<PAGE>
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>
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(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>
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* 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>
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(/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
