<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-27374
UNISON HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 86-0684011
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
8800 NORTH GAINEY CENTER DRIVE, SUITE 245
SCOTTSDALE, AZ 85258
(602) 423-1954
FORMER ADDRESS:
7272 E. INDIAN SCHOOL ROAD, SUITE 214
SCOTTSDALE, AZ 85251
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
Common Stock, Par Value $0.001 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 31, 1997, there were 6,422,096 shares of Common Stock, par
value $0.001 per share, outstanding. The aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant on March 28, 1997, was
approximately $9,539,685. For purposes of the foregoing calculation only, all
directors and executive officers of the registrant have been deemed affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE> 2
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" applicable to BritWill's separate
historical results and other financial information included herein.
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED YEARS ENDED
JULY 31, DECEMBER 31,
------------------- -------------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Net patient.................... $38,378 $29,098 $53,801 $32,107 $27,107
Other.......................... 476 759 624 625 70
------- ------- ------- ------- -------
Total revenues......... 38,854 29,857 54,425 32,732 27,177
Expenses:
Operating...................... 28,333 22,666 40,037 23,483 15,162
General and administrative..... 3,870 3,350 6,252 3,670 6,714
Rent........................... 5,223 4,719 8,264 5,097 3,750
Interest....................... 906 571 872 385 2,850
Depreciation and
amortization................ 591 487 987 704 741
------- ------- ------- ------- -------
Total expenses......... 38,923 31,793 56,412 33,339 29,217
------- ------- ------- ------- -------
Income (loss) from operations.... (69) (1,936) (1,987) (607) (2,040)
Other Income:
Interest income............. 113 50 55 65 220
------- ------- ------- ------- -------
Income (loss) before income
taxes.......................... 44 (1,886) (1,932) (542) (1,820)
Income taxes..................... 31 26 53 52 --
------- ------- ------- ------- -------
Net income (loss)................ $ 13 $(1,912) $(1,985) $ (594) $(1,820)
======= ======= ======= ======= =======
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act which are based on
assumptions set forth in this discussion that could prove to be inaccurate.
Important factors that could cause actual events to vary from the discussions
herein include the factors discussed in "Business", "-- Overview" and "-- Risks
and Uncertainties".
The following material should be read in conjunction with Unison's
Consolidated Financial Statements and related notes thereto for the years ended
December 31, 1994, 1995 and 1996. All references in this discussion and analysis
to years are to fiscal years ended December 31 of such year.
SIGNIFICANT EVENTS
- - On October 31, 1996, Unison completed the private placement of its
$100,000,000 12 1/4% Senior Notes Due 2006 (the "Senior Notes").
- - On October 31, 1996, Unison completed the Signature Acquisition and the Ampro
Acquisition. See "-- Acquisitions and Dispositions".
- - On September 30, 1996, Unison announced a plan to dispose of seven
(subsequently amended to include eight) underperforming nursing facilities and
recorded a $3,865,000 nonrecurring charge in the 1996 third quarter. See
"-- Acquisitions and Dispositions".
- - For the year ended December 31, 1996, Unison recorded a net loss of
$23,438,000 compared to net income of $117,000 and $340,000 in 1995 and 1994,
respectively. See "-- Results of Operations".
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<PAGE> 3
OVERVIEW
From a financial performance standpoint, 1996 was a very disappointing year
for Unison. In 1996, the Company pursued an aggressive expansion program and the
financial reporting and management information systems were not adequate for the
larger and more complex needs of the Company. On March 11, 1997, the Company
announced that it would restate its financial results for the nine months ended
September 30, 1996 and estimated that the restatement would be in the range of
$5,000,000 to $6,000,000. Unison also stated that its investigation was
continuing. On May 12, 1997, after consultation with the Company's auditors,
Unison announced that the restatement would be significantly higher than the
previous estimate. As a result of the auditor's examination in conjunction with
the Company's prior investigation, the restated pretax loss for the nine months
ended September 30, 1996 is $14,997,000.
Despite these difficulties, Unison believes that its core businesses remain
fundamentally sound. Its nursing home occupancy levels and quality mix have
shown improvement. Unison's quality of care as measured by levels of compliance
in state health care surveys is high. Unison's ancillary services subsidiaries
(providing therapy, pharmacy and laboratory services both to Unison facilities
and those of independent nursing home companies) are generally profitable. As of
May 21, 1997, Unison is current in all of its loan and leasehold payment
obligations, having recently made the first required interest payment on its
Senior Notes. During March 1997, Unison's outside directors took initial steps
to replace the Company's chief executive and several of its principal financial
officers. Unison also substantially curtailed its acquisition program, reduced
its corporate cost structure, and is implementing revenue enhancement programs
and expense controls in its nursing homes and ancillary services companies. See
"-- Liquidity and Capital Resources." The Company also is pursuing new sources
of debt or equity financing to help it rebuild value for its shareholders and
note holders. The Company believes that the revenue enhancement and cost
containment initiatives and access to cash flows from draws on its line of
credit or, if necessary, proceeds from sales of unencumbered assets and
additional borrowings, will provide Unison with the liquidity necessary to meet
its obligations during 1997.
RISKS AND UNCERTAINTIES
Risks and uncertainties that may impact future operating results and cash
flows include those described below.
High Leverage and Limited Capital Resources. At December 31, 1996, Unison
had approximately $157,138,000 in total long-term indebtedness, which was
approximately 93.1% of its total capitalization. It also has significant
long-term operating lease obligations (approximately $15,492,000 for 1997 and
$164,743,000 in the aggregate). Substantially all of Unison's cash flow and
availability under its current lines of credit, together with additional funds
from sources yet to be developed, will be needed for the next year and beyond in
order to satisfy its working capital, debt service and lease obligations. The
Company believes that the revenue enhancement and cost containment initiatives
and access to cash flows from draws on its line of credit or, if necessary,
proceeds from sales of unencumbered assets and additional borrowings will
provide Unison with the liquidity necessary to meet its obligations during 1997.
The Senior Notes and Unison's other indebtedness and lease obligations include
certain covenants that prohibit or limit asset sales, acquisitions, incurrence
of additional debt and liens, the making of restricted payments, affiliate
transactions, engaging in certain mergers and consolidations and entering new
lines of business. Unison's ability over the near term to respond to unexpected
obligations or revenue shortfalls or to other risks and uncertainties is
limited.
Pending Securities Litigation. Unison and certain of its current and
former directors and officers (among others) are named as defendants in several
class action complaints seeking unspecified damages following Unison's
announcement in March 1997 that the Company expected to restate its financial
statements for the nine-month period ended September 30, 1996. To date, six such
claims have been filed in federal district court in Phoenix, Arizona alleging
violations of Sections 10 and 20 of the Exchange Act and Rule 10b-5 promulgated
thereunder. While the purported class periods and the named defendants vary, the
broadest class period to date asserts that between May 14, 1996 (the date of
Unison's announcement of first quarter results) and March 10, 1997 (the date
before Unison's March 11 announcement of the restatement) the defendants knew,
or were reckless in not knowing, that Unison's results for the first three
quarters of 1996
20
<PAGE> 4
were materially overstated. The individual defendants named in some or all of
these actions are Jerry M. Walker (the Company's former Chief Executive
Officer), Craig Clark (the Company's former Chief Financial Officer), Paul
Contris (the Company's former Vice President of Acquisitions), Phillip Rollins
(the Company's Chief Operating Officer) and Bruce Whitehead (Chairman of the
Board). In addition, the Company is informed that an action has been filed in
the Superior Court of the State of California (County of Orange) against the
Company and the aforesaid individuals, as well as John T. Lynch, Jr. (a member
of the Board of Directors), Trouver Capital Partners, L.P. (a private investment
banking firm of which Mr. Lynch is a general partner), Cruttenden Roth Inc. and
Wheat First Butcher Singer (the latter two entities are named individually and
as representatives of a purported defendant underwriter class). The Orange
County action is purportedly filed on behalf of all persons who acquired Unison
stock in the Company's December 1995 initial public offering ("IPO"); it
essentially alleges that in connection with the IPO, the defendants made
positive statements about the Company's prospects for which there was no basis,
that accounts receivable were overstated, and that the Company's statement of
financial position as of September 30, 1995 was not fairly presented. Unison's
bylaws require the Company to indemnify current and former officers and
directors to the extent permitted by Delaware law against such liabilities and
related expenses. The Company denies the material allegations in these
complaints and intends to defend the actions vigorously. Management believes
that the costs of the ultimate disposition of these matters, if any, will be
substantially covered by insurance. An adverse determination could have a
material adverse effect upon Unison.
Market Listing for Equity Securities and Access to Capital
Markets. Because of its substantial losses in 1996, Unison does not currently
satisfy the minimum tangible net worth criteria for maintaining the listing of
its common stock on The Nasdaq Stock Market's National Market System. If the
listing of its common stock is suspended and not renewed, Unison's ability to
raise capital in the public or private equity markets will be hampered.
Management is exploring options to forestall or ameliorate any such action.
History of Losses and Accumulated Deficit. Unison began operations in 1992
and, prior to the pooling effects of the Ampro Acquisition on October 31, 1996,
it incurred net losses through the third quarter of 1995. Unison reported a
small net profit in the fourth quarter of 1995, but it reported substantial
losses for 1996. Unison's future profitability will depend upon many factors,
including its ability to reduce and control costs, its ability to integrate
recently acquired operations, occupancy levels, government regulation and
reimbursement policies, competition, Unison's ability to attract and retain
qualified personnel at competitive rates, the outcome of pending litigation and
general economic conditions. While the Company has instituted revenue
enhancement and cost containment programs and continues to work at integrating
recent acquisitions, there can be no assurance that Unison will be profitable in
the future.
Risks from Recent Business Expansion. A key element of Unison's business
strategy during 1995 and 1996 was to expand through the leasing of new or
existing long-term and specialty healthcare facilities and the acquisition or
development of ancillary healthcare businesses or services. The acquisitions of
BritWill, Signature, Sunbelt, RehabWest, and Ampro and the formation of Quest
occurred pursuant to this strategy. Acquisitions are inherently risky due to the
possibility of unknown and unforeseen contingencies affecting the new businesses
and due to costs of integrating acquired operations into the overall enterprise.
These risks have impacted and may continue to impact Unison's financial
performance. Although Unison has substantially curtailed its acquisition
strategy, its corporate overhead increased during the second half of 1996 in the
expectation that the number and size of acquisitions might continue to grow.
This expansion will make it difficult to reduce costs in response to liquidity
challenges.
Management Transition and Dependence on Skilled Personnel. Three of
Unison's executive officers, including its CEO, CFO and VP of Acquisitions,
resigned during the first part of 1997. They have not been replaced on a
permanent basis. A number of other personnel have also been laid off, primarily
in an attempt to control overhead costs. The loss of key personnel could
adversely affect Unison's ability to rebuild its financial health.
Rate Increases on Senior Notes. Pursuant to the Senior Note Registration
Rights Agreement, the interest rate payable on Unison's outstanding Senior Notes
has temporarily increased from 12.25% to 13.00%, and it is subject to further
increases at 90 day intervals (to a maximum rate of 14.25%) until a registration
21
<PAGE> 5
statement for the Senior Notes (or for Exchange Notes on the same terms) is
filed and becomes effective with the Securities and Exchange Commission (the
"Commission"). Unison has delayed filing the required registration statement
while it completed work on its financial statements for 1996, but expects to
make the filing in 1997. In light of Unison's 1996 results, the Commission may
choose to review that filing. Accordingly, further delays in completing the
required registration, with corresponding additional interest expense on the
Senior Notes, are possible.
Loan and Lease Covenant Violations. Although Unison is current on its
payment obligations on its outstanding loans and facilities leases, it is not in
compliance with certain covenants under mortgage loans with one lender for six
of its health care facilities and with the lease agreements for 23 facilities
leased from Omega. Unison has obtained a waiver from Omega for these financial
covenant violations as of December 31, 1996, and it is negotiating the terms of
revised covenants for the future. Management is attempting to renegotiate the
leases; however, there can be no assurance that such restructuring will be
accomplished. An acceleration of Unison's obligations under any of its financial
instruments or a default under any of its facilities leases could have a
material adverse impact on Unison.
ACQUISITIONS AND DISPOSITIONS
On October 31, 1996, Unison acquired by merger Signature Health Care
Corporation and four affiliated companies (collectively, the "Signature
Mergers") for a combination of Unison common shares, approximately $37,054,000
in cash and promissory notes totaling approximately $1,146,000. In accordance
with an adjustment provision of the Signature Merger Agreements relating to
stockholders' equity, in March 1997 the former shareholders of Signature
received additional consideration of $2,511,000, paid in convertible promissory
notes ($1,827,000) and 238,052 shares of Unison common stock ($684,000 valued as
of March 27, 1997). Signature operated 11 long-term care facilities and two
assisted living facilities in Arizona and metropolitan Denver, Colorado. Unison
also acquired RehabWest (a related rehabilitation company) for approximately
$5,350,000 in cash. The Signature Mergers and the acquisition of RehabWest are
referred to collectively as the "Signature Acquisition."
On October 31, 1996, Unison also acquired American Professional Holding,
Inc. and Memphis Clinical Laboratory, Inc. (together, "Ampro")(the "Ampro
Acquisition") in a pooling of interests transaction. The consideration paid for
Ampro included: (a) cash of approximately $237,000; (b) 540,000 shares of Unison
Common Stock and (c) a promissory note in the amount of $250,000 which has since
been prepaid. Ampro operates medical laboratories in Texas, Missouri and
Tennessee which, at March 31, 1997, provided testing services for 275 nursing
homes and other healthcare facilities. Summarized results of operations of Ampro
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues............................. $6,000,000 $7,203,000 $6,547,000
Net income (loss).................... 420,000 143,000 (565,000)
</TABLE>
Other acquisitions that have closed within the past three years include
BritWill (1995), Sunbelt (1996) and several smaller facilities or enterprises.
See "Business -- Acquisitions."
On September 30, 1996, Unison announced a disposition plan designed to
improve its long-term financial strength and operating performance (the
"Dispositions"). The plan includes the disposition of eight nursing facilities
(the "Disposition Facilities"), two of which are closed, which do not meet
Unison's operational or financial criteria. Unison also recorded a nonrecurring
charge of $3,865,000 in the quarter ended September 30, 1996 to record
impairment of long-lived assets and to establish reserves for costs to dispose
of the
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Disposition Facilities. Four of these facilities were subleased to an unrelated
party effective March 1, 1997 and the other four are held for disposition.
Results of operations of the Disposition Facilities were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues................................................. $16,269 $14,539
Net loss before taxes and impairment losses.............. 90 2,320
</TABLE>
RESULTS OF OPERATIONS
UNISON HISTORICAL
The following table summarizes selected operating statistics. Pro forma
data give effect to the Dispositions as if all of the Disposition Facilities had
been disposed of on December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------ PRO FORMA
1994 1995 1996 1996
---- ----- ----- ---------
<S> <C> <C> <C> <C>
Leased/Owned Facilities:
Number of facilities.......................... 11 42 59 53
Number of licensed beds:
Long-term care............................. 631 3,872 5,145 4,508
Assisted and independent living............ 104 112 320 320
Managed Facilities:
Number of facilities.......................... 9 8 3 3
Number of licensed beds....................... 990 874 310 310
Institutional Pharmacies:
Number of outlets............................. -- 1 2 2
Nonaffiliated facilities served............... -- 17 42 42
Therapy Services:
Nonaffiliated entities served................. -- -- 55 55
Laboratory Services:
Nonaffiliated entities served................. 225 260 295 295
</TABLE>
The following table identifies Unison's sources of revenues. Pro forma data
give effect to (i) the Dispositions and (ii) acquisitions completed after
January 1, 1996 as if such transactions had occurred on January 1, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------- PRO FORMA
1994 1995 1996 1996
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Percentage of total revenues:
Long-term care................................. 67.4% 87.6% 81.0% 84.1%
Therapy contracts.............................. -- -- 8.9 7.5
Pharmacies..................................... -- 1.0 4.6 3.8
Medicare Part B billing and supply............. -- 0.9 1.1 1.0
Laboratory services............................ 32.6 10.5 4.4 3.6
----- ----- ----- -----
Total....................................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Unison's revenues fluctuate from facility to facility based on various
factors, including total capacity, occupancy rates, reimbursement systems and
rates among the payor categories, payor mix and the scope and utilization of
Unison's ancillary services. Medicare patients generate the highest revenue per
patient day, although profitability is not always increased due to the
additional costs associated with the higher level of care required by such
patients. In general, private pay sources are more profitable to Unison than
governmental reimbursement sources. Unison generally derives a higher profit
margin from ancillary services than from basic nursing services.
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Data for nursing center operations with respect to sources of net patient
revenues by payor type are set forth below (long-term care only). Pro forma data
give effect to (i) the Dispositions and (ii) acquisitions completed after
January 1, 1996, as if such transactions had occurred on January 1, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------- PRO FORMA
1994 1995 1996 1996
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Medicare........................................... 9.1% 26.9% 29.5% 30.2%
Private and other.................................. 32.4 17.2 17.0 18.1
----- ----- ----- -----
Quality Mix...................................... 41.5 44.1 46.5 48.3
Medicaid........................................... 58.5 55.9 53.5 51.7
----- ----- ----- -----
Total............................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Unison recorded a net loss of $23,438,000 in 1996 and net income of
$117,000 in 1995. Loss before taxes amounted to $31,794,000 in 1996 compared to
pretax income in 1995 of $249,000. The pretax loss in 1996 is primarily
attributable to: (i) write-offs and provisions for doubtful accounts related to
management fees and patient and other receivables in the aggregate amount of
$4,524,000; (ii) a provision for impairment of long-lived assets and the
Dispositions amounting to $3,865,000, (iii) gross receipt taxes, interest, and
penalties of approximately $3,565,000, (iv) accrued accounting, legal and other
professional fees relating to 1996 matters of $1,300,000, (v) loan transaction
costs and fees for debt which has been paid off and acquisition costs of
$1,762,000, (vi) increased corporate salary costs from $2,838,000 in 1995 to
$5,340,000 in 1996, (vii) a litigation settlement amounting to $725,000 and
(viii) losses from nursing home operations.
Revenues. Revenues were $148,674,000 in 1996 compared to $68,488,000 in
1995. The $80,186,000 increase is due primarily to revenues from patient
services which increased from $64,947,000 in 1995 to $146,379,000 in 1996.
Patient days increased from 613,000 in 1995 to 1,235,000 in 1996. The increase
in patient days and net patient service revenues is primarily attributable to
(i) the increase in the number of facilities operated, including a full year of
operations of the 28 facilities acquired in the BritWill Acquisition on August
10, 1995 and 13 facilities with the Signature Acquisition on October 31, 1996;
(ii) the acquisitions of institutional pharmacies and therapy companies, and
progress in providing ancillary products and services to patients of Unison
facilities and unrelated facilities; and (iii) the increase in Unison's quality
mix to 46.5% in 1996 compared to 44.1% in the prior year period. Other operating
revenues decreased to $2,295,000 in 1996 from $3,541,000 in 1995 due primarily
to the decrease in managed facilities from eight at December 31, 1995 to three
at December 31, 1996.
Wages and Related. Wages and related expense increased 144.8% from
$35,047,000 in 1995 to $85,789,000 in 1996 and as a percentage of revenues from
51.2% in 1995 to 57.7% in 1996. The dollar increase is due primarily to the
increase in the number of leased facilities operated and an increase in
corporate overhead due to Unison's acquisition program during 1996 and
accounting and information system conversions. The percentage increase is due
primarily to the acquisition of therapy companies which have an inherently
higher percentage of salaries to revenues than long-term care providers and an
increase in corporate and regional overhead.
Other Operating. Other operating expenses increased 169.5% from
$24,032,000 in 1995 to $64,771,000 in 1996, due primarily to an increase in the
number of leased facilities operated as well as (i) a $1,892,000 increase in the
provision for doubtful accounts related to management fees and other accounts
receivable; (ii) costs associated with acquisition efforts and litigation; and
(iii) increases in corporate overhead. Other operating expenses as a percentage
of revenues amounted to 43.6% in 1996 compared to 35.1% in 1995.
Rent Expense. Rent expense increased 134.6% from $6,673,000 in 1995 to
$15,658,000 in 1996. The increase is due primarily to the increase in the number
of leased facilities operated. Rent expense as a percentage of revenues
increased to 10.5% in 1996 from 9.7% in 1995.
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Interest Expense. Interest expense amounted to $5,824,000 in 1996 compared
to $1,176,000 in 1995. The increase is primarily the result of debt incurred and
assumed in connection with acquisitions, including the $100,000,000 of Senior
Notes issued on October 31, 1996, as well as increases in borrowings for working
capital. See "-- Liquidity and Capital Resources." Interest expense as a
percentage of revenues increased to 3.9% in 1996 from 1.7% in 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased from $1,311,000 in 1995 to $4,561,000 in 1996. The increase is due
primarily to the increase in goodwill and lease operating rights associated with
acquisitions and an increase in fixed assets resulting from capital expenditures
and ownership interests in six facilities acquired in the Signature Acquisition.
Depreciation and amortization expense as a percentage of revenues was 3.1% in
1996 and 1.9% in 1995.
Income Tax Expense (Benefit). Unison recorded an income tax credit for
1996 amounting to $8,356,000, or 26.3% of pretax loss of $31,794,000. The
effective tax rate is lower than the statutory federal income tax rate due
primarily to (i) amortization of intangible assets and other expenses which are
not deductible for tax; (ii) taxable income of certain subsidiaries which are
not consolidated for tax; and (iii) the valuation allowance established against
deferred tax assets. Unison recorded a tax provision in 1995 of $132,000, or
53.0% of pretax income. The effective tax rate for 1995 is higher than the
statutory federal tax rate due primarily to amortization of intangible assets
and other nondeductible expenses.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues increased from $18,406,000 in 1994 to $68,488,000 in
1995. The increase is primarily attributable to revenues from patient services
which increased from $17,070,000 in 1994 to $64,947,000 in 1995. Patient days
increased from 140,000 in 1994 to 613,000 in 1995. Of this growth in patient
revenues and census, approximately 90% is attributable to acquisitions, with the
remainder attributable primarily to the increase in quality mix and an increase
in average census of facilities owned throughout the period. Unison operated 11
leased nursing and assisted living facilities at December 31, 1994 compared to
42 leased nursing and assisted living facilities at December 31, 1995. The
revenues related to the 28 facilities acquired from BritWill are included in
Unison's results of operations for periods subsequent to July 31, 1995.
Management fees and other revenue increased from $1,336,000 in 1994 to
$3,541,000 in 1995 as a result of an increase in the number of managed
facilities from nine facilities in 1994 to 12 facilities during 1995 (with eight
facilities under such management agreements at December 31, 1995).
Wages and Related. Wages and related expense increased from $9,593,000 in
1994 to $35,047,000 in 1995. The increase in wages and related expense is
primarily attributable to the increase in the number of leased facilities
operated. Wages and related expense as a percent of revenues decreased from
52.1% in 1994 to 51.2% in 1995 as a result of the higher proportion of revenues
from certain ancillary businesses whose operations are less labor-intensive than
those of the nursing facilities.
Other Operating. Other operating expenses increased from $6,462,000 in
1994 to $24,032,000 in 1995. The increase is attributable primarily to an
increase in the number of facilities operated. Other operating expenses as a
percent of revenues remained constant at 35.1% in 1994 and 1995.
Rent Expense. Rent expense increased from $1,406,000 in 1994 to $6,673,000
in 1995. The increase is primarily a result of the acquisition of 4 leased
facilities during the first seven months of 1995 and an additional 28 facilities
from the BritWill Acquisition for the last five months of the year. Rent expense
as a percent of patient revenues increased from 7.6% in 1994 to 9.7% in 1995.
Interest Expense. Interest expense increased from $147,000 in 1994 to
$1,176,000 in 1995. The increase is primarily attributable to the agreement
entered into in April 1995 to sell the Company's accounts receivable and
additional indebtedness assumed in connection with the BritWill Acquisition.
Interest expense as a percent of revenues increased from 0.8% in 1994 to 1.7% in
1995.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased from $286,000 in 1994 to $1,311,000 in 1995. The increase is
due primarily to the amortization of goodwill and lease operating rights
attributable to the increase in leased facilities, related equipment purchases
and leasehold
25
<PAGE> 9
improvements. Depreciation and amortization expense as a percent of revenues
increased from 1.6% in 1994 to 1.9% in 1995.
BRITWILL HISTORICAL
Overview
BritWill's long-term care facilities derived 28.6% of resident care revenue
from Medicare and ancillary services for the seven months ended July 31, 1995
compared to 18.8% in the comparable 1994 period. For the year ended December 31,
1994, 17.6% of resident care revenue was derived from Medicare and ancillary
services compared with 5.0% for the year ended December 31, 1993.
Seven Months Ended July 31, 1995 Compared to Seven Months Ended July 31, 1994
Revenues. Revenues increased from $29.9 million in 1994 to $38.9 million
in 1995, an increase of 30.1%. These increases are primarily attributable to the
expansion of Medicare services; there were 15 facilities in the Medicare program
in the first seven months of 1994 compared to 24 in 1995. Medicare and ancillary
revenue were 7.0% and 7.0%, respectively, of patient revenues in 1994 compared
to 23.0% and 6.0%, respectively, of patient revenues for 1995. Management fee
revenues decreased by $120,000 or 75% due to the conversion of 2 facilities from
management contracts to leases in November of 1994. However, this decrease was
offset by an additional $3.2 million in patient revenues.
Wages and Related Expense. Wages and related expense increased from $17.0
million in 1994 to $23.3 million in 1995, an increase of 37.1%. Salary and wages
increased 18.4%. New leases contributed to $1.7 million of the wage increase.
The remaining increase is attributable to increased staffing necessary to
support the Company's increased Medicare services.
Lease Expense. Lease expense increased from $4.7 million in 1994 to $5.2
million in 1995, an increase of 10.6% due to the addition of the 3 facilities in
the fourth quarter of 1994.
General and Administrative. General and administrative expenses increased
from $3.4 million in 1994 to $3.9 million in 1995, an increase of 14.7%. This
increase is primarily attributable to new leases. As a percentage of revenues,
general and administrative expenses declined from 11.2% of revenue in 1994 to
10.0% of revenue in 1995.
Depreciation and Amortization. Depreciation and amortization increased
from $487,000 in 1994 to $591,000 in 1995, an increase of 21.4%. This increase
is attributable to additional equipment and leasehold improvements at BritWill's
facilities.
Interest Expense. Interest expense increased from $571,000 in 1994 to
$906,000 in 1995, an increase of 58.7%. This increase was primarily due to
additional borrowings under the revolving credit facility.
Income (Loss) before Income Taxes and Net Income. Income before income
taxes increased from a loss of $1.9 million for the seven months ended July 31,
1994 to income of $43,880 for the seven months ended July 31, 1995. This was
primarily attributable to an increase in acuity of patients and an increase in
Medicare patients in 1995; thus, ancillary utilization increased resulting in
substantially improved performance. There was no tax benefit provided for the
1994 loss since a valuation reserve was established for such income tax
benefits. Net income increased from a net loss of $1.9 million for the seven
months ended July 31, 1994 to net income of $13,380 for the seven months ended
July 31, 1995.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Revenues. Revenues increased from $32.7 million in 1993 to $54.4 million
in 1994, an increase of 66.4%, primarily attributable to the acquisition of nine
facility leases in Texas, primarily in the fourth quarter of 1993. In addition,
in the latter half of 1994, there was a significant increase in Medicare patient
days as there were more Medicare certified facilities. Management fee revenues
decreased 28.1% due to the conversion of two facilities from management
contracts to leases in June 1994 and two additional facilities in November. The
increase in patient census was diluted by a modification in Rule 14 under the
Indiana Medicaid reimbursement program. The effect of this ruling decreased
revenues by $1.2 million.
26
<PAGE> 10
Operating Expenses. Operating expenses increased from $23.5 million in
1993 to $40.0 million in 1994, an increase of 70.2%. Facility salaries and wages
increased 68.2%, attributable to new leases in Texas. Ancillary expenses
increased $1.7 million due to the increase in the number of facilities
participating in the Medicare program.
Lease Expense. Lease expense increased from $5.1 million in 1993 to $8.3
million in 1994, an increase of 62.7%, due to the new leases.
General and Administrative. General and administrative expenses increased
from $3.7 million in 1993 to $6.3 million in 1994, an increase of 70.3%. This
increase is primarily attributable to new leases and additional resources
dedicated to expanded Medicare operations in 1994.
Depreciation and Amortization. Depreciation and amortization increased
from $704,000 in 1993 to $987,000 in 1994, an increase of 40.2%. This is
primarily attributable to the amortization of leasehold rights recorded as part
of the acquisition of five of the Texas facilities in December of 1994.
Interest Expense. Interest expense increased from $385,000 in 1993 to
$872,000 in 1994, an increase of 126.5%, primarily due to the payment of
interest on subordinated long-term debt.
Income/Loss before Income Taxes and Net Loss. Loss before income taxes
increased from $542,155 for the year ended December 31, 1993 to $1.9 million for
the year ended December 31, 1994. This was primarily attributable to an increase
in supplies expense, principally ancillary costs, in 1994 which were not
billable to Medicaid. There was no tax benefit provided for the losses since a
valuation reserve was established for such income tax benefit. Net loss
increased from $593,905 in 1993 to $2.0 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, Unison had $17,409,000 in cash and cash equivalents
compared to $6,169,000 at December 31, 1995. The Company had a working capital
deficit of $13,955,000 at December 31, 1996 compared to a working capital
deficit at December 31, 1995 amounting to $927,000. The working capital deficit
shown at December 31, 1996 is primarily the result of current maturities of
notes and debt amounting to $33,915,000. Of this amount, approximately
$12,545,000 was repaid in January 1997 with proceeds from the Senior Notes and
$19,622,000 is classified as a current liability because Unison is not in
compliance with certain financial covenants; however, although the financial
covenants have not yet been cured, management has no reason to believe that this
debt will be accelerated and paid off in 1997.
Cash used in operations in the year ended December 31, 1996 amounted to
$23,658,000 compared to $932,000 in 1995 and $43,000 in 1994. The increase is
due primarily to losses from operations for the various reasons described above
in the comparison of 1996 to 1995 and a net increase in accounts receivable of
$5,310,000, partially offset by an increase in accounts payable and accrued
expenses of $2,454,000 and a decrease in prepaid expenses of $825,000.
Net cash used in investing activities amounted to $48,723,000 in 1996
compared to $3,679,000 in 1995 and $1,630,000 in 1994. In 1996, capital
expenditures amounted to $3,587,000 compared to $1,333,000 in 1995 and $995,000
in 1994. Capital expenditures of approximately $2,144,000 are budgeted for 1997
for routine replacements and refurbishment of facilities, which is anticipated
to be funded from operating cash flows and borrowings under lines of credit.
Expenditures for acquisitions, net of cash acquired, amounted to $41,225,000 in
1996, $40,066,000 of which relates to the Signature Acquisition, compared to
$677,000 in 1995 for the BritWill Acquisition and $300,000 in 1994. Increases in
intangible and other assets amounted to $2,707,000 in 1996, $1,397,000 in 1995
and $155,000 in 1994.
Net cash provided by financing activities amounted to $83,621,000 in 1996
compared to $10,474,000 in 1995 and $1,795,000 in 1994. At December 31, 1996,
Unison had $157,138,000 in total debt (93.1% of total capitalization) compared
to $26,737,000 (56.1% of total capitalization) at December 31, 1995.
On October 31, 1996, Unison completed the private placement of $100,000,000
of the Senior Notes. The net proceeds to Unison amounting to $94,550,000 were
used to complete the Signature Acquisition and the Ampro Acquisition and prepay
certain debt and contingent obligations as described below. Excess proceeds of
approximately $15,500,000 were used for acquisitions and working capital. The
stated interest rate of 12 1/4%
27
<PAGE> 11
per annum is subject to temporary increase if the Senior Notes (or Exchange
Notes with the same terms) are not registered with the Commission within
specified time periods. As of December 31, 1996, the interest rate on the Senior
Notes was 12.75% and as of May 16, 1997 the interest rate is 13.00%. The
interest rate is subject to further increases of 0.25% on June 13, 1997 and
every 90 days thereafter (up to a maximum rate of 14 1/4%) until such
registration becomes effective.
In January 1997, Unison repaid with proceeds from the Senior Notes the
$8,000,000 subordinated note payable to the former BritWill shareholders (the
"Subordinated Note") and $1,750,000 of the contingent obligation due to the
former BritWill shareholders. Thereafter, Unison's remaining obligation
associated with the BritWill Acquisition is a $9,750,000 contingent obligation
(the "Additional Payment Obligation"). The Additional Payment Obligation is
payable in monthly installments of $99,000 to $166,000, which includes interest
at 12.0% to 14.0%, with a balloon payment of $8,146,000 due August 9, 2000.
Because these payments are contingent upon revenue targets that, in light of
recent acquisitions, are likely to be achieved, the Additional Payment
Obligation is recorded as long-term debt and an increase in lease operating
rights in the consolidated balance sheet at December 31, 1996. Although this
does not change the amount of cash due to the former BritWill shareholders,
Unison will record an increase in amortization and interest expense in 1997 in
the aggregate amount of approximately $1,600,000. In the event of a sale by
Unison prior to August 9, 2000 of debt or equity securities exceeding
$10,000,000, the remaining balance of the Additional Payment Obligation will be
due in full.
In connection with the Signature Acquisition, Unison assumed a 10.5%
mortgage loan ("Mortgage Note") collateralized by property and equipment of six
of the Signature facilities. The Mortgage Note requires Unison to maintain a
consolidated net worth of at least $39,000,000 and a minimum current ratio
(current assets to current liabilities) consolidated for the six properties of
at least 1.45 to 1 during 1996 and a debt service coverage ratio (as defined)
for the four preceding quarters consolidated for the six properties of at least
1.5 to 1. While the minimum current ratio and debt service ratios consolidated
for the six properties were in compliance with the debt covenants, Unison's
consolidated net worth was $11,689,000 as of December 31, 1996 and accordingly,
the Company was not in compliance with the net worth covenant. Unison did not
receive a waiver of this covenant violation and accordingly, classified the
entire obligation of $18,640,000 as current. In addition, the Company has not
met the financial reporting requirements of the Mortgage Note.
Effective February 1, 1996, in connection with the acquisition of Sunbelt
Therapy, Unison issued promissory notes and debentures in the aggregate amount
of $2,800,000 with interest payable quarterly at 10.0%. The notes and debentures
were convertible into shares of Unison Common Stock. In January 1997, Unison
repaid $2,000,000 of the notes and debentures with proceeds from the Senior
Notes, and the remaining $800,000 principal amount was converted into 105,196
shares of Unison Common Stock. In November 1996, but effective February 1, 1996,
Unison repurchased the 10% minority interest in Sunbelt Therapy. Consideration
for the purchase was comprised of promissory notes and guaranteed payments
totalling $1,876,000, with interest payable quarterly at 9.0% per annum, and
27,942 shares of Unison Common Stock. Additional contingent payments of up to
$1,418,000 will be due if specified income targets are achieved by Sunbelt
Therapy.
Unison also entered into a number of capital leases in 1996. At December
31, 1996, capital lease obligations for purchases of computer systems and other
fixed assets totalled $2,969,000, payable monthly over three to five years with
interest at 11.5% to 12.9%. The leases of two nursing facilities entered into in
August 1996 were recorded as capital leases; at December 31, 1996 the aggregate
lease obligation amounted to $4,122,000, payable monthly over the lease terms at
effective interest rates of 10.5% to 15.0%.
28
<PAGE> 12
Unison's minimum annual contractual commitments for leaseholds and
principal and interest on debt are expected to be as follows:
<TABLE>
<CAPTION>
LONG-TERM OPERATING TOTAL
DEBT LEASES OBLIGATIONS
------------ ----------- ------------
<S> <C> <C> <C>
Year ending December 31,
1997............................................ $ 33,289,000 $15,492,000 $ 48,781,000
1998............................................ 20,878,000 15,591,000 36,469,000
1999............................................ 19,268,000 15,362,000 34,630,000
2000............................................ 25,793,000 14,727,000 40,520,000
2001............................................ 16,499,000 13,975,000 30,474,000
Thereafter...................................... 177,071,000 89,596,000 266,667,000
</TABLE>
Unison finances its working capital needs out of its operating cash flows
and under a $10,000,000 revolving credit facility. Borrowings under this credit
facility bear interest at the prime rate plus 2.0% (10.25% at December 31, 1996)
and are secured by certain of Unison's eligible accounts receivable. On October
31, 1996, Unison repaid the outstanding balance of $8,900,000 (plus $200,000 of
fees) with proceeds from the Senior Notes. There were no outstanding borrowings
under this credit facility at December 31, 1996. In March 1997, Unison paid a
management fee (in lieu of a termination fee) of $500,000. The lender agreed
that the existing facility would remain in place at Unison's option until May
26, 1998. Unison is currently working with several lenders in an effort to
replace the existing credit facility and increase the availability of working
capital.
On April 21, 1997, the Company obtained a $2,950,000 loan for general
working capital purposes from affiliates of two of its directors, Messrs.
Kremser and Whitehead. The loan bears interest at prime plus 2% and is due on
the earlier of 30 days notice or August 1, 1997. The loan (and other Company
indebtedness to Messrs. Kremser and Whitehead and their affiliates) is secured
by a pledge of certain other accounts receivable and the stock of certain Unison
subsidiaries.
The terms of certain of Unison's indebtedness and lease obligations require
the Company to meet certain financial and reporting covenants including current
ratio and cash flow ratio and maintenance of specified levels of net worth. At
December 31, 1996, Unison was not in compliance with many of these covenants. At
December 31, 1996, Unison was obligated to Omega as a tenant under three master
lease agreements covering 14 facilities having an aggregate minimum rent of
approximately $34,900,000 (subject to increase) during the remainder of their
initial terms. The master leases require the Company to maintain specified cash
flow to rent ratios, cash flow to debt service ratios, minimum cash, current
ratios and tangible net worth ratios (each as defined). Unison also leases six
facilities located in Texas from BritWill Texas (the "BritWill Texas Leases")
for an initial term that expires in December 2005. The BritWill Texas Leases
contain cross default provisions with the Omega leases by which if Unison is in
default with any Omega indebtedness or lease obligation, the Company is also in
default under the BritWill Texas Leases. Unison was not in compliance with these
covenants at December 31, 1996. Omega has waived all existing covenant
violations through April 11, 1997. The Company may not be in compliance with
these covenants after this date and, accordingly, is negotiating with Omega to
restructure the aforementioned covenants. Management is attempting to
renegotiate the leases; however there can be no assurance that such
restructuring will be accomplished.
Unison's primary response to these developments has been to reduce costs
wherever possible without adversely impacting the quality of care and ancillary
services it provides. The number of corporate office personnel has been reduced
by approximately 35%, from 142 on December 31, 1996 to 92 on May 15, 1997. Cost
cutting and revenue enhancement initiatives are also underway at the nursing
homes and ancillary services companies.
The Company believes that its revenues from operations and its existing
$10,000,000 line of credit facility may be sufficient to meet its near-term cash
flow and capital requirements. However, these funds might not be adequate in the
event of a material reduction in revenues or increase in expenses or if other
risks identified above were to occur. The Company is attempting to develop
lending relationships that will use the Company's
29
<PAGE> 13
available accounts receivable and other available assets to reduce overall
borrowing costs and, if necessary, supply additional working capital. The
Company also intends to explore opportunities for a secured or unsecured term
loan or for equity financings, should that prove necessary or desirable. There
can be no assurances that such financings will be available or, if available,
that necessary funds will be available on terms favorable to Unison and its
shareholders.
Inflation. The Company does not believe that inflation has adversely
affected the Company's business during the past three years, even though
Medicare and Medicaid reimbursement rates in some areas have not kept pace with
inflation. To the extent inflation occurs in the future, the Company may not be
able to pass on the increased costs associated with providing health care
services to patients if reimbursement from third party payors does not keep up
with such increases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements are presented on pages F-1 through F-42 of the report
and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
30
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As described more fully under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" herein, in March 1997 the Company
determined it to be necessary to restate its operating results for the nine
months ended September 30, 1996. Subsequently, Unison's independent directors
have taken steps to reorganize the financial and executive leadership of the
Company. In connection with these changes, Messrs. Walker, Clark and Contris
have resigned as executive officers, directors and employees of the Company.
David A. Kremser, a Unison director who served as president and CEO of Signature
until it was acquired by Unison in October 1996, was appointed the Chairman of
the Executive Committee of the Board of Directors in March 1997, thereby serving
as the Company's chief executive officer and chief financial officer.
The following table sets forth certain information with respect to the
current directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- ---- --------------------------------------------
<S> <C> <C>
David A. Kremser(1)(3)(4)........ 49 Interim Chief Executive Officer and Chief
Financial Officer, Director
Phillip R. Rollins............... 39 Executive Vice President-Operations,
Chief Operating Officer, Director
L. Robert Oberfield.............. 59 President, Quest Pharmacies, Inc.
Paul G. Henderson................ 41 President, Sunbelt Therapy Management
Services, Inc.
Terry Troxell.................... 46 Senior Vice President - Clinical Operations
William G. Allen, Jr............. 46 Senior Vice President - Operations
Bruce H. Whitehead(1)............ 44 Chairman of the Board, Director
John T. Casey(2)(3).............. 51 Director
Tyrrell L. Garth(2).............. 48 Director
John T. Lynch, Jr.(1)(3)......... 48 Director
Mark W. White(2)(3).............. 57 Director
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Mr. Kremser became a director of Unison upon the closing of the Signature
Acquisition. Since April 1997, Mr. Kremser has served as Chairman of the
Executive Committee of the Board of Directors.
David A. Kremser, 49, founded Signature in July 1987 and served as its
Chairman, President, Chief Executive Officer and a Director until it was
acquired by Unison in October 1996. From January 1985 through 1987, Mr. Kremser
was a Director and Executive Vice President of Columbia Corporation, a long-term
care company, and the President of Columbia West Corporation, a subsidiary of
Columbia Corporation. Prior to joining Columbia Corporation, he was affiliated
with ARA Services, Inc. ("ARA"), most recently with responsibility for ARA's
operations in California, Colorado, Wyoming and Texas.
Phillip R. Rollins, 39, has served as the Executive Vice President and
Chief Operating Officer of Unison since it commenced operations in July 1992,
when he co-founded Unison. From June 1989 until joining Unison, he was the
Director of Operations of Samaritan Senior Services, Inc. ("Samaritan"), a
regional operator of subacute and long-term care facilities based in Phoenix,
Arizona. Prior to joining Samaritan, Mr. Rollins was the Director of Medicare
and Ancillary Services for Life Care Centers of America, a private operator of
long-term care facilities headquartered in Cleveland, Tennessee. Mr. Rollins is
a member of the American College of Health Care Administrators.
31
<PAGE> 15
L. Robert Oberfield, 59, has been President of Quest Pharmacies, Inc., a
subsidiary of Unison, since it was organized in March 1995. From December 1992
to March 1995, he was employed by Sunscript Pharmacy Corp., a subsidiary of Sun
Healthcare Company, most recently as President. From September 1990 to December
1992 he was employed by RDS Acquisition Corp. ("RDS"). RDS commenced bankruptcy
proceedings in December 1991. At the time the proceedings commenced, Mr.
Oberfield was the Senior Vice President of RDS, and he served as its President
thereafter until December 1992.
Paul G. Henderson, 41, has served as President of Sunbelt Therapy
Management Services, Inc. since the acquisition of Sunbelt by Unison in March
1996. For the past six years, Mr. Henderson has been active in the founding and
management of physical therapy service providers (such as Sunbelt) and in
providing patient care.
Terry Troxell, 46, has served as Director of Professional Services of
Unison since it commenced operations in July 1992. In November 1994, she became
Vice President of Unison and in September 1996 she became Senior Vice
President -- Clinical Operations. From July 1991 until July 1992, Ms. Troxell
served as Director of Professional Services of Samaritan. She was employed by
the Arizona Department of Health from 1985 until 1991, where she served as
Program Manager of Health Care Facility Licensure and Enforcement, overseeing
the licensing, certification and enforcement of all licensed healthcare
facilities in Arizona. Ms. Troxell is a licensed Registered Nurse and a
Certified Gerontologist Clinical Specialist. She sits on the American Health
Care Association's national facility standards committee and Long-Term Care
Nurse Council. She is a member of the American Gerontological Nurses Association
and the Association for Professionals in Infection Control and Epidemiology.
William G. Allen, Jr., 46, has been Senior Vice President - Operations
since October 14, 1996. Prior thereto he was a Regional Vice President for
Unison (since November 1994), and before that he was Executive Director of
Plantation Manor Incorporated, a private operator of skilled nursing and
assisted living facilities.
Bruce H. Whitehead, 44, has served as the Chairman of the Board of Unison
since August 1995. He is also President and Chief Executive Officer of the
general partner of Whitehead Family Investments, Ltd. Prior to joining Unison,
Mr. Whitehead was Chairman of BritWill from its inception in 1992. From 1984
through 1992, Mr. Whitehead was President of The BritWill Company, which also
invested in and managed long-term care facilities.
John T. Casey, 51, has served as a Director of Unison since August 1995.
Mr. Casey is the Chief Executive Officer of InteCare LLC, a hospital management
firm in Irving, Texas. From October 1991 through August 1995, Mr. Casey was the
Chief Operating Officer of American Medical International, a publicly traded
hospital management company. Prior to October 1991, Mr. Casey was President of
Samaritan Health Services, a hospital and long-term care provider.
Tyrrell L. Garth, 48, has served as a Director of Unison since August 1995.
Mr. Garth became President of Cheyenne Capital in Beaumont, Texas, a personal
investment firm, in 1996. Prior thereto he was a partner in the law firm of
Moore, Landry, Garth, Jones, Barmeister and Hulett, LLP, which served as general
counsel to BritWill prior to its acquisition by Unison in August 1995.
John T. Lynch, Jr., 48, has been a director of Unison since June 1992. Mr.
Lynch was also a director of BritWill between 1992 and its acquisition by Unison
in 1995. In January 1990, he co-founded Trouver Capital Partners, L.P.
("Trouver"), a private investment banking firm and serves as one of its general
partners. Mr. Lynch was Managing Director and a member of the Health Care
Finance Group of Furman Selz Incorporated, and was Managing Director and head of
the Health Care Finance Group at Thomson McKinnon Securities, Inc. and Dean
Witter Reynolds Inc. for the period 1980 through 1990.
Mark W. White, 57, has served as a Director of Unison since August 1995.
Mr. White has been an attorney in private practice since 1987. From 1983 to
1987, Mr. White served as Governor of the State of Texas.
32
<PAGE> 16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Commission. Specific due dates for these reports have been established, and the
Company is required to disclose any failure to file by these dates. The Company
believes that all of these filing requirements were satisfied during the year
ended December 31, 1996, except that Messrs. Whitehead, Garth, Casey, Lynch,
White, Walker, Contris, Clark and Oberfield and Ms. Troxell have not yet
reported on a Form 5 for the year ended December 31, 1996 a repricing of options
on January 16, 1996 and Mr. Rollins has not yet amended a Form 5 to report the
same repricings.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, with respect to the years ended December
31, 1996, 1995 and 1994, compensation awarded to, earned by or paid to (i)
Unison's Chief Executive Officer throughout 1996 and (ii) the four other
executive officers who were serving as executive officers at December 31, 1996.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
SALARY BONUS OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)(2) COMPENSATION
- ---------------------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jerry M. Walker,........................ 1996 $275,000 $41,250 33,924
President, Chief Executive Officer(3) 1995 200,000 $37,500 33,924
1994 161,952
Phillip R. Rollins,..................... 1996 $220,000 $33,000 73,924
Executive Vice President - 1995 200,000 30,000 33,924
Operations, Chief Operating Officer 1994 138,515
Craig R. Clark,......................... 1996 $220,000 $33,000 133,924
Executive Vice President, 1995 184,373 30,000 33,924 $175,000(5)
Chief Financial Officer 1994 14,231 20,000 88,250(6)
and Chief Accounting Officer(4)
Paul J. Contris,........................ 1996 $220,000 $33,000 65,443
Executive Vice President - 1995 200,000 30,000 33,924
Acquisitions and Development(7) 1994 138,515
L. Robert Oberfield,.................... 1996 $136,800 16,185
President, Quest Pharmacies, Inc. 1995 64,000 6,185
</TABLE>
- ---------------
(1) Certain columns have been omitted where there has been no compensation paid
or awarded to or earned by any of the named executives required to be
reported in such columns.
(2) The amounts shown for 1996 include both new option grants and outstanding
options from prior years that were granted during 1995 and "repriced" during
1996.
(3) Effective April 25, 1997, Mr. Walker resigned as President and Chief
Executive Officer and as a Director.
(4) Effective April 25, 1997, Mr. Clark resigned as Executive Vice President,
Chief Financial Officer, Chief Accounting Officer and as a Director.
(5) Represents a payment equal to one year's base salary in connection with the
termination of Mr. Clark's employment agreement with BritWill.
33
<PAGE> 17
(6) Includes consulting fees of $87,750 paid by BritWill before Mr. Clark became
an employee of BritWill and $500 of fees as a director of BritWill. See
"-- Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements."
(7) Mr. Contris served as Unison's Executive Vice President - Finance and Chief
Accounting Officer from August 15, 1995 until June 1996. Effective April 25,
1997, Mr. Contris resigned as Executive Vice President -- Acquisitions and
Development and as a Director.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants during
the last fiscal year to the past and present executive officers named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE
NUMBER OF OPTIONS/ AT ASSUMED ANNUAL RATES
SECURITIES SARS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTION/SARS EMPLOYEES OR BASE FOR OPTION TERM(4)
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#)(1) YEAR(2) ($/SH)(3) DATE 5% ($) 10% ($)
- ----------------------- ------------ ---------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Phillip R. Rollins..... 40,000 9.70% $9.50 9/6/2006 $238,980 $ 605,622
Craig R. Clark......... 60,000 14.55 9.00 9/6/2006 339,603 860,621
40,000 9.70 9.50 9/6/2006 238,980 605,622
Paul J. Contris........ 40,000 9.70 9.50 9/6/2006 238,980 605,622
L. Robert Oberfield.... 10,000 2.42 9.50 9/6/2006 59,745 151,406
</TABLE>
- ---------------
(1) Consists entirely of stock options. In connection with their resignations,
Messrs. Walker, Contris and Clark relinquished their options. Does not include
options granted in 1995 that were repriced in 1996.
(2) Based on total grants during the fiscal year of 412,412.
(3) These options (except 60,000 options granted to Mr. Clark at $9.00 per
share) were granted with an exercise price of $13.75 per share and were
repriced in December 1996 to $9.50 per share.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% or 10% compounded
annually from the date the respective options were granted to their
expiration date and are not presented to forecast possible future
appreciation, if any, in the price of the Common Stock. The potential
realizable value of the foregoing options is calculated by assuming that the
market price of the underlying security appreciates at the indicated rate
for the entire term of the option and that the option is exercised at the
repriced exercise price and sold on the last day of its term at the
appreciated price.
34
<PAGE> 18
FISCAL YEAR-END OPTION VALUE TABLE(1)
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the number and value
of options outstanding at the end of the last fiscal year. There were no option
exercises during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(1)
- -------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Jerry M. Walker......................................... 16,962/ 16,962 $69,968/$ 69,968
Phillip R. Rollins...................................... 16,962/ 56,962 69,968/ 214,968
Craig R. Clark.......................................... 16,962/116,962 69,968/ 462,468
Paul J. Contris......................................... 8,481/ 56,962 34,984/ 179,984
L. Robert Oberfield..................................... 2,474/ 13,711 10,205/ 46,455
</TABLE>
- ---------------
(1) Value as of December 31, 1996, based upon closing bid price on that date of
$13.125 as reported on the Nasdaq National Market, minus the exercise price
after repricing, multiplied by the number of shares underlying the option.
In connection with their resignations, Messrs. Walker, Contris and Clark
relinquished their options.
COMPENSATION OF DIRECTORS
The nonemployee directors of Unison receive an annual retainer of $10,000
plus $1,000 for each Board and Committee meeting attended and reimbursement of
expenses. In addition they are entitled to participate in the Option Plan.
Directors who are also executive officers of Unison receive no additional
compensation for serving on the Board of Directors. Mr. Kremser receives
compensation pursuant to a services agreement described elsewhere herein. As
compensation for services on the Executive Committee, Mr. Lynch will receive an
additional $15,000 per month.
THE 1995 STOCK OPTION PLAN
Unison's 1995 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors effective July 10, 1995 and approved by the stockholders on
August 8, 1995. The Board of Directors approved on September 6, 1996, and
Unison's stockholders approved at the Unison Special Meeting on October 28,
1996, an amendment to the Option Plan (the "Option Plan Amendment") which
increased the number of shares of Unison Common Stock authorized for issuance
under the Option Plan from 511,046 to 800,000.
The Option Plan is divided into two separate components: (i) a
Discretionary Option Grant Program under which eligible individuals may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock at an exercise price determined by the Plan Administrator and (ii)
the Automatic Option Grant Program under which option grants will automatically
be made at periodic intervals to eligible non-employee Board members to purchase
shares of Unison Common Stock at an exercise price equal to 100% of their fair
market value on the grant date.
The Discretionary Option Grant Program is administered by the Compensation
Committee. The Compensation Committee as Plan Administrator has complete
discretion to determine which eligible individuals are to receive option grants,
the time or times when such option grants are to be made, the number of shares
subject to each such grant, the status of any granted option as either an
incentive stock option or a non-qualified stock option under the Federal tax
laws, the vesting schedule to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.
Upon an acquisition of Unison by merger, consolidation or reorganization,
each outstanding option may be substituted with shares of the acquiring company
or such option may be canceled in consideration for a cash payment to the
optionee of an amount per option share equal to the excess of the highest fair
market
35
<PAGE> 19
value of Unison Common Stock during the 60-day period preceding the acquisition
over the option exercise price. A similar cash payment will be made to each
optionee upon the dissolution or liquidation of Unison.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program in return for
the grant of new options for the same or different number of option shares with
an exercise price per share based upon the fair market value of Unison Common
Stock on the new grant date.
Under the Automatic Option Grant Program, each individual serving as a
non-employee member of the Board of Directors of Unison on the date of adoption
of the Option Plan by the Board of Directors received an option grant on such
date for 9,246 shares of Unison Common Stock, except that the Chairman of the
Board of Directors received an option for 10,496 shares. The Option Plan
Amendment increased these amounts. Nonemployee Directors are now entitled to
receive annual option grants in respect of 15,000 shares (17,500 shares in the
case of the Chairman of the Board) for 1996 and at each subsequent annual
meeting of stockholders.
Each automatic grant becomes exercisable 50% one year after the grant and
100% two years after the grant and has a term of 10 years, subject to earlier
termination following the optionee's removal from the Board of Directors for
cause.
The Board of Directors may amend or modify the Option Plan at any time. The
Option Plan will terminate on July 9, 2005, unless sooner terminated by the
Board of Directors.
Effective August 10, 1995, the Board of Directors granted options to
purchase 261,520 shares of Unison Common Stock in the aggregate under the 1995
Plan to certain employees of Unison, including each of the executive officers in
the following amounts: Jerry M. Walker, Philip R. Rollins, Craig R. Clark and
Paul J. Contris, 33,924 shares each, which vest over a two-year period from the
grant date; and to L. Robert Oberfield and Terry Troxell, 6,185 shares each,
which vest over a four-year period from the grant date. All of the options have
an exercise price (after repricing in January 1996) of $9.00 per share, the fair
market value of the Common Stock on the grant date, as determined by the Board
of Directors.
In September 1996 the Compensation Committee of the Board of Directors
confirmed a special, one-time grant (originally promised in July 1996 subject to
Compensation Committee Approval) of options for 60,000 shares to Craig R. Clark
having an exercise price of $9.50 per share, in conjunction with his assumption
of additional responsibilities as Unison's Chief Accounting Officer. On the same
date, the Compensation Committee recommended, and the full Board approved, the
issuance of options for an additional 324,350 shares to Unison employees at an
exercise price of $13.75 per share (subsequently repriced at $9.50 per share),
including options for 40,000 shares each to Messrs. Rollins, Contris and Clark,
options for 10,000 shares to each of Mr. Oberfield and Mr. Henderson, options
for 6,500 shares to William Allen and options for 7,500 shares to Ms. Troxell.
Mr. Allen received an additional option grant in October 1996 for 10,000 shares
at an exercise price of $10.50 per share. The following table sets forth stock
options granted in 1996.
1996 OPTION GRANTS
UNISON STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OPTION SHARES
---------------------------------------------------------------------- -------------
<S> <C>
Jerry M. Walker, President, CEO....................................... 0
Phillip R. Rollins, Executive Vice President.......................... 40,000
Craig R. Clark, Executive Vice President.............................. 100,000
Paul J. Contris, Executive Vice President............................. 40,000
L. Robert Oberfield, President,
Quest Pharmacies, Inc............................................... 10,000
Executive Group (8 persons)........................................... 224,000
Non-Executive Director Group.......................................... 92,500
Non-Executive Officer Employee Group.................................. 188,412
</TABLE>
36
<PAGE> 20
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
In connection with their resignations, in each case effective April 25,
1997, Messrs. Walker, Clark and Contris have received or will receive severance
payments in the amounts of $67,373, $18,333 and $55,000, respectively, in full
satisfaction of the Company's monetary obligations to them under their (now
terminated) employment agreements.
Prior to its IPO in 1995 Unison entered into an employment agreement with
Mr. Rollins. The employment agreement will expire in August 1998, subject to
automatic renewal for successive one-year periods unless either Unison or Mr.
Rollins gives notice of non-renewal 30 days prior to expiration. As of December
31, 1996, the employment agreement provides for an annual base salary of
$220,000 and the right to earn quarterly and annual incentive compensation
totalling at least 60% of base salary, based on Unison's attainment of its
quarterly and annual budget as reflected in its quarterly and annual filings
with the SEC. The employment agreement provides that in the event of termination
by Unison other than for cause, Unison will pay Mr. Rollins one year's base
salary or his base salary for the remaining term of the agreement, whichever is
longer, and Mr. Rollins' pro-rated performance bonus. If the employment
agreement is not renewed at the end of the initial or subsequent term, Mr.
Rollins will be entitled to receive one year's base salary plus his pro-rated
performance bonus. The employment agreement contains a one-year nonsolicitation
of employees and customers provision. The contract also permits termination upon
Unison's failure to meet certain financial covenants under pledge agreements
that secure Unison's obligations incurred in the BritWill Acquisition. See
"Compensation Committee Interlocks and Insider Participation in Compensation
Decisions." The contract also provides that Mr. Rollins could be terminated for
cause defined in part as a material neglect of duties. In the event of a for
cause termination, Mr. Rollins is entitled to the equivalent of one month's
salary.
Unison entered into an employment agreement with Mr. Oberfield for a
one-year term beginning in May 1995, subject to automatic renewal for successive
one-year terms unless either Unison or Mr. Oberfield has given notice of
non-renewal 30 days prior to expiration. The employment agreement provides for
an initial annual base salary of $96,000. The annual base salary increased to
$136,800 as of January 1996 because Quest became profitable during 1995. Mr.
Oberfield is also entitled to participate in Unison's incentive compensation
program for key employees, up to a maximum award of 15% of his base salary. If
the employment agreement is not renewed by Unison other than for cause, Unison
must pay Mr. Oberfield one year's base salary and his pro-rated incentive
compensation. The employment agreement contains a one-year nonsolicitation of
employees and customers provision. During 1995, Mr. Oberfield was granted an
option to purchase 6,185 shares of Unison Common Stock under the Option Plan,
and in September 1996 he was granted an option to purchase an additional 10,000
shares at $13.75 per share which were subsequently repriced at $9.50 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Prior to August 1995, decisions concerning compensation of executive
officers were made by an Executive Committee of the Board of Directors, then
consisting of Messrs. Walker, Rollins and Contris. In August 1995, the Board of
Directors created a Compensation Committee consisting of Messrs. Garth, White
and Casey. See Item 10, "Directors and Executive Officers of the Registrant."
At the time that Unison acquired BritWill in August 1995, Mr. Garth was
outside counsel, a former director and a shareholder of BritWill, and Mr. White
was a director and shareholder of BritWill. Mr. Garth and Mr. White have (or
had) direct or indirect material interests in the following recent or
anticipated transactions with BritWill or Unison.
- As former shareholders of BritWill, Mr. Garth and Mr. White have
participated and will participate pro rata in all acquisition payments
made and acquisition obligations incurred by Unison in connection with
the BritWill Acquisition (the "BritWill Acquisition Obligations"). The
BritWill Acquisition Obligations are secured by stock pledge agreements
from Messrs. Walker, Rollins, Clark and Contris. The BritWill Acquisition
Obligations paid through December 31, 1996 include $5.6 million of
principal, $853,000 of interest, $2.3 million of payment on monthly
contingent obligations and 561,815 shares of Unison Common Stock
delivered to the former BritWill shareholders. The proceeds from the sale
of the Senior Notes were used (in part) to prepay in January 1997 the
remaining $8.0 million
37
<PAGE> 21
outstanding under the Subordinated Note and $1.75 million of contingent
payment obligations, after which the remaining BritWill Acquisition
Obligations are solely Additional Payment Obligations totaling
approximately $9.8 million ($14.1 million including an interest
component), primarily due on the earlier of Unison's next public or
private sale of debt or equity securities exceeding $10 million or August
9, 2000.
- Mr. Garth had a $400,000 interest in a $2.5 million promissory note
payable by BritWill and bearing interest at the rate of 12% per annum
(the "Participation Note"). The Participation Note was refinanced by
BritWill when it was acquired by Unison, and the $3.4 million refinancing
note (the "Renewal Note") was repaid from the proceeds of Unison's IPO in
1995.
- Mr. Garth's company, Cheyenne Capital, received consulting fees of
$24,000 per year from Unison through December 31, 1996, when the
consulting agreement was terminated.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Unison Common Stock at March 31, 1997 with respect to (i) each
person known to Unison to own beneficially more than five percent of the
outstanding shares of Unison Common Stock, (ii) each director of Unison, (iii)
each of the executive officers listed in the Summary Compensation Table set
forth herein and (iv) all directors and executive officers of Unison as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
---------------------------
IDENTITY OF STOCKHOLDER OR GROUP NUMBER PERCENT
- ------------------------------------------------------------------- --------- -------
<S> <C> <C>
David A. Kremser(2)................................................ 1,540,431 23.80%
Bruce H. Whitehead(3).............................................. 463,337 7.21
U.S. Bancorp(4)
111 SW Fifth Avenue
Portland, Oregon 97204........................................... 369,100 5.75
Jerry M. Walker(5)................................................. 329,336 5.11
Phillip R. Rollins(6).............................................. 327,136 5.08
Paul J. Contris(7)................................................. 201,775 3.14
John T. Lynch, Jr.(8).............................................. 202,208 3.12
Craig R. Clark(9).................................................. 54,984 *
Mark W. White(10).................................................. 7,665 *
Tyrrell L. Garth(11)............................................... 4,623 *
John T. Casey(12).................................................. 6,623 *
L. Robert Oberfield(13)............................................ 3,724 *
All executive officers and directors as a group (14 persons)(13)... 3,220,737 48.71
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. In accordance with Commission rules, shares which may be
acquired upon exercise of stock options which are currently exercisable or
which become exercisable within 60 days of the date of the table are deemed
beneficially owned by the optionee. Except as indicated by footnote, and
subject to community property laws where applicable, the persons or
entities named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them. Except as otherwise indicated, the mailing address of each person
known to the Company to be the owner of more than five percent of its
Common Stock is in care of the Company.
(2) Includes 1,490,431 shares of Unison Common Stock issued to Mr. Kremser in
the Signature Acquisition, including additional shares issued to him as
part of the Equity Adjustment Amount, and 50,000 shares issuable pursuant
to vested options. Excludes 15,000 shares issuable upon exercise of options
which will vest in December 1997 and thereafter.
38
<PAGE> 22
(3) Includes 458,089 shares of Unison Common Stock issued to Whitehead Family
Investments, Ltd. ("WFI") upon conversion of the Convertible Debenture
issued to the former shareholders of BritWill as partial payment of the
purchase price for the BritWill Acquisition. Mr. Whitehead has sole voting
and investment power with respect to the shares held by WFI. Does not
include 22,748 shares of Unison Common Stock issuable upon exercise of
outstanding options which will vest in August 1997 and thereafter. Includes
5,248 shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(4) In a report on Schedule 13G filed in February 1997, U.S. Bancorp stated
that holdings as of December 31, 1996 included 367,000 shares as to which
U.S. Bancorp has sole voting power, no shares for which voting power is
shared, 198,800 shares as to which U.S. Bancorp has sole dispositive power
and 11,700 shares as to which U.S. Bancorp has shared dispositive power.
(5) Currently 265,518 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition. Includes 16,962
shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(6) Currently 132,759 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition. Does not include
56,962 shares of Unison Common Stock issuable upon exercise of options
which will vest in August 1997 and thereafter. Includes 16,962 shares of
Unison Common Stock issuable upon exercise of immediately exercisable
options.
(7) Currently 86,294 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition. Includes 8,481 shares
of Unison Common Stock issuable upon exercise of immediately exercisable
options.
(8) Includes 10,140 shares of Unison Common Stock as to which he currently
shares investment power with Bruce H. Whitehead. Excludes 19,623 shares of
Unison Common Stock issuable upon exercise of options which will vest in
August 1997 and thereafter. Includes 4,623 shares of Unison Common Stock
issuable upon exercise of immediately exercisable options.
(9) Includes 38,022 shares of Unison Common Stock as to which Mr. Clark
currently shares investment power with Bruce H. Whitehead, which shares are
pledged to secure payment of the deferred purchase price for the BritWill
Acquisition. Includes 16,962 shares of Unison Common Stock issuable upon
exercise of immediately exercisable options.
(10) Includes 3,042 shares of Common Stock as to which he currently shares
investment power with Bruce H. Whitehead. Does not include 19,623 shares of
Common Stock issuable upon exercise of options which will vest in August
1997 and thereafter. Includes 4,623 shares of Unison Common Stock issuable
upon exercise of immediately exercisable options.
(11) Does not include 19,623 shares of Unison Common Stock issuable upon
exercise of options which will vest in August 1997 and thereafter. Includes
4,623 shares of Unison Common Stock issuable upon exercise of immediately
exercisable options.
(12) Includes 4,623 shares of Unison Common Stock issuable upon the exercise of
immediately exercisable options, but does not include another 19,623 shares
issuable upon exercise of options that will vest in August 1997 and
thereafter.
(13) Does not include 13,711 shares of Unison Common Stock issuable upon
exercise of options which will vest over a period beginning in August 1997.
Includes 2,474 shares of Unison Common Stock issuable upon exercise of
immediately exercisable options.
(14) Includes a total of 190,529 shares of Unison Common Stock issuable upon
exercise of immediately exercisable options (including those described in
the preceding footnotes) and the shares owned by Messrs. Walker, Contris
and Clark notwithstanding they are no longer serving as executive officers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
When Unison acquired BritWill in August 1995, Mr. Whitehead indirectly
owned approximately 81.5% of BritWill's outstanding stock and served as its
Chairman and as a director. As a result of this interest in the
39
<PAGE> 23
BritWill Acquisition Obligations, Mr. Whitehead currently is beneficially
Unison's second largest shareholder and one of its largest creditors. Mr. Clark
was a BritWill shareholder and served as BritWill's Executive Vice President and
Chief Financial Officer at the time Unison acquired BritWill. Messrs. Garth,
Lynch and White were also BritWill shareholders and directors. For information
concerning recent and anticipated transactions with BritWill or Unison in which
Messrs. Garth or White had or have a material direct or indirect interest, see
Item 11, "Executive Compensation -- Compensation Committee Interlocks and
Insider Participation in Compensation Decisions." Messrs. Clark, Lynch and
Whitehead also have pro rata interests in the BritWill Acquisition Obligations
described therein.
Mr. Whitehead has (or had) a direct or indirect material interest in the
following additional recent or anticipated transactions with BritWill or Unison.
- Prior to Unison's acquisition of BritWill, Mr. Whitehead sold certain
healthcare facilities or related interests to BritWill and acquired
certain other direct and indirect financial interests and obligations
related to BritWill's healthcare facilities, some of which have continued
thereafter. Through BritWill Texas, Mr. Whitehead is the indirect owner
and lessor of six of the long-term healthcare facilities that Unison
leases in Texas (including three of the Disposition Facilities that were
subleased to an unrelated party effective March 1, 1997) with 767
licensed beds and an annual base rental of $1.1 million, which is
approximately the amount of the annual payment obligations on the related
$10.2 million acquisition mortgage loan secured by those facilities from
Omega, an unrelated party, plus payments due on certain seller
subordinated notes incurred when BritWill Texas acquired the facilities.
The parties are currently in the process of restructuring the ownership
structure for three of the six facilities to eliminate BritWill Texas
from the chain of title. The parties anticipate that BritWill Texas will
convey fee title to the three facilities to Omega and that Omega will
then lease the facilities to BritWill Investments - II, Inc., a
subsidiary of Unison, on substantially the same economic terms that
existed under the BritWill Texas mortgage. Mr. Whitehead, who had
guaranteed the BritWill Texas loan, will remain liable under his guaranty
for all obligations owing under the new lease. Mr. Whitehead is also the
guarantor of BritWill's (now Unison's) obligations under the leases of
all fourteen other healthcare facilities that are leased from Omega.
- Mr. Whitehead directly or indirectly owned all of the interests in the
Participation Note and the Renewal Note (as described in Item 11 above)
that were not owned by Mr. Garth.
- From time to time both before and after Unison's acquisition of BritWill,
Mr. Whitehead has made loans and other financial accommodations to
BritWill (now Unison). In addition to the Renewal Note and a portion of
the BritWill Acquisition Obligations, $750,000 of loans from Mr.
Whitehead or his affiliates was repaid from the proceeds of the IPO. A
Unison subsidiary is obligated to repay to an affiliate of Mr. Whitehead
five unsecured promissory notes in the amounts at December 31, 1996 of
$1.2 million, $392,000, $319,000, $194,000, and $401,000 with interest at
rates currently ranging from 9.0% to 10.75% per annum and with scheduled
maturities in November 2001 and October 2004. Aggregate monthly payments
on these five notes total approximately $39,000. In addition,
approximately $1.1 million of the proceeds from a $7.5 million short-term
borrowing agreement (the "Bank Financing") was used to repay a loan from
Mr. Whitehead that bore interest at the rate of 12% per annum. The Bank
Financing was repaid from the proceeds of the sale of the Senior Notes.
- On April 21, 1997, the Company obtained a $2,950,000 loan for general
working capital purposes from Elk Meadows Investments, L.L.C. and
BritWill Investments Company, Ltd., as joint lenders. Elk Meadows
Investments, L.L.C. is controlled by David Kremser and BritWill
Investments Company, Ltd. is controlled by Bruce Whitehead. The loan
matures on the earlier of August 1, 1997, or 30 days after written demand
from the lenders, subject to earlier maturity in the event of
acceleration upon a default. Interest accrues on the loan at the Prime
Rate plus 2%, subject to an increase in the rate upon a default. Interim
payments on the loan are not required prior to maturity. The Company paid
a loan fee of $29,500 at the closing, and also agreed to pay all of the
lenders' out of pocket fees and costs, including attorneys fees and
costs, in an amount not yet determined or demanded by the lenders.
Repayment of the loan is secured by (i) a pledge from the Company of
approximately $5 million of
40
<PAGE> 24
accounts receivable generated by certain of the Company's affiliates and
assigned to the Company, and (ii) a pledge from the Company of its stock
in those affiliates of the Company that either assigned their accounts
receivable to the Company so they could be pledged by the Company as
security for the subject loan or control the entities that assigned such
accounts receivable. The collateral securing the loan also secures
repayment of other obligations owing from the Company and its affiliates
to Messrs. Whitehead and Kremser, and to individuals and entities related
to them.
In addition to his interests as a former director and shareholder of
BritWill, Mr. Lynch is a General Partner of Trouver. Trouver (a) earned
financial advisory fees of $675,000 in connection with Unison's acquisition of
BritWill, (b) assisted Unison in securing lease or management agreements in
respect of four long-term care facilities for which it is entitled to receive
fees of up to approximately $400,000 over the next seven years based on Unison's
management fees or earnings from those facilities over that period, and
(c)earned financial advisory fees of approximately $84,000 from Unison in
connection with the Ampro Acquisition.
The Company has entered into a services agreement with Mr. Kremser
commencing March 31, 1997. As compensation for his services to the Company in
all capacities, Mr. Kremser is entitled to cash compensation of $7,500 per week
plus expenses as well as options for 50,000 shares of Unison common stock at an
exercise price of $2.875 per share, fully vested. Mr. Kremser and the Company
are also parties to an indemnification agreement and a tolling agreement in
respect of claims he may have against the Company. The Company has also entered
into an agreement with Woodhill Capital Corporation, an entity of which Mr.
Lynch is president and sole shareholder, providing for the services of Mr. Lynch
as a consultant beginning March 1, 1997. Under the terms of the agreement,
Woodhill is entitled to receive $15,000 per month plus expenses and Mr. Lynch is
granted options to purchase 50,000 shares of Unison Stock at $3.125 per share,
fully vested. The agreement is terminable by either party with two weeks'
notice.
Mr. Oberfield, one of Unison's executive officers, serves as the president
and is the minority shareholder of its Quest subsidiary. He receives
compensation based in part upon the earnings of the subsidiary, and Unison is
required to repurchase his stock in the subsidiary at a formula price under
certain circumstances.
Effective February 1, 1996, Unison purchased 90% of the outstanding common
stock of Sunbelt from Mr. Henderson and Paige Plash. In consideration for the
stock of Sunbelt, Unison paid $800,000 in cash, issued term notes for $1.0
million in the aggregate (the "Notes") and issued subordinated convertible
debentures totaling $1.8 million in the aggregate (the "Debentures").
Approximately 56.2% of the purchase price was payable to Mr. Henderson. Interest
on the Notes and Debentures was 10.0% payable quarterly. The Notes and
Debentures were converted in January 1997 into 105,196 shares of Unison Common
Stock with the aggregate balance of $2.0 million paid in cash. In November 1996,
Unison purchased the remaining 10% of Sunbelt stock effective as of February 1,
1996. The aggregate purchase price, payable 50% to each of Mr. Henderson and Mr.
Plash, amounted to $1.4 million plus a guaranteed payment of $709,000.
Additional contingent payments of up to $1.4 million will be due if specified
income targets are achieved. Consideration for the purchase (excluding the
guaranteed payments) was comprised of promissory notes in the aggregate amount
of $1.2 million and 27,942 shares of Unison Common Stock.
41
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNISON HEALTHCARE CORPORATION
Report of Independent Auditors........................................................ F-1
Consolidated Balance Sheets as of December 31, 1996 and 1995.......................... F-2
Consolidated Statements of Operations for the years ended December 31, 1996, 1995, and
1994................................................................................ F-3
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December
31, 1996, 1995, and 1994............................................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994................................................................................ F-5
Notes to Consolidated Financial Statements............................................ F-6
BRITWILL HEALTHCARE COMPANY
Report of Independent Auditors........................................................ F-18
Report of Independent Accountants..................................................... F-19
Consolidated Balance Sheet as of June 30, 1995........................................ F-20
Consolidated Statements of Operations for the year ended December 31, 1994, six months
ended June 30, 1995 and one month ended July 31, 1995............................... F-21
Consolidated Statements of Shareholders' Equity for the year ended December 31, 1994
and six months ended June 30, 1995.................................................. F-22
Consolidated Statements of Cash Flows for the year ended December 31, 1994, six months
ended June 30, 1995 and one month ended July 31, 1995............................... F-23
Notes to Consolidated Financial Statements............................................ F-24
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES.
<TABLE>
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UNISON HEALTHCARE CORPORATION
Schedule II Valuation and Qualifying Accounts......................................... S-1
BRITWILL HEALTH CARE COMPANY
Schedule II Valuation and Qualifying Accounts......................................... S-2
</TABLE>
All other schedules are omitted because they are not applicable or not
required.
3. EXHIBITS
<TABLE>
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2 Second Amended and Restated Purchase and Sale Agreement among Unison HealthCare
Corporation and Whitehead Family Investments, Ltd., as amended (incorporated by
reference to Exhibit 2 to Amendment No. 1 to the Registration Statement on Form
S-1 filed on November 16, 1995, File No. 33-97662)
2.1 Modification Agreement dated April 15, 1996 among Unison HealthCare Corporation,
BritWill HealthCare Company and Bruce H. Whitehead (incorporated by reference to
Exhibit 2.1 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995)
2.1.1 Modification Agreement dated August 28, 1996 among Unison HealthCare Corporation,
BritWill HealthCare Company and Bruce H. Whitehead (incorporated by reference to
Exhibit 2.1.1 to the Registration Statement on Form S-4 filed on September 18,
1996, File No. 333-12263)
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2.2 Purchase and Sale Agreement effective as of February 1, 1996 by and among Unison
HealthCare Corporation, a Delaware corporation, Sunbelt Therapy Management
Services, Inc., an Arizona corporation, Paul G. Henderson and Paige B. Plash
(incorporated by reference to Exhibit 2.1 to the Form 8-K filed on April 12, 1996)
2.2.1 Agreement for Purchase of Shares as of November 24, 1996, among Unison Health Care
Corporation, Paul G. Henderson and Paige B. Plash*
2.3 Agreement and Plan of Merger among Unison HealthCare Corporation, Signature Health
Care Corporation, David A. Kremser and John D. Filkoski (incorporated by reference
to Exhibit 2.3 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996)
2.3.1 Amendment to Agreement and Plan of Merger among Union HealthCare Corporation,
Signature Health Care Corporation, David A. Kremser and John D. Filkoski*
2.4 Agreement and Plan of Merger among Unison HealthCare Corporation, Arkansas, Inc.,
David A. Kremser and John D. Filkoski (incorporated by reference to Exhibit 2.4 to
the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996)
2.5 Agreement and Plan of Merger among Unison HealthCare Corporation, Cornerstone
Care, Inc., David A. Kremser and John D. Filkoski (incorporated by reference to
Exhibit 2.5 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996)
2.6 Agreement and Plan of Merger among Unison HealthCare Corporation, Douglas Manor,
Inc., David A. Kremser and John D. Filkoski (incorporated by reference to Exhibit
2.6 to the Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996)
2.7 Agreement and Plan of Merger among Unison HealthCare Corporation, Safford Care,
Inc., David A. Kremser and John D. Filkoski (incorporated by reference to Exhibit
2.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30,
1996)
2.7.1 Amendment to Agreements and Plans of Merger among Unison HealthCare Corporation,
Arkansas, Inc., Cornerstone Care, Inc., Douglas Manor, Inc., Safford Care, Inc.,
David A. Kremser and John D. Filkoski*
2.8 Agreement and Plan of Merger among Unison HealthCare Corporation, a Delaware
corporation, Labco Acquisition Co., a Delaware corporation, and American
Professional Holding, Inc., a Utah corporation (incorporated by reference to the
Company's Current Report on Form 8-K dated July 31, 1996)
2.8.1 First Amendment to Agreement and Plan of Merger among Unison HealthCare
Corporation, a Delaware corporation, Labco Acquisition Co., a Delaware
corporation, and American Professional Holding, Inc., a Utah corporation
(incorporated by reference to Exhibit 2.8.1 to Amendment No. 1 to the Registration
Statement on Form S-4 filed on October 11, 1996, File No. 333-12263)
2.9 Agreement and Plan of Merger among Unison HealthCare Corporation, a Delaware
corporation, Memphis Acquisition Co., a Delaware corporation, and Memphis Clinical
Laboratory, Inc., a Tennessee corporation (incorporated by reference to the
Company's Current Report on Form 8-K dated July 31, 1996)
2.10 Stock Purchase Agreement among Unison HealthCare Corporation, Linda Redwine, David
A. Kremser and John D. Filkoski (incorporated by reference to the Company's
Current Report on Form 8-K dated October 10, 1996)
3.1 Restated Certificate of Incorporation of Unison HealthCare Corporation
(incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
3.1.1 Amendment to Restated Certificate of Incorporation of Unison HealthCare
Corporation*
3.2 Articles of Incorporation of SunQuest SPC, Inc.*
3.3 Certificate of Incorporation of BritWill HealthCare Company*
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3.4 Certificate of Incorporation of BritWill Investments-I, Inc.*
3.5 Certificate of Incorporation of BritWill Investments-II, Inc.*
3.6 Certificate of Incorporation of BritWill Funding Corporation*
3.7 Articles of Incorporation of Emory Care Center, Inc.*
3.8 Charter of Memphis Clinical Laboratory, Inc.*
3.9 Articles of Incorporation of American Professional Holding, Inc.*
3.10 Articles of Incorporation of Ampro Medical Services, Inc.*
3.11 Articles of Incorporation of Gamma Laboratories, Inc.*
3.12 Certificate of Incorporation of Signature Health Care Corporation*
3.13 Articles of Incorporation of Brookshire House, Inc.*
3.14 Articles of Incorporation of Christopher Nursing Center, Inc.*
3.15 Articles of Incorporation of Amberwood Court, Inc.*
3.16 Articles of Incorporation of The Arbors Health Care Center, Inc.*
3.17 Articles of Incorporation of Los Arcos, Inc.*
3.18 Articles of Incorporation of Pueblo Norte, Inc.*
3.19 Articles of Incorporation of Rio Verde Nursing Center, Inc.*
3.20 Articles of Incorporation of Signature Management Group, Inc.*
3.21 Articles of Incorporation of Cornerstone Care, Inc.*
3.22 Articles of Incorporation of Arkansas, Inc.*
3.23 Articles of Incorporation of Douglas Manor, Inc.*
3.24 Articles of Incorporation of Safford Care, Inc.*
3.25 Articles of Incorporation of RehabWest, Inc.*
3.26 Articles of Incorporation of Quest Pharmacies, Inc., and related Shareholder
Agreements*
3.27 Articles of Incorporation of Sunbelt Therapy Management Services, Inc. (AL)*
3.28 Articles of Incorporation of Decatur SportsFit & Wellness Center, Inc.*
3.29 Articles of Incorporation of Therapy Health Systems, Inc.*
3.30 Articles of Incorporation of Henderson & Associates Rehabilitation, Inc.*
3.31 Articles of Incorporation of Sunbelt Therapy Management Services, Inc. (AZ)*
3.32 Articles of Incorporation of Cedar Care, Inc.*
3.33 Articles of Incorporation of Sherwood Healthcare Corporation*
3.34 Partnership Agreement of BritWill Indiana Partnership*
3.35 Bylaws of Unison HealthCare Corporation (incorporated by reference to Exhibit 3.2
to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
3.36 Bylaws of Henderson & Associates Rehabilitation, Inc.*
3.37 Form of Bylaws of SunQuest SPC, Inc., The Arbors Health Care Center, Inc. and
Sunbelt Therapy Management Services, Inc. (AZ)*
3.38 Form of Bylaws of Brookshire House, Inc., Christopher Nursing Center, Inc.,
Amberwood Court, Inc., Los Arcos, Inc., Pueblo Norte, Inc., Rio Verde Nursing
Center, Inc., Signature Management Group, Inc., Cornerstone Care, Inc., Arkansas,
Inc., Douglas Manor, Inc., Safford Care, Inc. and RehabWest, Inc.*
3.39 Form of Bylaws of BritWill HealthCare Company, BritWill Investments-I, Inc.,
BritWill Investments-II, Inc., BritWill Funding Corporation and Signature Health
Care Corporation*
3.40 Bylaws of Therapy Health Systems, Inc.*
</TABLE>
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3.41 Bylaws of Gamma Laboratories, Inc.*
3.42 Bylaws of Memphis Clinical Laboratory, Inc.*
3.43 Bylaws of Emory Care Center, Inc.*
3.44 Bylaws of Ampro Medical Services, Inc.*
3.45 Bylaws of American Professional Holding, Inc.*
3.46 Form of Bylaws of Cedar Care, Inc. and Sherwood Healthcare Corporation**
4.1 Specimen 12 1/4% Senior Note due 2006*
4.2 Securities Purchase Agreement dated as of October 28, 1996 between Unison
HealthCare Corporation and the Initial Purchasers*
4.3 Indenture dated as of October 31, 1996 among Unison HealthCare Corporation, the
Guarantors and First Bank National Association, as Trustee*
4.3.1 Supplement No. 1 dated as of February 1, 1997 to Indenture dated as of October 28,
1996*
4.4 Senior Note Registration Rights Agreement dated as of October 31, 1996 among
Unison HealthCare Corporation, the Guarantors and the Initial Purchasers*
9 Voting Agreement among the Company and Messrs. Walker, Rollins, Contris, Lynch,
Boystak and King (incorporated by reference to Exhibit 9 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.1 Promissory Note of Unison HealthCare Corporation to the Agent for the Former
BritWill Shareholders in the amount of $1,000,000 dated May 6, 1996 (incorporated
by reference to Exhibit 10.1 to the Company's quarterly report on Form 10-Q filed
on May 15, 1996, File No. 0-27374)
10.1.1 Second Amended and Restated Subordinated Promissory Note of the Company to the
former shareholders of BritWill (incorporated by reference to Exhibit 10.1.1 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1995)
10.1.2 Contingent Payment Agreement dated April 15, 1996 among Unison HealthCare
Corporation, BritWill HealthCare Company and Bruce H. Whitehead (incorporated by
reference to Exhibit 10.1.2 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.2 Term Note of the Company to the former shareholders of BritWill (incorporated by
reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.3 Convertible Debenture of the Company issued to the former shareholders of BritWill
(incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
10.4 Renewal Note of BritWill to the former shareholders of BritWill (incorporated by
reference to Exhibit 10.4 to the Registration Statement on Form S-1 filed on
December 4, 1995, File No. 33-97662)
10.4.1 Letter agreement modifying the Term Note and the Renewal Note (incorporated by
reference to Exhibit 10.4.1 to Amendment No. 2 to the Registration Statement on
Form S-1 filed on December 4, 1995, File No. 33-97662)
10.5 $500,000 Supplemental Note of the Company to the former shareholders of BritWill
(incorporated by reference to Exhibit 10.5 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.5.1 Letter agreement regarding the $500,000 Supplemental Note (incorporated by
reference to Exhibit 10.5.1 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
</TABLE>
45
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10.6 $250,000 Supplemental Note of the Company to WFI (incorporated by reference to
Exhibit 10.6 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.7 Example of Stock Pledge Agreement of certain officers and the Former Shareholders
of BritWill (incorporated by reference to Exhibit 10.7 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.8 Registration Rights Agreement between the Company and WFI (incorporated by
reference to Exhibit 10.8 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.9 Employment Agreement of Jerry M. Walker (incorporated by reference to Exhibit 10.9
to Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.10 Employment Agreement of Phillip R. Rollins, Sr. (incorporated by reference to
Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-1 filed
on November 16, 1995, File No. 33-97662)
10.11 Employment Agreement of Craig R. Clark (incorporated by reference to Exhibit 10.11
to Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.12 Employment Agreement of Paul J. Contris (incorporated by reference to Exhibit
10.12 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.13 Employment and Non-Competition Agreement of L. Robert Oberfield (incorporated by
reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.14 Shareholders Agreement dated May 15, 1995, among Quest Pharmacies, Inc., the
Company and L. Robert Oberfield (incorporated by reference to Exhibit 10.14 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.15 Unison HealthCare Corporation 1995 Stock Option Plan, as amended*
10.16 [Intentionally Omitted]
10.17 Receivables Acquisition Agreement, dated November 14, 1994, as amended, with
HealthPartners Funding, L.P. (incorporated by reference to Exhibit 10.17 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.18 Agreements between the Company and Trouver Capital Partners, L.P. dated March 16,
1992 and July 10, 1995 (incorporated by reference to Exhibit 10.18 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.19 Agreement between BritWill and Trouver Capital Partners, L.P. dated September 15,
1992, as amended (incorporated by reference to Exhibit 10.19 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.20 Master Lease between BritWill -- I and Omega, dated as of November 1, 1992, for
Capital Care HealthCare Center, Cedar Crest HealthCare Center (Wellington Manor),
English Estates (Kingsbury Rehabilitation and HealthCare Center), Lockerbie
HealthCare Center, Parkview Manor and Sunset Manor (incorporated by reference to
Exhibit 10.20 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.21 Agreement of Acquisition and Lease between BritWill and Omega, dated as of
November 1, 1992 (incorporated by reference to Exhibit 10.21 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.22 Leasehold Mortgage between BritWill -- I and Omega, dated November 1, 1992
(incorporated by reference to Exhibit 10.22 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
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10.23 Loan Agreement (Texas Facilities) between BritWill Investments -- Texas and Omega,
dated April 1, 1993 (incorporated by reference to Exhibit 10.23 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.24 [Intentionally Omitted]
10.25 Loan Agreement between BritWill Investments -- Texas and Omega, dated November 30,
1993 (incorporated by reference to Exhibit 10.25 to the Registration Statement on
Form S-1 filed on October 2, 1995, File No. 33-97662)
10.26 BritWill Master Guaranty between BritWill and Omega, dated November 30, 1993
(incorporated by reference to Exhibit 10.26 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.27 Letter of Credit Agreement between BritWill Investments -- II and Omega, dated
November 30, 1993 (incorporated by reference to Exhibit 10.27 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.28 Master Lease between BritWill -- II and Omega, dated as of November 30, 1993
(incorporated by reference to Exhibit 10.28 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.29 Agreement Regarding Financial Covenants Compliance and Amendment Agreement among
BritWill and Omega, dated December 13, 1994 (incorporated by reference to Exhibit
10.29 to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
10.30 Master Lease between BritWill -- II and Omega, dated December 12, 1994
(incorporated by reference to Exhibit 10.30 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.31 Amendment Agreement between the Company and Omega, dated August 10, 1995
(incorporated by reference to Exhibit 10.31 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.32 Unison Master Guaranty to Omega, dated August 10, 1995 (incorporated by reference
to Exhibit 10.32 to the Registration Statement on Form S-1 filed on October 2,
1995, File No. 33-97662)
10.32.1 Letter Agreement among Unison HealthCare Corporation, Bruce H. Whitehead and Omega
dated October 31, 1996*
10.33 Subordinated Promissory Note in the amount of $2,475,000 of BritWill to WFI, dated
December 24, 1992 (incorporated by reference to Exhibit 10.33 to the Registration
Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.34 Participation Agreement among BritWill, WFI and Garth Financial Services, Inc.,
dated December 24, 1992 (incorporated by reference to Exhibit 10.34 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.35 Bonus Participation Agreement between BritWill and WFI, dated December 24, 1992
(incorporated by reference to Exhibit 10.35 to the Registration Statement on Form
S-1 filed on October 2, 1995, File No. 33-97662)
10.36 Unsecured Promissory Note of BritWill -- II to BritWill Investments -- Texas in
the amount of $1,081,548.39, dated November, 1993 (incorporated by reference to
Exhibit 10.36 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.37 Unsecured Promissory Note of BritWill -- II to BritWill Investments -- Texas in
the amount of $500,000, dated November, 1993 (incorporated by reference to Exhibit
10.37 to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
10.38 Unsecured Promissory Note of BritWill -- II to BritWill Investments -- Texas in
the amount of $660,000, dated November, 1993 (incorporated by reference to Exhibit
10.38 to the Registration Statement on Form S-1 filed on October 2, 1995, File No.
33-97662)
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10.39 [Intentionally Omitted]
10.40 Management Services Agreement between Unison and Lake City Nursing Homes, Inc.,
dated December 1, 1993 (incorporated by reference to Exhibit 10.40 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.41 Lease Contract and Agreement between BritWill Investments -- Texas, as Lessor and
BritWill -- II, as Lessee, dated December 1, 1993, for Four States Care Center,
Heritage Plaza Nursing Center, Pine Haven Care Center, Reunion Plaza Senior Care
and Retirement Center and Texarkana Nursing Center (incorporated by reference to
Exhibit 10.41 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.42 Management Agreement between Sherwood HealthCare Corp. and BritWill Investments --
Indiana, dated November 1, 1991, as amended, for Capital Care, Parkview, Sunset
Manor, Boonville, Holiday Manor, Kendallville Manor and Owensville (incorporated
by reference to Exhibit 10.42 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.43 Management Agreement between Cedar Care, Inc. and BritWill Investments -- Indiana,
dated November 1, 1991, as amended, for Cedar Crest, Country Side, English, Harty,
Lockerbie and Willow Manor (incorporated by reference to Exhibit 10.43 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.44 [Intentionally Omitted]
10.44.1 Lease for Oakwood Nursing Care Center*
10.45 Lease for Elkhart Nursing Home (incorporated by reference to Exhibit 10.45 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.46 Management Services Agreement between the Company and Marshall Manor (Michigan),
dated September 15, 1992 (incorporated by reference to Exhibit 10.46 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.47 Leases for Center (aka Pine Grove Care Center) and Waxahachie (aka Pleasant Manor
Living Center) with BritWill Investments -- Texas (incorporated by reference to
Exhibit 10.47 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.48 Management Services Agreement between the Company and HP/HealthCare Acquirors,
Inc. for Windsor Manor (incorporated by reference to Exhibit 10.48 to the
Registration Statement on Form S-1 filed on October 2, 1995, File No. 33-97662)
10.49 Management Services Agreement for Bayshore Convalescent Center (incorporated by
reference to Exhibit 10.49 to the Registration Statement on Form S-1 filed on
October 2, 1995, File No. 33-97662)
10.50 Lease for Henry Clay Villa, dated July 1, 1995 (incorporated by reference to
Exhibit 10.50 to the Registration Statement on Form S-1 filed on October 2, 1995,
File No. 33-97662)
10.51 Lease for Marshall Manor Nursing Home (Alabama) (incorporated by reference to
Exhibit 10.51 to Amendment No. 1 to the Registration Statement on Form S-1 filed
on November 16, 1995, File No. 33-97662)
10.52 [Intentionally Omitted]
10.53 [Intentionally Omitted]
10.54 [Intentionally Omitted]
10.55 Sublease for Ridgewood Health Care Center (incorporated by reference to Exhibit
10.55 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
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10.56 Management Services Agreement for Peachtree Nursing Center (aka Smyrna Nursing
Center) and Rehabilitation Facility, dated September 15, 1993 (incorporated by
reference to Exhibit 10.56 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.57 Management Services Agreement for St. Barnabas Nursing Home, and Retirement
Apartments, dated January 12, 1995 (incorporated by reference to Exhibit 10.57 to
Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.58 [Intentionally Omitted]
10.59 Lease for Boonville Convalescent Center (incorporated by reference to Exhibit
10.59 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.60 [Intentionally Omitted]
10.61 [Intentionally Omitted]
10.62 [Intentionally Omitted]
10.63 Sublease for Holiday Manor (incorporated by reference to Exhibit 10.63 to
Amendment No. 1 to the Registration Statement on Form S-1 filed on November 16,
1995, File No. 33-97662)
10.64 [Intentionally Omitted]
10.65 [Intentionally Omitted]
10.66 Lease for Owensville Convalescent Center (incorporated by reference to Exhibit
10.66 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.67 [Intentionally Omitted]
10.68 [Intentionally Omitted]
10.69 [Intentionally Omitted]
10.70 Lease for Willow Manor Convalescent Center (incorporated by reference to Exhibit
10.70 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.71 Lease for Bonner Health Center, dated February 1, 1995 (incorporated by reference
to Exhibit 10.71 to Amendment No. 1 to the Registration Statement on Form S-1
filed on November 16, 1995, File No. 33-97662)
10.72 Lease for Hillside Care Center (aka Prairie Manor), dated February 1, 1995
(incorporated by reference to Exhibit 10.72 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
10.73 Lease for Oswego Manor, dated March 2, 1994 (incorporated by reference to Exhibit
10.73 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.74 [Intentionally Omitted]
10.75 Lease for SunCrest HealthCare Center, dated September 14, 1994 (incorporated by
reference to Exhibit 10.75 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.76 Sublease for The Oaks of Boise (aka Franciscan Health Care Center of Boise)
(incorporated by reference to Exhibit 10.76 to Amendment No. 1 to the Registration
Statement on Form S-1 filed on November 16, 1995, File No. 33-97662)
10.77 Lease for Mountainside Care Center (aka Sandpoint Manor) and St. Francis Preschool
and Childcare Center (incorporated by reference to Exhibit 10.77 to Amendment No.
1 to the Registration Statement on Form S-1 filed on November 16, 1995, File No.
33-97662)
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10.77.1 Sublease for Mountainside Care Center (incorporated by reference to Exhibit
10.77.1 to Amendment No. 1 to the Registration Statement on Form S-1 filed on
November 16, 1995, File No. 33-97662)
10.78 [Intentionally Omitted]
10.79 Lease for White Pine Care Center, dated November 1, 1994 (incorporated by
reference to Exhibit 10.79 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.80 [Intentionally Omitted]
10.81 [Intentionally Omitted]
10.82 [Intentionally Omitted]
10.83 Lease for Green Acres Nursing Home, dated August 30, 1995 (incorporated by
reference to Exhibit 10.83 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.84 Lease for Hemphill Care Center, dated September 1, 1994 (incorporated by reference
to Exhibit 10.84 to Amendment No. 1 to the Registration Statement on Form S-1
filed on November 16, 1995, File No. 33-97662)
10.85 [Intentionally Omitted]
10.86 [Intentionally Omitted]
10.87 [Intentionally Omitted]
10.88 [Intentionally Omitted]
10.89 [Intentionally Omitted]
10.90 Lease for Nightingale West Nursing Home, dated August 24, 1995 (incorporated by
reference to Exhibit 10.90 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.91 Sublease for Twin Pines of Lewisville, dated September 8, 1995 (incorporated by
reference to Exhibit 10.91 to Amendment No. 1 to the Registration Statement on
Form S-1 filed on November 16, 1995, File No. 33-97662)
10.92 Lease for Homestead of McKinney dated as of July 1, 1996 between Westminister
Healthcare, Inc. and BritWill Investments-II, Inc.*
10.93 [Intentionally Omitted]
10.94 Letter Agreement regarding licensing and operation of the Indiana facilities from
Cedar Care and Sherwood to the Company, dated August 10, 1995 (incorporated by
reference to Exhibit 10.94 to Amendment No. 2 to the Registration Statement on
Form S-1 filed on December 4, 1995, File No. 33-97662)
10.95 Agreement Regarding Conversion of the Convertible Debenture, dated December 1,
1995 (incorporated by reference to Exhibit 10.95 to Amendment No. 2 to the
Registration Statement on Form S-1 filed on December 4, 1995, File No. 33-97662)
10.96 Letter Agreement Regarding Consulting Services (incorporated by reference to
Exhibit 10.96 to Amendment No. 3 to the Registration Statement on Form S-1 filed
on December 12, 1995, File No. 33-97662)
10.97 Loan and Security Agreement dated February 16, 1996 by and between Unison
HealthCare Corporation, SunQuest SPC, Inc., BritWill HealthCare Company, BritWill
Investments-I, Inc., BritWill Funding Corporation, BritWill Investments-II, Inc.,
Emory Care Center, Inc., Cedar Care, Inc., Sherwood Healthcare Corp. (collectively
as borrowers) and HealthPartners Funding, L.P. (as lender) (incorporated by
reference to Exhibit 10.97 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
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10.97.1 Letter Agreement dated October 4, 1996 between HealthPartners Funding, L.P. and
Unison HealthCare Corporation (incorporated by reference to Exhibit 10.97.1 to
Amendment No. 1 to the Registration Statement on Form S-4 filed on October 11,
1996, File No. 333-12263)
10.98 Security Agreement effective as of February 1, 1996 by and among Unison HealthCare
Corporation, a Delaware corporation, Sunbelt Therapy Management Services, Inc., an
Arizona corporation, Paul G. Henderson and Paige B. Plash (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed on April 12, 1996)
10.99 Promissory Note of Unison HealthCare Corporation to Omega Healthcare Investors,
Inc. in the amount of $3,500,000, dated February 9, 1996 (incorporated by
reference to Exhibit 10.99 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
10.100 Lease dated November 30, 1994 between Monica R. Salusky and SunQuest SPC, Inc.
(commencement date: August 1, 1996) (incorporated by reference to the Company's
Current Report on Form 8-K dated August 14, 1996)
10.101 Modification of Lease dated as of July 31, 1996 between Monica R, Salusky,
SunQuest SPC, Inc. and Unison HealthCare Corporation (incorporated by reference to
the Company's Current Report on Form 8-K dated August 14, 1996)
10.102 Lease dated June 19, 1996 between Walla Walla Partners, L.P. and SunQuest SPC,
Inc. (commencement date: August 1, 1996) (incorporated by reference to the
Company's Current Report on Form 8-K dated August 14, 1996)
10.103 First Amendment to Lease dated July 26, 1996 between Walla Walla Partners, L.P.
and SunQuest SPC, Inc. (incorporated by reference to the Company's Current Report
on Form 8-K dated August 14, 1996)
10.109 Promissory Note of Unison HealthCare Corporation to Red Line Healthcare
Corporation in the amount of $771,004.60 dated August 30, 1996 (incorporated by
reference to Exhibit 10.109 to the Registration Statement on Form S-4 filed on
September 18, 1996, File No. 333-12263)
10.110 Receivables Purchase and Sale Agreement dated August 8, 1996 between
HealthPartners Funding, L.P., Sunbelt Therapy Management Services, Inc. (an
Arizona corporation), Henderson & Associates Rehabilitation, Inc., Decator
Sportsfit & Wellness Center, Inc., Therapy Health Systems, Inc., Sunbelt Therapy
Management Services, Inc. (an Alabama corporation), Quest Pharmacies, Inc. and
SunQuest SPC, Inc. (incorporated by reference to Exhibit 10.110 to the
Registration Statement on Form S-4 filed on September 18, 1996, File No.
333-12263)
10.111 Master Lease Agreement dated June 4, 1996 between Unison HealthCare Corporation
and LINC Anthem Corporation (incorporated by reference to Exhibit 10.111 to the
Registration Statement on Form S-4 filed on September 18, 1996, File No.
333-12263)
10.112.1 Promissory Note dated March 17, 1997 to David A. Kremser in partial payment of
Equity Adjustment Amount*
10.112.2 Form of Promissory Notes dated March 17, 1997, to former Signature shareholders in
partial payment of Equity Adjustment Amount*
10.113 Services Agrement dated as of March 31, 1997, between the Registrant and David A.
Kremser*
10.114 Indemnification Agreement dated as of March 31, 1997, between the Registrant and
David A. Kremser*
10.115 Tolling Agreement dated as of March 31, 1997, between the Registrant and David A.
Kremser*
10.116 Option Agreement dated as of March 31, 1997, between the Registrant and David A.
Kremser*
10.117.1 Form of Loan and Security Agreement dated as of April 21, 1997 among the
Registrant, Elk Meadows Investments, L.L.C. and BritWill Investments Company,
Ltd.*
10.117.2 Form of Stock Pledge Agreement dated as of April 21, 1997 among Registrant, Elk
Meadows Investments, L.L.C. and BritWill Investments Company, Ltd.
</TABLE>
51
<PAGE> 35
<TABLE>
<C> <S>
10.118 Asset Purchase Agreement dated as of December 20, 1996, among Sunbelt Therapy
Management Services, Inc., Spine Rehabilitation and Physical Therapy Center, Inc.
and Douglas L. Bates*
10.119 Master Lease Agreement dated November 25, 1996, between Unison HealthCare
Corporation and Pacific Financial Company, relating to computer equipment and
software*
10.120 Form of sublease agreement dated as of March 1, 1997, between BritWill
Investments-II, Inc. and Hasmark East Ltd., relating to Four States Care Center,
Green Acres, Heritage Oaks and Texarkana Nursing Center*
10.121 Lease dated as of June 13, 1995, between AHP of Colorado, Inc. and Arkansas, Inc.
(incorporated by reference to Exhibit 10.121 to the Registration Statement on Form
S-4 filed on July 3, 1997)
10.122 Lease dated as of June 13, 1995, between AHP of Colorado, Inc. and Cornerstone
Care, Inc. (incorporated by reference to Exhibit 10.122 to the Registration
Statement on Form S-4 filed on July 3, 1997)
10.123 Lease dated as of July 28, 1995, between American Health Properties of Arizona,
Inc. and Safford Care, Inc. (incorporated by reference to Exhibit 10.123 to the
Registration Statement on Form S-4 filed on July 3, 1997)
10.124 Lease dated as of July 28, 1995, between American Health Properties of Arizona,
Inc. and Douglas Manor, Inc.*
10.125 Promissory Note and related Term Loan Agreement and Form of Deed of Trust dated
March 30, 1994 in the original principal amount of $19.1 million between Signature
Health Care, Inc. and National Health Investors, Inc.*
10.126 Lease dated as of December 1, 1990 between Health Care Reit, Inc. and The Arbors
Health Care Center Inc.*
11.1 Unison HealthCare Corporation Statement Re: Computation of Per Share Earnings*
21 List of subsidiaries*
27 Financial Data Schedule (included only in the EDGAR filing)
99.1 Report of Ronald H. Ridgers, P.C. related to American Professional Holding, Inc.*
99.2 Report of Ronald H. Ridgers, P.C. related to Memphis Clinical Laboratory, Inc.*
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(b) Reports on Form 8-K.
Unison filed the following reports on Form 8-K during the quarter ended
December 31, 1996:
(1) Report dated October 10, 1996 related to the Stock Purchase
Agreement between Unison and RehabWest, Inc.
(2) Report dated October 31, 1996 which included the following
financial statements: (i) audited financial statements of Signature
HealthCare Corporation for each of the three years ended December 31, 1995
and unaudited financial statements for the six months ended June 30, 1996
and 1995; (ii) audited combined financial statements of Arkansas, Inc.,
Cornerstone Care, Inc., Douglas Manor, Inc. and Safford Care, Inc. for each
of the three years ended December 31, 1995 and unaudited financial
statements for the six months ended June 30, 1996 and 1995; (iii) audited
financial statements of RehabWest, Inc. as of and for the years ended
December 31, 1995 and 1994 and unaudited financial statements for the six
months ended June 30, 1996 and 1995; (iv) audited financial statements of
American Professional Holding, Inc. for each of the three years ended
December 31, 1995 and unaudited financial statements for the six months
ended June 30, 1996 and 1995; and (v) audited financial statements of
Memphis Clinical Laboratory, Inc. for each of the three years ended
December 31, 1995 and unaudited financial statements for the six months
ended June 30, 1996 and 1995.
52
<PAGE> 36
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Unison HealthCare Corporation
By: /s/ DAVID A. KREMSER
------------------------------------
David A. Kremser
Interim Chief Executive Officer
and Chief Financial Officer
Date: July 16, 1997
----------------------------------
<PAGE> 1
Exhibit 10.44.1
LEASE
Dated August 22, 1995
OAKWOOD NURSING CENTER
ARLINGTON, TEXAS
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<PAGE> 2
LEASE
This Lease dated August 22, 1995, is by and between GEORGE M. RUGTIV
and BARBARA M. RUGTIV, RICHARD L. MANI, WILLIAM H. BARNES and DORIS S. BARNES,
JOHN K. SUTHERLAND and MONICA R. SALUSKY as Trustees of the Sutherland
Children's Trust, MONICA R. SALUSKY, and DONALD A JACOBY ("Landlord") and
SUNQUEST SPC, INC. ("Tenant").
RECITALS:
This Lease is made and entered into with reference to the following
facts:
A. Landlord is the owner of the "Oakwood Nursing Care Center" 120 bed
nursing facility at 301 West Randol Mill Road, Arlington, Texas, more
particularly described in Exhibit "A" attached hereto, and the personal
property, fixtures, equipment, business records, and supplies used in connection
therewith (the "Demised Premises").
B. Landlord desires to lease to Tenant, and Tenant desires to hire from
Landlord, the Demised Premises.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, Landlord hereby lets the Demised Premises to
Tenant, and Tenant hereby hires the Demised Premises from Landlord, for the term
and upon the conditions and provisions hereinafter set forth.
1. Term: The term of this Lease shall commence at close of escrow for
Landlord's purchase of the Demised Premises and shall end on August 15, 2015.
2. Base Rent:
PAGE MISSING
not binding upon Landlord and Tenant. The renovation and rehabilitation to be
paid for with the remaining proceeds from Landlord's new loan(s) shall be
subject to approval by Landlord and by Tenant, neither of which shall
unreasonably withhold its approval, and, if and as required, by the lender(s)
and/or loan guarantors of Landlord's new loan(s).
2.2.2. Landlord may impose reasonable conditions for the
disbursement of funds for renovating and rehabilitating the Demised Premises,
including, without limitation, designating the architect and/or contractor(s).
Title to all repairs and improvements to the Demised Premises and personal
property and fixtures paid for out of the proceeds of Landlord's new loan(s)
shall automatically vest in Landlord.
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<PAGE> 3
2.3. On September 1, 1996, and on each September 1 thereafter during
the term of this Lease, the monthly base rent under this Lease shall be
increased by an amount equal to the same percentage thereof as the percentage
increase, if any, in the applicable consumer price index.
2.3.1. The term "applicable consumer price index" shall mean
the U.S. consumer price index for all urban consumers for all items published by
the U.S. Department of Labor, Bureau of Labor Statistics.
2.3.2. For the first adjustment in monthly base rent on
September 1, 1996, the consumer price index most recently announced prior to the
commencement for the term of this Lease shall be compared to the consumer price
index most recently announced prior to September 1, 1996, to determine the
percentage increase thereof. For the adjustments in monthly base rent on and
after September 1, 1997, the consumer price index most recently announced prior
to the preceding September 1 shall be compared to the consumer price index most
recently announced prior to the adjustment date to determine the percentage
increase thereof.
2.3.3. In no event shall any one annual increase in the
monthly base rent be more than eight percent (8%) of the then effective monthly
base rent.
2.3.4. If the applicable consumer price index as currently
calculated is materially altered or is no longer available, then Landlord and
Tenant shall use such other index or method for determining adjustments to the
monthly base rent which will achieve approximately the same results as the
continued application of the applicable consumer price index as currently
calculated. If Landlord and Tenant are unable to agree upon the selection of a
replacement index or mechanism, the issue shall be determined by arbitration in
accordance with section 2.9, below.
2.4. Monthly base rent shall be paid in advance on the first day of
each and every calendar month during the term hereof, except that the base rent
for the first partial month of the term hereof, if any, shall be paid upon the
execution hereof. The base rent for any fractional month shall be prorated.
Payments of base rent shall be made to Landlord at Landlord's address for
notices specified in Section 45.1, below, or at such other place as Landlord may
from time to time direct. Rent shall be deemed paid when actually received by
Landlord. All rent hereunder shall be due and payable without diminution or
offset. Checks shall be deemed payment only if cleared in the ordinary course.
2.5. Commencing as of September 1, 1997, Tenant shall pay to Landlord
as additional rent for the Demised Premises percentage rent in an amount equal
to twenty percent (20%) of the net profit from Tenant's operation of the Demised
Premises.
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<PAGE> 4
2.5.1. For purposes of this Lease, the term "net profit" shall
mean Tenant's actual net profit, if any, from Tenant's operation of the Demised
Premises, as determined for a January 1 to December 31 fiscal year on an accrual
basis and in accordance with generally accepted accounting principles applied on
a consistent basis, excluding, however, any depreciation in excess of straight
line depreciation, any salaries, management fees, or other compensation paid to
affiliates, partners or shareholders or to spouses, issue, siblings, issue of
siblings, or ancestors of affiliates of partners or shareholders of Tenant,
except for a management fee of six percent (6%) of gross revenues which includes
accounting, data processing, government relations, nursing consulting,
marketing, and other services provided as of the date hereof by Tenant or any of
Tenant's affiliates for other facilities, and any percentage rent paid during
the year. Percentage rent for any partial year shall be based upon the actual
net profit for that partial year.
2.5.2. Within thirty (30) days after the end of each calendar
quarter during the term hereof, Tenant shall provide Landlord with a statement
showing Tenant's revenues, expenses and estimated net profit, as reasonably and
in good faith determined by Tenant, for that calendar quarter. Concurrent with
the delivery of Tenant's statement for each calendar quarter during the term
hereof, Tenant shall pay to Landlord an amount equal to twenty percent (20%) of
Tenant's estimated net profit for that quarter.
2.5.3. Within ninety (90) days after the end of each calendar
year, and within ninety (90) days after the expiration or termination hereof,
Tenant shall provide Landlord with a statement showing Tenant's revenues,
expenses and profits for that year, in form and content reasonably required by
Landlord, certified by Tenant to be true, complete and correct in all material
respects. If Tenant's annual statement shows a balance due Landlord for the
year, Tenant' shall promptly pay Landlord the amount due. If Tenant's annual
statement shows an overpayment to Landlord, the amount of the overpayment shall
be credited against the next payment or payments of percentage rent hereunder.
2.5.4. Tenant shall furnish Landlord with a true and accurate
copy of either the federal income tax return for Tenant or the consolidated
federal income tax return for Tenant's parent corporation within thirty (30)
days after filing the same with the Internal Revenue Service.
2.5.5. Receipt by Landlord of any statement or payment of
percentage rent for any period shall not bind Landlord as to the correctness of
the statement and/or payment.
2.6. Landlord and Tenant acknowledge and agree that it would be
extremely difficult or impossible to determine the amount of actual damages
Landlord would suffer as a result of Tenant's
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<PAGE> 5
default in the timely payment of base rent hereunder. Any base rent required to
be paid by Tenant under this Lease not paid within ten (10) days after the date
when due shall automatically and without notice bear a late payment charge in an
amount equal to five percent (5%) of the late payment.
2.7. All other payments of money required to be made by Tenant pursuant
to the terms of this Lease shall be deemed additional rent.
2.8 This Lease is intended to be a net lease in that it is the
intention of the parties hereto that the rent payable to Landlord shall not be
reduced by any cost or charge whatsoever, and that all expenses and charges,
whether for upkeep, maintenance, insurance, taxes, utilities, federal, state and
municipal requirements and other charges of a like nature or type or otherwise,
shall be paid by Tenant. This provision is not in derogation of the specific
provisions of this Lease, but in expansion thereof and as an indication of the
general intentions of the parties hereto.
2.9. Any dispute between Landlord and Tenant concerning the adjustment
of base rent under Section 2.2, above, the calculation of adjustments in base
rent under Section 2.3, above, the selection of a replacement index or mechanism
under Section 2.3.4, above, or the calculation of percentage rent under Section
2.5, above, shall be submitted to binding arbitration to and in accordance with
the then existing commercial arbitration rules of the American Arbitration
Association and shall be conducted at its office nearest the Demised Premises.
Any fee to initiate arbitration shall be paid by the party initiating
arbitration, but the cost of arbitration and reasonable travel cost shall
ultimately be borne by the losing party or in such proportion as the arbitrators
shall decide.
3. Security Deposit:
3.1. Tenant shall deliver to Landlord the sum of $60,000 as security
for the full and faithful performance of each and every provision of this Lease.
Tenant's security deposit shall be paid in six equal monthly installments on the
same dates as monthly base rent is due under this Lease, commencing September 1,
1995. Tenant's security deposit shall be increased to the amount of any debt
service or other reserve required to be provided in a lump sum payment by the
terms of Landlord's mortgage(s) for any refinance of the Demised Premises. If
and when the amount of Tenant's required security deposit increases, the
increase in Tenant's security shall be payable in six equal monthly installments
on the same dates as monthly base rent is due, commencing with the first payment
of monthly base rent due after the increase in the required amount. Landlord
shall give Tenant written notice of any increase in the amount of Tenant's
security deposit as soon as reasonably possible.
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<PAGE> 6
3.2. If Tenant defaults in the performance of any of its obligations
hereunder, Landlord may use, apply, or retain the whole or any part of Tenant's
security deposit to the extent of any sum due Landlord, to make any required
payment on Tenant's behalf, or to compensate Landlord for any expense or damage
caused by Tenant's default. On Landlord's demand, Tenant shall promptly pay to
Landlord a sum equivalent to the amount by which Tenant's security deposit has
been so depleted.
3.3. Within thirty (30) days of the expiration of the term of this
Lease, provided that Tenant is not then in default, Landlord shall refund
Tenant's security deposit, or such portion thereof as then remains, to Tenant.
3.4. Tenant's security deposit shall be paid directly to Landlord.
Tenant's security deposit shall bear no interest. The Landlord is not the
trustee of Tenant's security deposit, and Tenant's security deposit may be
commingled with Landlord's general funds.
3.5. Upon any sale or other transfer of the demised Premises by
Landlord, Landlord shall assign and deliver Tenant's security deposit to
Landlord's purchaser or other transferee, who or which shall assume Landlord's
obligations to Tenant with respect to Tenant's security deposit. The assumption
by Landlord's purchaser or other transferee of Landlord's obligations to Tenant
with respect to Tenant's security deposit shall relieve Landlord of all
obligations with respect thereto.
4. Taxes and Assessments:
4.1. Tenant shall pay before delinquency any and all real and personal
property taxes and assessments levied or assessed against the Demised Premises
during the term of this Lease. Tenant shall provide Landlord with proof
reasonably satisfactory to Landlord that all real and personal property taxes
and assessments have been timely paid.
4.2. At the commencement and at the end of the term of the Lease, all
real and personal property taxes and assessments shall be prorated.
4.3. Tenant shall have the right to protest the amount or payment of
any real or personal property taxes or assessments which it is required to pay
pursuant to this Lease, provided that Tenant adequately protects Landlord's
interest in the Demised Premises by bonding or by providing other security
satisfactory to Landlord. Tenant shall hold Landlord harmless and defend
Landlord from any and all claims, loss or damages resulting from prosecution of
such protest by Tenant.
-6-
<PAGE> 7
4.4. Landlord shall promptly forward to Tenant copies of all tax bills
relating to the Demised Premises received by Landlord.
4.5. If at any time during the term hereof, the State of Texas or any
political subdivision or agency thereof, including any county, city, city and
county, public corporation, district, or any other political entity or agency,
levies or assesses against Landlord a tax, fee, or excise on rents, on the
square footage of the Demised Premises, on the act of entering into this Lease,
or on the occupancy of Tenant, or any other tax, fee, or excise, however
described, including a value added tax, as a substitution, in whole or in part,
for, or in addition to, any real or personal property taxes or assessments,
Tenant shall pay the same before delinquency, regardless of whether the same is
collectible by Landlord.
5. Insurance:
5.1. At all times during the term of this Lease, Tenant shall keep and
maintain, at its own cost and expense, the following policies of insurance:
5.1.1. Comprehensive public liability insurance, including
hospital (professional malpractice) and owned and non-owned motor vehicle
coverage, with a combined single limit of at least $1,000,000 and with not less
than $3,000,000 excess coverage against bodily injury and property damage,
insuring Landlord and Tenant and, at Landlord's election, the mortgagee(s) of
any mortgage(s) of the Demised Premises, against claims for bodily injuries
and/or death and/or damage to property incurred while on or about the Demised
Premises and/or in connection with any act or omission by Tenant or Tenant's
members, agents, employees, officers, directors, guests, invitees and licensees.
Landlord and, at Landlord's election, the mortgagee(s) of any mortgage(s) of the
Demised Premises shall be named as additional insured(s) on Tenant's policy of
liability insurance.
5.1.2. Fire and extended peril insurance, with "all risk"
endorsement, covering the Demised Premises, including personal property,
sprinkler leakage, earthquake, and flood and windstorm damage, in an amount not
less than the full replacement value thereof. At Landlord's election, which
shall not be exercised more frequently than once every two (2) years, the full
replacement value of the Demised Premises shall be determined by appraisal by a
professional independent insurance appraiser selected by Landlord, subject to
Tenant's approval, which shall not be unreasonably withheld, whose fee shall be
paid one-half by Landlord and one-half by Tenant. Landlord shall be named as an
additional insured and the mortgagee(s) of any mortgage(s) of the Demised
Premises shall be named as mortgagee(s) on such policy of fire and extended
peril insurance. The net proceeds of any such
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<PAGE> 8
fire and extended peril insurance shall be expended only as set forth in Section
34, below.
5.1.3. All worker's compensation insurance required under the
worker's compensation law of the State of Texas.
5.1.4. Business interruption insurance in an amount equal to
one (1) year advance rent under this Lease, covering Tenant's operation of its
business at the Demised Premises.
5.1.5. Any other or additional insurance required pursuant to
any mortgages of the Demised Premises.
5.2. Tenant shall provide Landlord with copies or certificates or other
evidence reasonably satisfactory to Landlord establishing that Tenant has
obtained and continues to hold the policies of insurance required under Section
5.1, above. All such policies shall be in such form and shall be issued by such
company or companies as are approved by Landlord, which shall not be
unreasonably withheld, and, at Landlord's election, by the mortgagee(s) of any
mortgage(s) of the Demised Premises.
5.2.1. The policies of insurance required hereunder may be
provided under or by blanket or umbrella policy(ies) provided that such
policy(ies) specifically provide(s) that the amount of insurance required under
this Lease shall in no way be prejudiced by other losses covered by such
policy(ies).
5.2.2. All policies of insurance required hereunder shall
provide that they may not be canceled, lapse, expire, or be materially altered
except with thirty (30) days prior written notice to Landlord and, in the case
of the insurance required under Sections 5.1.1, 5.1.2, and 5.1.5, above, to any
mortgagee(s) of any mortgage(s) of the Demised Premises.
5.2.3. All policies or certificates of the insurers or of
insurance agencies satisfactory to Landlord and to any mortgagee(s) of any
mortgage(s) of the Demised Premises showing that renewals of the policies
required hereunder are in force shall be delivered to Landlord and to any
mortgagee(s) of any mortgage(s) of the Demised Premises at least thirty (30)
days prior to the expiration of the then outstanding policies.
5.3. Landlord and Tenant expressly waive any and all rights and claims
as against each other for losses and damages to the extent that such losses and
damages are covered by insurance.
6. Indemnification:
6.1. As a material part of the consideration to Landlord, Tenant hereby
expressly waives any and all claims against Landlord
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<PAGE> 9
for damages or liability for injury to persons or property in, on or about the
Demised Premises from any cause whatsoever except for the negligence or
intentional malfeasance of Landlord or Landlord's members, agents, or employees.
6.2. Tenant shall indemnify, defend and hold harmless Landlord, its
agents, members, employees, officers, and directors, and any mortgagee(s) of any
mortgage(s) of the Demised Premises, against each and every demand, claim,
assertion, damages, actions, fees, including, without limitation, attorneys'
fees, court costs and other expenses, paid, incurred or suffered arising or
alleged to have arisen out of any act or omission of Tenant, its agents,
members, employees, officers, directors, guests, invitees or licensees, or in
connection with the use or occupation of the Demised Premises, including,
without limitation, injury, death or damage to Tenant's patients or resulting
from, or relating to, Tenant's introduction or use of hazardous materials, as
defined in Section 55.4, below, except for the negligence or intentional
malfeasance of Landlord or Landlord's members, agents, or employees.
7. Impound Account:
7.1. If and as required by any mortgage of the Demised Premises,
Tenant, shall pay to Landlord or Landlord's mortgagee amounts necessary to
create an impound account sufficient to timely pay all real and personal
property taxes and assessments required to be paid by Tenant hereunder. If the
impound account is insufficient to timely pay all real and personal property
taxes and assessments payable by Tenant, Tenant shall pay the deficiency to
Landlord or Landlord's mortgagee within ten (10) days after Landlord's written
request.
7.2. Provided that Tenant is not in default under this Lease, the funds
in any impound account held by Landlord or Landlord's mortgagee shall be used
for the payment of the real and personal property taxes and assessments payable
by Tenant under this Lease.
8. Use of Premises: The Demised Premises shall be used solely as a licensed
nursing facility and for no other purposes except with Landlord's prior written
consent, which shall not be unreasonably withheld.
9. Maintenance: Tenant shall maintain the Demised Premises in good condition
and repair, including, without limitation, the roof, structural and mechanical
elements and systems of the Demised Premises, exterior and interior painting,
gardening and landscaping, and paving and striping of driveways and parking
areas. The Demised Premises shall at all times be kept clean and sanitary. All
maintenance and repair work undertaken by Tenant shall be done in a workmanlike
manner leaving the Demised Premises
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<PAGE> 10
free of liens for labor and materials. All replacements of capital items shall
be by items of like or better quality. Repairs shall be effected in accordance
with Sections 11.1 through 11.8, below.
10. Landlord Not to Maintain:
10.1. Except as expressly provided in Section 2.2.1, above, Landlord
shall not be required to repair or maintain, or pay for the repair or
maintenance of, the Demised Premises, or any part or portion thereof, and Tenant
hereby expressly waives the right to make repairs at the expense of Landlord as
provided by any statute or law in effect at the time of the execution of this
Lease, or any other statute or law which may be hereafter enacted.
10.2. Tenant shall timely pay any maintenance or repair reserves
required by any mortgage of the Demised Premises. Landlord shall provide Tenant
with reasonable notice and copies of any mortgage or other loan documents which
require the payment of maintenance or repair reserves. The maintenance or repair
reserves held by the mortgages of the Demised Premises may be used by Tenant on
the terms specified in the mortgage or other loan documents. Landlord shall
reasonably cooperate with Tenant to enable Tenant to use the maintenance or
repair reserves held by Landlord's mortgagee. Tenant shall restore any
maintenance or repair reserves used by Tenant in monthly installments or as
otherwise required by the mortgage.
11. Alterations: Tenant shall not reconstruct, remodel or alter the Demised
Premises without the prior written consent of Landlord, which shall not be
unreasonably withheld, and, if and to the extent required by any mortgage(s) of
the Demised Premises, of the mortgagee(s) of the Demised Premises.
11.1. As a condition to Landlord's consent to any repair,
reconstruction, remodeling or alteration of the Demised Premises which is
reasonably projected to cost $25,000 or more, Landlord may require Tenant or
Tenant's contractor to post a payment and completion or other bond satisfactory
to Landlord insuring the proper and timely completion of such repair,
reconstruction, remodeling or alteration.
11.2. Tenant agrees to fully pay and discharge all claims for labor and
materials furnished in connection with the repair, reconstruction, remodeling or
alteration of the Demised Premises, to obtain lien releases for labor or
materials for which payment has been made, and to take all other reasonable
steps to forestall the assertion of lien claims against the Demised Premises.
11.3. All work done in connection with the repair, reconstruction,
remodeling or alteration of the Demised Premises
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<PAGE> 11
shall be performed in compliance with all applicable laws, ordinances, rules and
regulations.
11.4. The repair, reconstruction, remodeling or alteration of the
Demised Premises shall be performed in compliance with any mortgages of the
Demised Premises.
11.5. No repair, reconstruction, remodeling or alteration of the
Demised Premises shall be effected unless and until Tenant has obtained all
required permits and consents from all governmental entities or agencies having
jurisdiction over the Demised Premises.
11.6. All alterations and improvements constructed by Tenant upon the
Demised Premises shall, upon termination of this Lease, belong to Landlord.
11.7. Tenant shall save and hold Landlord harmless from any and all
liability of any kind on account of the repair, reconstruction, remodeling or
alteration of the Demised Premises.
11.8. Prior to commencement of any work, alteration or repair to or of
the Demised Premises by anyone other than Tenant or the employees of Tenant,
Tenant shall give Landlord sufficient notice thereof to permit Landlord to
timely post or affix on or to the Demised Premises notices of nonresponsibility.
12. Right to Replace Property:
12.1. Notwithstanding any other provision of this Lease to the
contrary, Tenant shall have the right, subject to the provisions of any
mortgage(s) of the Demised Premises, to replace any or all of the personal
property, fixtures, equipment and supplies subject to this Lease with personal
property, fixtures, equipment or supplies of like or greater value. Tenant shall
have the obligation to promptly repair or replace any dilapidated, obsolete or
nonfunctional personal property. Replacement personal property, fixtures and
equipment, and any additional personal property, fixtures and equipment
purchased by Tenant legally required to equip the Demised Premises for the
purposes permitted under this Lease, shall automatically become the property of
Landlord, subject to the terms of any mortgages of the Demised Premises, and
thereafter subject to this Lease. Tenant shall be entitled to any salvage value
from any replaced personal property, fixtures and equipment.
12.2. Title to any vehicles required to be registered may be retained
in the name of the Tenant. The vehicles and any replacement vehicles shall
remain the property of Landlord and subject to the terms of the Lease.
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12.3. Tenant shall not acquire or finance the acquisition of any
replacement or additional personal property, fixture or equipment by conditional
sales agreements, leases, or lease/options except with Landlord's prior written
consent, which shall not be unreasonably withheld.
12.4. Upon the expiration or termination of this Lease, Tenant shall
provide Landlord with personal property, fixtures, equipment, and consumable
supplies of at least equal quantity and quality as those which existed on the
Demised Premises at completion of the renovation and rehabilitation of the
Demised Premises in accordance with Section 2.2, above.
13. Utilities, Etc.:
13.1. Tenant shall be solely responsible for and shall promptly and
before delinquency pay for all utilities, including, without limitation,
electricity, gas, water, garbage and telephone, and any and all other labor,
services, goods and supplies which may be used or furnished to or for Tenant,
including, without limitation, any payroll, business and opportunities,
withholding, employee, sales, excise and other taxes incurred in connection
therewith, incident to the use and occupation of the Demised Premises. Any
account payable to a vendor of supplies to the Demised Premises shall be
conclusively deemed delinquent if not paid in full within 120 days after
Tenant's receipt of a bill from the vendor, unless Tenant is in good faith
contesting the validity or the amount payable.
13.2. Tenant shall provide all security deposits, bonds and other
collateral or requirements necessary for all utilities and other services
provided or supplied to, for or in connection with the operation of the Demised
Premises.
13.3. At Landlord's request, Tenant shall provide Landlord with proof
reasonably satisfactory to Landlord, including, at Landlord's request, copies of
Tenant's Internal Revenue Service form 941, that Tenant has complied with the
provisions of Sections 13.1 and 13.2, above.
14. Laws and Regulations: Tenant shall at its sole cost and expense comply
with all laws, statutes, ordinances and regulations of all governmental agencies
having jurisdiction over the Demised Premises, specifically including, without
limitation, any laws, rules and regulations regarding hazardous materials.
15. Licensing Requirements:
15.1. Tenant shall maintain at all times during the term hereof and any
extensions or renewals hereof all governmental licenses, permits and
authorizations necessary for the establishment and operation of the Demised
Premises for the
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purposes permitted under this Lease. Tenant shall not, without the prior written
consent of Landlord, which shall not be unreasonably withheld, effect any
reduction in the number of licensed beds in the Demised Premises or change the
license or certification category or status of the Demised Premises or any part
thereof.
15.2. Tenant shall, at its own cost and expense, promptly do and
provide or perform each and every requirement of any state or federal licensing
or certification authority having jurisdiction over the Demised Premises,
including, without limitation, the timely filing of cost reports and other
documents or information required to be filed, delivered or submitted. Tenant
shall have the right to appeal or protest any such requirement, provided that
Tenant complies with the same at or prior to the time when such requirement
becomes final and binding and no longer subject to appeal or protest.
15.3. upon the expiration or termination of this Lease, Tenant shall
fully cooperate with Landlord in affecting a transfer of the Demised Premises
fully licensed and certified for the purposes permitted under this Lease.
15.4. Notwithstanding any other provisions of this Lease to the
contrary, Tenant shall inform Landlord immediately by telephone and by letter or
telegraph of any action taken, commenced or instituted by any state or federal
authority having jurisdiction over the Demised Premises to terminate or revoke
any license or certification of or to impose any vendor hold or stop placement
order on Tenant. Such notice shall be given to Landlord at the address(es) and
telephone number(s) set forth in Section 45, below.
16. Inspection Report: Tenant shall forward to Landlord legible copies of
all inspection reports and other documents relating to the Demised Premises
received from any state or federal licensing or certification authorities having
jurisdiction over the Demised Premises, including, without limitation,
inspection surveys and plans of correction and notices relating to the Medicaid
reimbursement rate applicable to the Demised Premises. Such copies shall be so
forwarded forthwith upon receipt of such reports and documents by Tenant.
17. Cost Reports: Tenant shall provide Landlord with legible copies of
Tenant's cost reports submitted for the Demised Premises, certified by Tenant to
be true and correct in all material respects. Such copies shall be so forwarded
concurrent with the submission thereof by Tenant.
18. Operating Statements.
18.1. Within 30 days after the end of each calendar month during the
term of this Lease, Tenant shall provide Landlord with an operating statement
for the Demised Premises for the
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preceding calendar month, including a staffing hours report, a census report
(with patient mix and average monthly census), and an accounts payable aging
report, in form and content satisfactory to Landlord, certified by Tenant to be
true and correct in all material respects.
18.2. Within 120 days after the end of each calendar year during the
term of this Lease, Tenant shall provide Landlord with an operating statement
for the Demised Premises for the preceding year, in form and content
satisfactory to Landlord, certified by Tenant to be true and correct in all
material respects.
19. Financial Statements: Within 120 days after the end of each calendar
year, and at Landlord's request at any other time in connection with Landlord's
refinancing of the Demised Premises, Tenant and any guarantor of this Lease
shall provide Landlord with a copy of its current financial statement, prepared
in accordance with generally accepted accounting principles and in form and
content reasonably required by Landlord, certified by Tenant or the guarantor
hereof, as applicable, to be true and correct in all material respects.
20. Reports to Mortgagee(s): Tenant shall timely provide any reports or
other information or documents required by any mortgagee(s) of the Demised
Premises. Tenant shall provide Landlord with copies of any reports or other
information or documents given or provided to any mortgagee(s) of the Demised
Premises. Tenant shall permit the mortgagee(s) of the Demised Premises to
inspect and audit Tenant's books and records if and as required by the
mortgage(s) of the Demised Premises.
21. Books and Records:
21.1. At all times during the term of this Lease, Tenant shall keep and
maintain complete, true and accurate books and records of the operation of the
Demised Premises in accordance with generally accepted accounting principles
applied on a consistent basis. Tenant shall maintain Tenant's books and records
for at least four (4) years after the close of the accounting period to which
the books and records relate.
21.2. Landlord shall have the right to audit Tenant's books and records
regarding the Demised Premises. Landlord's audit shall be at Landlord's expense,
unless the audit shows that any material information previously provided by
Tenant is incorrect by three percent (3%) or more, in which case the cost of the
audit shall be borne by Tenant. At Landlord's request Tenant shall provide
appropriate supporting documentation for any item.
22. Waste and Nuisance. Tenant shall not commit, or allow to be committed,
any waste upon the Demised Premises, or any public or
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private nuisance. Tenant shall not use, nor allow the Demised Premises to be
used, for any improper, immoral, unlawful or objectionable purpose. Tenant shall
not allow objectionable odors or excessive noise to emanate from the Demised
Premises.
23. Continuous Operation. Tenant shall at all times during the entire term
of this Lease continuously operate the Demised Premises for the purposes
permitted under this Lease.
24. Events of Default:
24.1. The occurrence of any of the following shall be deemed to
constitute an event of default on the part of Tenant hereunder:
24.1.1. The failure to pay rent, real or personal property
taxes and assessments, utilities, premiums for insurance, or other monetary
obligations under this Lease within ten (10) days after written notice of
default;
24.1.2. The failure to perform or comply with any term of this
Lease which causes or results in the imminent loss of Tenant's license to
operate the Demised Premises, the initiation of a "fast track" termination of
Tenant's Medicaid certification, or in imminent danger to the life or safety of
one or more of Tenant's patients;
24.1.3. The failure to perform or comply with any other term
or provision of this Lease within thirty (30) days after written notice of
default, except for defaults, other than the defaults specified in Section
24.1.2, above, which cannot reasonably be cured within thirty (30) days,
provided that Tenant commences to cure the default within thirty (30) days after
written notice and thereafter diligently proceeds to cure the default;
24.1.4. An assignment by Tenant of its property for the
benefit of creditors;
24.1.5. The appointment of a receiver, trustee or liquidator
for Tenant, or any of the property of Tenant;
24.1.6. The levy of a writ of attachment against this Lease;
24.1.7. Tenant or any assignee of this Lease or subtenant of
the Demised Premises files a voluntary petition under the federal Bankruptcy Act
or of the law of any state, to be adjudicated a bankrupt or for any arrangement
or other debtor's relief, or any such petition is filed against Tenant by any
other party and not dismissed within sixty (60) days after filing thereof;
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24.1.8. The financial statements provided to Landlord by
Tenant prior to the execution of this Lease are determined to be materially
false or misleading;
24.1.9. Any financial statements provided to Landlord by
Tenant during the term of this Lease are known by Tenant to be materially false
or misleading; or
24.1.10. Any financial statement provided to Landlord for any
assignee of this Lease or subtenant of the Demised Premises is determined to be
materially false or misleading.
24.2. Any notice of default to Tenant shall specify Tenant's default.
In the event of the occurrence of any event of default mentioned in this Section
24, Landlord shall have the right, at its election, by written notice to Tenant,
in addition to all other remedies, to terminate this Lease.
25. Landlord's Recovery From Tenant:
25.1. Upon termination of this Lease by Landlord under and in
accordance with the provisions of Section 24.2, above, Landlord shall be
entitled to recover from Tenant the unpaid rent that has been earned at the time
of the judgment, the discounted present value of the amount by which the rent
payable for the balance of the term of this Lease after the time of judgment
exceeds the amount of the loss of rent that Tenant proves could be reasonably
avoided, any other amount, and court costs, reasonably necessary to compensate
Landlord for all detriment proximately caused by Tenant's default. The present
value of future rent shall be computed by discounting the amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of the judgment.
26. Right of Reentry: In the event of Tenant's default hereunder, Landlord
may then, or any time thereafter, reenter the Demised Premises, or any part
hereof, and expel or remove Tenant therefrom, and again repossess and enjoy the
Demised Premises, with or without terminating this Lease, and Tenant shall not
interfere with or obstruct Landlord's reentry and repossession of the Demised
Premises or Landlord's collection of the revenues and accounts receivable
derived from the Demised Premises.
27. Tenant's Continuing Obligations:
27.1. In the event Landlord does not terminate this Lease as a result
of the default of Tenant, Tenant shall remain and continue to be liable to
Landlord under all of the terms of this Lease. Landlord may evict Tenant and let
or relet the Demised Premises or any or all parts thereof for the whole or any
part of the remainder of the term hereof, or for a period of time in excess of
the remainder of the term hereof, and out of any rent so collected or received,
Landlord shall:
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27.1.1. First, pay to itself the actual costs or expenses of
retaking and repossessing the Demised Premises and removing all persons and
property therefrom;
27.1.2. Second, shall pay itself any actual costs or expenses
sustained in securing any new tenant or tenants, including, without limitation,
the cost of alterations or additions to the Demised Premises and any leasing
commissions incurred by Landlord; and
27.1.3. Third, shall pay to itself any balance remaining, and
apply the whole thereof or so much thereof as may be required toward payment of
the liability of Tenant to Landlord then or thereafter unpaid by Tenant.
27.2. Any entry or reentry by Landlord, whether under summary
proceedings or otherwise, if this Lease is not terminated pursuant to Section
24.2 hereof, shall not absolve or discharge Tenant from liability hereunder. The
words "reenter" and "reentry" as used in this Lease are not restricted to their
technical legal meaning. The failure of Landlord to relet the Demised Premises
or any part thereof shall not release or affect Tenant's liability hereunder.
Should any rent so collected by Landlord after the foregoing payments be
insufficient to fully pay Landlord a sum equal to all rent and other charges
herein reserved, or should no rents be collected by Landlord, the deficiency
shall be calculated and paid by Tenant upon each of the dates for the payment of
rent as provided herein, and Tenant shall pay to Landlord the amount of said
deficiency then existing and shall remain liable for any portion thereof not so
paid.
28. Cure of Default: Landlord, at any time after Tenant commits a default
hereunder, may cure the default at Tenant's cost. If Landlord, at any time, by
reason of Tenant's default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord, shall bear a late payment charge in an amount equal to ten
percent (10%) of the sum paid by Landlord to cure Tenant's default, and shall
bear interest at the lesser of twelve percent (12%) per annum or the maximum
rate permitted by law, reckoned from the date the sum is paid until Landlord is
reimbursed in full.
29. Interest on Unpaid Rent: Any rent not paid within ten (10) days after
the date when due shall bear interest at the lesser of twelve percent (12%) per
annum or the maximum rate permitted by law, reckoned from the date when due.
30. Appointment of Receiver:
30.1. Tenant hereby assigns to Landlord all of Tenant's revenues and
accounts receivable derived from the Demised Premises specifically including,
without limitation, all Medicare,
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Medicaid and other reimbursement payments to Tenant, as security for performance
of Tenant's obligations hereunder.
30.2. Provided that Tenant is not in default under this Lease, Tenant
shall have the right to collect Tenant's revenues and accounts receivable
derived from the Demised Premises. If Tenant is in default under this Lease,
Landlord shall have the absolute right, in person or by receiver duly appointed
by a court of competent jurisdiction, to take possession of the Demised
Premises, to conduct Tenant's business thereon, and to collect all revenues and
accounts receivable due thereon to Tenant both prior to and after the date of
Tenant's default.
30.3. Neither the filing of a petition for the appointment of a
receiver nor the appointment itself shall constitute an election by Landlord to
terminate this Lease.
30.4. Tenant shall execute and deliver to Landlord UCC-1's to perfect
Landlord's security interest in the revenues and accounts receivable derived
from the Demised Premises.
30.5. Subject to the provisions of any mortgages of the Demised
Premises, Landlord shall subordinate Landlord's security interest in Tenant's
revenues and accounts receivable to a security interest granted by Tenant to an
institutional lender, in the business of financing accounts receivable, and
financing Tenant's accounts receivable.
31. No Waiver: No waiver by Landlord of any breach of the covenants,
conditions or agreements of this Lease shall be construed to be a waiver of any
succeeding breach of the same or of any other covenants, condition or agreement
hereof.
32. Remedies Cumulative: The remedies conferred by this Lease upon Landlord
are not intended to be exclusive, but are cumulative and in addition to all
other remedies provided by law.
33. Name: The name of the Demised Premises shall be determined by Tenant,
subject to Landlord's consent, which shall not be unreasonably withheld. The
name of the Demised Premises shall not be changed without Landlord's prior
consent, which shall not be unreasonably withheld.
34. Damage by Fire or other Casualty:
34.1. In the event of the damage or destruction of the Demised
Premises, Tenant shall forthwith repair or reconstruct the same to a like or
better condition than existed prior to such damage or destruction. Subject to
any mortgage(s) of the Demised Premises, the net insurance proceeds payable to
Landlord and/or Tenant shall be used for the, repair or reconstruction of the
Demised Premises.
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34.2. The repair or reconstruction of the Demised Premises shall be
effected in accordance with Section 11, above.
34.3. In the event the damage or destruction of the Demised Premises is
covered by the fire and extended peril insurance Tenant is required to carry
pursuant to Section 5.1.2, above, Landlord or Landlord's mortgagee(s) may, but
shall not be required to, negotiate the insurance settlement with the insurer if
Tenant fails to diligently process and negotiate Tenant's claim with the
insurer.
34.4. Subject to the provisions of any mortgage(s) of the Demised
Premises, at the election of Landlord, fire and extended peril insurance
proceeds (not including proceeds of business interruption insurance, which shall
be payable to Tenant except to the extent of rent due under this Lease) shall
not be payable to Tenant but shall instead be deposited in escrow with a bank or
other financial institution selected by Landlord on terms and in accordance with
procedures reasonably satisfactory to Landlord, with funds released during the
course and at completion of the repair or reconstruction, upon inspection and
approval by Landlord of the completed portion of the repair or reconstruction,
and receipt by Landlord of lien waivers from the contractors, subcontractors,
and suppliers.
34.5. If there remains any surplus of insurance proceeds after the
completion of the repair or reconstruction of the Demised Premises, such surplus
shall belong to and be paid to Tenant, subject, however, to the rights of any
mortgagee(s) under any mortgage(s) of the Demised Premises.
34.6. In any event during any time that Tenant is unable to use and
occupy the Demised Premises or any portion thereof as a result of damage or
destruction occurring without fault of Tenant, or as a result of any repairs
thereof, the rent hereunder shall be suspended to the extent, and only to the
extent, of the proceeds of Tenant's business interruption insurance made
available to Landlord.
34.7. Landlord shall have no liability whatsoever with respect to any
goods, fixtures, equipment or other personal property of Tenant, nor shall
Landlord have any liability for loss of revenues or income resulting from fire
or other casualty unless and to the extent resulting from the negligence or
intentional malfeasance of Landlord or Landlord's members, agents or employees.
35. Condemnation:
35.1. If during the term of this Lease, the whole of the Demised
Premises is taken or condemned by any competent public or quasi-public
authority, this Lease shall, at the date of such
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taking, terminate, and current rent shall be prorated as of the date of such
termination.
35.2. If during the term of this Lease, a portion of the Demised
Premises is taken or condemned and it is not practical or economical for Tenant
to retain and operate the remainder in accordance with this Lease, then Tenant
may, at Tenant's election, made within thirty (30) days of such taking or
condemnation, terminate this Lease, and current rent shall be prorated as of the
date of such termination.
35.3. All compensation upon any taking or condemnation of the Demised
Premises shall belong to Landlord, and Tenant shall have no claim thereto.
35.4. Except as provided above, this Lease shall not terminate and
shall remain in full force and effect in the event of a taking or condemnation
of the Demised Premises, or any portion thereof; provided, however, that the
rent hereunder shall be adjusted for the remainder of the term of this Lease
proportionately to the resulting reduction in the number of licensed beds
permitted in the Demised Premises.
36. Assigning and Subletting:
36.1. Tenant may not assign this Lease or any portion of the term
hereof, or sublet the Demised Premises, or any portion thereof, except with the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, and, if and to the extent required by any mortgage(s) of the Demised
Premises, of the mortgagee(s) of the Demised Premises. Tenant's written request
for Landlord's consent to the assignment of this Lease or the subletting of the
Demised Premises must be given at least thirty (30) days prior to the proposed
effective date of the assignment or subletting.
36.2. Notwithstanding any assignment of this Lease or subletting of the
Demised Premises, Tenant and Tenant's guarantors shall remain liable for the
full, faithful and complete performance of this Lease as provided herein.
36.3. As a condition to Landlord's consent to the assignment of this
Lease or the subletting of the Demised Premises, Landlord may require Tenant's
proposed assignee or sublessee to provide such financial and other information
as Landlord reasonably deems appropriate, including, without limitation, copies
of any agreements between Tenant and Tenant's proposed assignee or subtenant,
resumes of the principal officers and employees of Tenant's proposed assignee or
subtenant, and a comprehensive description of the operational experience of
Tenant's proposed assignee or subtenant.
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36.4. As a condition to Landlord's consent to the assignment of this
Lease or subletting of the Demised Premises, Landlord may also require the
principals of any assignee of this Lease or subtenant of the Demised Premises to
assume personal liability for compliance with each and every provision hereof.
36.5. If Tenant or Tenant's approved management company is a
corporation, partnership or other business entity then the following shall be
deemed an assignment of this Lease:
36.5.1. The sale of a majority of the shares of any class of
stock or other equity interest in Tenant or in an approved management company of
the Demised Premises, other than in an initial public offering registered with
the Securities and Exchange Commission or registered or qualified with
applicable state securities agency(ies);
36.5.2. The dissolution or merger of Tenant;
36.5.3. The sale of all or substantially all of the assets of
Tenant; or
36.5.4. Any other transaction entered into for the purpose of
avoiding the applicability of the foregoing provisions.
36.6. The assignment of this Lease or subletting of the Demised
Premises to a subsidiary or affiliate of Tenant is not exempt from the
requirement for Landlord's consent, which shall not be unreasonably withheld.
36.7. The execution or termination of a management or other agreement
giving control of the day-to-day operation of the Demised Premises to any person
or party other than Tenant shall be deemed an assignment of this Lease which
shall require Landlord's prior written consent, which shall not be unreasonably
withheld.
36.8. The consent to any one (1) assignment or subletting shall not be
deemed a consent to a subsequent assignment or subletting.
36.9. Any purported assignment or subletting in violation of this
Section 36 shall be null and void and of no force or effect whatsoever.
36.10. Landlord shall have the right of first refusal to match any
offer for Tenant's assignment of this Lease or for subleasing the Demised
Premises. Landlord shall have thirty (30) days after receipt of a copy or notice
of any proposal to assign this Lease or sublet the Demised Premises within which
to exercise the right of first refusal. Landlord's failure to exercise the right
of first refusal within the thirty (30) day period shall be deemed a waiver
thereof.
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36.11. Tenant shall pay the cost of Landlord's attorney's review of all
documents relating to a proposed assignment or subletting up to a maximum of
$1,000 for each proposed assignment or subletting.
37. Covenants Against Liens:
37.1. Tenant shall not, during the term hereof, suffer or permit any
lien, including, without limitation, any mechanic's or judgment lien or
conditional sales agreement, to be attached to or upon the Demised Premises or
any part thereof by reason of any act or omission on the part of Tenant, and
hereby agrees to save and hold harmless Landlord from or against any such lien
or claim of lien.
37.2. Tenant and any guarantors of Tenant shall not suffer or permit
any federal or state tax lien to attach to any property of Tenant or Tenant's
guarantors.
37.3. In the event that any lien attaches in violation of Section 37.1
or Section 37.2, above, and is not released within thirty (30) days thereafter,
Landlord, in its sole discretion, may pay and/or discharge the same, and Tenant
agrees to repay and reimburse Landlord upon demand for the amount so paid by
Landlord, together with interest thereon at the maximum rate permitted by law,
from the date the sum is paid by Landlord until Landlord is reimbursed in full.
38. Subordination: This Lease is and shall be subordinate to any mortgages
of the Demised Premises now of record. Such subordination is effective without
any further act of Tenant. This Lease shall be subordinated to future mortgages
of the Demised Premises, provided that the lender executes a non-disturbance and
attornment agreement with, and on terms and conditions reasonably acceptable to,
Tenant. Tenant acknowledges that in refinancing the Demised Premises Landlord
may be required to agree to commercially reasonable loan terms which impose
greater burdens on Tenant than are required under the current mortgages of the
Demised Premises. If and when Landlord refinances the Demised Premises, Landlord
shall use reasonable efforts to minimize any inspection, reporting or other
obligations which would be imposed upon Tenant under the terms of this Lease.
39. Relationship of Parties: Nothing contained in this Lease shall be deemed
to constitute Landlord and Tenant as partners or joint venturers, or any other
relationship other than that of lessor and lessee.
40. Further Assurances: Landlord and Tenant covenant and agree to execute
such further documents and instruments as shall be necessary or appropriate to
carry out the provisions of this Lease.
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41. Joint and Several Liability: If more than one (1) person or party is
named as Tenant herein, the obligations of Tenant are joint and several.
42. Attornment: Subject to Section 38, above, in the case of mortgages of
the Demised Premises, Tenant agrees to attorn to any successor in interest to
Landlord entitled to possession of the Demised Premises. The provisions of this
Section 42 shall inure to the benefit of any such successor in interest, shall
be self operative upon any demand by any such successor in interest, and no
further instrument shall be required to effect such attornment. Any successor in
interest to Landlord shall be bound by all of the terms and provisions of this
Lease.
43. Estoppel Certificates: Landlord and Tenant shall, within ten (10) days
after written request from the other, execute and deliver to the other, in
recordable form, a certificate stating that this Lease is unmodified and in full
force and effect, or in full force and effect as modified, and stating the
modifications, and that the other party is not in default hereunder, or is in
default and specifying the nature and extent of the alleged default. Failure to
deliver the certificate within said ten (10) days shall be conclusive upon the
party to whom the request has been given that this Lease is in full force and
effect and has not been modified except as may be represented by the requesting
party and that the requesting party is not in default hereunder.
44. Surrender of Possession: Tenant shall, on or before the last day of the
term of this Lease, or any renewals hereof, Surrender to Landlord the Demised
Premises (including all patient charts and records, subject, however, to
appropriate patient consents, if required, and except as prohibited by
applicable law or regulation) free and clear of sub-tenancies, broom clean and
in good condition and repair, ordinary wear and tear excepted.
45. Notices:
45.1. All notices or other documents required or permitted to be given
hereunder shall be personally delivered, sent by private overnight courier, or
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed to the parties as follows:
Landlord: Monica R. Salusky
2033 North Main Street, Suite 700
Walnut Creek, CA 94596
Telephone: (510) 932-8500
Copy to: John K. Sutherland
2033 North Main Street, Suite 700
Walnut Creek, CA 94596
Telephone: (510) 932-8500
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Tenant: SunQuest SPC, Inc.
7272 East Indian School Road
Suite 214
Scottsdale, AZ 65251
Telephone: (602) 423-1954
45.2. Notices sent by registered or certified mail shall be deemed
given and effective the second day after posting and notices sent by private
overnight courier shall be deemed given and effective the first day after
delivering the same to the other private overnight courier during regular
business hours.
45.3. Landlord and Tenant may change their addresses and/or telephone
numbers for purposes of this Lease by giving notice thereof in accordance with
the provisions of Section 45.1, above.
46. Quiet Enjoyment: If and for so long as Tenant is not in default
hereunder, Landlord agrees that it will not interfere with the peaceful and
quiet occupation and enjoyment of the Demised Premises by Tenant.
47. Corporate Authority: Tenant shall deliver to Landlord upon execution of
this Lease a certified copy of a resolution of its board of directors
authorizing the execution of this Lease and naming the officer who is authorized
to execute this Lease on its behalf.
48. Inspection:
48.1. Landlord shall at all reasonable times have the right to go upon
and inspect the Demised Premises, to post any notice that may be required or
permitted by any law relating to or affecting the liability of Landlord for
labor performed or materials furnished in or for the Demised Premises, and to
show the Demised Premises to prospective purchasers, tenants and lenders.
48.2. The mortgagee(s) of the Demised Premises shall have the right to
inspect the Demised Premises if and to the extent set forth in any mortgage(s)
of the Demised Premises.
49. No Constructive Eviction: The exercise of any right reserved to Landlord
pursuant to Section 48 hereof shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord except in the case of the negligence or
intentional malfeasance of Landlord or Landlord's members, agents or employees.
50. No Representations:
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50.1. Tenant acknowledges that Landlord has made no representations or
warranties whatsoever, express or implied, regarding the physical condition of
the Demised Premises except those contained in this Lease.
50.2. Landlord further hereby specifically disclaims any
representations or warranties, both express and implied, with respect to the
condition, habitability, or suitability of the Demised Premises, or any part
thereof, for the use and purposes permitted hereunder or for any other purpose,
and Landlord does not represent or warrant that the Demised Premises or any part
thereof complies with any laws, ordinances or regulations relating to the use
and occupancy thereof.
50.3. Tenant fully understands that there may be certain repairs and
alterations required for the continued licensing and/or certification of the
Demised Premises, and, except as expressly provided herein, Tenant shall be
fully responsible for the cost of and for effectuating any and all alterations,
maintenance, repair and replacements required to be made for the continued
licensing and certification of the Demised Premises and for any alterations,
maintenance, repair and replacements required to maintain and preserve the
Demised Premises in the condition provided for herein.
51. Applicable Law. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Texas.
52. Headings: The descriptive headings used in this Lease are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
53. Attorneys' Fees: If Landlord or Tenant brings any action to interpret or
enforce this Lease, or for damages for any alleged breach hereof, the prevailing
party in any such action shall be entitled to reasonable attorneys' fees as
awarded by the court in addition to all other recoverable damages and costs.
54. Exhibits: All exhibits attached hereto are incorporated herein by
reference as though set forth in full.
55. Definitions: As used in this Lease, following terms are defined as
follows:
55.1. The term "mortgage" shall include a mortgage, a deed of trust,
and a contract of sale or contract for deed.
55.2. The term "mortgagee" shall include a mortgagee under a mortgage,
a beneficiary under a deed of trust, and a vendor under a contract of sale or
contract for deed.
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55.3. The term "days" shall refer to calendar days unless otherwise
specified.
55.4. The term "hazardous materials" as used in this Lease shall mean
any substance, material, or waste which has been or becomes regulated by any
local governmental authority, the State of Texas, or the United States
government, including, but not limited to, "petroleum" as defined in 42 U.S.C.
Section 6991(8), asbestos, polychlorinated biphenyls, designated as a "hazardous
substance" pursuant to Section 311 or listed pursuant to Section 307 of the
Clean Water Act, defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, or defined as "underground storage tank" under
42 U.S.C. Section 6991.
55.5. The term "affiliate" shall mean a person or entity controlled by,
controlling, or under common control of, directly or indirectly, another person
or entity, an officer, director of employee or another person or entity, any
entity which employs another person or of which a person is a director or
officer, and any person or entity which owns or controls 10 percent of the
securities of an entity. The term "affiliate" also specifically includes
Alliance Healthcare Group, Inc., any subsidiaries of Alliance HealthCare Group,
Inc., and any companies acquired by, merged into, or created by merger with
Alliance HealthCare Group, Inc..
56. Severability: In the event any part or provision of this Lease shall be
determined to be invalid or unenforceable under the laws of the State of Texas,
the remaining portion of this Lease shall, nevertheless, continue in full force
and effect.
57. Time: Time is of the essence of each and every provision of this Lease.
58. Counterparts: This Lease may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same agreement.
59. Binding, Etc: This Lease shall be binding upon, and inure to the benefit
of, Landlord and Tenant, and their respective heirs, personal representatives,
successors in interest and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day and
year first above written.
Landlord: /s/ George M. Rugtiv
----------------------------------------
GEORGE M. RUGTIV
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<PAGE> 27
/s/ Barbara M. Rugtiv
----------------------------------------
BARBARA M. RUGTIV
/s/ Richard L. Mani
----------------------------------------
RICHARD L. MANI
/s/ William H. Barnes
----------------------------------------
WILLIAM H. BARNES
/s/ Doris S. Barnes
----------------------------------------
DORIS S. BARNES
/s/ John K. Sutherland
----------------------------------------
JOHN K. SUTHERLAND
Trustee of The Sutherland Children's
Trust
/s/ Monica R. Salusky
----------------------------------------
MONICA R. SALUSKY
Trustee of The Sutherland Children's
Trust
/s/ Monica R. Salusky
----------------------------------------
MONICA R. SALUSKY
/s/ Donald A. Jacoby
----------------------------------------
DONALD A. JACOBY
Tenant: SUNQUEST SPC, INC.
By: /s/ Jerry M. Walker
----------------------------------------
President
By: /s/ Phillip Rollins
----------------------------------------
Secretary
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Page 1
Escrow No. 77072-C-8- CA
LEGAL DESCRIPTION EXHIBIT
A tract of land out of the J.M. Henderson Survey, situated in Arlington, Tarrant
County, Taxes, and more particularly described as follows:
Beginning at the southeast corner of a tract of land conveyed to Robert K.
Mercer et ux VeLMA, according to the deed recorded in Volume 3135, Page 408,
Deed Records of Tarrant County, Texas, said corner also being in the existing
northerly right-of-way line of Randol Mill Road, said point also being the point
of beginning.
Thence, North 00 degrees 00 minutes 42 seconds West, along the east line of the
said Mercer tract and along the east line of a tract of land conveyed to Peter
C. Janavaris et ux Mary, according to the deed recorded in Volume 3477, Page
224, Deed Records of Tarrant County, Texas, 370.55 feet to a fence post for
corner;
Thence, North 89 degrees 43 minutes 31 seconds East, along the south line of a
tract of land conveyed to William C. Bryant et ux Helen, according to the deed
recorded in Volume 2072, Page 340, Deed Records of Tarrant County, Texas, 229.73
feet to a fence post for corner;
Thence, South 00 degrees 00 minutes 02 seconds West, along the west line of a
tract of land conveyed to Doyle V. Barcroft et ux Doris E., according to the
deed recorded in Volume 3347, Page 333, Deed Records of Tarrant County, Texas,
371.65 feet to an iron rod for corner, said iron rod also being in the existing
northerly right-of-way line of Randol Mill Road;
Thence, West, along the existing northerly right-of-way line of Randol Mill
Road, 229.65 feet to the point of beginning.
The tract of land herein described contains 82,238 square feet or 1.9568 acres
of land, more or less.
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