EXHIBIT 5
FORUM GROUP, INC.
May 5, 1995
Mr. Dennis L. Lehman
487 Woodcrest Drive
Mechanicsburg, Pennsylvania 17055
Dear Denny:
On behalf of Forum Group, Inc.'s ("FGI") senior management team, I am
delighted to officially offer you the position of Senior Vice President and
Chief Financial Officer of FGI.
Besides being a senior member of the Forum executive team, on the Forum
Executive Committee, and a business "partner" helping to drive our vision and
strategy, your essential responsibilities will be to lead all finance and
accounting responsibilities of FGI--including all elements of
financial/capital structure/investment strategy, treasury, accounting and
control, tax, internal audit, mergers and acquisitions, investor and
institutional relations, etc. In addition, you will be responsible for our
management information systems. A critical responsibility will be to interface
with our two significant Investors and "partners", Apollo and Hampstead. You
will report to me.
In keeping with our "term sheet", let me outline the compensation and
benefits associated with your employment:
. BASE SALARY of $235,000 payable bi-weekly, with annual adjustments based
on performance.
. INCENTIVE BONUS COMPENSATION of 0-50% of annual base salary assessed on
fulfillment of corporate financial targets and agreed upon annual
objectives ("MBOs"). Assuming you are on board by August 1, we will
guarantee you a minimum fiscal year end 1996 (the fiscal year ends
3/31/96) bonus of 60% of your maximum potential. If you arrive after
August 1, we will prorate this minimum 60% guarantee based on the
remaining months in the fiscal year, with August 1 as the starting point
for the proration.
. 150,000 NON-QUALIFIED STOCK OPTIONS with a 5 year vest and a 10 year
term. The strike price of the options will be set at the average of
market transactions on the day of your commencement of employment.
In the event of a "change in control" on the part of Hampstead and
Apollo, such that another entity is capable of controlling FGI by
electing a majority of the Board of Directors, all remaining unvested
stock options will vest immediately. The definition of "change in
control" is the same as the one in Mark Pacala's employment agreement
dated August 7, 1994.
. SEVERANCE: For the duration of your employment, should you be terminated
for any reason other than cause (definition of cause attached as Exhibit
1), you will receive a lump sum termination payment equal to 15 months
of the highest annual base salary achieved during your tenure at FGI.
. COBRA INSURANCE: During the period of your COBRA coverage, we will
reimburse you for your COBRA premiums for a period not to exceed 16
months.
. BOARD OF DIRECTOR MEETING AND COMMITTEE ATTENDANCE
We expect you to attend and participate actively in all meetings of our
Board of Directors and any Committee thereof.
We understand how important Board membership is to you. We commit over
the next several years to revisit the possibility of you joining the
Board and will keep your strong interest in mind during the
considerations.
. You will be entitled to receive all BENEFIT PROGRAMS commensurate with
being a member of senior management of FGI.
. A CASH "SIGN-ON" BONUS of $82,400 (40% of $206,000) will be provided to
compensate you for the loss of your annual bonus at Continental,
assuming Continental does not pay you this bonus. We do, however, want
to encourage you to use your best efforts to secure the bonus out of
Continental. To that end, if you are successful in securing the entire
$82,400 bonus from Continental, then we will pay you $10,000 for your
efforts. If you are successful in securing a portion of the $82,400
bonus from Continental, then we will make up the difference, so that you
will receive from both parties a total of $82,400. We will also prorate
the $10,000 incentive based on the percentage of $82,400 that you are
able to extract from Continental.
. RELOCATION TO VIRGINIA: In order to get you and your family relocated to
our new office location as easily, comfortably, and as quickly as
possible, we will provide the following programs:
--Sale of home in Pennsylvania: Home sale marketing assistance;
reimbursement of home sale reasonable and customary closing costs.
As we've discussed, as a policy matter, we are attempting to stay away
from 3rd party purchase or taking the home into inventory. We will,
however, upon completion of your home sale marketing assistance plan
and throughout your attempt to sell the house, reconsider this home
relocation benefit, and if necessary, implement some program to take
the house off your hands.
--Movement of all household goods.
--Temporary living expenses in the new location, as long as reasonable.
--A short term equity bridge loan: not to exceed the equity in your
Pennsylvania home, no interest charged, payable thirty days from the
closing on your Pennsylvania house.
--Purchase of home in Virginia: reimbursement of all reasonable and
customary closing costs (not to exceed 2 points on mortgage),
reimbursement of expenses associated with househunting trips within
reason (6 days maximum)
--Gross-up on all taxable income associated with the relocation.
. CONFIDENTIALITY AGREEMENT: Upon joining our company, we will ask you to
sign a confidentiality agreement protecting FGI's legitimate proprietary
information.
This offer letter is in full force and valid from this date forward, unless
FGI notifies you in writing at least seven business days prior to the offer's
intended termination date.
Denny, we are thrilled at the prospect of you helping us achieve our vision.
I hope this letter fully summarizes our understanding. If not, please let me
know. We are most anxious to welcome you, Joanne, and Nate as the newest
members of the Forum family.
Warm regards,
/s/ Mark L. Pacala
Mark L. Pacala,
President and Chief Executive
Officer
Read and Accepted:
/s/ Dennis L. Lehman
2
EXHIBIT 1
For purposes of this letter, the term "cause" means:
(i) the willful, persistent and continued failure by the Executive
substantially to perform his duties hereunder which are within his control
(other than any such failure resulting from the Executive's incapacity due
to physical or mental illness), after written notice demanding substantial
performance is delivered to the Executive by the Chief Executive Officer
("CEO"), which notice identifies in reasonable detail the manner in which
the CEO believes the Executive has not substantially performed; provided,
however, that the failure of the Executive or the Company to meet
performance objectives, such as operational or financial objectives
established by the CEO, will not be considered failure by the Executive
substantially to perform his duties hereunder; or
(ii) an act of fraud which is known to the Executive and not properly
reported, embezzlement or theft by the Executive in connection with his
duties or in the course of his employment with the Company.
3