, it is
required to accept by applicable law (including fiduciary principles thereof),
provided, that any such termination of the Merger Agreement in accordance with
clause (d) (ii) of this paragraph shall not be effective until payment of the
fees and expenses required by the immediately succeeding two paragraphs; (e)
by Parent or the Purchaser prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation or warranty
on the part of the Company under the Merger Agreement having a Material
Adverse Effect, (ii) there shall have been a breach of any covenant or
agreement on the part of the Company under the Merger Agreement resulting in a
Material Adverse Effect or materially adversely affecting the consummation of
the Offer, which shall not have been cured prior to 20 days following notice
of such breach, (iii) the Board (A) shall have withdrawn its approval or
recommendation of the Offer, the Merger or the Merger Agreement, (B) shall
have modified (including by amendment of Schedule 14D-9) in a manner adverse
to the Purchaser its approval or recommendation of the Offer, the Merger or
the Merger Agreement, (C) shall have recommended to the Company's shareholders
another offer, or (D) shall have adopted any resolution to effect any of the
foregoing; provided that a change in the reasons for any such recommendation
will not be deemed to be adverse to the Purchaser so long as the Board
continues to recommend that shareholders tender their Shares pursuant to the
Offer, or (iv) there shall not have been validly tendered and not withdrawn
prior to the expiration of the Offer at least two-thirds of the Shares,
determined on a Fully Diluted Basis, and on or prior to such date a person or
group (other than Parent or the Purchaser) shall have made and not withdrawn a
proposal with respect to a Third Party Transaction; (f) by the Company if (i)
there shall have been a breach of any representation or warranty in the Merger
Agreement on the part of Parent or the Purchaser which materially adversely
affects the consummation of the Offer or (ii) there shall have been a material
breach of any covenant or agreement in the Merger Agreement on the part of
Parent or the Purchaser which materially adversely affects the consummation
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of the Offer which shall not have been cured prior to 20 days following notice
of such breach; or (g) by Parent, Purchaser or the Company if the consummation
of the Offer shall not have occurred on or prior to July 15, 1996. Pursuant to
the Merger Agreement, in the event of the termination and abandonment of the
Merger Agreement in accordance with its terms, the Merger Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party thereto or its affiliates, directors, officers or shareholders,
other than the provisions of the Merger Agreement relating to fees and
expenses, governing law and dispute resolution, brokerage fees and
commissions, indemnification and confidentiality of information.
Notwithstanding the foregoing, no party will be relieved from liability that
it may have for any breach of the Merger Agreement.
Fees and Expenses. Pursuant to the Merger Agreement, if (i) Parent or
Purchaser terminates the Merger Agreement pursuant to clause (e)(ii) or
(e)(iv) of the immediately preceding paragraph and within 12 months thereafter
the Company enters into a definitive agreement providing for a Third Party
Transaction involving any person (or any affiliate thereof) (A) with whom the
Company (or its representatives or agents) have had substantive discussions
regarding a Third Party Transaction, (B) to whom the Company (or its
representatives or agents) furnished non-public information with a view to a
Third Party Transaction or (C) who had submitted a proposal or expressed an
interest in a Third Party Transaction, in the case of each of clauses (A), (B)
and (C) after the date hereof and prior to such termination; provided that a
sale of assets by the Company will constitute a Third Party Transaction for
purposes of this clause (i) only if a majority of the assets of the Company
are involved; or (ii) Parent or the Purchaser terminates the Merger Agreement
pursuant to clause (e)(iii) of the immediately preceding paragraph; or (iii)
the Company terminates the Merger Agreement pursuant to clause (d)(ii) of the
immediately preceding paragraph; then, in each case, the Company shall pay to
Parent, within one business day following the execution and delivery of such
agreement or such occurrence, as the case may be, a fee, in cash, of $14
million; provided, that the Company in no event shall be obligated to pay more
than one such $14 million fee with respect to all such agreements and
occurrences and such termination.
If Parent is entitled to receive the $14 million fee as described in the
preceding paragraph, then the Company shall reimburse Parent, the Purchaser
and their affiliates (not later than one business day after submission of
statements therefor) for up to $1 million of actual documented out-of-pocket
fees and expenses actually incurred by any of them or on their behalf in
connection with the Offer and the proposed Merger (including fees payable to
consultants, outside contractors, counsel to any of the foregoing and their
accountants), whether incurred prior to or after the date of the Merger
Agreement. The Company shall in any event pay the amount requested within one
business day of such request, subject to the Company's right to demand a
return of any portion as to which invoices are not received in due course.
Except as specifically provided in the Merger Agreement, each party shall
bear its own respective expenses incurred in connection with the Merger
Agreement, the Offer and the Merger, including the preparation, execution and
performance of the Merger Agreement and the transactions contemplated thereby,
and all fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants.
Non-Solicitation. For a period of one year from any termination of the
Merger Agreement, (i) the Company and its subsidiaries will not solicit for
hire any of the employees of Parent or its subsidiaries with whom the Company
and its subsidiaries and their representatives and agents have had contact
during the investigation and negotiation of the Merger Agreement or otherwise
prior to the termination of the Merger Agreement and (ii) Parent and its
subsidiaries will not solicit for hire any of the employees of the Company or
its subsidiaries with whom the Parent and its subsidiaries and their
representatives and agents have had contact during the investigation and
negotiation of the Merger Agreement or otherwise prior to the termination of
the Merger Agreement.
Amendment. The Merger Agreement may be amended by action taken by the
Company, Parent and the Purchaser at any time before or after adoption of the
Merger by the shareholders of the Company, if any; provided that (a) in the
event that any Designated Directors constitute in their entirety a majority of
the Board, no amendment shall be made which decreases the cash price per Share
or which adversely affects the rights of the Company's shareholders hereunder
without the approval of a majority of the Continuing Directors if at the
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time there shall be any Continuing Directors and (b) after the date of
adoption of the Merger Agreement by the shareholders of the Company (if
shareholder approval of the Merger is required by applicable law), no
amendment shall be made which decreases the cash price per Share or which
adversely affects the rights of the Company's shareholders hereunder without
the approval of such shareholders. The Merger Agreement may not be amended
except by an instrument in writing signed on behalf of the parties.
(b)(3) Shareholder Agreements. The following is a summary of certain
provisions of the Shareholder Agreements (as defined below), copies of which
are filed as Exhibits 9, 10 and 11 hereto and incorporated herein by this
reference. The following summary is qualified in its entirety by reference to
the Shareholder Agreements.
The Purchaser and Parent have also entered into an agreement (each a
"Shareholder Agreement") with each of Forum Holdings, L.P. ("Forum Holdings"),
Apollo FG Partners, L.P. ("Apollo") and Forum/Classic, L.P. (collectively, the
"Principal Shareholders"). Each Shareholder Agreement contains, among other
representations and warranties, a representation and warranty by the Principal
Shareholder as to its beneficial ownership of a specified number of Shares and
Shares issuable upon exercise of warrants.
Tender of Shares; Exercise of Warrants. Pursuant to the applicable
Shareholder Agreement, each Principal Shareholder has agreed to tender and not
withdraw all Shares beneficially owned by it (or to cause the record owner
thereof to tender and not withdraw such Shares), pursuant to and in accordance
with the terms of the Offer. The parties have agreed that the Principal
Shareholder will, for all Shares tendered by the Principal Shareholder in the
Offer and accepted for payment and paid for by the Purchaser, receive the same
per Share consideration paid to other holders of Shares who have tendered into
the Offer.
The Principal Shareholders holding warrants have further agreed, prior to
the expiration of the Offer, to exercise all such warrants that are currently
exercisable for Shares and agreed that, prior to the purchase of Shares
pursuant to the Offer, all other warrants shall be cancelled and extinguished
for no additional consideration. Upon exercise of the warrants, and the
purchase of Shares in accordance with the terms thereof, the Principal
Shareholders receiving such Shares have agreed to tender (and not withdraw)
such Shares pursuant to the Offer.
Restrictions on Transfer and Proxies; No Solicitation. Each Principal
Shareholder has agreed that it shall not directly or indirectly, except as
expressly provided in the Shareholder Agreement, (i) transfer (including the
transfer of any securities of an affiliate which is the record holder of
Shares if, as the result of such transfer, such person would cease to be an
affiliate of the Principal Shareholder) to any person any or all Shares; (ii)
grant any proxies or powers of attorney, deposit any Shares into a voting
trust or enter into a voting agreement, understanding or arrangement with
respect to such Shares; or (iii) take any action that would make any
representation or warranty of the Principal Shareholder contained in the
Shareholder Agreement untrue or incorrect or would result in a breach by the
Principal Shareholder of its obligations under the Shareholder Agreement.
Each Principal Shareholder shall, and shall cause its affiliates, and its
and their officers, directors, employees, representatives and agents (the
"Covered Persons") to, immediately cease any existing discussions or
negotiations with any parties conducted prior to execution of the Shareholder
Agreement with respect to any Acquisition Proposal. Each Principal Shareholder
will not, and will cause its Covered Persons not to, (i) solicit, directly or
through an intermediary, any inquiries with respect to, or the making of, any
Acquisition Proposal, or (ii) engage in negotiations or discussions with, or
furnish any confidential information relating to the Company or its
subsidiaries to, any Third Party relating to an Acquisition Proposal;
provided, that nothing in the Shareholder Agreement shall prohibit a Principal
Shareholder or any Covered Person in their capacities as officers, directors,
employees, representatives and agents of the Company from taking or omitting
to take any action permitted to be taken or omitted to be taken by the Company
under Section 6.2 of the Merger Agreement.
Termination. Each Shareholder Agreement shall terminate on the earliest of
(i) the purchase by Purchaser pursuant to the Offer of the Shares beneficially
owned by the Principal Shareholder, (ii) termination of the Merger Agreement
pursuant to and in conformity with Article VIII of the Merger Agreement
(except that the
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Shareholder Agreement shall not terminate based upon a termination of the
Merger Agreement by the Company following (a) a breach of a representation or
warranty in the Merger Agreement on the part of Parent or Purchaser which
materially adversely affects the consummation of the Offer or (b) a material
breach of any covenant or agreement in the Merger Agreement on the part of
Parent or Purchaser which materially adversely affects the consummation of the
Offer which shall not have been cured prior to 20 days following notice of
such breach, in each case if Parent and Purchaser are challenging the ability
of the Company to terminate the Merger Agreement pursuant to such
provision(s)), and (iii) July 16, 1996.
Voting of Owned Shares; Irrevocable Proxy. Each of Forum Holdings and Apollo
(but not Forum/Classic, L.P.) further agreed, in the Shareholder Agreement to
which it is a party, upon the request of Parent, to deliver to the Purchaser
an irrevocable proxy in the form attached to its Shareholder Agreement (each,
an "Irrevocable Proxy"). At the request of Parent, such Irrevocable Proxies
were delivered to Parent by Forum Holdings and Apollo on February 20 and 21,
1996, respectively. Each Irrevocable Proxy grants to representatives of the
Purchaser the right to vote all Shares held by the person providing such proxy
under specified conditions.
Each Irrevocable Proxy provides, among other things, that, so long as the
Merger Price is at least $13.00 in cash (net to the seller), at any meeting of
the Company's shareholders, the named proxies are authorized to vote all
Shares covered by the Irrevocable Proxy in favor of the Merger, the execution
and delivery by the Company of the Merger Agreement and the approval and
adoption of the Merger Agreement and the terms thereof and each of the other
actions contemplated by the Merger Agreement and the Shareholder Agreement and
any actions required in furtherance thereof and against any actions that are
adverse thereto.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Board Recommendation. On February 15, 1996, the Board, by unanimous vote
(i) determined that the Offer and Merger were fair to and in the best interest
of the Company and the shareholders of the Company, (ii) approved the
Shareholder Agreements, the Merger Agreement, the Offer and the Merger, and
(iii) subject to the fiduciary duties of the Board, resolved to recommend
acceptance of the Offer and adoption of the Merger Agreement by holders of the
Shares. Accordingly, the Board, subject to its fiduciary duties, unanimously
recommends that all shareholders accept the Offer and tender their Shares
pursuant to the Offer.
(b) Background of and Reasons for the Board Recommendation. From time to
time, the Company has received inquiries from various parties regarding the
Company's interest in pursuing a possible business combination transaction.
The Company's position with respect to such inquiries has been that, while the
Company was not for sale, the Company was prepared to consider inquiries from
qualified potential acquirors and furnish information related thereto, subject
to entering into appropriate confidentiality agreements.
In September 1995, a representative of the Company contacted a
representative of Parent to arrange a meeting. During the meeting, the
Company's representative stated that the Company was considering an equity
offering of its common stock in order to raise capital and to give greater
liquidity to its existing shareholders. The Company's representative told
Parent's representatives that the Company wanted to explore other available
options before proceeding with the public sale of equity in the Company,
including the possibility of combining the operations of Marriott's Senior
Living Services Division with those of the Company.
Following this meeting, Parent indicated it was interested in pursuing a
possible acquisition of the Company and the parties agreed to continue
discussions. In October 1995, the Company provided information to Parent
relating to the Company's business and operations. Thereafter, representatives
of Parent conducted due diligence reviews of the Company, and, on December 22,
1995, Parent and the Company signed a non-disclosure agreement concerning the
materials being provided to Parent by the Company and an agreement limiting
the ability of Parent to acquire securities of the Company. Representatives of
the Company and Parent continued to discuss the terms of a possible
transaction after the non-disclosure agreement was executed.
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While Parent's due diligence review of the Company's business and operations
continued, representatives of Parent and the Company met to discuss the details
of a possible acquisition of the Company by Parent. No agreement as to the
terms of a possible transaction was reached during these meetings, either as to
the price Parent was willing to pay or whether all assets of the Company would
be acquired by Parent.
Throughout January and early February of 1996, Parent and its representatives
continued their due diligence review of the Company. Representatives of Parent
and the Company had several telephone conversations about the terms and
conditions of a possible transaction during this period, but again no agreement
was reached.
On February 7, 1996, the Company publicly announced that it was exploring
possible alternatives to maximize value to shareholders.
In addition to discussions with Parent, the Company engaged in discussions
with other possible merger partners. Following the Company's February 7, 1996
public announcement that it was exploring possible alternatives to maximize
shareholder value, the Company received various indications of interest in
respect of a possible business combination transaction involving the Company.
However, neither such discussions nor any such indications of interest was at a
price at or in excess of $13.00 per Share.
On February 8 and 9, 1996, representatives of Parent, the Company and the two
principal shareholders of the Company met at the headquarters of Parent to
determine whether they could reach agreement on the terms of a possible
transaction. During the next several days, negotiations about the terms of a
possible acquisition of the Company continued. Representatives of Parent and
the Company ultimately agreed to recommend to their Boards of Directors the
terms of an acquisition of the Company by Parent, subject to satisfactory
conclusion of due diligence and negotiation of documentation acceptable to
Parent and the Company.
The Board met on February 7, 14 and 15, 1996 in respect of the indications of
interest expressed to the Company and the alternatives available to the Company
with respect thereto. At the meeting of the Board on February 15, 1996, the
Board, by unanimous vote, took the actions described in Item 4(a) above. On
February 15, 1996, the Shareholder Agreements and the Merger Agreement were
entered into by the respective parties.
In making the determination and recommendations described in Item 4(a) above,
the Board considered a number of factors, including without limitation the
matters referred to above in this Item 4(b) and the following:
(i) The Company's existing competitive and market position and future
prospects, including the Company's projected future results of operations.
(ii) The alternatives available to the Company in light of the
consideration proposed to be received for the Shares pursuant to the Offer
and the Merger.
(iii) The $13.00 per Share price to be received by holders of Shares in
the Offer and the Merger compared to (a) historical and recent market
prices for the Shares, (b) market prices for other companies believed to be
comparable to the Company, and (c) prices paid in other acquisition
transactions believed to be comparable to Parent's proposed acquisition
transaction.
(iv) The oral opinion of Smith Barney Inc. ("Smith Barney") rendered to
the Board on February 15, 1996 (subsequently confirmed in writing by
delivery of a written opinion dated such date) to the effect that, as of
such date and based upon and subject to certain matters stated in such
opinion, the $13.00 per Share price to be received by holders of Shares
(other than Parent and its affiliates) in the Offer and the Merger was
fair, from a financial point of view, to such holders. The full text of
Smith Barney's written opinion, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by
14
<PAGE>
Smith Barney, is filed as Exhibit 12 hereto and is incorporated herein by
this reference. Smith Barney's opinion is directed only to the fairness,
from a financial point of view, of the $13.00 per Share price to be
received in the Offer and the Merger by holders of Shares (other than
Parent and its affiliates) and is not intended to constitute, and does not
constitute, a recommendation as to whether any holder should tender Shares
pursuant to the Offer. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY.
(v) The provisions of the Merger Agreement, including the no-shop
covenant and provisions which permit the Company to terminate the Merger
Agreement, upon payment to Parent of a break-up fee of $14 million,
together with expenses not to exceed $1.0 million, in the event that the
Board determines to withdraw its recommendation that shareholders accept
the Offer based upon the Board's determination that such action is
necessary to comply with its duties under applicable law.
(vi) The failure of any other potential bidder to submit a proposal
having terms more favorable than the terms proposed by Parent.
(vii) The Board's view regarding the likelihood of a superior
transaction.
(viii) The willingness of the Principal Shareholders to enter into the
Shareholder Agreements, pursuant to which, among other things, the
Principal Shareholders agreed to tender and not withdraw the Shares owned
by them for purchase by the Purchaser pursuant to the Offer.
(ix) The fact that Parent's and Purchaser's obligations under the Offer
were not subject to any financing condition.
(x) Parent's financial condition and ability to meet its obligations
under the Merger Agreement.
(xi) The provisions of the Merger Agreement and other matters described
in Item 3(b)(2) above.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety
of factors considered in connection with its evaluation of the Offer and the
Merger, the Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Board may
have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained Smith Barney as its financial advisor with respect
to the Offer and the Merger. Pursuant to the terms of Smith Barney's
engagement, the Company has agreed to pay Smith Barney for its services an
aggregate fee of $750,000 payable in connection with Smith Barney's delivery
of an opinion. The Company also has agreed to reimburse Smith Barney for
reasonable travel and other out-of-pocket expenses, including legal fees and
expenses, and to indemnify Smith Barney and certain related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of Smith Barney's engagement. In the ordinary course of business,
Smith Barney and its affiliates may actively trade the securities of the
Company and Parent for their own account or for the account of customers and,
accordingly, may at any time hold a long or short position in such securities.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any person to make solicitations or recommendations to
the Company's shareholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Share Transaction in Last 60 Days. Except as described in Item 3 hereof
and except for purchases of Shares in the open market by the Company's
Employee Stock Purchase Plan in accordance with past practice, there have been
no transactions in Shares which were effected during the last 60 days by the
Company, or to the knowledge of the Company, any executive officer, director,
affiliate or subsidiary of the Company.
15
<PAGE>
(b) Intent to Tender. To the knowledge of the Company, (i) each of its
executive officers and directors and the Principal Shareholders presently
intends to tender Shares to Purchaser pursuant to the Offer and (ii) none of
such persons presently intends otherwise to sell any Shares which are owned
beneficially or held of record by such persons. The foregoing does not include
any Shares over which, or with respect to which, any such person acts in a
fiduciary or representative capacity or is subject to instructions from a
third party, as to which Shares, to the Company's knowledge, no determination
has been made.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Certain Negotiations. Except as referred to in Item 3(b) or Item 4
hereof, as of the date hereof, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company, (ii) a purchase, sale,
or transfer of a material amount of assets by the Company or any subsidiary of
the Company, (iii) a tender offer for or other acquisition of securities by or
of the Company, or (iv) any material change in the present capitalization or
dividend policy of the Company. Pursuant to the Merger Agreement, however, and
as described under "Acquisition Proposals" in Item 3(b)(2) hereof, the Company
may, subject to certain limitations, take certain actions in respect of
proposed transactions necessary for the directors of the Company to discharge
their fiduciary obligations under applicable law.
(b) Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and
the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to such
requirements. Pursuant to the requirements of the HSR Act, Parent and the
Company have filed the required Notification and Report Forms (the "Forms")
with the Antitrust Division and the FTC. The statutory waiting period
applicable to the purchase of Shares pursuant to the Offer is to expire at
11:59 P.M., New York City time, on the fifteenth day after Purchaser has filed
its Form. However, prior to such date, the Antitrust Division or the FTC may
extend the waiting periods by requesting additional information or documentary
material relevant to the acquisition. If such a request is made, the waiting
period will be extended until 11:59 P.M., New York City time, on the tenth day
after substantial compliance by Purchaser with such request. Thereafter, such
waiting periods can be extended only by court order. A request is being made
pursuant to the HSR Act for early termination of the applicable waiting
period. There can be no assurance, however, that the waiting period will be
terminated early.
The Antitrust Division and the FTC frequently scrutinize the legality of
transactions under the antitrust laws. At any time before or after the
consummation of any such transactions, the Antitrust Division or the FTC
could, notwithstanding termination of the waiting period, take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Purchaser or the Company. Private parties may also bring
legal actions under the antitrust laws. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result will be.
16
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger, dated as of February 15, 1996, by
and among Marriott International, Inc., FG Acquisition Corp. and
Forum Group, Inc.
Exhibit 2 Press Release issued jointly by Marriott International, Inc. and
Forum Group, Inc. published on February 16, 1996
Exhibit 3 Information under the captions "Director Compensation,"
"Compensation of Executive Officers," "Compensation Committee
Report on Executive Compensation," "Certain Relationships and
Transactions," and "Security Ownership of Certain Beneficial
Owners and Management" as set forth in the Company's Proxy
Statement, dated August 4, 1995, for its 1995 Annual Meeting of
Shareholders
Exhibit 4 Employment Agreement dated as of August 7, 1994, by and between
Forum Group, Inc. and Mark L. Pacala (incorporated by reference to
Exhibit 10(21) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995)
Exhibit 5 Letter Agreement, dated as of May 5, 1995, by and between Forum
Group, Inc. and Dennis L. Lehman
Exhibit 6 Severance Plan
Exhibit 7 Letter Agreement dated as of October 3, 1995, by and between Forum
Group, Inc. and Investors GenPar, Inc.
Exhibit 8 Letter Agreement dated as of October 3, 1995, by and between Forum
Group, Inc. and Apollo Investment Fund
Exhibit 9 Agreement and Irrevocable Proxy dated as of February 15, 1996, by
and among Marriott International, Inc., FG Acquisition Corp.,
Apollo FG Partners, L.P. and Forum Group, Inc.
Exhibit 10 Agreement and Irrevocable Proxy dated as of February 15, 1996, by
and among Marriott International, Inc., FG Acquisition Corp.,
Forum Holdings, L.P. and Forum Group, Inc.
Exhibit 11 Agreement dated as of February 15, 1996, by and among Marriott
International, Inc., FG Acquisition Corp, and Forum/Classic, L.P.
Exhibit 12* Opinion of Smith Barney Inc., dated February 15, 1996
Exhibit 13* Letter to Shareholders of the Company, dated February 23, 1996
</TABLE>
- --------
* Included in materials sent to shareholders of the Company.
17
<PAGE>
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.
Forum Group, Inc.
/s/ Mark L. Pacala
By: _________________________________
Chairman and Chief Executive
Officer
Dated: February 23, 1996
18
<PAGE>
SCHEDULE I
FORUM GROUP, INC.
11320 RANDOM HILLS ROAD, SUITE 400
FAIRFAX, VIRGINIA 22030
----------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
----------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
----------------
This Information Statement is being mailed on or about February 23, 1996 as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of shares of the Common Stock, without
par value (the "Shares"), of Forum Group, Inc., an Indiana corporation (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Schedule 14D-9. This Information Statement is
being furnished in connection with the designation by Marriott International,
Inc., a Delaware corporation ("Parent"), and FG Acquisition Corp., an Indiana
corporation and wholly owned indirect subsidiary of Parent ("Purchaser"), of
persons (the "Designated Directors") to the Board of Directors of the Company
(the "Board"). Such designation is to be made pursuant to an Agreement and
Plan of Merger dated as of February 15, 1996 (the "Merger Agreement") among
the Company, Parent and Purchaser.
NO ACTION IS REQUIRED BY THE SHAREHOLDERS OF THE COMPANY IN CONNECTION WITH
THE ELECTION OF THE DESIGNATED DIRECTORS TO THE BOARD. However, Section 14(f)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires the mailing to the Company's shareholders of the information set
forth in this Information Statement prior to a change in a majority of the
Company's directors otherwise than at a meeting of the Company's shareholders.
The Merger Agreement provides that in the event that Purchaser acquires at
least a majority of the Shares outstanding on a fully diluted basis pursuant
to the Offer, Parent will be entitled to designate for appointment or election
to the Board, upon written notice to the Company, a number of Designated
Directors such that Designated Directors constitute the same percentage (but
in no event less than a majority) of the Board (rounded up to the next whole
number) as the percentage of Shares acquired pursuant to the Offer. Prior to
the consummation of the Offer, the Company will use reasonable best efforts to
increase the size of the Board or to obtain the resignation of such number of
directors as is necessary to enable such number of Parent designees to be so
elected. Notwithstanding the foregoing, the parties to the Merger Agreement
will use their respective reasonable best efforts to ensure that at least
three of the members of the Board will, at all times prior to the Effective
Time, be Continuing Directors. The term "Continuing Director" means (a) any
member of the Board as of the date of the Merger Agreement, (b) any member of
the Board who is unaffiliated with, and not a Designated Director, or other
nominee of, Parent or Purchaser or their respective subsidiaries and (c) any
successor of a Continuing Director who is (i) unaffiliated with, and not a
Designated Director or other nominee of, Parent or Purchaser or their
respective subsidiaries and (ii) recommended to succeed a Continuing Director
by a majority of the Continuing Directors then on the Board.
The Merger Agreement may be amended by action taken by the Company, Parent
and Purchaser at any time before or after adoption of the Merger by the
shareholders of the Company, if any; provided that (a) in the event that any
Designated Directors constitute in their entirety a majority of the Board, no
amendment shall be made which decreases the cash price per Share or which
adversely affects the rights of the Company's shareholders thereunder without
the approval of a majority of the Continuing Directors if at the time there
shall be any Continuing Directors and (b) after the date of adoption of the
Merger Agreement by the shareholders of the Company (if shareholder approval
of the Merger is required by applicable law), no amendment shall be made which
decreases the cash price per Share or which adversely affects the rights of
the Company's shareholders thereunder without the approval of such
shareholders.
<PAGE>
The information contained in this Information Statement concerning Parent,
Purchaser and the Designated Directors has been furnished to the Company by
such persons, and the Company assumes no responsibility for the accuracy or
completeness of such information.
The Parent has advised the Company that it currently intends to designate one
or more of the persons listed in Schedule A attached hereto and incorporated
herein by reference to serve as directors of the Company. The Parent has
advised the Company that all of such persons have consented to act as directors
of the Company, if so designated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
The outstanding voting securities of the Company as of February 15, 1996
consisted of (a) 22,539,831 Shares that were validly issued and outstanding,
(b) 1,671,750 Shares that were reserved for issuance pursuant to outstanding
stock options (rights to stock options exercisable into 230,500 Shares had
vested as of February 15, 1996), (c) 700,144 Shares that were reserved for
issuance pursuant to warrants, (d) 262,793 Shares that were reserved for
issuance upon exercise of rights pursuant to the Company's Third Amended and
Restated Joint Plan of Reorganization, dated January 17, 1992, as amended (the
"Plan of Reorganization"), and (e) 6,000 Shares that were reserved for issuance
under certain circumstances to persons who are investors in the "Hearthside"
joint venture with the Company (the "Hearthside Shares"). Each issued and
outstanding Share is entitled to one vote on each matter.
It is a condition to the Offer that an order of the Bankruptcy Court (the
"Bankruptcy Order") be obtained that, among other things, terminates rights of
persons to receive Shares under the Plan of Reorganization after the date of
the Bankruptcy Order. Also, pursuant to their respective Shareholder Agreements
described below (see "Shareholder Agreements"), Forum Holdings, L.P. ("Forum
Holdings") and Apollo FG Partners, L.P. ("AFG") have agreed with Purchaser and
Parent to exercise warrants resulting in the issuance, in the aggregate, of
700,144 Shares, and that all other warrants held by them will be cancelled.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
Shares by each person known to the Company, as of February 15, 1996, to own
more than 5% of the Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) CLASS (2)
- ------------------------------------ --------------------------- ----------
<S> <C> <C>
Apollo FG Partners, L.P. 9,429,640(3) 40.6%
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite
1900
Los Angeles, California 90067
Forum/Classic, L.P. 2,550,544(4) 11.0%
200 West Madison Street
39th Floor
Chicago, Illinois 60606
Forum Holdings, L.P. 9,429,640(5) 40.6%
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
</TABLE>
- --------
(1) The amounts shown represent Shares with respect to which the named person
has sole dispositive power. As a result of the provisions of the
shareholders' agreement described below, each of AFG and Forum Holdings
(collectively, the "Investors") may be deemed to have shared voting power
with respect to, and thus to beneficially own, all of the 18,859,280 Shares
beneficially owned by such persons in the aggregate (constituting 81.2% of
Shares treated as outstanding as described in Note 2 below).
2
<PAGE>
(2) The percentages shown are based on 23,239,975 Shares outstanding. This
number includes (i) 149,607 Shares presently issuable at a nominal purchase
price upon the exercise of certain warrants ("Special Warrants") issued
pursuant to the Warrant Agreement, dated June 10, 1993 (the "Warrant
Agreement"), between the Company and Citicorp USA, Inc. and (ii) 550,537
Shares presently issuable at a purchase price equal to $3.9766 per Share
(subject to adjustment) upon the exercise of certain other warrants
("Warrants") issued pursuant to the Warrant Agreement.
(3) According to Amendment No. 8 to a Schedule 13D dated January 10, 1995 and
filed with the Securities and Exchange Commission (the "SEC") by AFG, the
number of Shares listed includes (i) 74,804 Shares purchasable by AFG upon
exercise of Special Warrants and (ii) 275,268 Shares purchasable by AFG
upon exercise of Warrants. The general partner of AFG is Apollo Investment
Fund, L.P. ("AIF"), the managing general partner of AIF is Apollo Advisors,
L.P. ("Apollo Advisors") and the general partner of Apollo Advisors is
Apollo Capital Management, Inc. ("ACM"). By reason of various relationships
among Messrs. Berg, Copses and Ressler and AFG and its affiliates, Messrs.
Berg, Copses and Ressler may be deemed to beneficially own the Shares owned
by AFG. Each of Messrs. Berg, Copses and Ressler disclaims beneficial
ownership of such Shares. See "Security Ownership of Management" below.
(4) According to Amendment No. 1 to a Schedule 13D dated January 18, 1995 and
filed with the SEC by Forum/Classic, L.P.
(5) According to Amendment No. 13 to a Schedule 13D dated January 10, 1995 (the
"Forum Holdings 13D") and filed with the SEC by Forum Holdings and certain
related entities (collectively, the "Forum Holdings Reporting Persons"),
the number of Shares listed includes (i) 74,803 Shares purchasable by Forum
Holdings upon exercise of Special Warrants and (ii) 275,269 Shares
purchasable by Forum Holdings upon exercise of Warrants. According to the
Forum Holdings 13D, each of the Forum Holdings Reporting Persons may, by
reason of certain control relationships, be deemed to beneficially own all
of the Shares owned directly by Forum Holdings. By reason of various
relationships among Messrs. Decker, Read and Whitman and the Forum Holdings
Reporting Persons, Messrs. Decker, Read and Whitman may be deemed to
beneficially own the Shares owned by the Forum Holdings Reporting Persons.
Each of Messrs. Decker, Read and Whitman disclaims beneficial ownership of
such Shares. See "Security Ownership of Management" below.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of February 15, 1996 with
respect to Shares beneficially owned by (i) each director, (ii) each Named
Executive (as defined below), and (iii) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
------------------------ --------------------------- ----------------
<S> <C> <C>
Laurence M. Berg (2)........ -0- -0-%
Peter P. Copses (2)......... -0- -0-
Daniel A. Decker (3)........ -0- -0-
James E. Eden............... -0- -0-
James R. Foulger............ 15,000(4) *
Mark L. Pacala.............. 160,000(5) *
Kurt C. Read (3)............ -0- -0-
Antony P. Ressler (2)....... -0- -0-
Robert A. Whitman (3)....... -0- -0-
Margaret A. Wylde........... -0- -0-
Paul A. Shively............. 10,074(6) *
Brian C. Swinton............ 44,950(7) *
Richard A. Huber............ 11,500(8) *
All directors and executive
officers as a group........ 231,450(6) 1.0
</TABLE>
- --------
* Represents less than 1% of the total number of Shares outstanding.
(1) Excludes the 18,859,280 Shares beneficially owned by the Investors.
3
<PAGE>
(2) By reason of various relationships between Messrs. Berg, Copses and
Ressler and AFG and its affiliates, Messrs. Berg, Copses and Ressler may
be deemed to beneficially own the Shares owned by AFG. Each of Messrs.
Berg, Copses and Ressler disclaims beneficial ownership of such Shares.
(3) By reason of various relationships between Messrs. Decker, Read and
Whitman and the Forum Holdings Reporting Persons, Messrs. Decker, Read and
Whitman may be deemed to beneficially own the Shares owned by the Forum
Holdings Reporting Persons. Each of Messrs. Decker, Read and Whitman
disclaims beneficial ownership of such Shares.
(4) Consists of 15,000 Shares purchasable upon the exercise of Mr. Foulger's
option within 60 days after February 15, 1996. Mr. Foulger became Senior
Vice President--Acquisitions of the Company in May 1995. Mr. Foulger is
not a Named Executive for purposes of this Information Statement because
he became an executive officer subsequent to the end of the Company's last
full fiscal year.
(5) Consists of 160,000 Shares purchasable upon the exercise of Mr. Pacala's
option within 60 days after February 15, 1996.
(6) Mr. Shively resigned all of his positions with the Company effective as of
June 30, 1995. As a result, Mr. Shively's 10,074 Shares have been excluded
from the aggregate Shares shown as held by all directors and executive
officers as a group. However, Mr. Shively is a Named Executive for
purposes of this Information Statement because his resignation occurred
subsequent to the end of the Company's last full fiscal year.
(7) Includes 20,000 Shares purchasable upon the exercise of Mr. Swinton's
option within 60 days after February 15, 1996.
(8) Includes 11,000 Shares purchasable upon the exercise of Mr. Huber's option
within 60 days after February 15, 1996.
SHAREHOLDER AGREEMENTS
Each of Forum Holdings and AFG has agreed to take all actions necessary to
terminate, immediately prior to the consummation of the Offer, the
Shareholders' Agreement, dated June 14, 1993, and amended and restated as of
July 28, 1995, between Forum Holdings and AFG (the "Amended and Restated
Shareholders' Agreement"). Pursuant to the Amended and Restated Shareholders'
Agreement, the Investors had agreed that the right to nominate a majority of
the Company's directors would be allocated between the Investors in proportion
to their relative percentages of share ownership and that the remaining
directors would consist of the Chief Executive Officer of the Company and
other persons acceptable to each of the Investors. Pursuant to the Amended and
Restated Shareholders' Agreement, AFG had nominated Messrs. Berg, Copses and
Ressler and Forum Holdings had nominated Messrs. Decker, Read and Whitman for
election as directors at the 1995 annual meeting of shareholders.
The Purchaser and Parent have entered into an agreement (each, a
"Shareholder Agreement") with each of Forum Holdings, AFG and Forum/Classic,
L.P. (collectively, the "Principal Shareholders"). Each Shareholder Agreement
contains, among other representations and warranties, a representation and
warranty by the Principal Shareholder as to its beneficial ownership of a
specified number of Shares and Shares issuable upon exercise of warrants.
Tender of Shares; Exercise of Warrants. Pursuant to the applicable
Shareholder Agreement, each Principal Shareholder has agreed to tender and not
withdraw all Shares beneficially owned by it (or to cause the record owner
thereof to tender and not withdraw such Shares), pursuant to and in accordance
with the terms of the Offer. The parties have agreed that the Principal
Shareholder will, for all Shares tendered by the Principal Shareholder in the
Offer and accepted for payment and paid for by the Purchaser, receive the same
per Share consideration paid to other holders of Shares who have tendered into
the Offer.
The Principal Shareholders holding warrants have further agreed, prior to
the expiration of the Offer, to exercise all such warrants that are currently
exercisable for Shares and agreed that, prior to the purchase of Shares
pursuant to the Offer, all other warrants shall be cancelled and extinguished
for no additional consideration. Upon exercise of the warrants, and the
purchase of Shares in accordance with the terms thereof, the Principal
Shareholders receiving such Shares have agreed to tender (and not withdraw)
such Shares pursuant to the Offer.
4
<PAGE>
Restrictions on Transfer and Proxies; No Solicitation. Each Principal
Shareholder has agreed that it shall not directly or indirectly, except as
expressly provided in the Shareholder Agreement, (i) transfer (including the
transfer of any securities of an affiliate which is the record holder of
Shares if, as the result of such transfer, such person would cease to be an
affiliate of the Principal Shareholder) to any person any or all Shares; (ii)
grant any proxies or powers of attorney, deposit any Shares into a voting
trust or enter into a voting agreement, understanding or arrangement with
respect to such Shares; or (iii) take any action that would make any
representation or warranty of the Principal Shareholder contained in the
Shareholder Agreement untrue or incorrect or would result in a breach by the
Principal Shareholder of its obligations under the Shareholder Agreement.
Each Principal Shareholder shall, and shall cause its affiliates, and its
and their officers, directors, employees, representatives and agents (the
"Covered Persons") to, immediately cease any existing discussions or
negotiations with any parties conducted prior to execution of the Shareholder
Agreement with respect to any Acquisition Proposal. Each Principal Shareholder
will not, and will cause its Covered Persons not to, (i) solicit, directly or
through an intermediary, any inquiries with respect to, or the making of, any
Acquisition Proposal, or (ii) engage in negotiations or discussions with, or
furnish any confidential information relating to the Company or its
subsidiaries to, any Third Party relating to an Acquisition Proposal;
provided, that nothing in the Shareholder Agreement shall prohibit a Principal
Shareholder or any Covered Person in their capacities as officers, directors,
employees, representatives and agents of the Company from taking or omitting
to take any action permitted to be taken or omitted to be taken by the Company
under Section 6.2 of the Merger Agreement.
Termination. Each Shareholder Agreement shall terminate on the earliest of
(i) the purchase by Purchaser pursuant to the Offer of the Shares beneficially
owned by the Principal Shareholder, (ii) termination of the Merger Agreement
pursuant to and in conformity with Article VIII of the Merger Agreement
(except that the Shareholder Agreement shall not terminate based upon a
termination of the Merger Agreement by the Company following (a) a breach of a
representation or warranty in the Merger Agreement on the part of Parent or
Purchaser which materially adversely affects the consummation of the Offer or
(b) a material breach of any covenant or agreement in the Merger Agreement on
the part of Parent or Purchaser which materially adversely affects the
consummation of the Offer which shall not have been cured prior to 20 days
following notice of such breach, in each case if Parent and Purchaser are
challenging the ability of the Company to terminate the Merger Agreement
pursuant to such provision(s)), and (iii) July 16, 1996.
Voting of Owned Shares; Irrevocable Proxy. Each of Forum Holdings and AFG
(but not Forum/Classic, L.P.) further agreed, in the Shareholder Agreement to
which it is a party, upon the request of Parent, to deliver to the Purchaser
an irrevocable proxy in the form attached to its Shareholder Agreement (each,
an "Irrevocable Proxy"). At the request of Parent, such Irrevocable Proxies
were delivered to Parent by Forum Holdings and AFG on February 20 and 21,
1996, respectively. Each Irrevocable Proxy grants to representatives of the
Purchaser the right to vote all Shares held by the person providing such proxy
under specified conditions.
Each Irrevocable Proxy provides, among other things, that, so long as the
Merger Price is at least $13.00 in cash (net to the seller), at any meeting of
the Company's shareholders, the named proxies are authorized to vote all
Shares covered by the Irrevocable Proxy in favor of the Merger, the execution
and delivery by the Company of the Merger Agreement and the approval and
adoption of the Merger Agreement and the terms thereof and each of the other
actions contemplated by the Merger Agreement and the Shareholder Agreement and
any actions required in furtherance thereof and against any actions that are
adverse thereto.
THE BOARD OF DIRECTORS
PARENT DESIGNEES
Parent has informed the Company that the Designated Directors will consist
of, or be selected from among, the six individuals identified on Schedule A
annexed hereto. If the number of directors that the Parent may appoint is less
than six, then the individuals identified on such Schedule A will be selected
as Designated Directors in descending order. None of the potential Designated
Directors or their associates is a director of, or holds any position with,
the Company. To the best knowledge of the Company, none of the potential
Designated Directors or their associates
5
<PAGE>
(a) beneficially owns any equity securities of the Company, (b) has been
involved in any transactions with the Company or any of its directors or
executive officers or (c) has been involved in any legal proceedings or other
matters that, in each case, are required to be disclosed pursuant to the rules
and regulations of the SEC.
CURRENT DIRECTORS
The Board is currently comprised of nine directors: Laurence M. Berg, Peter
P. Copses, Daniel A. Decker, James E. Eden, Mark L. Pacala, Kurt C. Read,
Anthony P. Ressler, Robert A. Whitman and Margaret A. Wylde, Ph.D. The
information set forth below is correct as of February 20, 1996.
The Company's Articles of Incorporation and By-Laws provide that the
directors of the Company shall be elected at the annual meeting of
shareholders to serve until the next annual meeting of shareholders and until
their respective successors shall have been elected and qualified.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS A
AND BUSINESS EXPERIENCE DIRECTOR SINCE AGE
-------------------------- -------------- ---
<S> <C> <C>
LAURENCE M. BERG 1994 29
An associate of Apollo Capital Management, Inc. ("ACM") and
Lion Capital Management, Inc. ("LCM"), each a general
partner of Apollo Advisors, L.P. ("Apollo Advisors"), which
acts as managing general partner of Apollo Investment Fund,
L.P. ("AIF") and AIF II, L.P., securities investment funds,
and Lion Advisors, L.P. ("Lion Advisors"), which serves as
financial advisor and representative for certain
institutional investors with respect to securities
investments, since 1992; theretofore employed by Drexel
Burnham Lambert Incorporated ("DBL"), an investment firm;
director of CWT Specialty Stores, Inc., a company owning and
operating women's specialty clothing stores.
PETER P. COPSES 1993 37
An officer of ACM and LCM since 1990; theretofore employed
by Donaldson, Lufkin and Jenrette Securities Corporation, an
investment firm, and by DBL; director of Family Restaurants,
Inc. ("Family Restaurants"), a company engaged in the
restaurant industry; Food 4 Less Holdings, Inc., a Southern
California based supermarket operator; Dominick's Finer
Foods, Inc., a Chicago based supermarket operator; and Zale
Corporation, a company owning and operating jewelry stores.
DANIEL A. DECKER 1993 43
Partner of The Hampstead Group, L.L.C. ("Hampstead"), a
privately held investment company, since 1990; theretofore a
partner in the law firm of Decker, Hardt, Munsch and Dinan,
P.C.; director of Bristol Hotel Company ("Bristol Hotels"),
an owner and operator of 38 hotels in the Southwest and
Southeast.
JAMES E. EDEN 1993 58
Owner of James E. Eden & Associates, a consulting firm
specializing in the senior living and long-term care
industry, President of Eden & Associates, Inc., a company
engaged in the senior living and long-term care industry,
and Chairman and Chief Executive Officer of Oakwood Living
Centers, Inc., a company which owns and operates nursing
homes and rehabilitation centers, since 1992; theretofore
employed by Marriott Corporation ("Marriott")(/1/), a
company which owns and operates, among other properties,
senior living facilities, in various capacities including
Executive Vice President and Vice President and General
Manager, Senior Living Services Division; director of Omega
Healthcare Investors, Inc., a real estate investment trust
which owns long-term healthcare facilities.
</TABLE>
- --------
(/1/Prior)to October 8, 1993, Parent was a wholly-owned subsidiary of Marriott
Corporation. Marriott Corporation separated Parent's businesses from its
other businesses through a distribution to the holders of outstanding
shares of Marriott Corporation common stock, on a share-for-share basis,
of all the outstanding shares of Company common stock. Upon the
consummation of the distribution, Parent became a separate, publicly held
company and Marriott Corporation changed its name to Host Marriott
Corporation.
6
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS A
AND BUSINESS EXPERIENCE DIRECTOR SINCE AGE
-------------------------- -------------- ---
<S> <C> <C>
MARK L. PACALA 1994 40
Chief Executive Officer of the Company since 1994 and
Chairman of the Board since 1995; theretofore Senior Vice
President of The Walt Disney Company, a company which, among
other things, owns and operates theme parks and resorts.
KURT C. READ 1995 33
Vice President of Hampstead since 1990; theretofore an
officer of Columbia Realty Group, a real estate investment
advisory firm.
ANTONY P. RESSLER 1993 35
One of the founding principals of Apollo Advisors and Lion
Advisors and an officer of ACM and LCM since 1990;
theretofore Senior Vice President of DBL; director of Family
Restaurants; Gillett Holdings, Inc., a company which owns
the Vail and Beaver Creek ski resorts and a meat packing
business; PRI Holdings, Inc., a company engaged in the
manufacture of packaging materials; Dominick's Finer Foods,
Inc., a Chicago based supermarket operator; and United
International Holdings, Inc., a company engaged in the cable
television industry.
ROBERT A. WHITMAN 1993 42
Chairman of the Board of the Company from 1993 through
September 1995 and interim President and Chief Executive
Officer of the Company from 1993 through 1994; President and
Co-Chief Executive Officer of Hampstead since 1991;
theretofore Managing Partner and Chief Executive Officer of
Trammell Crow Ventures, the real estate investment, banking
and investment management unit of Trammell Crow Company;
director of Bristol Hotels, an owner and operator of 38
hotels in the Southwest and Southeast; director of The Covey
Leadership Center, Inc., a training and publishing firm; and
director of Wyndham Hotel Company, Ltd., an owner and
operator of hotels and resorts.
MARGARET A. WYLDE, PH.D. 1995 45
President of ProMatura Group, a division of the Institute of
Technology Development which provides market research,
planning, product development and product testing services
to businesses serving seniors, and Chairman of the Board of
Directors of LifeSpec Cabinet Systems, Inc. ("LifeSpec"), a
manufacturer of cabinetry designed for use in senior
housing; director of LifeSpec and of the National
Association of Senior Living Industries, the American
Society on Aging and the Business Forum on Aging.
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The management of the Company is under the direction of the Board. The Board
held five meetings during the Company's fiscal year ended March 31, 1995
("Fiscal Year 1995"). Each director attended at least 75% of the meetings of
the Board held while he or she was a director, and each director appointed to
serve on one or more committees of the Board attended at least 75% of the
meetings of such committee or committees held while he or she was a member
thereof.
BOARD COMMITTEES
The Board has established an Executive Committee, which has the authority,
subject to applicable legal restrictions, to exercise all of the powers of the
Board in the oversight of the management of the business and affairs of the
Company. During Fiscal Year 1995, the Executive Committee met approximately 24
times. Messrs. Copses, Pacala and Whitman presently serve on the Executive
Committee. The Board has authorized the Executive Committee to perform the
functions of a nominating committee. Accordingly, the Executive Committee is
also responsible for considering and making recommendations to the Board
regarding nominees for election to the Board and Board committee assignments.
The Executive Committee will consider recommendations for nominees for election
to the Board which may be submitted by shareholders to the Secretary of the
Company.
7
<PAGE>
The Board has established a Compensation Committee, which reviews executive
salaries, administers the bonus, incentive compensation and stock option plans
of the Company and approves salaries and other benefits of the executive
officers of the Company. In addition, the Compensation Committee consults with
the Company's management regarding pension and other benefit plans and
compensation policies and practices of the Company. During Fiscal Year 1995,
the Compensation Committee met two times. Messrs. Copses and Decker and Ms.
Wylde presently serve on the Compensation Committee.
The Board has established an Audit Review Committee, which reviews the
professional services provided by the Company's independent auditors and the
independence of such auditors from management of the Company. This Committee
also reviews the scope of the audit by the Company's independent accountants,
the annual financial statements of the Company, the Company's system of
internal accounting controls and such other matters with respect to the
accounting, auditing and financial reporting practices and procedures of the
Company as it finds appropriate or as are brought to its attention, and meets
from time to time with management. During Fiscal Year 1995, the Audit Review
Committee met two times. Messrs. Berg, Eden and Read presently serve on the
Audit Review Committee.
DIRECTOR COMPENSATION
The Company pays each director who is not also a full-time employee of the
Company an annual retainer of $15,000, payable quarterly, for his or her
services as a director of the Company. In addition, each such director
generally receives $500 for each meeting of any Board committee attended by
such director. All directors are reimbursed for their reasonable out-of-pocket
expenses incurred in connection with attendance at meetings of, and other
activities relating to serving on, the Board and any Board committee. No
compensation has been paid for attendance at meetings of the Executive
Committee.
EXECUTIVE OFFICERS
The names of the executive officers of the Company (other than Mr. Pacala,
the Chief Executive Officer of the Company, who is also a member of the Board
(see "The Board of Directors" above)), their positions and offices, business
experience, terms of office and ages are as follows:
<TABLE>
<CAPTION>
SERVED AS AN
NAME, POSITIONS AND OFFICES, EXECUTIVE OFFICER
AND BUSINESS EXPERIENCE SINCE AGE
---------------------------- ----------------- ---
<S> <C> <C>
JAMES R. FOULGER 1995 52
Senior Vice President--Acquisitions of the Company since
1995; theretofore President of Autumn America Retirement,
Ltd. ("Autumn America"), a company which provides
acquisition and management services to owners of senior
living facilities. Mr. Foulger has responsibility for the
Company's acquisition program.
DENNIS L. LEHMAN 1995 40
Senior Vice President and Chief Financial Officer since
1995; theretofore Senior Vice President-Finance and Chief
Financial Officer of Continental Medical Systems, Inc., a
company which provides medical rehabilitation services.
Mr. Lehman is the Company's principal financial officer.
BRIAN C. SWINTON 1994 51
Senior Vice President--Product Development, Research and
Marketing of the Company since 1994; theretofore Vice
President, Senior Living Services Division of Parent. Mr.
Swinton is the Company's principal marketing executive.
RICHARD A. HUBER 1993 35
Vice President-Operations Finance of the Company since
1993; theretofore Director-Operations Accounting and
Analysis, Senior Living Services Division of Marriott.
Mr. Huber is the Company's principal accounting officer
and has also served as the Secretary of the Company since
1995.
</TABLE>
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION SUMMARY
The following table summarizes the compensation of the persons who served as
Chief Executive Officer of the Company during Fiscal Year 1995 and each of the
other four most highly compensated executive officers of the Company who were
serving as such at the end of Fiscal Year 1995 (collectively, the "Named
Executives") for the Company's last three fiscal years for services rendered
in all capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION
NAME AND FISCAL YEAR -------------------- SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION ENDED MARCH 31, SALARY($) BONUS($) OPTION AWARDS (#) COMPENSATION($)
------------------ --------------- ---------- --------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Mark L. Pacala, 1995(1) $ 190,385 $ 100,000 800,000 $14,130(2)
Chairman of the Board 1994 -- -- -- --
and Chief Executive 1993 -- -- -- --
Officer
Robert A. Whitman, 1995 -0- -0- -0- -0-
Interim President and 1994 -0- -0- -0- -0-
Chief Executive 1993 -- -- -- --
Officer(3)
Paul A. Shively, 1995 230,000 -0- -0- 5,319(4)
Senior Vice President, 1994 230,000 82,500 -0- 3,049
Chief Financial Officer 1993 169,583 -0- -0- 208,057
and Treasurer(5)
Brian C. Swinton 1995 153,635 91,000 100,000 74,372(6)
Senior Vice President-- 1994(7) 25,961 39,063 -0- 500
- 1993 -- -- -- --
Product Development,
Research and Marketing
Richard A. Huber 1995 87,077 65,000 55,000 822(8)
Vice President-- 1994(9) 49,039 36,095 -0- 39,788
Operations Finance and 1993 -- -- -- --
Secretary
</TABLE>
- --------
(1) Mr. Pacala became Chief Executive Officer of the Company on October 24,
1994. Prior to that time, he was not an officer or employee of the
Company.
(2) The amount shown represents payments made to Mr. Pacala in reimbursement
of temporary living and relocation expenses incurred by him in connection
with the commencement of his employment with the Company.
(3) While concurrently serving as President and Co-Chief Executive Officer of
Hampstead, Mr. Whitman served as interim President and Chief Executive
Officer of the Company from July 19, 1993 until Mr. Pacala commenced his
employment with the Company on October 24, 1994. Prior to July 19, 1993,
Mr. Whitman was not an officer of the Company. Mr. Whitman received no
compensation from the Company for services rendered by him as interim
President and Chief Executive Officer of the Company. See "The Board of
Directors and its Committees--Director Compensation" with respect to
compensation paid to members of the Board, including Mr. Whitman, and
"Certain Relationships and Transactions--General and Administrative
Services" for a discussion of a payment made in June 1994 by the Company
to Forum Holdings in respect of various general and administrative
services provided to the Company by Forum Holdings and its
representatives, including, among others, Mr. Whitman's services as
interim President and Chief Executive Officer of the Company.
9
<PAGE>
(4) The amount shown represents employer contributions of $2,494 and $2,825
made to the Company's 401(k) Savings Plan and Employee Stock Purchase
Plan, respectively, on behalf of Mr. Shively.
(5) Mr. Shively resigned all positions held by him with the Company and its
subsidiaries and affiliates effective as of June 30, 1995 and received a
severance payment of $254,200. Mr. Shively, however, has agreed to serve
as a consultant to the Company on matters pertaining to the conduct of the
business and operations of the Company and its affiliates.
(6) The amount shown represents payments made to Mr. Swinton in reimbursement
of relocation expenses incurred by him in connection with the commencement
of his employment with the Company.
(7) Mr. Swinton became Senior Vice President--Product Development, Research
and Marketing of the Company on January 24, 1994. Prior to that time, he
was not an officer or employee of the Company.
(8) The amount shown represents (i) payments of $416 made to Mr. Huber in
reimbursement of relocation expenses incurred by him in connection with
the commencement of his employment with the Company and (ii) employer
contributions of $406 made to the Company's 401(k) Savings Plan on behalf
of Mr. Huber.
(9) Mr. Huber became Vice President--Operations Finance of the Company on
November 10, 1993. Prior to that time, he was not an officer or employee
of the Company.
FISCAL YEAR 1995 STOCK OPTION GRANTS
The following table sets forth certain information regarding grants of stock
options made during Fiscal Year 1995 to the Named Executives pursuant to the
Company's Equity Incentive Plan (the "Incentive Plan"). No grants of stock
appreciation rights were made during Fiscal Year 1995 to any of the Named
Executives.
STOCK OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------ --------------------------------
% OF TOTAL
SECURITIES OPTIONS MARKET
UNDERLYING GRANTED TO PRICE ON
OPTIONS EMPLOYEES EXERCISE GRANT
GRANTED IN FISCAL PRICE DATE EXPIRATION
NAME (#) YEAR 1995 ($/SH) ($/SH)(1) DATE 0% ($) 5% ($) 10% ($)
---- ---------- ---------- -------- --------- ---------- -------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark L. Pacala.......... 800,000(2) 60.9% $5.875 $5.875 8/7/2004 $ -0- $ 2,955,805 $ 7,490,590
Robert A. Whitman....... N/A N/A N/A N/A N/A N/A N/A N/A
Paul A. Shively......... N/A N/A N/A N/A N/A N/A N/A N/A
Brian C. Swinton........ 100,000(3) 7.6% 4.00 7.00 10/24/2004 300,000 740,226 1,415,620
Richard A. Huber........ 55,000(3) 4.2% 4.00 7.00 10/24/2004 165,000 407,124 778,591
</TABLE>
- --------
(1) The "market price" shown is the average of the closing bid and asked
prices for Shares as reported on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") on the grant date or,
if such date was not a trading day, the trading day immediately preceding
such date.
(2) The option vests in five equal annual installments commencing August 7,
1995.
(3) The option vests in five equal annual installments commencing October 24,
1995.
10
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the total
number of stock options held by each of the Named Executives, and the
aggregate value of such stock options, on March 31, 1995. None of such stock
options was exercisable as of such date.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
SHARES UNEXERCISED VALUE OF IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT UNEXERCISED OPTIONS AT
NAME EXERCISE (#) REALIZED ($) FISCAL YEAR-END FISCAL YEAR-END ($)(1)
---- ------------ ------------ --------------- ----------------------
<S> <C> <C> <C> <C>
Mark L. Pacala.......... 0 0 800,000 $750,000
Robert A. Whitman....... 0 0 N/A N/A
Paul A. Shively......... 0 0 N/A N/A
Brian C. Swinton........ 0 0 100,000 281,250
Richard A. Huber........ 0 0 55,000 154,688
</TABLE>
- --------
(1) In-the-money options are options having a per Share exercise price below
$6.8125, the average of the closing bid and asked prices for Shares as
reported on NASDAQ on March 31, 1995. The dollar amounts shown represent
the amount by which the product of $6.8125 and the number of Shares
purchasable upon the exercise of such in-the-money options exceeds the
aggregate exercise price payable upon such exercise.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company is presently a party to an employment agreement with Mark L.
Pacala, Chairman and Chief Executive Officer of the Company, a copy of which
is filed as Exhibit 4 to the Schedule 14D-9. Mr. Pacala's employment agreement
provides for his employment as Chief Executive Officer of the Company for a
term expiring on October 24, 1998. The agreement provides for a base salary of
not less than $450,000 per year, plus an annual performance bonus in an amount
up to 60% of his then-current annual base salary, such bonus to be determined
by the Board or the Compensation Committee based upon performance objectives
established by the Board or the Compensation Committee after consultation with
Mr. Pacala. However, Mr. Pacala did not receive a bonus in respect of Fiscal
Year 1995. Rather, he received a bonus in the amount of $270,000 on October
24, 1995, and any bonus otherwise payable to Mr. Pacala following the
Company's fiscal year ending March 31, 1996 will be reduced by approximately
$152,000. Pursuant to his employment agreement, Mr. Pacala was paid, in
connection with the commencement of his employment with the Company, a one-
time payment of $100,000 in order to induce him to forego the payment of an
equivalent amount that would have been paid to him by his previous employer
had he continued in his former employment and was granted an option to
purchase 800,000 Shares at $5.875 per Share, the average of the closing bid
and asked prices for Shares on NASDAQ on the trading day immediately preceding
the date of grant, which option becomes exercisable in five equal annual
installments commencing on August 7, 1995. The agreement also provides Mr.
Pacala certain welfare benefits.
If Mr. Pacala's employment is terminated by the Company other than for cause
or as a result of death, disability or a change in control, the Company will
for two years following such termination pay Mr. Pacala his then-current base
salary (subject to offset for compensation received by Mr. Pacala from other
parties) and provide him the welfare benefits that he was receiving
immediately prior to his termination (subject to termination in the event that
Mr. Pacala receives comparable benefits from a subsequent employer). If Mr.
Pacala's employment is terminated by the Company (other than as a result of
death or disability or for cause) or by Mr. Pacala (for any reason) within 12
months following a change in control, the Company will pay to Mr. Pacala a
lump sum severance payment equal to two times his then-current base salary and
will provide him the welfare benefits that he was receiving immediately prior
to such termination. In those circumstances, in the event
11
<PAGE>
that the change in control occurs prior to April 24, 1996, Mr. Pacala would
also have the right to cause the Company to repurchase the then-unexercised
portion of his stock options at a price of $0.625 per Share then underlying
such options.
The Company is also presently a party to a letter agreement with Dennis L.
Lehman, Senior Vice President and Chief Financial Officer of the Company, a
copy of which is filed as Exhibit 5 to the Schedule 14D-9. Such agreement
provides for the payment of certain severance benefits in the event Mr.
Lehman's employment is terminated for any reason other than for cause.
The consummation of the Offer and/or Merger constitutes a change in control
under these agreements. The Company estimates that the maximum amount payable
to Messrs. Pacala and Lehman pursuant to such agreements is approximately $1.2
million. The Merger Agreement provides that the Company will honor and, on and
after the Effective Time, Parent will cause the Surviving Corporation to honor,
all employment, severance, termination, consulting and retirement agreements to
which the Company or any of its subsidiaries is a party on the date of the
Merger Agreement, subject to the right of the Surviving Corporation to amend or
otherwise modify the terms and provisions of any such agreements in accordance
with the terms thereof. The Company believes that the foregoing covenant would
apply to the agreements between the Company and each of Messrs. Pacala and
Lehman.
SEVERANCE PLAN
Pursuant to the Merger Agreement, Parent has agreed to adopt the following
severance plan immediately following the Effective Time, which will supersede
the existing severance pay policy of the Company. Employees at the corporate
offices of the Company and its subsidiaries ("Forum") immediately before the
earlier of the acquisition of the Shares pursuant to the Offer or the Effective
Time (the "Acquisition Date") shall be subject to an Employee Protection Plan
for Employees of Forum's Corporate Offices (the "Plan") following the
Acquisition Date and subsequent integration of Forum into Marriott Senior
Living Services, Inc. ("MSLS"). An "employee" for purposes of this Plan shall
consist of all administrative and clerical staff, managers, directors, vice
presidents and senior vice presidents of Forum who are employed at Forum's
corporate offices immediately before the Effective Time, but shall not include
the chief financial officer or chief executive officer of the Company.
It is the intention of MSLS that Forum employees should continue to perform
their normal job functions following the Acquisition Date, while MSLS
undertakes an assessment of Forum's operations. Following such assessment
period, MSLS will notify each Forum employee as to his or her eligibility for
employment in a comparable position with MSLS. The date on which the employee
receives notice of his or her eligibility for employment with MSLS shall be the
"Employee's Notification Date."
If MSLS offers a Forum employee a position with MSLS, and the employee
accepts such offer, the employee shall be eligible to participate in the
Parent's employee benefits plan and shall be subject to the policies and
procedures applicable to all other MSLS employees. For purposes of any benefits
program for which continuous length of service is a factor (including, but not
limited to, insurance program effective dates, pre-existing condition waiting
periods, retirement program entry dates and vesting, vacation, sick pay and
other paid leave benefits, service awards and any other similar program), MSLS
and Parent shall recognize service with Forum and its predecessors as
employment with MSLS or any other Marriott division.
If MSLS offers a Forum employee a position with MSLS, but the employee
rejects such offer, the employee shall receive the following "Marriott
International Income Extension Plan" benefits: (a) if MSLS shall provide the
employee with at least thirty (30) days' notice as to his or her final date of
employment (the "Job Elimination Date"), (b) as of the Job Elimination Date,
the employee shall receive payment representing, (i) severance pay equal to one
week's salary for each full year of service with Forum; provided, however, that
no employee shall receive a severance payment of less than two (2) weeks' pay
and (ii) payment for unused vested and unvested vacation leave, up to a maximum
of thirty (30) days' leave.
If MSLS does not offer the Forum employee a position with MSLS, the employee
shall be eligible for the following: (a) the employee shall receive notice as
to his or her Job Elimination Date, which date shall in no event be less than
forty-five (45) days from the Employee Notification Date, and (b) throughout
the period
12
<PAGE>
preceding the employee's Job Elimination Date, MSLS will provide general
assistance to the employee in identifying vacant positions in other divisions
of Parent for which the employee may be qualified. Reasonable accommodation
will be made to allow an employee to look for another job during the
notification period. If the employee is successful in obtaining employment in
another division of Parent, the employee shall be eligible to participate in
the Parent's employee benefit plans and shall be subject to the policies and
procedures applicable to other employees of that Marriott division. The
employee shall receive credit for prior service with Forum, as described
above.
If the employee has not obtained other employment with Parent as of the Job
Elimination Date, the employee shall receive payment consisting of the
following: (a) payment for unused vested vacation leave, up to a maximum of
twenty (20) days leave and (b) a final severance payment which will include
credit for unvested vacation leave, up to a maximum of fifteen (15) days'
leave. The final severance payment will be determined based on the employee's
position with Forum and shall be equal to the employee's base salary for a
certain number of months (in the case of administrative/clerical staff, three
(3) months; in the case of managers, four (4) months; in the case of
directors, five (5) months; and in the case of vice presidents and senior vice
presidents, six (6) months) reduced by the amount of regular pay the employee
received for time worked from the Employee's Notification Date through the Job
Elimination Date.
If a Forum employee resigns or is terminated for cause before the Employee's
Notification Date or the employee's Job Elimination Date, the employee shall
not be eligible for benefits under the Employee Protection Plan. The employee
will, however, be eligible for any benefits applicable to the employee under
group health plans maintained for former Forum employees as may be required
under Section 601 of the Employee Retirement Income Security Act of 1974, as
amended.
In the event an employee is terminated by MSLS or Parent on or before March
31, 1997, other than for cause, such employee shall be eligible to receive the
benefits described above as if such employee had not been offered a position
with MSLS.
OPTIONS
Pursuant to the Merger Agreement, all options and other rights to acquire
Shares ("Stock Options") granted to employees under any stock option plan,
program or similar arrangement of the Company or any subsidiary of the Company
(each as amended, an "Option Plan"), whether or not then exercisable, will be
cancelled by the Company immediately prior to the earlier of (x) the
consummation of the Offer and (y) the Effective Time, and the holders thereof
will be entitled to receive from the Company, for each Share subject to such
Stock Option, an amount in cash equal to the difference between the Merger
Price (as defined in the Merger Agreement) and the exercise price per share of
such Stock Option, which amount will be paid at the time the Stock Option is
cancelled. All applicable withholding taxes attributable to such payments will
be deducted from the amounts payable and all such taxes attributable to the
exercise of Stock Options will be withheld from the proceeds received in
respect of Shares issuable on such exercise. Except as provided in the Merger
Agreement or as otherwise agreed to by the parties and to the extent permitted
by the Option Plans, the Option Plans will terminate as of the Effective Time
and the provisions in any other plan providing for the issuance or grant by
the Company of any interest in respect of the capital stock of the Company
will be deleted as of the Effective Time.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
SETTLEMENT OF CERTAIN LITIGATION
Pursuant to a court-approved settlement agreement, during Fiscal Year 1995,
the Company settled certain claims asserted by Forum/Classic, L.P., an entity
affiliated with the Pritzker family, and others against the Company, the
Investors and certain other persons (including persons who comprised the Board
immediately prior to the recapitalization of the Company in 1993 (the "1993
Recapitalization")) in a suit filed in connection with the 1993
Recapitalization. In connection with the settlement, the Company reimbursed
the plaintiffs for $500,000 of the expenses incurred by them in that
litigation.
13
<PAGE>
CERTAIN CONSULTING SERVICES
The Company and Mr. Eden have entered into an agreement, effective as of
March 31, 1995, pursuant to which Mr. Eden will render to the Company such
consulting and advisory services as the Company's Chief Executive Officer may
from time to time request regarding the Company and the retirement industry.
In connection with the execution of the agreement, the Company paid to Mr.
Eden $137,500 in respect of certain consulting services provided by him to the
Company prior to such time, including services provided during Fiscal Year
1995. Under the agreement, which terminates on December 31, 1996, the Company
will pay to Mr. Eden an annual retainer of $31,250 and certain additional
amounts in certain circumstances.
GENERAL AND ADMINISTRATIVE SERVICES
In July 1994, the Company paid $750,000 to Forum Holdings in respect of
various general and administrative services provided to the Company by Forum
Holdings prior to such date. Such services include, among others, arranging
for and negotiating the Company's debt refinancing which was completed in
February 1994 and negotiating the co-investment agreement which was entered
into by the Company and National Guest Homes, LLC in July 1994. Services
covered by such payment also include Mr. Whitman's services as interim
President and Chief Executive Officer of the Company.
CERTAIN ACQUISITIONS
In May 1995, the Company acquired from Autumn America, an affiliate of Forum
Holdings, for $1.3 million, Autumn America's rights as the manager of five
retirement communities and entered into new management contacts with the
owners of such facilities (two of which are affiliates of Forum Holdings).
Under each such management contract, the Company will receive in respect of
management services to be provided by it thereunder a monthly management fee
equal to 5% of gross collections. In connection with such acquisition, the
Company also paid to Autumn America for disbursement to its management
personnel $250,000 in cash in lieu of granting certain rights with respect to
future acquisitions by the Company. Of such amount, $150,000 was disbursed to
James R. Foulger, formerly the President of Autumn America, who, upon the
consummation of such acquisition, became Senior Vice President--Acquisitions
of the Company.
In May 1995, the Company acquired for $1.7 million an 80% interest in the
retirement community now known as The Forum at the Woodlands (the "Woodlands
Property"). The remaining 20% interest in the Woodlands Property is owned by
an unaffiliated co-investor. In connection with such acquisition, an affiliate
of Forum Holdings (the "Holdings Affiliate") was granted a carried interest in
the Woodlands Property in exchange for assigning its rights to purchase such
property to the Company and its 20% co-investor. Commencing May 1996, the
Holdings Affiliate may require the Company to purchase, and the Company may
require the Holdings Affiliate to sell to the Company, such carried interest
for a price between $0.8 million and $1.7 million, depending on the
performance of the Woodlands Property and sales of related tax-exempt bonds.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires directors and executive officers
of the Company, and persons who own more than 10% of the issued and
outstanding Shares, to file reports of ownership and changes in ownership with
the SEC. Directors, executive officers and greater than 10% shareholders are
required by SEC regulation to furnish the Company copies of all Section 16(a)
forms they file. Except as described below, to the Company's knowledge, based
solely on review of those copies and written representations that no Forms 5
were required, the Company's directors, executive officers and greater than
10% shareholders complied with all applicable Section 16(a) filing
requirements during Fiscal Year 1995. Mr. Swinton has failed to file the
required forms with the SEC in connection with three transactions resulting in
changes in his beneficial ownership that occurred during Fiscal Year 1995 and
two such transactions that occurred during the Company's current fiscal year.
14
<PAGE>
SCHEDULE A
The following table sets forth the name, age, present principal occupation or
employment and material occupation, positions, offices or employment for the
past five years of each of Parent's potential designees to the Company's Board.
The business address for each potential designee is c/o Marriott International,
Inc., 10400 Fernwood Road, Bethesda, Maryland 20817. Each potential designee is
a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
FIVE-YEAR
NAME AGE EMPLOYMENT HISTORY
---- --- ----------------------------
<C> <C> <S>
William J. Shaw 50 Mr. Shaw is President and a Director of
President of Purchaser; Purchaser. Mr. Shaw was elected President
Executive Vice President and of the Marriott Service Group in February
President--Marriott Service 1992, which now comprises Parent's Contract
Group of Parent Services Group. He joined Marriott
Corporation in 1974, was Corporate
Controller in 1979 and a Vice President in
1982. In 1985, he assumed responsibility
for Marriott Corporation's tax department
and risk management department and was
elected Senior Vice President--Finance. In
1986, Mr. Shaw was elected Senior Vice
President--Finance and Treasurer of
Marriott Corporation. He was elected
Executive Vice President of Marriott
Corporation and promoted to Chief Financial
Officer in April 1988.
Paul E. Johnson, Jr. 48 Mr. Johnson is Vice President and a
Vice President and Director of Director of Purchaser, and Executive Vice
Purchaser; Executive Vice President and General Manager of the Senior
President and General Manager Living Services Division of Parent. Mr.
of Senior Living Services Johnson joined Marriott Corporation in 1983
Division of Parent in Corporate Financial Planning & Analysis.
In 1987, he was promoted to group vice
president of finance and development for
the Marriott Service Group and later
assumed responsibility for real estate
development for Marriott Senior Living
Services. During 1989, he served as vice
president and general manager of Marriott's
Travel Plazas division. Mr. Johnson
subsequently served as vice president and
general manager of Marriott Family
Restaurants from December 1989 through
1991. In October 1991, he was appointed to
his present position as executive vice
president and general manager of Marriott
Senior Living Services.
Terrence P. Morrow 48 Mr. Morrow is Treasurer and a Director of
Treasurer and Director of Purchaser. Mr. Morrow is Vice President of
Purchaser; Vice President-- Finance for Marriott Senior Living Services
Finance, Senior Living Services with responsibility for the Accounting,
Division of Parent Finance and Information Systems functions
of the business. Mr. Morrow has worked for
Marriott since 1970 and has been in his
current job since 1990. Previously, he was
Vice President of Marriott Suites and Vice
President of Internal Audit for Marriott
Corporation. Mr. Morrow also spent 17 years
in the Hotel Division where he held
positions as a Hotel Controller, Regional
Controller and Vice President Area
Controller.
Lawrence B. Murphy 38 Mr. Murphy is a Vice President of the
Vice President of Purchaser; Purchaser. Mr. Murphy joined Parent in 1983
Vice President--Operations of and served in various capacities in its
the Senior Living Services Lodging Division, including Vice President
Division of Parent of Rooms Operations, Vice President of
Service Development and General Manager,
until March 1995 when he joined the Senior
Living Services Division as Vice President
for Operations.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
OR EMPLOYMENT AND
FIVE-YEAR
NAME AGE EMPLOYMENT HISTORY
---- --- ----------------------------
<S> <C> <C>
Edward L. Bednarz 53 Mr. Bednarz is a Vice President of the Purchaser. Mr. Bednarz joined the Law Department
Vice President of Purchaser; of Parent in 1973 and has served as the principal attorney for the Senior Living Services
Associate General Counsel of Division since 1992.
Parent
G. Cope Stewart III 54 Mr. Stewart is a Vice President of the Purchaser. Mr. Stewart has served as Associate
Vice President of Purchaser; General Counsel, Corporate Affairs Department, of Parent since February 1994. From 1986
Associate General Counsel of to 1994, Mr. Stewart was a partner in the Washington, D.C. law firm of Arent Fox Kintner
Parent Plotkin & Kahn. Prior to 1986, Mr. Stewart was engaged in the private practice of law in
Washington, D.C.
</TABLE>
16
<PAGE>
EXHIBIT 1
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 15, 1996
BY AND AMONG
FORUM GROUP, INC.,
MARRIOTT INTERNATIONAL, INC.
AND
FG ACQUISITION CORP.
<PAGE>
ARTICLE I
<TABLE>
<CAPTION>
THE OFFER
<S> <C> <C>
SECTION 1.1. THE OFFER................................................ 1
SECTION 1.2. COMPANY ACTIONS.......................................... 3
SECTION 1.3. SHAREHOLDER LISTS........................................ 3
SECTION 1.4. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(F)..... 3
ARTICLE II
<CAPTION>
THE MERGER
<S> <C> <C>
SECTION 2.1. THE MERGER............................................... 4
SECTION 2.2. EFFECTIVE TIME........................................... 4
SECTION 2.3. EFFECTS OF THE MERGER.................................... 4
SECTION 2.4. ARTICLES OF INCORPORATION AND BY-LAWS.................... 4
SECTION 2.5. DIRECTORS................................................ 5
SECTION 2.6. OFFICERS................................................. 5
SECTION 2.7. CONVERSION OF SHARES..................................... 5
SECTION 2.8. CONVERSION OF PURCHASER'S COMMON STOCK................... 5
SECTION 2.9. STOCK OPTIONS............................................ 6
SECTION 2.10. SHAREHOLDERS' MEETING.................................... 6
SECTION 2.11. CLOSING.................................................. 7
ARTICLE III
<CAPTION>
DISSENTING SHARES; EXCHANGE OF SHARES
<S> <C> <C>
SECTION 3.1. DISSENTING SHARES........................................ 7
SECTION 3.2. EXCHANGE OF SHARES....................................... 7
ARTICLE IV
<CAPTION>
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<S> <C> <C>
SECTION 4.1. ORGANIZATION............................................. 8
SECTION 4.2. CAPITALIZATION........................................... 9
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT..................... 10
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS.................... 10
SECTION 4.5. ABSENCE OF CERTAIN CHANGES............................... 11
SECTION 4.6. NO UNDISCLOSED LIABILITIES............................... 11
SECTION 4.7. REPORTS.................................................. 11
SECTION 4.8. SCHEDULE 14D-9; OFFER DOCUMENTS; PROXY STATEMENT......... 12
SECTION 4.9. NO DEFAULT............................................... 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.10. LITIGATION; COMPLIANCE WITH LAWS......................... 13
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA............................ 14
SECTION 4.12. ASSETS; REAL PROPERTY; INTELLECTUAL PROPERTY............. 15
SECTION 4.13. CERTAIN CONTRACTS AND ARRANGEMENTS....................... 16
SECTION 4.14. TAXES.................................................... 16
SECTION 4.15. LABOR MATTER............................................. 18
SECTION 4.16. LICENSES AND PERMITS..................................... 18
SECTION 4.17. BROKERS.................................................. 18
ARTICLE V
<CAPTION>
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
<S> <C> <C>
SECTION 5.1. ORGANIZATION............................................. 19
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT..................... 19
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS.................... 19
SECTION 5.4. OFFER DOCUMENTS; PROXY STATEMENT; SCHEDULE 14D-9......... 20
SECTION 5.5. FINANCING................................................ 20
SECTION 5.6. BROKERS.................................................. 20
ARTICLE VI
<CAPTION>
COVENANTS
<S> <C> <C>
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY....................... 21
SECTION 6.2. ACQUISITION PROPOSALS.................................... 23
SECTION 6.3. ACCESS TO INFORMATION.................................... 24
SECTION 6.4. REASONABLE EFFORTS....................................... 25
SECTION 6.5. CONSENTS AND CERTAIN ARRANGEMENTS........................ 25
SECTION 6.6. ANTITRUST FILINGS........................................ 26
SECTION 6.7. PUBLIC ANNOUNCEMENTS..................................... 27
SECTION 6.8. EMPLOYEE BENEFITS; EMPLOYEES............................. 27
SECTION 6.9. PRE-CLOSING CONSULTATION................................. 28
SECTION 6.10. INDEMNIFICATION.......................................... 28
ARTICLE VII
<CAPTION>
CONDITIONS TO CONSUMMATION OF THE MERGER
<S> <C> <C>
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER............................................... 29
SECTION 7.2. CONDITIONS TO THE OBLIGATION OF THE COMPANY
TO EFFECT THE MERGER..................................... 29
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND
PURCHASER TO EFFECT THE MERGER........................... 30
SECTION 7.4. EXCEPTION................................................ 30
</TABLE>
ii
<PAGE>
ARTICLE VIII
<TABLE>
<CAPTION>
TERMINATION; AMENDMENT; WAIVER
<S> <C> <C>
SECTION 8.1. TERMINATION.............................................. 30
SECTION 8.2 EFFECT OF TERMINATION.................................... 31
SECTION 8.3 FEES AND EXPENSES........................................ 32
SECTION 8.4. AMENDMENT................................................ 33
SECTION 8.5. EXTENSION; WAIVER........................................ 33
ARTICLE IX
<CAPTION>
MISCELLANEOUS
<S> <C> <C>
SECTION 9.1. SURVIVAL................................................ 34
SECTION 9.2. ENTIRE AGREEMENT........................................ 34
SECTION 9.3. GOVERNING LAW........................................... 34
SECTION 9.4. NOTICES................................................. 34
SECTION 9.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY
BENEFICIARIES........................................... 35
SECTION 9.6. COUNTERPARTS............................................ 36
SECTION 9.7. INTERPRETATION.......................................... 36
SECTION 9.8. SCHEDULES............................................... 36
SECTION 9.9. LEGAL ENFORCEABILITY.................................... 36
SECTION 9.10. SPECIFIC PERFORMANCE.................................... 36
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
Exhibit A ............................................. Conditions to Offer
</TABLE>
iii
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Section No.
- ---- -----------
<S> <C>
Acquisition Proposal..................................................... 6.2(b)
Antitrust Law............................................................ 6.6(d)
Audit................................................................ 4.14(i)(1)
Bankruptcy Court......................................................... 6.5(b)
Bankruptcy Order......................................................... 6.5(b)
Benefit Agreements....................................................... 6.8(b)
Board....................................................................... 1.2
Certificates............................................................. 3.2(b)
Code.................................................................... 4.11(a)
Company................................................................ Preamble
Company Employee............................................................ 6.8
Company Representative...................................................... 6.9
Company SEC Documents.................................................... 4.7(a)
Conditions.................................................................. 1.1
Confidentiality Agreement................................................ 6.3(b)
Continuing Director......................................................... 8.4
Current Premium............................................................ 6.10
D&O Insurance.............................................................. 6.10
Designated Directors........................................................ 8.4
Dissenting Shares........................................................... 3.1
Effective Time.............................................................. 2.2
Environmental Laws...................................................... 4.10(c)
ERISA................................................................... 4.11(a)
ERISA Affiliate......................................................... 4.11(a)
Exchange Act................................................................ 1.2
Exchange Agent........................................................... 3.2(a)
Facility................................................................ 4.12(d)
FRI......................................................................... 6.1
FRP......................................................................... 6.1
Form 10-K................................................................... 4.5
Fully Diluted Basis......................................................... 1.4
Hearthside Shares........................................................ 4.2(a)
HSR Act..................................................................... 4.4
IBCL........................................................................ 2.1
Indemnified Parties........................................................ 6.10
Intellectual Property................................................... 4.12(c)
IRS..................................................................... 4.11(a)
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Law.................................................................... 2.4
Lien................................................................... 4.2(B)
<CAPTION>
Term Section No.
- ---- -----------
<S> <C>
Material Adverse Effect............................................... 4.1, 5.1
Material Contracts........................................................ 4.13
Merger..................................................................... 2.1
Merger Price............................................................ 2.7(a)
Offer................................................................... 1.1(a)
Offer Documents......................................................... 1.1(c)
Option Plan............................................................. 2.9(a)
Order................................................................... 6.6(b)
Ordinary Course Obligations................................................ 6.1
Parent................................................................ Preamble
Parent Representative...................................................... 6.9
PBGC................................................................... 4.11(a)
Permits................................................................... 4.16
Permitted Liens........................................................ 4.12(b)
Person.................................................................. 1.1(b)
Plans.................................................................. 4.11(a)
POR..................................................................... 4.2(a)
Pre-February 6 Party.................................................... 6.2(c)
Proxy Statement........................................................ 2.10(b)
Purchaser............................................................. Preamble
Schedule 14D-9............................................................. 1.2
SEC..................................................................... 1.1(c)
Securities Act............................................................. 4.4
Shares.................................................................. 1.1(a)
Stock Options........................................................... 2.9(a)
Shareholders' Meeting.................................................. 2.10(a)
Subsidiary.............................................................. 1.1(b)
Surviving Corporation...................................................... 2.1
Taxes............................................................... 4.14(i)(2)
Tax Returns......................................................... 4.14(i)(3)
Third Party............................................................. 6.2(b)
Third Party Transaction................................................. 6.2(b)
Warrants................................................................... 4.2
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 15, 1996, is among
MARRIOTT INTERNATIONAL, INC., a Delaware corporation ("PARENT"), FG ACQUISITION
CORP., an Indiana corporation and a wholly-owned indirect subsidiary of Parent
("PURCHASER"), and FORUM GROUP, INC., an Indiana corporation (the "COMPANY").
RECITALS
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser deem
it advisable and in the best interests of their respective shareholders that
Parent acquire the Company pursuant to the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Subject to this Agreement not having been terminated in accordance
with the provisions of Section 8.1 hereof, Purchaser shall, and Parent shall
cause Purchaser to, as promptly as practicable, but in no event later than five
business days from the date of the public announcement of the terms of this
Agreement or the Offer, commence an offer to purchase for cash (as it may be
amended in accordance with the terms of this Agreement, the "OFFER") all of the
Company's outstanding shares of common stock, no par value (the "SHARES"),
subject to the conditions set forth in Exhibit A hereto (the "CONDITIONS"), at a
price of $13.00 per Share, net to the seller in cash. Subject only to the
Conditions, Purchaser shall, and Parent shall cause Purchaser to, (i) accept for
payment and pay for all Shares tendered pursuant to the Offer as promptly as
practicable following the expiration date of the Offer, and (ii) extend the
period of time the Offer is open until the first business day following the date
on which the Conditions are satisfied or waived in accordance with the
provisions thereof; provided that (x) Purchaser shall be permitted but shall not
--------
be obligated to extend the time the Offer is open if the Company is in breach in
any material respect of its covenants or agreements contained herein and (y)
Purchaser shall be permitted but shall not be obligated to extend the time the
Offer is open if there is a reasonable likelihood that one or more of the
Conditions cannot be satisfied; and provided, further, that the Purchaser shall
-------- -------
in no event be obligated or permitted to extend the period of time the Offer is
open beyond July 15, 1996. Neither Purchaser nor Parent will extend the
expiration
1
<PAGE>
date of the Offer beyond the twentieth business day following commencement
thereof unless one or more of the Conditions shall not be satisfied. Purchaser
expressly reserves the right to amend the terms and conditions of the Offer;
provided, that without the consent of the Company, no amendment may be made
- --------
which (i) decreases the price per Share or changes the form of consideration
payable in the Offer, (ii) decreases the number of Shares sought, or (iii)
imposes additional conditions to the Offer or amends any other term of the Offer
in any manner adverse to the holders of Shares. Upon the terms and subject to
the Conditions, Purchaser will accept for payment and purchase, as soon as
permitted under the terms of the Offer, all Shares validly tendered and not
withdrawn prior to the expiration of the Offer.
(b) The Company will not, nor will it permit any of its wholly owned
Subsidiaries (as defined below) to, tender into the Offer any Shares
beneficially owned by it; provided, that Shares held beneficially or of record
--------
by any plan, program or arrangement sponsored or maintained for the benefit of
employees of the Company or any of its Subsidiaries shall not be deemed to be
held by the Company regardless of whether the Company has, directly or
indirectly, the power to vote or control the disposition of such Shares. For
purposes of this Agreement, "SUBSIDIARY" means, as to any Person (as defined
below), any corporation, partnership or joint venture, whether now existing or
hereafter organized or acquired: (a) in the case of a corporation, of which at
least a majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation (other than stock having such voting power solely by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person and/or one or more of its Subsidiaries or (b) in the
case of a partnership or joint venture, in which such Person or a Subsidiary of
such Person is a general partner or joint venturer or of which a majority of the
partnership or other ownership interests are at the time owned by such Person
and/or one or more of its Subsidiaries. For purposes of this Agreement,
"PERSON" means any individual, corporation, company, voluntary association,
partnership, joint venture, trust, unincorporated organization or other entity.
(c) On the date of the commencement of the Offer, Purchaser shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain an offer to purchase
and form of the related letter of transmittal (together with any supplements or
amendments thereto, the "OFFER DOCUMENTS"). The Company and its counsel shall
be given a reasonable opportunity to review and comment on the Offer Documents
prior to the filing of such Offer Documents with the SEC. Purchaser agrees to
provide the Company and its counsel copies of any written comments Purchaser and
its counsel may receive from the SEC or its staff with respect to the Offer
Documents and a summary of any such comments received orally promptly after the
receipt thereof.
2
<PAGE>
SECTION 1.2. COMPANY ACTIONS. The Company hereby consents to the Offer
and represents that its Board of Directors (the "BOARD") (at a meeting duly
called and held) has unanimously (a) determined as of the date hereof that the
Offer and the Merger (as defined in Section 2.1 hereof) are fair to and in the
best interests of the shareholders of the Company and (b) subject to the
fiduciary duties of the Board, resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by the shareholders of
the Company. The Company further represents that Smith Barney Inc. has
delivered to the Board its opinion to the effect that, as of the date of this
Agreement, the cash consideration to be received by the holders of Shares (other
than Parent and its affiliates) in the Offer and the Merger is fair to such
holders from a financial point of view. The Company hereby agrees to file a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9")
containing such recommendation with the SEC (and the information required by
Section 14(f) of the Securities Exchange Act of 1934, as amended (together with
all rules and regulations thereunder, the "EXCHANGE ACT"), so long as Parent
shall have furnished such information to the Company in a timely manner) and to
mail such Schedule 14D-9 to the shareholders of the Company; provided, that
--------
subject to the provisions of Section 6.2(a) hereof, such recommendation may be
withdrawn, modified or amended. The Company will use reasonable efforts so that
such Schedule 14D-9 shall be, if so requested by Purchaser, filed on the same
date as Purchaser's Schedule 14D-1 is filed and mailed together with the Offer
Documents; provided, that in any event the Schedule 14D-9 shall be filed and
--------
mailed no later than 10 business days following the commencement of the Offer.
Purchaser and its counsel shall be given a reasonable opportunity to review and
comment on such Schedule 14D-9 prior to the Company's filing of the Schedule
14D-9 with the SEC. The Company agrees to provide Parent and its counsel copies
of any written comments the Company or its counsel may receive from the SEC or
its staff with respect to such Schedule 14D-9 and a summary of any such comments
received orally promptly after the receipt thereof.
SECTION 1.3. SHAREHOLDER LISTS. In connection with the Offer, at the
request of Parent or Purchaser, from time to time after the date hereof, the
Company will promptly furnish Purchaser with mailing labels, security position
listings and any available listing or computer file maintained for or by the
Company containing the names and addresses of the record holders of the Shares
as of a recent date and shall furnish Purchaser with such information reasonably
available to the Company and assistance as Purchaser or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of Shares.
SECTION 1.4. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(F). In the
event that Purchaser acquires at least a majority of the Shares outstanding on a
Fully Diluted Basis (as defined below) pursuant to the Offer, Parent shall be
entitled to designate for appointment or election to the Board, upon written
notice to the Company, such number of persons so that the designees of Parent
constitute the same percentage (but in no event less than a majority) of the
Board (rounded up to the next whole number) as the percentage of Shares acquired
pursuant to the Offer. Prior to the purchase of Shares pursuant to the Offer
(sometimes referred to herein as the "consummation" of the Offer), the Company
will use reasonable best efforts to increase the size of the Board or to obtain
the resignation of such number of directors as is
3
<PAGE>
necessary to enable such number of Parent designees to be so elected. In
connection therewith, the Company will mail to the shareholders of the Company
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder unless such information has previously been provided to such
shareholders in the Schedule 14D-9; provided, however, that Parent and Purchaser
-------- -------
provide to the Company in writing, and will be solely responsible for, any
information with respect to such companies and their nominees, officers,
directors and affiliates required by such Section and Rule. Notwithstanding the
provisions of this Section 1.4, the parties hereto shall use their respective
reasonable best efforts to ensure that at least three of the members of the
Board shall, at all times prior to the Effective Time (as defined in Section 2.2
hereof) be, Continuing Directors (as defined in Section 8.4 hereof). As used in
this Agreement, "FULLY DILUTED BASIS" means, as of any date of determination, a
basis that includes all outstanding Shares, together with all Shares issuable
upon exercise of vested Stock Options (as defined in Section 2.9(a)) and
Warrants (as defined in Section 4.2).
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the applicable provisions of the Indiana Business
Corporation Law ("IBCL"), Purchaser shall be merged (the "MERGER") with and into
the Company as soon as practicable following the satisfaction or waiver of the
conditions set forth in Article VII hereof or on such other date as the parties
hereto may agree (such agreement to require the approval of a majority of the
Continuing Directors if at the time there shall be any Continuing Directors).
Following the Merger the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and the separate corporate existence of Purchaser
shall cease.
SECTION 2.2. EFFECTIVE TIME. The Merger shall become effective by filing
with the Secretary of State of Indiana articles of merger in accordance with the
relevant provisions of the IBCL (the time the Merger becomes effective being the
"EFFECTIVE TIME").
SECTION 2.3. EFFECTS OF THE MERGER. The Company will continue to be
governed by the laws of the State of Indiana, and the separate corporate
existence of the Company and all of its rights, privileges, powers and
franchises as well of a public as of a private nature, and being subject to all
of the restrictions, disabilities and duties as a corporation organized under
the IBCL, will continue unaffected by the Merger. The Merger will have the
effects specified in the IBCL. As of the Effective Time the Company shall be a
wholly-owned Subsidiary of Parent.
SECTION 2.4. ARTICLES OF INCORPORATION AND BY-LAWS. The Articles of
Incorporation and By-laws of Purchaser as in effect at the Effective Time, shall
be the Articles of Incorporation and By-laws of the Surviving Corporation until
amended in accordance with applicable Law (as defined below). For purposes of
this Agreement, "LAW" or "LAWS" means
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any valid constitutional provision, statute, ordinance or other law (including
common law), rule, regulation, decree, injunction, judgment, order, ruling,
assessment or writ of any governmental entity, as any of these may be in effect
from time to time.
SECTION 2.5. DIRECTORS. The directors of Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation and will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Articles of Incorporation
and By-laws of the Surviving Corporation, or as otherwise provided by Law.
SECTION 2.6. OFFICERS. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Articles of Incorporation
and By-laws of the Surviving Corporation, or as otherwise provided by Law.
SECTION 2.7. CONVERSION OF SHARES. At the Effective Time:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or held by any
wholly-owned Subsidiary, and other than Dissenting Shares (as defined in Section
3.1 hereof)) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive $13.00 in cash,
or any higher price paid per Share in the Offer (the "MERGER PRICE"), payable to
the holder thereof, without interest thereon, upon the surrender of the
certificate formerly representing such Share.
(b) Each Share held in the treasury of the Company or held by any wholly
owned Subsidiary of the Company and each Share held by Parent or any wholly-
owned Subsidiary of Parent immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be cancelled and retired and cease to exist; provided, that Shares held
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beneficially or of record by any plan, program or arrangement sponsored or
maintained for the benefit of employees of the Company or any Subsidiaries
thereof shall not be deemed to be held by the Company regardless of whether the
Company has, directly or indirectly, the power to vote or control the
disposition of such Shares.
SECTION 2.8. CONVERSION OF PURCHASER'S COMMON STOCK. Each share of common
stock, no par value, of Purchaser issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and exchangeable for one share of
common stock of the Surviving Corporation.
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SECTION 2.9. STOCK OPTIONS.
(a) All outstanding options and other rights to acquire Shares ("STOCK
OPTIONS") granted to employees under any stock option plan, program or similar
arrangement of the Company or any Subsidiaries (each, as amended, an "OPTION
PLAN"), whether or not then exercisable, will be cancelled by the Company
immediately prior to the earlier of (x) the consummation of the Offer and (y)
the Effective Time, and the holders thereof shall be entitled to receive from
the Company, for each Share subject to such Stock Option, an amount in cash
equal to the difference between the Merger Price and the exercise price per
share of such Stock Option, which amount shall be paid at the time the Stock
Option is cancelled. All applicable withholding taxes attributable to the
payments made hereunder or to distributions contemplated hereby shall be
deducted from the amounts payable under this Section 2.9 and all such taxes
attributable to the exercise of Stock Options shall be withheld from the
proceeds received in respect of the Shares issuable on such exercise.
(b) Except as provided herein or as otherwise agreed to by the parties and
to the extent permitted by the Option Plans, the Option Plans shall terminate as
of the Effective Time and the provisions in any other plan providing for the
issuance or grant by the Company of any interest in respect of the capital stock
of the Company shall be deleted as of the Effective Time.
SECTION 2.10. SHAREHOLDERS' MEETING. If required by applicable Law in
order to consummate the Merger, the Company, acting through its Board, shall, in
accordance with applicable Law, its Amended and Restated Articles of
Incorporation and its By-laws:
(a) duly call, give notice of, convene and hold a special meeting of its
shareholders as soon as practicable following the consummation of the Offer for
the purpose of considering and taking action upon this Agreement (the
"SHAREHOLDERS' MEETING");
(b) subject to its fiduciary duties under applicable Laws as advised as to
legal matters by counsel, include in the proxy statement or information
statement prepared by the Company for distribution to shareholders of the
Company in advance of the Shareholders' Meeting in accordance with Regulation
14A or Regulation 14C promulgated under the Exchange Act (the "PROXY STATEMENT")
the recommendation of its Board referred to in Section 1.2 hereof; and
(c) use its reasonable efforts to (i) obtain and furnish the information
required to be included by it in the Proxy Statement and, after consultation
with Parent, respond promptly to any comments made by the SEC with respect to
the Proxy Statement and any preliminary version thereof and cause the Proxy
Statement to be mailed to its shareholders following the consummation of the
Offer and (ii) obtain the necessary approvals of this Agreement by its
shareholders.
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Parent will provide the Company with the information concerning Parent and
Purchaser required to be included in the Proxy Statement and will vote, or cause
to be voted, all Shares owned by it or its Subsidiaries in favor of approval and
adoption of this Agreement.
SECTION 2.11. CLOSING. Prior to the filings referred to in Section 2.2, a
closing will be held at the offices of O'Melveny & Myers, 555 Thirteenth Street,
N.W., Washington, D.C. (or such other place as the parties may agree), for the
purpose of confirming all of the foregoing. The closing will take place one
business day after the later of (i) the business day immediately following the
receipt of approval or adoption of this Agreement by the Company's shareholders
and (ii) the business day on which the last of the conditions set forth in
Article VII is satisfied or duly waived, or at such other time as the parties
may agree.
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have
perfected any dissenters' rights provided under the IBCL, if applicable (the
"DISSENTING SHARES"), shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.7 of this Agreement,
unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost such holder's right to appraisal and payment under
the IBCL. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's Shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the consideration provided for in
Section 2.7(a) of this Agreement, without any interest thereon.
SECTION 3.2. EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Immediately prior to the Effective Time, Parent will take all steps necessary to
enable and cause the Company to deposit with the Exchange Agent the funds
necessary to make the payments contemplated by Section 2.7 and, if applicable,
the Bankruptcy Order (as defined in Section 6.5(b)) on a timely basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "CERTIFICATES") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor, in each case
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customary for transactions such as the Merger. Upon surrender to the Exchange
Agent of a Certificate, together with such letter of transmittal duly executed,
and any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor the consideration set forth in Section
2.7(a) hereof, and such Certificate shall forthwith be cancelled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a Person other than the Person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the Person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a Person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.2, each Certificate (other than Certificates
representing Shares held by Parent or any wholly owned Subsidiary of Parent,
Shares held in the treasury of the Company or held by any wholly owned
Subsidiary of the Company and Dissenting Shares) shall represent for all
purposes only the right to receive the consideration set forth in Section 2.7(a)
hereof, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration provided in Section 2.7 hereof in accordance
with the procedures set forth in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to and with Parent and
Purchaser as follows:
SECTION 4.1. ORGANIZATION. Except as set forth on Schedule 4.1, each of
the Company and its Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization and has the requisite
corporate, partnership or other power and authority to own, lease, manage and
operate its properties and to carry on its business as now being conducted.
Except as set forth on Schedule 4.1, each of the Company and its Subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased, managed or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate have or
constitute a Material Adverse Effect (as defined below). The Company has
heretofore delivered or made available to Parent accurate and complete copies of
the articles or certificate of incorporation and by-laws (or other similar
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organizational documents in the event of any Person other than a corporation),
as currently in effect, of the Company and each of its Subsidiaries. For
purposes of this Agreement (except as provided in Article V hereof), the term
"MATERIAL ADVERSE EFFECT" shall mean any change, effect or circumstance that has
had or could reasonably be expected to have a material adverse effect on (i) the
business, results of operations, financial condition or prospects of the Company
and its Subsidiaries taken as a whole, or (ii) the ability of the Company to
perform its material obligations under this Agreement. In determining whether
any change, effect or circumstance is or constitutes a Material Adverse Effect,
effect will be given to any reserves set forth on the financial statements
contained in the Company Quarterly Report on Form 10-Q for the quarter ending
December 31, 1995 that specifically relates to the change, effect or
circumstance in question.
SECTION 4.2. CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the Company
consists of: (i) 48,000,000 Shares and (ii) 2,000,000 shares of preferred stock
("PREFERRED STOCK"). As of the date hereof, (a) 22,539,831 Shares were validly
issued and outstanding, fully paid and nonassessable and not subject to
preemptive rights, (b) 1,671,750 Shares were reserved for issuance pursuant to
outstanding Stock Options (rights to Stock Options exercisable into 230,500
shares have vested as of the date hereof), (c) 700,144 Shares were reserved for
issuance pursuant to the warrants set forth on Schedule 4.2(c) (the "Warrants"),
(d) 262,793 Shares were reserved for issuance pursuant to the Company's Third
Amended and Restated Joint Plan of Reorganization, dated January 17, 1992, as
amended (the "POR"), (e) 6,000 Shares were reserved for issuance to certain
Persons who are investors in the "Hearthside" joint venture (the "Hearthside
Shares") and (f) no shares of Preferred Stock were issued and outstanding. Since
December 31, 1995, the Company has not issued any additional shares of capital
stock other than pursuant to the exercise or conversion of Stock Options and
Warrants or pursuant to the POR. Except for the Stock Options and Warrants or
pursuant to the POR, Shares issued pursuant thereto and as set forth above in
this Section 4.2(a), there are not now, and at the Effective Time there will not
be, any shares of capital stock of the Company issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character obligating the Company to issue,
transfer or sell any of its securities. Immediately prior to the consummation of
the Offer, after giving effect to the transactions contemplated by Section
2.9(a), assuming (i) the Bankruptcy Order is obtained, (ii) the Warrants are
fully exercised, (iii) the warrants issued pursuant to an Acquisition Agreement
dated as of April 18, 1994 are cancelled and extinguished, and (iv) the rights
of Persons to receive the Hearthside Shares are cancelled, 23,239,975 Shares
will be issued and outstanding and, except for the Stock Options, there will not
be any subscriptions, options, warrants, calls, rights, convertible securities
or other agreements or commitments of any character obligating the Company to
issue, transfer or sell any of its securities.
(b) Schedule 4.2(b) sets forth the outstanding shares of capital stock of,
or ownership interests in, each Subsidiary of the Company and the registered
owners thereof. All of such shares and interests have been validly issued and
are fully paid and nonassessable and, with respect to shares and interests owned
by the Company and its Subsidiaries, are owned free
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and clear of all Liens (as defined below) except as set forth on Schedule
4.2(b). Except as set forth on Schedule 4.2(b), there are not now, and at the
Effective Time there will not be, any outstanding subscriptions, options,
warrants, calls, rights, convertible securities or other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of any of the Company's Subsidiaries, or otherwise obligating
the Company or any such Subsidiary to issue, transfer or sell any such
securities. For purposes of this Agreement, "LIEN" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind whatsoever in respect of such asset.
(c) Except as set forth on Schedule 4.2(c), there are no voting trusts or
shareholder agreements or agreements providing for the issuance of capital stock
to which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its Subsidiaries.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board and no other corporate proceedings on the part of the Company, including
any approval by the shareholders of the Company, are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than with
respect to the Merger, the approval and adoption of this Agreement by the
holders of the requisite number of the outstanding Shares). This Agreement has
been duly and validly executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms. The affirmative vote of the holders of two-thirds of
the Shares is the only vote of the holders of any class or series of Company
capital stock necessary to approve the Merger.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for any
applicable requirements of the Exchange Act, the Securities Act of 1933, as
amended, and all rules and regulations thereunder (the "SECURITIES ACT"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), the filing and recordation of articles of merger as required by the IBCL,
filing with and approval of the any national securities exchange (including
NASDAQ) on which the Shares are listed and traded and the SEC with respect to
the delisting and deregistering of the Shares, and such filings and approvals as
may be required under the "takeover" or "blue sky" Laws of various states,
neither the execution and delivery of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the articles or
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, (ii) require on the part of the Company or any of its Subsidiaries
any filing with, or the obtaining of any permit, authorization, consent or
approval of, any governmental or regulatory authority or any third party, (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation, acceleration or payment, or to the
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creation of a lien or encumbrance) under any of the terms, conditions or
provisions of any note, mortgage, indenture, other evidence of indebtedness,
guarantee, license, agreement or other contract, instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which any of them
or any of their assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their assets, except for such of the foregoing in clauses
(ii), (iii) and (iv) above that are set forth on Schedule 4.4 or which could not
in the aggregate have or constitute a Material Adverse Effect.
SECTION 4.5. ABSENCE OF CERTAIN CHANGES. Except (a) as set forth in
Schedule 4.5 or as disclosed to Parent by the Company in a writing which makes
express reference to this Section 4.5, (b) as set forth in the Company's Annual
Report on Form 10-K for the year ended March 31, 1995 (the "FORM 10-K") or any
other document filed prior to the date hereof pursuant to Section 13(a) or 15(d)
of the Exchange Act, or (c) as contemplated by this Agreement, from December 31,
1995 until the date hereof, neither the Company nor any of its Subsidiaries has
(x) taken any of the actions prohibited by Section 6.1 hereof or suffered any
events or changes that, in each case, either individually or in the aggregate,
would result in or constitute a Material Adverse Effect, (y) conducted its
business or operations other than in the ordinary and usual course of business,
consistent with past practices or (z) changed any accounting principles used for
purposes of financial reporting.
SECTION 4.6. NO UNDISCLOSED LIABILITIES. Except (a) for liabilities
incurred in the ordinary course of business consistent with past practice, (b)
transaction expenses incurred in connection with this Agreement, (c) liabilities
which singly or in the aggregate could not reasonably be expected to have a
Material Adverse Effect, and (d) as set forth in Schedule 4.6, from December 31,
1995 until the date hereof, neither the Company nor any of its Subsidiaries has
incurred any liabilities that would be required to be reflected or reserved
against in a consolidated balance sheet of the Company and its Subsidiaries
prepared in accordance with generally accepted accounting principles as applied
in preparing the consolidated balance sheet of the Company and its Subsidiaries
as of March 31, 1995 contained in the Form 10-K.
SECTION 4.7. REPORTS.
(a) The Company has filed all reports, forms, statements and other
documents required to be filed with the SEC pursuant to the Exchange Act from
and including June 30, 1993 (collectively, including any financial statements or
schedules included or incorporated by reference therein, the "COMPANY SEC
DOCUMENTS"). Each of the Company SEC Documents, as of its filing date and at
each time thereafter when the information included therein was required to be
updated pursuant to the rules and regulations of the SEC, complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act. None of the Company SEC Documents, as of their respective filing
dates or any date thereafter when the information included therein was required
to be updated pursuant to the rules and regulations of the SEC, contained or
will contain any untrue statement of a material fact or omitted or will omit to
state
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a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the consolidated balance sheets (including the related
notes) included in the Company SEC Documents filed prior to or after the date of
this Agreement (but prior to the date on which the Offer is consummated, and
excluding the Company SEC Documents described in Section 4.8 hereof) fairly
presents or will fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof, and the other related statements (including the related notes)
included therein fairly present or will fairly present in all material respects
the consolidated results of operations and the cash flows of the Company and its
Subsidiaries for the respective periods or as of the respective dates set forth
therein. Each of the financial statements (including the related notes) included
in the Company SEC Documents filed prior to or after the date of this Agreement
(but prior to the date on which the Offer is consummated, and excluding the
Company SEC Documents described in Section 4.8 hereof) has been prepared or will
be prepared in all material respects in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
(i) as otherwise noted therein, (ii) to the extent required by changes in
generally accepted accounting principles or (iii) in the case of unaudited
financial statements, normal year-end audit adjustments.
(b) The Company has heretofore made available or promptly will make
available to Purchaser a complete and correct copy of any amendments or
modifications, which have not yet been filed with the SEC, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act.
SECTION 4.8. SCHEDULE 14D-9; OFFER DOCUMENTS; PROXY STATEMENT. None of
the information (other than information provided in writing by Parent or
Purchaser for inclusion therein) included in the Schedule 14D-9, the Proxy
Statement or any other document filed or to be filed by or on behalf of the
Company with the SEC or any other governmental entity in connection with the
transactions contemplated by this Agreement, or supplied by the Company for
inclusion in the Offer Documents, including any amendments to any of the
foregoing, will be false or misleading with respect to any material fact or will
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading; provided, that the foregoing shall not apply to
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information supplied by or on behalf of Parent or Purchaser in writing
specifically for inclusion or incorporation by reference in any such document.
The Schedule 14D-9 and the Proxy Statement, including any amendments thereto,
will comply in all material respects with the Exchange Act and the Securities
Act.
SECTION 4.9. NO DEFAULT. Except as set forth in Schedule 4.9 and except for
defaults or violations which, in the aggregate, would not have or constitute a
Material Adverse Effect, neither the Company nor any of its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its charter, by-laws or other governing documents, (ii) any
note, mortgage, indenture, other evidence of indebtedness, guarantee, license,
agreement or
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other contract, instrument or contractual obligation to which the Company or any
of its Subsidiaries is now a party or by which they or any of their assets may
be bound, or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its Subsidiaries.
SECTION 4.10. LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth in the Company SEC Documents or on Schedule
4.10(a), there are no actions, suits, claims, proceedings or investigations
pending or, to the knowledge of the executive officers of the Company,
threatened, involving the Company or any of its Subsidiaries or any of their
respective assets (or any Person whose liability therefrom may have been
retained or assumed by the Company or any of its Subsidiaries either
contractually or by operation of Law), by or before any court, governmental or
regulatory authority or by any third party which, either individually or in the
aggregate, would have or constitute a Material Adverse Effect. None of the
Company, any of its Subsidiaries or any of their respective assets is subject to
any outstanding order, writ, injunction or decree which individually or in the
aggregate, in the future would have or constitute a Material Adverse Effect.
(b) Except as disclosed by the Company in the Company SEC Documents or
Schedule 4.10(b), the Company and its Subsidiaries are now being and in the past
have been operated in substantial compliance with all Laws except for violations
which individually or in the aggregate do not and will not have or constitute a
Material Adverse Effect.
(c) Without limiting the foregoing, except for those matters which
individually or in the aggregate would not have or constitute a Material Adverse
Effect and those matters set forth in Schedule 4.10(c), to the knowledge of the
executive officers of the Company, (i) the business of the Company is not being,
and has not in the last five years been, conducted in violation of any
applicable Environmental Laws (as defined below); (ii) the business of the
Company has not made, caused or contributed to any material release of any
hazardous or toxic waste, substance or constitute, into the environment, and
there are no hazardous wastes or toxic substances in, on, over or under the real
property owned, leased, managed or used by the Company on any of its
Subsidiaries; and (iii) neither the Company nor any of its Subsidiaries is
subject to any compliance agreement or settlement agreement from an alleged
violation of any Environmental Laws. For purposes of this Agreement,
"ENVIRONMENTAL LAWS" means all applicable Laws relating to pollution or
protection of the environment, including the Resource Conservation and Recovery
Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic
Substances Control Act and the Comprehensive Environmental Response,
Compensation and Liability Act.
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except for those matters set forth in Schedule 4.11(a) and such of the
following as would not have a Material Adverse Effect, (i) each "employee
benefit plan" (as
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defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and all other employee benefit, bonus, incentive, stock
option (or other equity-based), severance, change in control, welfare (including
post-retirement medical and life insurance) and fringe benefit plans (whether or
not subject to ERISA) maintained or sponsored by the Company or its Subsidiaries
or any trade or business, whether or not incorporated, that would be deemed a
"single employer" within the meaning of Section 4001 of ERISA (an "ERISA
AFFILIATE"), for the benefit of any employee or former employee of the Company
or any of its ERISA Affiliates (the "PLANS") is, and has been, operated in all
material respects in accordance with its terms and in substantial compliance
(including the making of governmental filings) with all applicable Laws,
including ERISA and the applicable provisions of the Internal Revenue Code of
1986, as amended (the "CODE"), (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service (the "IRS") to be so qualified, (iii) no material
withdrawal liability with respect to any "multiemployer pension plan" (as
defined in Section 3(37) of ERISA) would be incurred by the Company and its
ERISA Affiliates if withdrawal from such plan were to occur on the Effective
Time, (iv) no "reportable event," as such term is defined in Section 4043(c) of
ERISA (for which the 30-day notice requirement to the Pension Benefit Guaranty
Corporation ("PBGC") has not been waived), has occurred with respect to any Plan
that is subject to Title IV of ERISA, and (v) there are no material pending or,
to the knowledge of the executive officers of the Company, threatened claims
(other than routine claims for benefits) by, on behalf of or against any of the
Plans or any trusts related thereto other than routine benefit claim matters.
(b) (i) No Plan has incurred an "accumulated funding deficiency" (as
defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, (ii) neither the Company nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA except for required premium payments to the
PBGC, which payments have been made when due, and no events have occurred which
are reasonably likely to give rise to any liability of the Company or an ERISA
Affiliate under Title IV of ERISA or which could reasonably be anticipated to
result in any claims being made against Purchaser by the PBGC, and (iii) neither
the Company nor any ERISA Affiliate has incurred any material withdrawal
liability (including any contingent or secondary withdrawal liability) within
the meaning of Sections 4201 and 4204 of ERISA to any "multiemployer plan"
(within the meaning of Section 3(37) of ERISA) which has not been satisfied in
full.
(c) Except as set forth on Schedule 4.11(c), with respect to each Plan that
is subject to Title IV of ERISA, (i) the Company has provided to Purchaser
copies of the most recent actuarial valuation report prepared for such Plan
prior to the date hereof, (ii) the assets and liabilities in respect of the
accrued benefits as set forth in the most recent actuarial valuation report
prepared by the Plan's actuary fairly present the funded status of such Plan in
all material respects, and (iii) since the date of such valuation report there
has been no material adverse change in the funded status of any such Plan.
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(d) Neither the Company nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan or multiemployer plan which, in either case
has resulted or could result in the imposition of a material Lien or the posting
of a material bond or other material security under ERISA or the Code.
(e) Except as otherwise set forth on Schedule 4.11(e) or as expressly
provided for in this Agreement, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or officer of the Company or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer.
(f) Except as set forth on Schedule 4.11(f), the Company and its
Subsidiaries do not have any employment or consulting agreements, written or
oral, with any Company Employees (as defined in Section 6.8).
SECTION 4.12. ASSETS; REAL PROPERTY; INTELLECTUAL PROPERTY; FACILITIES.
(a) Except as set forth on Schedule 4.12(a), the Company and its
Subsidiaries own or have rights to use all assets (other than real property)
necessary to permit the Company and its Subsidiaries to conduct their business
as it is currently being conducted except where the failure to own or have the
right to use such assets would not, individually or in the aggregate, have or
constitute a Material Adverse Effect.
(b) Schedule 4.12(b) identifies all real property owned or leased by the
Company or its Subsidiaries. Except as set forth on Schedule 4.12(b), the
Company has, either directly or through its Subsidiaries, (i) good, valid and
marketable or indefeasible title to, free and clear of any Liens other than
Permitted Liens (as defined below), or (ii) rights by lease or other agreement
to use, all such real property. The term "PERMITTED LIENS" shall mean (i) Liens
for water, sewage and similar charges and current taxes and assessments not yet
due and payable or being contested in good faith, (ii) mechanics', carriers',
workers', repairers', materialmen's, warehousemen's and other similar Liens
arising or incurred in the ordinary course of business, (iii) Liens that do not
secure debt as would not in the aggregate have a Material Adverse Effect, (iv)
Liens arising or resulting from any action taken by Parent or Purchaser, and (v)
Liens securing indebtedness described in, or created pursuant to documents filed
as exhibits pursuant to, the Company SEC Documents. All real property leases of
property (excluding for purposes of this sentence leases with residents of
Facilities) under which the Company or any of its Subsidiaries is a lessee or
lessor are valid, binding and enforceable in all material respects in accordance
with their terms, and there are no existing material defaults thereunder.
(c) Neither the Company or any of its Subsidiaries now or in the past has
used Intellectual Property (as defined below) which conflicts with or infringes
upon any proprietary rights of others except where such conflict or infringement
would not, individually or in the aggregate, have or constitute a Material
Adverse Effect. "INTELLECTUAL PROPERTY" means
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trademarks, trade names, service marks, service names, mark registrations,
logos, assumed names, copyright registrations, patents and all applications
therefor and all other similar proprietary rights.
(d) Schedule 4.12(d) sets forth each residential community, retirement
housing community, continuing care community, skilled nursing facility, assisted
living facility or other residence or group of residences (each, a "FACILITY")
owned, operated, managed or used by the Company or any of its Subsidiaries,
whether such Facility is owned, operated, managed or used by the Company or one
of its Subsidiaries and, if a Subsidiary, the ownership interest of the Company
and its Subsidiaries in such Subsidiary and the nature of any minority ownership
interests, if any, in such Subsidiary.
SECTION 4.13. CERTAIN CONTRACTS AND ARRANGEMENTS. Except as set forth on
Schedule 4.13, during the twelve months immediately prior to the date hereof, no
Material Contract (as defined below) to which the Company or any of its
Subsidiaries is a party has been cancelled or otherwise terminated and during
such time the Company has not been threatened with any such cancellation or
termination except, in each case, for cancelled or terminated contracts which,
individually or in the aggregate, would not have or constitute a Material
Adverse Effect. "Material Contract" mean any agreement, written or oral, to
which the Company or one of its Subsidiaries is a party or by which any of their
assets are bound that either (i) obligates the Company and its Subsidiaries to
pay amounts in excess of $500,000, (ii) is a Facility management or similar
agreement, (iii) relates to the provision or procurement of goods or services to
or from an affiliate, (iv) involves a material joint venture or partnership
arrangement, (v) involves an acquisition or divestiture with a price in excess
of $1,000,000 or (vi) relates to the ownership or lease of material real
property.
SECTION 4.14. TAXES. Except as otherwise disclosed on Schedule 4.14 and
except for those matters which, either individually or in the aggregate, would
not result in a Material Adverse Effect:
(a) The Company and each of its Subsidiaries have filed (or have had filed
on their behalf) or will file or cause to be filed, all Tax Returns (as defined
in Section 4.14(i)(3) hereof) required by applicable Law to be filed by any of
them prior to the consummation of the Offer, and all such Tax Returns and
amendments thereto are or (when filed prior to the consummation of the Offer)
will be true, complete and correct in all material respects.
(b) The Company and each of its Subsidiaries have paid (or have had paid on
their behalf) all Taxes (as defined in Section 4.14(i)(2) hereof) due with
respect to any period ending prior to or as of the expiration of the Offer), or
where payment of Taxes is not yet due, have established (or have had established
on their behalf and for their sole benefit and recourse), or will establish or
cause to be established before the consummation of the Offer, an adequate
accrual in accordance with generally accepted accounting principles for the
payment of all such Taxes which have accrued prior to the expiration of the
Offer. No claim has been made by any
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tax authority that the Company or any of its Subsidiaries is or may be subject
to the payment of taxes in jurisdiction in which the Company and its
Subsidiaries have not filed Tax Returns.
(c) There are no Liens for any Taxes upon the assets of the Company or any
of its Subsidiaries, other than statutory liens for Taxes not yet due and
payable and Liens for real estate Taxes being contested in good faith.
(d) No Audit (as defined in Section 4.14(i)(1)) is pending with respect to
any Taxes due from the Company or any of its Subsidiaries. There are no
outstanding waivers extending any statute of limitations relating to the payment
of Taxes due from the Company or any of its Subsidiaries for any taxable period
ending prior to the expiration of the Offer.
(e) Neither the Company nor any of its Subsidiaries has received any
written notice of deficiency, assessment or adjustment from the Internal Revenue
Service or any other domestic or foreign governmental tax authority that has not
been fully paid or finally settled, and any such deficiency, adjustment or
assessment shown on Schedule 4.14 is being contested in good faith through
appropriate proceedings and adequate reserves have been established on the
Company's financial statements therefor. There are no deficiencies, assessments
or adjustments pending, assessed or, to the knowledge of the executive officers
of the Company, threatened, with respect to the Company or any of its
Subsidiaries for which written notice has not been received.
(f) Neither the Company nor any of its Subsidiaries is a party to, is bound
by, or has any obligation under, a tax sharing or tax allocation agreement or
arrangement for the allocation, apportionment, sharing, indemnification or
payment of Taxes.
(g) Neither the Company nor any of its Subsidiaries has filed a consent
under Section 341(f) of the Code.
(h) Except as provided in this Agreement, as disclosed in the Company SEC
Documents or as described in Schedule 4.14(h), neither the Company nor any of
its Subsidiaries is a party to any agreement, contract, or other arrangement
that would result, separately or in the aggregate, in the requirement to pay any
"excess parachute payments" within the meaning of Section 280G of the Code or
any gross-up or additional payment in connection with such an agreement,
contract or arrangement.
(i) For purposes of this Section 4.14, the following capitalized terms have
the following meanings:
(1) "AUDIT" shall mean any audit, assessment or other
examination of Taxes or Tax Returns by the IRS or by any other domestic or
foreign governmental authority responsible for the administration of any
Taxes, proceeding or appeal of such proceeding relating to Taxes.
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(2) "TAXES" shall mean all federal, state, local and foreign
taxes, and other assessments of a similar nature (whether imposed directly
or through withholding) including but not limited to income, excise,
property, gross receipts, sales, use (or any similar taxes), gains,
transfer, franchise, payroll, value-added, withholding, Social Security,
business license fees, customs, duties and other taxes, assessments,
charges, or other fees imposed by a governmental authority, including any
interest, additions to tax or penalties applicable thereto, whether or not
contested.
(3) "TAX RETURNS" shall mean all Federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms
and information returns and any amended Tax Return relating to Taxes.
SECTION 4.15. LABOR MATTERS. Except as set forth on Schedule 4.15,
neither the Company nor any of its Subsidiaries has, since July 1, 1993, (i)
been subject to, or threatened with, any material strike, lockout or other labor
dispute or engaged in any unfair labor practice, the result of which had or
constituted, or could reasonably be expected to have or constitute, a Material
Adverse Effect, or (ii) received notice of any pending petition for
certification before the National Labor Relations Board with respect to any
material group of Company Employees who are not currently organized.
SECTION 4.16. LICENSES AND PERMITS. Each of the Company and its
Subsidiaries holds all licenses, permits, certificates of authority or
franchises (collectively, "PERMITS") that are required by any governmental
entity to permit each of them to conduct their respective businesses as now
conducted, and all such Permits are valid and in full force and effect and will
remain so upon consummation of the transactions contemplated by this Agreement,
except where the failure to hold any such Permits or the failure to keep such
Permits in effect could not, individually or in the aggregate, have or
constitute a Material Adverse Effect. To the knowledge of the executive
officers of the Company, no suspension, cancellation or termination of any of
such Permits is threatened or imminent that could be or constitute a Material
Adverse Effect.
SECTION 4.17. BROKERS. Except as set forth on Schedule 4.17, no
broker, finder, investment banker or other intermediary is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf the Company or any of its Subsidiaries.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent, warrant and covenant to and with the
Company as follows:
SECTION 5.1. ORGANIZATION. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the Laws
of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority would not, in the
aggregate, have a Material Adverse Effect (as defined below) on Parent or
Purchaser. When used in connection with Parent or Purchaser, the term "MATERIAL
ADVERSE EFFECT" means any change, effect or circumstance that could reasonably
be expected to have a material adverse effect on the business, results of
operations, financial condition or prospects of Parent and its Subsidiaries
taken as a whole, or (ii) the ability of Parent or Purchaser to perform their
material obligations under this Agreement. Parent beneficially owns, directly
or indirectly, all of the outstanding capital stock of Purchaser.
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of
Parent and Purchaser has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of Purchaser and Parent and no other corporate or other
proceedings on the part of Parent, Purchaser or any of their affiliates are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered
by each of Parent and Purchaser and constitutes the valid and binding agreement
of each of Parent and Purchaser, enforceable against each of Parent and
Purchaser in accordance with its terms.
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
applicable requirements of the Securities Act, the Exchange Act, the HSR Act,
the filing and recordation of articles of merger as required by the IBCL, and
any such filings and approvals as may be required under the "takeover" or "blue
sky" Laws of various states and as contemplated by this Agreement, neither the
execution and delivery of this Agreement by Parent or Purchaser nor the
consummation by Parent or Purchaser of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the charter or by-
laws of Parent or Purchaser, (ii) require on the part of Parent or Purchaser any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any governmental or regulatory authority or any third party, (iii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation, acceleration or payment, or to the creation of a lien or
encumbrance) under any of the terms, conditions or
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provisions of any note, mortgage, indenture, other evidence of indebtedness,
guarantee, license, agreement or other contract, instrument or contractual
obligation to which Parent, Purchaser or any of their respective Subsidiaries is
a party or by which any of them or any of their assets may be bound, or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, Purchaser, any of their Subsidiaries or any of their
assets, except for such of the foregoing in clauses (ii), (iii) and (iv) above
that are set forth on Schedule 5.3 or which would not in the aggregate have or
constitute a Material Adverse Effect.
SECTION 5.4. OFFER DOCUMENTS; PROXY STATEMENT; SCHEDULE 14D-9.
Neither the Offer Documents nor any other document filed or to be filed by or on
behalf of Parent or Purchaser with the SEC or any other governmental entity in
connection with the transactions contemplated by this Agreement contained when
filed or will, at the respective times filed with the SEC or other governmental
entity, or at any time thereafter when the information included therein is
required to be updated pursuant to applicable law, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading; provided, that the
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foregoing shall not apply to information supplied by or on behalf of the Company
specifically for inclusion or incorporation by reference in any such document.
The Offer Documents will comply as to form in all material respects with the
provisions of the Exchange Act. None of the information supplied by Parent or
Purchaser in writing for inclusion in the Proxy Statement or the Schedule 14D-9
will, at the respective times that the Proxy Statement and the Schedule 14D-9 or
any amendments or supplements thereto are filed with the SEC and are first
published or sent or given to holders of Shares, and in the case of the Proxy
Statement, at the time that it or any amendment or supplement thereto is mailed
to the Company's shareholders, at the time of the Shareholders' Meeting or at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 5.5. FINANCING. Prior to the expiration of the Offer,
Purchaser will have all funds necessary for the purchase of the Shares pursuant
to the Offer. Prior to the Effective Time, Purchaser will have all funds
necessary to consummate the Merger and to consummate all other transactions
contemplated hereunder to be consummated by it, Parent or the Company.
SECTION 5.6. BROKERS. No broker, finder, investment banker or other
intermediary is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Purchaser.
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ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement or as set forth on Schedule 6.1, during the
period from the date of this Agreement to the consummation of the Offer and, if
Parent has made a request therefor pursuant to Section 1.4 hereof, until its
Designated Directors (as defined in Section 8.4 hereof) shall constitute in
their entirety a majority of the Board, the Company and its Subsidiaries will
each conduct its operations according to its ordinary course of business,
consistent with past practice, and will use all reasonable efforts to (i)
preserve intact its business organization, (ii) maintain its material rights and
franchises, (iii) keep available the services of its officers and key employees,
and (iv) keep in full force and effect insurance comparable in amount and scope
of coverage to that maintained as of the date hereof (collectively, the
"ORDINARY COURSE OBLIGATIONS"). Without limiting the generality of and in
addition to the foregoing, and except as set forth on Schedule 6.1 or otherwise
contemplated by this Agreement, prior to the time specified in the preceding
sentence, neither the Company nor any of its Subsidiaries will, without the
prior written consent of Parent:
(a) amend its charter, by-laws or other governing documents;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (except by the Company in connection with
Stock Options, Warrants and the POR) or amend any of the terms of any such
securities outstanding on the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock or
redeem or otherwise acquire any of its securities or any securities of its
Subsidiaries;
(d) (i) pledge or otherwise encumber shares of capital stock of the
Company or any of its Subsidiaries; (ii) incur, assume or prepay any long-term
debt; (iii) except in the ordinary course of business consistent with past
practices, (A) incur, assume or prepay any obligations with respect to letters
of credit or any short-term debt, (B) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
any material obligations of any other Person except wholly owned Subsidiaries of
the Company, (C) make any material loans, advances or capital contributions to,
or investments in, any other Person; (iv) change the practices of the Company
and its Subsidiaries with respect to the timing of payments or collections; or
(v) mortgage or pledge any assets or create or permit to exist any Lien
thereupon other than a Permitted Lien;
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(e) except (i) for arrangements entered into in the ordinary course of
business consistent with past practices, (ii) as required by Law or (iii) as
otherwise contemplated hereby, enter into, adopt or amend any bonus, profit
sharing, compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements of or for the benefit or welfare of
any Company Employee (or any other person for whom the Company or its
Subsidiaries will have any liability), or (except for normal increases in the
ordinary course of business that are consistent with past practices) increase in
any manner the compensation or fringe benefits of any Company Employee (or any
other person for whom the Company or its Subsidiaries will have any liability)
or pay any benefit not required by any existing plan and arrangement (including
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(f) (i) transfer, sell, lease, license or dispose of any lines of
business, Subsidiaries, divisions, operating units or Facilities (other than
Facilities that have been closed or are currently proposed to be closed) outside
the ordinary course of business, (ii) enter into any material joint venture
agreements, acquisition agreements or partnership agreements or (iii) enter into
any other material agreement, commitment or transaction outside the ordinary
course of business;
(g) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, (i) any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other Person, in each case where such action would be
material to the Company and its Subsidiaries taken as a whole or (ii) any
Facility or site upon which the Company intends to locate any Facility;
(h) except as may be required by Law, take any action to terminate or
materially amend any of its pension plans or retiree medical plans;
(i) modify, amend, terminate or waive any rights under any Material
Contract except in the ordinary course of business consistent with past
practice; provided, that the provisions of this Section 6.1(i) shall not apply
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to any arrangement, agreement or contract proposal previously submitted by the
Company or a Subsidiary thereof which proposal, upon acceptance thereof, cannot
be revised or withdrawn;
(j) effect any change in any of its methods of accounting in effect as
of December 31, 1995, except as may be required by Law or generally accepted
accounting principles;
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(k) enter into any material arrangement, agreement or contract that,
individually or in the aggregate with other material arrangements, agreements
and contracts entered into after the date hereof, would have or constitute a
Material Adverse Effect after the date hereof; and
(l) enter into a legally binding commitment with respect to, or any
agreement to take, any of the foregoing actions; provided, that with respect to
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Forum Retirement Partners, L.P. ("FRP") and Forum Retirement, Inc., FRP's
general partner ("FRI"), the Company shall be obligated only to use its
reasonable efforts to cause FRP to comply with the provisions of this Section
6.1 (subject to the fiduciary duties of FRI, if then applicable).
SECTION 6.2. ACQUISITION PROPOSALS.
(a) The Company shall, and shall cause its officers, directors,
employees, representatives and agents to, immediately cease any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal (as defined in Section 6.2(b) hereof). The Company
and its Subsidiaries will not, and will cause their respective officers,
directors, employees and investment bankers, attorneys, accountants or other
agents retained by the Company or any of its Subsidiaries not to, (i) solicit,
directly or through an intermediary, any inquiries with respect to, or the
making of, any Acquisition Proposal, or (ii) except as permitted below, engage
in negotiations or discussions with, or furnish any confidential information
relating to the Company or its Subsidiaries to, any Third Party (as defined in
Section 6.2(b)) relating to an Acquisition Proposal (other than the transactions
contemplated hereby). Notwithstanding anything to the contrary contained in
this Section 6.2, the Company (and any Person referred to above) may furnish
information to, and participate in discussions or negotiations with, any Third
Party which submits an unsolicited written Acquisition Proposal to the Company
if the Board by a majority vote determines, based as to legal matters upon the
advice of legal counsel, that furnishing such information or participating in
such discussions or negotiations is required by applicable law (including
fiduciary principles thereof); provided, that nothing herein shall prevent the
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Board from taking, and disclosing to the Company's shareholders, a position
contemplated by Rules 14D-9 and 14e-2 promulgated under the Exchange Act with
regard to any tender offer; and provided further, that the Company shall not
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enter into a written agreement providing for a Third Party Transaction (as
defined in Section 6.2(b)) except concurrently with or after the termination of
this Agreement (except with respect to confidentiality agreements to the extent
expressly provided below). The Company shall promptly provide Parent with a
reasonable description of any Acquisition Proposal received (including a summary
of all material terms of such Acquisition Proposal and, unless it is prohibited
from disclosing the same, the identity of the Person making such Acquisition
Proposal). The Company shall promptly inform Parent of the status and content
of any discussions regarding any Acquisition Proposal with a Third Party. In no
event shall the Company provide material, non-public information to any Third
Party making an Acquisition Proposal unless such party enters into a
confidentiality or similar agreement containing provisions believed by the
Company to reasonably protect the confidentiality of such information. Promptly
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after entering into any confidentiality or similar agreement with any Person on
or after February 6, 1996, the Company shall notify Parent of such event and
identify the Person with whom the agreement was executed.
(b) For purposes of this Agreement, the term "ACQUISITION PROPOSAL"
shall mean any proposal, whether in writing or otherwise, made by a Third Party
to enter into a Third Party Transaction. "THIRD PARTY TRANSACTION" means the
acquisition of beneficial ownership of all or a material portion of the assets
of, or a majority equity interest in, the Company pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer or exchange offer or other business acquisition or
combination transaction involving the Company and its Subsidiaries, including
any single or multi-step transaction or series of related transactions which is
structured to permit such Third Party to acquire beneficial ownership of any
material portion of the assets of, or a majority of the equity interest in, the
Company (other than the transactions contemplated by this Agreement). "THIRD
PARTY" means any Person other than Parent, Purchaser or any affiliate thereof.
(c) Notwithstanding any provision to the contrary herein, none of the
Company, its Subsidiaries and their respective officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents
shall engage in negotiations or discussions with, or furnish any information to,
either (x) any Person (each such Person, together with its affiliates, a "PRE-
FEBRUARY 6 PARTY") (i) with whom the Company or any representatives or agents
entered into a confidentiality agreement, (ii) with whom the Company or any of
its representatives or agents have held substantive discussions regarding a
Third Party Transaction or (iii) to whom the Company or its representatives or
agents furnished non-public information, in any such case prior to February 6,
1996, or (y) any Person who first expressed an interest in making an Acquisition
Proposal or first requested confidential information regarding the Company and
its Subsidiaries after the twentieth business day after the Offer was actually
commenced. With respect to Persons (other than Pre-February 6 Parties) who
first expressed interest in making an Acquisition Proposal or first requested
confidential information regarding the Company and its Subsidiaries prior to the
twentieth business day after the Offer was actually commenced, none of the
Company, its Subsidiaries and their respective officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents
shall engage in negotiations or discussions with, or furnish any information to,
such Persons after the twentieth business day after the Offer was actually
commenced. The Company has previously provided to Parent a complete and
accurate list of all Pre-February 6 Parties.
SECTION 6.3. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Time, upon
reasonable notice and at reasonable times, and subject to any access,
disclosure, copying or other limitations imposed by applicable Law or any of the
Company's or its Subsidiaries' contracts, the Company will give Parent and its
authorized representatives reasonable access to all Facilities, offices and
other properties and assets and to all books and records of it and its
Subsidiaries, and will permit
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Parent to make such inspections as it may reasonably require, and will cause
its officers and those of its Subsidiaries to furnish Parent with (i) such
financial and operating data and other information with respect to the Company
and its Subsidiaries as Parent may from time to time reasonably request, or (ii)
any other financial and operating data which materially affects the Company and
its Subsidiaries. Parent and its authorized representatives will conduct all
such inspections in a manner which will minimize any disruptions of the business
and operations of the Company and its Subsidiaries.
(b) Parent, Purchaser and the Company agree that the provisions of the
Confidentiality Agreement dated December 22, 1995 and the related undertaking
(collectively, the "CONFIDENTIALITY AGREEMENT") by and between Parent and the
Company shall remain binding and in full force and effect and that the terms of
the Confidentiality Agreement are incorporated herein by reference; provided
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that nothing in such undertaking shall prohibit Parent and Purchaser from
consummating the transactions contemplated by this Agreement and the Offer.
SECTION 6.4. REASONABLE EFFORTS. Subject to the terms and conditions
of this Agreement and without limitation to the provisions of Section 6.6
hereof, each of the parties hereto agrees to use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable Laws and regulations
to consummate and make effective the transactions contemplated by this Agreement
(including (i) cooperating in the preparation and filing of the Offer Documents,
the Schedule 14D-9, the Proxy Statement and any amendments to any thereof; (ii)
cooperating in making available information and personnel in connection with
presentations, whether in writing or otherwise, to prospective lenders to Parent
and Purchaser that may be asked to provide financing for the transactions
contemplated by this Agreement; (iii) taking of all action reasonably necessary,
proper or advisable to secure any necessary consents or waivers under existing
debt obligations of the Company and its Subsidiaries or amend the notes,
indentures or agreements relating thereto to the extent required by such notes,
indentures or agreements or redeem or repurchase such debt obligations; (iv)
contesting any pending legal proceeding relating to the Offer or the Merger; and
(v) executing any additional instruments necessary to consummate the
transactions contemplated hereby). In case at any time after the Effective Time
any further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall use all reasonable
efforts to take all such necessary action.
SECTION 6.5. CONSENTS AND CERTAIN ARRANGEMENTS.
(a) Each of the Company, Parent and Purchaser shall cooperate and use
their respective reasonable efforts to make all filings and obtain all consents
and approvals of governmental authorities and other third parties necessary to
consummate the transactions contemplated by this Agreement. Each of the parties
hereto will furnish to the other party such necessary information and reasonable
assistance as such other Persons may reasonably request in connection with the
foregoing.
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(b) As soon as practicable after the date hereof, Parent, Purchaser
and the Company will cause a motion to be filed with the United States
Bankruptcy Court for the Southern District of Indiana, Indianapolis Division
(the "BANKRUPTCY COURT"), requesting, and thereafter use their reasonable
efforts to obtain, the issuance of an order relating to the POR substantially to
the effect set forth on Schedule 6.5 (the "BANKRUPTCY ORDER"). Immediately
after receipt of the Bankruptcy Order, the Company will cancel all Shares
reserved for issuance under the POR.
(c) The Company will, upon the specific request of Purchaser, use
reasonable efforts to (i) exempt the Company, the Offer and the Merger from the
requirements of any state takeover Law by action of its Board and (ii) assist in
any challenge by Purchaser to the validity or applicability to the Offer or the
Merger of any state takeover Law.
SECTION 6.6. ANTITRUST FILINGS.
(a) In addition to and without limiting the agreements of Parent and
Purchaser contained in Section 6.5 hereof, Parent, Purchaser and the Company
will (i) take promptly all actions necessary to make the filings required of
Parent, Purchaser or any of their affiliates under the applicable Antitrust
Laws, (ii) comply at the earliest practicable date with any request for
additional information or documentary material received by Parent, Purchaser or
any of their affiliates from the Federal Trade Commission or the Antitrust
Division of the Department of Justice pursuant to the Antitrust Laws, and (iii)
cooperate with the Company in connection with any filing of the Company under
applicable Antitrust Laws and in connection with resolving any investigation or
other inquiry concerning the transactions contemplated by this Agreement or the
Ancillary Agreements commenced by any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice or any state attorney general.
(b) In furtherance and not in limitation of the covenants of Parent
and Purchaser contained in Section 6.5 and Section 6.6(a) hereof, Parent,
Purchaser and the Company shall each use all reasonable efforts to resolve such
objections, if any, as may be asserted with respect to the Offer or the Merger
under any Antitrust Law. If any administrative, judicial or legislative action
or proceeding is instituted (or threatened to be instituted) challenging the
Offer or the Merger as violative of any Antitrust Law, Parent, Purchaser and the
Company shall each cooperate and use reasonable efforts to contest and resist
any such action or proceeding, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (any such decree, judgment, injunction or other order
is hereafter referred to as an "ORDER") that is in effect and that restricts,
prevents or prohibits consummation of the Offer or the Merger, including by
pursuing all reasonable avenues of administrative and judicial appeal. The
entry by a court of an Order permitting the Offer or the Merger, but requiring
that any of the businesses, product lines or assets of the Company be held
separate thereafter, or an offer of settlement substantially to the foregoing
effect in any actual or threatened action, suit or proceeding, will not be
deemed a failure of the Condition specified in clause (i)(A) of Exhibit A, so
long as such action is, in the good faith judgment of Parent, unlikely to have a
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material impact on the benefits Parent anticipates from the transactions
contemplated by this Agreement.
(c) Each of the Company, Parent and Purchaser shall promptly inform
the other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
the SEC or any other governmental or regulatory authority regarding any of the
transactions contemplated hereby. Parent and/or Purchaser will promptly advise
the Company with respect to any understanding, undertaking or agreement (whether
oral or written) which it proposes to make or enter into with any of the
foregoing parties with regard to any of the transactions contemplated hereby.
(d) "ANTITRUST LAW" means the Sherman Act, as amended, the Clayton
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and
all other federal and state statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
SECTION 6.7. PUBLIC ANNOUNCEMENTS. Parent, Purchaser and the Company
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the Offer, or the Merger and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law or by obligations pursuant to any
listing agreement with any securities exchange or the NASDAQ.
SECTION 6.8. EMPLOYEE BENEFITS; EMPLOYEES.
(a) Until December 31, 1996, Parent agrees to cause the Surviving
Corporation to continue in all material respects the (i) employee benefit plans
(including all employee benefit plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended), practices and
policies which provide employee benefits to employees of the Company or any of
its Subsidiaries ("COMPANY EMPLOYEES") and (ii) compensation arrangements,
programs and plans providing employee or executive compensation or benefits, to
Company Employees; provided that no individual plan or plans must be maintained
--------
by the Surviving Corporation so long as, in the aggregate, a substantially
equivalent level of compensation or benefits is maintained.
(b) Parent agrees that the Company will honor and, on and after the
Effective Time, Parent will cause the Surviving Corporation to honor, without
offset, deduction, counterclaims, interruptions or deferment (other than
withholdings under applicable Law), all employment, severance, termination,
consulting and retirement agreements to which the Company or any of its
Subsidiaries is presently a party ("BENEFIT AGREEMENTS"), subject in all
respects to the right of the Company to amend or otherwise modify the terms and
provisions of any such Benefit Agreements in accordance with the terms thereof.
All of the Benefit Agreements
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providing for payments in excess of $100,000 are identified in reports made
available to the Purchaser pursuant to Section 4.11 or on Schedule 6.8(b).
(c) The parties will take the actions with respect to severance and
other employment-related matters set forth on Schedule 6.8(c).
SECTION 6.9. PRE-CLOSING CONSULTATION. Following the date hereof
and prior to the Effective Time, the Company shall designate a senior officer of
the Company (the "COMPANY REPRESENTATIVE") to consult with an officer of Parent
designated by Parent (the "PARENT REPRESENTATIVE") with respect to major
business decisions to be made concerning the operation of the Company and its
Subsidiaries. Such consultation shall be made on as frequent a basis as may be
reasonably requested by Parent. The parties hereto acknowledge and agree that
the agreements set forth in this Section 6.9 shall be subject to any
restrictions or limitations required under applicable Law.
SECTION 6.10. INDEMNIFICATION. For six years after the Effective
Time, Parent will cause the Surviving Corporation to indemnify, defend and hold
harmless the present and former officers, directors, employees, agents and
representatives of the Company and its Subsidiaries (including financial and
legal advisors to the Company in respect of this Agreement and the transactions
contemplated hereby), and each Person that is an affiliate of the foregoing and
has or may have liability in respect of any of the foregoing under respondeat
superior, agency, controlling person or any other theory of liability for
actions or failure to take action by another such Person (the foregoing persons
and entities, collectively, "INDEMNIFIED PARTIES"), against all losses, claims,
damages or liabilities arising out of (i) any action, suit or proceeding based
in whole or in part on this Agreement or the transactions contemplated hereby
and (ii) without limiting the generality or effect of the foregoing, any actions
or omissions occurring on or prior to the Effective Time to the full extent
permitted or required under Indiana law, the Articles of Incorporation and
By-Laws of the Company in effect at the date hereof and under all agreements to
which the Company is a party as of the date hereof set forth in Schedule 6.10,
including provisions relating to advances of expenses incurred in the defense of
any action or suit (including attorneys' fees of counsel selected by the
Indemnified Party); provided that (x) no Indemnified Party shall be entitled to
--------
indemnification under this Section 6.10 for acts or omissions that constitute
gross negligence, bad faith or willful misconduct, and (y) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under Indiana law, the Articles of
Incorporation or By-Laws of the Company or under this Section 6.10 will be made
by independent counsel selected by the Indemnified Party and reasonably
satisfactory to the Surviving Corporation. Notwithstanding the foregoing,
nothing in this Agreement will diminish or impair the rights of any Indemnified
Party under the Articles of Incorporation or By-Laws of the Company or any
agreement set forth on Schedule 6.10. The Surviving Corporation will maintain
the Company's existing officers' and directors' liability insurance ("D&O
INSURANCE") in full force and effect without reduction of coverage for a period
of three years after the Effective Time; provided that the Surviving Corporation
--------
will not be required to pay an annual premium therefor in excess of 150% of the
last annual premium paid
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prior to the date hereof (the "CURRENT PREMIUM"); and, provided, further, that
-------- -------
if the existing D&O Insurance expires, is terminated or cancelled during the
3-year period, the Surviving Corporation will use reasonable efforts to obtain
as much D&O Insurance as can be obtained for the remainder of such period for a
premium on an annualized basis not in excess of 150% of the Current Premium.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have been adopted by the affirmative vote of
the shareholders of the Company by the requisite vote in accordance with
applicable Law, if required by applicable Law;
(b) No statute, rule, regulation, Order, decree, ruling or injunction
shall have been enacted, entered, promulgated, enforced or deemed applicable by
any court or governmental authority which prohibits the consummation of the
Merger;
(c) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired; and
(d) The Offer shall not have been terminated or expired in accordance
with its terms and the terms of this Agreement prior to the purchase of any
Shares.
SECTION 7.2. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER. The obligation of the Company to effect the Merger is
further subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of Parent and Purchaser
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time as if made at and as of such time; and
(b) Each of Parent and Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Effective Time pursuant to the terms hereof.
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Parent and Purchaser will furnish the Company with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 7.2 as the Company may reasonably request.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER TO
EFFECT THE MERGER. The obligations of Parent and Purchaser to effect the Merger
are further subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time as if made at and as such time; and
(b) The Company shall have performed in all material respects each of
its obligations under this Agreement required to be performed by it at or prior
to the Effective Time pursuant to the terms hereof.
The Company will furnish Parent and Purchaser with such certificates and other
documents to evidence the fulfillment of the conditions set forth in this
Section 7.3 as Parent or Purchaser may reasonably request.
SECTION 7.4. EXCEPTION. The conditions set forth in Sections 7.2
and 7.3 hereof shall cease to be conditions to the obligations of any of the
parties hereto if Purchaser shall have accepted for payment and paid for Shares
validly tendered pursuant to the Offer or if Purchaser fails to accept for
payment any Shares pursuant to the Offer in violation of the terms thereof.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and
the Offer and the Merger may be abandoned at any time (notwithstanding approval
of the Merger by the shareholders of the Company) prior to the Effective Time:
(a) by mutual written consent of Parent, Purchaser and the Company;
(b) by Parent, Purchaser or the Company if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the consummation of the Offer or
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable;
30
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(c) by Parent and Purchaser if due to an occurrence or circumstance
which would result in a failure to satisfy any of the Conditions, but subject to
the terms of this Agreement, Purchaser shall have (i) failed to commence the
Offer within the time required by Regulation 14D under the Exchange Act, (ii)
terminated the Offer or (iii) failed to pay for Shares pursuant to the Offer on
or prior to July 15, 1996;
(d) by the Company if (i) there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of the
Company and Purchaser shall have (A) failed to commence the Offer within the
time required by Regulation 14D under the Exchange Act, (B) terminated the Offer
or (C) failed to pay for Shares pursuant to the Offer on or prior to July 15,
1996 or (ii) prior to the twentieth business day after the Offer was actually
commenced, a Third Party other than a Pre-February 6 Party shall have made an
offer that the Board determines, based as to legal matters on the advice of
legal counsel, it is required to accept by applicable law (including fiduciary
principles thereof), provided, that such termination under this clause (ii)
--------
shall not be effective until payment of the fee required by Section 8.3(a)
hereof and the fees and expenses of Section 8.3(b) hereof;
(e) by Parent or Purchaser prior to the purchase of Shares pursuant to
the Offer, if (i) there shall have been a breach of any representation or
warranty on the part of the Company under this Agreement having a Material
Adverse Effect, (ii) there shall have been a breach of any covenant or agreement
on the part of the Company under this Agreement resulting in a Material Adverse
Effect or materially adversely affecting the consummation of the Offer, which
shall not have been cured prior to 20 days following notice of such breach,
(iii) the Board (A) shall have withdrawn its approval or recommendation of the
Offer, the Merger or this Agreement, (B) shall have modified (including by
amendment of Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Merger or this Agreement, (C) shall have
recommended to the Company's shareholders another offer, or (D) shall have
adopted any resolution to effect any of the foregoing; provided that a change in
--------
the reasons for any such recommendation will not be deemed to be adverse to
Purchaser so long as the Board continues to recommend that shareholders tender
their Shares pursuant to the Offer; or (iv) there shall not have been validly
tendered and not withdrawn prior to the expiration of the Offer at least two-
thirds of the Shares, determined on a Fully Diluted Basis, and on or prior to
such date a Person or group (other than Parent or Purchaser) shall have made and
not withdrawn a proposal with respect to a Third Party Transaction;
(f) by the Company if (i) there shall have been a breach of any
representation or warranty in this Agreement on the part of Parent or Purchaser
which materially adversely affects the consummation of the Offer or (ii) there
shall have been a material breach of any covenant or agreement in this Agreement
on the part of Parent or Purchaser which materially adversely affects the
consummation of the Offer which shall not have been cured prior to 20 days
following notice of such breach; or
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(g) by Parent, Purchaser or the Company if the consummation of the
Offer shall not have occurred on or prior to July 15, 1996.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to and in conformity with Section 8.1,
this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or shareholders, other than the provisions of this Section 8.2 and Sections
6.3(b), 8.3, 9.3 and 9.10 hereof. Nothing contained in this Section 8.2 shall
relieve any party from liability for any breach of this Agreement. For a period
of one year from any termination of this Agreement, (i) the Company and its
Subsidiaries will not solicit for hire any of the employees of Purchaser or its
Subsidiaries with whom the Company and its Subsidiaries and their
representatives and agents have had contact during the investigation and
negotiation of this Agreement or otherwise prior to the termination of this
Agreement and (ii) Parent and its Subsidiaries will not solicit for hire any of
the employees of the Company or its Subsidiaries with whom the Parent and its
Subsidiaries and their representatives and agents have had contact during the
investigation and negotiation of this Agreement or otherwise prior to the
termination of this Agreement.
SECTION 8.3 FEES AND EXPENSES.
(a) If:
(i) Parent or Purchaser terminates this Agreement pursuant to
Section 8.1(e)(ii) or 8.1(e)(iv) hereof and within 12 months thereafter the
Company consummates a transaction constituting a Third Party Transaction
involving any Person (or any affiliate thereof) (A) with whom the Company
or its representatives or agents have had substantive discussions regarding
a Third Party Transaction, (B) to whom the Company or its representatives
or agents furnished non-public information with a view to a Third Party
Transaction or (C) who submitted a proposal or expressed an interest in a
Third Party Transaction, in the case of each of clauses (A), (B) and (C)
after the date hereof and prior to such termination; provided, that a sale
--------
of assets by the Company shall constitute a Third Party Transaction for
purposes of this Section 8.3(a)(i) only if a majority of the assets of the
Company are involved;
(ii) Parent or Purchaser terminates this Agreement pursuant to
Section 8.1(e)(iii) hereof; or
(iii) the Company terminates this Agreement pursuant to
Section 8.1(d)(ii) hereof;
then, in each case, the Company shall pay to Parent, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, a fee, in cash,
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of $14 million; provided, that the Company in no event shall be obligated to pay
--------
more than one such $14 million fee with respect to all such agreements and
occurrences and such termination.
(b) If Parent is entitled to receive the $14 million fee under Section
8.3(a) hereof, then the Company shall reimburse Parent, Purchaser and their
affiliates (not later than one business day after submission of statements
therefor) for up to $1 million of actual documented out-of-pocket fees and
expenses actually incurred by any of them or on their behalf in connection with
the Offer and the proposed Merger (including fees payable to consultants,
outside contractors, counsel to any of the foregoing and accountants), whether
incurred prior to or after the date hereof. The Company shall in any event pay
the amount requested within one business day of such request, subject to the
Company's right to demand a return of any portion as to which invoices are not
received in due course.
(c) Except as specifically provided in this Section 8.3 each party
shall bear its own respective expenses incurred in connection with this
Agreement, the Offer and the Merger, including the preparation, execution and
performance of this Agreement and the transactions contemplated hereby and
thereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants.
SECTION 8.4. AMENDMENT. This Agreement may be amended by action
taken by the Company, Parent and Purchaser at any time before or after adoption
of the Merger by the shareholders of the Company, if any; provided that (a) in
--------
the event that any persons designated by Parent pursuant to Section 1.4 hereof
(such directors are hereinafter referred to as the "DESIGNATED DIRECTORS")
constitute in their entirety a majority of the Company's Board, no amendment
shall be made which decreases the cash price per Share or which adversely
affects the rights of the Company's shareholders hereunder without the approval
of a majority of the Continuing Directors (as hereafter defined) if at the time
there shall be any Continuing Directors and (b) after the date of adoption of
the Merger Agreement by the shareholders of the Company (if shareholder approval
of the Merger is required by applicable Law), no amendment shall be made which
decreases the cash price per Share or which adversely affects the rights of the
Company's shareholders hereunder without the approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the parties. For purposes hereof, the term "CONTINUING DIRECTOR"
shall mean (a) any member of the Board as of the date hereof, (b) any member of
the Board who is unaffiliated with, and not a Designated Director or other
nominee of, Parent or Purchaser or their respective Subsidiaries, and (c) any
successor of a Continuing Director who is (i) unaffiliated with, and not a
Designated Director or other nominee of, Parent or Purchaser or their respective
Subsidiaries and (ii) recommended to succeed a Continuing Director by a majority
of the Continuing Directors then on the Board.
SECTION 8.5. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document, certificate or writing delivered pursuant
hereto or
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(c) waive compliance with any of the agreements or conditions of the other
parties hereto contained herein; provided that (x) in the event that any
--------
Designated Directors constitute in their entirety a majority of the Board, no
extensions or waivers shall be made which adversely affect the rights of the
Company's shareholders hereunder without the approval of a majority of the
Continuing Directors if at the time there shall be any Continuing Directors and
(y) after the date of adoption of the Merger Agreement by the shareholders of
the Company, no extensions or waivers shall be made which adversely affect the
rights of the Company's shareholders hereunder without the approval of such
shareholders. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SURVIVAL. If the Merger occurs, the representations,
warranties, covenants and agreements made herein shall not survive beyond the
Effective Time; provided that the covenants and agreements contained in Sections
--------
2.7, 2.9, 3.1, 3.2, 6.4, 6.5, 6.6, 6.8, 6.10, 8.2, 8.3, 8.4, 8.5, 9.3, 9.5 and
9.10 hereof shall survive beyond the Effective Time without limitation. If the
Agreement is terminated in accordance with Article VIII, the representations,
warranties, covenants and agreements made herein shall not survive beyond such
termination; provided that the covenants and agreements contained in Sections
--------
6.3(b), 8.1, 8.2, 8.3 and 9.3 shall survive any such termination without
limitation.
SECTION 9.2. ENTIRE AGREEMENT. Except for the provisions of the
Confidentiality Agreement which shall continue in full force and effect, this
Agreement (including the schedules and exhibits and the agreements and other
documents referred to herein) constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all other prior
negotiations, commitments, agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
SECTION 9.3. GOVERNING LAW. Except to the extent the IBCL is
required to apply, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware (regardless of the Laws that
might otherwise govern under applicable principles of conflict of laws) as to
all matters, including matters of validity, construction, effect, performance
and remedies.
SECTION 9.4. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by certified or registered
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mail, postage prepaid, addressed at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Parent or Purchaser, to:
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Telephone: (301) 380-9555
Telecopy: (301) 380-8150
Attention: General Counsel
with a copy to:
O'Melveny & Myers
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telephone: (202) 383-5300
Telecopy: (202) 383-5414
Attention: Jeffrey J. Rosen
David G. Pommerening
(b) If to the Company, to:
Forum Group, Inc.
11320 Random Hills Road, Suite 400
Fairfax, Virginia 22066
Telephone: (703) 277-7000
Telecopy: (703) 277-7090
Attention: Chief Executive Officer
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 326-3800
Telecopy: (212) 755-7306
Attention: Robert A. Profusek
SECTION 9.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any
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of the rights, interests or obligations hereunder shall be assigned by either
party (whether by operation of Law or otherwise) without the prior written
consent of the other party; provided, that Purchaser may assign its rights and
--------
obligations hereunder to Parent or any Subsidiary of Parent, but no such
assignment shall relieve Purchaser of its obligations hereunder. This Agreement
shall be binding upon and inure solely to the benefit of each party hereto, and
except for Sections 2.7, 2.9, 6.8 and 6.10 hereof nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.6. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
SECTION 9.7. INTERPRETATION. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. "Include,"
"includes," and "including" shall be deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import.
SECTION 9.8. SCHEDULES. The Schedules hereto shall be construed
with and as an integral part of this Agreement to the same extent as if the same
had been set forth verbatim herein.
SECTION 9.9. LEGAL ENFORCEABILITY. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
SECTION 9.10. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any other
remedy to which they may be entitled at law or in equity, to compel specific
performance of this Agreement in any action instituted in any state or federal
court sitting in Delaware. The parties hereto consent to personal jurisdiction
in any such action brought in any state or federal court sitting in Delaware and
to service of process upon it in the manner set forth in Section 9.4 hereof.
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
FORUM GROUP, INC.
By: /s/ MARK PACALA
---------------------------------
Name: Mark Pacala
Title: Chairman and Chief
Executive Officer
MARRIOTT INTERNATIONAL, INC.
By: /s/ WILLIAM J. SHAW
---------------------------------
Name: William J. Shaw
Title: Executive Vice President
FG ACQUISITION CORP.
By: /s/ WILLIAM J. SHAW
----------------------------------
Name: William J. Shaw
Title: Vice President
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EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment or pay for, and may delay the acceptance for
payment of (whether or not the Shares have theretofore been accepted for
payment), or the payment for, any Shares tendered, and may terminate or extend
the Offer and not accept for payment any Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer and the Agreement), (A) the applicable
waiting period under the HSR Act shall not have expired or been terminated, or
(B) the number of Shares validly tendered and not withdrawn when added to the
Shares then beneficially owned by Parent does not constitute two-thirds of the
Shares then outstanding and represent two-thirds of the voting power of the
Shares then outstanding on a Fully Diluted Basis on the date of purchase; OR
(ii) on or after the date of this Agreement and prior to the
acceptance for payment of Shares, any of the following conditions exist and be
continuing:
(a) (1) any of the representations or warranties of the Company
contained in the Merger Agreement shall not have been true and correct in
all material respects at the date when made or (except for those
representations and warranties expressly made only as of a particular date
which need only be true and correct in all material respects as of such
date) shall cease to be true and correct in all material respects at any
time prior to consummation of the Offer; or (2) (i) one or more
circumstances or conditions exist, or changes have occurred since the date
of this Agreement, that would constitute a breach or violation of any of
the representations or warranties made by the Company in Article IV of this
Agreement if such representations or warranties had been made without any
materiality qualifications (e.g., if such representations and warranties
----
were not qualified by "in all material respects" or except for such matters
"as would not, individually or in the aggregate, have or constitute a
Material Adverse Effect") and (ii) all such circumstances, conditions or
changes, in the aggregate, have or constitute a Material Adverse Effect; or
(b) the Company shall have breached in any material respect any
of its covenants or agreements contained in the Merger Agreement; provided
--------
that, if any such breach is curable by the Company through the exercise of
its reasonable efforts, then Purchaser may not terminate the Offer under
this subsection (b) until 20 days after written notice thereof has been
given to the Company by Parent or Purchaser and unless at such time the
breach has not been cured; or
A-1
<PAGE>
(c) there shall have been any statute, rule, regulation,
judgment, order or injunction promulgated, enacted, entered, enforced or
deemed applicable to the Offer, or any other legal action shall have been
taken, by any state, federal or foreign government or governmental
authority or by any U.S. court, other than the routine application to the
Offer or the Merger of waiting periods under the HSR Act, that (1) makes
the acceptance for payment of, or the payment for, some or all of the
Shares illegal or otherwise prohibits or restricts consummation of the
Offer, (2) imposes material limitations on the ability of Purchaser or
Parent to acquire or hold or to exercise any rights of ownership of the
Shares, or effectively to manage or control the Company and its business,
assets and properties or (3) has or constitutes a Material Adverse Effect
as defined in either Section 4.1 or Section 5.1 of the Merger Agreement; or
(d) facts or circumstances exist or shall have occurred in
respect of the Company or any of its Subsidiaries that in the aggregate
have or constitute a Material Adverse Effect; or
(e) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (2) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or
not mandatory), (3) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States and having or constituting a Material Adverse Effect or
materially adversely affecting (or materially delaying) the consummation of
the Offer, (4) any limitation or proposed limitation (whether or not
mandatory) by any U.S. governmental authority or agency, or any other
event, that materially adversely affects generally the extension of credit
by banks or other financial institutions, (5) from the date of the Merger
Agreement through the date of termination or expiration of the Offer, a
decline of at least 25% in the Standard & Poor's 500 Index or (6) in the
case of any of the situations described in clauses (1) through (5)
inclusive, existing at the date of the commencement of the Offer, a
material acceleration, escalation or worsening thereof; or
(f) any Person or any group, other than Purchaser, any of its
affiliates, any current holder of more than 25% of the outstanding shares
or any group of which any of them is a member, shall have acquired
beneficial ownership of more than 25% of the outstanding Shares or shall
have entered into a definitive agreement with the Company with respect to a
tender offer or exchange offer for any Shares or merger, consolidation or
other business combination with or involving the Company or any of its
Subsidiaries; or
(g) prior to the purchase of Shares pursuant to the Offer, the
Board (1) shall have withdrawn its approval or recommendation of the Offer,
the Merger Agreement or the Merger, (2) shall have or modified (including
by amendment of the Schedule 14D-9) in a manner adverse to Purchaser its
approval or recommendation of the Offer, the Merger
A-2
<PAGE>
Agreement or the Merger, (3) shall have recommended to the Company's
shareholders another offer, or (4) shall have adopted any resolution to
effect any of the foregoing; provided that a change in the reasons for any
--------
such recommendation will not be deemed to be adverse to Purchaser so long
as the Board continues to recommend that shareholders tender their Shares
pursuant to the Offer; or
(h) the Merger Agreement shall have been terminated in
accordance with its terms; or
(i) the Bankruptcy Court shall not have entered the Bankruptcy
Order; or
(j) the Company shall have failed to purchase all ownership
interests (other than ownership interests owned as of the date hereof by
the Company or any of its Subsidiaries) in the Forum Retirement Communities
II, L.P., or shall have purchased such ownership interests for an aggregate
purchase price in excess of $1,235,000; or
(k) the Company shall have failed to obtain written confirmation
of the oral waiver of the actual or potential breaches under the loan
agreement referred to in item 3 of Schedule 4.9 of the Merger Agreement.
The foregoing conditions are for the sole benefit of Purchaser and may
be asserted by Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion. The failure by Purchaser at any time
to exercise any of the foregoing rights will not be deemed a waiver of any other
rights and each such right will be deemed an ongoing right which may be asserted
at any time and from time to time.
A-3
<PAGE>
EXHIBIT 2
MARRIOTT INTERNATIONAL AGREES
TO ACQUIRE FORUM GROUP
WASHINGTON, D.C., Feb. 16, 1996--Marriott International, Inc. and Forum
Group, Inc. today announced a definitive agreement under which Marriott
International would acquire Forum, one of the nation's leading operators of
senior housing, and merge it with Marriott's Senior Living Services business.
Forum's stockholders will receive $13 per share.
The total acquisition consideration will be $605 million, including $302
million paid in cash to Forum stockholders and $303 million of existing Forum
debt.
Forum and Forum shareholders owning more than 90 percent of Forum's voting
stock have agreed to the proposed acquisition. Marriott will commence a tender
offer for all outstanding Forum shares within the next several days.
William J. Shaw, executive vice president of Marriott International and
president of the Marriott Service Group, said, "Forum is a highly successful
and well respected leader in the senior services industry, sharing Marriott's
commitment to service excellence and care for our nation's seniors. We are
very enthusiastic about the merger. It will expand our substantial position in
this rapidly growing industry, provide additional concepts to accelerate our
growth rate, and enable us to offer even greater advancement opportunities to
the associates of both companies."
Based in Fairfax, Va., Forum is the third largest provider of senior housing
and health care services in the United States. It has 42 facilities, 34 of
which are wholly or partially owned. Marriott Senior Living Services operates
27 full service and assisted living communities nationwide. Combined, the two
companies operate over 14,500 retirement community units or nursing beds.
"We are delighted to have come to this agreement," said Mark L. Pacala,
chairman and chief executive officer of Forum Group. "We believe that the
transaction fairly reflects Forum Group's very excellent prospects, which we
feel will be even further enhanced by the combination with Marriott," Pacala
said.
In addition to its full service communities, Forum has expanded into a
moderately priced assisted living concept, National Guest Homes, and
Hearthside, which provides both assisted living and dementia-related care.
Forum also acquired Health Care Industries, Inc. last year which provides home
health care services to residents in senior living communities. Forum has
started an expansion program designed to add 1,000 units or nursing beds to
existing full service facilities over the next two years.
The merger is subject to customary conditions, including the expiration or
termination of the Hart-Scott-Rodino Act waiting period requirements.
MacKenzie Partners, New York, has been appointed Information Agent. Direct
inquiries to 800-322-2885.
Marriott International, Inc., based in Washington, D.C., is a diversified
hospitality company involved in lodging and services management.
# # #
1
<PAGE>
EXHIBIT 3
DIRECTOR COMPENSATION
The Company pays each director who is not also a full-time employee of the
Company an annual retainer of $15,000, payable quarterly, for his or her
services as a director of the Company. In addition, each such director
generally receives $500 for each meeting of any Board committee attended by
such director. All directors are reimbursed for their reasonable out-of-pocket
expenses incurred in connection with attendance at meetings of, and other
activities relating to, serving on the Board and any Board committee. No
compensation has been paid for attendance at meetings of the Executive
Committee.
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION SUMMARY
The following table summarizes the compensation of the persons who served as
Chief Executive Officer of the Company during Fiscal Year 1995 and each of the
other executive officers of the Company who were serving as such at the end of
Fiscal Year 1995 (collectively, the "Named Executives") for the Company's last
three fiscal years for services rendered in all capacities to the Company and
its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- -----------------
SECURITIES
NAME AND FISCAL YEAR UNDERLYING OPTION ALL OTHER
PRINCIPAL POSITION ENDED MARCH 31, SALARY($) BONUS($) AWARDS (#) COMPENSATION($)
------------------ --------------- ---------- --------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Mark L. Pacala, 1995(1) $ 190,385 $ 100,000 800,000 $14,130(2)
President and Chief 1994 -- -- -- --
Executive Officer 1993 -- -- -- --
Robert A. Whitman, 1995 -0- -0- -0- -0-
Chairman of the Board, 1994 -0- -0- -0- -0-
Interim President and 1993 -- -- -- --
Chief Executive
Officer(3)
Paul A. Shively 1995 230,000 -0- -0- 5,319(4)
Senior Vice President, 1994 230,000 82,500 -0- 3,049
Chief Financial Officer 1993 169,583 -0- -0- 208,057
and Treasurer
Brian C. Swinton 1995 153,635 91,000 100,000 74,372(6)
Senior Vice President-- 1994(7) 25,961 39,063 -0- 500
Chief Financial Officer 1993 -- -- -- --
and Treasurer(5)
Richard A. Huber 1995 87,077 65,000 55,000 822(8)
Vice President-- 1994(9) 49,039 36,095 -0- 39,788
Operations 1993 -- -- -- --
Finance and Secretary
</TABLE>
- --------
(1) Mr. Pacala became President and Chief Officer of the Company on October
24, 1994. Prior to that time, he was not an officer or employee of the
Company.
(2) The amount shown represents payments made to Mr. Pacala in reimbursement
of temporary living and relocation expenses incurred by him in connection
with the commencement of his employment with the Company.
<PAGE>
(3) While concurrently serving as President and Co-Chief Executive Officer of
Hampstead, Mr. Whitman served as interim President and Chief Executive
Officer of the Company from July 19, 1993 until Mr. Pacala commenced his
employment with the Company on October 24, 1994. Prior to July 19, 1993,
Mr. Whitman was not an officer of the Company. Mr. Whitman received no
compensation from the Company for services rendered by him as interim
President and Chief Executive Officer of the Company. See "The Board of
Directors and its Committees--Director Compensation" with respect to
compensation paid to members of the Board, including Mr. Whitman, and
"Certain Relationships and Transactions--General and Administrative
Services" for a discussion of a payment made in June 1994 by the Company
to Forum Holdings in respect of various general and administrative
services provided to the Company by Forum Holdings and its
representatives, including, among others, Mr. Whitman's services as
interim President and chief Executive Officer of the Company.
(4) The amount shown represents employer contributions of $2,494 and $2,825
made to the Company's 401(k) Savings Plan and Employee Stock Purchase
Plan, respectively, on behalf of Mr. Shively.
(5) Mr. Shively resigned all positions held by him with the Company and its
subsidiaries and affiliates effective as of June 30, 1995 and received a
severance payment of $254,200. Mr. Shively, however, has agreed to serve
as a consultant to the Company on matters pertaining to the conduct of the
business and operations of the Company and its affiliates.
(6) The amount shown represents payments made to Mr. Swinton in reimbursement
of relocation expenses incurred by him in connection with the commencement
of his employment with the Company.
(7) Mr. Swinton became Senior Vice President--Product Development, Research
and Marketing of the Company on January 24, 1994. Prior to that time, he
was not an officer or employee of the Company.
(8) The amount shown represents (i) payments of $416 made to Mr. Huber in
reimbursement of relocation expenses incurred by him in connection with
the commencement of his employment with the Company and (ii) employer
contributions of $406 made to the Company's 401(k) Savings Plan on behalf
of Mr. Huber.
(9) Mr. Huber became Vice President--Operations Finance of the Company on
November 10, 1993. Prior to that time, he was not an officer or employee
of the Company.
FISCAL YEAR 1995 STOCK OPTION GRANTS
The following table sets forth certain information regarding grants of stock
options made during Fiscal Year 1995 to the Named Executives pursuant to the
Company's Equity Incentive Plan (the "Incentive Plan"). No grants of stock
appreciation rights were made during Fiscal Year 1995 to any of the Named
Executives.
STOCK OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- ------------------------------------------------------------------------------ -----------------------------
% OF TOTAL
OPTIONS MARKET
SECURITIES GRANTED TO PRICE ON
UNDERLYING EMPLOYEES EXERCISE GRANT
OPTIONS IN FISCAL PRICE DATE EXPIRATION
NAME GRANTED (#) YEAR 1995 ($/SH) ($/SH)(1) DATE 0% ($) 5% ($) 10% ($)
---- ----------- ---------- -------- --------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark L. Pacala.......... 800,000(2) 60.9% $5.875 $5.875 8/7/2004 $ -0- $2,955,805 $7,490,590
Robert A. Whitman....... N/A N/A N/A N/A N/A N/A N/A N/A
Paul A. Shively......... N/A N/A N/A N/A N/A N/A N/A N/A
Brian C. Swinton........ 100,000(3) 7.6% 4.00 7.00 10/24/2004 300,000 740,226 1,415,620
Richard A. Huber........ 55,000(3) 4.2% 4.00 7.00 10/24/2004 165,000 407,124 778,591
</TABLE>
- --------
(1) The "market price" shown is the average of the closing bid and asked
prices for shares of Common Stock as reported on the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") on the
grant date or, if such date was not a trading day, the trading day
immediately preceding such date.
(2) The option vests in five equal annual installments commencing August 7,
1995.
(3) The option vests in five equal annual installments commencing October 24,
1995.
2
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the total
number of stock options held by each of the Named Executives, and the
aggregate value of such stock options, on March 31, 1995. None of such stock
options was exercisable as of such date.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF IN-THE-MONEY
ACQUIRED ON VALUE UNEXERCISED OPTIONS UNEXERCISED OPTIONS AT
NAME EXERCISE (#) REALIZED($) AT FISCAL YEAR-END FISCAL YEAR-END ($)(1)
---- ------------ ----------- -------------------- ----------------------
<S> <C> <C> <C> <C>
Mark L. Pacala.......... 0 0 800,000 $750,000
Robert A. Whitman....... 0 0 N/A N/A
Paul A. Shively......... 0 0 N/A N/A
Brian C. Swinton........ 0 0 100,000 281,250
Richard A. Huber........ 0 0 55,000 154,688
</TABLE>
- --------
(1) In-the-money options are options having a per share exercise price below
$6.8125, the average of the closing bid and asked prices for shares of
Common Stock as reported on NASDAQ on March 31, 1995. The dollar amounts
shown represent the amount by which the product of $6.8125 and the number
of shares purchasable upon the exercise of such in-the-money options
exceeds the aggregate exercise price payable upon such exercise.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
Mr. Pacala's employment agreement provides for his employment as President
and Chief Executive Officer of the Company for a term expiring on October 24,
1998. The agreement provides for a base salary of not less than $450,000 per
year, plus an annual performance bonus in an amount up to 60% of his then-
current annual base salary, such bonus to be determined by the Board or the
Compensation Committee based upon performance objectives established by the
Board or the Compensation Committee after consultation with Mr. Pacala.
However, Mr. Pacala will not receive a bonus in respect of Fiscal Year 1995.
Rather, he will receive a bonus in the amount of $270,000 on October 24, 1995,
and any bonus otherwise payable to Mr. Pacala following the Company's fiscal
year ending March 31, 1996 will be reduced by approximately $152,000. Pursuant
to his employment agreement, Mr. Pacala was paid, in connection with the
commencement of his employment with the Company, a one-time payment of
$100,000 in order to induce him to forego the payment of an equivalent amount
that would have been paid to him by his previous employer had he continued in
his former employment and was granted an option to purchase 800,000 shares of
Common Stock at $5.875 per share, the average of the closing bid and asked
prices for shares of Common Stock on NASDAQ on the trading day immediately
preceding the date of grant, which option becomes exercisable in five equal
annual installments commencing on August 7, 1995. The agreement also provides
Mr. Pacala certain welfare benefits.
If Mr. Pacala's employment is terminated by the Company other than for cause
or as a result of death, disability or a change in control, the Company will
for two years following such termination pay Mr. Pacala his then-current base
salary (subject to offset for compensation received by Mr. Pacala from other
parties) and provide him the welfare benefits that he was receiving
immediately prior to his termination (subject to termination in the event that
Mr. Pacala receives comparable benefits from a subsequent employer). If Mr.
Pacala's employment is terminated by the Company (other than as a result of
death or disability or for cause) or by Mr. Pacala (for any reason) within 12
months following a change in control, the Company will pay to Mr. Pacala a
lump sum severance payment equal to two times his then-current base salary and
will provide him the welfare benefits that he was receiving immediately prior
to such termination. In those circumstances, in the event that the change in
control occurs prior to April 24, 1996, Mr. Pacala would also have the right
to cause the Company to repurchase the then-unexercised portion of his stock
option at a price of $0.625 per share of Common Stock then underlying such
option.
3
<PAGE>
SEVERANCE PAY POLICY
Under the Company's severance pay policy, severance pay may be granted to
eligible employees, including the Named Executives (other than Messrs.
Whitman, Pacala and Shively), if the termination of their employment is
initiated by the Company as the result of any one of certain qualifying
events, including reductions in force, position elimination and the inability
to meet the requirements of a position, but not as a result of voluntary
resignation, retirement, merger into or acquisition by another organization
(if the employee is offered employment with the successor organization),
discharge for misconduct and certain other reasons. Under the severance pay
policy, executive officers generally are entitled to receive severance pay
equal to one month's pay plus two additional weeks' pay for each year of
continuous service, up to a maximum of eight months' pay.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
After the Investors acquired a majority interest in the Company in
connection with the recapitalization of the Company in June 1993 (the "1993
Recapitalization"), the Company undertook to assemble a top-quality management
team consisting of experienced executives capable of pursuing the Company's
growth strategy. Following an extensive search, during Fiscal Year 1995, the
Company hired Mark L. Pacala, formerly a senior executive at The Walt Disney
Company, as President and Chief Executive Officer. Mr. Pacala commenced his
employment with the Company on October 24, 1994. His compensation arrangements
are described under the caption "Compensation of Executive Officers--
Employment Agreement with Chief Executive Officer" above.
The Company has hired other new senior executives in addition to Mr. Pacala,
including James R. Foulger, Senior Vice President--Acquisitions, Dennis L.
Lehman, Senior Vice President and Chief Financial Officer, Brian C. Swinton,
Senior Vice President--Product Development, Research and Marketing, and
Richard A. Huber, Vice President--Operations Finance. Each of Messrs. Swinton
and Huber commenced his employment with the Company prior to the beginning of
Fiscal Year 1995, and each of Messrs. Foulger and Lehman commenced his
employment with the Company after the end of Fiscal Year 1995. Each of Messrs.
Foulger, Lehman, Swinton and Huber has had substantial senior management
experience with other companies engaged in the senior living or healthcare
fields.
The compensation arrangements entered into with the Company's new executive
officers reflect the Company's principal objectives with respect to executive
compensation, which are to (i) provide appropriate incentives for the
achievement of the Company's performance objectives, (ii) help ensure that the
Company is able to attract and retain top-quality management personnel, and
(iii) ensure that an appropriate portion of executive compensation is variable
and dependent upon increases in the value of an investment in the Company.
The compensation packages for the Company's new executive officers are
comprised of cash salary, cash bonus and stock options granted under the
Incentive Plan. The Compensation Committee believes that the nature and level
of the compensation of these executives is reasonable and appropriate in light
of the objectives underlying the Company's executive compensation policy, the
Company's financial and operational performance and prospects, individual
levels of experience and prevailing executive compensation practices.
Following the 1993 Recapitalization, Mr. Whitman served as interim President
and Chief Executive Office of the Company from July 19, 1993 until October 24,
1994, when Mr. Pacala commenced his employment with the Company. Mr. Whitman
received no compensation from the Company for services rendered by him in that
capacity. See "The Board of Directors and its Committees--Director
Compensation" with respect to compensation paid to members of the Board,
including Mr. Whitman, and "Certain Relationships and Transactions--General
and Administrative Services" for a discussion of a payment made in June 1994
by the Company to Forum Holdings in respect of various general and
administrative services provided to the Company by Forum Holdings and its
representatives, including, among others, Mr. Whitman's services as interim
President and Chief Executive Officer of the Company.
4
<PAGE>
In addition, at the Company's request, Mr. Shively, who until his recent
resignation had been an executive officer of the Company since 1974, continued
as an executive officer of the Company following the 1993 Recapitalization in
order to ease the transition to a new management team. Mr. Shively's
compensation package for Fiscal year 1995 was determined considering the
Company's financial and operational performance, the Company's historical
compensation levels and practices as they relate to Mr. Shively, his levels of
responsibility and experience and subjective judgments regarding his
individual performance. No relative weights were assigned to such factors. The
Compensation Committee believes that the level of Mr. Shively's compensation
was appropriate in light of such factors.
The Company believes that the compensation paid to its executive officers
during Fiscal Year 1995 is deductible for federal income tax purposes. In
connection with future executive compensation determinations, the Company
presently intends to consider, together with such other factors as may be
deemed pertinent under the circumstances, whether such compensation will be
deductible for federal income tax purposes.
The members of the Compensation Committee are directors whose principal
employment is with affiliates of the Investors. The Investors, in the
aggregate, beneficially own a majority of the Company's outstanding Common
Stock. See "Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Transactions."
Respectfully submitted,
Peter P. Copses
Daniel A. Decker
5
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
SETTLEMENT OF CERTAIN LITIGATION
Pursuant to a court-approved settlement agreement, during Fiscal Year 1995,
the Company settled certain claims asserted by Forum/Classic, L.P., an entity
affiliated with the Pritzker family, and others against the Company, the
Investors and certain other persons (including persons who comprised the Board
immediately prior to the 1993 Recapitalization) in a suit filed in connection
with the 1993 Recapitalization. In connection with the settlement, the Company
reimbursed the plaintiffs for $500,000 of the expenses incurred by them in
that litigation.
CERTAIN CONSULTING SERVICES
The Company and Mr. Eden have entered into an agreement, effective as of
March 31, 1995, pursuant to which Mr. Eden will render to the Company such
consulting and advisory services as the Company's Chief Executive Officer may
from time to time request regarding the Company and the retirement industry.
In connection with the execution of the agreement, the Company paid to Mr.
Eden $137,500 in respect of certain consulting services provided by him to the
Company prior to such time, including services provided during Fiscal Year
1995. Under this agreement, which terminates on December 31, 1996, the Company
will pay to Mr. Eden an annual retainer of $31,250 and certain additional
amounts in certain circumstances.
GENERAL AND ADMINISTRATIVE SERVICES
In July 1994, the Company paid $750,000 to Forum Holdings in respect of
various general and administrative services provided to the Company by Forum
Holdings prior to such date. Such services include, among others, arranging
for and negotiating the Company's debt refinancing which was completed in
February 1994 and negotiating the co-investment agreement which was entered
into by the Company and National Guest Homes, LLC in July 1994. Services
covered by such payment also include Mr. Whitman's services as interim
President and Chief Executive Officer of the Company.
CERTAIN ACQUISITIONS
In May 1995, the Company acquired from Autumn America, an affiliate of Forum
Holdings, for $1.3 million, Autumn America's rights as the manager of five
retirement communities and entered into new management contacts with the
owners of such facilities (two of which are affiliates of Forum Holdings).
Under each such management contract, the Company will receive in respect of
management services to be provided by it thereunder a monthly management fee
equal to 5% of gross collections. In connection with such acquisition, the
Company also paid to Autumn America for disbursement to its management
personnel $250,000 in cash in lieu of granting certain rights with respect to
future acquisitions by the Company. Of such amount, $150,000 was disbursed to
James R. Foulger, formerly the President of Autumn America, who, upon the
consummation of such acquisition, became Senior Vice President--Acquisitions
of the Company.
In May 1995, the Company acquired for $1.7 million an 80% interest in the
retirement community now known as The Forum at the Woodlands (the "Woodlands
Property"). The remaining 20% interest in the Woodlands Property is owned by
an unaffiliated co-investor. In connection with such acquisition, an affiliate
of Forum Holdings (the "Holdings Affiliate") was granted a carried interest in
the Woodlands Property in exchange for assigning its rights to purchase such
property to the Company and its co-investor. Commencing May 1996, the Holdings
Affiliate may require the Company to purchase, and the Company may require the
Holdings Affiliate to sell to the Company, such carried interest for a price
between $0.8 million and $1.7 million, depending on the performance of the
Woodlands Property and sales of related tax-exempt bonds.
6
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
each person known to the Company, as of July 24, 1995, to own more than 5% of
the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) CLASS (2)
- ------------------------------------ --------------------------- ----------
<S> <C> <C>
Apollo FG Partners, L.P. 9,428,203(3) 40.6%
c/o Apollo Advisors, L.P
1999 Avenue of the Stars, Suite
1900
Los Angeles, California 90067
Forum/Classic, L.P. 2,550,544(4) 11.0%
200 West Madison Street
39th Floor
Chicago, Illinois 60606
Forum Holdings, L.P. 9,428,203(5) 40.6%
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
</TABLE>
- --------
(1) The amounts shown represent shares of Common Stock with respect to which
the named person has sole dispositive power. As a result of the provisions
of the shareholders' agreement described below, each of AFG and Forum
Holdings may be deemed to have shared voting power with respect to, and
thus to beneficially own, all of the 18,856,406 shares of Common Stock
beneficially owned by such persons in the aggregate (constituting 81.3% of
shares of Common Stock treated as outstanding as described in Note 2
below).
(2) The percentages shown are based on 23,206,113 shares of Common Stock
outstanding. This number includes (i) 5,760 shares of Common Stock
presently issuable at a nominal purchase price upon exercise of certain
warrants ("Investor Warrants") issued pursuant to the Acquisition
Agreement, dated as of April 18, 1993, among the Company, the Investors
and the other parties thereto, (ii) 149,607 shares of Common Stock
presently issuable at a nominal purchase price upon the exercise of
certain warrants ("Special Warrants") issued pursuant to the Warrant
Agreement, dated June 10, 1993 (the "Warrant Agreement"), between the
Company and Citicorp USA, Inc., and (iii) 550,537 shares of Common Stock
presently issuable at a purchase price equal to $3.98 per share (subject
to adjustment) upon the exercise of certain other warrants ("Warrants")
issued pursuant to the Warrant Agreement.
(3) According to Amendment No. 8 to a Schedule 13D dated January 10, 1995 and
filed with the Securities and Exchange Commission (the "SEC") by AFG. The
number of shares listed includes (i) 2,880 shares of Common Stock
presently purchasable by AFG upon exercise of Investor Warrants, (ii)
74,804 shares of Common Stock purchasable by AFG upon exercise of Special
Warrants, and (iii) 275,268 shares of Common Stock purchasable by AFG upon
exercise of Warrants. The general partner of AFG is AIF, the managing
general partner of AIF is Apollo Advisors, and the general partner of
Apollo Advisors is ACM. By reason of various relationships among Messrs.
Berg, Copses and Ressler and AFG and its affiliates, Messrs. Berg, Copses
and Ressler may be deemed to beneficially own the shares of Common Stock
owned by AFG. Each of Messrs. Berg, Copses and Ressler disclaims
beneficial ownership of such shares.
(4) According to Amendment No. 1 to a Schedule 13D dated January 18, 1995 and
filed with the SEC by Forum/Classic, L.P.
7
<PAGE>
(5) According to Amendment No. 13 to a Schedule 13D dated January 10, 1995
(the "Forum Holdings 13D") and filed with the SEC by Forum Holdings and
certain related entities (collectively, the "Forum Holdings Reporting
Persons"). The number of shares listed includes (i) 2,880 shares of Common
Stock presently purchasable by Forum Holdings upon exercise of Investor
Warrants, (ii) 74,803 shares of Common Stock purchasable by Forum Holdings
upon exercise of Special Warrants, and (iii) 275,269 shares of Common
Stock purchasable by Forum Holdings upon exercise of Warrants. According
to Forum Holdings 13D, each of the Forum Holdings Reporting Persons may,
by reason of certain control relationships, be deemed to beneficially own
all of the shares of Common Stock owned directly by Forum Holdings. By
reason of various relationships among Messrs. Decker, Read and Whitman and
the Forum Holdings Reporting Persons, Messrs. Decker, Read and Whitman may
be deemed to beneficially own the shares of Common Stock owned by the
Forum Holdings Reporting Persons. Each of Messrs. Decker, Read and Whitman
disclaims beneficial ownership of such shares.
Shareholders' Agreement. Pursuant to a shareholders' agreement (the
"Shareholders' Agreement") entered into between the Investors, the Investors
have agreed that, from and after the Annual Meeting, the right to nominate a
majority of the Company's directors will be allocated between the Investors in
proportion to their relative percentages of share ownership and that the
remaining directors will consist of the Chief Executive Officer of the Company
and other persons acceptable to each of the Investors. Pursuant to the
Shareholders' Agreement, AFG has nominated Messrs. Berg, Copses and Ressler
for election as directors at the Annual Meeting, and Forum Holdings has
nominated Messrs. Decker, Read and Whitman. The Shareholders' Agreement also
provides that the Investors will use their respective best efforts to cause
the Executive Committee to consist of at least three persons, one designee
designated by each Investor and the Chief Executive Officer of the Company,
and such additional directors of the Company, if any, as shall be acceptable
to each of the Investors.
The Shareholders' Agreement includes reciprocal rights of first refusal and
other provisions and will terminate on June 14, 1998 or earlier under certain
circumstances.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of the close of business on
the Record Date with respect to shares of Common Stock beneficially owned by
(i) each director nominee, (ii) each Named Executive, and (iii) all directors
and executive officers of the Company as a group. All shares of Common Stock
listed below are beneficially owned directly by the person indicated in the
table and all persons own less than 1% of the total number of outstanding
shares of Common Stock
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP (1)
------------------------ -----------------
<S> <C>
Laurence M. Berg (2)..................................... -0-
Peter P. Copses (2)...................................... -0-
Daniel A. Decker (3)..................................... -0-
James E. Eden............................................ -0-
Mark L. Pacala........................................... 160,000(4)
Kurt C. Read (3)......................................... -0-
Antony P. Ressler (2).................................... -0-
Robert A. Whitman (3).................................... -0-
Margaret A. Wylde........................................ -0-
Paul A. Shively.......................................... 18,055
Brian C. Swinton......................................... 24,950
Richard A. Huber......................................... 500
All directors and executive offers as a group............ 195,601
</TABLE>
- --------
(1) Excludes the 18,856,406 shares of Common Stock beneficially owned by the
Investors.
8
<PAGE>
(2) By reason of various relationships between Messrs. Berg, Copses and
Ressler and AFG and its affiliates, Messrs. Berg, Copses and Ressler may
be deemed to beneficially own the shares of Common Stock owned by AFG.
Each of Messrs. Berg, Copses and Ressler disclaims beneficial ownership of
such shares.
(3) By reason of various relationships between Messrs. Decker, Read and
Whitman and the Forum Holdings Reporting Persons, Messrs. Decker, Read and
Whitman may be deemed to beneficially own the shares of Common Stock owned
by the Forum Holdings Reporting Persons. Each of Messrs. Decker, Read and
Whitman disclaims beneficial ownership of such shares.
(4) Consists of 160,000 shares of Common Stock purchasable upon the exercise
of Mr. Pacala's option within 60 days after July 24, 1995.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires directors and executive officers
of the Company, and persons who own more than 10% of the issued and
outstanding shares of Common Stock, to file reports of ownership and changes
in ownership with the SEC. Directors, executive officers and greater than 10%
shareholders are required by SEC regulation to furnish the Company copies of
all Section 16(a) forms they file. Except as described below, to the Company's
knowledge, based solely on review of those copies and written representations
that no Forms 5 were required, the Company's directors, executive officers and
greater than 10% shareholders complied with all applicable Section 16(a)
filing requirements during Fiscal Year 1995. Mr. Swinton has failed to file
the required forms with the SEC in connection with three transactions
resulting in changes in his beneficial ownership of Common Stock that occurred
during Fiscal Year 1995 and two such transactions that occurred during the
Company's current fiscal year.
9
<PAGE>
EXHIBIT 5
FORUM GROUP, INC.
May 5, 1995
Mr. Dennis L. Lehman
487 Woodcrest Drive
Mechanicsburg, Pennsylvania 17055
Dear Denny:
On behalf of Forum Group, Inc.'s ("FGI") senior management team, I am
delighted to officially offer you the position of Senior Vice President and
Chief Financial Officer of FGI.
Besides being a senior member of the Forum executive team, on the Forum
Executive Committee, and a business "partner" helping to drive our vision and
strategy, your essential responsibilities will be to lead all finance and
accounting responsibilities of FGI--including all elements of
financial/capital structure/investment strategy, treasury, accounting and
control, tax, internal audit, mergers and acquisitions, investor and
institutional relations, etc. In addition, you will be responsible for our
management information systems. A critical responsibility will be to interface
with our two significant Investors and "partners", Apollo and Hampstead. You
will report to me.
In keeping with our "term sheet", let me outline the compensation and
benefits associated with your employment:
. BASE SALARY of $235,000 payable bi-weekly, with annual adjustments based
on performance.
. INCENTIVE BONUS COMPENSATION of 0-50% of annual base salary assessed on
fulfillment of corporate financial targets and agreed upon annual
objectives ("MBOs"). Assuming you are on board by August 1, we will
guarantee you a minimum fiscal year end 1996 (the fiscal year ends
3/31/96) bonus of 60% of your maximum potential. If you arrive after
August 1, we will prorate this minimum 60% guarantee based on the
remaining months in the fiscal year, with August 1 as the starting point
for the proration.
. 150,000 NON-QUALIFIED STOCK OPTIONS with a 5 year vest and a 10 year
term. The strike price of the options will be set at the average of
market transactions on the day of your commencement of employment.
In the event of a "change in control" on the part of Hampstead and
Apollo, such that another entity is capable of controlling FGI by
electing a majority of the Board of Directors, all remaining unvested
stock options will vest immediately. The definition of "change in
control" is the same as the one in Mark Pacala's employment agreement
dated August 7, 1994.
. SEVERANCE: For the duration of your employment, should you be terminated
for any reason other than cause (definition of cause attached as Exhibit
1), you will receive a lump sum termination payment equal to 15 months
of the highest annual base salary achieved during your tenure at FGI.
. COBRA INSURANCE: During the period of your COBRA coverage, we will
reimburse you for your COBRA premiums for a period not to exceed 16
months.
. BOARD OF DIRECTOR MEETING AND COMMITTEE ATTENDANCE
We expect you to attend and participate actively in all meetings of our
Board of Directors and any Committee thereof.
We understand how important Board membership is to you. We commit over
the next several years to revisit the possibility of you joining the
Board and will keep your strong interest in mind during the
considerations.
<PAGE>
. You will be entitled to receive all BENEFIT PROGRAMS commensurate with
being a member of senior management of FGI.
. A CASH "SIGN-ON" BONUS of $82,400 (40% of $206,000) will be provided to
compensate you for the loss of your annual bonus at Continental,
assuming Continental does not pay you this bonus. We do, however, want
to encourage you to use your best efforts to secure the bonus out of
Continental. To that end, if you are successful in securing the entire
$82,400 bonus from Continental, then we will pay you $10,000 for your
efforts. If you are successful in securing a portion of the $82,400
bonus from Continental, then we will make up the difference, so that you
will receive from both parties a total of $82,400. We will also prorate
the $10,000 incentive based on the percentage of $82,400 that you are
able to extract from Continental.
. RELOCATION TO VIRGINIA: In order to get you and your family relocated to
our new office location as easily, comfortably, and as quickly as
possible, we will provide the following programs:
--Sale of home in Pennsylvania: Home sale marketing assistance;
reimbursement of home sale reasonable and customary closing costs.
As we've discussed, as a policy matter, we are attempting to stay away
from 3rd party purchase or taking the home into inventory. We will,
however, upon completion of your home sale marketing assistance plan
and throughout your attempt to sell the house, reconsider this home
relocation benefit, and if necessary, implement some program to take
the house off your hands.
--Movement of all household goods.
--Temporary living expenses in the new location, as long as reasonable.
--A short term equity bridge loan: not to exceed the equity in your
Pennsylvania home, no interest charged, payable thirty days from the
closing on your Pennsylvania house.
--Purchase of home in Virginia: reimbursement of all reasonable and
customary closing costs (not to exceed 2 points on mortgage),
reimbursement of expenses associated with househunting trips within
reason (6 days maximum)
--Gross-up on all taxable income associated with the relocation.
. CONFIDENTIALITY AGREEMENT: Upon joining our company, we will ask you to
sign a confidentiality agreement protecting FGI's legitimate proprietary
information.
This offer letter is in full force and valid from this date forward, unless
FGI notifies you in writing at least seven business days prior to the offer's
intended termination date.
Denny, we are thrilled at the prospect of you helping us achieve our vision.
I hope this letter fully summarizes our understanding. If not, please let me
know. We are most anxious to welcome you, Joanne, and Nate as the newest
members of the Forum family.
Warm regards,
/s/ Mark L. Pacala
Mark L. Pacala,
President and Chief Executive
Officer
Read and Accepted:
/s/ Dennis L. Lehman
2
<PAGE>
EXHIBIT 1
For purposes of this letter, the term "cause" means:
(i) the willful, persistent and continued failure by the Executive
substantially to perform his duties hereunder which are within his control
(other than any such failure resulting from the Executive's incapacity due
to physical or mental illness), after written notice demanding substantial
performance is delivered to the Executive by the Chief Executive Officer
("CEO"), which notice identifies in reasonable detail the manner in which
the CEO believes the Executive has not substantially performed; provided,
however, that the failure of the Executive or the Company to meet
performance objectives, such as operational or financial objectives
established by the CEO, will not be considered failure by the Executive
substantially to perform his duties hereunder; or
(ii) an act of fraud which is known to the Executive and not properly
reported, embezzlement or theft by the Executive in connection with his
duties or in the course of his employment with the Company.
3
<PAGE>
EXHIBIT 6
EMPLOYEE PROTECTION PLAN FOR EMPLOYEES OF FORUM'S CORPORATE OFFICES
Employees at the corporate offices of Forum Group, Inc. and its subsidiaries
("Forum") immediately before the earlier of the acquisition of the Shares
pursuant to the Offer or the Effective Time (the "Acquisition Date") shall be
subject to this Employee Protection Plan for Employees of Forum's Corporate
Offices (the "Plan") following the Acquisition Date and subsequent integration
of Forum into Marriott Senior Living Services, Inc. ("MSLS");/1/
1. It is the intention of MSLS that Forum employees should continue to
perform their normal job functions following the Acquisition Date, while MSLS
undertakes an assessment of Forum's operations. Following such assessment
period, MSLS will notify each Forum employee as to his or her eligibility for
employment in a comparable position with MSLS. The date on which the employee
receives notice of his or her eligibility for employment with MSLS shall be
the "Employee's Notification Date."
2. If MSLS offers a Forum employee a position with MSLS, and the employee
accepts such offer, the employee shall be eligible to participate in the
Marriott International employee benefits plan and shall be subject to the
policies and procedures applicable to all other MSLS employees. For purposes
of any benefits program for which continuous length of service is a factor
(including, but not limited to, insurance program effective dates, pre-
existing condition waiting periods, retirement program entry dates and
vesting, vacation, sick pay and other paid leave benefits, service awards and
any other similar program), MSLS and Marriott International, Inc. shall
recognize service with Forum and its predecessors as employment with MSLS or
any other Marriott division.
3. If MSLS offers a Forum employee a position with MSLS, but the employee
rejects such offer, the employee shall receive the following "Marriott
International Income Extension Plan" benefits:
a. MSLS shall provide the employee with at least thirty (30) days' notice
as to his or her final date of employment (the "Job Elimination Date");
b. As of the Job Elimination Date, the employee shall receive payment
representing:
(i) Severance pay equal to one week's salary for each full year of
service with Forum; provided, however, that no employee shall receive a
severance payment of less than two (2) weeks' pay; and
(ii) Payment for unused vested and unvested vacation leave, up to a
maximum of thirty (30) days' leave.
4. If MSLS does not offer the Forum employee a position with MSLS, the
employee shall be eligible for the following:
a. The employee shall receive notice as to his or her Job Elimination
Date, which date shall in no event be less than forty-five (45) days from
the Employee Notification Date; and
b. Throughout the period preceding the employee's Job Elimination Date,
MSLS will provide general assistance to the employee in identifying vacant
positions in other divisions of Marriott International, Inc. for which the
employee may be qualified. Reasonable accommodation will be made to allow
an employee to look for another job during the Notification Period. If the
employee is successful in obtaining employment in another division of
Marriott International, Inc., the employee shall be eligible to participate
in the Marriott International, Inc. employee benefit plans and shall be
subject to the policies and procedures applicable to other employees of
that Marriott division. The employee shall receive credit for prior service
with Forum, as described in section 2 above.
- --------
/1/An "employee" for purposes of this Plan shall consist of all
administrative and clerical staff, managers, directors, vice presidents and
senior vice presidents of Forum Group, Inc. who are employed at Forum's
corporate offices immediately before the Effective Time, but shall not include
the chief financial officer or chief executive officer of Forum.
<PAGE>
c. If the employee has not obtained other employment with Marriott
International, Inc. as of the Job Elimination Date, the employee shall
receive payment consisting of the following:
(i) Payment for unused vested vacation leave, up to a maximum of
twenty (20) days' leave; and
(ii) A final severance payment which will include credit for unvested
vacation leave, up to a maximum of fifteen (15) days' leave. The final
severance payment will be determined based on the employee's position
with Forum and shall be equal to the employee's base salary for the
number of months shown below, reduced by the amount of regular pay the
employee received for time worked from the Employee's Notification Date
through the Job Elimination Date:
<TABLE>
<S> <C>
Administrative/Clerical Staff............................. Three (3) months
Managers.................................................. Four (4) months
Directors................................................. Five (5) months
Vice Presidents and Senior Vice Presidents................ Six (6) months
</TABLE>
5. If a Forum employee resigns or is terminated for cause before the
Employee's Notification Date or the employee's Job Elimination Date, the
employee shall not be eligible for benefits under the Employee Protection Plan
described herein. The employee will, however, be eligible for any benefits
applicable to the employee under group health plans maintained for former
Forum employees as may be required under Section 601 of the Employee
Retirement Income Security Act of 1974, as amended.
6. In the event an employee is terminated by MSLS or Marriott International,
Inc. on or before March 31, 1997, other than for cause, such employee shall be
eligible to receive the benefits described in Section 4.c. above.
2
<PAGE>
EXHIBIT 7
FORUM GROUP, INC.
As of October 3, 1995
Mr. Robert A. Whitman
Investors GenPar, Inc.
Forum Holdings, L.P.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
Dear Bob:
Upon the occurrence of a Qualifying Transaction (as defined below), this
letter will (i) confirm the Company's determination made in the following
paragraph and (ii) amend our October 3, 1995 letter agreement with you (the
"Letter Agreement") regarding Section 4.17 of that certain Acquisition
Agreement among Apollo Investment Fund, L.P., Investors GenPar, Inc.,
Evergreen Healthcare, Ltd., L.P. and Forum Group, Inc. (the "Company") dated
as of April 18, 1993 (the "Acquisition Agreement"). The Company agreed in the
Acquisition Agreement to indemnify and hold harmless the Indemnified Parties
specified therein (the "Indemnity") from Transactional Losses as that term is
defined therein.
This letter confirms that the Company has made a final determination that
all losses, claims, liabilities, damages, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses (including,
without limitation, expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, whether or not in
connection with pending or threatened litigation in which any Indemnified
Party is a party) or actions in respect thereof related to or arising out of
the Law Suit (as defined in the Letter Agreement) are Transactional Losses
with respect to which you and the other Indemnified Parties described in the
Acquisition Agreement are entitled to the Indemnity. As a result of, and
without limiting, the foregoing determination, the conditions set forth in
items 1-4 of the Letter Agreement are no longer applicable.
This letter will be of no force or effect unless and until a Qualifying
Transaction has occurred. As used herein, the term "Qualifying Transaction"
means (i) with respect to the Agreement and Plan of Merger dated as of
February 15, 1996 by and among the Company and the other parties thereto, the
acquisition of Shares (as defined therein) of the Company pursuant to the
Offer or the Merger (as defined therein) or (ii) the consummation of another
transaction in which a majority of the Shares or all or the majority of the
assets of the Company are acquired by a third party on or prior to March 31,
1997.
If the foregoing correctly states our agreement, please signify by signing a
copy of this letter in the space indicated and returning it to the
undersigned.
Sincerely,
FORUM GROUP, INC.
By: /s/ Marc L. Pacala
------------------
Agreed and Accepted:
Investors GenPar, Inc.
By: /s/ Robert A. Whitman
Name: ___________________________
Title: __________________________
<PAGE>
EXHIBIT 8
FORUM GROUP, INC.
As of October 3, 1995
Apollo Advisors, L.P.
Apollo Investment Fund, L.P.
Apollo FG Partners, L.P.
1999 Avenue of the Stars
Los Angeles, CA 90067
Dear Sirs:
Upon the occurrence of a Qualifying Transaction (as defined below), this
letter will (i) confirm the Company's determination made in the following
paragraph and (ii) amend our October 3, 1995 letter agreement with you (the
"Letter Agreement") regarding Section 4.17 of that certain Acquisition
Agreement among Apollo Investment Fund, L.P., Investors GenPar, Inc.,
Evergreen Healthcare, Ltd., L.P. and Forum Group, Inc. (the "Company") dated
as of April 18, 1993 (the "Acquisition Agreement"). The Company agreed in the
Acquisition Agreement to indemnify and hold harmless the Indemnified Parties
specified therein (the "Indemnity") from Transactional Losses as that term is
defined therein.
This letter confirms that the Company has made a final determination that
all losses, claims, liabilities, damages, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses (including,
without limitation, expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, whether or not in
connection with pending or threatened litigation in which any Indemnified
Party is a party) or actions in respect thereof related to or arising out of
the Law Suit (as defined in the Letter Agreement) are Transactional Losses
with respect to which you and the other Indemnified Parties described in the
Acquisition Agreement are entitled to the Indemnity. As a result of, and
without limiting, the foregoing determination, the conditions set forth in
items 1-4 of the Letter Agreement are no longer applicable.
This letter will be of no force or effect unless and until a Qualifying
Transaction has occurred. As used herein, the term "Qualifying Transaction"
means (i) with respect to the Agreement and Plan of Merger dated as of
February 15, 1996 by and among the Company and the other parties thereto, the
acquisition of Shares (as defined therein) of the Company pursuant to the
Offer or the Merger (as defined therein) or (ii) the consummation of another
transaction in which a majority of the Shares or all or the majority of the
assets of the Company are acquired by a third party on or prior to March 31,
1997.
If the foregoing correctly states our agreement, please signify by signing a
copy of this letter in the space indicated and returning it to the
undersigned.
Sincerely,
FORUM GROUP, INC.
By: /s/ Marc L. Pacala
Agreed and Accepted:
Apollo Investment Fund, L.P.
By: /s/ Michael D. Weiner
Name:Michael D. Weiner
Title: Vice President of Apollo Capital Management, Inc., General Partner of
Apollo Advisors, L.P., General Partner of Apollo Investment Fund, L.P.
<PAGE>
EXHIBIT 9
<PAGE>
AGREEMENT AND IRREVOCABLE PROXY
THIS AGREEMENT AND IRREVOCABLE PROXY (this "Agreement"), dated as of
February 15, 1996, is by and among MARRIOTT INTERNATIONAL, INC., a Delaware
corporation ("PARENT"), FG ACQUISITION CORP., an Indiana corporation and a
subsidiary of Parent ("PURCHASER"), APOLLO FG PARTNERS, L.P., a Delaware limited
partnership ("SHAREHOLDER") and, solely for the purpose of Section 2(c) hereof,
FORUM GROUP, INC., an Indiana corporation (the "COMPANY").
W I T N E S S E T H:
-------------------
WHEREAS, simultaneously with the execution of this Agreement, Parent,
Purchaser and the Company have entered into an Agreement and Plan of Merger (as
such Agreement may hereafter be amended from time to time, the "MERGER
AGREEMENT"), pursuant to which (i) Purchaser has agreed, among other things, to
commence a cash tender offer (as such tender offer may hereafter be amended from
time to time in accordance with the Merger Agreement, the "OFFER") to purchase
all shares of common stock, no par value, of the Company (the "COMPANY COMMON
STOCK") and (ii) Purchaser will be merged with and into the Company (the
"MERGER");
WHEREAS, as of the date hereof, Shareholder is the beneficial owner
of, and has the sole right to vote and dispose of, 9,079,568 shares of Company
Common Stock; and
WHEREAS, as of the date hereof, Shareholder holds warrants (the
"CITICORP WARRANTS") exercisable into 350,072 shares of Company Common Stock
(the "CITICORP WARRANT SHARES"); and
WHEREAS, as of the date hereof, Shareholder holds warrants (the
"INVESTOR WARRANTS"), issued pursuant to an Acquisition Agreement dated as of
April 18, 1993 (the "ACQUISITION AGREEMENT"), which Investor Warrants are not
currently exercisable into any shares of Company Common Stock; and
WHEREAS, as an inducement and a condition to its entering into the
Merger Agreement and incurring the obligations set forth therein, including the
Offer and the Merger, Parent has required that Shareholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained herein
and in the Merger Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
<PAGE>
1. Certain Definitions. Capitalized terms used and not defined
-------------------
herein have the respective meanings ascribed to them in the Merger Agreement. In
addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. For
purposes of this Agreement, with respect to Shareholder, "AFFILIATE" shall not
include (i) the Company and the Persons that directly, or indirectly through one
or more intermediaries, are controlled by the Company or (ii) any Person in
which Shareholder has a material direct or indirect ownership interest that is
an operating company or otherwise is not in the business of making direct or
indirect equity and/or debt investments in other Persons.
"BENEFICIALLY OWN," "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" with
respect to any securities means having "BENEFICIAL OWNERSHIP" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act ). Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "GROUP" within the
meaning of Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"OWNED SHARES" means the shares of Company Common Stock owned by
Shareholder (either of record or through a nominee), together with any other
shares of Company Common Stock and any securities (other than Investor Warrants)
convertible into or exercisable or exchangeable for such securities (whether or
not subject to contingencies with respect to any matter or proposal submitted
for the vote or consent of shareholders of the Company) now or hereafter
Beneficially Owned by Shareholder.
"PERSON" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"TRANSFER" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such security
or the Beneficial Ownership thereof, the offer to make such a sale, transfer or
other disposition, and each option, agreement, arrangement or understanding,
whether or not in writing, to effect any of the foregoing. As a verb,
"TRANSFER" shall have a correlative meaning.
2. Tender of Shares; Exercise of Warrants.
--------------------------------------
(a) Shareholder hereby agrees to tender and not withdraw all Owned
Shares (or cause the record owner thereof to tender and not withdraw such Owned
Shares), pursuant
2
<PAGE>
to and in accordance with the terms of the Offer. Shareholder hereby
acknowledges and agrees that Parent's and Purchaser's obligation to accept for
payment and pay for shares of Company Common Stock in the Offer, including any
Owned Shares tendered by Shareholder, is subject to the terms and conditions of
the Offer. The parties agree that Shareholder will, for all Owned Shares
tendered by Shareholder in the offer and accepted for payment and paid for by
Purchaser, receive the same per share consideration paid to other shareholders
who have tendered into the Offer.
(b) Prior to the expiration of the Offer, Shareholder will exercise
all of the Citicorp Warrants. Upon exercise of the Citicorp Warrants, and the
purchase of the Citicorp Warrant Shares in accordance with the terms thereof,
the Citicorp Warrant Shares shall be deemed to be Owned Shares, and Shareholder
agrees to tender (and not withdraw) such Warrant Shares pursuant to the Offer in
accordance with Section 2(a) hereof.
(c) In order to induce Parent and Purchaser to enter into the
Merger Agreement, the Company and the holders of the Investor Warrants agree
that, notwithstanding any provision of the Investor Warrants or the Acquisition
Agreement to the contrary, immediately prior to the purchase of Shares pursuant
to the Offer and without further action, each Investor Warrant then outstanding
will be cancelled and extinguished for no additional consideration whatsoever.
Shareholder will not exercise any Investor Warrants for any reason whatsoever.
(d) Shareholder will take all actions necessary to terminate,
immediately prior to the consummation of the Offer, the Shareholders' Agreement,
dated as of June 14, 1993, and amended and restated as of July 28, 1995, by and
between Shareholder and another shareholder of the Company.
3. Voting of Owned Shares; Irrevocable Proxy. At the request of
-----------------------------------------
Parent, Shareholder, in furtherance of the transactions contemplated hereby and
by the Merger Agreement, and in order to secure the performance by Shareholder
of its duties under this Agreement, shall promptly execute and deliver to
Purchaser an irrevocable proxy in the form of Exhibit A hereto.
4. Restrictions on Transfer and Proxies; No Solicitation.
-----------------------------------------------------
(a) Shareholder shall not directly or indirectly: (i) except as
provided in Section 2 hereof, Transfer (including the Transfer of any securities
of an Affiliate which is the record holder of Owned Shares if, as the result of
such Transfer, such Person would cease to be an Affiliate of Shareholder) to any
Person any or all Owned Shares; (ii) except as provided in Section 3 of this
Agreement, grant any proxies or powers of attorney, deposit any Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares; or (iii) take any action that
would make any representation or
3
<PAGE>
warranty of Shareholder contained herein untrue or incorrect or would result in
a breach by Shareholder of its obligations under this Agreement.
(b) Shareholder shall, and shall cause its Affiliates and its and
their officers, directors, employees, representatives and agents (the "Covered
Persons") to, immediately cease any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal.
Shareholder will not, and will cause the Covered Persons not to, (i) solicit,
directly or through an intermediary, any inquiries with respect to, or the
making of, any Acquisition Proposal, or (ii) engage in negotiations or
discussions with, or furnish any confidential information relating to the
Company or its Subsidiaries to, any Third Party relating to an Acquisition
Proposal; provided, that nothing in this Agreement shall prohibit Shareholder or
--------
any Covered Person in their capacities as officers, directors, employees,
representatives and agents of the Company from taking or omitting to take any
action permitted to be taken or omitted to be taken by the Company under Section
6.2 of the Merger Agreement.
5. Representations and Warranties of Shareholder. Shareholder hereby
---------------------------------------------
represents, warrants and covenants to Parent and Purchaser as follows:
(a) Shareholder has all necessary partnership power and authority
to execute and deliver this Agreement and perform its obligations hereunder. The
execution and delivery by Shareholder of this Agreement and the performance by
Shareholder of its obligations hereunder have been duly and validly authorized
by the requisite partnership action on the part of Shareholder, and no other
partnership proceedings on the part of Shareholder are necessary to authorize
the execution, delivery or performance of this Agreement by Shareholder or the
consummation of the transactions contemplated hereby by Shareholder.
(b) This Agreement has been duly and validly executed and Delivered
by Shareholder and constitutes the valid and binding agreement of Shareholder,
enforceable against Shareholder in accordance with its terms except to the
extent (i) such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors rights and (ii) the remedy of specified
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Shareholder is the Beneficial Owner of 9,079,568 shares of
Company Common Stock and has the right to tender such shares as contemplated by
this Agreement so that, upon the consummation of the Offer, Purchaser will own
such shares free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. Shareholder holds
warrants for the purchase of 350,072 Citicorp Warrant Shares. Upon exercise of
the Citicorp Warrants and purchase of the Citicorp Warrant Shares in accordance
with the terms thereof, Shareholder will be the Beneficial Owner of the Citicorp
Warrant Shares and will have the right to tender such shares as contemplated by
this
4
<PAGE>
Agreement so that, upon the consummation of the Offer, Purchaser will own such
shares, free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. Except for the Owned
Shares, the Citicorp Warrants and the Investor Warrants (and the shares of
Company Common Stock purchasable upon exercise of such warrants), neither
Shareholder nor any of its Affiliates Beneficially Owns any shares of Company
Common Stock or any securities convertible into Company Common Stock. Except as
provided in this Agreement or referred to in Schedule 4.2(b) to the Merger
Agreement, Shareholder has sole power to vote and to dispose of the Owned
Shares, and sole power to issue instructions with respect to the Owned Shares to
the extent appropriate in respect of the matters set forth in this Agreement,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case which respect to all of the
Owned Shares, with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the terms of this Agreement.
(d) Except for filings, authorizations, consents and approvals as
may be required under, and other applicable requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR ACT") and the Exchange Act,
in each case as amended, (i) no filing will, and no permit, authorization,
consent or approval of, any state or federal governmental body or authority is
necessary for the execution of this Agreement by Shareholder and the
consummation by Shareholder of the transactions contemplated hereby and (ii)
none of the execution and delivery of this Agreement by Shareholder, the
consummation by Shareholder of the transactions contemplated hereby or
compliance by Shareholder with any of the provisions hereof shall (A) conflict
with or result in any breach of the partnership agreement or other
organizational documents of Shareholder, (B) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Shareholder is a party or by which Shareholder
or any of its properties or assets (including the Owned Shares) may be bound, or
(C) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to Shareholder or any of its properties or assets. As of
immediately prior to the execution of this Agreement, no litigation is pending
or, to the knowledge of Shareholder, threatened involving Shareholder or the
Company relating in any way, this Agreement, the Merger Agreement or any
transactions contemplated hereby or thereby.
(e) Shareholder understands and acknowledges that Parent is
entering into, and causing the Purchaser to enter into, the Merger Agreement,
and is incurring the obligations set forth therein, in reliance upon
Shareholder's execution and delivery of this Agreement.
(f) Shareholder agrees with and covenants to Parent that
Shareholder shall not request that the Company or Parent, as the case may be,
register the Transfer (book-entry
5
<PAGE>
or otherwise) of any certificated or uncertificated interest representing any of
the securities of the Company or of Parent, as the case may be, unless such
Transfer is made in compliance with this Agreement.
6. Representations and Warranties of Parent and Purchaser. Parent
------------------------------------------------------
and Purchaser hereby represent, warrant and covenant to Shareholder as follows:
(a) Parent is a corporation duly organized and validly existing
under the laws of the State of Delaware, and Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware and each
of them is in good standing under the laws of the state of its incorporation.
Parent and Purchaser have all necessary corporate power and authority to execute
and deliver this Agreement and perform their respective obligations hereunder.
The execution and delivery by Parent and Purchaser of this Agreement and the
performance by Parent and Purchaser of their respective obligations hereunder
have been duly and validly authorized by the Board of Directors of each of
Parent and Purchaser and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered
by Parent and Purchaser and constitutes a valid and binding agreement each of
Parent and Purchaser, enforceable against each of them in accordance with its
terms except to the extent (i) such enforcement may the limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as
may be required under, and other applicable requirements of the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by Parent or Purchaser and the consummation by
Parent or Purchaser of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by Parent or Purchaser, the
consummation by Parent or Purchaser of the transactions contemplated hereby or
compliance by Parent or Purchaser with any of the provisions hereof shall (A)
conflict with or result in any breach of the certificate of incorporation or by-
laws of Parent or Purchaser, or (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Parent or Purchaser is a party or by which
Parent or Purchaser or any of their respective properties or assets may be
bound, or violate any order, writ, injunction, decree, judgment, statute, rule
or regulation applicable to
6
<PAGE>
Parent or Purchaser or any of their respective properties or assets. As of
immediately prior to the execution of this Agreement, no litigation is pending
or, to the knowledge of Parent and Purchaser, threatened involving Parent or
Purchaser relating in any way to this Agreement, the Merger Agreement or any
transactions contemplated hereby or thereby.
7. Termination. This Agreement (and all covenants of Shareholder
-----------
hereunder) shall terminate on the earliest of (i) the purchase by Purchaser of
the Owned Shares pursuant to the Offer, (ii) termination of the Merger Agreement
pursuant to and in conformity with Article VIII of the Merger Agreement;
provided that this Agreement shall not terminate based on a termination under
- --------
Section 8.1(f) of the Merger Agreement if Parent and Purchaser are challenging
the ability of the Company to terminate the Merger Agreement pursuant to such
Section 8.1(f) and (iii) July 16, 1996.
8. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(b) Shareholder agrees that this Agreement and the respective
rights and obligations of Shareholder hereunder shall attach to any shares of
Company Common Stock, and any securities convertible into such shares, that may
become Beneficially Owned by Shareholder.
(c) All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, and each of Parent and Purchaser, on the one hand, and
Shareholder, on the other hand, shall indemnify and hold the other harmless from
and against any and all claims, liabilities or obligations with respect to any
brokerage fees, commissions or finders' fees asserted by any person on the basis
of any act or statement alleged to have been made by such party or its
Affiliates.
(d) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or delegated by any
party (whether by operation of Law or otherwise) without the prior written
consent of the other parties; provided, that Purchaser may assign or delegate
--------
its rights and obligations hereunder to Parent or any Subsidiary of Parent, but
no such assignment or delegation shall relieve Purchaser of its obligations
hereunder. This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
7
<PAGE>
(e) This Agreement may not be amended, changed, supplemented, or
otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Shareholder:
Apollo FG Partners, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Telephone No.: (310) 201-4100
Telecopy No.: (310) 201-4119
Attention: Michael D. Weiner
copy to:
Robert A. Profusek
Jones, Day, Reavis & Pogue
599 Lexington Avenue, 32d Floor
New York, New York 10022
Telephone No.: (212) 326-3800
Telecopy No.: (212) 755-7306
If to Parent or
Purchaser:
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Telephone No.: (301) 380-9555
Telecopy No.: (301) 380-8150
Attention: General Counsel
8
<PAGE>
copy to:
O'Melveny & Myers
555 13th Street, NW
Washington, D.C. 20004
Telephone No.: (202) 383-5300
Telecopy No.: (202) 383-5414
Attention: Jeffrey J. Rosen
David G. Pommerening
(g) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (a) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court sitting in Delaware. The
parties hereto consent to personal jurisdiction in any such action brought in
any state or federal court sitting in Delaware and to service of process upon it
in the manner set forth in Section 8(f) hereof.
(h) All rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) This Agreement shall be governed and construed in accordance
with the Laws of the State of Delaware, (regardless of the Laws that might
otherwise govern under applicable principles of conflict of laws) as to all
matters, including matters of validity, construction, effect, performance and
remedies.
(j) The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or inter pretation of this Agreement. "Include," "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import.
9
<PAGE>
(k) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same instrument.
10
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and Shareholder have caused this
Agreement to be duly executed as of the day and year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ WILLIAM J. SHAW
-------------------------------
Name: William J. Shaw
Title: Executive Vice President
FG ACQUISITION CORP.
By: /s/ WILLIAM J. SHAW
------------------------
Name: William J. Shaw
Title: President
APOLLO FG PARTNERS, L.P.
By: Apollo Advisors, L.P.,
Its Managing General Partner
By: Apollo Capital Management, Inc.,
Its General Partner
By: /s/ PETER COPSES
--------------------------
Name: Peter Copses
Title: Vice President
Solely for the purpose of Section 2(c) hereof:
FORUM GROUP, INC.
By: /s/ MARK PACALA
--------------------------
Name: Mark Pacala
11
<PAGE>
Title: Chairman and Chief Executive
Officer
12
<PAGE>
EXHIBIT A
---------
IRREVOCABLE PROXY
-----------------
The undersigned hereby revokes any previous proxies and appoints
Marriott International, Inc. ("PARENT"), William J. Shaw and Paul E. Johnson,
Jr., and each of them, with full power of substitution, as attorney and proxy of
the undersigned (this "PROXY") to attend any and all meetings of shareholders of
Forum Group, Inc., an Indiana corporation (the "COMPANY") (and any adjournments
or postponements thereof), to vote all shares of Common Stock, no value, of the
Company that the undersigned is then entitled to vote, and to represent and
otherwise to act for the undersigned in the same manner and with the same effect
as if the undersigned were personally present, with respect to all matters
specified herein. This is the proxy referred to in Section 3 of the Agreement
and Irrevocable Proxy (the "AGREEMENT") dated as of February 15, 1996, by and
among Parent, Purchaser, the undersigned and the Company. Capitalized terms
used and not defined herein have the respective meanings ascribed to them in, or
as prescribed by, the Agreement.
So long as the Merger Price is at least $13.00 in cash (net to the
seller), the undersigned hereby agrees that at any meeting (whether annual or
special, and whether or not an adjourned or postponed meeting) of the Company's
shareholders, however called, or in connection with any written consent of the
Company's shareholders, subject to the absence of a preliminary or permanent
injunction or other final order by any United States federal court or state
court barring such action, the undersigned shall vote (or cause to be voted) all
Owned Shares: (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the Agreement and the approval and adoption
of the Merger Agreement and the Agreement and the terms thereof and each of the
other actions contemplated by the Merger Agreement and the Agreement and any
actions required in furtherance thereof; (ii) against any action or agreement
that would (A) result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
of the Company or the undersigned under the Agreement or (B) impede, interfere
with, delay, postpone or adversely affect the Offer, the Merger or the
transactions contemplated thereby or by the Agreement; and (iii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement, the Agreement and this Proxy: (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or any of its Subsidiaries (including any Acquisition
Proposal or any Third Party Transaction); (B) any sale, lease or transfer of a
substantial portion of the assets or business of the Company or its
Subsidiaries, or reorganization, restructuring, recapitalization, special
dividend, dissolution or liquidation of the Company or its Subsidiaries; or (C)
any change in the present capitalization of the Company including any proposal
to sell any equity interest in the Company or any of its Subsidiaries. The
undersigned shall not enter into any binding
13
<PAGE>
agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Proxy.
The undersigned acknowledges and agrees that this Proxy (w) shall be
coupled with an interest, (x) shall constitute, among other things, an
inducement for Parent to enter into the Agreement and the Merger Agreement, (y)
shall be irrevocable and (z) shall not terminate (by operation of law or
otherwise), except upon the termination of the Agreement pursuant to and in
conformity with Section 7 thereof.
The undersigned authorizes such attorney and proxy to substitute any
other person to act hereunder, to revoke any substitution and to file this Proxy
and any substitution or revocation with the Secretary of the Company.
Dated: February 15, 1996
APOLLO FG PARTNERS, L.P.
By: Apollo Advisors, L.P.,
Its Managing General Partner
By: Apollo Capital Management, Inc.,
Its General Partner
By:_______________________________
Name:
Title:
Exhibit A-1
<PAGE>
EXHIBIT 10
<PAGE>
AGREEMENT AND IRREVOCABLE PROXY
THIS AGREEMENT AND IRREVOCABLE PROXY (this "Agreement"), dated as of
February 15, 1996, is by and among MARRIOTT INTERNATIONAL, INC., a Delaware
corporation ("PARENT"), FG ACQUISITION CORP., an Indiana corporation and a
subsidiary of Parent ("PURCHASER"), FORUM HOLDINGS, L.P., a Texas limited
partnership ("SHAREHOLDER") and, solely for the purpose of Section 2(c) hereof,
FORUM GROUP, INC., an Indiana corporation (the "COMPANY").
W I T N E S S E T H:
-------------------
WHEREAS, simultaneously with the execution of this Agreement, Parent,
Purchaser and the Company have entered into an Agreement and Plan of Merger (as
such Agreement may hereafter be amended from time to time, the "MERGER
AGREEMENT"), pursuant to which (i) Purchaser has agreed, among other things, to
commence a cash tender offer (as such tender offer may hereafter be amended from
time to time in accordance with the Merger Agreement, the "OFFER") to purchase
all shares of common stock, no par value, of the Company (the "COMPANY COMMON
STOCK") and (ii) Purchaser will be merged with and into the Company (the
"MERGER");
WHEREAS, as of the date hereof, Shareholder is the beneficial owner
of, and has the sole right to vote and dispose of, 9,079,568 shares of Company
Common Stock; and
WHEREAS, as of the date hereof, Shareholder holds warrants (the
"CITICORP WARRANTS") exercisable into 350,072 shares of Company Common Stock
(the "CITICORP WARRANT SHARES"); and
WHEREAS, as of the date hereof, Shareholder holds warrants (the
"INVESTOR WARRANTS"), issued pursuant to an Acquisition Agreement dated as of
April 18, 1993 (the "ACQUISITION AGREEMENT"), which Investor Warrants are not
currently exercisable into any shares of Company Common Stock; and
WHEREAS, as an inducement and a condition to its entering into the
Merger Agreement and incurring the obligations set forth therein, including the
Offer and the Merger, Parent has required that Shareholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained herein
and in the Merger Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
<PAGE>
1. Certain Definitions. Capitalized terms used and not defined
-------------------
herein have the respective meanings ascribed to them in the Merger Agreement. In
addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. For
purposes of this Agreement, with respect to Shareholder, "AFFILIATE" shall not
include (i) the Company and the Persons that directly, or indirectly through one
or more intermediaries, are controlled by the Company or (ii) any Person in
which Shareholder has a material direct or indirect ownership interest that is
an operating company or otherwise is not in the business of making direct or
indirect equity and/or debt investments in other Persons.
"BENEFICIALLY OWN," "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" with
respect to any securities means having "BENEFICIAL OWNERSHIP" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act). Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "GROUP" within the
meaning of Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"OWNED SHARES" means the shares of Company Common Stock owned by
Shareholder (either of record or through a nominee), together with any other
shares of Company Common Stock and any securities (other than Investor Warrants)
convertible into or exercisable or exchangeable for such securities (whether or
not subject to contingencies with respect to any matter or proposal submitted
for the vote or consent of shareholders of the Company) now or hereafter
Beneficially Owned by Shareholder.
"PERSON" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"TRANSFER" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such security
or the Beneficial Ownership thereof, the offer to make such a sale, transfer or
other disposition, and each option, agreement, arrangement or understanding,
whether or not in writing, to effect any of the foregoing. As a verb,
"TRANSFER" shall have a correlative meaning.
2. Tender of Shares; Exercise of Warrants.
--------------------------------------
(a) So long as the per share price in the Offer is not less than
$13.00 in cash (net to the seller), Shareholder hereby agrees to tender and not
withdraw all Owned Shares (or
2
<PAGE>
cause the record owner thereof to tender and not withdraw such Owned Shares),
pursuant to and in accordance with the terms of the Offer. Shareholder hereby
acknowledges and agrees that Parent's and Purchaser's obligation to accept for
payment and pay for shares of Company Common Stock in the Offer, including any
Owned Shares tendered by Shareholder, is subject to the terms and conditions of
the Offer. The parties agree that Shareholder will, for all Owned Shares
tendered by Shareholder in the offer and accepted for payment and paid for by
Purchaser, receive the same per share consideration paid to other shareholders
who have tendered into the Offer.
(b) Prior to the expiration of the Offer, Shareholder will exercise
all of the Citicorp Warrants. Upon exercise of the Citicorp Warrants, and the
purchase of the Citicorp Warrant Shares in accordance with the terms thereof,
the Citicorp Warrant Shares shall be deemed to be Owned Shares, and Shareholder
agrees to tender (and not withdraw) such Warrant Shares pursuant to the Offer in
accordance with Section 2(a) hereof.
(c) In order to induce Parent and Purchaser to enter into the Merger
Agreement, the Company and the holders of the Investor Warrants agree that,
notwithstanding any provision of the Investor Warrants or the Acquisition
Agreement to the contrary, immediately prior to the purchase of Shares pursuant
to the Offer and without further action, each Investor Warrant then outstanding
will be cancelled and extinguished for no additional consideration whatsoever.
Shareholder will not exercise any Investor Warrants for any reason whatsoever.
(d) Shareholder will take all actions necessary to terminate,
immediately prior to the consummation of the Offer, the Shareholders' Agreement,
dated as of June 14, 1993, and amended and restated as of July 28, 1995, by and
between Shareholder and another shareholder of the Company.
3. Voting of Owned Shares; Irrevocable Proxy. At the request
-----------------------------------------
of Parent, Shareholder, in furtherance of the transactions contemplated hereby
and by the Merger Agreement, and in order to secure the performance by
Shareholder of its duties under this Agreement, shall promptly execute and
deliver to Purchaser an irrevocable proxy in the form of Exhibit A hereto.
4. Restrictions on Transfer and Proxies; No Solicitation.
-----------------------------------------------------
(a) Shareholder shall not directly or indirectly: (i) except as
provided in Section 2 hereof, Transfer (including the Transfer of any securities
of an Affiliate which is the record holder of Owned Shares if, as the result of
such Transfer, such Person would cease to be an Affiliate of Shareholder) to any
Person any or all Owned Shares; (ii) except as provided in Section 3 of this
Agreement, grant any proxies or powers of attorney, deposit any Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares; or (iii) take any action that
would make any representation or
3
<PAGE>
warranty of Shareholder contained herein untrue or incorrect or would result in
a breach by Shareholder of its obligations under this Agreement.
(b) Shareholder shall, and shall cause its Affiliates and its and
their officers, directors, employees, representatives and agents (the "Covered
Persons") to, immediately cease any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal.
Shareholder will not, and will cause the Covered Persons not to, (i) solicit,
directly or through an intermediary, any inquiries with respect to, or the
making of, any Acquisition Proposal, or (ii) engage in negotiations or
discussions with, or furnish any confidential information relating to the
Company or its Subsidiaries to, any Third Party relating to an Acquisition
Proposal; provided, that nothing in this Agreement shall prohibit Shareholder or
--------
any Covered Person in their capacities as officers, directors, employees,
representatives and agents of the Company from taking or omitting to take any
action permitted to be taken or omitted to be taken by the Company under Section
6.2 of the Merger Agreement.
5. Representations and Warranties of Shareholder. Shareholder hereby
---------------------------------------------
represents, warrants and covenants to Parent and Purchaser as follows:
(a) Shareholder has all necessary partnership power and authority to
execute and deliver this Agreement and perform its obligations hereunder. The
execution and delivery by Shareholder of this Agreement and the performance by
Shareholder of its obligations hereunder have been duly and validly authorized
by the requisite partnership action on the part of Shareholder, and no other
partnership proceedings on the part of Shareholder are necessary to authorize
the execution, delivery or performance of this Agreement by Shareholder or the
consummation of the transactions contemplated hereby by Shareholder.
(b) This Agreement has been duly and validly executed and delivered
by Shareholder and constitutes the valid and binding agreement of Shareholder,
enforceable against Shareholder in accordance with its terms except to the
extent (i) such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors rights and (ii) the remedy of specified
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Shareholder is the Beneficial Owner of 9,429,640 shares of
Company Common Stock (350,072 shares of which are Beneficially Owned by virtue
of the Citicorp Warrants) and has the right to tender such shares as
contemplated by this Agreement so that, upon the consummation of the Offer,
Purchaser will own such shares free and clear of all liens, claims, options,
proxies, voting agreements, security interests, charges and encumbrances.
Shareholder holds warrants for the purchase of 350,072 Citicorp Warrant Shares.
Upon exercise of the Citicorp Warrants and purchase of the Citicorp Warrant
Shares in accordance with the terms thereof, Shareholder will have the right to
tender such shares as
4
<PAGE>
contemplated by this Agreement so that, upon the consummation of the Offer,
Purchaser will own such shares, free and clear of all liens, claims, options,
proxies, voting agreements, security interests, charges and encumbrances. Except
for the Owned Shares, the Citicorp Warrants and the Investor Warrants (and the
shares of Company Common Stock purchasable upon exercise of such warrants),
neither Shareholder nor any of its Affiliates Beneficially Owns any shares of
Company Common Stock or any securities convertible into Company Common Stock.
Except as provided in this Agreement or referred to in Schedule 4.2(b) to the
Merger Agreement, Shareholder has sole power to vote and to dispose of the Owned
Shares, and sole power to issue instructions with respect to the Owned Shares to
the extent appropriate in respect of the matters set forth in this Agreement,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case which respect to all of the
Owned Shares, with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the terms of this Agreement.
(d) Except for filings, authorizations, consents and approvals as
may be required under, and other applicable requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR ACT") and the Exchange Act,
in each case as amended, (i) no filing will, and no permit, authorization,
consent or approval of, any state or federal governmental body or authority is
necessary for the execution of this Agreement by Shareholder and the
consummation by Shareholder of the transactions contemplated hereby and (ii)
none of the execution and delivery of this Agreement by Shareholder, the
consummation by Shareholder of the transactions contemplated hereby or
compliance by Shareholder with any of the provisions hereof shall (A) conflict
with or result in any breach of the partnership agreement or other
organizational documents of Shareholder, (B) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Shareholder is a party or by which Shareholder
or any of its properties or assets (including the Owned Shares) may be bound, or
(C) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to Shareholder or any of its properties or assets. As of
immediately prior to the execution of this Agreement, no litigation is pending
or, to the knowledge of Shareholder, threatened involving Shareholder or the
Company relating in any way, this Agreement, the Merger Agreement or any
transactions contemplated hereby or thereby.
(e) Shareholder understands and acknowledges that Parent is entering
into, and causing the Purchaser to enter into, the Merger Agreement, and is
incurring the obligations set forth therein, in reliance upon Shareholder's
execution and delivery of this Agreement.
(f) Shareholder agrees with and covenants to Parent that Shareholder
shall not request that the Company or Parent, as the case may be, register the
Transfer (book-entry
5
<PAGE>
or otherwise) of any certificated or uncertificated interest representing any of
the securities of the Company or of Parent, as the case may be, unless such
Transfer is made in compliance with this Agreement.
6. Representations and Warranties of Parent and Purchaser. Parent
-----------------------------------------------------
and Purchaser hereby represent, warrant and covenant to Shareholder as follows:
(a) Parent is a corporation duly organized and validly existing
under the laws of the State of Delaware, and Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware and each
of them is in good standing under the laws of the state of its incorporation.
Parent and Purchaser have all necessary corporate power and authority to execute
and deliver this Agreement and perform their respective obligations hereunder.
The execution and delivery by Parent and Purchaser of this Agreement and the
performance by Parent and Purchaser of their respective obligations hereunder
have been duly and validly authorized by the Board of Directors of each of
Parent and Purchaser and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered
by Parent and Purchaser and constitutes a valid and binding agreement each of
Parent and Purchaser, enforceable against each of them in accordance with its
terms except to the extent (i) such enforcement may the limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as
may be required under, and other applicable requirements of the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by Parent or Purchaser and the consummation by
Parent or Purchaser of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by Parent or Purchaser, the
consummation by Parent or Purchaser of the transactions contemplated hereby or
compliance by Parent or Purchaser with any of the provisions hereof shall (A)
conflict with or result in any breach of the certificate of incorporation or by-
laws of Parent or Purchaser, or (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Parent or Purchaser is a party or by which
Parent or Purchaser or any of their respective properties or assets may be
bound, or violate any order, writ, injunction, decree, judgment, statute, rule
or regulation applicable to
6
<PAGE>
Parent or Purchaser or any of their respective properties or assets. As of
immediately prior to the execution of this Agreement, no litigation is pending
or, to the knowledge of Parent and Purchaser, threatened involving Parent or
Purchaser relating in any way to this Agreement, the Merger Agreement or any
transactions contemplated hereby or thereby.
7. Termination. This Agreement (and all covenants of Shareholder
-----------
hereunder) shall terminate on the earliest of (i) the purchase by Purchaser of
the Owned Shares pursuant to the Offer, (ii) termination of the Merger Agreement
pursuant to and in conformity with Article VIII of the Merger Agreement;
provided that this Agreement shall not terminate based on a termination under
- --------
Section 8.1(f) of the Merger Agreement if Parent and Purchaser are challenging
the ability of the Company to terminate the Merger Agreement pursuant to such
Section 8.1(f) and (iii) July 16, 1996.
8. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(b) Shareholder agrees that this Agreement and the respective
rights and obligations of Shareholder hereunder shall attach to any shares of
Company Common Stock, and any securities convertible into such shares, that may
become Beneficially Owned by Shareholder.
(c) All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, and each of Parent and Purchaser, on the one hand, and
Shareholder, on the other hand, shall indemnify and hold the other harmless from
and against any and all claims, liabilities or obligations with respect to any
brokerage fees, commissions or finders' fees asserted by any person on the basis
of any act or statement alleged to have been made by such party or its
Affiliates.
(d) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned or delegated by any party (whether by
operation of Law or otherwise) without the prior written consent of the other
parties; provided, that Purchaser may assign or delegate its rights and
--------
obligations hereunder to Parent or any Subsidiary of Parent, but no such
assignment or delegation shall relieve Purchaser of its obligations hereunder.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
7
<PAGE>
(e) This Agreement may not be amended, changed, supplemented, or
otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Shareholder:
Forum Holdings, L.P.
c/o The Hampstead Group
2200 Ross Avenue, Suite 4200 West
Dallas, Texas 75201-6799
Telephone No.: (214) 220-4900
Telecopy No.: (214) 220-4949
Attention: Robert Whitman
copy to:
Robert A. Profusek
Jones, Day, Reavis & Pogue
599 Lexington Avenue, 32nd Floor
New York, New York 10022
Telephone No.: (212) 326-3800
Telecopy No.: (212) 755-7306
If to Parent or
Purchaser:
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Telephone No.: (301) 380-9555
Telecopy No.: (301) 380-8150
Attention: General Counsel
8
<PAGE>
copy to:
O'Melveny & Myers
555 13th Street, NW
Washington, D.C. 20004
Telephone No.: (202) 383-5300
Telecopy No.: (202) 383-5414
Attention: Jeffrey J. Rosen
David G. Pommerening
(g) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (a) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court sitting in Delaware. The
parties hereto consent to personal jurisdiction in any such action brought in
any state or federal court sitting in Delaware and to service of process upon it
in the manner set forth in Section 8(f) hereof.
(h) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) This Agreement shall be governed and construed in accordance
with the Laws of the State of Delaware (regardless of the Laws that might
otherwise govern under applicable principles of conflict of laws) as to all
matters, including matters of validity, construction, effect, performance and
remedies.
(j) The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or inter pretation of this Agreement. "Include," "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import.
9
<PAGE>
(k) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same instrument.
10
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and Shareholder have caused this
Agreement to be duly executed as of the day and year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ WILLIAM J. SHAW
-------------------------------
Name: William J. Shaw
Title: Executive Vice President
FG ACQUISITION CORP.
By: /s/ WILLIAM J. SHAW
-------------------------------------
Name: William J. Shaw
Title: Vice President
FORUM HOLDINGS, L.P.
By: HRP Management, Ltd.,
Its General Partner
By: HH Genpar Partners,
Its General Partner
By: Hampstead Associates, Inc.,
Its Managing General Partner
By:/s/ DANIEL DECKER
-----------------
Name:
Title:
Solely for the purpose of Section 2(c)
hereof:
FORUM GROUP, INC.
By: /s/ MARK PACALA
------------------
Name: Mark Pacala
11
<PAGE>
Title: Chairman and Chief Executive
Officer
12
<PAGE>
EXHIBIT A
---------
IRREVOCABLE PROXY
-----------------
The undersigned hereby revokes any previous proxies and appoints
Marriott International, Inc. ("PARENT"), William J. Shaw and Paul E. Johnson,
Jr., and each of them, with full power of substitution, as attorney and proxy of
the undersigned (this "PROXY") to attend any and all meetings of shareholders of
Forum Group Inc., an Indiana corporation (the "COMPANY") (and any adjournments
or postponements thereof), to vote all shares of Common Stock, no value, of the
Company that the undersigned is then entitled to vote, and to represent and
otherwise to act for the undersigned in the same manner and with the same effect
as if the undersigned were personally present, with respect to all matters
specified herein. This is the proxy referred to in Section 3 of the Agreement
and Irrevocable Proxy (the "AGREEMENT") dated as of February 15, 1996, by and
among Parent, Purchaser, the undersigned and the Company. Capitalized terms
used and not defined herein have the respective meanings ascribed to them in, or
as prescribed by, the Agreement.
So long as the Merger Price is at least $13.00 in cash (net to the
seller), the undersigned hereby agrees that at any meeting (whether annual or
special, and whether or not an adjourned or postponed meeting) of the Company's
shareholders, however called, or in connection with any written consent of the
Company's shareholders, subject to the absence of a preliminary or permanent
injunction or other final order by any United States federal court or state
court barring such action, the proxies named above are authorized to vote all
Owned Shares: (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the Agreement and the approval and adoption
of the Merger Agreement and the Agreement and the terms thereof and each of the
other actions contemplated by the Merger Agreement and the Agreement and any
actions required in furtherance thereof; (ii) against any action or agreement
that would (A) result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
of the Company or the undersigned under the Agreement or (B) impede, interfere
with, delay, postpone or adversely affect the Offer, the Merger or the
transactions contemplated thereby or by the Agreement; and (iii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement, the Agreement and this Proxy: (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or any of its Subsidiaries (including any Acquisition
Proposal or any Third Party Transaction); (B) any sale, lease or transfer of a
substantial portion of the assets or business of the Company or its
Subsidiaries, or reorganization, restructuring, recapitalization, special
dividend, dissolution or liquidation of the Company or its Subsidiaries; or (C)
any change in the present capitalization of the Company including any proposal
to sell any equity interest in the Company or any of its Subsidiaries. The
undersigned shall not enter into any binding
13
<PAGE>
agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Proxy.
The undersigned acknowledges and agrees that this Proxy (w) shall be
coupled with an interest, (x) shall constitute, among other things, an
inducement for Parent to enter into the Agreement and the Merger Agreement, (y)
shall be irrevocable and (z) shall not terminate (by operation of law or
otherwise), except upon the termination of the Agreement pursuant to and in
conformity with Section 7 thereof.
The undersigned authorizes such attorney and proxy to substitute any
other person to act hereunder, to revoke any substitution and to file this Proxy
and any substitution or revocation with the Secretary of the Company.
Dated: February 15, 1996
FORUM HOLDINGS, L.P.
By: HRP Management, Ltd.,
Its General Partner
By: HH Genpar Partners,
Its General Partner
By: Hampstead Associates, Inc.,
Its Managing General Partner
By:____________________________
Name:
Title:
Exhibit A-2
<PAGE>
Exhibit A-2
15
<PAGE>
EXHIBIT 11
<PAGE>
AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of February 15, 1996, is
by and among MARRIOTT INTERNATIONAL, INC., a Delaware corporation ("PARENT"), FG
ACQUISITION CORP., an Indiana corporation and a subsidiary of Parent
("PURCHASER"), and FORUM/CLASSIC, L.P., a Delaware limited partnership
("SHAREHOLDER").
W I T N E S S E T H:
-------------------
WHEREAS, simultaneously with the execution of this Agreement, Parent,
Purchaser and Forum Group Inc., an Indiana corporation, (the "COMPANY") have
entered into an Agreement and Plan of Merger (as such Agreement may hereafter be
amended from time to time, the "MERGER AGREEMENT"), pursuant to which (i)
Purchaser has agreed, among other things, to commence a cash tender offer (as
such tender offer may hereafter be amended from time to time in accordance with
the Merger Agreement, the "OFFER") to purchase all shares of common stock, no
par value, of the Company (the "COMPANY COMMON STOCK") and (ii) Purchaser will
be merged with and into the Company (the "MERGER");
WHEREAS, as of the date hereof, Shareholder is the beneficial owner
of, and has the sole right to vote and dispose of, 2,550,554 shares of Company
Common Stock; and
WHEREAS, as an inducement and a condition to its entering into the
Merger Agreement and incurring the obligations set forth therein, including the
Offer and the Merger, Parent has required that Shareholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained herein
and in the Merger Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined
-------------------
herein have the respective meanings ascribed to them in the Merger Agreement. In
addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. As used
herein, "CONTROL" means the ownership of fifty percent (50%) or more of the
voting securities of a Person. For purposes of this Agreement, with respect to
Shareholder, "AFFILIATE" shall not include (i) the Company and the Persons that
directly, or indirectly through one or more intermediaries, are controlled by
the Company or (ii) any Person in which Shareholder has a material direct or
indirect ownership interest that is an operating company or otherwise is not in
the business of making direct or indirect equity and/or debt investments in
other Persons.
<PAGE>
"BENEFICIALLY OWN," "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" with
respect to any securities means having "BENEFICIAL OWNERSHIP" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act ). Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "GROUP" within the
meaning of Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"OWNED SHARES" means the shares of Company Common Stock owned by
Shareholder (either of record or through a nominee), together with any other
shares of Company Common Stock and any securities convertible into or
exercisable or exchangeable for such securities (whether or not subject to
contingencies with respect to any matter or proposal submitted for the vote or
consent of shareholders of the Company) now or hereafter Beneficially Owned by
Shareholder.
"PERSON" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"TRANSFER" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such security
or the Beneficial Ownership thereof, the offer to make such a sale, transfer or
other disposition, and each option, agreement, arrangement or understanding,
whether or not in writing, to effect any of the foregoing. As a verb,
"TRANSFER" shall have a correlative meaning.
2. Tender of Shares.
----------------
So long as the per share price in the Offer is not less than $13 in
cash (net to the seller), Shareholder hereby agrees to tender and not withdraw
all Owned Shares (or cause the record owner thereof to tender and not withdraw
such Owned Shares), pursuant to and in accordance with the terms of the Offer.
Shareholder hereby acknowledges and agrees that Parent's and Purchaser's
obligation to accept for payment and pay for shares of Company Common Stock in
the Offer, including any Owned Shares tendered by Shareholder, is subject to the
terms and conditions of the Offer. The parties agree that Shareholder will, for
all Owned Shares tendered by Shareholder in the Offer and accepted for payment
and paid for by Purchaser, receive the same per share consideration paid to
other shareholders who have tendered into the Offer.
2
<PAGE>
3. Restrictions on Transfer and Proxies; No Solicitation.
-----------------------------------------------------
(a) So long as the per share price in the Offer is not less than $13
in cash (net to the seller), Shareholder shall not directly or indirectly: (i)
except as provided in Section 2 hereof, Transfer (including the Transfer of any
securities of an Affiliate which is the record holder of Owned Shares if, as the
result of such Transfer, such Person would cease to be an Affiliate of
Shareholder) to any Person any or all Owned Shares; (ii) grant any proxies or
powers of attorney, deposit any Owned Shares into a voting trust or enter into a
voting agreement, understanding or arrangement with respect to such Owned
Shares; or (iii) take any action that would make any representation or warranty
of Shareholder contained herein untrue or incorrect or would result in a breach
by Shareholder of its obligations under this Agreement.
(b) Shareholder shall, and shall cause its Affiliates and its and
their officers, directors, employees, representatives and agents (the "Covered
Persons") to, immediately cease any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal.
Shareholder will not, and will cause the Covered Persons not to, (i) solicit,
directly or through an intermediary, any inquiries with respect to, or the
making of, any Acquisition Proposal, or (ii) engage in negotiations or
discussions with, or furnish any confidential information relating to the
Company or its Subsidiaries to, any Third Party relating to an Acquisition
Proposal; provided, that nothing in this Agreement shall prohibit Shareholder or
--------
any Covered Person in their capacities as officers, directors, employees,
representatives and agents of the Company from taking or omitting to take any
action permitted to be taken or omitted to be taken by the Company under Section
6.2 of the Merger Agreement.
4. Representations and Warranties of Shareholder. Shareholder
---------------------------------------------
hereby represents, warrants and covenants to Parent and Purchaser as follows:
(a) Shareholder has all necessary partnership power and authority
to execute and deliver this Agreement and perform its obligations hereunder. The
execution and delivery by Shareholder of this Agreement and the performance by
Shareholder of its obligations hereunder have been duly and validly authorized
by the requisite partnership action on the part of Shareholder, and no other
partnership proceedings on the part of Shareholder are necessary to authorize
the execution, delivery or performance of this Agreement by Shareholder or the
consummation of the transactions contemplated hereby by Shareholder.
(b) This Agreement has been duly and validly executed and delivered
by Shareholder and constitutes the valid and binding agreement of Shareholder,
enforceable against Shareholder in accordance with its terms except to the
extent (i) such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors rights and (ii) the remedy of specified
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3
<PAGE>
(c) Shareholder is the Beneficial Owner of 2,550,544 shares of
Company Common Stock and has the right to tender such shares as contemplated by
this Agreement so that, upon the consummation of the Offer, Purchaser will own
such shares free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. Except for the Owned
Shares, the Citicorp Warrants and the Investor Warrants (and the shares of
Company Common Stock purchasable upon exercise of such warrants), neither
Shareholder nor any of its Affiliates Beneficially Owns any shares of Company
Common Stock or any securities convertible into Company Common Stock.
Shareholder has sole power to vote and to dispose of the Owned Shares, and sole
power to issue instructions with respect to the Owned Shares to the extent
appropriate in respect of the matters set forth in this Agreement, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case which respect to all of the Owned Shares, with
no limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(d) Except for filings, authorizations, consents and approvals as
may be required under, and other applicable requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR ACT") and the Exchange Act,
in each case as amended, (i) no filing will, and no permit, authorization,
consent or approval of, any state or federal governmental body or authority is
necessary for the execution of this Agreement by Shareholder and the
consummation by Shareholder of the transactions contemplated hereby and (ii)
none of the execution and delivery of this Agreement by Shareholder, the
consummation by Shareholder of the transactions contemplated hereby or
compliance by Shareholder with any of the provisions hereof shall (A) conflict
with or result in any breach of the partnership agreement or other
organizational documents of Shareholder, (B) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Shareholder is a party or by which Shareholder
or any of its properties or assets (including the Owned Shares) may be bound, or
(C) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to Shareholder or any of its properties or assets. As of
immediately prior to the execution of this Agreement, no litigation is pending
or, to the knowledge of Shareholder, threatened involving Shareholder relating
in any way to this Agreement, the Merger Agreement or any transactions
contemplated hereby or thereby.
(e) Shareholder understands and acknowledges that Parent is
entering into, and causing the Purchaser to enter into, the Merger Agreement,
and is incurring the obligations set forth therein, in reliance upon
Shareholder's execution and delivery of this Agreement.
(f) Shareholder agrees with and covenants to Parent that
Shareholder shall not request that the Company or Parent, as the case may be,
register the Transfer (book-entry
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or otherwise) of any certificated or uncertificated interest representing any of
the securities of the Company or of Parent, as the case may be, unless such
Transfer is made in compliance with this Agreement.
5. Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser hereby represent, warrant and covenant to Shareholder as
follows:
(a) Parent is a corporation duly organized and validly existing
under the laws of the State of Delaware, and Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware and each
of them is in good standing under the laws of the state of its incorporation.
Parent and Purchaser have all necessary corporate power and authority to execute
and deliver this Agreement and perform their respective obligations hereunder.
The execution and delivery by Parent and Purchaser of this Agreement and the
performance by Parent and Purchaser of their respective obligations hereunder
have been duly and validly authorized by the Board of Directors of each of
Parent and Purchaser and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered
by Parent and Purchaser and constitutes a valid and binding agreement each of
Parent and Purchaser, enforceable against each of them in accordance with its
terms except to the extent (i) such enforcement may the limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as
may be required under, and other applicable requirements of the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by Parent or Purchaser and the consummation by
Parent or Purchaser of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by Parent or Purchaser, the
consummation by Parent or Purchaser of the transactions contemplated hereby or
compliance by Parent or Purchaser with any of the provisions hereof shall (A)
conflict with or result in any breach of the certificate of incorporation or by-
laws of Parent or Purchaser, or (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Parent or Purchaser is a party or by which
Parent or Purchaser or any of their respective properties or assets may be
bound, or violate any order, writ, injunction, decree, judgment, statute, rule
or regulation applicable to Parent or Purchaser or any of their respective
properties or assets. As of immediately prior to
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the execution of this Agreement, no litigation is pending or, to the knowledge
of Parent and Purchaser, threatened involving Parent or Purchaser relating in
any way to this Agreement, the Merger Agreement or any transactions contemplated
hereby or thereby.
6. Termination. This Agreement (and all covenants of Shareholder
-----------
hereunder) shall terminate on the earliest of (i) the purchase by Purchaser of
the Owned Shares pursuant to the Offer, (ii) termination of the Merger Agreement
pursuant to and in conformity with Article VIII of the Merger Agreement;
provided that this Agreement shall not terminate based on a termination under
- --------
Section 7.1(f) of the Merger Agreement if Parent and Purchaser are challenging
the ability of the Company to terminate the Merger Agreement pursuant to such
Section 7.1(f), and (iii) July 16, 1996.
7. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(b) Shareholder agrees that this Agreement and the respective
rights and obligations of Shareholder hereunder shall attach to any shares of
Company Common Stock, and any securities convertible into such shares, that may
become Beneficially Owned by Shareholder.
(c) All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, and each of Parent and Purchaser, on the one hand, and
Shareholder, on the other hand, shall indemnify and hold the other harmless from
and against any and all claims, liabilities or obligations with respect to any
brokerage fees, commissions or finders' fees asserted by any person on the basis
of any act or statement alleged to have been made by such party or its
Affiliates.
(d) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or delegated by any
party (whether by operation of Law or otherwise) without the prior written
consent of the other parties; provided, that Purchaser may assign or delegate
--------
its rights and obligations hereunder to Parent or any Subsidiary of Parent, but
no such assignment or delegation shall relieve Purchaser of its obligations
hereunder. This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
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(e) This Agreement may not be amended, changed, supplemented, or
otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) on receipt, unless receipt
fails to occur because of a refusal to accept delivery or inability to effect
delivery because of a change of address of which no notice was given, in which
case notice shall be deemed given upon the expiration of five business days
after the day when mailed by certified or registered mail, postage prepaid,
addressed at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Shareholder:
Forum/Classic, L.P.
Suite 3900
200 West Madison
Chicago, Illinois 60606
Telephone No.: (312) 750-8103
Telecopy No.: (312) 750-8566
Attention: Kenneth R. Posner
copy to:
Forum/Classic, L.P.
Suite 3900
200 West Madison
Chicago, Illinois 60606
Telephone No.: (312) 750-8415
Telecopy No.: (312) 750-8597
Attention: John Kevin Poorman
If to Parent or
Purchaser:
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Telephone No.: (301) 380-9555
Telecopy No.: (301) 380-8150
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Attention: General Counsel
copy to:
O'Melveny & Myers
555 13th Street, NW
Washington, D.C. 20004
Telephone No.: (202) 383-5300
Telecopy No.: (202) 383-5414
Attention: Jeffrey J. Rosen
David G. Pommerening
(g) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (a) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court sitting in Delaware. The
parties hereto consent to personal jurisdiction in any such action brought in
any state or federal court sitting in Delaware and to service of process upon it
in the manner set forth in Section 7(f) hereof.
(h) All rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(i) This Agreement shall be governed and construed in accordance
with the Laws of the State of Delaware (regardless of the Laws that might
otherwise govern under applicable principles of conflict of laws) as to all
matters, including matters of validity, construction, effect, performance and
remedies.
(j) The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or inter pretation of this Agreement. "Include," "includes" and
"including" shall be deemed to be followed by "without limitation" whether or
not they are in fact followed by such words or words of like import.
8
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(k) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same instrument.
9
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IN WITNESS WHEREOF, Parent, Purchaser and Shareholder have caused this
Agreement to be duly executed as of the day and year first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ WILLIAM J. SHAW
-----------------------------------
Name: William J. Shaw
Title: Executive Vice President
FG ACQUISITION CORP.
By: /s/ WILLIAM J. SHAW
-----------------------------------
Name: William J. Shaw
Title: Vice President
FORUM/CLASSIC, L.P.
By: FORUM/CLASSIC GP CO., its general
partner
By: /s/ JOHN KEVIN POORMAN
---------------------------------
Name: John Kevin Poorman
Title: Vice President
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EXHIBIT 12
SMITH BARNEY INC.
February 15, 1996
The Board of Directors
Forum Group, Inc.
11320 Random Hills Road
Fairfax, Virginia 22030
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Forum Group, Inc., other than
Marriott International, Inc. ("Marriott") and its affiliates, of the
consideration to be received by such holders pursuant to the terms and subject
to the conditions set forth in the Agreement and Plan of Merger, dated as of
February 15, 1996 (the "Merger Agreement"), by and among Marriott, FG
Acquisition Corp., a wholly owned subsidiary of Marriott ("Purchaser"), and
Forum. As more fully described in the Merger Agreement, (i) Purchaser will
commence a tender offer to purchase all outstanding shares of the common
stock, no par value, of Forum (the "Forum Common Stock") at a purchase price
of $13.00 per share, net to the seller in cash (the "Tender Offer") and (ii)
subsequent to the Tender Offer, Purchaser will be merged with and into Forum
(the "Merger" and, together with the Tender Offer, the "Transaction") and each
outstanding share of Forum Common Stock not previously tendered will be
converted into the right to receive $13.00 in cash.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Forum concerning the business, operations and prospects of
Forum. We examined certain publicly available business and financial
information relating to Forum as well as certain financial forecasts and other
data for Forum which were provided to us by or otherwise discussed with the
management of Forum. We reviewed the financial terms of the Transaction as set
forth in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of Forum Common Stock; the
historical and projected earnings and operating data of Forum; and the
capitalization and financial condition of Forum. We also considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Transaction and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of Forum. In addition to
the foregoing, we conducted such other analyses and examinations and
considered such other financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with us. With respect to financial forecasts and other data provided
to or otherwise reviewed by or discussed with us, we have been advised by the
management of Forum that such forecasts and other data were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of Forum as to the future financial performance of
Forum. We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of Forum nor
have we made any physical inspection of the properties or assets of Forum. In
connection with our engagement, we were requested to approach on a limited
basis, and held discussions with, certain third parties to solicit indications
of interest in a possible acquisition of Forum; however, we were not requested
to, and did not, participate in the negotiation or structuring of the
Transaction. Our opinion is necessarily based upon information available to
us, and financial, stock market and other conditions and circumstances
existing and disclosed to us, as of the date hereof.
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Smith Barney has been engaged to render financial advisory services to Forum
with respect to this opinion and will receive a fee for our services. In the
ordinary course of our business, we and our affiliates may actively trade the
securities of Forum and Marriott for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, we and our affiliates (including Travelers Group
Inc. and its affiliates) may maintain relationships with Forum and Marriott.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Forum in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of Forum Common stock in the Tender Offer or
how such stockholder should vote on the proposed Merger. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Smith Barney be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the cash consideration to be received by
holders of Forum Common Stock (other than Marriott and its affiliates) in the
Transaction is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Smith Barney Inc.
SMITH BARNEY INC.
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FORUM GROUP, INC.
February 23, 1996
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to inform you that Forum
Group, Inc. has entered into a definitive merger agreement with Marriott
International, Inc. pursuant to which Marriott has agreed to acquire the
Company. Under the merger agreement, a wholly owned subsidiary of Marriott
today commenced a cash tender offer for all of the outstanding shares of the
Company's common stock at a price of $13.00 per share. Under the merger
agreement, the tender offer will be followed by a merger of Marriott's
subsidiary with and into the Company pursuant to which any remaining shares
will be converted into the right to receive $13.00 per share in cash, without
interest.
YOUR BOARD OF DIRECTORS, BY UNANIMOUS VOTE, APPROVED THE MERGER AGREEMENT,
INCLUDING THE TENDER OFFER AND MERGER, AND DETERMINED THAT THE TERMS OF THE
TENDER OFFER AND MERGER ARE FAIR TO AND IN THE BEST INTEREST OF THE COMPANY
AND THE SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS, SUBJECT TO ITS
FIDUCIARY DUTIES, UNANIMOUSLY RECOMMENDS THAT ALL SHAREHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES TO MARRIOTT'S SUBSIDIARY.
In arriving at its decision to recommend the offer, the Board of Directors
gave careful consideration to a number of factors, which are described in the
Schedule 14D-9 filed by the Company with the Securities and Exchange
Commission and enclosed with this letter. In addition to the enclosed Schedule
14D-9, also enclosed is Marriott's offering materials which include the Offer
to Purchase, dated February 23, 1996, together with related materials
including a Letter of Transmittal, to be used for tendering your shares. These
documents set forth the terms and conditions of the tender offer and the
merger and provide instructions as to how to tender your shares. I urge you to
read the enclosed materials carefully.
Forum Group's management and Directors thank you for the support you have
given the Company over the years.
Sincerely,
/s/ Mark L. Pacala
Chairman and
Chief Executive Officer
