-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NsiQZwdiLGVTlApgj/Fm1nt7z/y3gzb0UE0JQDIm4zP3mePTOUFG56vEhIDE2QsH OtkveZmL352/371kaEfdkg== 0000928385-96-000086.txt : 19960227 0000928385-96-000086.hdr.sgml : 19960227 ACCESSION NUMBER: 0000928385-96-000086 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19960223 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FORUM GROUP INC CENTRAL INDEX KEY: 0000033939 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SOCIAL SERVICES [8300] IRS NUMBER: 610703072 STATE OF INCORPORATION: IN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-30915 FILM NUMBER: 96524827 BUSINESS ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: P O BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240-0498 BUSINESS PHONE: 3178460700 MAIL ADDRESS: STREET 1: 8900 KEYSTONE CROSSING STE 200 STREET 2: PO BOX 40498 CITY: INDIANAPOLIS STATE: IN ZIP: 46240-0498 FORMER COMPANY: FORMER CONFORMED NAME: EXCEPTICON INC DATE OF NAME CHANGE: 19810909 FORMER COMPANY: FORMER CONFORMED NAME: GUARDIAN CARE CORP DATE OF NAME CHANGE: 19720615 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MARRIOTT INTERNATIONAL INC CENTRAL INDEX KEY: 0000905036 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 520936594 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013809000 MAIL ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 SC 14D1 1 SCHEDULE 14D1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- FORUM GROUP, INC. (NAME OF SUBJECT COMPANY) FG ACQUISITION CORP. MARRIOTT INTERNATIONAL, INC. (BIDDERS) COMMON STOCK, WITHOUT PAR VALUE (TITLE OF CLASS OF SECURITIES) 349841304 (CUSIP NUMBER OF CLASS OF SECURITIES) EDWARD L. BEDNARZ, ESQ. COPY TO: FG ACQUISITION CORP. JEFFREY J. ROSEN, ESQ. MARRIOTT INTERNATIONAL, INC. O'MELVENY & MYERS 10400 FERNWOOD ROAD 555 13TH ST., N.W., SUITE 500W BETHESDA, MARYLAND 20817 WASHINGTON, D.C. 20004-1109 (301) 380-9555 (202) 383-5300 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) CALCULATION OF FILING FEE - ------------------------------------------------------------------------------- Transaction Valuation(1): $305,194,175 Amount of Filing Fee(2): $61,039 - ------------------------------------------------------------------------------- (1) For purposes of calculating the filing fee only. This calculation assumes the purchase of (i) all outstanding shares of Common Stock of Forum Group, Inc., (ii) all shares of Common Stock of Forum Group, Inc. issuable pursuant to stock options vested as of February 15, 1996, and (iii) all shares of Common Stock of Forum Group, Inc. issuable upon exercise of outstanding warrants (other than warrants which are to be cancelled pursuant to agreements with the holders thereof), and (iv) all shares issuable pursuant to certain contractual obligations of Forum Group, Inc. and its subsidiaries, in each case at $13.00 net per share in cash. (2) The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate value of cash offered by FG Acquisition Corp. for such shares. [_]CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2) AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING. ---------------- Amount previously paid: Not applicable Filing Party: Not Applicable Form or registration no.: Not applicable Date Filed: Not Applicable (CONTINUED ON FOLLOWING PAGE(S)) (PAGE 1 OF 9 PAGES) EXHIBIT INDEX IS LOCATED ON PAGE 9 =============================================================================== SCHEDULE 14D-1 - ------------------------------------------------------------------------------- CUSIP NO. 349841304 14D-1 PAGE 2 OF 9 PAGES - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification Nos. of Above Person FG Acquisition Corp. - ------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) [_] (b) [X] - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. Sources of Funds AF - ------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) [_] - ------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Indiana - ------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person None - ------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_] - ------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) Not applicable - ------------------------------------------------------------------------------- 10. Type of Reporting Person CO - ------------------------------------------------------------------------------- SCHEDULE 14D-1 - -------------------------------------------------------------------------------- CUSIP NO. 349841304 14D-1 PAGE 3 OF 9 PAGES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification Nos. of Above Person Marriott International, Inc. - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Sources of Funds WC, BK - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person None - -------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_] - -------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) Not applicable - -------------------------------------------------------------------------------- 10. Type of Reporting Person CO, HC - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Forum Group, Inc., an Indiana corporation (the "Subject Company"). The address of the Subject Company's principal executive offices is 11320 Random Hills Road, Suite 400, Fairfax, VA 22030. (b) This Statement on Schedule 14D-1 relates to the offer by FG Acquisition Corp. (the "Purchaser"), an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc. ("Parent"), a Delaware corporation, to purchase all outstanding shares of common stock, without par value (the "Common Stock"), of the Subject Company upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 23, 1996, and in the related Letter of Transmittal (which together constitute the "Offer"), at a purchase price of $13.00 per share, net to the seller in cash. According to the Subject Company, as of February 15, 1996, 22,539,831 Shares of the Common Stock were outstanding, 700,144 Shares were issuable pursuant to currently exercisable warrants, stock options exercisable into 230,500 Shares had vested and 6,000 Shares were issuable under certain circumstances under contracts and obligations of the Subject Company. The information set forth in the Introduction and Section 1 ("Terms of the Offer") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) This Statement is being filed by the Purchaser and Parent. The information set forth in Section 8 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase annexed hereto as Exhibit (a)(1) and Schedule I thereto is incorporated herein by reference. (e) and (f) During the last five years, neither the Purchaser, Parent, nor any persons controlling the Purchaser or Parent, nor, to the best knowledge of the Purchaser or Parent, any of the persons listed on Schedule I to the Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, Federal or State securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in the Introduction, Section 8 ("Certain Information Concerning the Purchaser and Parent"), Section 10 ("Background of the Offer; the Merger Agreement; the Shareholder Agreements") and Section 11 ("Purpose of the Offer and the Merger; Plans for the Company") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) The information set forth in Section 9 ("Source and Amounts of Funds") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction, Section 10 ("Background of the Offer; the Merger Agreement; the Shareholder Agreements"), Section 11 ("Purpose of the Offer and the Merger; Plans for the Company") and Section 13 ("Dividends and Distributions") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. 4 (f)-(g) The information set forth in Section 12 ("Effect on the Market for the Shares; Exchange Act Registration; Margin Regulations") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF SUBJECT COMPANY. (a)-(b) The information set forth in Section 8 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 8 ("Certain Information Concerning the Purchaser and Parent"), Section 10 ("Background of the Offer; the Merger Agreement; the Shareholder Agreements") and Section 11 ("Purpose of the Offer and the Merger; Plans for the Company") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in Section 17 ("Fees and Expenses") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in (i) Section 8 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase annexed hereto as Exhibit (a)(1), (ii) Parent's Annual Report on Form 10-K for the year ended December 30, 1994 filed with the Commission pursuant to Rule 15d-2 of the Exchange Act (the "Parent 10-K") (Item 8. Financial Statements and Supplementary Data, pages 20-40) and (iii) Parent's Quarterly Report on Form 10-Q for the quarter ended September 8, 1995 (the "Parent 10-Q") (Item 1. Financial Statements, pages 3- 9), is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 10 ("Background of the Offer; the Merger Agreement; the Shareholder Agreements") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. (b)-(c) The information set forth in the Introduction, Section 1 ("Terms of the Offer"), Section 10 ("Background of the Offer; the Merger Agreement; the Shareholder Agreements"), Section 12 ("Effect on the Market for the Shares; Exchange Act Registration; Margin Regulations"), Section 16 ("Certain Legal Matters; Regulatory Approvals") and Section 18 ("Miscellaneous") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. (d) The information set forth in Section 12 ("Effect on the Market for the Shares; Exchange Act Registration; Margin Regulations") and Section 16 ("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. (e) The information set forth in Section 16 ("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. (f) The information set forth in the Offer to Purchase, annexed hereto as Exhibit (a)(1), and the Letter of Transmittal, annexed hereto as Exhibit (a)(2), is incorporated herein by reference. 5 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated February 23, 1996. (2) Letter of Transmittal. (3) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (4) Notice of Guaranteed Delivery. (5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (6) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (7) Text of Press Release dated February 16, 1996 is incorporated herein by reference to Exhibit 99(1) to Parent's Current Report on Form 8-K filed with the Commission on February 16, 1996. (8) Summary Advertisement dated February 23, 1996. (b)(1) Credit Agreement dated as of June 9, 1995 by and among Marriott International, Inc., Citibank, N.A., as Administrative Agent and certain financial institutions is incorporated herein by reference to Exhibit 10.1 to Parent's Quarterly Report on Form 10-Q for the quarter ended June 16, 1995. (c)(1) Agreement and Plan of Merger, dated as of February 15, 1996, by and among Forum Group, Inc., Marriott International, Inc. and FG Acquisition Corp. (2) 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. (3) 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. (4) Agreement dated as of February 15, 1996, by and among Marriott International, Inc., FG Acquisition Corp. and Forum/Classic, L.P. (5) Irrevocable Proxy dated as of February 20, 1996, by Apollo FG Partners, L.P. (6) Irrevocable Proxy dated as of February 20, 1996, by Forum Holdings, L.P. (d) Not applicable (e) Not applicable (f) None 6 SIGNATURE After due 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. February 23, 1996 FG ACQUISITION CORP. /s/ WILLIAM J. SHAW By: _________________________________ Name: William J. Shaw Title: President 7 SIGNATURE After due 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. February 23, 1996 MARRIOTT INTERNATIONAL, INC. /s/ WILLIAM J. SHAW By: _________________________________ Name: William J. Shaw Title: Executive Vice President 8 14D-1 EXHIBIT INDEX
EXHIBIT DESCRIPTION ------- ----------- (a) (1) Offer to Purchase, dated February 23, 1996. (2) Letter of Transmittal. (3) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (4) Notice of Guaranteed Delivery. (5) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (6) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (7) Text of Press Release dated February 16, 1996 is incorporated herein by reference to Exhibit 99(1) to Parent's Current Report on Form 8-K filed with the Commission on February 16, 1996. (8) Summary Advertisement dated February 23, 1996. (b) (1) Credit Agreement dated as of June 9, 1995 by and among Marriott International, Inc., Citibank, N.A., as Administrative Agent and certain financial institutions is incorporated by reference to Exhibit 10.1 to Parent's Quarterly Report on Form 10-Q for the quarter ended June 16, 1995. (c) (1) Agreement and Plan of Merger, dated as of February 15, 1996, by and among Forum Group, Inc., Marriott International, Inc. and FG Acquisition Corp. (2) 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. (3) 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. (4) Agreement dated as of February 15, 1996, by and among Marriott International, Inc., FG Acquisition Corp. and Forum/Classic, L.P. (5) Irrevocable Proxy dated as of February 20, 1996, by Apollo FG Partners, L.P. (6) Irrevocable Proxy dated as of February 20, 1996, by Forum Holdings, L.P. (d) Not applicable (e) Not applicable (f)None
9 EX-99.A1 2 OFFER TO PURCHASE DATED FEB. 23, 1996 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF FORUM GROUP, INC. AT $13.00 NET PER SHARE BY FG ACQUISITION CORP. A WHOLLY OWNED INDIRECT SUBSIDIARY OF MARRIOTT INTERNATIONAL, INC. THE BOARD OF DIRECTORS OF FORUM GROUP, INC. (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO THE SHAREHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE SHAREHOLDERS OF THE COMPANY. -------------- THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF COMMON STOCK WITHOUT PAR VALUE WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY MARRIOTT INTERNATIONAL, INC. ("PARENT"), CONSTITUTES AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING AND TWO-THIRDS OF THE VOTING POWER OF THE SHARES THEN OUTSTANDING ON A FULLY-DILUTED BASIS. ANY OR ALL CONDITIONS TO THE OFFER MAY BE WAIVED BY FG ACQUISITION CORP. (THE "PURCHASER"). SEE SECTION 15. -------------- THE PURCHASER AND PARENT HAVE ENTERED INTO AGREEMENTS (EACH, A "SHAREHOLDER AGREEMENT") WITH EACH OF FORUM HOLDINGS, L.P., A TEXAS LIMITED PARTNERSHIP, APOLLO FG PARTNERS, L.P., A DELAWARE LIMITED PARTNERSHIP, AND FORUM/CLASSIC, L.P., A DELAWARE LIMITED PARTNERSHIP (THE FOREGOING COLLECTIVELY, THE "PRINCIPAL SHAREHOLDERS"). PURSUANT TO THE SHAREHOLDER AGREEMENTS, EACH PRINCIPAL SHAREHOLDER HAS AGREED, AMONG OTHER THINGS, SO LONG AS THE PRICE TO BE PAID IN THE OFFER IS AT LEAST $13.00 IN CASH (NET TO THE SELLER), TO TENDER AND NOT WITHDRAW ITS SHARES IN THE OFFER. SEE INTRODUCTION AND SECTION 10. -------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 21, 1996, UNLESS EXTENDED. THE PURCHASER HAS AGREED, UNDER THE MERGER AGREEMENT, TO EXTEND THE OFFER UNTIL THE FIRST BUSINESS DAY AFTER THE CONDITIONS (AS DEFINED BELOW) ARE SATISFIED; PROVIDED THAT THE PURCHASER SHALL BE PERMITTED BUT NOT OBLIGATED TO EXTEND THE OFFER IF EITHER (X) THE COMPANY IS IN BREACH IN ANY MATERIAL RESPECT OF ITS COVENANTS OR AGREEMENTS CONTAINED IN THE MERGER AGREEMENT (AS DEFINED BELOW) OR (Y) THERE IS A REASONABLE LIKELIHOOD THAT ONE OR MORE OF THE CONDITIONS CANNOT BE SATISFIED; AND PROVIDED, FURTHER, THAT THE PURCHASER SHALL NOT BE PERMITTED OR OBLIGATED TO EXTEND THE OFFER BEYOND JULY 15, 1996. -------------- IMPORTANT Any shareholder desiring to tender all or any portion of such holder's Shares (as defined herein) should either (a) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificates representing the tendered Shares and all other required documents to the Depositary, or tender such Shares pursuant to the procedure for book- entry transfer set forth in Section 3 of this Offer to Purchase or (b) request his or her broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him or her. A shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such holder desires to tender such Shares. Any shareholder who desires to tender such holder's Shares and whose certificates representing such Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3 of this Offer to Purchase. Questions and requests for assistance and for additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the other tender offer materials may also be obtained from brokers, dealers, commercial banks or trust companies. February 23, 1996 TABLE OF CONTENTS
PAGE ---- INTRODUCTION............................................................. 1 1. Terms of the Offer.................................................. 2 2. Acceptance for Payment and Payment.................................. 3 3. Procedures for Tendering Shares..................................... 4 4. Withdrawal Rights................................................... 6 5. Certain Tax Considerations.......................................... 7 6. Price Range of Shares; Dividends.................................... 8 7. Certain Information Concerning the Company.......................... 8 8. Certain Information Concerning the Purchaser and Parent............. 12 9. Sources and Amounts of Funds........................................ 13 10. Background of the Offer; the Merger Agreement; the Shareholder Agreements......................................................... 14 11. Purpose of the Offer and the Merger; Plans for the Company.......... 26 12. Effect of the Offer on the Market for the Shares; Exchange Act Registration; Margin Regulations................................... 27 13. Dividends and Distributions......................................... 28 14. Extension of Tender Period; Amendment; Termination.................. 29 15. Conditions to the Offer............................................. 29 16. Certain Legal Matters; Regulatory Approvals......................... 31 17. Fees and Expenses................................................... 33 18. Miscellaneous....................................................... 33
Schedule I--Directors and Executive Officers of Parent and the Purchaser To the Holders of Common Stock of FORUM GROUP, INC. INTRODUCTION FG Acquisition Corp., an Indiana corporation (the "Purchaser") and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of common stock, without par value (the "Shares"), of Forum Group, Inc., an Indiana corporation (the "Company"), at $13.00 per Share, net to the seller in cash (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses of First Chicago Trust Company of New York (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See Section 17. For purposes of this Offer to Purchase, references to "Section" are references to a section of this Offer to Purchase, unless the context otherwise requires. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF COMMON STOCK WITHOUT PAR VALUE WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY PARENT, CONSTITUTES AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING AND TWO-THIRDS OF THE VOTING POWER OF THE SHARES THEN OUTSTANDING ON A FULLY-DILUTED BASIS (THE "MINIMUM CONDITION"). ANY OR ALL OF THE CONDITIONS TO THE OFFER MAY BE WAIVED BY THE PURCHASER. SEE SECTION 15. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF DIRECTORS") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO THE SHAREHOLDERS OF THE COMPANY AND ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, AND, SUBJECT TO THE FIDUCIARY DUTIES OF THE BOARD, RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER (EACH AS DEFINED BELOW) BY THE SHAREHOLDERS OF THE COMPANY. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of February 15, 1996 (the "Merger Agreement"), by and among the Company, Parent and the Purchaser. The Merger Agreement provides, among other things, that as promptly as practicable following the completion of the Offer and the satisfaction or waiver of certain conditions, including the purchase of Shares pursuant to the Offer (sometimes referred to herein as the "consummation" of the Offer) and the approval and adoption of the Merger Agreement by the shareholders of the Company, if required by applicable law, the Purchaser will be merged with and into the Company (the "Merger") with the Company as the surviving corporation. In the Merger, each issued and outstanding Share (other than Dissenting Shares (as hereinafter defined)) not owned by Parent, the Purchaser, the Company or any of their wholly owned subsidiaries will be converted into and represent the right to receive $13.00 in cash, or any higher price that may be paid per Share in the Offer, without interest (the "Merger Price"). See Section 10. Smith Barney Inc. ("Smith Barney"), financial advisor to the Company, has delivered to the Board a written opinion dated February 15, 1996 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 cash consideration to be received by the holders of Shares (other than Parent and its affiliates) in the Offer and the Merger was fair to such holders from a financial point of view. A copy of such opinion is included with the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to shareholders concurrently herewith, and 1 should be read carefully in its entirety for a description of the assumptions made, matters considered and limitations on the review undertaken by Smith Barney. The Purchaser and Parent have entered into agreements (each, a "Shareholder Agreement") with each of Forum Holdings, L.P., a Texas limited partnership, Apollo FG Partners, L.P., a Delaware limited partnership, and Forum/Classic, L.P., a Delaware limited partnership (the foregoing collectively, the "Principal Shareholders"). Pursuant to the Shareholder Agreements, each Principal Shareholder has agreed, among other things, so long as the Offer Price is at least $13.00 in cash (net to the seller), to tender and not withdraw its Shares in the Offer. See Section 10. Based upon representations made by the Principal Shareholders to Parent and the Purchaser, as of the date of the Shareholder Agreements, the Principal Shareholders collectively hold 20,709,680 Shares and warrants currently exercisable to purchase 700,144 Shares in the aggregate. According to the Company, as of February 15, 1996, (A) 22,539,831 Shares were validly issued and outstanding, (B) 1,671,750 Shares 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 were reserved for issuance pursuant to warrants, (D) 262,793 Shares 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 were reserved for issuance to persons who are investors in the "Hearthside" joint venture with the Company (the "Hearthside Shares"). 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. See Section 15. Also, pursuant to their respective Shareholder Agreements, Forum Holdings, L.P. and Apollo FG Partners, L.P. have agreed with the 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. Based upon information provided by the Company and assuming (i) the issuance of the Bankruptcy Order as described above, (ii) the issuance of 700,144 Shares upon exercise of warrants, (iii) the cancellation of all other warrants as provided in the Shareholder Agreements, (iv) no issuance of the Hearthside Shares, and (v) no exercise of stock options prior to consummation of the Offer, then the Purchaser understands that the Minimum Condition would be satisfied if at least 15,493,317 Shares are validly tendered and not withdrawn prior to the Expiration Date. The Purchaser further understands that, after the exercise of warrants as provided in the applicable Shareholder Agreements, the Principal Shareholders will hold, collectively, 21,409,824 Shares. The Purchaser thus expects that, upon a tender of Shares by each Principal Shareholder in accordance with the applicable Shareholder Agreement, the Minimum Condition would be satisfied. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares which are validly tendered prior to the Expiration Date and not withdrawn in accordance with Section 4. 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. Pursuant to the Merger Agreement, the Purchaser, subject to the terms and conditions of the Offer, will extend the period of time during which the Offer is open if the Offer would otherwise expire before the 2 Conditions (as defined at Section 15) 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 unless any of the Conditions shall not have been satisfied. Subject to the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, and regardless of whether or not any of the events set forth in Section 15 shall have occurred or shall have been determined by the Purchaser to have occurred, (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Without the consent of the Company, no amendment may be made which (x) decreases the price per Share or changes the form of consideration payable in the Offer, (y) decreases the number of Shares sought, or (z) imposes additional conditions to the Offer or amends any other term of the Offer in any manner adverse to the holders of Shares. The Offer is subject to certain conditions set forth in Section 15, including satisfaction of the Minimum Condition and the expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). If any such condition is not satisfied prior to the expiration of the Offer, the Purchaser may, subject to the terms of the Merger Agreement, (i) terminate the Offer and return all tendered Shares to tendering shareholders, (ii) extend the Offer and, subject to withdrawal rights as set forth in Section 4, retain all such Shares until the expiration of the Offer as so extended, (iii) waive such condition and, subject to any requirement to extend the period of time during which the Offer is open, purchase all Shares validly tendered and not withdrawn by the Expiration Date or (iv) delay acceptance for payment of (whether or not the Shares have theretofore been accepted for payment), or payment for, any Shares tendered and not withdrawn, subject to applicable law, until satisfaction or waiver of the conditions to the Offer. In the Merger Agreement, the Purchaser has agreed, subject to the conditions in Section 15 and its rights under the Offer, to accept for payment and purchase all validly tendered and not properly withdrawn Shares as promptly as practicable following the expiration of the Offer. For a description of the Purchaser's right to extend the period of time during which the Offer is open, and to amend, delay or terminate the Offer, see Section 14. The Company has provided or will provide (upon request of Parent or the Purchaser) the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered and not properly withdrawn by the Expiration Date as soon as practicable after the later of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth in Section 15. For a description of the Purchaser's right to terminate the Offer and not accept for payment or pay for Shares or to delay acceptance for payment or payment for Shares, see Section 14. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment tendered Shares if, as and when the Purchaser gives oral or written notice to the Depositary of its acceptance of the tender of such Shares. Payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting such payments to tendering shareholders. In all cases, payment for Shares accepted 3 for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or of a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in Section 3)), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other required documents. For a description of the procedure for tendering Shares pursuant to the Offer, see Section 3. Accordingly, payment may be made to tendering shareholders at different times if delivery of the Shares and other required documents occur at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser increases the consideration to be paid for Shares pursuant to the Offer, the Purchaser will pay such increased consideration for all Shares purchased pursuant to the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for Shares not purchased or tendered will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to an account maintained at one of the Book-Entry Transfer Facilities), without expense to the tendering shareholder, as promptly as practicable after the expiration or termination of the Offer. 3. PROCEDURES FOR TENDERING SHARES Valid Tender. To tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (i) certificates for Shares to be tendered must be received by the Depositary along with the Letter of Transmittal or (ii) such Shares must be delivered to the Depositary pursuant to the procedures for book-entry transfer described below (and a confirmation of such delivery received by the Depositary including an Agent's Message (as defined below) if the tendering shareholder has not delivered a Letter of Transmittal), in each case prior to the Expiration Date, or (b) the tendering shareholder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to and received by the Depositary and forming a part of a book-entry confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such book-entry confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against such participant. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at each of the Depository Trust Company, the Midwest Securities Trust Company, and the Philadelphia Depository Trust Company (collectively referred to as the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make book-entry delivery of Shares by causing a Book- Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with the procedures of such Book-Entry Transfer Facility. However, although delivery of Shares may be effected through book-entry transfer, the Letter of Transmittal (or facsimile thereof) properly completed and duly executed, together with any required signature guarantees and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. Delivery of the Letter of Transmittal and any other required documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. 4 Signature Guarantees. Signatures on all Letters of Transmittal must be guaranteed by a recognized member of a Medallion Signature Guarantee Program or by any other "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each of the foregoing, an "Eligible Institution"). Signatures on a Letter of Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith and such holder has not completed the box entitled "Special Payment Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered if all the following conditions are satisfied: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary prior to the Expiration Date as provided below; and (iii) the certificates for such Shares, in proper form for transfer (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility), together with a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days after the date of execution of the Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq Small Cap Market (the "Nasdaq Small Cap Market") operated by the National Association of Securities Dealers (the "NASD") is open for business. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. Back-up Federal Income Tax Withholding. Under the federal income tax laws, the Depositary will be required to withhold 31% of the amount of any payments made to certain shareholders pursuant to the Offer. In order to avoid such backup withholding, each tendering shareholder must provide the Depositary with such shareholder's correct taxpayer identification number and certify that such shareholder is not subject to back-up federal income tax withholding by completing the Substitute Form W-9 included in the Letter of Transmittal (see Instruction 10 of the Letter of Transmittal) or by filing a Form W-9 with the Depositary prior to any such payments. If the shareholder is a nonresident alien or foreign entity not subject to backup withholding, the shareholder must give the Depositary a completed Form W-8 Certificate of Foreign Status prior to receipt of any payments. Other Requirements. By executing a Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of the Purchaser as the shareholder's proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of the shareholder's rights with respect to the Shares tendered by the shareholder and accepted for payment by the Purchaser (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of the Merger Agreement). All such proxies shall be irrevocable and coupled with an interest in the tendered Shares. Such appointment is effective only upon acceptance for payment of the Shares by the Purchaser. Upon such acceptance for payment, 5 all prior proxies and consents given by the shareholder with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given nor any subsequent written consent executed by such shareholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of the Purchaser will, with respect to the Shares and other securities, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual, special or adjourned meeting of the Company's shareholders, by written consent or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser is able to exercise full voting and other rights with respect to such Shares (including voting at any meeting of shareholders then scheduled or acting by written consent without a meeting). A tender of Shares pursuant to any one of the procedures described above will constitute the tendering shareholder's acceptance of the terms and conditions of the Offer, as well as the tendering shareholder's representation and warranty that such shareholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer. Determination of Validity. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tendered Shares will be determined by the Purchaser in its sole discretion, which determination shall be final and binding. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or the acceptance for payment of, or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in any tender of Shares. No tender of Shares will be deemed to have been properly made until all defects and irregularities relating thereto have been cured or waived. The Purchaser's interpretation of the terms and conditions of the Offer in this regard (including the Letter of Transmittal and the Instructions thereto) will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. 4. WITHDRAWAL RIGHTS Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after April 22, 1996, unless theretofore accepted for payment as provided in this Offer to Purchase. To be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution) signatures guaranteed by an Eligible Institution, must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering shareholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give 6 notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN TAX CONSIDERATIONS The following summary addresses the material federal income tax consequences to holders of Shares who sell their Shares in the Offer. The summary does not address all aspects of federal income taxation that may be relevant to particular holders of Shares and thus, for example, may not be applicable to holders of Shares who are not citizens or residents of the United States, who are employees and who acquired their Shares pursuant to the exercise of incentive stock options or who are entities that are otherwise subject to special tax treatment under the Internal Revenue Code of 1986, as amended (the "Code") (such as insurance companies, tax-exempt entities and regulated investment companies); nor does this summary address the effect of any applicable foreign, state, local or other tax laws. The discussion assumes that each holder of Shares holds such Shares as a capital asset within the meaning of Section 1221 of the Code. The federal income tax discussion set forth below is included for general information only and is based upon present law. The precise tax consequences of the Offer (or the Merger) will depend on the particular circumstances of the holder. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE PROPOSED TRANSACTION. The receipt of cash for Shares pursuant to the Offer (or the Merger) will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. In general, a shareholder who receives cash for Shares pursuant to the Offer (or the Merger) will recognize gain or loss for federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. Such gain or loss will be capital gain or loss, and will be long term capital gain or loss if the holder has held the Shares for more than one year at the time of sale. Gain or loss will be calculated separately for each block of Shares tendered pursuant to the Offer. Under current law, the maximum federal tax rate applicable to long-term capital gains recognized by an individual is 28%, and the maximum federal tax rate applicable to ordinary income (including dividends and short-term capital gains recognized by individuals) is 39.6%. The maximum federal tax rate applicable to all capital gains and ordinary income recognized by a corporation is 35%. It is possible that legislation may be enacted that would reduce the maximum federal tax rate applicable to long-term capital gains, possibly with retroactive effect. It is not possible to predict whether or in what form any such legislation may be enacted. Dissenters. A holder of Shares who does not sell Shares in the Offer or the Merger and who exercises and perfects his or her applicable rights under the Indiana Business Corporation Law ("IBCL") to demand fair value for such Shares will recognize capital gain or loss (and may recognize an amount of interest income) attributable to any payment received pursuant to the exercise of such rights based upon the principles described above. See Section 16. Withholding. Unless a shareholder complies with certain reporting and/or certification procedures or is an exempt recipient under applicable provisions of the Code (and regulations promulgated thereunder), such shareholder may be subject to a "backup" withholding tax of 31% with respect to any payments received in the Offer, the Merger or as a result of the exercise of the holder's dissenters' rights. Shareholders should contact their brokers to ensure compliance with such procedures. Foreign shareholders should consult with their tax advisors regarding withholding taxes in general. 7 6. PRICE RANGE OF SHARES; DIVIDENDS The Shares are traded in the over-the-counter market and prices are quoted on the Nasdaq Small Cap Market under the symbol "FOUR." The following table sets forth, for the fiscal quarters indicated, the high and low bid prices per Share as reported by the Nasdaq Small Cap Market:
HIGH LOW ------ ------ Fiscal Year Ended March 31, 1994: Quarter ended March 31, 1994.............................. $5 7/8 $4 Fiscal Year Ended March 31 1995: Quarter ended June 30, 1994............................... $7 3/4 $5 3/8 Quarter ended September 30, 1994.......................... $6 3/4 $5 5/8 Quarter ended December 31, 1994........................... $8 1/2 $6 1/8 Quarter ended March 31, 1995.............................. $9 5/8 $6 1/2 Fiscal Year Ending March 31 1996: Quarter ended June 30, 1995............................... $7 5/8 $6 1/4 Quarter ended September 30, 1995.......................... $9 1/2 $7 3/8 Quarter ended December 31, 1995........................... $8 3/4 $7
No cash dividends have been declared or paid on the Shares during the two most recently concluded fiscal years or during the current fiscal year of the Company. The Merger Agreement prohibits the Company from declaring or paying any dividends until the consummation of the Offer. On February 15, 1996, the last full trading day prior to announcement of the Merger Agreement, the last reported bid price per Share on the Nasdaq Small Cap Market was $12 1/2. On February 22, 1996, the last full trading day prior to the commencement of the Offer, the last reported bid price per Share on the Nasdaq Small Cap Market was $12 13/16. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is an Indiana corporation with its principal offices located at Suite 400, 11320 Random Hills Road, Fairfax, Virginia 22030. The Company provides senior housing and healthcare services in 15 states through the ownership and/or operation of 44 retirement communities ("RCs"). The RCs generally provide a continuum of care, including independent living, assisted living and skilled nursing. Independent living services consist of residential accommodations together with amenities such as security, meals and housekeeping. Assisted living residents, in addition to independent living amenities, receive certain healthcare services, including medication delivery, assistance with activities of daily living and other supportive services in private or semiprivate suites. The skilled nursing section of certain of the RCs provide residents with a full range of nursing care. In addition to RCs offering a complete continuum of care, the Company operates RCs providing only assisted living care, such as the National Guest Homes concept, which manages seven RCs (two of which are owned by a majority owned subsidiary of the Company), with five additional projects under construction or commencing construction this fiscal quarter, and the Hearthside concept (two RCs), which provides assisted living and care for residents with dementia-related needs. It is anticipated that the Company will acquire a third recently opened Hearthside RC upon satisfaction of certain conditions. The Company owns, leases and/or operates (i) 11 RCs that are wholly owned or leased by the Company, one nursing facility leased by the Company and two nonperforming first mortgage notes secured by RCs (ownership of which is anticipated to be transferred to the Company in the near future), (ii) 19 RCs owned by partnerships or limited liability companies which are not wholly owned by the Company but which are consolidated for financial reporting purposes, including nine RCs owned by Forum Retirement Partners, L.P., a publicly traded limited partnership, (iii) ten RCs in which the Company has no ownership interest (two of which are expected to be sold in March 1996), and (iv) one RC in which the Company has a 50% ownership interest, 8 but which is not consolidated for financial reporting purposes. As of the date of the Merger Agreement, the Company's interests in these partnerships and limited liability companies that own RCs range from 50% to 89.5%. Wholly or majority owned subsidiaries of the Company act as general partner of each limited partnership and, in the case of the limited liability companies, are the sole managing members. It is a Condition of the Offer that the Company have purchased all ownership interests (other than ownership interests owned as of the date hereof by the Company or any of its subsidiaries) in Forum Retirement Communities II, L.P., which owns three RCs, for an aggregate purchase price of not more than $1,235,000. See Section 15. The Company is subject to the information requirements of the Exchange Act, and is required to file reports and other information with the Securities and Exchange Commission (the "Commission") relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be described in periodic statements distributed to the Company's shareholders and filed with the Commission. These reports, proxy statements, and other information, including the Company's Annual Report on Form 10-K for the year ended March 31, 1995 (the "Company 10-K") and the Schedule 14D-9, should be available for inspection and copying at the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at 75 Park Place, New York, New York 10007 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office. Such material should also be available for inspection at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, DC 20006. The above information concerning the Company has been taken from or based upon the Company 10-K and other publicly available documents on file with the Commission, other publicly available information and information provided by the Company. Although neither the Purchaser nor Parent has any knowledge that would indicate that such information is untrue, neither the Purchaser nor Parent takes any responsibility for, or makes any representation with respect to, the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but which are unknown to the Purchaser or Parent. A copy of this Offer to Purchase, and certain of the agreements referred to herein, are attached to the Purchaser's Tender Offer Statement on Schedule 14D-1, dated February 23, 1996 (the "Schedule 14D-1"), which has been filed with the Commission. The Schedule 14D-1 and the exhibits thereto, along with such other documents as may be filed by the Purchaser with the Commission, may be examined and copied from the offices of the Commission in the manner set forth in the third paragraph of this Section 7. 9 Summary Financial Information for the Company. The following table sets forth certain summary consolidated financial information with respect to the Company and its subsidiaries excerpted or derived from the audited financial statements contained in the Company 10-K and the unaudited financial information contained in the Company's Quarterly Reports on Form 10-Q for the nine months ended December 31, 1995 and 1994. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such documents (which may be inspected and obtained as described above), including the financial statements and related notes contained therein. Neither Parent nor the Purchaser assumes any responsibility for the accuracy of the financial information set forth below. FORUM GROUP, INC. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED FISCAL YEAR DECEMBER 31 ENDED MARCH 31 ------------------ ---------------------------- 1995 1994 1995 1994 1993 -------- -------- -------- -------- -------- INCOME STATEMENT DATA Net sales and operating revenues and other revenues. $145,033 $107,504 $151,960 $108,465 $ 93,302 Income (loss) before extraordinary items......... 16,208 11,168 12,490 2,690 (7,359) Net income (loss)............ 13,627 10,906 12,228 (7,130) (7,359) BALANCE SHEET DATA (AT END OF PERIOD) Net current assets (liabilities)............... (52,445) (a) 3,649 (a) (a) Total assets................. 455,985 371,417 398,346 290,200 348,641 Shareholders' equity......... 81,495 61,095 65,666 44,284 18,445 PER SHARE Income (loss) per common share before extraordinary items....................... 0.68 0.49 0.54 0.16 (0.98) Extraordinary items.......... (0.11) (0.01) (0.01) (0.57) -- Net income (loss) per common share (and common share equivalents)................ 0.57 0.48 0.53 (0.41) (0.98) Net income per share on a fully diluted basis......... 0.57 0.48 0.53 (0.41) (0.98)
- -------- (a) For the Fiscal Years ended March 31, 1994 and 1993 Forum Group, Inc. presented an unclassified balance sheet. Projected Financial Information. Prior to entering into the Merger Agreement, Parent conducted due diligence on the Company and in connection with such due diligence review received certain non-public information from the Company. The non-public information included, among other things, financial projections for the Company. Over the course of its negotiations with the Company regarding the Merger Agreement, Parent received additional projections relating to the Company's prospective results of operations under a range of assumptions. These projections were delivered to Parent, on behalf of the Company, by one of the Principal Shareholders. Set forth below is a summary of the projections received by Parent on January 9 and 10, 1996 (except for the figures relating to the fiscal year ending March 31, 1996, which were received by Parent on January 30, 1996). The following projections represent the final version of projections furnished by the Principal Shareholder after the Principal Shareholder and the Company had gathered, assimilated and refined relevant data needed for preparation of projections relating to prospective results of operations. Parent did not rely on these projections in entering into the Merger Agreement. 10 The first table set forth below depicts projected results of operations for the Company based upon existing assets and expansion programs currently under way or identified. The second table set forth below depicts projected results of operations based upon existing assets, expansion programs currently under way or identified, and the Company's estimates of future projects to be acquired or developed. FORUM GROUP, INC. PROJECTED FINANCIAL INFORMATION (IN MILLIONS) EXISTING COMMUNITIES AND CURRENT EXPANSION PROGRAMS
FISCAL YEAR ENDING MARCH 31 ----------------------------------------- 1996 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ ------ Net Sales............................. $195.9 $225.2 $250.2 $273.1 $286.6 $301.4 EBITDA(1)............................. 51.0 64.8 74.8 84.6 88.0 92.5 Net income(2)......................... 18.3 9.7 16.9 22.2 26.9 31.0
- -------- (1) Income before interest, taxes, depreciation, amortization, gains on cooperative membership sales, gain or loss on asset dispositions and other provisions, minority interests and extraordinary charges. (2) Includes $14.8M pre-tax gain from the sale of cooperative memberships in 1996 with no such gains or losses projected for 1997 and beyond. EXISTING COMMUNITIES, CURRENT EXPANSION PROGRAMS AND PROJECTED NEW COMMUNITIES
FISCAL YEAR ENDING MARCH 31 ----------------------------------------- 1996 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ ------ Net Sales............................. $195.9 $237.0 $302.7 $373.4 $447.1 $515.8 EBITDA(1)............................. 51.0 70.0 95.3 121.1 146.2 169.3 Net income(2)......................... 18.3 11.2 21.0 29.2 35.9 42.0
- -------- (1) Income before interest, taxes, depreciation, amortization, gains on cooperative membership sales, gain or loss on asset dispositions and other provisions, minority interests and extraordinary charges. (2) Includes $14.8M pre-tax gain from the sale of cooperative memberships in 1996 with no such gains or losses projected for 1997 and beyond. THE COMPANY HAS ADVISED PARENT AND THE PURCHASER THAT THE FOREGOING PROJECTIONS AND FORECASTS (THE "PROJECTIONS") WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS. THE PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE THEY WERE PROVIDED TO PARENT. NONE OF PARENT, THE PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE ADVISORS OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF THE PROJECTIONS. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY WHICH MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS SET FORTH ABOVE WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS WILL BE REALIZED, OR THAT ACTUAL RESULTS WILL NOT DIFFER FROM THOSE ESTIMATED. THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT, THE PURCHASER, THE COMPANY, ANY OF THEIR RESPECTIVE ADVISORS OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS. 11 8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. The Purchaser is a newly formed Indiana corporation and a wholly owned indirect subsidiary of Parent. To date, the Purchaser has not conducted any business other than in connection with the Offer. Until immediately prior to the time the Purchaser purchases Shares pursuant to the Offer, it is not anticipated that the Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer. Because the Purchaser is a newly formed corporation and has minimal assets and capitalization, no meaningful financial information regarding the Purchaser is available. Parent is a Delaware corporation. Parent, together with its consolidated subsidiaries, is a diversified hospitality company with operations in two business segments: Lodging, which operates and franchises lodging businesses under four brand names, and operates a vacation timesharing business; and Contract Services, consisting of food service and facilities management for clients in business, education and health care; development, ownership and operation of retirement communities; and wholesale food distribution. Until 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 (the "Distribution") to the holders of outstanding shares of Marriott Corporation common stock, on a share-for-share basis, of all the outstanding shares of Parent 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. The principal executive offices of Parent and the Purchaser are located at 10400 Fernwood Road, Bethesda, Maryland 20817. The name, citizenship, business address, present principal occupation or employment, and material positions held during the past five years of each of the directors and executive officers of the Purchaser and of Parent are set forth in Schedule I to this Offer to Purchase. Except as set forth in this Offer to Purchase, neither Parent nor the Purchaser, or, to the best knowledge of Parent or the Purchaser, any of the persons listed on Schedule I, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, neither Parent nor the Purchaser, or, to the best knowledge of Parent or the Purchaser, any of the persons listed on Schedule I, has had, since April 1, 1992, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as set forth in this Offer to Purchase, since April 1, 1992, there have been no contacts, negotiations or transactions between Parent or the Purchaser, or their respective subsidiaries or, to the best knowledge of any of Parent or the Purchaser, any of the persons listed on Schedule I, and the Company or its affiliates, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. Except as set forth in this Offer to Purchase, neither Parent nor the Purchaser or, to the best knowledge of Parent or the Purchaser, any of the persons listed on Schedule I, or any majority-owned subsidiary or associate of Parent or the Purchaser or any person so listed beneficially owns any Shares or has effected any transactions in the Shares in the past 60 days. Certain Financial Information. Set forth below is a summary of certain consolidated financial and operating data relating to Parent and its consolidated subsidiaries excerpted or derived from the information contained in or incorporated by reference into Parent's Annual Report on Form 10-K for the year ended December 30, 1994 filed with the Commission pursuant to Rule 15d-2 of the Exchange Act (the "Parent 10-K") and Parent's Quarterly Reports on Form 10-Q for the quarters ended September 8, 1995 and September 9, 1994. More comprehensive financial information is included in or incorporated by reference into the Parent 10-K and other documents filed by Parent with the Commission, and the financial information summary set forth below is qualified in its entirety by reference to the Parent 10-K and such other documents and all the financial information and related notes contained therein. 12 MARRIOTT INTERNATIONAL, INC. SELECTED CONSOLIDATED FINANCIAL DATA(1) (IN MILLIONS, EXCEPT PER SHARE DATA)
36 WEEKS ENDED FISCAL YEAR ENDED ---------------- ------------------------- SEPT. 8 SEPT. 9 DEC. 30 DEC. 31 JAN. 1 1995 1994 1994 1993(2) 1993(3) ------- ------- ------- ------- ------- INCOME STATEMENT DATA Net sales and operating revenues and other revenues........................ $6,051 $5,711 $8,415 $7,430 $6,971 Income before cumulative effect of a change in accounting principle........ 157 128 200 159 134 Net income............................. 157 128 200 126 134 BALANCE SHEET DATA (AT END OF PERIOD) Net current assets (liabilities)....... (128) (188) (166) (142) (6) Total assets........................... 3,844 3,245 3,207 3,092 2,601 Shareholders' equity................... 965 742 767 696 -- PER SHARE (3) Income per common share before cumulative effect of a change in accounting principle (2).............. 1.19 .96 1.51 1.28 -- Change in accounting for income taxes (2)................................... -- -- -- (.27) -- Net income per common share (and common share equivalents).................... 1.19 .96 1.51 1.01 -- Net income per share on a fully diluted basis................................. 1.19 .96 1.51 1.00 --
- -------- (1) Parent was a wholly-owned subsidiary of Marriott Corporation (now named Host Marriott Corporation) prior to October 8, 1993, on which date its common stock was distributed to Marriott Corporation shareholders. The historical income statement for Parent for 1993 includes 40 weeks of operating results as a subsidiary of Marriott Corporation and 12 weeks of operating results as an independent entity. The income statement for fiscal year 1992 reflects operating results for Parent as a subsidiary of Marriott Corporation. As a result, 1994 and 1995 operating results are not directly comparable to the results reported by Parent for fiscal years 1992 and 1993. (2) Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," was adopted in the first fiscal quarter of 1993. (3) Per share data has not been presented for fiscal year 1992 because the Company was not publicly held during that year. Parent is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, stock options granted to them, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is required to be described in proxy statements distributed to Parent's shareholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for inspection at the Commission's regional offices located at 75 Park Place, New York, New York 10007 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may also be obtained by mail, upon payment of the Commission's customary fees, by writing to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The information should also be available for inspection at the New York Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York 10005. 9. SOURCES AND AMOUNTS OF FUNDS. The Purchaser estimates that the total amount of funds required to purchase pursuant to the Offer the number of Shares that are outstanding on a fully diluted basis and to pay fees and expenses related to the Offer and the 13 Merger will be approximately $305 million. The Purchaser plans to obtain all funds needed for the Offer through a loan from Parent, which will be made by Parent to the Purchaser at the time Shares tendered pursuant to the Offer are accepted for payment. To obtain the funds necessary to make this loan, Parent intends to use its available cash on hand and funds raised in the public or private securities markets, although the Offer is not conditioned on the issuance of any securities or the availability of any financing. Parent has additional financing options available to it, including its Revolving Credit Facility (defined below) to make this loan. An unsecured revolving credit facility (the "Revolving Credit Facility") is available to Parent pursuant to a Credit Agreement dated as of June 9, 1995 (the "Credit Agreement") by and among Parent, Citibank, N.A., as Administrative Agent (the "Agent"), and certain financial institutions. Parent may borrow up to an aggregate of $1 billion at any time outstanding under the Revolving Credit Facility for general corporate purposes, which includes acquisitions. Loans made under the Credit Agreement mature at the expiration of the Revolving Credit Facility on June 9, 2000. As of February 22, 1996, approximately $890 million was available for borrowing under the Revolving Credit Facility. Parent's ability to borrow under the Revolving Credit Facility is conditioned only upon the accuracy at the time of borrowing of customary representations and warranties, and the absence of a default under the Credit Agreement. Parent currently satisfies these conditions and believes that these conditions will be satisfied, and that adequate borrowing capacity will exist under the Revolving Credit Facility, at the time that funds are required to pay for Shares tendered in the Offer. Each loan provided pursuant to the Revolving Credit Facility bears interest, at Parent's election at (i) one of two identified variable interest rates as in effect from time to time plus an incremental interest rate that depends on Parent's senior unsecured long-term debt ratings at the time, or (ii) a rate determined pursuant to a competitive bidding process among the financial institutions party to the Credit Agreement. Currently, Parent expects that it would select the London interbank offer rate plus a currently applicable margin of 22.5 basis points, if it were to borrow funds under the Credit Agreement. Parent also pays a quarterly facility fee based upon Parent's senior unsecured long-term debt ratings at the time. The preceding description of certain of the terms and conditions of the Revolving Credit Facility is subject in its entirety to the terms and conditions of the Credit Agreement, which is incorporated herein by reference to Exhibit 10.1 to Parent's Quarterly Report on Form 10-Q for the quarter ended June 16, 1995. Parent expects that it will repay any amounts borrowed in the public or private securities markets or under the Revolving Credit Facility with cash flow from operations and/or with proceeds from subsequent refinancings in the public or private securities markets or a refinancing of the Revolving Credit Facility prior to its expiration in June 2000. 10. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT; THE SHAREHOLDER AGREEMENTS. BACKGROUND OF THE OFFER 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 14 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. 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. 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 of Directors of Parent held a special telephonic meeting on February 12, 1996 at which senior management of Parent apprised the Board of the status of negotiations with the Company. No action was taken by the Board at that meeting. On February 15, 1996, Parent's Board of Directors, by unanimous consent, approved the acquisition of all of the outstanding common stock of the Company at $13 per Share and the subsequent merger of the Purchaser with and into the Company. Thereafter, the parties finalized and executed the Merger Agreement and the Shareholder Agreements. The Company and Parent publicly announced the transaction on the morning of February 16, 1996. THE MERGER AGREEMENT The following is a summary of certain provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Schedule 14D-1 and which is incorporated herein by reference. The Merger Agreement may be examined, and copies may be obtained, as set forth in Section 7 above. 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. 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. 15 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 certain other conditions described in Section 15. 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 those described in Section 15 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 (as defined below) 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 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. 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 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 such payments shall be deducted from the amounts payable and all such taxes attributable to the exercise of Stock Options shall 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 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. 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 16 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 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 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 17 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 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 take 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 agrees 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 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 18 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. For purposes of the Merger 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 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 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). 19 The term "Continuing Director" shall mean (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. 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 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 agrees 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 on 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. 20 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, 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 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 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 the Merger Agreement or any ancillary agreements commenced by any of the Federal Trade Commission, the Antitrust Division of the Department of Justice 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 21 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 HSR Act shall have expired or 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 Federal Trade Commission, the Antitrust Division of the Department of Justice, 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. In addition, 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. 22 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 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 23 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 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 the 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 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 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 of the Merger Agreement 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 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, 24 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 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. SHAREHOLDER AGREEMENTS The following is a summary of certain provisions of the Shareholder Agreements. A copy of each Shareholder Agreement is filed as an exhibit to the Schedule 14D-1 and is incorporated herein by reference. The Shareholder Agreements may be examined, and copies may be obtained, as set forth in Section 7 above. The following summary is qualified in its entirety by reference to the Shareholder Agreements. The Purchaser and Parent have also entered into a Shareholder Agreement with each Principal Shareholder. Each Shareholder Agreement contains, among other representations and warranties, a representation and warranty by the 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, the 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. 25 Termination. Each Shareholder Agreement shall terminate on the earliest of (i) the purchase by the 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 the 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 the 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 the 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, L.P. and Apollo FG Partners, L.P. (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, L.P. and Apollo FG Partners, L.P. 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. 11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. The purpose of the Offer and the Merger is for the Purchaser to acquire the entire equity interest in the Company. Consummation of the Offer in accordance with its terms and conditions will provide the Purchaser with at least a two- thirds equity interest in the Company. Assuming tender of Shares in the Offer by each Principal Shareholder in accordance with the terms of the Shareholder Agreement to which it is a party, consummation of the Offer will provide the Purchaser with at least a 91% equity interest in the Company. The Merger will allow the Purchaser to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. The acquisition of the entire equity interest in the Company has been structured as a cash tender offer and a cash merger in order to provide a prompt and orderly transfer of ownership of the Company from the public shareholders of the Company to Parent. The purchase of Shares pursuant to the Offer will increase the likelihood that the Merger will be consummated. Parent plans to integrate the operations of the Company's RCs with its existing operations. Parent believes that this combination will allow for better utilization of centralized resources, thereby reducing costs and improving effectiveness. As a part of the integration process, Parent will add the Marriott name to the name of the RCs. Where possible, the Purchaser will pursue opportunities to reduce borrowing costs by selectively refinancing existing debt of the Company or its affiliates. The Company's 1,000 room expansion program at existing RCs will continue as planned. The Purchaser also intends to expand several of the Company's new concepts. In addition to the five National Guest Homes projects now under construction or commencing construction this fiscal quarter, the Purchaser plans to expand this moderate-tier assisted living concept into additional markets. Expansion is also planned for the Hearthside assisted living and alzheimer's care facilities, and the Company's home health care businesses. 26 12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and the number of holders of Shares and could adversely affect the liquidity and market value of the remaining Shares held by the public, and may also have other consequences with respect to Nasdaq Small Cap Market listing, Exchange Act registration and availability of margin credit. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion in the Nasdaq Small Cap Market, which require that an issuer have at least 100,000 publicly held shares, held by at least 300 shareholders, with a market value of at least $1,000,000, and have net tangible assets of at least $2,000,000. If these standards are not met, or if there are not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq Small Cap Market or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the Nasdaq Small Cap Market or in any other tier of the Nasdaq Stock Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its shareholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with shareholders' meetings and the related requirement of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. It is the current intention of Parent to deregister the Shares after consummation of the Offer if the requirements for termination of registration are met. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In addition, the Merger will have to comply with other applicable procedural and substantive requirements of Indiana law, including any duties to minority shareholders imposed upon a controlling or, if applicable, majority shareholder. The Commission has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which the Purchaser seeks to acquire the 27 remaining Shares not held by it. Purchaser believes, however, that if the Merger is consummated within one year of its purchase of Shares pursuant to the Offer, Rule 13e-3 will not be applicable to the Merger. Purchaser believes that if the Merger is not consummated within one year of its purchase of Shares pursuant to the Offer, Rule 13e-3 will be applicable to the Merger. Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such transaction be filed with the Commission and disclosed to shareholders prior to consummation of the transaction. 13. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger Agreement, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire or otherwise cause a reduction in the number of outstanding Shares or other securities or (c) issue or sell additional Shares (other than the issuance of Shares under option prior to the date of the Merger Agreement, in accordance with the terms of such options as then publicly disclosed), shares of any other class of capital stock, other voting securities or any securities convertible into or exchangeable for, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, then, without prejudice to the Purchaser's rights under Sections 1 and 15, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after the date of the Merger Agreement, the Company should declare or pay any dividend on the Shares or make any distribution (including, without limitation, cash dividends, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares, payable or distributable to shareholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, without prejudice to the Purchaser's rights under Sections 1 and 15, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering shareholders will (i) be received and held by the tendering shareholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such dividend, distribution or right and may withhold the entire purchase price for Shares tendered in the Offer or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. The Merger Agreement prohibits the Company from taking any of the foregoing actions without the prior written consent of Parent. 14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION. The Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, regardless of whether or not any of the Conditions set forth at Section 15 will have occurred or will have been determined by the Purchaser to have occurred, subject to the terms of the Merger Agreement and the applicable rules of the Commission, (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. In the Merger Agreement, Parent and the Purchaser have agreed to extend the period of time the Offer is open until the first business day following the date on which the Conditions set forth in Section 15 are satisfied or waived in accordance with the provisions thereof; 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 herein 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 obligated or 28 permitted to extend the period of time the Offer is open beyond July 15, 1996. In the Merger Agreement, the Purchaser and Parent also have agreed not to extend the expiration date of the Offer beyond the twentieth business day following commencement thereof unless one or more of the Conditions shall not be satisfied. The Purchaser also reserves the right, in its sole discretion, subject to the terms of the Merger Agreement, in the event any of the conditions specified in Section 15 will not have been satisfied and so long as Shares have not theretofore been accepted for payment, to delay (except as otherwise required by applicable law) acceptance for payment of or payment for Shares or to terminate the Offer and not accept for payment or pay for Shares. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares which the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer (including the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the terms or information. With respect to a change in price or a change in percentage of securities sought, a minimum ten business day period is generally required to allow for adequate dissemination to shareholders and investor response. If prior to the Expiration Date, the Purchaser should decide to increase the price per Share being offered in the Offer, such increase will be applicable to all shareholders whose Shares are accepted for payment pursuant to the Offer. As used in this Offer to Purchase, "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 AM through 12:00 midnight, New York City time as computed in accordance with Rule 14d-1 under the Exchange Act. 15. CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Offer, the 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), (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 the Merger 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 the Merger Agreement, that would constitute a breach or violation of any of the representations or warranties made by the Company in Article IV of the Merger Agreement if such representations or warranties had been made without any 29 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 the Purchaser may not terminate the Offer as a result of such breach until 20 days after written notice thereof has been given to the Company by Parent or the Purchaser and unless at such time the breach has not been cured; or (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 the 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 with respect to Company and its subsidiaries or with respect to Parent or the Purchaser. (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 NYSE, (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 the 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 the Purchaser its approval or recommendation of the Offer, the Merger 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 the 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 30 (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 received by the Company of the actual or potential breaches under the Amended and Restated Loan Agreement dated as of June 8, 1995, as amended, by and among Forum Investments I, L.L.C., Nomura Asset Capital Corporation and Midland Loan Services, L.P. The foregoing conditions (the "Conditions") are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances giving rise to such conditions, or may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by the 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. 16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS Except as described in this Section 16, based upon a review of publicly available filings by the Company with the Commission and other publicly available information concerning the Company, neither Parent nor the Purchaser is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by the Purchaser or Parent pursuant to the Offer, the Merger or otherwise or, except as set forth below, of any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required prior to the acquisition of Shares by the Purchaser pursuant to the Offer, the Merger or otherwise. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that it will be sought. While the Purchaser does not currently intend to delay the acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that adverse consequences might not result to the Company's business or that certain parts of the business of the Company or Parent might not have to be disposed of in the event that such approvals were not obtained or any other actions were not taken. The Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions, including conditions relating to certain of the legal matters discussed in this Section 16. See Section 15. Dissenters' Rights. Under Indiana law, the affirmative vote of the holders of a majority of the outstanding Shares entitled to vote, including the Shares owned by Parent and its affiliates (including the Purchaser), would be required to adopt the Merger, although the Articles of Incorporation of the Company may require the affirmative vote of two-thirds of the outstanding Shares entitled to vote thereon. No dissenters' or appraisal rights are available in connection with the Offer. However, if the Merger is consummated, shareholders of the Company would have certain rights under Indiana law to dissent and demand appraisal of, and payment in cash of the fair value of, their Shares. Such rights, if the statutory procedures were complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares held by such dissenting holders could be based upon considerations other than or in addition to the price paid in the Offer and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be greater or less than the purchase price per Share pursuant to the Offer or the consideration per Share to be paid in the Merger. The foregoing summary of rights of dissenting shareholders does not purport to be a complete statement of the procedures to be followed by shareholders desiring to exercise their dissenters' rights. The preservation and exercise of dissenters' rights are conditioned upon strict adherence with Indiana law. Short-Form Merger. Section 23-1-40-4 of the IBCL provides that if a parent company owns at least 90 percent of each class of stock of a subsidiary, the parent company can effect a merger with the subsidiary without 31 the authorization of the other shareholders of the subsidiary (a "short-form merger"). While Parent has been advised by counsel that a short-form merger could be effected if the Purchaser acquires at least 90% of the Shares pursuant to the Offer, Parent currently intends to effect the Merger in accordance with the provisions of Section 23-1-40-1 of the IBCL, which is the provision applicable to mergers of corporations not effected through short- form mergers. State Takeover Statutes. A number of states, including Indiana, have adopted "takeover" statutes that purport to apply to attempts to acquire corporations that are incorporated in such states, or whose business operations have substantial economic effects in such states, or which have substantial assets, security holders, employees, principal executive offices or principal places of business in such states. In Edgar v. MITE Corporation, the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Act, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics Corp. of America, addressing Indiana's Control Share Acquisition Act, the Supreme Court held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable under certain conditions, in particular, that the corporation has a substantial number of shareholders in the state and is incorporated there. The Company's Articles of Incorporation expressly provide that Chapter 42 of the IBCL, governing "control share acquisitions," will not apply to acquisitions of Shares of the Company, and that the Chapter 43, governing "business combinations" of a corporation with an "interested shareholder," will not apply to the Company. In addition, the Board of the Company has approved the Offer and the Merger prior to the acquisition of Shares by the Purchaser. Accordingly, the Purchaser and Parent do not intend to comply with the requirements of Chapters 42 or 43 of the IBCL. The Company conducts business in a number of states throughout the United States, some of which have enacted "takeover" statutes. The Purchaser does not know whether any of these statutes will, by their terms, apply to the Offer, and has not complied with any such statutes, except the Indiana Takeover Offers Act (Section 23-2-3.1-1 et seq. of the IBCL). To the extent that certain provisions of these statutes purport to apply to the Offer, the Purchaser believes that there are reasonable bases for contesting such statutes. If any person should seek to apply any state takeover statute, the Purchaser would take such action as then appears desirable, which action may include challenging the validity or applicability of any such statute in appropriate court proceedings. If it is asserted that one or more takeover statutes apply to the Offer, and it is not determined by an appropriate court that such statute or statutes do not apply or are invalid as applied to the Offer, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities, and the Purchaser might be unable to purchase or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer. In such case, the Purchaser may not be obligated to accept for payment or pay for Shares tendered. See Section 14. Antitrust. Under the provisions of the HSR Act applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. If, within the initial 15-calendar day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's acquisition of the Shares pursuant to the Offer and the Merger Agreement. At any time 32 before or after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Parent or its subsidiaries. Private parties and state attorneys general may also bring legal action under the antitrust laws in certain circumstances. Based upon an examination of publicly available information relating to the business in which Parent and the Company are engaged, Parent and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by the Purchaser on antitrust grounds will not be made or, if such challenge is made, of the result. See Section 15 for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. Federal Reserve Board Regulations. The margin regulations promulgated by the Federal Reserve Board place restrictions on the amount of credit that may be extended for the purpose of purchasing margin stock (including the Shares) if such credit is secured directly or indirectly by margin stock. The Purchaser and Parent believe that the financing of the acquisition of the Shares will not be subject to the margin regulations. 17. FEES AND EXPENSES The Purchaser and Parent have retained MacKenzie Partners, Inc. to act as the Information Agent and First Chicago Trust Company of New York, to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities and expenses under the federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 18. MISCELLANEOUS The Purchaser is not aware of any jurisdiction in which the making of the Offer is not in compliance with applicable law. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In those jurisdictions whose securities or blue sky laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser and Parent have filed with the Commission the Tender Offer Statement on Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments thereto. Such Schedule 14D-1 and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Section 7 (except that such material will not be available at the regional offices of the Commission). FG ACQUISITION CORP. February 23, 1996 33 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT The name, business address, present principal occupation or employment and five-year employment history of each director and executive officer of Parent and certain other information are set forth below. Unless otherwise indicated below, the address of each director and officer is c/o 10400 Fernwood Road, Bethesda, Maryland 20817. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Parent. All directors and officers listed below are citizens of the United States.
AGE --- J.W. Marriott, Jr.* 64 Mr. Marriott is Chairman of the Board, Chairman of the Board and CEO President and Chief Executive Officer of Parent. Mr. Marriott has been a Director of Parent since 1964 (including the period prior to the spin-off of Parent in 1993 from Marriott Corporation (now known as Host Marriott Corporation) (the "Distribution")), and is currently serving a three-year term expiring at the 1996 Annual Meeting of Shareholders. He also serves as a Director of Host Marriott Corporation, Host Marriott Services Corporation, General Motors Corporation, Outboard Marine Corporation and the U.S.-Russia Business Roundtable. He also serves on the Board of Trustees of the Mayo Foundation, the National Geographic Society and Georgetown University, and on the Advisory Board of the Boy Scouts of America. He is on the President's Advisory Committee of the American Red Cross and the Executive Committee of the World Travel & Tourism Council. Prior to the Distribution, he served as Chairman of the Board, President and Chief Executive Officer of Marriott Corporation. Richard E. Marriott* 57 Mr. Marriott has been a Director of Director Parent since 1979 (including the period prior to the Distribution), and is currently serving a three-year term expiring at the 1998 Annual Meeting of Shareholders. Mr. Marriott is Chairman of the Board of Host Marriott Corporation. He is also Chairman of the Board of First Media Corporation and serves as a Director of Host Marriott Services Corporation, Potomac Electric Power Company, Riggs National Bank, Gallaudet University, Polynesian Cultural Center, Primary Children's Medical Center, Boys and Girls Clubs of America SE Region and The J. Willard Marriott Foundation. He also serves on the Board of Trustees of Federal City Council and Marriott Foundation for People with Disabilities. Prior to the Distribution, Mr. Marriott served as an Executive Vice President and member of the Board of Directors of Marriott Corporation. Gilbert M. Grosvenor 64 Mr. Grosvenor has been a Director of Director Parent since 1987 (including the period prior to the Distribution), and is currently serving a three-year term expiring at the 1998 Annual Meeting of Shareholders. Mr. Grosvenor is President and Chairman of the Board of the National Geographic Society (a publisher of books and magazines and producer of television documentaries) and a director or trustee of Bell Atlantic- Washington, D.C., Inc., Chevy Chase Federal Savings Bank, Ethyl Corporation, Charles Allmon Trust, Albemarle and Saul Centers, Inc. Prior to the Distribution, Mr. Grosvenor served as a member of the Board of Directors of Marriott Corporation.
* Messrs. J.W. Marriott, Jr. and Richard E. Marriott are brothers. I-1
AGE --- Floretta Dukes McKenzie 60 Dr. McKenzie has been a Director of Director Parent since 1992 (including the period prior to the Distribution), and is currently serving a three-year term expiring at the 1997 Annual Meeting of Shareholders. Dr. McKenzie is the founder, President and a Director of The McKenzie Group, Inc. (an educational consulting firm). She is also a director or trustee of the Potomac Electric Power Company, the National Geographic Society, the Acacia Group, Group Hospitalization and Medical Services, Inc., Reading is Fundamental (RIF), Howard University, WETA public television, University of Maryland-College Park Campus Board of Visitors and the American Woman's Economic Development Corporation. From 1981 to 1988, she served as Superintendent of the District of Columbia Public Schools. Prior to the Distribution, Dr. McKenzie served as a member of the Board of Directors of Marriott Corporation. Harry J. Pearce 53 In August 1995 the Board appointed Mr. Director Pearce as a Director of Parent for a term to expire at the 1998 Annual Meeting of Shareholders. Mr. Pearce is Vice Chairman of the Board of General Motors Corporation (an automobile manufacturer) and a director of General Motors Acceptance Corporation, Hughes Electronics Corporation, Electronic Data Systems Corporation, American Automobile Manufacturers Association and Economic Strategy Institute. He also serves on the Board of Trustees of Howard University. W. Mitt Romney 49 Mr. Romney has been a director of Parent Director since 1993 (including the period prior to the Distribution), and is currently serving a three-year term expiring at the 1996 Annual Meeting of Shareholders. Mr. Romney is a Director, President and Chief Executive Officer of Bain Capital, Inc. (a private equity investment firm). He is also a director of NeoStar Retail Group, Sports Authority, Duane Reade and Staples, Inc. Prior to the Distribution, Mr. Romney served as a member of the Board of Directors of Marriott Corporation. Roger W. Sant 64 Mr. Sant has been a director of Parent Director since 1993, and is currently serving a three-year term expiring at the 1997 Annual Meeting of Shareholders. Mr. Sant is Chairman of the Board and a co-founder of The AES Corporation (an international independent power business). He is also Chairman of the Board of World Wildlife Fund (U.S.) and a member of the Board of World Resources Institute and World Wide Fund for Nature. Lawrence M. Small 54 Mr. Small has been a director of Parent Director since 1995, and is currently serving a term to expire at the 1997 Annual Meeting of Shareholders. Mr. Small is President, Chief Operating Officer and a member of the Board of Directors of Fannie Mae, formerly known as Federal National Mortgage Association (a congressionally chartered mortgage financing corporation). Prior to joining Fannie Mae, Mr. Small was Vice Chairman and Chairman of the Executive Committee of the Boards of Directors of Citicorp/Citibank. He also serves as a Director of The Chubb Corporation, Chairman of the Financial Advisory Committee of Trans-Resources International, a member of the Board of Trustees of Morehouse College and New York University Medical Center and a member of the U.S. Holocaust Memorial Council.
I-2
AGE --- Clifford J. Ehrlich 57 Mr. Ehrlich joined Marriott Corporation Senior Vice President in 1973 and was Marriott Corporation's chief human resources executive from April 1978 until the Distribution in 1993. In 1980, Mr. Ehrlich was elected Senior Vice President--Human Resources of Marriott Corporation. Joseph Ryan 54 Mr. Ryan joined Parent in December 1994 Executive Vice President and as Executive Vice President and General General Counsel Counsel. Prior to that time, he was a partner in the law firm of O'Melveny & Myers, serving as the Managing Partner from 1993 until his departure. He joined O'Melveny & Myers in 1967 and was admitted as a partner in 1976. William J. Shaw 50 Mr. Shaw was elected President of the Executive Vice President and Marriott Service Group in February 1992, President--Marriott Service which now comprises Parent's Contract Group 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. Michael A. Stein 46 Mr. Stein joined Marriott Corporation in Executive Vice President, Chief 1989 as Vice President, Finance and Chief Financial Officer and Acting Accounting Officer. In 1990, he assumed Corporate Controller responsibility for Marriott Corporation's financial analysis and functions. In 1991, he was elected Senior Vice President--Finance and Corporate Controller of Marriott Corporation and also assumed responsibility for Marriott Corporation's internal audit function. In October 1993, he was named Executive Vice President and Chief Financial Officer. Prior to joining Marriott Corporation, Mr. Stein spent 18 years with Arthur Anderson LLP where, since 1982, he was a partner. William R. Tiefel 61 Mr. Tiefel joined Marriott Corporation in Executive Vice President and 1961 and was named President of Marriott President--Marriott Lodging Hotels, Resorts and Suites in 1988. Mr. Group Tiefel previously served as a resident manager and general manager at several Marriott Hotels prior to being appointed Regional Vice President and later Executive Vice President of Marriott Hotels, Resorts and Suites and Marriott Ownership Resorts. Mr. Tiefel was elected Executive Vice President of Marriott Corporation in November 1989. In March 1992, Mr. Tiefel was elected President-- Marriott Lodging Group and assumed responsibility for all of Parent's lodging brands.
I-3 DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER The name, business address, present principal occupation or employment and five-year employment history of each director and executive officer of Purchaser and certain other information are set forth below. Unless otherwise indicated below, the address of each director and officer is c/o 10400 Fernwood Road, Bethesda, Maryland 20817. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Purchaser. All directors and officers listed below are citizens of the United States.
AGE --- William J. Shaw 50 Mr. Shaw is President and a Director of President the Purchaser. He is also an officer of Parent. See above. Paul E. Johnson, Jr. 48 Mr. Johnson is Vice President and a Vice President and Director of Director of the Purchaser, and Executive Purchaser; Executive Vice Vice President and General Manager of the President and General Manager Senior Living Services Division of of the Senior Living Services Parent. Mr. Johnson joined Marriott Division of Parent Corporation in 1983 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 the Purchaser. Mr. Morrow is Vice Purchaser; Vice President-- President of Finance for Marriott Senior Finance of the Senior Living Living Services with responsibility for Services Division of Parent the Accounting, 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 Vice President--Operations of 1983 and served in various capacities in the Senior Living Services its Lodging Division, including Vice Division of Parent President 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. Edward L. Bednarz 53 Mr. Bednarz is a Vice President of the Vice President of Purchaser; Purchaser. Mr. Bednarz joined the Law Associate General Counsel of Department of Parent in 1973 and has Parent served as the principal attorney for the Senior Living Services Division since 1992. G. Cope Stewart III 54 Mr. Stewart is a Vice President of the Vice President of Purchaser; Purchaser. Mr. Stewart has served as Associate General Counsel of Associate General Counsel, Corporate Parent Affairs Department, of Parent since February 1994. From 1986 to 1994, Mr. Stewart was a partner in the Washington, D.C. law firm of Arent Fox Kintner Plotkin & Kahn. Prior to 1986, Mr. Stewart was engaged in the private practice of law in Washington, D.C.
I-4 The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or his broker, dealer, commercial bank or other nominee to the Depository at one of its addresses set forth below. The Depositary for the Offer is: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Mail: Facsimile Transmission By Hand or Overnight (For Eligible Institutions Courier: Only): P.O. Box 2559 14 Wall Street Suite 4660-FGI 201-222-4720 8th Floor, Suite 4680-FGI Jersey City, New Jersey or New York, New York 10005 07303-2559 201-222-4721 CONFIRM RECEIPT OF NOTICE OF GUARANTEED DELIVERY: (201) 222-4707 Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent at its telephone numbers and location listed below. You may also contact your broker, dealer, commercial bank or trust company or nominee for assistance concerning the Offer. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-Free: (800) 322-2885 EX-99.A2 3 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF FORUM GROUP, INC. PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 23, 1996 OF FG ACQUISITION CORP. A WHOLLY OWNED INDIRECT SUBSIDIARY OF MARRIOTT INTERNATIONAL, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 21, 1996, UNLESS THE OFFER IS EXTENDED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH SHAREHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW. THE DEPOSITARY FOR THE OFFER IS: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Mail: By Hand or Overnight Courier: P.O. Box 2559 14 Wall Street Suite 4660-FGI 8th Floor, Suite 4680-FGI Jersey City, New Jersey 07303-2559 New York, New York 10005 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders either if certificates are to be forwarded herewith or if delivery is to be made by book-entry transfer to the Depositary's account at the Depository Trust Company ("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Shareholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or who cannot comply with the book-entry transfer procedures on a timely basis must tender their Shares (as defined below) according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
- --------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED SHARE CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL LIST IF NECESSARY) - --------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES REPRESENTED NUMBER OF SHARE CERTIFICATE BY SHARE SHARES NUMBER(S) CERTIFICATE(S)* TENDERED** ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES: - ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. [_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution _____________________________________________ Check Box of Book-Entry Transfer Facility (check one): [_] DTC [_] MSTC [_] PDTC Account Number ____________________________________________________________ Transaction Code Number ___________________________________________________ [_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) ____________________________________________ Window Ticket Number (if any) _____________________________________________ Date of Execution of Notice of Guaranteed Delivery ________________________ Name of Institution that Guaranteed Delivery ______________________________ Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry Transfer (check one): [_] DTC [_] MSTC [_] PDTC Account Number (if delivered by Book-Entry Transfer) ______________________ Transaction Code Number ___________________________________________________ BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to FG Acquisition Corp. (the "Purchaser"), an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation ("Parent"), the above-described shares of Common Stock, without par value (the "Shares"), of Forum Group, Inc., an Indiana corporation (the "Company"), at $13.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 23, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, constitutes the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or in part from time to time or to Parent or one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer. Subject to and effective upon acceptance for payment of the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and all other Shares or other securities or property issued or issuable in respect thereof on or after February 15, 1996 (such other Shares, securities or property other than the Shares being referred to herein as the "Other Securities") and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Other Securities with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver Share Certificates evidencing such Shares and all Other Securities, or transfer ownership of such Shares and all Other Securities on the account books maintained by any of the Book-Entry Transfer Facilities, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares and all Other Securities for transfer on the books of the Company, and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Other Securities, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Parent, William J. Shaw and Paul E. Johnson, Jr., and each of them or any other designees of the Purchaser, the attorneys and proxies of the undersigned, each with full power of substitution, to exercise such voting and other rights as each such attorney and proxy or his (or her) substitute shall, in his (or her) sole discretion, deem proper, and otherwise act (including pursuant to written consent) with respect to all of the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or action and any and all Other Securities issued or issuable in respect thereof, which the undersigned is entitled to vote at any meeting of shareholders of the Company (whether annual or special and whether or not an adjourned meeting), or written consent in lieu of such meeting, or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby and is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by the Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior proxies granted by the undersigned with respect to such Shares (and all Shares and other securities issued in Other Securities in respect of such Shares), and no subsequent proxy or power of attorney shall be given (and if given or executed, shall be deemed not to be effective) with respect thereto by the undersigned. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser is able to exercise full voting and other rights with respect to such Shares (including voting at any meeting of shareholders then scheduled or acting by written consent without a meeting). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Other Securities, and that when such Shares are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Other Securities will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver any signature guarantees or additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Other Securities. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser all Other Securities in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of such Other Securities and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any Share Certificates evidencing Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Share Certificates evidencing Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or return any Share Certificates evidencing Shares not purchased (together with accompanying documents as appropriate) in the name(s) of, and deliver said check and/or return such Share Certificates to, the person or persons so indicated. Shareholders tendering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such account maintained at DTC, MSTC or PDTC as such shareholder may designate by making an appropriate entry under "Special Payment Instructions." The undersigned recognizes that the Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder(s) thereof if the Purchaser does not accept for payment any of the Shares so tendered. - ------------------------------------ ------------------------------------ SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 5 AND 7) To be completed ONLY if the To be completed ONLY if the check for the purchase price of check for the purchase price of Shares purchased or Share Cer- Shares purchased or Share Cer- tificates evidencing Shares not tificates evidencing Shares not tendered or not purchased are to tendered or not purchased are to be issued in the name of someone be mailed to someone other than other than the undersigned. the undersigned, or to the un- dersigned at an address other Issue [_] Check and/or than that shown under "Descrip- [_] Certificate(s) to: tion of Shares Tendered." Name ____________________________ Mail [_] Check and/or [_] Certificates to: _________________________________ Name_____________________________ _________________________________ (PLEASE PRINT) _________________________________ Address _________________________ _________________________________ (PLEASE PRINT) _________________________________ (INCLUDE ZIP CODE) Address _________________________ _________________________________ _________________________________ (TAXPAYER IDENTIFICATION OR (INCLUDE ZIP CODE) SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9) - ------------------------------------ ------------------------------------ - -------------------------------------------------------------------------------- SHAREHOLDERS SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9) ___________________________________________________________________________ SIGNATURE(S) OF SHAREHOLDER(S) ___________________________________________________________________________ Dated __________________ , 1996 (MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) OR ON A SECURITY POSITION LISTING OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, AGENT, OFFICER OF A CORPORATION OR ANY OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE FOLLOWING INFORMATION. SEE INSTRUCTION 5.) Name(s) ___________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ (PLEASE PRINT OR TYPE) Capacity (full title) _____________________________________________________ Address ___________________________________________________________________ ___________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. (home) ____________________________________________________________________ (business) ________________________________________________________________ Tax Identification or Social Security Number: _____________________________ (COMPLETE SUBSTITUTE FORM W-9) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) Authorized Signature ______________________________________________________ Name ______________________________________________________________________ (PLEASE PRINT OR TYPE) Name of Firm ______________________________________________________________ Address ___________________________________________________________________ ___________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number ____________________________________________ Dated __________________ , 1996 - -------------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIOINS OF THE OFFER 1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal must be guaranteed by a recognized member of a Medallion Signature Guarantee Program or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of Shares (which term, for the purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on this Letter of Transmittal or (ii) such shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by shareholders either if Share Certificates are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or confirmation ("Book-Entry Confirmation") of any book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal, must be received by the Depositary, at one of the addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot comply with the book-entry transfer procedures on a timely basis may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, must be received by the Depositary (as provided in (iii) below) prior to the Expiration Date and (iii) the Share Certificates evidencing all physically tendered Shares (or Book-Entry Confirmation with respect to such Shares), as well as a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq Small Cap Market trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the certificate numbers and/or the number of Shares tendered should be listed on a separate signed schedule and attached hereto. 4. PARTIAL TENDERS. (Not applicable to shareholders who tender by book-entry transfer.) If fewer than all the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the old Share Certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Share Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several Share Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares evidenced by Share Certificates listed and transmitted hereby, no endorsements of Share Certificates or separate stock powers are required unless payment is to be made to or Share Certificates evidencing Shares not tendered or purchased are to be issued in the name of a person other than the registered holder(s), in which case the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such certificates and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear on the Share Certificate(s). Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificates or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or any person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if Share Certificates evidencing Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder(s), or if Share Certificates evidencing tendered shares are registered in the name of any person other than the person(s) signing this letter of transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent and/or any Share Certificates are to be returned to someone other than the signer above, or to the signer above but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on this Letter of Transmittal should be completed. Shareholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at any of the Book-Entry Transfer Facilities as such shareholder may designate under "Special Delivery Instructions". If no such instructions are given, any such Share not purchased will be returned by crediting the account at the Book-Entry Transfer Facilities designated above. 8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to, or additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from, the Information Agent at the telephone numbers and address set forth below. Shareholders may also contact their broker, dealer, commercial bank or trust company. 9. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to Purchase, the Purchaser reserves the right in its sole discretion to waive in whole or in part at any time or from time to time any of the specified conditions of the Offer or any defect or irregularity in tender with regard to any Shares tendered. 10. SUBSTITUTE FORM W-9. The tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the shareholder's social security or employer identification number, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, whether he or she is subject to backup withholding of federal income tax. If a tendering shareholder is subject to backup withholding, he or she must cross out item (2) of the Certification Box on Substitute Form W-9. Failure to provide the information on Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding on the payment of the purchase price. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of payments for surrendered Shares thereafter until a TIN is provided to the Depositary. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY DELIVERY, TOGETHER WITH CERTIFICATES (OR BOOK-ENTRY CONFIRMATION) AND ALL OTHER REQUIRED DOCUMENTS OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under federal tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payor) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's Social Security Number. If the Depositary is not provided with the correct TIN or an adequate basis for exemption, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding in an amount equal to 31% of the gross proceeds resulting from the Offer. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit an IRS Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of his correct TIN by completing the Substitute Form W-9 contained herein, certifying that the TIN provided on the Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN) and that (1) the shareholder is exempt from backup withholding, (2) the shareholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of failure to report all interest or dividends, or (3) the Internal Revenue Service has notified the shareholder that he or she is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price until a TIN is provided to the Depositary. PAYOR'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK - -------------------------------------------------------------------------------- PART 1--PLEASE PROVIDE TIN _________________ SUBSTITUTE YOUR TIN IN THE BOX AT Social Security FORM W-9 RIGHT AND CERTIFY BY Number or Employer SIGNING AND DATING Identification BELOW: Number If Awaiting TIN write DEPARTMENT OF THE TREASURY "Applied for" INTERNAL REVENUE SERVICE PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) ---------------------------------------------------- NAME (PLEASE PRINT) PART II--For Payees NOT subject to backup -------------------------- withholding, see the ADDRESS enclosed Guidelines for Certification -------------------------- of Taxpayer CITY STATE ZIP CODE Identification Number on Substitute Form W-9 and complete as instructed therein. ---------------------------------------------------- CERTIFICATION--Under the penalties of perjury, I certify that: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because either (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. SIGNATURE ___________________ DATE _________, 1996 CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) - ------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. - ------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Officer, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. SIGNATURE(S) _____________________________ DATE: , 1996 - ------------------------------------------------------------------------------- THE INFORMATION AGENT FOR THE OFFER IS: MACKENZIE PARTNERS, INC. 156 FIFTH AVENUE NEW YORK, NEW YORK 10010 (212) 929-5500 (CALL COLLECT) OR CALL TOLL FREE: (800) 322-2885 EX-99.A3 4 SUBSTITUTE FORM W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE Purpose of Form. -- A person who is required to file an information return with the Internal Revenue Service ("IRS") must obtain your correct taxpayer identification number ("TIN") to report income paid to you, real estate transactions, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person asking you to furnish your TIN) and, when applicable, (1) to certify that the TIN you are furnishing is correct (or that you are waiting for a number to be issued), (2) to certify that you are not subject to backup withholding, and (3) to claim exemption from backup withholding if you are an exempt payee. Furnishing your correct TIN and making the appropriate certifications will prevent certain payments from being subject to backup withholding. Note: If a requester gives you a form other than W-9 to request your TIN, you must use the requester's form. How To Obtain a TIN. -- If you do not have a TIN, apply for one immediately. To apply, get Form SS-5, Application for a Social Security Card (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), from your local IRS office. To complete Form W-9 if you do not have a TIN, write "Applied for" in the space for the TIN in Part I, sign and date the form, and give it to the requester. Generally, you will then have 60 days to obtain a TIN and furnish it to the requester. If the requester does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN to the requester. For reportable interest or dividend payments, the payor must exercise one of the following options concerning backup withholding during this 60-day period. Under option (1), a payor must backup withhold on any withdrawals you make from your account after 7 business days after the requester receives this form back from you. Under option (2), the payor must backup withhold on any reportable interest or dividend payments made to your account, regardless of whether you make any withdrawals. The backup withholding under option (2) must begin no later than 7 business days after the requester receives this form back. Under option (2), the payor is required to refund the amounts withheld if your certified TIN is received within the 60-day period and you were not subject to backup withholding during that period. Note: Writing "Applied for" on the form means that you have already applied for a TIN or that you intend to apply for one in the near future. As soon as you receive your TIN, complete another Form W-9, include your TIN, sign and date the form, and give it to the requester. What Is Backup Withholding? -- persons making certain payments to you after 1992 are required to withhold and pay to the IRS 31% of such payments under certain conditions. This is called "backup withholding." Payments that could be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee compensation, and certain payments from fishing boat operators, but do not include real estate transactions. If you give the requester your correct TIN, make the appropriate certifications, and report all your taxable interest and dividends on your tax return, your payments will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: 1. You do not furnish your TIN to the requester, or 2. The IRS notifies the requester that you furnished an incorrect TIN, or 3. You are notified by the IRS that you are subject to backup withholding because you failed to report all your interest and dividends on your tax return (for reportable interest and dividends only), or 4. You do not certify to the requester that you are not subject to backup withholding under 3 above (for reportable interest and dividend accounts opened after 1983 only), or 1 5. You do not certify your TIN. This applies only to reportable interest, dividend, broker, or barter exchange accounts opened after 1983, or broker accounts considered inactive in 1983. Except as explained in 5 above, other reportable payments are subject to backup withholding only if 1 or 2 above applies. Certain payees and payments are exempt from backup withholding and information reporting. See Payees and Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments under Specific Instructions, below, if you are an exempt payee. Payees and Payments Exempt From Backup Withholding. -- The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except as listed in item (9). For broker transactions, payees listed in items (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividend and patronage dividends generally not subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident partner. . Payments of patronage dividends not paid in money. . Payments made by certain foreign organizations. Payments of interest generally not subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. 2 Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payor's trade or business and you have not provided your correct TIN to the payor. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Mortgage interest paid by you. Payments that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and the regulations under those sections. PENALTIES Failure To Furnish TIN. -- If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. Civil Penalty for False Information With Respect to Withholding. -- If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. Criminal Penalty for Falsifying Information. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. Misuse of TINs. -- If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. SPECIFIC INSTRUCTIONS Name: -- If you are an individual, you must generally provide the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter your first name, the last name shown on your social security card, and your new last name. If you are a sole proprietor, you must furnish your individual name and either your SSN or EIN. You may also enter your business name or "doing business as" name on the business name line. Enter your name(s) as shown on your social security card and/or as it was used to apply for your EIN on Form SS-4. SIGNING THE CERTIFICATION 1. Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and Broker Accounts Considered Active During 1983. You are required to furnish your correct TIN, but you are not required to sign the certification. 2. Interest, Dividend, Broker, and Barter Exchange Accounts Opened After 1983 and Broker Accounts Considered Inactive During 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form. 3. Real Estate Transactions. You must sign the certification. You may cross out item 2 of the certification. 4. Other Payments. You are required to furnish your correct TIN, but you are not required to sign the certification unless you have been notified of an incorrect TIN. Other payments include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services, payments to a nonemployee for services (including attorney and accounting fees), and payments to certain fishing boat crew members. 3 5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured Property, or IRA Contributions. You are required to furnish your correct TIN, but you are not required to sign the certification. 6. Exempt Payees and Payments. If you are exempt from backup withholding, you should complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and sign and date the form. If you are a nonresident alien or foreign entity not subject to backup withholding, give the requester a complete Form W-8, Certificate of Foreign Status. 7. TIN "Applied for." Follow the instructions under How To Obtain a TIN, on page 1, and sign and date this form. Signature: -- For a joint account, only the person whose TIN is shown in Part I should sign. Privacy Act Notice: -- Section 6109 requires you to furnish your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your TIN whether or not you are required to file a tax return. Payors must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a TIN to a payor. Certain penalties may also apply. WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- -------------------------------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN OF: - -------------------------------------------------------------------------------- 1. Individual The individual 2. Two or more individuals (joint The actual owner of the account) account or, if combined funds, the first individual on the account (1) 3. Custodian account of a minor The minor (2) (Uniform Gift to Minors Act) 4.a. The usual revocable savings trust The grantor-trustee (1) (grantor is also trustee) b. So-called trust account that is not a The actual owner (1) legal or valid trust under state law 5. Sole proprietorship The owner (3) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE NAME AND EIN OF: - -------------------------------------------------------------------------------- 6. Sole proprietorship The owner (3) 7. A valid trust, estate, or pension trust Legal entity (4) 8. Corporate The corporation 9. Association, club, religious, The organization charitable, educational, or other tax- exempt organization 10. Partnership The partnership 11. A broker or registered nominee The broker or nominee 12. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district or prison) that receives agriculture program payments - --------------------------------------------------------------------------------
- ------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's SSN. (3) Show your individual name. You may also enter your business name. You may use your SSN or EIN. (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title). Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 4 EX-99.A4 5 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF FORUM GROUP, INC. This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if the certificates representing shares of common stock, without par value, of Forum Group, Inc. (the "Shares") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or if time will not permit all required documents to reach the Depositary at or prior to the expiration of the Offer. Such form may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Facsimile By Hand or By Overnight By Mail: Transmission: Courier: Tenders & Exchanges (201) 222-4720 Tenders & Exchanges P.O. Box 2559--Suite 4660-- or 14 Wall Street, Suite FGI (201) 222-4721 4680--FGI Jersey City, New Jersey New York, New York 10005 07303-2559 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (201) 222-4707 ---------------- DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to FG Acquisition Corp. (the "Purchaser"), an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 23, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. - --------------------------------------- -------------------------------------- Number of Shares: _________________ Name(s) of Record Holder(s): Share Certificate Numbers (if ___________________________________ available): ___________________________________ ___________________________________ Please Type or Print ___________________________________ Address(es) _______________________ ___________________________________ If Shares will be delivered by Zip Code book-entry transfer, check one box: Area Code and Telephone Number: [_] The Depository Trust Company ___________________________________ [_] Midwest Securities Trust Company ___________________________________ [_] Philadelphia Depository Trust ___________________________________ Company ___________________________________ Account Number ____________________ Signature(s) Dated: _______________ , 1996 Dated: _______________ , 1996 - --------------------------------------- -------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States (each, an "Eligible Institution"), hereby guarantees that either the certificates representing the Shares tendered hereby in proper form for transfer, or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (pursuant to guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantee and any other required documents, will be received by the Depositary at one of its addresses set forth above within three (3) Nasdaq Small Cap Market trading days after the date of execution hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: _______________________ _____________________________________ Authorized Signature Address: ____________________________ Name: _______________________________ ____________________________ Please Type or Print Zip Code Title: ______________________________ Area Code and Telephone Number: ___________________ Dated: _______________________ , 1996 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER OF TRANSMITTAL. 2 EX-99.A5 6 BROKER/DEALER LETTER OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF FORUM GROUP, INC. BY FG ACQUISITION CORP. A WHOLLY OWNED INDIRECT SUBSIDIARY OF MARRIOTT INTERNATIONAL, INC. AT $13.00 NET PER SHARE - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 21, 1996, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- To Brokers, Dealers, Commercial Banks, February 23, 1996 Trust Companies and Other Nominees: We have been appointed by FG Acquisition Corp. (the "Purchaser"), an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation ("Parent"), to act as Information Agent in connection with its offer to purchase all outstanding shares of common stock, without par value (the "Shares"), of Forum Group, Inc., an Indiana corporation (the "Company"), at $13.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated February 23, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), copies of which are enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of February 15, 1996, among the Purchaser, Parent and the Company. For your information and for forwarding to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase; 2. Letter of Transmittal for your use and for the information of your clients, together with Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to the Depositary by the Expiration Date (as defined in the Offer to Purchase); 4. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. Solicitation/Recommendation Statement on Schedule 14D-9 issued by the Company; and 6. Return envelope addressed to First Chicago Trust Company of New York, as the Depositary. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will be deemed to have accepted for payment, and will pay for, all Shares validly tendered and not properly withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) when, as and if the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. Payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) (unless, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) is utilized) and any other documents required by the Letter of Transmittal. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal, with any required signature guarantees and any other required documents, should be sent to the Depositary, and certificates representing the tendered Shares should be delivered, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender their Shares, but it is impracticable for them to deliver their certificates on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. The Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and Depositary as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. The Purchaser will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 21, 1996, UNLESS THE OFFER IS EXTENDED. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the undersigned at the addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Very truly yours, MacKenzie Partners, Inc. - -------------------------------------------------------------------------------- NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE PURCHASER, PARENT, THE COMPANY, ANY AFFILIATE OF THE COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. - -------------------------------------------------------------------------------- 2 EX-99.A6 7 LETTER TO CLIENTS OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF FORUM GROUP, INC. BY FG ACQUISITION CORP. A WHOLLY OWNED INDIRECT SUBSIDIARY OF MARRIOTT INTERNATIONAL, INC. AT $13.00 NET PER SHARE - ------------------------------------------------------------------------------ THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 21, 1996, UNLESS THE OFFER IS EXTENDED. - ------------------------------------------------------------------------------ February 23, 1996 To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated February 23, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") and other materials relating to the Offer by FG Acquisition Corp. (the "Purchaser"), an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation ("Parent"), to purchase all outstanding shares of common stock, without par value (the "Shares"), of Forum Group, Inc., an Indiana corporation (the "Company"), at $13.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. This material is being sent to you as the beneficial owner of Shares held by us for your account but not registered in your name. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL ACCOMPANYING THIS LETTER IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The tender price is $13.00 per Share, net to the seller in cash, without interest. 2. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Thursday, March 21, 1996 unless the Offer is extended. 3. The Offer is being made as part of a series of transactions pursuant to an Agreement and Plan of Merger dated as of February 15, 1996 (the "Merger Agreement") by and among the Company, the Purchaser and Parent, pursuant to which, as promptly as practicable following the completion of the Offer and the satisfaction or waiver of certain conditions and the approval and adoption of the Merger Agreement, if required by applicable law, the Purchaser will be merged with and into the Company (the "Merger"), with the Company as the surviving corporation. In the Merger, each issued and outstanding Share not owned by Parent, the Purchaser, the Company or any of their subsidiaries will be converted into and represent the right to receive $13.00 in cash or any higher price that may be paid per Share in the Offer, without interest. 4. The Board of Directors of the Company has unanimously approved the Offer and the Merger, determined that the Offer and the Merger are fair to the shareholders of the Company and are in the best interests of the shareholders of the Company, and, subject to the fiduciary duties of the Board, recommends acceptance of the Offer and approval and adoption of the Merger Agreement and the Merger by the shareholders of the Company. 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) a number of Shares which, when added to the number of shares then beneficially owned by Parent and its affiliates, represents at least two-thirds of the total number of Shares outstanding and two-thirds of the voting power of the Shares outstanding on a fully diluted basis. Any or all conditions to the Offer may be waived by the Purchaser. 6. Any stock transfer taxes applicable to the sale of Shares to the Purchaser pursuant to the Offer will be paid by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. The Offer is being made to all holders of Shares. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdictions. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing and returning to us the instruction form set forth below. Please forward your instructions to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the instruction form set forth below. INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF FORUM GROUP, INC. BY FG ACQUISITION CORP. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated February 23, 1996, and the related Letter of Transmittal, in connection with the offer by FG Acquisition Corp., an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation, to purchase for cash all outstanding shares of common stock, without par value (the "Shares"), of Forum Group, Inc., an Indiana corporation. This will instruct you to tender the number of Shares indicated below (or if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Dated: , 1996 NUMBER OF SHARES TO BE TENDERED: SHARES* ------- ------------------------------------- ------------------------------------- Signature(s) ------------------------------------- Please Print Name(s) ------------------------------------- ------------------------------------- Please Print Address(es) ------------------------------------- Area Code and Telephone Number(s) ------------------------------------- Tax, Identification, or Social Security Number(s) - -------- *I (We) understand that if I (we) sign this instruction form without indicating a lesser number of Shares in the space above, all Shares held by you for my (our) account will be tendered. EX-99.A8 8 SUMMARY ADVERTISEMENT DATED FEB 23, 1996 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated February 23, 1996 and the related Letter of Transmittal and is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdictions. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Forum Group, Inc. at $13.00 Net Per Share by FG Acquisition Corp. A Wholly Owned Indirect Subsidiary of Marriott International, Inc. FG Acquisition Corp. (the "Purchaser"), an Indiana corporation and a wholly owned indirect subsidiary of Marriott International, Inc., a Delaware corporation ("Parent"), is offering to purchase all outstanding shares of common stock, without par value (the "Shares"), of Forum Group, Inc., an Indiana corporation (the "Company"), at $13.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 23, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any supplements or amendments, collectively constitute the "Offer"). - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MARCH 21, 1996, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) a number of Shares which, when added to the number of Shares then beneficially owned by Parent and its affiliates, represents at least two-thirds of the total number of Shares outstanding and two-thirds of the voting power of the Shares outstanding on a basis that includes all outstanding Shares, together with all Shares issuable upon exercise of vested options and warrants as of the Expiration Date (a "Fully Diluted Basis"). The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of February 15, 1996 (the "Merger Agreement"), among Parent, the Purchaser and the Company. The Merger Agreement provides that, among other things, the Purchaser will make the Offer and that following the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with relevant provisions of the Indiana Business Corporation Law, the Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation and will be a wholly owned indirect subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares held by the Company as treasury stock or by any wholly owned subsidiary of the Company or by Parent, the Purchaser or any other wholly owned subsidiary of Parent and other than Shares held by a holder who has perfected such holder's dissenters' rights in accordance with Chapter 44 of the Indiana Business Corporation Law) will be converted into the right to receive cash without interest in an amount equal to the price per Share paid in the Offer. The Purchaser and Parent have also entered into agreements (each, a "Shareholder Agreement") with each of certain shareholders of the Company (the "Principal Shareholders"). Pursuant to the Shareholder Agreements, each Principal Shareholder has agreed, among other things, so long as the price per share in the Offer is at least $13.00 in cash (net to the seller) to tender and not withdraw its Shares in the Offer. The Shareholder Agreements cover 21,409,834 Shares (including presently exercisable warrants to purchase Shares) in the aggregate owned by the Principal Shareholders, representing approximately 91% of the outstanding Shares calculated on a Fully Diluted Basis. The Board of Directors of the Company has unanimously approved the Offer and the Merger, determined that the Offer and the Merger are fair to the shareholders of the Company and are in the best interests of the shareholders of the Company and, subject to the fiduciary duties of the Board, recommends acceptance of the Offer and approval and adoption of the Merger Agreement and the Merger by the shareholders of the Company. The Offer is subject to certain conditions set forth in the Offer to Purchase. Subject to the terms of the Merger Agreement, if any such condition is not satisfied, the 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. The Purchaser may waive any or all of the conditions to the Offer in whole or in part at any time in its sole discretion. The Purchaser reserves the right, at any time or from time to time in accordance with the terms of the Merger Agreement, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to First Chicago Trust Company of New York (the "Depositary"). Any such extension will be followed as promptly as practicable by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled date on which the Offer was to expire. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer subject to the right of a tendering shareholder to withdraw such shareholder's Shares. For purposes of the Offer, the Purchaser shall be deemed to have accepted for payment tendered Shares when, as and if the Purchaser gives oral or written notice to the Depositary of its acceptance of the tenders of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal. Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn at any time after April 22, 1996 unless theretofore accepted for payment as provided in the Offer to Purchase. To be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth in the Offer to Purchase and must specify the name of the person who tendered the Shares to be withdrawn and the number of Shares to be withdrawn. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution (as defined in the Offer to Purchase)) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering shareholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn, or, in the case of Shares tendered by book-entry transfer, the name and number of the account at one of the Book-Entry Transfer Facilities to be credited with the withdrawn Shares. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d- 6 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has agreed to provide the Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information which should be read carefully before any decision is made with respect to the Offer. Requests for copies of the Offer to Purchase, the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below, and copies will be furnished promptly at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent and the Depositary) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or CALL TOLL-FREE (800) 322-2885 February 23, 1996 EX-99.C1 9 AGREEMENT & PLAN OF MERGER DATED 2/15/96 FORUM AGREEMENT AND PLAN OF MERGER DATED AS OF FEBRUARY 15, 1996 BY AND AMONG FORUM GROUP, INC., MARRIOTT INTERNATIONAL, INC. AND FG ACQUISITION CORP. ARTICLE I
THE OFFER 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 THE MERGER 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 DISSENTING SHARES; EXCHANGE OF SHARES SECTION 3.1. DISSENTING SHARES........................................ 7 SECTION 3.2. EXCHANGE OF SHARES....................................... 7 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY 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
i 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
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER 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 COVENANTS 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 CONDITIONS TO CONSUMMATION OF THE MERGER 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
ii ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER 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 MISCELLANEOUS 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
EXHIBITS -------- Exhibit A ............................................. Conditions to Offer
iii Schedules to Agreement and Plan of Merger Schedule 4.1(a) Certain Information Schedule 4.2(b) Shares of or Ownership Interests in Subsidiaries of the Company Schedule 4.2(c) Voting Trusts, Etc. Schedule 4.4 Consents and Approvals Schedule 4.5 Absence of Certain Changes Schedule 4.6 Certain Liabilities Schedule 4.9 Certain Defaults or Violations Schedule 4.10(a) Litigation Schedule 4.10(b) Compliance with Laws Schedule 4.10(c) Compliance with Environmental Laws Schedule 4.11(a) Information Relating to Employee Benefit Plans Schedule 4.11(c) Information Relating to Employee Benefit Plans Subject to Title IV of ERISA Schedule 4.11(e) Severance or Acceleration of Compensation Schedule 4.11(f) Employment and Consulting Agreements Schedule 4.12(a) Ownership of Assets Necessary to Conduct Business Schedule 4.12(b) Owned Real Property Schedule 4.12(d) Summary of Owned Operated and Managed Facilities Schedule 4.13 Material Contracts Terminated in Prior 12 Months Schedule 4.14 Taxes Schedule 4.14(h) Certain Payments Schedule 4.15 Labor Matters Schedule 4.17 Brokers Schedule 5.3 Consents and Approvals Schedule 6.1 Conduct of Business Schedule 6.5 POR Amendment Schedule 6.8(b) Certain Benefit Agreements Schedule 6.8(c) Certain Actions Schedule 6.10 Certain Indemnity Agreements TABLE OF DEFINED TERMS
Term Section No. - ---- ----------- 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)
iv Law.................................................................... 2.4 Lien................................................................... 4.2(B)
Term Section No. - ---- ----------- 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
v 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 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 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 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 4 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 -------- 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. 5 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. 6 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 7 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 8 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 9 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 10 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 11 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 -------- 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 12 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 13 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. 14 (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 15 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 16 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. 17 (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. 18 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 19 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 -------- 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. 20 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; 21 (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 -------- 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; 22 (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 -------- 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 -------- 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 -------- ------- 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 23 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 24 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 -------- 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. 25 (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 26 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 27 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 28 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. 29 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 (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 31 (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, 32 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 33 (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 34 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 35 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.] 36 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 37 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 (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 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 EX-99.C2 10 AGREEMENT & IRREVOCABLE PROXY 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: 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 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 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 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 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 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 (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 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 (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 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 Title: Chairman and Chief Executive Officer 12 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 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 Exhibit A-2 15 EX-99.C3 11 AGREEMENT & IRREVOCABLE PROXY 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: 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 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 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 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 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 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 (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 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 (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 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 Title: Chairman and Chief Executive Officer 12 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 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 EX-99.C4 12 AGREEMENT DTD. FEBRUARY 15, 1996 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. "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 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 (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 4 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 5 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. 6 (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 7 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 (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 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 10 EX-99.C5 13 IRREVOCABLE PROXY (APOLLO) 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 20, 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 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. 1 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 20, 1996 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 2 EX-99.C6 14 IRREVOCABLE PROXY (FORUM HOLDINGS) 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 20, 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 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. 1 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 20, 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:/s/ DANIEL DECKER ----------------- Name: Title: 2 -----END PRIVACY-ENHANCED MESSAGE-----