<PAGE> 1
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
UNISON HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
UNISON HEALTHCARE CORPORATION
8800 North Gainey Center Drive, Suite 245
Scottsdale, Arizona 85258
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 27, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Unison HealthCare Corporation,
a Delaware corporation (the "Company"), will be held on Wednesday, August 27,
1997, at 9:00 a.m. local time, at the Marriott Suites Hotel, 7325 East Third
Avenue, Scottsdale, Arizona 85251 for the following purposes:
(1) To elect two directors as Class II directors to serve until the
2000 Annual Meeting of Stockholders or until their respective successors are
elected;
(2) To consider and vote upon a proposal to amend Unison's 1995
Stock Option Plan to increase the number of shares of Common Stock authorized
for issuance thereunder from 800,000 to 1,500,000; and
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on July 7, 1997, are
entitled to vote at the meeting and at any adjournment or postponement thereof.
Shares can be voted at the meeting only if the holder is present or represented
by proxy. A list of stockholders entitled to vote at the meeting will be open
for inspection at the Company's corporate headquarters for any purpose germane
to the meeting during ordinary business hours for ten days prior to the meeting.
A copy of the Company's 1996 Annual Report to Stockholders, which
includes audited financial statements, is enclosed. All stockholders are
cordially invited to attend the Annual Meeting in person.
By order of the Board of Directors,
James A. Rice
Secretary
Scottsdale, Arizona
July 17, 1997
- --------------------------------------------------------------------------------
IMPORTANT: IT IS IMPORTANT THAT YOUR STOCKHOLDINGS BE REPRESENTED AT THIS
MEETING. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE> 3
UNISON HEALTHCARE CORPORATION
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 27, 1997
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES ................................................. 1
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF ................................................... 2
Security Ownership of Certain Beneficial Owners and Management ........................ 2
PROPOSAL 1: ELECTION OF DIRECTORS ................................................................. 4
Executive Officers .................................................................... 6
Section 16(a) Beneficial Ownership Reporting Compliance ............................... 7
Board Meetings and Committees ......................................................... 8
Executive Compensation ................................................................ 9
Summary Compensation Table ................................................ 9
Option Grants in Last Fiscal Year ......................................... 10
Fiscal Year-End Option Value Table ........................................ 11
Ten-Year Option Repricings ................................................ 12
Report on Repricing of Options ............................................ 12
Compensation of Directors ................................................. 13
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements .............................................................. 13
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions ................................................................. 13
Certain Transactions ...................................................... 14
Board Compensation Committee Report on Executive Compensation ............. 16
Comparison of Stock Performance ........................................... 18
PROPOSAL 2: APPROVAL TO AMEND THE 1995 STOCK OPTION PLAN .......................................... 18
INDEPENDENT AUDITORS .............................................................................. 23
OTHER MATTERS ..................................................................................... 23
STOCKHOLDER PROPOSALS ............................................................................. 23
</TABLE>
i
<PAGE> 4
UNISON HEALTHCARE CORPORATION
8800 NORTH GAINEY CENTER DRIVE, SUITE 245
SCOTTSDALE, ARIZONA 85258
- --------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 27, 1997
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of Unison HealthCare Corporation ("Unison"
or the "Company") for use at the Annual Meeting of Stockholders to be held on
August 27, 1997, or any adjournment thereof (the "Annual Meeting"). All shares
represented by properly executed proxies, unless such proxies have previously
been revoked, will be voted in accordance with the direction on the proxies. If
no direction is indicated, the shares will be voted in favor of the proposals to
be acted upon at the Annual Meeting. The Board of Directors is not aware of any
other matter which may come before the meeting. If any other matters are
properly presented at the meeting for action, including a question of adjourning
the meeting from time to time, the persons named in the proxies and acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment.
When stock is in the name of more than one person, the proxy is
valid if signed by any of such persons unless the Company receives written
notice to the contrary. If the stockholder is a corporation, the proxy should be
signed in the name of such corporation by an executive or other authorized
officer. If signed as attorney, executor, administrator, trustee, guardian or in
any other representative capacity, the signer's full title should be given and,
if not previously furnished, a certificate or other evidence of appointment
should be furnished.
This Proxy Statement and the form of proxy which is enclosed are
being mailed to the Company's stockholders commencing on or about July 17, 1997.
A stockholder executing and returning a proxy has the power to
revoke it at any time before it is voted. A stockholder who wishes to revoke a
proxy can do so by executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of the Company prior to the vote at the Annual
Meeting, by written notice of revocation received by the Secretary prior to the
vote at the Annual Meeting or by appearing in person at the Annual Meeting,
filing a written notice of revocation and voting in person the shares to which
the proxy relates.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by the directors, officers and
regular employees of the Company. Such persons will receive no additional
compensation for such services. Arrangements will also be made with certain
brokerage firms and certain other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Common Stock
held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection therewith. It is not anticipated that any other persons
will be engaged to solicit proxies. However, the Company may seek the services
of an outside proxy solicitor in the event such services become necessary. All
expenses incurred in connection with this solicitation will be borne by the
Company.
The mailing address of the principal corporate office of the Company
is 8800 North Gainey Center Drive, Suite 245, Scottsdale, Arizona 85258.
<PAGE> 5
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on July 7, 1997
(the "Record Date") will be entitled to vote at the meeting. On the Record Date,
there were issued and outstanding 6,422,096 shares of Common Stock. Each holder
of Common Stock is entitled to one vote, exercisable in person or by proxy, for
each share of the Company's Common Stock held of record on the Record Date. The
presence of the holders of a majority of the shares of Common Stock entitled to
vote, in person or by proxy, is required to constitute a quorum for the conduct
of business at the Annual Meeting. The Inspector of Election appointed by the
Chairman of the Board of Directors shall determine the shares represented at the
meeting and the validity of proxies and ballots and shall count all proxies and
ballots. The two nominees for director receiving the highest number of
affirmative votes (whether or not a majority) cast by the shares represented at
the Annual Meeting and entitled to vote thereon, a quorum being present, shall
be elected as directors. The proposal to amend the 1995 Stock Option Plan will
be approved if it receives the affirmative votes of a majority of the shares
represented at the Annual Meeting and entitled to vote thereon.
Although the only issues expected to come before the Annual Meeting
are the election of two Class II directors and the proposal to amend the 1995
Stock Option Plan to increase the number of shares available for issuance
thereunder, it is possible that other matters may properly be brought before the
meeting. Abstentions and broker non-votes are each included in the determination
of the number of shares present for quorum purposes. Because abstentions
represent shares entitled to vote, the effect of an abstention will be the same
as a vote cast against a proposal, except with respect to the election of
directors, for which only affirmative votes are relevant. A broker non-vote, on
the other hand, will not be regarded as representing a share entitled to vote on
the proposal and, accordingly, will have no effect on the voting for such
proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As described more fully under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Unison's 1996 Annual Report
on Form 10-K, 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, Jerry M. Walker, Craig R. Clark and Paul J. 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 Health Care
Corporation and affiliated companies ("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 information regarding the beneficial
ownership of the Company's Common Stock at July 7, 1997 with respect to (i) each
person known to the Company to own beneficially more than five percent of the
outstanding shares of the Company's Common Stock, (ii) each director of the
Company, (iii) each of the executive officers listed in the Summary Compensation
Table set forth herein and (iv) all directors and executive officers of the
Company 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) ............... 477,335 7.41
U.S. Bancorp (4)...................... 369,100 5.75
111 SW Fifth Avenue
Portland, Oregon 97204
Phillip R. Rollins (5) ............... 364,098 5.62
Jerry M. Walker (6) .................. 287,946 4.48
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
----------------------------
IDENTITY OF STOCKHOLDER OR GROUP NUMBER PERCENT
- -------------------------------- ------ -------
<S> <C> <C>
Paul J. Contris (7) ................ 193,294 3.01
John T. Lynch, Jr. (8) ............. 214,331 3.30
Craig R. Clark (9) ................. 38,022 *
Mark W. White (10) ................. 19,788 *
Tyrrell L. Garth (11) .............. 16,746 *
John T. Casey (12) ................. 18,746 *
L. Robert Oberfield (13) ........... 8,961 *
All executive officers and directors
as a group (16 persons) (14) ....... 3,269,667 48.93%
</TABLE>
- ------------------------------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission ("SEC") and generally
includes voting or investment power with respect to securities. In
accordance with SEC 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 Common Stock issued to Mr. Kremser in
connection with the acquisition of Signature on October 31, 1996
(the "Signature Acquisition"), including additional shares issued to
him in accordance with an adjustment provision of the Signature
Acquisition agreements relating to stockholders' equity (the "Equity
Adjustment Amount"). Also includes 50,000 shares of Common Stock
issuable upon exercise of immediately exercisable options. Does not
include 15,000 shares of Common Stock issuable upon exercise of
options which will vest in December 1997 and thereafter.
(3) Includes 458,089 shares of Common Stock issued to Whitehead Family
Investments, Ltd. ("WFI") upon conversion of the Convertible
Debenture issued to the former shareholders of BritWill HealthCare
Company ("BritWill") as partial payment of the purchase price for
the acquisition of BritWill (the "BritWill Acquisition"). Mr.
Whitehead has sole voting and investment power with respect to the
shares held by WFI. Does not include 8,750 shares of Common Stock
issuable upon exercise of outstanding options which will vest in
September 1998. Includes 19,246 shares of Common Stock underlying
options exercisable within 60 days.
(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 132,759 of these shares are pledged to secure payment of
the deferred purchase price for the BritWill Acquisition. Does not
include 20,000 shares of Common Stock issuable upon exercise of
options which will vest in September 1998. Includes 53,924 shares of
Common Stock underlying options exercisable within 60 days.
(6) 265,518 of these shares are pledged to secure payment of the
deferred purchase price for the BritWill Acquisition.
(7) 86,294 of these shares are pledged to secure payment of the deferred
purchase price for the BritWill Acquisition.
3
<PAGE> 7
(8) Includes 10,140 shares of Common Stock as to which he currently
shares investment power with Bruce H. Whitehead. Excludes 7,500
shares of Common Stock issuable upon exercise of options which will
vest in September 1998. Includes 66,746 shares of Common Stock
underlying options exercisable within 60 days.
(9) Mr. Clark currently shares investment power with Mr. Whitehead over
these shares, which are pledged to secure the deferred purchase
price for the BritWill Acquisition.
(10) Includes 3,042 shares of Common Stock as to which he currently
shares investment power with Bruce H. Whitehead. Does not include
7,500 shares of Common Stock issuable upon exercise of options which
will vest in September 1998. Includes 16,746 shares of Common Stock
underlying options exercisable within 60 days.
(11) Does not include 7,500 shares of Common Stock issuable upon exercise
of options which will vest in September 1998. Includes 16,746 shares
of Common Stock underlying options exercisable within 60 days.
(12) Does not include 7,500 shares of Common Stock issuable upon exercise
of options which will vest in September 1998. Includes 16,746 shares
of Common Stock underlying options exercisable within 60 days.
(13) Does not include 8,474 shares of Common Stock issuable upon exercise
of options which will vest over a period beginning in September
1998. Includes 7,711 shares of Common Stock underlying options
exercisable within 60 days.
(14) Includes a total of 210,887 shares of Common Stock underlying
options exercisable within 60 days (including those described in the
preceding footnotes) and the shares owned by Messrs. Walker, Contris
and Clark notwithstanding that they are no longer serving as
executive officers.
PROPOSAL 1: ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting to serve as
Class II directors until the 2000 Annual Meeting of Stockholders and until their
respective successors are elected. UNLESS OTHERWISE INSTRUCTED, THE PROXY
HOLDERS WILL VOTE THE PROXIES RECEIVED BY THEM FOR THE COMPANY'S NOMINEES, BRUCE
H. WHITEHEAD AND TYRRELL L. GARTH. Each nominee is currently a director of the
Company.
The Certificate of Incorporation and Bylaws of the Company provide
that the Board of Directors shall have three to nine members, as determined by
resolution of the Board of Directors, and shall be divided into three classes,
designated as Class I, Class II and Class III directors. Terms of Class I
directors and Class III directors expire upon the election and qualification of
directors at the annual meetings of stockholders to be held in 1999 and 1998,
respectively. At each annual meeting of stockholders, directors will be elected
for a full term of three years to succeed those directors whose terms are
expiring. Directors may be removed only for cause.
If any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director.
Any stockholder entitled to vote for the election of directors at a
meeting may nominate persons for election as directors only if written notice of
such stockholder's intent to make such nomination is given, either by personal
delivery at 8800 North Gainey Center Drive, Suite 245, Scottsdale, Arizona, or
by United States mail, postage prepaid to Secretary, Unison HealthCare
Corporation, 8800 North Gainey Center Drive, Suite 245, Scottsdale, Arizona
85258, not later than: (i) with respect to the election to be held at an annual
meeting of stockholders, not less that 60 nor more than 90 days in advance of
such meeting, and (ii) with respect to any election to be held at a special
meeting of stockholders for the election of directors, the close of business on
the fifteenth day following the date on which notice of such meeting is first
given to stockholders. Each such notice must set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that such stockholder is a holder
of record of stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
4
<PAGE> 8
specified in the notice; (c) a description of all arrangements or understandings
between such stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by such stockholder; (d) such other information regarding each
nominee proposed by such stockholder as would have been required to be included
in a proxy statement filed pursuant to the proxy rules of the SEC if such
nominee had been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a director of the
Company if elected. The presiding officer of the meeting of the stockholders may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure. No stockholder has given notice in accordance with this
procedure regarding an intent to make any nominations at the Annual Meeting.
The names of the nominees for director and of the directors whose
terms continue beyond the Annual Meeting, and certain information about them,
are set forth below.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---------------------------- ------- ------------------------------------------------------------------------
Nominees for election as Class II directors whose terms will expire in 2000:
<S> <C> <C>
Bruce H. Whitehead (1) 44 Bruce H. Whitehead 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 WFI. 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.
Tyrrell L. Garth (2) 48 Tyrrell L. Garth 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 counsel to BritWill prior to its acquisition by
Unison in August 1995.
<CAPTION>
Class I directors whose terms will expire in 1999:
David A. Kremser (1)(3)(4) 49 David A. Kremser 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 July
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 Phillip R. Rollins 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.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---------------------------- ------- ------------------------------------------------------------------------
Class III directors whose terms will expire in 1998:
<S> <C> <C>
John T. Casey (2)(4) 51 John T. Casey has served as a Director of Unison since August 1995.
Mr. Casey was the Chief Executive Officer of InteCare LLC, a hospital
management firm in Irving, Texas, until June 1, 1997. From October
1991 through August 1995, Mr. Casey was the Chief Operating Officer
of American Medical International, Inc., 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.
John T. Lynch, Jr. (1)(4) 49 John T. Lynch, Jr. 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 (2)(4) 57 Mark W. White has served as a Director of Unison since August 1995
and has been an attorney in private practice since 1987. From 1983 to
1987, Mr. White served as Governor of the State of Texas.
</TABLE>
- ------------------------------------
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) 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 o Directors.
(4) Member of Audit Committee.
EXECUTIVE OFFICERS
The executive officers of the Company serve until their successors
have been chosen or until their earlier resignation or removal. The current
executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------- ------------ ----------------------------------------------------------------------------
<S> <C> <C>
David A. Kremser 49 Interim Chief Executive Officer and Chief Financial Officer, Director
Phillip R. Rollins 39 Executive Vice President-Operations, Chief Operating Officer, Director
James A. Rice 50 Executive Vice President, General Counsel and Secretary
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
Clayton Kloehr 40 Senior Vice President and Treasurer
</TABLE>
6
<PAGE> 10
James A. Rice has served as Executive Vice President, General
Counsel and Secretary of Unison since June 5, 1997. From 1995 to June 1997 when
he joined Unison, he was Special Counsel to Kaiser Foundation Health Plan, Inc.,
an operator of prepaid health plans. From 1983 to 1995, Mr. Rice was an attorney
in private practice. From 1979 to 1983, Mr. Rice was Vice President, Associate
General Counsel and Assistant Secretary of American Medical International, Inc.,
a publicly traded hospital management company. Mr. Rice is a Certified
Administrator of Residential Care Facilities for the Elderly in California.
L. Robert Oberfield 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 has served as President of Sunbelt Therapy
Management Services, Inc. since the acquisition of Sunbelt by Unison in March
1996. For the past seven 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 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 health care
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. 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.
Clayton Kloehr has served as Senior Vice President and Treasurer
since July 1, 1997. From August 1995 through June 30, 1997, Mr. Kloehr provided
financial consulting services to Unison. From February 1995 until August 1995,
Mr. Kloehr was BritWill's Treasurer. During the 14 years prior thereto Mr.
Kloehr was employed by Placid Oil Company, a privately held oil exploration and
production company based in Dallas, Texas, most recently as Manager of Treasury
Operations.
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
SEC. 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: (i) on June 24, 1997 Messrs. Walker, Clark and
Oberfield and Ms. Troxell reported on a Form 5 for the year ended December 31,
1996 a repricing of options on January 16, 1996; (ii) on June 24, 1997, Mr.
Rollins amended a Form 5 to report the same repricing of options; and (iii)
Messrs. Contris, Whitehead, Garth, Casey, Lynch and White have not yet reported
on a Form 5 for the year ended December 31, 1996, a repricing of options on
January 16, 1996.
7
<PAGE> 11
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 13 meetings during the fiscal
year ended December 31, 1996. No director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors and any committee on which
such director served during the period of such service.
The Board had during 1996 a Compensation Committee and an Audit
Committee. The Compensation Committee currently consists of Messrs. Garth, Casey
and White and met three times during 1996. The Compensation Committee reviews
salaries and benefit programs designed for senior management, officers and
directors, and administers the Company's 1995 Stock Option Plan (the "1995
Plan") with a view to ensuring that the Company is attracting and retaining
highly qualified managers through competitive salary and benefit programs and
encouraging extraordinary effort through incentive rewards. The Audit Committee
currently consists of Messrs. Kremser, Lynch, Garth and White. The Audit
Committee met twice during 1996. The Audit Committee meets independently with
representatives of the Company's independent auditors and with representatives
of senior management. The Committee reviews the general scope of the Company's
annual audit, the fee charged by the independent auditors and other matters
relating to internal control systems. In addition, the Audit Committee is
responsible for reviewing and monitoring the performance of non-audit services
by the Company's auditors. The Committee is also responsible for recommending
the engagement or discharge of the Company's independent auditors.
The Board does not have a nominating committee or a committee
performing the functions of a nominating committee. Nominations of persons to be
directors are considered by the full Board of Directors.
The Board established an Executive Committee on February 26, 1997,
and appointed Messrs. Kremser, Whitehead and Lynch to the new committee. The
Executive Committee, which has (except as may be limited by law) the full
authority of the Board of Directors between meetings of the Board, was created
to respond to rapidly changing conditions at the Company.
8
<PAGE> 12
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) the Company's Chief Executive Officer and (ii) the four other executive
officers who were serving as executive officers at December 31, 1996.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------------- -----------
SECURITIES
UNDERLYING
SALARY BONUS OPTIONS 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 and Chief ... 1994 14,231 20,000 -- 88,250(6)
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 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.
(6) Includes consulting fees of $87,750 paid by BritWill before Mr. Clark
became an employee of BritWill and $500 of fees as a director of BritWill.
See "-- Employment Contracts, Termination of Employment, and
Change-in-Control Arrangements."
(7) Mr. Contris served as Unison's Executive Vice President-Finance and Chief
Accounting Officer from August 15, 1995 until June 1996. Effective April
25, 1997, Mr. Contris resigned as Executive Vice President-Acquisitions
and Development and as a Director.
9
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants
during the last fiscal year to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
- ----------------------------------------------------------------------------- AT ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE
TOTAL APPRECIATION FOR OPTION
NUMBER OF OPTIONS EXERCISE TERM (4)
SECURITIES GRANTED TO OR BASE -------------------------
UNDERLYING EMPLOYEES PRICE
OPTIONS IN FISCAL ($/SH) EXPIRATION
NAME GRANTED (1) YEAR (2) (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 9.5 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 as described
below in "- Report on Repricing of Options."
(2) Based on total grants during the fiscal year of 412,412.
(3) These options (except the grant of options for 60,000 shares to Mr. Clark)
were granted in September 1996 with an exercise price of $13.75 per share
and were repriced in December 1996 to $9.50 per share.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% or 10% compounded
annually from the date the respective options were granted to their
expiration date and are not presented to forecast possible future
appreciation, if any, in the price of the Common Stock. The potential
realizable value of the foregoing options is calculated by assuming that
the market price of the underlying security appreciates at the indicated
rate for the entire term of the option and that the option is exercised at
the repriced exercise price and sold on the last day of its term at the
appreciated price.
10
<PAGE> 14
FISCAL YEAR-END OPTION VALUE TABLE (1)
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning the number
and value of options outstanding at the end of the last fiscal year.
There were no option exercises during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS
OPTIONS AT FISCAL AT FISCAL YEAR-
YEAR-END (#) END ($)
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.
<PAGE> 15
TEN-YEAR OPTION REPRICINGS
The following table sets forth information with respect to repricings
of options held by Unison's executive officers.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF MARKET OPTION TERM
SECURITIES PRICE OF EXERCISE REMAINING
UNDERLYING STOCK AT PRICE AT AT DATE OF
OPTIONS TIME OF TIME OF NEW REPRICING OR
REPRICED REPRICING OR REPRICING OR EXERCISE AMENDMENT
NAME DATE OR AMENDED AMENDMENT AMENDMENT PRICE (MONTHS)
- ---------------------------------- ---- ---------- --------- --------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Jerry M. Walker, President, Chief 01/16/96 33,924 $ 9.00 $ 10.00 $ 9.00 114
Executive Officer
Phillip R. Rollins, Executive Vice 01/16/96 33,924 9.00 10.00 9.00 114
President-Operations, Chief 12/03/96 40,000 9.50 13.75 9.50 117
Operating Officer
Craig R. Clark, Executive Vice 01/16/96 33,924 9.00 10.00 9.00 114
President, Chief Financial Officer 12/03/96 40,000 9.50 13.75 9.50 117
and Chief Accounting Officer
Paul J. Contris, Executive Vice 01/16/96 33,924 9.00 10.00 9.00 114
President-Acquisitions and 12/03/96 40,000 9.50 13.75 9.50 117
Development
L. Robert Oberfield, President, 01/16/96 6,185 9.00 10.00 9.00 114
Quest Pharmacies, Inc. 12/03/96 10,000 9.50 13.75 9.50 117
Paul G. Henderson, President, 12/03/96 10,000 9.50 13.75 9.50 117
Sunbelt Therapy Management
Services, Inc.
Terry Troxell, Senior Vice 01/16/96 6,185 9.00 10.00 9.00 114
President-Clinical Operations 12/03/96 7,500 9.50 13.75 9.50 117
William G. Allen, Jr., Senior Vice 01/16/96 6,185 9.00 10.00 9.00 114
President-Operations 12/03/96 6,500 9.50 13.75 9.50 117
</TABLE>
REPORT ON REPRICING OF OPTIONS
Stock options granted effective August 10, 1995, at an exercise price
of $10.00 were repriced to $9.00 per share in January 1996 to conform the
exercise price to the per share price of the Common Stock in the Company's
initial public offering of Common Stock during December 1995 and January 1996
(the "IPO"). Stock options granted September 6, 1996, at an exercise price of
$13.75 were repriced to $9.50 per share in December 1996 following a decline in
the market price of the Company's Common Stock subsequent to the grant date.
Compensation Committee
John T. Casey
Tyrrell L. Garth
Mark W. White
12
<PAGE> 16
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
1995 Plan. Directors who are also employees 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.
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 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 prorated 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 Common Stock under the 1995 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 the 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 "Election of Directors" and " -- Directors and Executive
Officers."
13
<PAGE> 17
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, Messrs. Garth and 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 payments on monthly contingent obligations and 561,815
shares of Common Stock delivered to the former BritWill
shareholders. The proceeds from the sale in October 1996 of
$100 million of 12 1/4% Senior Notes Due 2006 (the "Senior
Notes") were used (in part) to prepay in January 1997 the
remaining $8.0 million subordinated note and $1.75 million of
contingent payment obligations (the "Additional 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
December 1995.
- Mr. Garth's company, Cheyenne Capital, received consulting
fees of $24,000 per year from Unison from August 1995 through
December 31, 1996, when the consulting agreement was
terminated.
CERTAIN 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 BritWill
Acquisition Obligations, Mr. Whitehead currently is beneficially Unison's second
largest stockholder 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
"Compensation Committee Interlocks and Insider Participation in Compensation
Decisions." Messrs. Whitehead (81.5%), Lynch (1.8%) and Clark (6.8%) 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 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
14
<PAGE> 18
Healthcare Investors, Inc. ("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 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 Mr.
Kremser and BritWill Investments Company, Ltd. is controlled
by Mr. 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 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 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 is 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 acquisition of American Professional Holding, Inc. and
Memphis Clinical Laboratory, Inc.
15
<PAGE> 19
The Company has entered into an 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 this agreement,
Woodhill is entitled to receive $15,000 per month plus expenses and Mr. Lynch is
granted options to purchase 50,000 shares of Common Stock at an exercise price
of $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 Mr. 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 Common Stock
with the aggregate balance of $2.0 million paid in cash. In January 1997, but
with an effective date of November 24, 1996, Unison purchased the remaining 10%
of Sunbelt stock. 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 Common Stock.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview. The Compensation Committee of the Board of Directors (the
"Committee") was established in August 1995 and is composed of independent
directors, none of whom is or has been an employee of Unison. As part of its
duties, the Committee makes recommendations to the full Board with respect to
salaries of executive officers and administers the 1995 Plan.
Executive Compensation Policies and Administration. The fundamental
policy of the Committee is to provide to Unison's executive officers competitive
compensation based upon their personal performance and contribution to the
financial success of the Company. In determining the compensation for a
particular executive officer, the Committee is guided by the following
objectives:
- Attracting and retaining highly qualified officers with
competitive compensation packages; - Motivating those officers to
achieve and maintain superior performance levels;
- Making a significant portion of each executive officer's total
compensation package at risk and dependent on Company performance
and creation of stockholder value; and
- Aligning executive officers' financial interests with those of the
other stockholders of the Company.
The Committee believes that total compensation for executive officers
should be sufficiently competitive with compensation paid by long-term care
companies of similar size, lines of business and geographic location so that
Unison can attract and retain qualified officers who will contribute to the
Company's long-term success. The Committee engaged in 1995 an independent
compensation consultant who provided to the Company a market survey of
compensation data. The survey included 77 health care companies, of which 24
were long-term care companies. Initial compensation levels, which were
established by written contract on August 15, 1995, were determined in part
16
<PAGE> 20
in reliance on the compensation ranges for comparable positions reported in the
survey. The compensation levels established were below the medians reported in
the survey for comparable positions.
Compensation payments in excess of $1 million to the executive officers
named in the Summary Compensation Table are not deductible by Unison for federal
income tax purposes under Section 162(m) of the Internal Revenue Code of 1986,
as amended. The Company does not presently pay, and does not anticipate paying
in the foreseeable future, compensation subject to the $1 million deduction
limitation to any of its executive officers.
COMPONENTS OF EXECUTIVE COMPENSATION
Base Salary. Base salaries are established by the Committee based on an
executive's performance and contribution to the Company, scope of
responsibilities, individual performance and comparisons to pay practices of
competitors.
In early 1996, the Committee increased base salaries for executive
officers to make them more competitive with executive salaries being paid by
other long-term care companies and to recognize the substantial increase in the
size and scope of the Unison's operations as a result of strategic acquisitions
in 1995 and 1996.
Performance-Based Compensation. A description of the incentive cash
bonus provisions contained in the employment agreement of Mr. Rollins appears
above under "- Employment Contracts, Termination of Employment and
Change-in-Control Arrangements." The Committee expects to reformulate corporate
policy in regards to incentive compensation in the context of the Board's
ongoing efforts to recruit a new Chief Executive Officer and Chief Financial
Officer.
Stock Options. During 1996, the Committee recommended and the Board
approved grants of stock options to certain of the Company's executive officers
and other key employees under the 1995 Plan. These grants were designed to align
the interests of each individual with those of the Company's stockholders and
provide each individual with an incentive to manage the Company from the
perspective of an owner with an equity stake in the business. The size of
individual option grants was generally intended to reflect the officer's
position within the Company and his or her performance and contributions to the
Company. The eight executive officers, at December 31, 1996, of Unison received
an aggregate of 224,000 options in 1996 vesting over periods of two to four
years.
CEO Compensation. Compensation for Unison's former Chief Executive
Officer, Mr. Walker, was determined based on the same general policies and
criteria as the compensation for the other executive officers. During 1996 Mr.
Walker's base salary was increased from $250,000 to $275,000 to make his salary
more competitive with chief executive salaries being paid by other long-term
care companies and commensurate with his increased responsibilities as a result
of the completion in 1995 and 1996 of strategic acquisitions which substantially
increased the size and scope of the Company's operations.
Compensation Committee
John T. Casey
Tyrrell L. Garth
Mark W. White
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report, and
the performance graph immediately following, may not be incorporated by
reference into any such filings.
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COMPARISON OF STOCK PERFORMANCE
The following graph compares the cumulative total returns for the
Company's Common Stock (Nasdaq/NMS:UNHC), the Nasdaq Health Services Index and
the Nasdaq National Market Index for the period December 19, 1995 through May
30, 1997.
PROPOSAL 2: APPROVAL TO AMEND THE 1995 STOCK OPTION PLAN
Unison's Board of Directors has declared advisable and directed that
there be submitted to the stockholders of Unison a proposed amendment to
Unison's 1995 Stock Option Plan (the "1995 Plan") which would increase the
number of shares of Common Stock authorized for issuance under the 1995 Plan
from 800,000 to 1,500,000. As of July 7, 1997, options to purchase 592,966
shares have been granted and are outstanding under the 1995 Plan.
For the year ended December 31, 1996, Unison recorded a loss of $23.4
million, more than two-thirds of its total stockholders equity. The Company and
certain of its current and former directors and officers are defendants in
several class action lawsuits seeking unspecified damages under federal and
California securities laws and common law. The Company is paying substantial
additional interest with respect to its outstanding Senior Notes as a result of
delays in causing an exchange offer registration statement to be filed and
become effective under applicable securities laws, and the additional interest
will continue to accrue until the exchange offer registration statement becomes
effective. Certain of the Company's executive officers, including its Chief
Executive Officer and Chief Financial Officer, resigned earlier this year, and
the ongoing search for appropriate replacements has not yet been completed.
Meanwhile, the Common Stock, which traded at $13.125 on December 31, 1996 closed
at $3.125 on July 7, 1997.
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One result of the foregoing has been that the Company has faced
significant difficulty in attracting and retaining key executives and employees.
The Company simply cannot afford to use its limited cash resources to pay the
level of salaries one might expect would attract the best people. Moreover,
options previously granted to Unison's key employees, many of whom have done
difficult jobs well under challenging circumstances, are of little or no value
as an incentive because of the sharp decline in the market value of the
underlying stock. Indeed, of the options outstanding, approximately 453,000 (or
76%) are well "out of the money," being exercisable at between $8.00 and $10.50
per share. Although the Board of Directors is fully aware that issuing
attractive options to current and new employees necessarily dilutes the
ownership interest of existing stockholders, the Board nevertheless believes
that this action is imperative to attract and retain the human resources that
will be essential to turn the Company around and provide value to the
stockholders. UNLESS OTHERWISE INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE
PROXIES RECEIVED BY THEM FOR THE PROPOSAL TO AMEND THE 1995 PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER.
The description of the 1995 Plan set forth below is only a summary and
is qualified in its entirety by reference to the text of the 1995 Plan, a copy
of which is available at no expense from the Secretary of the Company upon
request. Capitalized terms not otherwise defined shall have the meanings
assigned to such terms in the 1995 Plan.
THE 1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "1995 Plan") was adopted by
the Board of Directors effective July 10, 1995, and approved by the stockholders
on August 8, 1995. The 1995 Plan was amended in October 1996 to increase, from
511,046 to 800,000, the number of shares reserved for issuance under the 1995
Plan.
The 1995 Plan is divided into two separate components: (i) a
discretionary option grant program (the "Discretionary Option Grant Program")
under which eligible individuals may, at the discretion of the Compensation
Committee (the "Committee") of the Board of Directors, be granted options to
purchase shares of Common Stock at an exercise price determined by the Committee
and (ii) an automatic option grant program (the "Automatic Option Grant
Program") under which option grants will automatically be made at periodic
intervals to eligible non-employee members of the Board of Directors to purchase
shares of Common Stock at an exercise price equal to 100% of their fair market
value on the grant date.
THE DISCRETIONARY OPTION GRANT PROGRAM
Eligibility and Participation. The Discretionary Option Grant Program
is administered by the Committee, and the Committee, as the administrator of the
1995 Plan, has complete discretion to determine which eligible individuals are
to receive option grants. In general, the only consideration received by the
Company for the grant of an award will be past services or the expectation of
future services, or both. The 1995 Plan does not confer on any participant in
the 1995 Plan (a "Participant") any right with respect to continued employment
or other services to the Company and will not interfere in any manner with the
right of the Company to terminate a Participant's employment or other services.
Administration. The 1995 Plan is administered by the Committee, which
is constituted to permit the 1995 Plan to comply with SEC Rule 16b-3. The
Committee is authorized to: (i) select Participants; (ii) approve forms for
grants under the 1995 Plan; (iii) determine the time or times when such option
grants are to be made, including the number of shares subject to each such
grant; (iv) designate the status of any granted option as either an incentive
stock option or a non-qualified stock option under the Federal tax laws (except
that Nonemployee Directors are only eligible to receive Nonqualified Stock
Options); (v) set the exercise price for any Nonqualified Stock Option; (vi) set
the vesting schedule and exercise period to be in effect for the option grant;
(vii) fix the maximum term for which any granted option is to remain
outstanding; (viii) extend and maintain, or arrange for the extension and
maintenance of, credit to a Participant to purchase shares pursuant to the
exercise of options (subject to applicable
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laws and regulations); (ix) designate grants, or amend existing grants, which
allow transfer between immediate family members; (x) modify, extend or renew
outstanding options granted under the 1995 Plan, accept the surrender of
outstanding options (to the extent not previously exercised), reduce the
exercise price of outstanding options, or authorize the granting of new options
in substitution therefor (to the extent not previously exercised and with an
exercise price per share based upon the fair market value of the Common Stock on
the new grant date), none of which shall alter or impair any rights of the
Participant; (xi) modify grants to foreign nationals to reflect foreign tax
laws; (xii) include in grants other terms consistent with the purposes of the
1995 Plan such as discretionary performance standards, tax withholding
provisions, or other forfeiture provisions regarding competition and
confidential information.
Upon an acquisition of the Company 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 Participant of an amount per option share equal to the excess of
the highest fair market value of the Common Stock during the 60-day period
preceding the acquisition over the option exercise price. A similar cash payment
will be made to each Participant upon the dissolution or liquidation of the
Company.
Limitations on Awards. Except pursuant to the Automatic Option Grant
Program, no grants are required to be made during any calendar year. No
Incentive Stock Option ("ISO") may be exercised more than ten years from the
date of grant (five years in the case of a grant to a Participant owning more
than 10% or more of the total combined voting power of all classes of stock of
the Company or any ISO Group Member), three months after the date the
Participant ceases to perform services for the Company or any ISO Group Member
(for reasons other than death or disability), one year after the date the
Participant ceases to perform services for the Company or any ISO Group Member
if cessation is due to death or disability, or the date the Participant ceases
to perform services for the Company or any ISO Group Member if cessation is for
cause. No Nonqualified Stock Option may be exercised more than ten years from
the date of grant, two years after the date the Participant ceases to perform
services for the Company or any Affiliated Group Member (for reasons other than
death, disability, retirement or cause), three years after the date the
Participant cease to perform services for the Company or any Affiliated Group
Member if cessation is due to death, disability or retirement, or the date the
Participant ceases to perform services for the Company or any Affiliated Group
Member if cessation is for cause.
Pricing and Payment of Options. The per share exercise price of each
stock option granted under the 1995 Plan will be established by the Committee at
the time of grant. Subject to the provisions of the Internal Revenue Code of
1986, as amended, grants to Participants may be either ISOs or Nonqualified
Stock Options. In the case of an ISO, the per share exercise price may be no
less than 100% of the fair market value of a share of Common Stock on the date
of grant (110% in the case of a Participant who owns, directly or indirectly,
10% or more of the outstanding voting power of all classes of stock of the
Company). The per share exercise price of a Nonqualified Stock Option may be any
amount determined in good faith by the Committee. With respect to ISOs, the
aggregate fair market value of the Common Stock for which one or more options
granted to a Participant may become exercisable during any one calendar year may
not exceed $100,000. The fair market value of the Common Stock equals the
closing price on the date in question as reported by the Nasdaq National Market.
Under the 1995 Plan, the purchase price of an option is payable upon
exercise: (i) in cash; (ii) by check; (iii) to the extent permitted by the
particular option grant, by transferring to the Company shares of Common Stock
of the Company at their fair market value as of the option exercise date
(provided that the Participant held the shares of stock for at least six
months); or (iv) through a sale and remittance procedure by which a Participant
delivers concurrent written instructions to a Company-designated brokerage firm
to sell immediately the purchased Common Stock and remit to the Company
sufficient funds to pay for the options exercised and by which the certificates
for the purchased Common Stock are delivered directly to the brokerage firm. The
Company may also extend and maintain, or arrange for the extension and
maintenance of, credit to a Participant to finance the purchase of shares
pursuant to the exercise of options, on such terms as may be approved by the
Board of Directors or the Committee,
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subject to applicable regulations of the Federal Reserve Board and any other
applicable laws or regulations in effect at the time such credit is extended.
The Committee may require, as a condition to exercise of an option,
that the Participant pay to the Company, in cash or in shares of the Common
Stock of the Company, the entire amount of taxes which the Company is required
to withhold by reason of such exercise, in such amount as the Committee or the
Board of Directors may determine. Alternatively, the Participant may elect,
subject to rules adopted by the Committee or the Board of Directors, or the
Company may require that the Company withhold from the shares to be issued that
number of shares having a fair market value equal to the amount which the
Company is required to withhold.
Exercise. As described above, the Committee has the authority to
determine the vesting and exercise provisions of all grants under the 1995 Plan.
In general under the 1995 Plan, no option shall be exercisable during the
lifetime of a Participant by any person other than the Participant, his or her
guardian or legal representative.
THE AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual serving as a
non-employee member of the Board of Directors of the Company on the date of
adoption of the 1995 Plan by the Board of Directors received an option grant on
such date for 9,246 shares of Common Stock, except that the Chairman of the
Board of Directors received an option for 10,496 shares. Upon amendment of the
1995 Plan in 1996, each individual who was at the time a non-employee member of
the Board of Directors received a 15,000-share option grant (17,500 in the case
of the Chairman of the Board). In addition, each individual who continues to
serve as a non-employee Board of Directors will receive an additional option
grant to purchase the same number of shares of Common Stock at each annual
meeting of stockholders of the Company thereafter.
Each automatic grant will be exercisable 50% one year after the grant
and 100% two years after the grant and will have a term of ten years, subject to
earlier termination following the optionee's removal from the Board of Directors
for cause.
AMENDMENT AND TERMINATION OF THE 1995 PLAN
The Board of Directors may amend or modify the 1995 Plan at any time.
The 1995 Plan will terminate on July 9, 2005, unless sooner terminated by the
Board of Directors.
The benefits that executive officers, directors and employees would
receive if the proposed amendment to the 1995 Plan is approved cannot be
determined by the Company at this time. In September 1996, the Committee
confirmed a special one-time grant (originally framed in 1996 subject to
Committee approval) of options for 60,000 shares to Craig R. Clark at an
exercise price of $9.00 per share. On the same date, but subject to approval by
Unison's stockholders, the Committee recommended, and the full Board of
Directors approved, the issuance of options for an additional 324,350 shares to
Unison employees at an exercise price of $13.75 per share (its market value,
later repriced to $9.50 per share), including options for 40,000 shares to each
of Messrs. Rollins, Contris and Clark, options for 10,000 shares each to Messrs.
Oberfield and Henderson and options for 7,500 shares to Ms. Troxell. The total
grants to the then executive group, non-executive director group and the
non-executive officer employee group amounted to options for 197,500 shares,
92,500 shares and 186,850 shares, respectively.
FEDERAL INCOME TAX CONSIDERATIONS
The discussion that follows is a summary, based upon current law, of
some of the significant federal income tax considerations relating to awards
under the 1995 Plan. The following discussion does not address state, local or
foreign tax consequences.
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A Participant will not recognize taxable income upon the grant or
exercise of an ISO except under certain circumstances when the exercise price is
paid with already-owned shares of Common Stock that were acquired through the
previous exercise of an ISO. However, upon the exercise of an ISO, the excess of
the fair market value of the shares received on the date of exercise over the
exercise price of the shares will be treated as a tax preference item for
purposes of the alternative minimum tax. In order for the exercise of an ISO to
qualify for the foregoing tax treatment, the Participant generally must be an
employee of the Company from the date the ISO is granted through the date three
months before the date of exercise, except in the case of death or disability,
where special rules apply. The Company will not be entitled to any deduction
with respect to the grant of an ISO.
If shares acquired upon exercise of an ISO are not disposed of by the
Participant within two years from the date of grant or within one year after the
transfer of such shares to the Participant (the "ISO Holding Period"), then (i)
no amount will be reportable as ordinary income with respect to such shares by
the Participant and (ii) the Company will not be allowed a deduction in
connection with such ISO or the Common Stock acquired pursuant to the exercise
of the ISO. If a sale of such Common Stock occurs after the ISO Holding Period
has expired, then any amount recognized in excess of the exercise price will be
reportable as a long-term capital gain, and any amount recognized below the
exercise price will be reportable as a long-term capital loss. The exact amount
of tax payable on a long-term capital gain will depend upon the tax rates in
effect at the time of the sale. The ability of a Participant to utilize a
long-term capital loss will depend upon the statutory limitations on capital
loss deductions not discussed herein.
A "disqualifying disposition" will generally result if Common Stock
acquired upon the exercise of an ISO is sold before the ISO Holding Period has
expired. In such case, at the time of a disqualifying disposition, the
Participant will recognize ordinary income in the amount of the difference
between the exercise price and the lesser of (i) the fair market value on the
date of exercise or (ii) the amount realized on disposition. The Participant
will report as a capital gain any amount recognized in excess of the fair market
value on the date of exercise, and the Company will be allowed a deduction on
its federal income tax return in the year of the disqualifying disposition equal
to the ordinary income recognized by the Participant. If the amount realized on
the sale is less than the exercise price, then the Participant will recognize no
ordinary income, and the recognized loss will be reportable as a capital loss.
In general, a Participant to whom a Nonqualified Option is granted will
recognize no taxable income at the time of the grant. Upon exercise of a
Nonqualified Option, the Participant will recognize ordinary income in an amount
equal to the amount by which the fair market value of the Common Stock on the
date of exercise exceeds the exercise price of the Nonqualified Option, and the
Company will generally be entitled to a deduction equal to the ordinary income
recognized by the Participant in the year the Participant recognizes ordinary
income, subject to the limitations of Section 162(m) of the Code.
The Company is required to withhold certain income taxes from
Participants upon exercises of Nonqualified Options. The Company will be
entitled to a business expense deduction for federal income tax purposes equal
to the ordinary income recognized by the Participant in the year the Participant
recognizes ordinary income from the exercise of Nonqualified Options.
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INDEPENDENT AUDITORS
Ernst & Young LLP audited the financial statements of the Company for
the fiscal year ending December 31, 1996. A representative of Ernst & Young LLP
are expected to be present at the Annual Meeting and will have the opportunity
to make a statement, if he or she desires, and to respond to appropriate
questions.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matter properly comes before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
STOCKHOLDER PROPOSALS
Proposals of stockholders of Unison which are intended to be presented
by such stockholders at the Company's Annual Meeting to be held in 1998 must be
received by the Company no later than December 31, 1997 in order that they may
be considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
July 17, 1997 THE BOARD OF DIRECTORS
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