<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 10, 1998
UNISON HEALTHCARE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-27374 86-0684011
(Commission File Number) (I.R.S. Employer Identification No.)
15300 N. 90th St., Suite 100, SCOTTSDALE, ARIZONA 85260
(Address of Principal Executive Offices) (Zip Code)
(602) 423-1954
(Registrant's Telephone Number, Including Area Code)
8800 NORTH GAINEY CENTER DRIVE, SUITE 245, SCOTTSDALE, ARIZONA 85258
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS
On August 10, 1998, Unison HealthCare Corporation filed its plan of
reorganization and disclosure statement with the United States Bankruptcy Court
in the District of Arizona. The plan of reorganization and disclosure statement
is filed as Exhibit 99.1 to this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
UNISON HEALTHCARE CORPORATION
August 10, 1998 By /s/ LISA M. BEUCHE
------------------------------------
Lisa M. Beuche
Vice President - Financial Reporting
<PAGE> 3
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
99.1 Unison HealthCare Corporation's plan of
reorganization and disclosure statement.
<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA
In re: ) In Proceedings Under Chapter 11
)
UNISON HEALTHCARE CORPORATION, a ) Case Nos. B-98-06583-PHX-GBN
Delaware corporation, and related ) through B-98-06612-PHX-GBN
proceedings, )
)
Debtors. )
)
- ------------------------------------
)
In re: )
)
BRITWILL INVESTMENTS-I, INC., a )
Delaware corporation, and ) Case Nos. B-98-0173-PHX-GBN
related proceedings, ) through B-98-0175-PHX-GBN
)
Debtors. ) (Jointly Administered)
)
DISCLOSURE STATEMENT
IN SUPPORT OF DEBTORS' JOINT
PLAN OF REORGANIZATION
DATED AUGUST 10, 1998
SQUIRE, SANDERS & DEMPSEY L.L.P. GALLAGHER & KENNEDY
Two Renaissance Square 2600 North Central Avenue
40 North Central Avenue, Suite 2700 Phoenix, Arizona 85004-3020
Phoenix, Arizona 85004 (602) 530-8000
(602) 528-4000
Attorneys: Thomas J. Salerno Attorneys: Charles R. Sterbach
Craig D. Hansen Joseph E. Cotterman
Christopher D. Johnson
Kathleen T. Tobin
Counsel to Unison Debtors Counsel to BritWill Debtors
<PAGE> 2
APPLICABLE DEBTORS
UNISON HEALTHCARE CORPORATION [X]
(Case No. 98-06583-PHX-RGM)
BRITWILL INVESTMENTS-I, INC. [X]
(Case No. 98-0173-PHX-GBN)
BRITWILL INVESTMENTS-II, INC. [X]
(Case No. 98-0174-PHX-GBN)
BRITWILL INDIANA PARTNERSHIP [X]
(Case No. 98-0175-PHX-GBN)
SUNQUEST SPC, INC. [X]
(Case No. 98-06584-PHX-SSC)
BRITWILL HEALTHCARE COMPANY [X]
(Case No. 98-06585-PHX-SSC)
BRITWILL FUNDING CORPORATION [X]
MEMPHIS CLINICAL LABORATORY, INC. [X]
(Case No. 98-06588-PHX-CGC)
AMERICAN PROFESSIONAL HOLDINGS, INC. [X]
(Case No. 98-06587-PHX-GBN)
AMPRO MEDICAL SERVICES, INC. [X]
(Case No. 98-06609-PHX-GBN)
GAMMA LABORATORIES, INC. [X]
(Case No. 98-06611-PHX-SSC)
SIGNATURE HEALTH CARE CORPORATION [X]
(Case No. 98-06591-PHX-SSC)
BROOKSHIRE HOUSE INC. [X]
(Case No. 98-06608-PHX-RGM)
CHRISTOPHER NURSING CENTER, INC. [X]
(Case No. 98-06596-PHX-JMM)
AMBERWOOD COURT, INC. [X]
(Case No. 98-06597-PHX-RGM)
THE ARBORS HEALTH CARE CORPORATION [X]
(Case No. 98-06598-PHX-CGC)
LOS ARCOS, INC. [X]
(Case No. 98-06603-PHX-RGM)
PUEBLO NORTE, INC. [X]
(Case No. 98-06604-PHX-RTB)
RIO VERDE NURSING CENTER, INC. [X]
(Case No. 98-06606-PHX-CGC)
SIGNATURE MANAGEMENT GROUP, INC. [X]
(Case No. 98-06605-PHX-GBN)
CORNERSTONE CARE CENTER, INC. [X]
(Case No. 98-06595-PHX-RTB)
ARKANSAS, INC. [X]
(Case No. 98-06590-PHX-GBN)
DOUGLAS MANOR, INC. [X]
(Case No. 98-06589-PHX-CGC)
SAFFORD CARE, INC. [X]
(Case No. 98-06593-PHX-RTB)
REHABWEST, INC. [X]
(Case No. 98-06594-PHX-CGC)
QUEST PHARMACIES, INC. [X]
(Case No. 98-06586-PHX-RGM)
SUNBELT THERAPY MANAGEMENT SERVICES, [X]
INC. (ALABAMA)
(Case No. 98-06602-PHX-CGC)
(Case No. 98-06607-PHX-RTB)
DECATUR SPORTS FIT & WELLNESS CENTER, [X]
INC.
(Case No. 98-06601-PHX-SSC)
THERAPY HEALTH SYSTEMS, INC. [X]
(Case No. 98-06600-PHX-GBN)
HENDERSON & ASSOCIATES REHABILITATION,
INC. [X]
(Case No. 98-06599-PHX-SSC)
SUNBELT THERAPY MANAGEMENT SERVICES, [X]
INC. (ARIZONA)
(Case No. 98-06592-PHX-RGM)
CEDAR CARE, INC. [X]
(Case No. 98-06612-PHX-GBN)
SHERWOOD HEALTHCARE CORP. [X]
(Case No. 98-06610-PHX-SSC)
<PAGE> 3
On May 28, 1998, UNISON HEALTHCARE CORPORATION, a Delaware corporation
("Unison Healthcare"), together with twenty-nine (29) of its subsidiaries, filed
petitions for relief under Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court") (collectively, the "Unison Debtors"). On
January 7, 1998, BRITWILL INVESTMENTS-I, INC., a Delaware corporation, BRITWILL
INVESTMENTS-II, INC., a Delaware corporation and BRITWILL INDIANA PARTNERSHIP,
an Arizona general partnership (collectively the "BritWill Debtors" and together
with the Unison Debtors, "Debtors," the "Company" or "Unison") filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code. On August 10,
1998, Debtors filed with the Bankruptcy Court "Debtor's Joint Plan of
Reorganization Dated August 10, 1998" (together with the "Supplement to Debtors'
Joint Plan of Reorganization Dated August 10, 1998," the "Plan"), which provides
for the restructuring and reconstitution of Unison and all of its subsidiaries.
A copy of the Plan is attached hereto as Annex 1.
The purpose of this Disclosure Statement is to provide the Creditors of
Debtors with adequate information to make an informed judgment about the Plan.
This information includes, among other matters, a brief history of Debtors, a
summary of their Chapter 11 Cases, a description of Debtors' assets and
liabilities, a description of the terms pursuant to which Debtors' business will
be reorganized and restructured pursuant to the Plan, and an explanation of how
the Plan will function.
It is important that Creditors of Debtors read and carefully consider
this Disclosure Statement and the Plan, and that such Creditors vote promptly on
the acceptance of the Plan. Debtors' current capital structure is over-leveraged
and as a result, Debtors have no ability to service or otherwise satisfy their
existing debt obligations. Debtors believe that the restructuring contemplated
by the Plan will yield a recovery to Creditors which is greater than the return
that could be achieved through other restructuring alternatives or a liquidation
under Chapter 7 of the Bankruptcy Code.
YOU SHOULD READ THIS DISCLOSURE STATEMENT IN ITS ENTIRETY BEFORE VOTING
ON THE PLAN. THIS DISCLOSURE STATEMENT SUMMARIZES CERTAIN TERMS OF THE PLAN, BUT
THE PLAN ITSELF WILL BE THE GOVERNING DOCUMENT. IF ANY INCONSISTENCY EXISTS
BETWEEN THE PLAN AND THE DISCLOSURE STATEMENT, THE TERMS OF THE PLAN ARE
CONTROLLING.
IF YOU HAVE ANY QUESTIONS CONCERNING THE PROCEDURES FOR VOTING OR
FILING YOUR PROOF OF CLAIM, PLEASE CONTACT PRICEWATERHOUSECOOPERS (THE "CLAIMS
AGENT"), 2901 NORTH CENTRAL AVENUE, SUITE 1000, PHOENIX, ARIZONA, 85012-2755,
TELEPHONE NUMBER (602) 280-1800, FACSIMILE NUMBER (602) 280-1985, ATTENTION
MICHAEL A. TUCKER, TED M.
BURR.
IF YOU HAVE QUESTIONS CONCERNING YOUR TREATMENT UNDER THE PLAN, PLEASE
CONTACT LEGAL COUNSEL TO THE UNISON DEBTORS, THOMAS J. SALERNO, CRAIG D. HANSEN,
CHRISTOPHER D. JOHNSON, KATHLEEN T. TOBIN, SQUIRE, SANDERS & DEMPSEY L.L.P., TWO
RENAISSANCE SQUARE, 40 NORTH CENTRAL AVENUE, SUITE 2700, PHOENIX, ARIZONA 85004,
TELEPHONE NUMBER (602) 528-4000, FACSIMILE NUMBER (602) 253-8129.
-i-
<PAGE> 4
DEBTORS' LARGEST CREDITORS INCLUDING OMEGA HEALTHCARE INVESTORS, INC.
("OMEGA") AND THE AD HOC COMMITTEE OF HOLDERS OF THE NOTES (AS DEFINED IN THE
PLAN) (THE "AD HOC COMMITTEE") HAVE PARTICIPATED IN THE NEGOTIATION OF THE PLAN
AND THE RESTRUCTURING CONTEMPLATED THEREIN. THE PLAN IS THE PRODUCT OF
EXTENSIVE, GOOD FAITH NEGOTIATIONS AMONG DEBTORS, OMEGA AND THE AD HOC
COMMITTEE, AND SUCH PARTIES BELIEVE IT PRESENTS THE GREATEST RECOVERY TO
CREDITORS. ACCORDINGLY, OMEGA AND THE AD HOC COMMITTEE SUPPORT THE PLAN'S
ACCEPTANCE.
A SUMMARY DESCRIPTION OF THE CLASSIFICATION OF YOUR CLAIM AND THE
TREATMENT PROPOSED UNDER THE PLAN ARE CONTAINED ON PAGES 4 AND 5 HEREIN.
FURTHERMORE, A COMPARISON OF YOUR ESTIMATED DISTRIBUTIONS UNDER THE TERMS OF THE
PLAN AND WHAT YOU WOULD RECEIVE IF DEBTORS WERE LIQUIDATED IS CONTAINED ON PAGE
7 HEREIN. SEE ANNEX 1 TO THIS DISCLOSURE STATEMENT FOR A COPY OF THE PLAN.
Debtors reserve the right to amend, modify or supplement the Plan at
any time prior to the confirmation of the Plan, provided that such amendments or
modifications do not materially alter the treatment of, or distributions to,
Creditors under the Plan.
A NUMBER OF SECURITIES ARE TO BE ISSUED BY REORGANIZED UNISON PURSUANT
TO THE PLAN. IT IS THE COMPANY'S POSITION THAT SUCH SECURITIES ARE BEING OFFERED
AND ISSUED PURSUANT TO EXEMPTIONS PROVIDED IN SECTION 1145 OF THE BANKRUPTCY
CODE AND CERTAIN RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. WHILE THE
SECURITIES MAY BE TRANSFERRED AND RESOLD WITHOUT REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, THE PLAN MAY IMPOSE CERTAIN
RESTRICTIONS ON THE TRANSFERABILITY OF SUCH SECURITIES. THE SECURITIES EXCHANGE
COMMISSION HAS NOT TAKEN A POSITION WITH RESPECT TO THE SECURITIES TO BE ISSUED
PURSUANT TO THE PLAN.
THE FINANCIAL PROJECTIONS CONTAINED IN THIS DISCLOSURE STATEMENT
REPRESENT ESTIMATES BY THE COMPANY'S MANAGEMENT OF FUTURE EVENTS BASED ON
CERTAIN ASSUMPTIONS MORE FULLY DESCRIBED HEREIN WHICH MAY NOT BE REALIZED. NONE
OF THE FINANCIAL ANALYSES CONTAINED HEREIN ARE CONSIDERED TO BE A "FORECAST" OR
"PROJECTION" AS TECHNICALLY DEFINED BY THE AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS. THE USE OF THE WORDS "FORECAST," "PROJECT" OR "PROJECTION"
WITHIN THIS DOCUMENT RELATE TO THE BROAD EXPECTATIONS OF FUTURE EVENTS OR MARKET
CONDITIONS AND QUANTIFICATIONS OF THE POTENTIAL RESULTS OF OPERATIONS UNDER
THOSE CONDITIONS.
ALL FINANCIAL INFORMATION PRESENTED HEREIN WAS PREPARED BY DEBTORS.
REFERENCE IS MADE TO EXHIBIT A OF THE DISCLOSURE STATEMENT,
-ii-
<PAGE> 5
WHICH IS DEBTORS' ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1996 ("FORM 10-K/A"). REFERENCE IS ALSO MADE TO DEBTORS' QUARTERLY REPORT ON
FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 ("FORM 10-Q"), ATTACHED
HERETO AS EXHIBIT B. EACH CREDITOR IS URGED TO REVIEW THE PLAN IN FULL PRIOR TO
VOTING ON THE PLAN TO INSURE A COMPLETE UNDERSTANDING OF THE PLAN AND THIS
DISCLOSURE STATEMENT.
Certain statements, projections of future operating results, valuation
estimates and the like contained in this Disclosure Statement and elsewhere
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievements of Reorganized
Unison, or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other important factors include, among
others: general economic and business conditions; industry totals; competition;
loss of any significant customers; changes in business strategy or development
plans; availability, terms and deployment of capital; adverse uninsured
determinations in any existing or future litigation or regulatory proceedings
and any other factors referenced in this Disclosure Statement or otherwise. See
"RISK FACTORS." These forward-looking statements speak only as of the date of
this Disclosure Statement, and Debtors expressly disclaim any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in Debtors' or Reorganized
Unison's expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
THIS DISCLOSURE STATEMENT IS INTENDED FOR THE SOLE USE OF CREDITORS AND
OTHER PARTIES IN INTEREST, AND FOR THE SOLE PURPOSE OF ASSISTING THEM IN MAKING
AN INFORMED DECISION ABOUT THE PLAN. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONJUNCTION WITH THE SOLICITATION OF
VOTES TO ACCEPT OR REJECT THE PLAN OTHER THAN THOSE CONTAINED HEREIN OR IN THE
BALLOTS. IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY DEBTORS.
THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT AS
CONTAINING ADEQUATE INFORMATION TO PERMIT A CREDITOR TO VOTE ON THE PLAN.
CAPITALIZED TERMS USED IN THIS DISCLOSURE STATEMENT AND NOT DEFINED
HEREIN SHALL HAVE THE MEANING SET FORTH IN THE PLAN.
-iii-
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
DISCLOSURE STATEMENT SUMMARY.................................................................................. 1
UNISON AND ITS AFFILIATES AND SUBSIDIARIES............................................................... 1
IMPORTANT FEATURES OF THE PLAN........................................................................... 3
NEW MANAGEMENT OF REORGANIZED UNISON..................................................................... 3
SUMMARY DESCRIPTION OF THE RESTRUCTURING................................................................. 3
CLASSIFICATION OF CLAIMS............................................................................. 3
DISTRIBUTIONS TO UNSECURED CREDITORS................................................................. 4
SUMMARY TABLE........................................................................................ 4
CRAM DOWN............................................................................................ 5
COMPARISON TABLE..................................................................................... 6
CERTAIN CONSIDERATIONS............................................................................... 8
VOTING ON THE PLAN................................................................................... 8
INCOME TAX CONSEQUENCES.............................................................................. 8
THE DEBTORS................................................................................................... 10
INTRODUCTION............................................................................................. 10
RELATIONSHIP OF DEBTORS.................................................................................. 10
ACQUISITIONS............................................................................................. 12
PROPERTIES............................................................................................... 12
NURSING FACILITIES................................................................................... 12
OFFICE FACILITIES.................................................................................... 14
PATIENT SERVICES......................................................................................... 14
ASSISTED AND INDEPENDENT LIVING SERVICES............................................................. 14
SKILLED NURSING CARE SERVICES........................................................................ 14
SUBACUTE AND OTHER SPECIALTY CARE SERVICES........................................................... 15
OPERATION OF NURSING FACILITIES.......................................................................... 15
ORGANIZATION......................................................................................... 15
QUALITY MANAGEMENT................................................................................... 16
MARKETING............................................................................................ 16
PAYOR MIX............................................................................................ 17
ANCILLARY SERVICES....................................................................................... 17
LABORATORY........................................................................................... 18
PHARMACY............................................................................................. 18
THERAPY.............................................................................................. 19
INDUSTRY OVERVIEW........................................................................................ 19
INDUSTRY CONSOLIDATION............................................................................... 19
AGING POPULATION..................................................................................... 20
COST CONTAINMENT PRESSURES........................................................................... 20
ADVANCES IN MEDICAL TECHNOLOGY....................................................................... 20
LIMITATIONS IN THE SUPPLY OF LONG-TERM CARE FACILITIES............................................... 20
BUSINESS STRATEGY........................................................................................ 21
PROVIDE A CONTINUUM OF CARE.......................................................................... 21
IMPROVE PAYOR QUALITY, OCCUPANCY LEVELS AND OPERATING MARGINS........................................ 21
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<S> <C>
CONCENTRATE HEALTHCARE FACILITIES IN GEOGRAPHIC...................................................... 21
COMPETITION.............................................................................................. 22
GOVERNMENT REGULATION.................................................................................... 22
PAYMENT FOR SERVICES................................................................................. 23
THE BALANCED BUDGET ACT.............................................................................. 23
THE MEDICARE PROGRAM................................................................................. 24
THE MEDICAID PROGRAM................................................................................. 25
ENFORCEMENT PROCEEDINGS AND SANCTIONS; CERTIFICATION REQUIREMENTS.................................... 26
CERTIFICATES OF NEED................................................................................. 27
PATIENT REFERRAL REGULATIONS......................................................................... 27
PHARMACY............................................................................................. 29
LABORATORY........................................................................................... 29
EMPLOYEES................................................................................................ 29
CURRENT EXECUTIVE OFFICERS AND DIRECTORS................................................................. 30
RELATED PARTY TRANSACTIONS.................................................................................... 33
BRITWILL ACQUISITION..................................................................................... 33
MR. WHITEHEAD............................................................................................ 34
SIGNATURE ACQUISITION.................................................................................... 34
MR. KREMSER.............................................................................................. 35
THE 1997 LOANS........................................................................................... 35
MR. LYNCH................................................................................................ 36
MR. GARTH................................................................................................ 36
MR. OBERFIELD............................................................................................ 36
MR. HENDERSON............................................................................................ 36
SELECTED FINANCIAL INFORMATION................................................................................ 37
RESULTS OF OPERATIONS......................................................................................... 39
SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASES................................................................ 40
COMMENCEMENT OF THE CHAPTER 11 CASES..................................................................... 40
THE BRITWILL DEBTORS..................................................................................... 40
FIRST DAY ORDERS..................................................................................... 40
POST PETITION FINANCING.............................................................................. 41
OMEGA'S LIFT STAY MOTION............................................................................. 41
RETENTION OF PROFESSIONALS FOR BRITWILL DEBTORS...................................................... 41
UNSECURED CREDITORS' COMMITTEE....................................................................... 41
THE UNISON DEBTORS....................................................................................... 42
FIRST DAY ORDERS..................................................................................... 42
CASH COLLATERAL...................................................................................... 42
POSTPETITION FINANCING............................................................................... 42
RETENTION OF COUNSEL TO UNISON DEBTORS............................................................... 43
MATTERS PERTAINING TO ALL DEBTORS........................................................................ 43
MOTION TO APPOINT AN EXAMINER........................................................................ 43
CLASS ACTION LITIGATION.............................................................................. 43
DEBTORS' PREFERENCE LITIGATION....................................................................... 43
THE PLAN OF REORGANIZATION.................................................................................... 43
BRIEF EXPLANATION OF CHAPTER 11 REORGANIZATION........................................................... 43
SOLICITATION OF ACCEPTANCES OF THE PLAN.................................................................. 44
</TABLE>
-v-
<PAGE> 8
<TABLE>
<S> <C>
VOTING ON THE PLAN....................................................................................... 45
UNIMPAIRED CLASSES....................................................................................... 45
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS............................................................ 46
SUMMARY OF TREATMENT OF AND DISTRIBUTIONS TO CREDITORS UNDER THE PLAN.................................... 46
1.UNCLASSIFIED CLAIMS................................................................................ 46
A. ADMINISTRATIVE CLAIMS....................................................................... 46
B. TREATMENT................................................................................... 47
GENERALLY................................................................................... 47
PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIMS............................................. 47
HCFP DIP LOAN CLAIMS........................................................................ 47
ALLOWED PRIORITY TAX CLAIMS................................................................. 47
RECLAMATION CLAIMS.......................................................................... 47
2.CLASSIFIED CLAIMS.................................................................................. 48
A. CLASS 1 - ALLOWED PRIORITY WAGE CLAIM....................................................... 48
B. CLASS 2 - ALLOWED PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS................................ 48
C. CLASS 3 - SECURED TAX CLAIMS................................................................ 48
D. CLASS 4 - MISCELLANEOUS SECURED CLAIMS...................................................... 48
E. CLASS 5 - OMEGA SECURED CLAIMS.............................................................. 48
1. OMEGA MORTGAGE GUARANTEE CLAIMS.................................................. 49
2. OMEGA INDIANA REJECTION CLAIM.................................................... 49
3. OMEGA HASMARK FACILITIES CLAIMS.................................................. 49
4. OMEGA MISCELLANEOUS SECURED CLAIM................................................ 49
5. FEES AND EXPENSES OF OMEGA....................................................... 49
F. CLASS 6 - BRITWILL ACQUISITION CLAIMS....................................................... 50
G. CLASS 7 - SIGNATURE ACQUISITION CLAIMS...................................................... 50
H. CLASS 8 - CONVENIENCE CLAIMS................................................................ 50
I. CLASS 9 - GENERAL UNSECURED CLAIMS.......................................................... 50
J. CLASS 10 - NOTES SECURITIES CLAIMS.......................................................... 51
K. CLASS 11 - SUBSIDIARY AND AFFILIATE EQUITY INTERESTS........................................ 51
L. CLASS 12 - EQUITY INTERESTS AND EQUITY INTERESTS RELATED CLAIMS............................. 51
OTHER SIGNIFICANT PROVISIONS OF THE PLAN...................................................................... 52
SUBSTANTIVE CONSOLIDATION................................................................................ 52
DESCRIPTION OF REORGANIZED UNISON........................................................................ 54
MANAGEMENT OF REORGANIZED UNISON..................................................................... 54
EXECUTIVE COMPENSATION................................................................................... 55
PROSPECTIVE COMPENSATION OF MANAGEMENT............................................................... 55
SEVERANCE PACKAGES................................................................................... 55
POST EFFECTIVE DATE OPTIONS FOR SENIOR MANAGEMENT.................................................... 57
CASH BONUSES......................................................................................... 57
PROVISIONS GOVERNING DISTRIBUTIONS....................................................................... 57
GENERALLY............................................................................................ 57
DISTRIBUTIONS TO CLASS 9............................................................................. 57
DISTRIBUTIONS TO CLASS 11............................................................................ 58
OBJECTIONS TO CLAIMS................................................................................. 58
SETTLEMENT OF OBJECTIONS AFTER EFFECTIVE DATE........................................................ 58
DISTRIBUTIONS TO DISPUTED CLAIMS..................................................................... 58
</TABLE>
-vi-
<PAGE> 9
<TABLE>
<S> <C>
MEANS FOR IMPLEMENTATION OF PLAN......................................................................... 59
SIGNATURE SALE LEASEBACK TRANSACTION................................................................. 59
EXECUTION OF THE OMEGA NEW MASTER LEASE.............................................................. 59
SALE OF NEW PREFERRED STOCK TO OMEGA................................................................. 60
OBTAINING NEW LINE OF CREDIT......................................................................... 60
PURCHASE OF MINORITY INTEREST IN QUEST............................................................... 60
COUNSEL TO THE AD HOC COMMITTEE...................................................................... 60
EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................................................. 61
ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES............................................... 61
REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................................ 61
APPROVAL OF ASSUMPTION OR REJECTION.................................................................. 61
CURE OF DEFAULTS..................................................................................... 61
POST-PETITION DATE CONTRACTS AND LEASES.............................................................. 61
BAR DATE............................................................................................. 61
INDEMNIFICATION OBLIGATIONS.......................................................................... 62
PRESERVATION AND PROSECUTION OF LITIGATION CLAIMS........................................................ 62
ESTABLISHMENT OF CLAIMS LITIGATION LLC............................................................... 62
SPECIFIC CLAIMS PRESERVED............................................................................ 63
SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN...................................................... 63
COMMON STOCK......................................................................................... 63
NEW PREFERRED STOCK.................................................................................. 64
NEW WARRANTS......................................................................................... 64
NEW SENIOR NOTES..................................................................................... 65
SECTION 1145 EXEMPTION............................................................................... 66
TITLE TO PROPERTY; DISCHARGE; INJUNCTION................................................................. 66
REVESTING OF ASSETS.................................................................................. 66
DISCHARGE............................................................................................ 66
INJUNCTION........................................................................................... 67
EXCULPATION.......................................................................................... 67
FEASIBILITY................................................................................................... 68
GENERAL FEASIBILITY ANALYSIS............................................................................. 68
KEY ASSUMPTIONS UNDERLYING THE OPERATING PLAN AND THE PROJECTIONS.................................... 68
RISK FACTORS.................................................................................................. 73
REORGANIZATION FACTORS................................................................................... 73
LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND ACCUMULATED DEFICIT..................................... 74
MANAGEMENT RESIGNATIONS AND DEPENDENCE ON SKILLED PERSONNEL.............................................. 74
RELIANCE ON REIMBURSEMENT FROM GOVERNMENT SOURCES........................................................ 74
HEALTH CARE REFORM....................................................................................... 75
EXTENSIVE GOVERNMENT REGULATIONS......................................................................... 76
COMPETITION FOR PATIENTS AND EMPLOYEES................................................................... 77
CERTAIN FEDERAL TAX CONSEQUENCES.............................................................................. 77
CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS................................................................ 78
IMPORTANCE OF WHETHER CERTAIN DEBT INSTRUMENTS CONSTITUTE "SECURITIES"............................... 78
CLASS 1 AND CLASS 2 PRIORITY CLAIMS.................................................................. 78
CLASS 4 MISCELLANEOUS SECURED CLAIMS................................................................. 78
CLASS 5 OMEGA SECURED CLAIMS......................................................................... 79
</TABLE>
-viii-
<PAGE> 10
<TABLE>
<S> <C>
CLASS 6 AND CLASS 7 BRITWILL AND SIGNATURE ACQUISITION CLAIMS; CLASS 9 GENERAL UNSECURED CLAIMS...... 80
CLASS 8 CONVENIENCE CLAIMS........................................................................... 81
CLASS 10 NOTES SECURITIES CLAIMS..................................................................... 81
CLASS 12 EQUITY INTERESTS AND EQUITY INTEREST RELATED CLAIMS......................................... 81
CHARACTER OF GAIN, BASIS, AND HOLDING PERIOD......................................................... 81
TREATMENT OF ACCRUED BUT UNPAID INTEREST............................................................. 82
ORIGINAL ISSUE DISCOUNT.............................................................................. 82
BACKUP WITHHOLDING................................................................................... 83
CONSEQUENCES TO DEBTORS.................................................................................. 83
SIGNATURE SALE LEASEBACK TRANSACTION................................................................. 83
DISCHARGE OF INDEBTEDNESS AND REDUCTION OF TAX ATTRIBUTES............................................ 83
LIMITATION ON USE OF NOLS............................................................................ 84
ALTERNATIVE MINIMUM TAX.............................................................................. 85
TAXATION OF CLAIMS LITIGATION LLC........................................................................ 85
CERTAIN SECURITIES LAWS MATTERS............................................................................... 86
GENERAL DISCUSSION....................................................................................... 86
RESALE CONSIDERATIONS.................................................................................... 86
TRUST INDENTURE ACT...................................................................................... 89
DELIVERY OF DISCLOSURE STATEMENT......................................................................... 89
ALTERNATIVES TO THE PLAN...................................................................................... 89
LIQUIDATION UNDER CHAPTER 7.............................................................................. 89
ALTERNATIVE PLANS........................................................................................ 90
LIQUIDATION ANALYSIS.......................................................................................... 90
VOTING AND CONFIRMATION....................................................................................... 92
VOTING PROCEDURES........................................................................................ 92
GENERALLY............................................................................................ 92
SUBMISSION OF BALLOTS................................................................................ 92
CONFIRMATION............................................................................................. 92
REQUIREMENTS FOR CONFIRMATION........................................................................ 92
THE CRAM DOWN ALTERNATIVE............................................................................ 93
CONFIRMATION HEARING................................................................................. 94
OBJECTIONS........................................................................................... 94
CONCLUSION AND RECOMMENDATION................................................................................. 95
ANNEX 1 - The Plan
ANNEX 2 - Financials
</TABLE>
EXHIBITS:
EXHIBIT A - Form 10-K/A (incorporated by reference to the Company's
1996 Form 10-K/A, Amendment No. 3, filed on
April 21, 1998)
EXHIBIT B - Form 10-Q (incorporated by reference to the Company's
Form 10-Q for the quarterly period ended September 30,
1997, filed on November 14, 1997)
EXHIBIT C - Comparison of New Common Stock Allocation
-viii-
<PAGE> 11
DISCLOSURE STATEMENT SUMMARY
The following is a summary of certain features of the Plan, the restructuring
and other matters, and all statements contained herein are qualified in their
entirety by reference to the more detailed information included elsewhere herein
or in the Annexes or Exhibits to this Disclosure Statement.
UNISON HEALTHCARE AND ITS AFFILIATES AND SUBSIDIARIES
Unison is a leading provider of comprehensive long-term and specialty
healthcare services. As of June 30, 1998, after giving effect to the
Dispositions,(1) Unison ranks as one of the 30 largest long-term care operators
in the United States, operating facilities in five states clustered in the
Midwest, Southwest and Southeast. These facilities include 32 long-term and
specialty care facilities with 3,284 licensed beds and three independent or
assisted living facilities with 214 units. Unison seeks to operate its
businesses as an interrelated network of services to provide a full continuum of
cost-effective long-term and specialty healthcare.
Unison's healthcare services include both traditional long-term care
and higher margin specialized healthcare services. Unison also provides, either
directly or through third-party providers, pharmaceutical services,
rehabilitation and respiratory therapy services, medical supplies and laboratory
testing both to its facilities and to non-affiliated facilities. Unison's range
of services includes the following:
- LONG-TERM CARE SERVICES. Unison's facilities provide residents
with routine long-term care services, including room and
board, daily dietary services, social and recreational
therapy, housekeeping, laundry and nursing services.
- ANCILLARY SERVICES. Unison provides ancillary services
including physical, speech, and occupational therapies,
pharmaceuticals, parenteral and enteral nutrition, infusion
and respiratory therapies and laboratory services. Unison has
expanded its healthcare expertise in ancillary services and
now provides (either directly or through third-party
providers) some of these services in substantially all of its
facilities.
- SUBACUTE AND SPECIALTY CARE SERVICES. Unison provides care to
patients with specialized healthcare needs, including those
suffering from Alzheimer's disease, wounds, post-surgical and
other ailments. Specialty units are located in designated
sections within selected facilities and are staffed by
specially trained personnel.
- ASSISTED AND INDEPENDENT LIVING SERVICES. Unison's independent
and assisted living centers provide central dining, limited
nursing services, recreational areas,
(1) As used herein, the "Dispositions" means the disposition of eight
nursing facilities and two assisted living facilities during the first
six months of 1998, and the planned disposition of eight additional
nursing facilities and one assisted living facility (the "Disposition
Facilities").
-1-
<PAGE> 12
social programs, housekeeping, laundry and maintenance
services. Such facilities are designed to accommodate
individuals with more modest healthcare needs.
See "THE DEBTORS" and "SELECTED FINANCIAL INFORMATION."
As described in greater detail elsewhere herein, the operating results
and financial condition of the Company have been negatively impacted by a number
of factors, including cash flow difficulties, increased costs due to recent
acquisitions and rising litigation costs. See "THE DEBTORS -- Acquisitions" and
"SELECTED FINANCIAL INFORMATION."
The Company's cash flows from operations and its available capital have
been insufficient to meet its current operating expenses, lease obligations and
debt service requirements and the Company is currently in covenant and payment
default in the terms of material operating leases and indebtedness. In the
absence of obtaining additional capital through refinancing, asset sales,
securing an increased revolving credit facility, consensual restructuring of
debt and lease terms and/or similar measures, the Company will be unable to
remedy the existing defaults and will experience additional defaults in the
future. The Company's operating leases are subject to termination in the event
of default, and the Company's indebtedness may be accelerated in the event of
continuing default. Certain lenders could foreclose on Company assets securing
their indebtedness, which would include substantially all of the Company's
operating assets.
The risks associated with the Company's historic acquisition strategy
has negatively impacted Unison's financial performance. 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 health care businesses or services. The
acquisitions of BritWill, Signature, Sunbelt, RehabWest and Ampro and the
formation of Quest were in pursuit of this strategy. As a result of the
acquisitions, the Company was faced with unforeseen contingencies affecting its
new businesses including increased costs due to integrating the acquired
operations into the overall enterprise. For example, difficulties in integrating
acquired facilities within Unison's financial reporting and management
information systems were a substantial factor contributing to the need to
restate Unison's financial statements for the nine months ended September 30,
1996. Its financial reporting and management information systems were not
adequate for the larger and more complex needs of the Company. Those system
difficulties then contributed to the operating inefficiencies that led to the
unexpected losses for that period and subsequent periods.
Prior to the bankruptcy filing, Debtors felt the increasing burden of
costs associated with litigation. The number of lawsuits initiated against the
Company grew as its financial difficulties worsened, including suits with
vendors, landlords and several class action lawsuits (which also involved
certain of the Company's current and former directors and officers (among
others) as named defendants). Such class action complaints generally assert that
the defendants knew, or were reckless in not knowing, that Unison's results for
the first nine months of 1996 were materially overstated, or misrepresented the
capability of Unison's internal accounting system to reliably record and reflect
its financial condition, among other things.
-2-
<PAGE> 13
IMPORTANT FEATURES OF THE PLAN
The Plan provides for the substantive consolidation of Debtors' assets
and liabilities. Substantive consolidation means that, for purposes of Claims
and distributions under the Plan, the assets and liabilities of all Debtors will
be treated as the assets and liabilities of one company. Unison Healthcare is
the parent company and directly or indirectly owns the other thirty-two Debtors.
See "THE DEBTORS -- Relationship of Debtors." The Plan provides for
distributions to the Creditors of the thirty-three (33) companies that are the
Debtors and debtors-in-possession in the above-captioned cases. The Plan will
satisfy a substantial portion of the General Unsecured Claims (Class 9), the
Allowed Class 6 and 7 Claims, as well as Allowed Equity Interests and Equity
Interest Related Claims (subject to certain restrictions), pursuant to the
issuance of the New Common Stock and the New Warrants as described more fully in
the Plan.
NEW MANAGEMENT OF REORGANIZED UNISON
As of the Effective Date, Reorganized Unison will retain its existing
corporate structure. However, Reorganized Unison will have the ability to modify
its corporate structure (such as by consolidation of subsidiaries and
Affiliates, or otherwise), as long as such restructuring does not impair or
prejudice the rights of any holders of Allowed Claims as provided in the Plan.
On the Effective Date, the operation of Reorganized Unison will become the
general responsibility of the respective boards of directors, who will
thereafter have responsibility for the management, control and operation of
Reorganized Unison in accordance with the Plan, applicable law, the Reorganized
Unison Articles and the Reorganized Unison Bylaws. The names of the initial
members of the board of directors, and the senior management of Reorganized
Unison are set forth herein. See "THE PLAN OF REORGANIZATION -- Description of
Reorganized Unison."
SUMMARY DESCRIPTION OF THE RESTRUCTURING
This Disclosure Statement is being furnished to the Creditors of
Debtors in order to provide Creditors with adequate information to make an
informed judgment about the Plan. Set forth below is a brief summary of the
principal components of the restructuring that will be implemented pursuant to
the Plan. This summary does not purport to be complete. See "PLAN OF
REORGANIZATION" attached hereto as Annex 1, for a more complete description of
the restructuring and the Plan.
CLASSIFICATION OF CLAIMS. The Plan divides the Claims of known
Creditors and Equity Interests into Classes and sets forth the treatment offered
each Class. The classification of Claims and the distribution to be made
pursuant thereto take into account the relative priorities of Claims and Equity
Interest Related Claims. Debtors believe that they have classified all Claims
and Equity Interests in compliance with the provisions of Section 1122 of the
Bankruptcy Code.
If the Plan is confirmed by the Bankruptcy Court, each holder of an
Allowed Claim will receive the same treatment as the holder of other Allowed
Claims in the same Class, regardless of whether such holder voted to accept the
Plan. Moreover, upon confirmation, the Plan will be binding on all Creditors and
Equity Interests regardless of whether such Creditors or Equity Interests voted
to accept the Plan.
-3-
<PAGE> 14
DISTRIBUTIONS TO UNSECURED CREDITORS. The Claims of General Unsecured
Creditors of the Debtors are classified in Class 8 and Class 9 under the Plan.
Class 8 includes those Creditors holding Allowed General Unsecured Claims of
$1,000 or less, or who elect to reduce their Claims to $1,000. Allowed Claims in
Class 8 will be paid in Cash the lesser of: (i) $1,000; or (ii) the actual
amount of such Creditor's Allowed Claim. The Debtors believe that approximately
$690,000 in Claims held by approximately 1,500 Creditors will elect Class 8
treatment. Class 8 will receive a Cash payment by the Debtors on the Effective
Date of an amount no greater than $600,000. Depending upon the amount of Claims
which elect treatment under Class 8, such Class may be impaired under the Plan.
All other General Unsecured Claims, including, but not limited to, the
Claims of the Consenting Noteholders, the Non-Consenting Noteholders, the
Filkoski Claims and the holders of Senior Notes, are classified in Class 9 under
the Plan. The Company estimates that the aggregate amount of Allowed General
Unsecured Claims in Class 9 is approximately $139,836,000. Of this amount,
Debtors estimate that approximately $700,000 is attributable to the Claims of
landlords under facility leases previously closed by the Company. The estimate
of the Claims arising out of the rejection of the closed facility leases has
been calculated subject to the limitations set forth in Section 502(b)(6) of the
Bankruptcy Code. With respect to Class 9, the Plan provides that such Creditors
will receive (a) a Pro Rata distribution of approximately 5,635,400 shares of
the New Common Stock; (b) from the Claims Litigation LLC, their Pro Rata
distribution of Claims Litigation LLC Shares; and (c) their Pro Rata Share of
the New Senior Notes. For a complete description of the treatment of, and
distributions to, all Creditors under the Plan, see "THE PLAN OF REORGANIZATION
- -- Summary of Treatment of and Distributions to Creditors Under the Plan."
SUMMARY TABLE. The Plan categorizes into 12 Classes the Claims against
and Equity Interests in the Company. The table below sets forth the specific
classification and treatment under the Plan of each of the Classes.
<TABLE>
<CAPTION>
CLASS ESTIMATED CLAIM TREATMENT
AMOUNT
($ IN THOUSANDS)
<S> <C> <C>
Class 1 - Priority Wage Claims $-0- Paid in full
Class 2 - Priority Benefit Plan Contribution -0- Paid in full
Claims
Class 3 - Secured Tax Claims 125 Paid in full
19,564 Paid in full
Class 4 - Miscellaneous Secured Claims
(including the NHI Secured Claims)
</TABLE>
-4-
<PAGE> 15
<TABLE>
<S> <C> <C>
Class 5 - Omega Secured Claims 6,871 Execution of Omega New Master
Class 5A Omega Mortgage Lease and New Omega Guarantee;
Guarantee Claims Surrender of Indiana Returned
Facilities;
Class 5B Omega Indiana Rejection Cash distribution of Omega
Claims Effective Date Payment; and
Issuance of Indiana Returned
Class 5C Omega Hasmark Facility Note
Facilities Claims
Class 5D Omega Miscellaneous
Secured Claim
Class 6 - BritWill Acquisition Claims 12,589 To the extent Allowed - shares of
New Common Stock
Class 7 - Signature Acquisition Claims 5,095 To the extent Allowed - shares of
New Common Stock
Class 8 - Convenience Claims 690 Lesser of the amount of Allowed
Claim or $1,000
Class 9 - General Unsecured Claims 139,836 Pro Rata distribution of : (a)
5,635,400 shares of New Common
Stock; (b) Claims Litigation LLC
Shares; and (c) New Senior Notes
Class 10 - Notes Securities Claims No distribution - claims
discharged
Class 11- Subsidiary and Affiliate Equity Unchanged
Interests
Class 12 - Equity Interests and Equity Pro Rata share of New Warrants or,
Interest Related Claims alternatively,
cancelled and terminated
</TABLE>
CRAM DOWN. For the Plan to be confirmed without the use of "cram down"
procedures available under the Bankruptcy Code, Debtors must receive acceptances
("Plan Acceptances") from the holders of claims constituting at least two-thirds
of the dollar amount of the allowed claims and more than one-half in number of
the allowed claims in each impaired class that has actually voted on the Plan
(the "Requisite Plan Acceptance"). ONLY VOTES ACTUALLY CAST WILL BE COUNTED IN
DETERMINING WHETHER THE REQUISITE PLAN ACCEPTANCES HAVE BEEN OBTAINED. Under the
Plan, the only impaired classes of claims that are being solicited are Classes
5, 6, 7, 8 and 9. See "THE PLAN OF REORGANIZATION--
-5-
<PAGE> 16
Brief Explanation of Chapter 11 Reorganization." Except for Classes 5, 6, 7, 8
and 9, all other Creditors under the Plan are either unimpaired and deemed to
have accepted the Plan, or receive nothing under the Plan and, therefore, are
deemed to have rejected the Plan. If Debtors do not receive the Requisite Plan
Acceptances from the holders of Claims and Interests in Classes 5, 6, 7, 8 and
9, Debtors reserve the right to use the "cram down" procedures with respect to
such class of Claims and Interests. For a discussion of "cram down" procedures
and the effects thereof, see "VOTING AND CONFIRMATION." If the Plan is confirmed
by the Bankruptcy Court, all holders of Claims against Debtors (including those
who reject the Plan) and Equity Interests will be bound by the Plan and the
restructuring contemplated thereby.
COMPARISON TABLE. The following table sets forth a comparison of the
treatment received by each Class of Creditors under a liquidation scenario and
the Plan.
-6-
<PAGE> 17
COMPARISON TABLE
<TABLE>
<CAPTION>
CLASS PLAN TREATMENT
-------------------------------------------------------
ESTIMATED CLAIM CASH DEBT %STOCK IN ESTIMATED
AMOUNT (1) REORGANIZED NUMBER OF
($ in Thousands) UNISON (ESCROWED STOCK SHARES
OR ISSUED)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class 1 - Priority Wage Claims $ -0- $ --- $ --- --- ---
Class 2 - Priority Benefit Plan Contribution -0- --- --- --- ---
Claims
Class 3 - Secured Tax Claims 125 125 -0- --- ---
Class 4 - Miscellaneous Secured Claims 19,564 19,356 208(2) --- ---
Class 5 - Omega Secured Claims 6,871 3,704 3,000 --- ---
Class 6 - BritWill Acquisition Claims 12,589 --- --- 9.47% (E) 615,488(3)
Class 7 - Signature Acquisition Claims 5,095 --- --- 3.83% (E) 249,111(3)
(excluding Filkoski)
Class 8 - Convenience Claims 690 600 --- --- ---
Class 9 - General Unsecured Claims 139,836 82 24,446 86.70% (I) 5,635,401(3)
Class 10 - Notes Securities Claims --- --- --- --- ---
Class 11 - Subsidiary and Affiliate Equity --- --- --- --- ---
Interests
Class 12 - Equity Interests and Equity Interest --- --- --- --- ---
Related Claims
</TABLE>
<TABLE>
<CAPTION>
PLAN TREATMENT
--------------------------
WARRANTS LIQUIDATION
RECOVERY
--------------------------
<S> <C> <C>
Class 1 - Priority Wage Claims --- $ ---
Class 2 - Priority Benefit Plan Contribution --- ---
Claims
Class 3 - Secured Tax Claims --- 125(100%)
Class 4 - Miscellaneous Secured Claims --- 19,564(100%)
Class 5 - Omega Secured Claims --- (4)
Class 6 - BritWill Acquisition Claims -0- (4)
Class 7 - Signature Acquisition Claims -0- (4)
(excluding Filkoski)
Class 8 - Convenience Claims --- (4)
Class 9 - General Unsecured Claims -0- (4)
Class 10 - Notes Securities Claims --- -0-
Class 11 - Subsidiary and Affiliate Equity --- -0-
Interests
Class 12 - Equity Interests and Equity Interest 377,907 -0-
Related Claims
</TABLE>
Notes:
(1) Estimated Claim Amounts as of October 31, 1998.
(2) Vehicle security agreements will be reinstated.
(3) See Exhibit C for a comparison of Common Stock allocations as a
function of the resolution of the BritWill Acquisition Claims and the
Signature Acquisition Claims.
(4) Available for Classes 5-9 $4,689,000, which represents a recovery of
2.78%
7
<PAGE> 18
CERTAIN CONSIDERATIONS. Prior to deciding whether to vote to accept the
Plan, each Creditor should carefully consider all of the information set forth
in this Disclosure Statement, including the factors set forth under the captions
"FEASIBILITY" and "RISK FACTORS."
VOTING ON THE PLAN. This Disclosure Statement is accompanied by (i) a
copy of the Plan and (ii) a Ballot to accept or reject the Plan. Creditors must
return the Ballots to the Claims Agent by 12:00 midnight, Arizona time, on
_________, 1998, unless such date is extended prior to such time (the
"Expiration Date").
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED IN
ACCORDANCE WITH THE VOTING INSTRUCTIONS ON THE BALLOT AND RECEIVED NO LATER THAN
THE EXPIRATION DATE BY THE CLAIMS AGENT.
BALLOTS MAY BE RETURNED VIA FACSIMILE.
If you have any question about the procedure for voting your Claim,
questions about the amount of your Claim, or with respect to the packet of
materials that you have received, please contact the Claims Agent at:
PricewaterhouseCoopers
2901 North Central Avenue
Suite 1000
Phoenix, Arizona 85012-2755
Attn: Michael A. Tucker
Ted M. Burr
Telephone: (602) 280-1800
Facsimile: (602) 280-1985
If you have any questions concerning the restructuring or the Plan, please
contact:
Legal Counsel to the Unison Debtors
Thomas J. Salerno
Craig D. Hansen
Christopher D. Johnson
Kathleen T. Tobin
SQUIRE, SANDERS & DEMPSEY L.L.P.
Two Renaissance Square
40 North Central, Suite 2700
Phoenix, Arizona 85004
Telephone: (602) 528-4000
Facsimile: (602) 253-8129
INCOME TAX CONSEQUENCES. For a discussion of certain United States
Federal Income Tax consequences of consummation of the transactions contemplated
by the Plan, see "CERTAIN
8
<PAGE> 19
FEDERAL TAX CONSEQUENCES." The description of certain federal tax consequences
contained in this Disclosure Statement is intended merely as an aid to Creditors
in understanding the Plan and merely represents Debtors' interpretation of the
Internal Revenue Code of 1986, as amended, the Treasury regulations thereunder,
and administrative and judicial interpretations thereof. There can be no
assurance that the Internal Revenue Service will not take a contrary view.
Creditors are urged to consult with their own tax advisors as to particular tax
consequences associated with the Plan.
9
<PAGE> 20
THE DEBTORS
INTRODUCTION.
Unison is a leading provider of comprehensive long-term and
specialty healthcare services. As of June 30, 1998, after giving effect to the
Dispositions, Unison ranks as one of the 30 largest long-term care operators in
the United States, operating facilities in five states clustered in the Midwest,
Southwest and Southeast. These facilities include 32 long-term and specialty
care facilities with 3,284 licensed beds and three independent or assisted
living facilities with 214 units. Unison seeks to operate its businesses as an
interrelated network of services to provide a full continuum of cost-effective
long-term and specialty healthcare.
Unison's healthcare services include both traditional long-term care
services and higher margin specialized healthcare. Unison also provides, either
directly or through third-party providers, pharmaceutical services,
rehabilitation and respiratory therapy services, medical supplies and laboratory
testing both to its facilities and to non-affiliated facilities.
Unison Healthcare was incorporated in Delaware as SunQuest HealthCare
Corporation in July 1992 and changed its name to Unison HealthCare Corporation
on November 14, 1995. Unison Healthcare completed its initial public offering on
December 18, 1995. Its common stock traded on the Nasdaq Stock Market's National
Market System under the symbol "UNHC" from December 19, 1995 to August 21, 1997.
Effective August 22, 1997, Nasdaq moved the stock to the SmallCap Market because
Unison Healthcare did not satisfy the minimum tangible net asset requirement for
the listing of its common stock on the National Market System. On February 23,
1998, new, more stringent quantitative maintenance requirements for continued
listing on the Nasdaq Small Cap Market went into effect. These new maintenance
standards require, among other things, minimum levels of either net tangible
assets, market capitalization or net income. On April 15, 1998, Nasdaq notified
Unison Healthcare that its securities were delisted. Subsequently, Unison
Healthcare's Common Stock has traded on the over-the-counter ("OTC") market.
RELATIONSHIP OF DEBTORS.
Although Debtors' enterprise is comprised of numerous corporate
entities, Debtors have historically operated as one business. The chart on the
following page sets forth the Debtors' corporate organization. As reflected by
the chart, each Debtor is directly or indirectly owned by Unison Healthcare.
10
<PAGE> 21
[Unison Healthcare Flow chart]
11
<PAGE> 22
ACQUISITIONS.
On August 10, 1995, Unison Healthcare acquired BritWill HealthCare
Company and its subsidiaries ("BritWill") which, at the date of acquisition,
operated 28 long-term care facilities in Indiana and Texas (the "BritWill
Acquisition"). On October 31, 1996, Unison Healthcare acquired Signature Health
Care Company and its affiliates ("Signature") which, at the date of acquisition,
operated 13 facilities in Arizona and Colorado (the "Signature Acquisition").
Signature also provided rehabilitation therapy services through its related
company RehabWest, Inc. ("RehabWest").
Unison Healthcare has also acquired and developed several other
ancillary businesses in recent years. In May 1995, Unison Healthcare established
Quest Pharmacies, Inc. ("Quest") to develop an institutional pharmacy business.
Quest has since acquired institutional pharmacy operations in Indiana and Texas.
As of June 30, 1998 Quest provided pharmacy services to 78 long-term care
facilities, including 38 Unison facilities and 40 facilities operated by others.
Since March 1995, Unison Healthcare has also operated a Medicare Part B billing
and supply company that specializes in wound care and enteral and parenteral
feeding products. On February 1, 1996, Unison Healthcare acquired Sunbelt
Therapy Management Services, Inc. and its subsidiaries ("Sunbelt") to provide
rehabilitation therapy services. At June 30, 1998, Sunbelt (including RehabWest)
provided therapy services through 163 contracts, including 36 Unison facilities
and 127 other contracts. Sunbelt is currently held for possible disposition. On
October 31, 1996, Unison Healthcare acquired American Professional Holding, Inc.
and Memphis Clinical Laboratory, Inc. (together, "Ampro") in a pooling of
interest transaction. Ampro operates medical reference laboratories in Texas,
Missouri and Tennessee which, at June 30, 1998, provided testing services for
approximately 228 nursing facilities, as well as a number of other healthcare
providers.
PROPERTIES.
NURSING FACILITIES. The following table lists the nursing facilities
and assisted and independent living centers operated by the Company as of June
30, 1998. Except as indicated, all of the facilities are leased.
<TABLE>
<CAPTION>
FACILITY NAME LOCATION NUMBER
OF
LICENSED
BEDS
OR
UNITS
<S> <C> <C>
Marshall Manor Guntersville, Alabama 91
Ridgewood Health Care Center Jasper, Alabama 98
Terrace Lake Village (1) Guntersville, Alabama 90
The Arbors Health Care Center(2) Camp Verde, Arizona 118
Douglas Manor Douglas, Arizona 64
Los Arcos Health Care Center (3) Flagstaff, Arizona 80
Peppertree Square (1) Safford, Arizona 62
</TABLE>
12
<PAGE> 23
<TABLE>
<CAPTION>
NUMBER
OF
LICENSED
BEDS OR
FACILITY NAME LOCATION UNITS
- ------------- -------- --------
<S> <C> <C>
Pueblo Norte Nursing Center (3) Show Low, Arizona 100
Rio Verde Health Care Center (3) Cottonwood, Arizona 80
Safford Care Center Safford, Arizona 128
SunCrest Healthcare Center Phoenix, Arizona 115
Village Catered Care (1) Douglas, Arizona 62
Amberwood Court Care Center (3) Denver, Colorado 75
Arkansas Manor Denver, Colorado 116
Brookshire House (3) Denver, Colorado 67
Christopher House (3) Wheat Ridge, Colorado 78
Cornerstone Care Center Lakewood, Colorado 140
Boonville Convalescent Center Boonville, Indiana 108
Capital Care Healthcare Center (4) Indianapolis, Indiana 60
Cloverleaf of Knightsville Knightsville, Indiana 86
English Estates (4) Lebanon, Indiana 130
English Senior Living (1)(4) Lebanon, Indiana 19
Holiday Manor Princeton, Indiana 91
Kendalville Manor Kendalville, Indiana 60
Lockerbie Healthcare Center(4) Indianapolis, Indiana 79
Owensville Convalescent Center Owensville, Indiana 68
Parkview Manor (4) Indianapolis, Indiana 39
Sunset Manor (4) Greencastle, Indiana 79
Wellington Manor Indianapolis, Indiana 132
Willow Manor Convalescent Center Vincennes, Indiana 142
Bonner Health Center(5) Bonner Springs, Kansas 50
Oswego Manor(5) Oswego, Kansas 56
Nightingale West(5) Westland, Michigan 236
Colonial Pines San Augustine, Texas 107
Hemphill Care Center Hemphill, Texas 90
Heritage Plaza Texarkana, Texas 90
Homestead of McKinney McKinney, Texas 138
Lake Village Nursing and Rehabilitation Lewisville, Texas 120
Pine Grove Nursing Center Center, Texas 120
Pine Haven Care Center Texarkana, Texas 120
Pleasant Manor Living Center Waxahachie, Texas 120
Reunion Plaza Texarkana, Texas 102
South Place Nursing Center Athens, Texas 120
West Place Nursing Center Athens, Texas 120
---
Total beds 4,246
=====
</TABLE>
- ------------------------------------
(1) Assisted living and independent living facilities.
13
<PAGE> 24
(2) This facility is currently leased. In connection with the Plan, Unison
will exercise its purchase option and enter into a sale/leaseback
transaction with Omega.
(3) The facility real estate is owned. Unison will sell these facilities to
Omega and lease them back under the terms of the Plan.
(4) These facilities will be returned to Omega under the terms of the Plan.
(5) These facilities are currently held for disposition.
OFFICE FACILITIES. Unison Healthcare leases approximately 14,000 square
feet of office space located at 15300 North 90th Street, Suite 100, Scottsdale,
Arizona 85260. The Scottsdale office houses the executive offices of Unison
Healthcare, and the lease for that space expires in the year 2003. Quest leases
approximately 3,600 square feet of commercial office space in Longview, Texas
for its pharmacy operations and approximately 2,000 feet of office space in
Bloomington, Indiana for its Indiana pharmacy. Sunbelt, through the four therapy
companies, leases an aggregate of approximately 38,000 square feet of space for
outpatient clinics and fitness centers in Mississippi and Alabama. Ampro leases
an aggregate of approximately 8,000 square feet for office and laboratory space
in Texas, Tennessee and Missouri and owns one building with approximately 4,000
square feet of space in Missouri. Lease terms on most of the office, pharmacy,
laboratory and therapy space range from one to five years. Management believes
that Unison's leased properties are adequate for its present needs and that
suitable additional or replacement space will be available as required.
PATIENT SERVICES.
Unison's objective is to provide long-term care services across the
continuum of care from independent living services to subacute care services,
all of which are provided primarily to the elderly. Independent living
facilities that offer assistance with activities of daily living are appropriate
for those among the elderly requiring limited healthcare services. Assisted
living facilities are appropriate for residents in need of greater assistance,
but who do not need the services of a skilled nursing facility. Assisted living
facilities provide nutritional, housekeeping, and only limited medical services.
For the elderly and other patients in need of specialized support,
rehabilitation, nutrition, respiratory therapies and other treatments, skilled
nursing care is often required. The provision of specialized subacute services
within skilled nursing facilities also responds to the needs of patients
requiring intense and specialized treatment and rehabilitation therapy services
immediately after hospitalization.
ASSISTED AND INDEPENDENT LIVING SERVICES. Services and facilities at
assisted and independent living centers include central dining facilities,
limited nursing services, recreational areas, social programs, housekeeping,
laundry and maintenance service, emergency call systems, special features for
handicapped persons and transportation to shopping and special events. These
facilities provide fewer nursing and medical services than are provided at
Unison's long-term care facilities. Unison believes that the availability of
healthcare services and assistance with the activities of daily living are
significant reasons that residents move to an assisted or independent living
center.
SKILLED NURSING CARE SERVICES. Unison's skilled nursing facilities
provide basic healthcare services, including room and board, dietary services,
recreational therapy, social
14
<PAGE> 25
services, housekeeping, laundry and nursing services. In addition, the long-term
care facilities dispense medications and otherwise follow treatment plans
prescribed by the patient's physician. Unison's long-term care facilities are
licensed by state licensing agencies and are extensively regulated at the
federal, state, and local level. Unison also provides for the delivery of
specialty medical services at its facilities.
SUBACUTE AND OTHER SPECIALTY CARE SERVICES. Unison's facilities
currently offer a wide variety of subacute and specialty healthcare services,
which may include (i) intensive rehabilitation services; (ii) wound management;
(iii) enteral and parenteral feeding programs; (iv) intravenous drug
administration, including chemotherapy; (v) respiratory therapy; (vi) orthopedic
rehabilitation; and (vii) other specialized subacute services. Subacute and
other specialty care is a major component of Unison's strategy. Unison provides
care to certain types of patients with specialized needs through designated
units such as those for the treatment of Alzheimer's disease and other
conditions. These units are located in specially designed sections within
selected facilities and are staffed by specially trained personnel. In addition
to providing care tailored to the unique needs of patients within these units,
these services include education and support to the patients' families. These
units generally receive higher levels of reimbursement. The daily cost to
patients for Unison's specialty services are generally significantly less than
the cost charged for similar services by acute care hospitals.
OPERATION OF NURSING FACILITIES.
Unison Healthcare is responsible for the day-to-day operation of the
Company's nursing facilities. These responsibilities include recruiting, hiring
and training all nursing and other personnel, and directing the full scope of
patient care activities that are necessary to operate the facilities. In
general, these activities include direct patient care, nursing services, food
service, social services and resident activity programs, housekeeping and
maintenance, business office services including billing and accounts receivable
management, accounts payable, accounting and finance, cash management, debt
management, quality assurance, risk management, legal services and regulatory
compliance at each facility. Unison Healthcare provides additional support by
providing liability, workers compensation and casualty insurance for all
Debtors.
ORGANIZATION. With respect to its long-term and specialty care
facilities, Unison Healthcare maintains three regions, each of which is
supervised by a regional director. The regional director is supported by a
clinical operations specialist, a financial consultant and a regional director
of marketing, all of whom are employed by Unison Healthcare. Daily operations of
each facility are supervised by an on-site licensed administrator. The
administrator at each facility is primarily responsible for adherence to
Unison's standards of practice. Each facility administrator's incentive
compensation is based, in part, on the achievement of specified quality
objectives. Clinical Operations Specialists provide individualized on-site
training to direct care givers. Clinical Operations Specialists also conduct
mock state and federal surveys in advance of scheduled annual surveys. The
administrator of each facility is supported by other professional personnel,
including a medical director, who assists in the medical management of the
facility, a director of marketing who directs the sales and marketing efforts of
the facility and a director of nursing who supervises a staff of registered
nurses, licensed practical nurses and
15
<PAGE> 26
nurses aides. Other personnel include dietary staff, activities and social
service staff, housekeeping, laundry and maintenance staff and a business office
staff.
QUALITY MANAGEMENT. The Company maintains a quality improvement program
that is focused on important aspects of care and critical key indicators that
measure the quality of care provided to its patients. The program is an internal
facility process focused on involvement by direct care givers. Reporting is
monitored by Unison Healthcare's clinical operations specialists under the
direction of the Senior Vice President of Clinical Operations. Monthly reports
are used to monitor adherence to the standards of care established by the
Company's quality improvement program. On-site visits are conducted by specially
trained healthcare professionals. The quality improvement program is designed to
provide patients with better care, and thus a higher quality of life.
In recent years, Unison entered into certain leases of facilities that
have had regulatory compliance or quality difficulties. Unison has generally
achieved improvements of such facilities. In August 1995, Unison acquired 28
operating facilities in the BritWill Acquisition. Regulatory records contained
244 total deficiencies cited at these facilities prior to acquisition. On the
first governmental review conducted after acquisition this number was reduced to
138 deficiencies, a 43% reduction in regulatory noncompliance. Based on
subsequent governmental review, as of October 1, 1996 the number of deficiencies
at these facilities was 61, reflecting a cumulative reduction of 75%. As of July
6, 1998, the equivalent number of deficiencies was 18. Company-wide, Unison's
facilities had 116 surveys from government agencies during the period from
January 1, 1998 through July 6, 1998. The average number of deficiencies cited
during these reviews was 1.3, compared to a national average of 6.5 in the
states in which Unison operates. The Company has reduced substandard quality of
care deficiencies from 5.7% of total surveys in 1996 to 1.7% in 1998, compared
to a national average of 6.7% in the states in which Unison operates. As of July
6, 1998, Unison had no outstanding deficiencies for substandard quality of care.
MARKETING. Unison's marketing efforts are designed to promote higher
occupancy levels and improved payor quality mix. Quality mix has improved from
approximately 41.5% in 1994 to approximately 48.3% in 1997. This increase in
quality mix is due in part to the Company's marketing efforts and the higher
quality mix from acquired operations. Average occupancy was 77.0% in 1996, 83.1%
in 1997 and 81.2% in the first six months of 1998. The decrease in occupancy in
1998 is due primarily to the negative perception of Unison as a result of the
bankruptcy filing in its Texas and Indiana markets. Management believes that
Unison's average occupancy rate will improve as it implements its restructuring
plan.
Unison believes that the long-term healthcare and assisted and
independent living industries are driven by local market forces and that
patients and referral sources are generally located in the immediate geographic
area of the facility. Unison's marketing strategy emphasizes the role and
performance of the administrator and director of admissions in marketing and
promoting the services offered by Unison facilities to each local community.
Unison's marketing program is focused on market analysis, competitive
services, sales training, and accountability and tracking systems. Quantitative
and systematic reporting and
16
<PAGE> 27
analysis is monitored by the regional directors of marketing. Market specific
information, along with weekly and monthly reporting, is used to monitor
adherence to the standards established by Unison. The hub of this strategy is
the local facility administrator and director of admissions and marketing. These
individuals, under the direction of the corporate and regional marketing staff,
are responsible for establishing and building relationships with various
referral sources including general and specialty physicians, hospital
administration and discharge planners, insurance case managers and other local
community organizations. Unison seeks to use their input in conjunction with
demographic and medical data analysis to identify specific market needs, and to
introduce new services where appropriate. The facilities also are involved in
community affairs in order to maintain a public awareness of their services.
PAYOR MIX. Medicare, Medicaid, and other payor sources each pay at
different rates, which are customarily expressed as rates per patient day.
Changes in the mix of a facility's patient population among Medicaid, Medicare,
and private pay can significantly affect the profitability of the facility's
operations because of the widely varying rates of payment between these various
payors. As the following table indicates, Unison has achieved growth in its
quality mix of payor sources throughout the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PRO
----------------------------------------- FORMA
SOURCE OF REVENUES 1994 1995 1996 1997 1997 (1)
------------------ ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Medicare 9.1% 26.9% 29.5% 32.1% 34.2%
Private and other 32.4 17.2 17.0 16.2 16.0
---- ---- ---- ---- ----
Quality mix 41.5 44.1 46.5 48.3 50.2
Medicaid 58.5 55.9 53.5 51.7 49.8
---- ---- ---- ---- ----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
(1) Adjusts for the Dispositions as though such transactions had occurred
as of January 1, 1997.
ANCILLARY SERVICES.
Unison Healthcare provides ancillary services, either directly or
through third-party contracts, to the residents of skilled nursing facilities in
response to physician orders. The major ancillary services include physical,
speech and occupational therapies, pharmaceuticals, parenteral and enteral
nutrition, infusion and respiratory therapies and laboratory services. Although
Unison Healthcare anticipates that it will sell Sunbelt, the Company will
continue to provide rehabilitation therapy services to its patients through
third-party contracts.
Management of each of the ancillary companies reports to Unison
Healthcare's chief executive officer. Unison Healthcare's corporate management
team provides oversight of Ampro, Quest and Sunbelt in the areas of cash
management, budgeting, accounting controls, staffing and detailed review of
financial results. Unison Healthcare also directs the ancillary companies'
growth and marketing strategies, accounts receivable management and integration
and quality of services to Unison facilities. Unison Healthcare provides
additional support in the
17
<PAGE> 28
areas of risk management, legal services, regulatory compliance, government
reimbursement, management information systems and purchasing. A number of the
ancillary companies' supply contracts with major vendors are in the name of
Unison Healthcare. In addition, bank loans and equipment leases provided to the
ancillary companies are negotiated by Unison Healthcare's senior management.
General liability, workers compensation and casualty insurance for all Debtors
is provided under Unison Healthcare's policy.
LABORATORY. Ampro operates three medical reference laboratories
located in Dallas, Texas, Poplar Bluff, Missouri and Memphis, Tennessee, and
three satellite offices located in Austin, Tyler and Fort Worth, Texas. These
laboratories provide clinical laboratory services to approximately 228 nursing
facilities, as well as to other health care facilities such as hospice
providers, home health agencies, physicians and medical clinics.
The laboratories provide bodily fluid testing services to assist in
detecting, diagnosing and monitoring diseases. These tests, performed as ordered
by each patient's attending physician, include testing for complete blood count,
blood chemistry testing, coagulation studies, urinalysis, microbiology tests and
therapeutic drug level tests. Upon completion of these tests, the laboratories
communicate the results of each test to the applicable facility for inclusion on
each patient's medical chart for review by the attending physician.
In connection with the management of the laboratories, Ampro hires
and trains all necessary personnel and directs all other activities associated
with operating a medical laboratory, including billing, collection and other
accounting functions. Quality assurance is provided by laboratory managers
located at each facility. The marketing staff of each facility is responsible
for promoting higher occupancy levels and penetration in their respective
markets.
PHARMACY. Quest is a comprehensive, full-service long-term care
pharmacy and medical supply company that provides services through two
institutional pharmacies located in Longview, Texas and Bloomington, Indiana.
Quest has grown from a pharmacy servicing 15 long-term care facilities in
September 1995 to a highly diversified organization that services, as of June
30, 1998, 41 facilities in Texas and 37 facilities in Alabama, Arizona,
Colorado, Idaho and Indiana. Quest's specialized services include pharmacy,
wound care, medical supplies and enteral therapies. Additionally, Quest provides
infusion management, IV nurse consultants and Medicare Part B services. Quest's
clinical pharmacists provide consulting, medical records services, educational
seminars and continuing education programs. Quest seeks to provide services that
assist its clients in controlling costs and complying with regulatory and
medical standards.
Quest provides pharmaceutical dispensing services to approximately
4,000 patients and clients in various settings, including nursing facilities,
transitional care facilities, assisted living communities, rehabilitation
centers and correctional facilities. Quest provides a variety of pharmaceutical
consulting services, including training of facility staff, designed to assist
nursing facilities in program administration.
Quest management trains all necessary personnel and directs all other
activities associated with operating an institutional pharmacy, including
billing, collection and other
18
<PAGE> 29
accounting functions. Quality assurance is provided by licensed clinical
pharmacists who manage the pharmacy outlets. The consultant pharmacy staff act
as account managers, responsible for marketing, promoting higher occupancy
levels and market penetration. To respond to the needs of its client facilities,
Quest has assembled a team of information specialists who are prepared to
consult about the managed care market, new products and applications, health
care trends and new business opportunities.
THERAPY. Sunbelt provides physical therapy, occupational therapy and
speech language pathology services through Unison facilities and nonaffiliated
health care providers, including long-term care facilities, outpatient clinics,
fitness centers, hospitals and home health agencies. Sunbelt also provides
rehabilitation and sports medicine services to school systems and has
implemented industrial and occupational medicine programs which are delivered
through outpatient clinics, hospitals and on-site industrial environments. As of
June 30, 1998, Sunbelt provided services through 163 contracts, which include 36
Unison facilities.
Sunbelt develops programs for its long-term care clients, utilizing
teams of rehabilitation staff and nursing facility staff, which are tailored to
the needs of the individual facility. Specific programs in which Sunbelt works
in conjunction with facility staff include functional maintenance, wound care,
restraint reduction, dementia training and continuous quality improvement.
Sunbelt also provides training in proper patient posture and positioning to aid
in feeding and prevention of pressure sores.
Sunbelt management is responsible for the hiring and training of its
licensed therapists and other staff, and maintains billing, collections and
accounting functions for Sunbelt. Sunbelt's marketing staff works to increase
penetration in its markets and to increase occupancy in its nursing facilities.
INDUSTRY OVERVIEW.
Unison believes there will continue to be significant business
opportunities to provide healthcare services to long-term care residents in
non-hospital settings, including both long-term care facilities and assisted or
independent living facilities. Certain factors that contribute to this growth
potential are described below.
INDUSTRY CONSOLIDATION. The long-term care industry is highly
fragmented. There are approximately 17,000 long-term care facilities in the
United States which contain a total of approximately 1.8 million licensed beds.
The 50 largest long-term care providers operate approximately 5,000 facilities
comprising approximately 500,000 licensed beds, or 28% of the industry total.
Recently, the long-term care industry has been subject to competitive pressures
and uncertainty with regard to future changes in governmental regulations, which
have resulted in a trend toward consolidation, especially of smaller, local
operators into larger, more established regional or national providers. The
increasing complexity of medical services provided, growing regulatory and
compliance requirements and increasingly complicated and potentially volatile
reimbursement systems have resulted in the consolidation of operators who lack
sophisticated management information systems, operating efficiencies and
financial
19
<PAGE> 30
resources to compete effectively. Unison believes that this trend toward
consolidation will continue.
AGING POPULATION. The overwhelming majority of the patients in
long-term care facilities and residents in assisted or independent living
facilities are over the age of 65. According to the United States Bureau of the
Census, the number of people over the age of 65 in the United States has grown
from approximately 25.6 million in 1980, or 11.3% of the population, to
approximately 33.5 million in 1994, or 13% of the population, and is projected
to increase to approximately 62.2 million, or 18% of the population, by 2025.
The number of people age 85 and older is expected to double from 3.5 million in
1994 to 7 million in 2020, making this age group the fastest growing segment of
the population. As the United States population ages, the demand for the types
of services Unison provides is expected to increase. According to published
reports, one in three Americans currently 65 years old can be expected to enter
a nursing home, for an average of two to three years.
COST CONTAINMENT PRESSURES. Governmental and private pay sources have
adopted cost containment measures which encourage reduced lengths of stay in
acute care hospitals. Many of the patients being discharged, in particular
elderly patients, require additional skilled nursing care and specialty
healthcare services, such as those provided by Unison. The Balanced Budget Act
of 1997 (the "Balanced Budget Act") mandates that, for cost reporting periods
beginning on or after July 1, 1998, skilled nursing facilities will receive a
fixed payment for services to Medicare patients. Any subsequently adopted
healthcare reform proposals are expected to continue to emphasize the cost
containment efforts included in healthcare reform legislation. See "THE DEBTORS
- -- Government Regulation."
ADVANCES IN MEDICAL TECHNOLOGY. Innovations in medical equipment and
new treatment methodologies have lengthened life expectancies, increasing the
number of individuals requiring specialized care and supervision. The incidence
of chronic illness increases with age, particularly certain degenerative
conditions. In the past, the level of care required by many of these individuals
was not generally available outside acute care hospitals. However, long-term
care providers such as Unison have become a more attractive alternative to acute
care hospitals in certain instances due to technological advances that have
enabled long-term care providers to offer services to patients less expensively
than acute care hospitals.
LIMITATIONS IN THE SUPPLY OF LONG-TERM CARE FACILITIES. In many areas
the number of available long-term care beds has not grown as quickly as demand
in recent years. Many states (but not all of the states in which Unison
operates) have enacted certificate of need or similar legislation which
generally limit the construction of long-term care facilities and the addition
of beds or services in existing facilities. Furthermore, high construction
costs, limitations on government reimbursement for the full costs of
construction, and start-up expenses also act to constrain growth in the numbers
of facilities. As a result, the Company believes that the supply of long-term
care facilities may not grow as quickly as the demand for such facilities. See
"THE DEBTORS -- Government Regulation - Certificates of Need."
20
<PAGE> 31
BUSINESS STRATEGY.
Unison's business strategy is to become a preferred provider of
long-term and specialty healthcare services in its markets by offering a full
range of high quality, cost competitive, long-term healthcare services. The key
components of the Company's strategy are:
PROVIDE A CONTINUUM OF CARE. Unison operates both skilled nursing and
assisted living facilities and provides a wide variety of medical,
rehabilitative and pharmaceutical treatments. Unison seeks to offer these
services across the entire continuum of care from independent and assisted
living, to traditional long-term, specialty and subacute care. This strategy
provides an opportunity for entry at each point in the continuum of care. As
patients' needs change, they may be served by different elements of the care
continuum. The primary benefit of offering a continuum of care is that it offers
patients an appropriate level of cost-effective care which the Company believes
is attractive to third party payors.
Unison believes that independent and assisted living arrangements have
become an increasingly important component of the continuum of care required by
older Americans. Cost containment pressures from government and private payors
alike encourage discharge from long-term and specialty care facilities before
residents may be fully able to care entirely for themselves. The change from the
traditional family structure which was able to care for the sick and elderly to
dual income families has increased the need for facilities that can assist such
persons. Unison believes that offering services at this important level of the
continuum of care enables it to maintain contacts with potential consumers of
its long-term and specialty healthcare services and thus to improve its
occupancy levels and profitability.
IMPROVE PAYOR QUALITY, OCCUPANCY LEVELS AND OPERATING MARGINS. Unison
is focused on improving its payor quality mix and occupancy levels. The
profitability of caring for private-pay and Medicare patients is generally
higher than that of Medicaid patients. Unison's marketing efforts are focused on
the hospital and medical community in each market to promote higher occupancy
levels and improved payor mix at its long-term care facilities and assisted or
independent living centers.
Unison seeks to improve its profitability by attempting to obtain an
increasing proportion of its revenue from specialized healthcare services which
typically generate higher profit margins than basic long-term nursing care.
Specialty healthcare services are developed in cooperation with, and in
accordance with, the needs of the local medical community. Specialty programs
are developed by the Company's clinical specialists, marketing professionals and
facility administrators working directly with local hospital discharge planners
and physicians. Management believes that this approach generally has been well
received by local medical communities
CONCENTRATE HEALTHCARE FACILITIES IN GEOGRAPHIC "CLUSTERS." Unison has
in the past sought to acquire facilities which fit within existing geographic
regions or "clusters," and to enter new markets through clustered acquisitions.
Clustering is intended to attempt to capture local economies of scale by
providing ancillary services, purchasing, marketing, information systems, risk
management, accounting, reimbursement and quality control to geographically
concentrated
21
<PAGE> 32
facilities. The cluster strategy is based on the belief that clustering
facilities will enable Unison to leverage management across a larger base of
client revenue and efficiently monitor individual facilities, ensuring high
quality patient care. Clustering facilities should also enable Unison to
leverage the addition of ancillary services over a larger patient base. The
Signature Acquisition in 1996, which included the acquisition of five long-term
care facilities in the Denver, Colorado area, is an example of this strategy.
COMPETITION.
Unison's facilities compete on a local and regional basis with general
acute care hospitals, skilled nursing facilities, rehabilitation hospitals,
long-term care hospitals, assisted living facilities, home care providers and
other subacute and specialty care providers. Many of these companies have
greater financial and other resources than Unison and some are nonprofit or
charitable organizations. No assurance can be given that Unison will have the
resources to compete successfully with such companies. In addition, cost
containment efforts, which encourage more efficient utilization of general acute
care hospital services, have resulted in decreased hospital occupancy in recent
years. As a result, a significant number of general acute care hospitals have
converted portions of their facilities to other purposes, including various
types of long-term and subacute care. The Company believes that significant
competitive factors include the quality and spectrum of care and services
provided, the reputation of the medical personnel employed, the physical
appearance of the facilities and, in the case of private-pay patients, the level
of charges for services. Because the Company's facilities compete primarily on a
local and regional basis, rather than on a national basis, the competitive
position of the Company varies from facility to facility. The Company seeks to
meet competition in each locality by improving the quality and types of services
provided in and the appearance of its facilities, by establishing a reputation
within the local medical communities for providing quality care, and by
responding appropriately to regional variations in demographics and preferences.
There is no price competition with respect to Medicare and Medicaid patients
because revenues for services administered to such patients are based on
strictly controlled fixed rates and cost reimbursement principles.
Unison's pharmacy and laboratory businesses compete with national,
regional and local pharmacies and medical reference laboratories, some of which
have significantly greater financial and other resources than Unison. The
Company's strategy for its pharmacy services focuses on the expansion of
services beyond dispensing tablet, capsule and liquid medications to include
more intensive and higher margin IV therapy services, antibiotic and hydration
therapies, pain management and chemotherapy. No assurance can be given that
Unison will have the resources to compete successfully with such companies.
Unison believes that the primary factor in competing for pharmacy business is
prompt service and that the primary factor in competing for laboratory business
is prompt and accurate test results.
GOVERNMENT REGULATION.
The federal government and all states in which Unison operates regulate
various aspects of Unison's business. All of the Company's skilled nursing
facilities are certified or approved as providers under one or more of the
Medicaid or Medicare programs. To participate in the
22
<PAGE> 33
Medicare or Medicaid program, each facility must comply with federal
participation requirements and meet additional state licensure requirements. All
of these programs are currently the subject of numerous legislative and
regulatory proposals at both federal and state levels, some of which could
adversely affect Unison. The Federal Social Security Act (the "Act") authorizes
the Secretary of the Department of Health and Human Services to execute
agreements with state survey agencies to determine whether skilled nursing
facilities meet the federal participation requirements for Medicare. State
survey agencies perform the same survey tasks for nursing facilities
participating or seeking to participate in the Medicaid program. The results of
Medicare and Medicaid surveys are used by the Health Care Financing
Administration ("HCFA") and Medicaid state agencies as the basis for decisions
to execute, deny or terminate provider agreements with facilities.
PAYMENT FOR SERVICES. Unison derives a significant portion of its net
revenues, directly or indirectly, from the Medicare and Medicaid programs. These
programs are subject to statutory and regulatory changes, retroactive and
prospective rate adjustments, administrative rulings and funding restrictions,
all of which could limit or reduce reimbursement for Unison's services. Any
significant decrease in Medicare or Medicaid reimbursement amounts could have a
material adverse effect on Unison. Unison also obtains payment from private
insurers, including managed care organizations and private pay patients. The
Company's facilities also have contracts with private payors, including health
maintenance organizations and other managed care organizations, to provide
certain healthcare services to cover patients for a set per diem payment for
each patient. There can be no assurance that the rates paid to Unison by these
payors will remain at current levels or be adequate to reimburse Unison for the
cost of providing services to covered beneficiaries. In addition, cost increases
due to inflation without corresponding increases in reimbursement could
adversely affect Unison's business.
THE BALANCED BUDGET ACT. The Balanced Budget Act, signed into law on
August 5, 1997, makes numerous changes to the Medicare and Medicaid programs,
which may impact Unison. The Balanced Budget Act mandates the establishment of a
prospective payment system ("PPS") for Medicare skilled nursing facility
services, under which facilities will be paid a fixed fee for virtually all
covered services based upon their patients' assessed acuity. PPS will be phased
in over a four-year period, effective for Unison's facilities on January 1,
1999. During the first three years, payments will be based on a blend of the
facility's historical costs and calculated federal rates. Thereafter, the per
diem rates will be based 100% on federal rates, adjusted for inflation and
geographical data. Under PPS, each patient's clinical status is evaluated and
placed into one of 44 payment categories. The patient's payment category
dictates the amount that the provider will receive to care for the patient on a
daily basis. The per diem rate will cover (i) all routine inpatient costs
currently paid under Medicare Part A, (ii) certain ancillary and other items and
services currently covered separately under Medicare Part B on a "pass-through"
basis, and (iii) certain capital costs. The final rules and new per diem rates
were published on May 22, 1998 and were open for public comment until July 13,
1998. There can be no assurance that payments under PPS will be comparable to
current levels and that PPS will not have a material adverse impact on Unison's
liquidity, results of operations or financial condition.
For Medicare patients receiving services on an outpatient basis under
Medicare Part B, effective July 1, 1998, reimbursement for ancillary services
such as rehabilitation therapy, drugs,
23
<PAGE> 34
medical supplies and other items, will be based on a fee schedule. In addition,
effective January 1, 1999, there will be an annual per-patient cap of $1,500 on
reimbursement for Part B and outpatient physical and speech therapy services and
an annual per-patient cap of $1,500 or reimbursement for Part B and outpatient
occupational therapy services. There can be no assurance that these fee
schedules will not have a material adverse effect on the Company.
The Balanced Budget Act also contains changes to the Medicaid program,
the most significant of which is the repeal of the Boren Amendment. The Boren
Amendment required state Medicaid programs to pay rates that are reasonable and
adequate to meet the costs that must be incurred by a nursing facility in order
to provide care and services in compliance with applicable standards. Effective
October 1, 1997, states have more flexibility in establishing payment rates.
Indiana and Colorado will adopt case-mix prospective payment systems effective
October 1, 1998 and January 1, 1999, respectively. Unison is unable to predict
whether any other states will change their reimbursement policies and, if so,
what effect such changes would have on the Company. There can be no assurance
that any changes to the Medicaid program will not have a material adverse impact
on the Company.
THE MEDICARE PROGRAM. The Medicare Program is a federally funded and
administered health insurance program for individuals age 65 and over or who are
disabled as defined by the Social Security Administration. The Medicare Program
covers patients requiring daily skilled nursing and other rehabilitation care
following a minimum three-day stay in a general or acute care hospital, but does
not cover patients requiring only intermediate or custodial levels of care.
Until the implementation of PPS, Medicare reimburses the skilled
nursing facility based on a reasonable cost standard. With certain exceptions,
payment for skilled nursing facility services is made retrospectively with each
facility receiving an interim payment during the year for its expected
reimbursable costs. The interim payment is later adjusted to reflect actual
allowable direct and indirect costs of services based on the submission of an
annual cost report. Each facility is also subject to limits on reimbursement for
routine costs. Exceptions to these limits are available for, among other things,
the provision of atypical services. Due in part to the provision of subacute
services, Unison's costs for care delivered to Medicare patients in certain of
its long-term and specialty healthcare facilities have exceeded the routine cost
limits. Although management believes that Unison will recover these routine cost
limit exception requests, failure to obtain such exceptions could adversely
affect Unison's results of operations.
Medicare covers and pays for rehabilitation therapy services furnished
in facilities in various ways. For rehabilitation services provided directly,
specific guidelines exist for evaluating the reasonable cost of physical
therapy, occupational therapy and speech language pathology services. Medicare
applies salary equivalency guidelines in determining the reasonable cost of
physical therapy and respiratory services, which is the cost that would be
incurred if the therapist were employed by a nursing facility, plus an amount
designed to compensate the provider for certain general and administrative
overhead costs. Until April 1, 1998, Medicare paid for occupational therapy and
speech language pathology services on a reasonable cost basis, subject to the
so-called "prudent buyer" rule for evaluating the reasonableness of the costs.
Unison's gross margins for services reimbursed under the salary
24
<PAGE> 35
equivalency guidelines are significantly less than services reimbursed under the
"prudent buyer" rule.
In January 1998, HCFA issued rules applying salary equivalency limits
to certain speech and occupational therapy services and revised existing
physical and respiratory therapy limits. The new limits are effective for
services provided on or after April 1, 1998. For the year ended December 31,
1997, Unison's revenues and contribution margin from speech and occupational
therapy services amounted to $31.2 million and $13.1 million, respectively. The
imposition of salary equivalency guidelines on speech language pathology and
occupational therapy services could significantly impact Unison's margins in
1998. The revised guidelines will be in effect until nursing facilities
transition to PPS. Under PPS, the reimbursement for these services provided to
nursing facility patients will be a component of the total reimbursement allowed
per patient and the salary equivalency guidelines will no longer be applicable.
Unison's client nursing facilities, both affiliated and nonaffiliated, will
transition to PPS on January 1, 1999.
Current Medicare regulations that apply to transactions between related
parties are relevant to the amount of Medicare reimbursement that the Company is
entitled to receive for the rehabilitation and respiratory therapy and
pharmaceutical services that it provides to Unison facilities. These related
party regulations require that, among other things, (i) the Company's therapy
and pharmacy subsidiaries must each be a bona fide separate organization; (ii) a
substantial part of the services of each subsidiary is transacted with
nonaffiliated entities, and there is an open, competitive market for such
services; (iii) the services provided by such subsidiary commonly are obtained
by long-term and subacute care facilities from other organizations and are not a
basic element of patient care provided by such facilities; and (iv) the prices
charged to the Company's long-term and subacute care facilities by such
subsidiaries are in line with the charges for such services in the open market
and no more than the prices charged by its therapy and pharmacy subsidiaries
under comparable circumstances to nonaffiliated entities in order to satisfy the
"substantial part" requirement of such regulations. In instances where this
issue has been litigated by others, no consensus has emerged as to the
appropriate threshold necessary to satisfy the "substantial part" requirement.
In the fourth quarter of 1997, Unison Healthcare was informed by its
Medicare fiscal intermediary that it is challenging reimbursement for certain
services provided at Unison facilities by Sunbelt, a Unison Healthcare
subsidiary which provides physical, speech and occupational therapy services to
both affiliated and nonaffiliated long-term care facilities. Although the
Company intends to vigorously pursue reimbursement of the challenged items, in
the fourth quarter of 1997 it recorded a reduction in Medicare revenues in
connection with this related party issue. When PPS and the fee schedules are
implemented, the Medicare impact of the related party rule will be eliminated.
Sunbelt is currently held for possible disposition.
THE MEDICAID PROGRAM. All of Unison's nursing facilities are certified
to participate in applicable state Medicaid programs. Medicaid is a joint
federal-state medical assistance program for individuals who meet certain income
and resource standards. Facilities participating in the Medicaid program are
required to meet state licensing requirements to be certified in accordance with
the state and federal regulations and to enter into contracts with the state
agency to provide services at rates established by the state. States have
considerable flexibility in establishing their
25
<PAGE> 36
Medicaid reimbursement systems, and as a result, the payment methodologies and
rates vary significantly from state to state. All of the states in which Unison
operates Medicaid-certified facilities, except for Texas and Arizona, use a
cost-based reimbursement system under which reimbursement rates are determined
by the state from cost reports filed annually by each facility on a
retrospective basis. Reimbursable costs normally include the costs of providing
healthcare services to patients, administrative and general costs, and the costs
of property and equipment. Not all costs incurred are reimbursed, however,
because of cost ceilings applicable to both operating and fixed costs. Some
state Medicaid programs include an incentive allowance for providers whose costs
are less than the ceilings and who meet other requirements. In addition, certain
Medicaid payments are subject to relatively long collection cycles and payment
delays due to budget shortfalls in state Medicaid programs.
Currently, several states, including Texas, utilize case-mix
prospective payment systems, pursuant to which payment levels increase based on
a patient's acuity level and need for services. Indiana and Colorado will adopt
case-mix prospective payment systems effective October 1, 1998 and January 1,
1999, respectively. Arizona has developed a managed care program for its
Medicaid beneficiaries, whereby subcontractors, usually county health
departments, receive negotiated capped rates from the state. The subcontractors
then negotiate contracts with nursing facilities to provide patient care.
ENFORCEMENT PROCEEDINGS AND SANCTIONS; CERTIFICATION REQUIREMENTS.
Under the Omnibus Reconciliation Act of 1987 ("OBRA"), HCFA has promulgated
survey, certification and enforcement rules governing skilled nursing facilities
and nursing facilities participating in the Medicare and Medicaid programs.
Among other things, the HCFA rules governing survey and certification of
long-term care facilities define a number of terms used in the survey and
certification process. The rules require states to enact state plans to
incorporate the provisions of the rules, including the full range of remedies
for nursing facilities subject to the jurisdiction of the state Medicaid agency.
Additional remedies are available.
Unannounced standard surveys must be conducted at least every 15 months
with a state-wide average of 12 months. In addition to the standard survey,
survey agencies have the authority to conduct surveys as frequently as necessary
to determine whether facilities comply with requirements of participation, to
determine whether facilities have achieved correction and to monitor care if
there is a change of ownership or management of a facility. Furthermore, the
state survey agency must review all complaint allegations and conduct a standard
or an abbreviated standard survey to investigate complaints of violations of
regulatory requirements by long-term care facilities if a review of the
complaint shows that a deficiency in one or more of the federal requirements may
have occurred and only a survey will determine whether a deficiency or
deficiencies exist. If a facility has been found to furnish substandard quality
of care, or to have deficiencies requiring "significant improvement," it is
subject to an extended survey. The extended survey is intended to identify
policies and procedures which may have caused a facility to furnish substandard
quality of care.
HCFA's rules allow either HCFA or state agencies to impose one or more
remedies provided under the rules for any particular deficiency. Facilities must
provide a plan of correction for all deficiencies regardless of whether a remedy
is imposed. Available remedies
26
<PAGE> 37
include termination of provider agreement, temporary management, denial of
payment for new admissions, civil money penalties, closure of the facility in
emergencies or transfer of residents or both, and state monitoring. States may
also adopt optional remedies. The rules divide remedies into three categories.
Category 1 remedies include directed plans of correction, state monitoring and
directed in-service training. Category 2 remedies include denial of payment for
new admissions, denial of payment for all individuals (imposed only by HCFA),
and civil money penalties of $50 to $3,000 per day. Category 3 remedies include
temporary management, immediate termination or civil money penalties of $3,050
to $10,000 per day. The rules define situations in which one or more of the
penalties must be imposed.
The HCFA certification, survey and enforcement regulations impose
significant burdens on long-term care facilities. The regulations may require
state survey agencies to take aggressive enforcement actions. The breadth of the
rules create uncertainty over how the rules will be implemented and the
standards of compliance.
Unison believes that its facilities substantially comply with the
various state licensure and Federal certification requirements applicable to
them. However, in the ordinary course of its business, Unison sometimes receives
notices of alleged deficiencies for failure to comply with regulatory
requirements. Unison reviews such notices and attempts to take corrective
action. Unison's facilities sometimes receive notices from state agencies which
result in fines and/or the agencies taking steps to decertify the facilities
from participation in Medicare and Medicaid programs. In 1996 the Company
received notices of monetary penalties related to two of its Texas facilities in
the aggregate amount of approximately $168,000. These fines are currently being
appealed. In February 1998, Unison closed its Oaks at Boise facility in Boise,
Idaho, after voluntarily terminating its participation in the Medicare program
and relocating the patients. Unison had been in negotiations with the owners for
disposition of the facility when it encountered regulatory problems.
Negotiations broke down and Unison closed the facility. Unison was assessed a
penalty amounting to $25,875 for violations of Medicare regulations, payment of
which has not been demanded due to the bankruptcy filing.
CERTIFICATES OF NEED. Many states (although not every state in which
Unison operates) have adopted certificate of need or similar health planning
laws which generally require prior state agency approval of certain
acquisitions, new bed additions or services or capital expenditures. To the
extent that such approvals are required for Unison to expand its operations or
enter new geographic markets, Unison could be adversely affected by its
inability to obtain the necessary approvals and could incur delays and expenses
associated with obtaining such approvals. Currently, the states with certificate
of need requirements in which the Company operates include Michigan and Alabama.
In addition, Colorado and Texas have placed moratoriums on bed additions.
PATIENT REFERRAL REGULATIONS. Unison is also subject to federal and
state laws that prohibit direct and indirect payments between healthcare
providers that are intended to induce or encourage the referral of patients to a
particular provider of items or services. Violation of these laws may result in
criminal fines, imprisonment and exclusion from the Medicare and Medicaid
programs. Federal regulations establish certain safe harbors from liability
under this statute. While failure to satisfy all of the criteria for a safe
harbor does not necessarily mean that an
27
<PAGE> 38
arrangement is unlawful, arrangements that are of the same generic kind as those
for which a safe harbor is available may be subject to scrutiny if they fail to
qualify for the appropriate safe harbor. In addition, under separate statutes,
submission of claims for payment that are deemed to be false or fraudulent, or
for items or services that are "not provided as claimed," may lead to civil
monetary penalties, criminal fines and imprisonment, and/or exclusion from
participation in Medicare, Medicaid and other federally funded state healthcare
programs.
Under Medicare conditions of participation and some state licensure
laws, Unison, because of its method of service delivery, is required to contract
with healthcare providers, practitioners and suppliers, including hospitals,
facilities, physicians, pharmacies and medical equipment companies. Some of
these individuals or entities may refer, or be in a position to refer, patients
to Unison, and Unison may refer, or be in a position to refer, patients to
certain of these individuals or entities. The Health Insurance Portability and
Accountability Act ("HR 3103"), which was signed by President Clinton on August
21, 1996, has for the first time established a procedure requiring the Secretary
of the Department of Health and Human Services to issue advisory opinions
concerning some activity punishable under federal healthcare fraud statutes. To
the Company's knowledge, none of its patients were referred under practices
which are in violation of HR 3103. Although Unison believes its practices are
not in violation of these laws, there can be no assurance that such laws will
ultimately be interpreted in a manner consistent with Unison's practices.
Other laws prohibit physician referrals for certain "designated health
services" rendered to Medicare and Medicaid patients by a provider in which the
referring physician has an ownership interest or other financial relationship.
Various exceptions are available for financial arrangements that would otherwise
prohibit physician self-referrals. Many states have also enacted physician
self-referral laws that apply whether or not Medicare or Medicaid payments are
involved. Similar penalties, including fines and loss of licensure or
eligibility to participate in government reimbursement programs, apply to
violations of these state self-referral laws. These self-referral laws could
require Unison to modify its contractual arrangements in order to satisfy an
available exception, or limit the ability of physicians with whom Unison has
compensation arrangements to refer patients to Unison.
The nursing home industry has been a target of focus by government
regulators seeking to discover and prosecute claims of healthcare fraud and from
time to time Unison has received inquiries related to such claims. Medicare
intermediaries and carriers have been given new instructions from HCFA
concerning investigating and referring for prosecution suspected instances of
Medicare and Medicaid fraud and abuse. In May 1996, the federal government
announced the first year results of its "Operation Restore Trust" initiative.
This initiative is a combined federal and state effort designed to combat
healthcare fraud, waste and abuse and specifically targets the Medicare and
Medicaid programs in connection with services of home health agencies, nursing
homes and durable medical equipment suppliers. These entities are targeted
because they account for the fastest growing cost areas in the Medicare and
Medicaid programs. Operation Restore Trust originally focused on California,
Florida, Illinois, New York and Texas. It is now extended to all states and is
concerned with detection of suspected nursing facility fraud and abuse. This
effort is focused on problems with claims for services not rendered
28
<PAGE> 39
or not provided as claimed and claims falsified to circumvent coverage
limitations on medical supplies. The Company expects efforts of this sort to
continue.
PHARMACY. Pharmacists and those providing pharmacy services in the
United States are regulated by state statutes and the rules and regulations of
state boards of pharmacy. Currently, Unison operates pharmacies only in Texas
and Indiana. As required by Texas and Indiana law, Unison and its pharmacists
are licensed as a retail pharmacy and as pharmacists, respectively. In addition,
both state and federal regulators prohibit the dispensing of certain drugs or
medicines other than pursuant to a prescription written by a licensed
practitioner. In order to implement these restrictions, regulations impose
strict recordkeeping requirements with respect to the handling and dispensing of
controlled substances, small quantities of which are maintained in Unison's
pharmacy for use in filling prescriptions. These requirements also impose
significant recordkeeping obligations upon Unison and its pharmacists. Unison is
subject to regular audits by governmental authorities to monitor compliance with
recordkeeping and other requirements imposed by law and regulation. Penalties
for failure to comply with applicable regulations can range from imposition of
fines to the suspension or revocation of the license of the pharmacy, one or
more pharmacists, or both. As of June 30, 1998, Unison provided pharmacy
services to 11 Company-affiliated and 30 non-affiliated skilled nursing
facilities in East Texas, and 13 Unison-affiliated and 10 non-affiliated skilled
nursing facilities in Indiana (including the Disposition Facilities), and 14
other Unison-affiliated skilled nursing facilities in Alabama, Arizona and
Colorado.
LABORATORY. Laboratories providing laboratory services in the United
States are regulated by state statutes and the rules and regulations of the
Clinical Laboratory Improvement Act of 1988 ("CLIA"). All laboratories must have
a certificate of compliance or a certificate of accreditation for laboratory
testing. Laboratories which have certificates must permit HCFA or a HCFA agent
to conduct an inspection to assess the laboratory's compliance with the
requirements of CLIA. The most recent inspection of Ampro's three laboratories
revealed no deficiencies. Currently, Ampro operates laboratories in Missouri,
Texas and Tennessee. As of June 30, 1998, Ampro provided laboratory services to
two Company affiliated and 86 non affiliated skilled nursing facilities in
Texas, 18 non affiliated skilled nursing facilities in Tennessee, and 122 non
affiliated skilled nursing facilities in Missouri.
EMPLOYEES.
As of June 30, 1998, Unison employs approximately 4,530 individuals
(including full-time and part-time employees), of which approximately 3,550
employees work at Unison's nursing facilities, 100 employees work at Unison
Healthcare's corporate and regional offices, 70 employees work in Unison's
pharmacy operations, 690 employees work for Sunbelt and 120 employees work in
the Company's medical reference laboratories. Among its clinical staff, Unison
employs approximately 290 registered nurses, 530 licensed practical nurses and
1,400 certified nursing assistants. Unison has two collective bargaining
agreements covering approximately 250 nursing facility employees. One of the
collective bargaining agreements is with the 160 employees at Unison's
Nightingale West facility, which is currently held for disposition.
29
<PAGE> 40
Unison's employee benefits include medical, long-term disability and
life insurance. The Company also offers a 401-K retirement plan to all eligible
employees.
CURRENT EXECUTIVE OFFICERS AND DIRECTORS.
The following table sets forth certain information with respect to the
current directors and executive officers of Debtors.
<TABLE>
<CAPTION>
UNISON HEALTHCARE
-----------------
Name Age Position(2)
---- --- -----------
<S> <C> <C> <C>
Michael A. Jeffries 48 President, Chief Executive Officer, Director
Clayton Kloehr 41 Senior Vice President-Finance, Treasurer, Director
Nir E. Margalit 40 Executive Vice President, General Counsel, Secretary, Director
Jimmy L. Fields 47 Senior Vice President and Chief Financial Officer
Terry Troxell 47 Senior Vice President-Clinical Operations
John T. Casey 52 Director
Tyrrell L. Garth 50 Director(3)
John T. Lynch, Jr. 50 Director
Mark W. White 58 Director
QUEST
-----
Name Age Position
---- --- --------
L. Robert Oberfield 60 President
Michael A. Jeffries 48 Chief Executive Officer, Director
Clayton Kloehr 41 Chief Financial Officer, Treasurer, Director
Nir E. Margalit 40 Secretary
Jimmy L. Fields 47 Vice President
SUNBELT THERAPY (ALABAMA)
-------------------------
Name Age Position
---- --- --------
Paul G. Henderson 42 President
Michael A. Jeffries 48 Chief Executive Officer, Director
Clayton Kloehr 41 Chief Financial Officer, Treasurer, Director
Nir E. Margalit 40 Secretary
Jimmy L. Fields 47 Vice President
</TABLE>
- ------------------------
(2) Mr. Bruce Whitehead was a Director from August 1995, until his resignation
from the Board of Directors on May 29, 1998. Similarly, Mr. David Kremser served
as a Director from November 1, 1996, until his resignation from the Board of
Directors on May 29, 1998.
(3) Mr. Garth was a Director from August 1995, until his resignation from the
Board of Directors on August 6, 1998.
30
<PAGE> 41
<TABLE>
<CAPTION>
ALL OTHER DEBTORS
-----------------
Name Age Position
---- --- --------
<S> <C> <C> <C>
Michael A. Jeffries 48 President, Chief Executive Officer, Director
Clayton Kloehr 41 Chief Financial Officer, Treasurer, Director
Nir E. Margalit 40 Secretary
Jimmy L. Fields 47 Vice President
</TABLE>
MICHAEL A. JEFFRIES has served as President, Chief Executive Officer
and Director of Unison Healthcare since September 8, 1997. Mr. Jeffries is also
the Chief Executive Officer and a Director of Quest and Sunbelt and the
President, Chief Executive Officer and a Director of Unison Healthcare's other
subsidiaries. From 1989 to August 1997, Mr. Jeffries was Senior Vice President
and a Director of Horizon/CMS Healthcare, a publicly traded long-term care
company. From 1983 to 1989, Mr. Jeffries was employed by Beverly Enterprises,
the nation's largest long-term care company, most recently as Senior Vice
President, Operations. Prior thereto Mr. Jeffries was the Director of Operations
and Chief Financial Officer of Mid-America Nursing, a regional nursing home
system in Kansas.
L. ROBERT OBERFIELD has been President of Quest 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 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.
JIMMY L. FIELDS has served as Executive Vice President and Chief
Financial Officer since April 1, 1998. From 1995 to March 1998 he was the Chief
Financial Officer and Director of Health Care Operations for Fountains
Retirement Communities, Inc., a senior housing and long-term care company. From
1993 to 1995 Mr. Fields was the Chief Operating Officer of Retirement Management
Corporation, an operator of long-term care facilities. From 1983 to 1993 Mr.
Fields was an executive with various long-term care companies including The
Multicare Companies, Inc., where he served as Chief Financial Officer and Chief
Operations Officer. Mr. Fields is a certified public accountant.
NIR E. MARGALIT has served as Executive Vice President, General
Counsel, Secretary and a Director of Unison Healthcare and Secretary of all
other Debtors since February 15, 1998. From 1995 to February 1998, when he
joined Unison, Mr. Margalit was Vice President, General Counsel and Secretary of
Starwood Hotels and Resorts Worldwide, Inc., a publicly traded hotel paired
share real estate investment trust. From 1993 to 1995, Mr. Margalit was Vice
President, Development and Special Counsel of Capstar Hotels. Prior thereto, Mr.
Margalit was an attorney in private practice.
31
<PAGE> 42
TERRY TROXELL has served as Director of Professional Services of Unison
Healthcare since it commenced operations in July 1992. In November 1994, she
became Vice President of Clinical Operations of Unison Healthcare and in
September 1996 she became Senior Vice President of Clinical Operations. From
July 1991 until July 1992, Ms. Troxell served as Director of Professional
Services of Samaritan Senior Services, Inc. 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
board as Regional Vice president and serves on its Advocacy Panel 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.
CLAYTON KLOEHR has served as Senior Vice President-Finance and
Treasurer of Unison Healthcare since July 1, 1997. Mr. Kloehr is also the Chief
Financial Officer, Treasurer and a Director of each of the other Debtors. From
August 1995 through June 30, 1997, Mr. Kloehr was an independent financial
consultant. 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.
JOHN T. CASEY has served as a Director of Unison Healthcare since
August 1995. Mr. Casey is the Chairman and Chief Executive Officer of Physician
Reliance Network, a publicly traded provider of cancer treatment services. From
1995 to 1997, Mr. Casey was the Chief Executive Officer of InteCare LLC, a
hospital management firm in Irving, Texas. From 1991 to 1995, Mr. Casey was the
Chief Operating Officer of American Medical International, a publicly traded
hospital management company. Prior thereto, Mr. Casey was President of Samaritan
Health Services, a hospital and long-term care provider.
TYRRELL L. GARTH served as a Director of Unison Healthcare from August
1995 until his resignation on August 6, 1998. 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 Healthcare in August 1995.
JOHN T. LYNCH, JR. has been a director of Unison Healthcare since June
1992. Mr. Lynch was also a director of BritWill between 1992 and its acquisition
by Unison Healthcare in August 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 Health Care Finance Groups at Thomson McKinnon Securities,
Inc. and Dean Witter Reynolds, Inc. for the period 1980 through 1990.
MARK W. WHITE has served as a Director of Unison Healthcare since
August 1995. Mr. White has been an attorney in private practice since 1987 and
also serves as the President of
32
<PAGE> 43
GeoVox, Inc., a security systems company. From 1983 to 1987, Mr. White served as
Governor of the State of Texas.
RELATED PARTY TRANSACTIONS
BRITWILL ACQUISITION. In August 1995, Unison Healthcare's predecessor,
SunQuest, acquired BritWill from Whitehead Family Investments, Ltd., a Texas
limited partnership, and other BritWill shareholders in a stock purchase
transaction. The General Partner of Whitehead Family Investments, Ltd. ("WFIL")
at the time of the BritWill Acquisition was BritWill Texas Investments Company
("BritWill Texas Investments"), a Delaware corporation. The President of
BritWill Investments at the time of the BritWill Acquisition was Mr. Whitehead.
The consideration given by Unison Healthcare in connection with the
BritWill Acquisition in August 1995 included: (a) a debenture that was
subsequently converted into 561,815 shares of Unison's common stock; (b) a
combination of promissory notes and lump sum contingent payment obligations
totaling $25 million (collectively the "Loan Documents"), together with a
monthly contingent payment obligation and an Additional Payment Obligation (as
defined in the Loan Documents); and (c) indemnifications and guarantees by
Unison Healthcare and certain of its subsidiaries and affiliates of certain
debts and obligations of BritWill.
The Loan Documents issued as consideration for the BritWill
Acquisition were issued to Mr. Whitehead as agent for 100% of the former
shareholders of BritWill, and to WFIL, by its general partner, BritWill Texas
Investments. Mr. Whitehead directly or indirectly held or controlled
approximately 81.5% of BritWill's outstanding stock, and served as BritWill's
Chairman of the board of directors. At the time of the BritWill Acquisition in
August 1995, the BritWill Acquisition Obligations were unsecured. As a result of
the BritWill Acquisition, Mr. Whitehead became, beneficially, one of Unison
Healthcare's largest shareholders and, at the same time, one of Debtor's largest
creditors. At the time Unison Healthcare acquired BritWill, Messrs. Garth, Lynch
and White were also BritWill shareholders and directors, and Mr. Garth served as
outside counsel. Messrs. Garth and White were not directors of Unison Healthcare
prior to the BritWill Acquisition.
As former shareholders of BritWill, Messrs. Whitehead, Garth, Lynch
and White have participated pro rata in some or all acquisition payments made
and acquisition obligations incurred by Unison in connection with the BritWill
Acquisition (the "BritWill Acquisition Obligations"). The BritWill Acquisition
Obligations paid, in total, include $13.6 million of principal, $853,000 of
interest, $5.2 million of payments on monthly contingent payment obligations and
561,815 shares of Unison Healthcare Common Stock. On or about January 9, 1997,
Unison Healthcare paid $9.75 million of the Notes proceeds to Mr. Whitehead and
his affiliated entities as and for a payment on the unsecured BritWill
Acquisition Obligations. Messrs. Garth and Lynch have transferred their
interests in the BritWill Acquisition Obligations to their children, and Mr.
White transferred his interest to Mr. Whitehead.
33
<PAGE> 44
MR. WHITEHEAD.(4) Mr. Whitehead has (or had) a direct or indirect
material interest in the following additional transactions with BritWill or
Unison.
- - Prior to Unison Healthcare'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 Investments-Texas, Ltd.
("Brit-Texas"), Mr. Whitehead is the indirect owner and lessor of six
of the nursing facilities that the Company leases in Texas (including
three facilities that were subleased to an unrelated party effective
March 1, 1997). The annual base rent for these facilities amounts to
$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. Mr. Whitehead is also the
guarantor of the Company's obligations with respect to the facilities
that are leased from Omega.
- - Mr. Whitehead directly or indirectly owned all of the interests, except
for Mr. Garth's $400,000 interest, in a $2.5 million promissory note
payable to BritWill (the "Participation Note"). The Participation Note
was refinanced by BritWill when it was acquired by Unison Healthcare,
and the resulting $3.4 million refinancing note (the "Renewal Note")
was ultimately repaid from the proceeds of Unison Healthcare's initial
public offering (the "IPO") in December 1995.
- - From time to time both before and after the BritWill Acquisition, Mr.
Whitehead has made loans and other financial accommodations to BritWill
and 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
Healthcare subsidiary is obligated to repay to Brit-Texas five
unsecured promissory notes in the aggregate amount of $2.3 million with
interest at rates ranging from 9.0% to 10.75%. In addition, in 1996 Mr.
Whitehead loaned $1.0 million to Unison Healthcare for working capital
purposes. This loan was repaid in 1996 with the proceeds from a $7.5
million bank financing, which was in turn repaid from the proceeds of
the Notes.
SIGNATURE ACQUISITION. On October 31, 1996 Unison Healthcare acquired
Signature (the "Signature Acquisition") for an initial aggregate purchase price
of approximately $50.7 million comprised of cash and promissory notes totaling
approximately $38.2 million and 1,509,434 shares of Unison Healthcare's common
stock. Signature was founded in 1987 by Mr. Kremser,
- ------------------------
(4) In August 1995, subsequent to the BritWill Acquisition, Mr. Whitehead became
a director of Unison Healthcare, and on August 10, 1995, became Chairman of the
Board of Directors of Unison Healthcare. Moreover, in March, 1997, the Board of
Unison created a three (3) person "executive committee" (the "Executive
Committee") comprised of Messrs. Whitehead, Kremser (acting as Chair of the
Executive Committee), and Lynch, which Executive Committee exercised all of the
functions of the Board from its creation until February 1998, at which time a
Special Restructuring Committee of the Unison Healthcare Board was created to
deal solely with restructuring issues facing Unison Healthcare and its
subsidiaries and affiliates. Mr. Whitehead remained as Chairman of the Unison
Healthcare Board and a member of the Executive Committee until he resigned from
all such positions on May 29, 1998.
34
<PAGE> 45
who served as its Chairman, President, Chief Executive Officer and Director
until Signature was acquired by Unison Healthcare.
In October 1996, Unison Healthcare paid Mr. Kremser and other
related parties in cash the sum of approximately $37 million from the Notes
proceeds. Even after this cash payment was made, approximately $1.1 million in
notes (placed in escrow) was still payable to Mr. Kremser and others
representing the balance of the obligations resulting from the Signature
Acquisition. In March 1997, Mr. Kremser and the Kremser related parties, as
former shareholders of Signature, received an additional $2.5 million in
convertible promissory notes (amounting to approximately $1.8 million) and
shares of Unison Healthcare common stock as further consideration for the
Signature Acquisition. The Signature Acquisition Obligations were unsecured at
the time they were incurred.
MR. KREMSER.(5) Mr. Kremser has (or had) a direct or indirect material
interest in the following additional transactions with Unison:
- - The Board of Directors of Unison Healthcare 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 received
cash compensation of $7,500 per week plus expenses as well as options
for 50,000 shares of Unison Healthcare Common Stock at an exercise
price of $2.875 per share, fully vested. Cash compensation ended in
September 1997. 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 1997 LOANS. On April 21, 1997, the Company obtained a $2.95 million
unsecured loan (the "April 1997 Loan") for general working capital purposes from
BritWill Investments Company Ltd. ("BritWill Investments") and Elk Meadows
Investments, L.L.C. ("Elk Meadows"), entities owned and/or controlled by Messrs.
Whitehead and Kremser, respectively, as joint lenders. The Company paid a loan
fee of $29,500 at the closing of the April 1997 Loan, and also agreed to pay all
of the lenders' out-of-pocket expenses, including attorneys' fees and costs. As
part of the April 1997 Loan, Unison Healthcare and Memphis, Ampro, Arkansas,
Cornerstone, Decatur, Douglas Manor, Gamma, Henderson, Memphis, Quest, Rehab,
Safford, Sunbelt (Arizona), Sunbelt (Alabama), and Therapy Health (collectively
the "Unison Affiliates") purportedly granted a lien and security interest in and
to the accounts receivable of the Unison Affiliates (the "April 1997 Lien").
On September 24, 1997, the Company entered into a Modification
Agreement with Elk Meadows and BritWill Investments (the "Modification
Agreement"), which amended the April 1997 Loan to provide for a total of $1
million of new loans from Elk Meadows and BritWill Investments, in the amount of
$500,000 each (collectively, the "September 1997 Loan" and together with the
April 1997 Loan, the "1997 Loans"). Pursuant to the Modification Agreement,
collateral for the April 1997 Loan was also deemed to be collateral for the
- ------------------------
(5) From November 1, 1996 on, Mr. Kremser served as a director of Unison, and
from March, 1997 on served as Chairman (and one of three members) of the
Executive Committee until his resignation from the board on May 29, 1998.
35
<PAGE> 46
September 1997 Loan. The Modification Agreement also provided that collateral
for the April 1997 Loan and September 1997 Loan would also secure repayment of
the BritWill Acquisition Obligations and the Signature Acquisition Obligations,
which were theretofore unsecured obligations.
MR. LYNCH. 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 the BritWill
Acquisition, (b) assisted Unison in securing lease or management agreements in
respect of four long-term care facilities for which it received fees of
approximately $179,000 (these facilities were disposed of in 1998), and (c)
earned financial advisory fees of approximately $84,000 from Unison Healthcare
in connection with the Ampro Acquisition. On December 15, 1997, Trouver was
retained by Unison to perform certain financial advisory services in connection
with the Company's restructuring efforts. The Company also entered into an
agreement with Woodhill Capital Corporation ("Woodhill"), an entity of which Mr.
Lynch is president and sole shareholder, providing for the services of Mr. Lynch
as a financial advisor beginning March 1, 1997. Under the terms of the
agreement, Woodhill received $15,000 per month plus expenses until the agreement
was terminated in February 1998. Mr. Lynch was also granted options to purchase
50,000 shares of Common Stock at an exercise price of $3.125 per share, fully
vested. Woodhill received a fee amounting to $350,000 in connection with the
sale of the $20 million of Senior Notes in November 1997.
MR. GARTH. In addition to his aforementioned interests, Mr. Garth's
company, Cheyenne Capital, received consulting fees of $24,000 per year from
Unison Healthcare in connection with the start-up and oversight of nine
facilities acquired in the BritWill Acquisition. These facilities were
previously owned by Mr. Garth. The consulting agreement was terminated on
December 31, 1996.
MR. OBERFIELD. Mr. Oberfield serves as the president and is the
minority shareholder of Unison Healthcare's Quest Pharmacies subsidiary. The
Shareholders Agreement between Mr. Oberfield and Unison Healthcare contains a
put and call feature annually, whereby, beginning February 1, 1998 and effective
May 1, 1998, Unison Healthcare may require Mr. Oberfield to sell his stock in
the subsidiary (the "Quest Stock") to Unison Healthcare or Mr. Oberfield may
require Unison Healthcare to purchase his Quest Stock at a price based on a
defined formula. In connection with the Company's restructuring plan, Unison
Healthcare has entered into a Stock Purchase Agreement with Mr. Oberfield
whereby Mr. Oberfield will transfer his 25% equity interest in the subsidiary to
Unison Healthcare. The purchase price for the Quest Stock will be $4.0 million,
payable in cash amounting to $1.5 million and $2.5 million Promissory Note. The
Quest Stock purchased will collateralize the Promissory Note. The Promissory
Note will bear interest at 8.0%, payable quarterly. Principal reductions are
payable annually over a three-year period. The purchase is scheduled to close by
May 19, 1999, but not later than the Effective Date of the Plan.
MR. HENDERSON. Effective February 1, 1996, Unison Healthcare purchased
90% of the outstanding stock of Sunbelt from Mr. Henderson and Paige Plash. In
consideration for the stock of Sunbelt, Unison Healthcare paid $800,000 in cash,
issued term notes for $1.0 million in the aggregate (the "Sunbelt Notes"), and
issued subordinated convertible debentures in the aggregate
36
<PAGE> 47
amount of $1.8 million (the "Debentures"). Approximately 56.2% of the purchase
price was paid to Mr. Henderson. Interest on the Sunbelt Notes and Debentures
accrued at 10.0%, payable quarterly. The Sunbelt Notes and Debentures were
converted in January 1997 into 105,196 shares of Unison Healthcare Common Stock
with the aggregate balance of $2.0 million paid in cash. In November 1996,
Unison Healthcare purchased the remaining 10% of Sunbelt stock effective as of
February 1, 1996. The purchase price, payable 50% to each of Mr. Henderson and
Mr. Plash, amounted to $1.4 million plus a guaranteed payment of $709,000.
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 Healthcare Common Stock. A principal reduction on the promissory note in
the amount of approximately $918,000 was due in January 1998. This payment has
not been made and is a general unsecured claim of the Company.
SELECTED FINANCIAL INFORMATION
The selected financial data presented below are derived from Unison's
audited financial statements for the years ended December 31, 1995, 1996 and
1997. The audited financial statement for the year ended December 31, 1997 and
notes thereto is attached as Annex 2 hereto.
37
<PAGE> 48
UNISON
(dollars in thousands, except per share)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995(1) 1996(1) 1997(1)
------- ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues $68,488 $148,674 $224,366
Expenses:
Wages and related 35,047 85,789 116,137
Other operating 24,032 64,771 84,566
Rent 6,673 15,658 16,119
Interest 1,176 5,824 20,076
Depreciation and 1,311 4,561 9,974
amortization
Impairment losses and
Other charges -- 3,865 27,185
--------- -------- --------
Total expenses 68,239 180,468 274,057
--------- -------- --------
Income (loss) before income taxes 249 (31,794) (49,691)
Income tax expense (benefit) 132 (8,356) (2,480)
--------- -------- --------
Net income (loss) $ 117 $(23,438) $(47,211)
========= ======== ========
Net income (loss) per share $0.05 $(5.01) $(7.41)
Shares used in per share calculation 2,280,213 4,676,037 6,370,834
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $6,169 $17,409 $ 5,295
Working capital (deficiency) (927) (13,955) (151,068)
Total assets 81,301 230,921 192,167
Total debt 26,737 157,138 172,797
Stockholders' equity (deficit) 20,903 11,689 (34,034)
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995(1) 1996(1) 1997(1)
------- ------- -------
<S> <C> <C> <C>
OTHER DATA:
Skilled nursing facilities(2):
Number of facilities 45 54 49
Number of licensed beds 4,629 5,455 4,839
Patient days 581,410 1,203,655 1,524,025
</TABLE>
38
<PAGE> 49
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995(1) 1996(1) 1997(1)
------- ------- -------
<S> <C> <C> <C>
OTHER DATA:
Assisted living facilities(2):
Number of facilities 3 6 6
Number of units 229 325 325
Sources of patient revenues:
Medicare 26.9% 29.5% 32.1%
Private pay 17.2 17.0 16.2
----- ----- -----
Quality mix 44.1 46.5 48.3
Medicaid 55.9 53.5 51.7
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
(1) All acquisitions which occurred in 1995 and 1996, except for the merger
with Ampro, are reflected from the date of each acquisition in the
historical operating results of the Company.
(2) Number of facilities, beds and units expressed are at end of period
RESULTS OF OPERATIONS
For the year ended December 31, 1997, Unison reported a net loss of
$47.2 million compared to a net loss of $23.4 million for 1996 and net income of
$117,000 in 1995. The Company recorded charges for the write-down of impaired
assets and reserves for disposition costs amounting to $27.2 million in 1997 and
$3.9 million in 1996. Net loss for the six months ended June 30, 1998 amounted
to $9.8 million.
Revenues increased to $224.4 million in 1997 from $148.7 million in 1996
and $68.5 million in 1995. These increases are due primarily to acquisitions and
the growth in ancillary services provided, both to Unison facilities and
unrelated entities. Revenues for the six months ended June 30, 1998 amounted to
$102.8 million.
Wages and related expenses amounted to $116.1 million in 1997 compared
to $85.8 million in 1996 and $35.0 million in 1995. As a percentage of revenues,
wages and related expenses increased from 51.2% in 1995 to 57.7% in 1996, and
decreased to 51.8% in 1997. The decrease from 1996 to 1997 is a result of
improved controls over labor costs in the Company's facilities and reductions in
corporate overhead. For the six months ended June 30, 1998, wages and related
expenses amounted to $52.4 million, or 51.0% of revenues.
Other operating expenses amounted to $84.6 million in 1997 compared to
$64.8 million in 1996 and $24.0 million in 1995. As a percentage of revenues,
wages and related expenses increased from 35.1% in 1995 to 43.6% in 1996, and
decreased to 37.7% in 1997. The decrease in 1997 is a result of the Company's
cost containment initiatives. For the six months ended June 30, 1998, other
operating expenses amounted to $37.2 million, or 36.2% of revenues.
39
<PAGE> 50
Interest expense increased to $20.1 million in 1997 from $5.8 million
in 1996 and $1.2 million in 1995. The increase is due to the sale of the Notes
on October 31, 1996 as well as increased borrowings for working capital.
Interest expense for the six months ended June 30, 1998 amounted to $9.9
million.
Following approval of the Plan, the Company's leverage will be
substantially reduced. Management projects that the Company will have sufficient
cash flow to meet its debt service obligations and working capital requirements.
SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASES
COMMENCEMENT OF THE CHAPTER 11 CASES.
Prior to the May 28 Chapter 11 filing by the Unison Debtors, the
Company initiated negotiations to reach a consensual restructuring of its
existing debt with Omega, the Ad Hoc Committee, and certain entities related to
Messrs. Whitehead and Kremser. An agreement-in-principle with respect to a
consensual restructuring was concluded on June 15, 1998, with Omega and the Ad
Hoc Committee, the terms of which are reflected in the Plan.
Subsequently, on May 28, 1998 (the "Petition Date"), Unison Healthcare
and twenty-nine (29) of its subsidiaries filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code. Three Unison subsidiaries, BritWill I,
BritWill II and BritWill Indiana had previously filed voluntary Chapter 11
petitions on January 7, 1998 (the "BritWill Petition Date"). All thirty-three
(33) cases were procedurally consolidated for administrative purposes and have
been jointly administered under Case No. 98-06583-PHX-GBN. Since the Petition
Date, the Unison Debtors and the BritWill Debtors have operated their businesses
and managed their properties as debtors-in-possession, under the authority of
Sections 1107(a) and 1108 of the Bankruptcy Code. No motions seeking the
appointment of a trustee have been filed.
THE BRITWILL DEBTORS.
FIRST DAY ORDERS. The BritWill Debtors were precluded by their Chapter
11 filings from continuing certain activities vitally necessary to the continued
operation of their business. Accordingly, during the initial days of these
cases, the BritWill Debtors sought and received Bankruptcy Court approval to:
(i) operate their consolidated cash management system and maintain certain bank
accounts; (ii) continue to make certain payments to or for the benefit of
employees; and (iii) enter into a postpetition financing arrangement.
40
<PAGE> 51
POST PETITION FINANCING. On the BritWill Petition Date, the BritWill
Debtors obtained Bankruptcy Court approval for the interim use of cash
collateral. Subsequently, the BritWill Debtors negotiated with HCFP to provide
debtor-in-possession financing to such entities pursuant to Section 364(c) and
(d). A hearing was held on January 29, 1998, at which time the Bankruptcy Court
approved the financing on a final basis.
OMEGA'S LIFT STAY MOTION. On February 18, 1998, Omega filed a motion
for relief from stay (the "Stay Relief Motion") seeking termination of the
automatic stay with respect to fourteen nursing homes that are the subject of
three Master Leases between Omega and the BritWill Debtors. Omega asserts that
the Master Leases terminated prior to the BritWill Petition Date and, therefore,
Omega is within its rights to evict the BritWill Debtors from the facilities in
question. The BritWill Debtors, with the support of Unison and the Creditors'
Committee, sought unsuccessfully to have the motion converted to an adversary
proceeding. Prior to the hearing on the Stay Relief Motion in July 1998, Omega
and the BritWill Debtors stipulated to a 90-day continuance of the hearing,
given the anticipated filing of the Plan and resolution of Omega's claims.
RETENTION OF COUNSEL TO BRITWILL DEBTORS. On January 8, 1998, the
BritWill Debtors sought Bankruptcy Court approval of their retention of
Gallagher & Kennedy, P.A. (the "Gallagher Firm") as counsel to the BritWill
Debtors. The retention of the Gallagher Firm was approved by order dated January
12, 1998.
UNSECURED CREDITORS' COMMITTEE. Upon the filing of the BritWill
Debtors' Chapter 11 Cases, the United States Trustee ("UST") filed notice of the
appointment of the Creditors' Committee. Shortly thereafter, the Creditors'
Committee retained Milbank, Tweed, Hadley & McCloy (the "Milbank Firm") as
counsel. Given the relatedness of the Debtors and the significant involvement of
the Creditors' Committee and its counsel in the BritWill Debtors' Chapter 11
Cases, the Unison Debtors sought to have a joint committee appointed upon the
commencement of the Unison Debtors' Chapter 11 Cases. On the Petition Date, the
Court authorized the appointment of a joint committee and on July 1, 1998, the
UST filed a notice of second amended appointment, which identified the following
creditors to the joint Creditors' Committee:
<TABLE>
<CAPTION>
<S> <C>
IBJ Shroder Bank & Trust Company Freedom Medical/formerly Tri-Med, Inc.
One State Street 3799 W. S.R. 62, #104
New York, NY 10004 Boonville, IN 47601
Sundance Rehabilitation Corporation Kinetic Concepts Inc.
3802 W. 96th Street, #100 8023 Vantage
Indianapolis, IN 46468 San Antonio, TX 78230
Columbia Medical Center of Sherman Laidlaw & Co.
111 Gallagher Drive 100 Park Avenue
Sherman, TX 75090 New York, NY 10017
</TABLE>
41
<PAGE> 52
<TABLE>
<CAPTION>
<S> <C>
Healthcare Services Group, Inc. U.S. Bank National Association
2643 Huntingdon Pike 180 E. 5th Street, Suite 200
Huntingdon Valley, PA 19006 St. Paul, MN 55101
RCS Subacute, Inc.
3901 W. 86th Street, #397
Indianapolis, IN 46268
</TABLE>
Debtors have kept the Creditors' Committee informed about their
business operations and have responded to requests for information. Debtors have
discussed the terms of the Plan with the Creditors' Committee and have sought
the approval of the Creditors' Committee for proposed actions outside the
ordinary course of Debtors' business operations. The Creditors' Committee and
its professional advisors consult regularly with Debtors and Debtors'
professionals regarding the administration of Debtors' Chapter 11 Cases.
THE UNISON DEBTORS.
FIRST DAY ORDERS. The Unison Debtors were precluded by their Chapter 11
filings from continuing certain activities vitally necessary to the continued
operation of their businesses. Accordingly, in the initial days of these cases,
the Unison Debtors sought and received Bankruptcy Court approval to: (i) operate
their consolidated cash management system and maintain certain bank accounts;
(ii) pay certain prepetition claims of vendors and suppliers identified by the
Unison Debtors as being essential; (iii) continue to make certain payments to or
for the benefit of employees; (iv) use cash collateral; and (v) enter into a
postpetition financing arrangement.
CASH COLLATERAL. As part of the first day orders, the Bankruptcy Court
approved the use of cash collateral by: (i) Signature and six of its
subsidiaries (the "Signature Debtors"); and (ii) Quest, Ampro and Sunbelt
Therapy and each of their respective subsidiaries and affiliates (the "Ancillary
Debtors").
Subsequent to the entry of the first day order, Unison negotiated the
terms of an agreed order for the use of cash collateral by the Signature Debtors
with the secured creditor, NHI. In addition to replacement liens in its
collateral, NHI is also granted as adequate protection a monthly payment equal
to NHI's pre-petition debt service.
Parties purporting to hold security interests in the Ancillary Debtors'
cash collateral, including Kremser And Affiliates and Whitehead And Affiliates,
filed objections to the Ancillary Debtors continued use of cash collateral. The
objections were resolved on an interim basis by, inter alia, the granting of
replacement liens and the requirement that the Ancillary Debtors produce certain
financial and operational information to the objecting parties. On July 17,
1998, the Bankruptcy Court entered the fourth interim order authorizing the
Ancillary Debtors' use of cash collateral, which is in effect through September
8, 1998.
POSTPETITION FINANCING. Prior to the Petition Date, Unison and certain
of its subsidiaries that operate healthcare facilities negotiated with HCFP to
provide debtor-in-possession financing
42
<PAGE> 53
to such entities pursuant to Section 364(c) and (d). An interim order approving
the financing was entered on the Petition Date. A final hearing was held on June
18, 1998, at which time the Bankruptcy Court approved the financing on a final
basis.
RETENTION OF COUNSEL TO UNISON DEBTORS. On the Petition Date the
Bankruptcy Court approved the Unison Debtors' retention of Squire, Sanders &
Dempsey L.L.P., as counsel to the Unison Debtors.
MATTERS PERTAINING TO ALL DEBTORS.
MOTION TO APPOINT AN EXAMINER. On or about July 17, 1998, BritWill
Investments and UNHC Real Estate Holdings, Inc. (fka Brit-Texas) filed a motion,
pursuant to Section 1104(c) of the Bankruptcy Code, requesting that the
Bankruptcy Court order the appointment of an examiner in Debtors' Chapter 11
Cases.
CLASS ACTION LITIGATION. Certain of Debtors' shareholders have filed
lawsuits asserting securities law violations and other tort claims against
certain Debtors and certain of their pre-petition officers and directors. The
class action, Martin Grossman, et al. v. Unison Healthcare Corporation, et al.
(CIV-97-0583-PHX-SMM), was consolidated in the United States District Court for
the District of Arizona in September 1997. In June 1998, an action, John D.
Filkoski, et al. v. Unison Healthcare Corporation, et al., 98-CV-4270 (Dist. Ct.
Colo., Denver, Co.), was commenced in Colorado District Court, County of Denver.
Plaintiffs in the Filkoski action voluntarily dismissed the Company from the
litigation on June 24, 1998. The automatic stay prohibits the continuation of
the class actions against any of the Debtors.
DEBTORS' PREFERENCE LITIGATION. On July 31, 1998, certain of the
Debtors commenced an adversary proceeding (Adversary No. 98-540) against
Whitehead And Affiliates and Kremser And Affiliates to set aside certain alleged
preferential transfers arising in connection with the BritWill Acquisition, the
Signature Acquisition and the 1997 Loans. The Plan also preserves numerous
claims and causes of action held by Debtors. See "OTHER SIGNIFICANT PROVISIONS
OF THE PLANS -- Preservation and Prosecution of Litigation Claims."
THE PLAN OF REORGANIZATION
A copy of the Plan accompanies this Disclosure Statement as Annex 1 and
is incorporated herein by reference. The following summary of the material
provisions of the Plan is qualified in its entirety by reference to all of the
provisions of the Plan, including the definitions therein of certain terms used
below.
BRIEF EXPLANATION OF CHAPTER 11 REORGANIZATION.
Chapter 11 of the Bankruptcy Code is the principal reorganization
chapter of the Bankruptcy Code. Under Chapter 11, a debtor is authorized to
reorganize its business for the benefit of itself and its creditors and
shareholders. Confirmation of a plan of reorganization is the principal
objective of a Chapter 11 case.
43
<PAGE> 54
In general, a Chapter 11 plan of reorganization (i) divides claims and
equity interests into separate classes, (ii) specifies the property that each
class is to receive under the plan, and (iii) contains other provisions
necessary to the reorganization of the debtor. A Chapter 11 plan may specify
that certain classes of claims or equity interests are either to be paid in full
upon the effective date of the plan, reinstated or their legal, equitable and
contractual rights are to remain unchanged by the reorganization effectuated by
the plan. Such classes are referred to under the Bankruptcy Code as "unimpaired"
and, because of such favorable treatment, are deemed to accept the plan.
Accordingly, it is not necessary to solicit votes from the holders of claims or
equity interest in such classes. A Chapter 11 plan also may specify that certain
classes will not receive any distribution of property. Such classes are deemed
to reject the plan and, therefore, need not be solicited to vote to accept or
reject the plan.
All the other classes of claims and equity interests are "impaired"
claims and equity interests which are entitled to vote on the plan. As a
condition to confirmation, the Bankruptcy Code generally requires that each
impaired class of claims or equity interests vote to accept a plan. Acceptances
must be received (i) from the holders of claims constituting at least two-thirds
in dollar amount and more than one-half in number of the allowed claims in each
impaired class of claims that have voted to accept or reject the plan, and (ii)
from the holders of at least two-thirds in amount of the allowed equity
interests in each impaired class of equity interest that have voted to accept or
reject the plan. If any class or classes of claims or equity interests entitled
to vote with respect to the plan rejects the plan, upon request of the plan
proponents, the Bankruptcy Court may nevertheless confirm the plan if certain
minimum treatment standards are met with respect to such class or classes.
Chapter 11 of the Bankruptcy Code does not require each holder of a
claim or equity interest to vote in favor of a plan of reorganization in order
for the bankruptcy court to confirm the plan. However, the Bankruptcy Court must
find that the plan of reorganization meets a number of statutory tests (other
than the voting requirements described in this section) before it may confirm,
or approve, the plan of reorganization. Many of these tests are designed to
protect the interest of holders of claims or equity interest who do not vote to
accept the plan of reorganization but who will nonetheless be bound by the
plan's provisions if it is confirmed by the Bankruptcy Court.
SOLICITATION OF ACCEPTANCES OF THE PLAN.
The Debtors are seeking acceptances of the Plan from holders of Allowed
Claims classified as Classes 5, 6, 7, 8 and 9 under the Plan, which Classes are
the only impaired Classes entitled to vote under the Plan. The holders of Notes
Securities Claims and Equity Interests and Equity Interest Related Claims
(Classes 10 and 12, respectively, under the Plan) are deemed to reject the Plan.
If the requisite acceptances have been received, Debtors will use the
acceptances as evidenced by Ballots solicited pursuant to this Disclosure
Statement to seek confirmation of the Plan under Chapter 11 of the Bankruptcy
Code.
44
<PAGE> 55
In the event that any impaired Class is determined to have rejected the
Plan in accordance with Section 1126 of the Bankruptcy Code, Debtors may use the
provisions of Section 1129(b) of the Bankruptcy Code to satisfy the requirements
for confirmation of the Plan. See "VOTING AND CONFIRMATION -- Confirmation - The
Cram Down Alternative."
Debtors believe that this Disclosure Statement complies with applicable
bankruptcy and non-bankruptcy law. This Disclosure Statement and the Plan
(delivered herewith as Annex 1, including all Exhibits thereto) are being
transmitted to all known holders of impaired claims. Debtors believe that this
Disclosure Statement contains adequate information for all holders of impaired
claims to cast an informed vote to accept or reject the Plan.
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT, EACH HOLDER OF AN
IMPAIRED CLAIM WILL RECEIVE THE SAME PRO RATA CONSIDERATION AS OTHER HOLDERS OF
CLAIMS, WHETHER OR NOT SUCH HOLDER VOTED TO ACCEPT THE PLAN. MOREOVER, UPON
CONFIRMATION, THE PLAN WILL BE BINDING UPON ALL CREDITORS AND EQUITY INTEREST
HOLDERS OF DEBTORS REGARDLESS OF WHETHER OR NOT SUCH CREDITORS AND EQUITY
INTEREST HOLDERS VOTED TO ACCEPT THE PLAN.
VOTING ON THE PLAN.
As more fully described above, only impaired classes of claims and
equity interest are entitled to vote on a plan of reorganization. The Plan
designates 12 separate Classes of Claims and Equity Interests - seven are
impaired and, thus, entitled to vote. The five remaining Classes under the Plan
are unimpaired and, accordingly, not entitled to vote. Of the seven impaired
Classes, the members of Classes 10 and 12 are deemed to reject the Plan. For
instructions on how to vote on the Plan, see "VOTING AND CONFIRMATION."
UNIMPAIRED CLASSES.
The following Classes of Claims are not impaired under the Plan, and
pursuant to Section 1126(f) of the Bankruptcy Code, are conclusively deemed to
have accepted the Plan and are not entitled to vote on the Plan:
Class 1 Priority Wage Claims
Class 2 Priority Benefit Plans Contribution Claims
Class 3 Secured Tax Claims
Class 4 Miscellaneous Secured Claims
Class 11 Subsidiary and Affiliate Equity Interests
45
<PAGE> 56
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.
Section 1123 of the Bankruptcy Code provides that a plan of
reorganization must classify claims against a debtor. Under Section 1122 of the
Bankruptcy Code, a plan must classify claims and equity interests into classes
that contain substantially similar claims and interests. The Plan divides the
Claims of known Creditors and the Equity Interests into Classes and sets forth
the treatment offered each Class. Debtors believe they have classified all
Claims and Equity Interests in compliance with the provisions of Section 1122 of
the Bankruptcy Code, but it is possible that a Creditor or Equity Interest
holder may challenge such classification of Claims and Equity Interests and that
the Bankruptcy Court may find that a different classification is required for
the Plan to be confirmed. In such event, it is the present intention of Debtors,
to the extent permitted by the Bankruptcy Code and the provisions of the Plan,
to amend or revoke such Plan and file an amended or different Plan that would
make modifications to the classification of Claims or Equity Interests that are
required by the Bankruptcy Court for confirmation.
SUMMARY OF TREATMENT OF AND DISTRIBUTIONS TO CREDITORS UNDER THE PLAN.
The following describes the Plan's classification of Claims against and
Equity Interests in Debtors and the treatment the holders of Allowed Claims and
Allowed Equity Interests would receive under the Plan. The treatment of Claims
set forth below is consistent with the requirements of Section 1129(a)(9)(A) of
the Bankruptcy Code.
1. UNCLASSIFIED CLAIMS. Pursuant to Section 1123(a)(1) of the
Bankruptcy Code, the following Claims are designated as unclassified under
Article 3 of the Plan.
A. ADMINISTRATIVE CLAIMS. Administrative Claims are generally
any Claims that arise after the Petition Date in conjunction with the business
and operations of the Company or the administration of the Company's Chapter 11
Case and allowed under Section 503(b), Section 507(b) or Section 546(c)(2) of
the Bankruptcy Code and entitled to priority under Section 507(a)(1) of the
Bankruptcy Code. To the extent that a Claim is Allowed as an Administrative
Claim pursuant to Section 365(d)(3) of the Bankruptcy Code, such Claim will also
be treated as an Administrative Claim pursuant to Article 1.2 of the Plan.
Administrative Claims include, for example, quarterly fees payable pursuant to
Section 1930 of Title 28 of the United States Code, Claims for the payment of
Professional Fees, Reclamation Claims and Preserved Ordinary Course
Administrative Claims.
- PROFESSIONAL FEES. Claims for Professional Fees are Claims
of professionals providing service to parties involved in the Chapter 11 Case.
These Claims are defined in Article 1.152 of the Plan.
- RECLAMATION CLAIMS. These are Claims by Creditors arising
out of the sale of goods to Debtors, in the ordinary course of the Creditor's
business, provided that such Creditor has otherwise satisfied the requirements
of Section 546(c) of the Bankruptcy Code.
- PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIMS. These are
generally Claims for liabilities incurred in the ordinary course of Unison's
business during the Chapter 11 Case.
46
<PAGE> 57
B. TREATMENT.
GENERALLY. Each Allowed Administrative Claim (including all
accrued U.S. Trustee quarterly fees), other than Preserved Ordinary Course
Administrative Claims and Reclamation Claims, shall be paid in full in Cash (or
otherwise satisfied in accordance with its terms) upon the latest of: (a) the
Effective Date, or as soon thereafter as practicable; (b) such date as may be
fixed by the Bankruptcy Court, or as soon thereafter as practicable; (c) the
10th Business Day after such Claim is Allowed, or as soon thereafter as
practicable; and (d) such date as the holder of such Claim and Reorganized
Unison have agreed or shall agree. All requests for payment of Administrative
Claims (except for Professional Fees and Preserved Ordinary Course
Administrative Claims) must be filed by the Administrative Claims Bar Date or
the holders thereof shall be forever barred from asserting such Administrative
Claims against the Debtors and Reorganized Unison. All final applications for
allowance and disbursement of Professional Fees must be filed by the
Professional Fee Bar Date.
PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIMS. Each Allowed
Preserved Ordinary Course Administrative Claim shall be paid by Reorganized
Unison pursuant to either: (a) the terms and conditions under which such Claim
arose; or (b) in the ordinary course of Reorganized Unison's business. Such
payments shall be made by Reorganized Unison without further action by the
holder of such Claim.
HCFP DIP LOAN CLAIMS. The HCFP DIP Loan Claims shall be
Allowed Claims and paid pursuant to the terms of the DIP Financing Orders, but
in all events no later than the Effective Date.
ALLOWED PRIORITY TAX CLAIMS. Each Allowed Priority Tax Claim,
if any, will be paid in full in Cash on the Effective Date; provided, however,
that Reorganized Unison may elect to pay such Claims through deferred Cash
payments over a period not exceeding six (6) years after the date of assessment
of such Claim, of a value as of the Effective Date, equal to the amount of such
Allowed Claim. In that event, such payments shall be made in equal annual
installments of principal, plus interest accruing from the Effective Date at the
rate on the unpaid portion of Allowed Priority Tax Claim set forth in Internal
Revenue Code Sections 6621 and 6622. The first such payment shall be payable on
the latest of: (a) the Effective Date; (b) the tenth (10th) Business Day after
the date on which an order allowing such Claim becomes a Final Order; and (c)
such other time as is agreed upon by the holder of such Claim and Reorganized
Unison, provided, however, that Reorganized Unison shall have the right to
prepay any such Allowed Priority Tax Claim, or any remaining balance of such
Claim, in full or in part, at any time on or after the Effective Date, without
premium or penalty.
RECLAMATION CLAIMS. All requests for payment of Reclamation
Claims must be filed by the Bar Date or the holders thereof shall be forever
barred from asserting such Reclamation Claim against Debtors and Reorganized
Unison. Each allowed Reclamation Claim shall be paid in full in cash upon the
latest of: (i) the Effective Date, or as soon thereafter as practicable; (ii)
such date as may be fixed by the Bankruptcy Court, or as soon thereafter as
practicable; (iii) the tenth (10th) Business Day after such claim is Allowed
during the Chapter 11
47
<PAGE> 58
Cases, or as soon thereafter as practicable; and (iv) such date as the holder of
such Reclamation Claim and Reorganized Unison have agreed or shall agree.
2. CLASSIFIED CLAIMS. The treatment of Classified Claims, to the extent
Allowed, is generally discussed below. A Claim is in a particular Class only to
the extent that such Claim fits within the description of such Class and is in
such other and different Class or Classes to the extent that the remainder of
such Claim fits within the description of such other Class or Classes. The
treatment of classified Claims and the provisions governing distributions on
account of Allowed Claims is set forth in Articles 5 and 6 of the Plan. You
should refer to the Plan itself for the operative language governing the
treatment of your particular Claim.
A. CLASS 1 - ALLOWED PRIORITY WAGE CLAIM. Priority Wage Claims
are defined in Section 1.149 of the Plan as Allowed Claims entitled to priority
under Section 507(a)(3) of the Bankruptcy Code. Each holder of an Allowed
Priority Wage Claim which has not been paid as of the Effective Date will be
paid in cash, in full, as provided in Article 5.1 of the Plan. As of the
Effective Date, Debtors estimate that their liability for such Priority Wage
Claims is zero.
B. CLASS 2 - ALLOWED PRIORITY BENEFIT PLAN CONTRIBUTION
CLAIMS. These Claims are defined in Article 1.147 of the Plan as Allowed Claims
entitled to priority under Section 507(a)(4) of the Bankruptcy Code. Each holder
of an Allowed Priority Benefit Plan Contribution Claim which has not been paid
as of the Effective Date will be paid in cash, in full, as provided in Article
5.2 of the Plan. Debtors estimate that their liability for such Priority Benefit
Plan Contribution Claims is zero.
C. CLASS 3 - SECURED TAX CLAIMS. These Claims are defined in
Article 1.171 of the Plan as any Claim of any state or local governmental unit
which is secured by a lien upon property of the Company. Each holder of a
Secured Tax Claim which has not been paid as of the Effective Date shall be paid
in cash, in full, as provided in Article 5.3 of the Plan. As of the Effective
Date, Debtors estimate that their liability for such Secured Tax Claims will be
$125,000.
D. CLASS 4 - MISCELLANEOUS SECURED CLAIMS. Class 4 is
comprised of Secured Claims (including the NHI Secured Claims) not otherwise
classified under the Plan. Each holder of a Miscellaneous Secured Claim shall be
considered to be in its own separate subclass within Class 4, and each such
subclass shall be deemed to be a separate Class for purposes of this Plan.
Secured Claims in Class 4 will be treated in one of several alternative methods,
as specified by the Bankruptcy Code and Article 5.4 of the Plan. Debtors
estimate that, as of the Effective Date, Allowed Miscellaneous Secured Claims
will be $19,564,000.
E. CLASS 5 - OMEGA SECURED CLAIMS. Class 5 consists of the
Omega Secured Claims, which are defined in Article 1.138 of the Plan. The Omega
Secured Claims is comprised of four subclaims: (1) the Omega Mortgage Guarantee
Claims; (2) the Omega Indiana Rejection Claims; (3) the Omega Hasmark Facilities
Rejection Claims; and (4) the Omega Miscellaneous Secured Claim. As more fully
set forth in Article 6.1 of the Plan, the Omega Secured Claims shall be
satisfied as follows:
48
<PAGE> 59
1. OMEGA MORTGAGE GUARANTEE CLAIMS. In satisfaction of the Omega
Mortgage Guarantee Claims, on the Effective Date Unison and BritWill II shall
execute and deliver to Omega the New Omega Guarantee, which shall be an absolute
and unconditional guarantee of payment to supersede and replace any and all of
the Debtors' guarantees of Brit-Texas obligations. The New Omega Guarantee shall
be in an amount not to exceed $3 million and will be secured by the New Omega
Guarantee Collateral.
2. OMEGA INDIANA REJECTION CLAIM. The Omega Indiana Rejection Claim
shall be satisfied as follows: (a) the Indiana Returned Facilities shall be
turned over to Omega on the Effective Date if not surrendered prior to that
time. The Indiana Returned Facilities shall then be deleted from the Indiana
Master Lease, with a rent reduction attributable to the Indiana Returned
Facilities as set forth in Article 7.2.4 of the Plan; and (b) (i) cash in the
amount of $1 million to be paid as part of the Omega Effective Date Payment, and
(ii) the Indiana Returned Facility Note.
3. OMEGA HASMARK FACILITIES CLAIMS. The Omega Hasmark Facility Claim
shall be satisfied as follows:
(a) On the Effective Date, the Hasmark Facilities shall be
deleted from the Texas Master Lease and Omega shall be paid $1 million in
Cash as part of the Omega Effective Date Payment in full satisfaction of
any Claims resulting from such deletion; and upon payment of the amount
set forth above, the rent under the Omega New Master Lease shall be
reduced $120,000 per year, commencing with a pro rata reduction on the
Effective Date upon payment of the amount set forth above.
(b) Provided Omega has been paid the amount set forth above,
if Omega acquires, within its sole discretion, fee and leasehold interests
in the Hasmark Facilities (or any portion thereof) after the Effective
Date (or before the Effective Date provided the Debtors or Reorganized
Unison pays the amount set forth above), Omega shall promptly quit claim
to Reorganized Unison or its assignee its interests in such Hasmark
Facilities, which transfer shall be without any representations, express
or implied, with respect to the nature of title being transferred.
4. OMEGA MISCELLANEOUS SECURED CLAIM. The Allowed Omega
Miscellaneous Secured Claim shall be paid in Cash on the Effective Date, or be
provided such other treatment as agreed to between Omega and the Debtors.
5. FEES AND EXPENSES OF OMEGA. Any and all fees and costs of Omega
relating to the Omega Secured Claims shall be paid to Omega upon the closing of
the Signature Sale Leaseback Transaction, which fees and costs shall be Allowed
in the amount of $500,000.00 (the "Closing Allowance"), which amount shall cover
(irrespective of the actual amount thereof): (a) any and all commitment fees
associated with the Signature Sale Leaseback Transaction as discussed in Article
7.1 of the Plan; (b) any and all past and prospective legal fees and other costs
and expenses owed to Omega relating to the Omega Secured Claims or otherwise;
(c) all closing costs for the Signature Sale Leaseback Transaction and the Omega
New Master Lease.
49
<PAGE> 60
F. CLASS 6 - BRITWILL ACQUISITION CLAIMS. The BritWill Acquisition
Claims are defined in Article 1.19 of the Plan as the Claims, including any such
Claims that are disputed Claims, held by Whitehead And Affiliates resulting from
the BritWill Acquisition. The adjudication as to the Allowed amounts (if any) of
the BritWill Acquisition Claims shall be determined pursuant to Article 10 of
the Plan, and shall be prosecuted (or compromised) by the Claims Litigation LLC.
The Disputed BritWill Acquisition Claims shall not be entitled to any
distributions under this Plan until the Class 6 Claims are Allowed. Reorganized
Unison will escrow approximately 600,000 shares of New Common Stock for the
Class 6 Claims (the "Class 6 Reserved Stock"). Upon entry of a Final Order
Allowing the BritWill Acquisition Claims, the holder(s) of such Allowed Claims
shall receive, subject to the terms of certain agreements as described in
Article 6.2.2 of the Plan, a number of shares of the Class 6 Reserved Stock
equal to the percentage of the Class 6 Reserved Stock which the amount of such
Allowed Claims represents of $12,589,000.00.
G. CLASS 7 - SIGNATURE ACQUISITION CLAIMS. These Claims are defined
in Article 1.179 of the Plan as, collectively, the purported secured obligations
against Debtors resulting from the Signature Acquisition. The adjudication as to
the Allowed amounts (if any) of the Signature Acquisition Claims shall be
determined pursuant to Article 10 of the Plan, and shall be prosecuted (or
compromised) by the Claims Litigation LLC. The Disputed Signature Acquisition
Claims shall not be entitled to any distributions under the Plan until the Class
7 Claims are Allowed. Reorganized Unison will escrow approximately 250,000
shares of New Common Stock for the Class 7 Claims (the "Class 7 Reserved
Stock"). Upon entry of a Final Order Allowing the Signature Acquisition Claims,
the holder(s) of such Allowed Claims shall receive, subject to the terms of
certain agreements as described in Article 6.3.2 of the Plan, a number of shares
of Class 7 Reserved Stock equal to the percentage of the Class 7 Reserved Stock
which the amount of such Allowed Claims represents of $5,095,000.00.
H. CLASS 8 - CONVENIENCE CLAIMS. Class 8 is comprised of Convenience
Claims as defined in Article 1.49 of the Plan. Each Allowed Convenience Claim
shall be paid in Cash the lesser of: (a) the amount of such Allowed Claim; or
(b) the sum of $1,000.00. All such Allowed Convenience Claim shall be paid upon
the latest of: (i) the Effective Date, or as soon thereafter as practicable;
(ii) such date as may be fixed by the Bankruptcy Court, or as soon thereafter as
practicable; (iii) the tenth (10th) Business Day after such Claim is allowed, or
as soon thereafter as practicable; and (iv) such date as the holder of such
Claim and Reorganized Unison have agreed.
I. CLASS 9 - GENERAL UNSECURED CLAIMS. General Unsecured Claims are
defined in Article 1.80 of the Plan as any Claim that is not secured by a charge
against or interest in property in which the Debtors' Estate has an interest. As
described more fully in Article 6.5 of the Plan, in full satisfaction (subject
to Article 6.5.7 of the Plan) of the Allowed Class 9 General Unsecured Claims,
on the Effective Date, each holder of an Allowed Class 9 General Unsecured Claim
as of the Distribution Record Date shall receive (subject to Article 6.5.2 of
the Plan): (a) its Pro Rata distribution of approximately 5,635,400 shares of
the New Common Stock; (b) from the Claims Litigation LLC, its Pro Rata
distribution of Claims Litigation LLC Shares; and (c) its Pro Rata share of the
New Senior Notes.
50
<PAGE> 61
J. CLASS 10 - NOTES SECURITIES CLAIMS. Notes Securities Claims are
defined in Article 1.120 of the Plan as all Claims, if any, whether asserted
prior to or after the Petition Date based on alleged violations of applicable
federal or state securities laws: (a) arising from the rescission of a purchase
or sale, or offer to purchase or sell, any Notes or Senior Notes; and (b) for
damages arising from the purchase or sale of any such Notes or Senior Notes. The
holders of Notes Securities Claims will receive no distribution under the Plan,
and any and all such claims will be discharged under the Plan.
K. CLASS 11 - SUBSIDIARY AND AFFILIATE EQUITY INTERESTS. Subsidiary
And Affiliate Equity Interests are defined in Article 1.185 of the Plan as all
of the common stock or other equity interests issued by Amberwood, American
Professional, Ampro, Arbors, Arkansas, BritWill Funding, BritWill Healthcare,
BritWill I, BritWill II, BritWill Indiana, Brookshire, Cedar Care, Christopher,
Cornerstone, Decatur, Douglas, Gamma, Henderson, Los Arcos, Memphis Clinical,
Pueblo Norte, Quest, Rehab, Rio Verde, Safford, Sherwood, Signature Health,
Signature Management, Sunbelt Therapy (Alabama), Sunbelt Therapy (Arizona),
Sunquest, and Therapy Health, and held by Unison Healthcare or a Unison
subsidiary or Affiliate, including, if applicable, any warrants, options, or
rights to purchase any such stock or equity interests. On the Effective Date,
Reorganized Unison (and its subsidiaries, as applicable) shall continue to hold
and own the Subsidiary And Affiliate Equity Interests, and those entities shall
continue as subsidiaries or Affiliates (as the case may be) of Reorganized
Unison.
L. CLASS 12 - EQUITY INTERESTS AND EQUITY INTERESTS RELATED CLAIMS.
Equity Interests And Equity Interests Related Claims are defined in Articles
1.71 and 1.72 of the Plan as any interest in Unison, including any right to
purchase or otherwise acquire any such Equity Interests and any Claim arising
from the rescission of a purchase or sale of an Equity Interest, or for damages
arising from the purchase or sale of an Equity Interest, or any Claim by any
Person that asserts equitable or contractual rights of reimbursement,
contribution or indemnification arising from such Claim. Subject to Article
6.7.2 of the Plan, in satisfaction of all Allowed Equity Interests and Equity
Interest Related Claims, subject to the following sentence, on the Effective
Date each holder of an Equity Interest and Equity Interest Related Claim shall
receive its Pro Rata portion of the New Warrants from the Disbursing Agent
pursuant to Article 12 of the Plan. In the event that: (a) the Bankruptcy Court
determines that the treatment of, and distributions to, Class 12 under the Plan
violates the provisions of Section 1129(b) of the Bankruptcy Code (to the extent
such provisions may be applicable); or (b) the SEC asserts that the New Warrants
or the New Warrant Shares must be registered pursuant to the Securities Act or
otherwise; or (c) the Bankruptcy Court determines that the issuance of the New
Warrants is not covered by the exemptions provided in Section 1145 of the
Bankruptcy Code, then the Equity Interests shall be cancelled and extinguished
on the Confirmation Date without further act or action under any applicable
agreement, law, regulation, order or rule, and neither the holders of Equity
Interests nor the holders of Allowed Equity Interest Related Claims shall
receive or retain any rights, property or distributions on account of their
Equity Interests or Equity Interest Related Claims, as the case may be.
51
<PAGE> 62
OTHER SIGNIFICANT PROVISIONS OF THE PLAN
SUBSTANTIVE CONSOLIDATION.
The Plan incorporates the substantive consolidation of Debtors' assets and
liabilities. Substantive consolidation means that the assets and liabilities of
the 33 Debtors will be pooled and all of Debtors' creditors will share in that
common pool. If Debtors' estates were not substantively consolidated, it would
be necessary to have 33 separate plans of reorganization, with each creditor
receiving a distribution from the debtor with which the particular creditor did
business. Substantive consolidation of Debtors' estates is necessary because
Debtors operate as a single business enterprise and have no means of separating
their assets and liabilities by individual Debtor in order to formulate 33
individual plans of reorganization. Moreover, Debtors' creditors, in many cases,
would similarly be unable to determine with which particular Debtors they did
business. Substantive consolidation is an equitable remedy that must be approved
by the Bankruptcy Court. The Plan constitutes a motion for substantive
consolidation by Debtors.
The Debtors believe that the standards for substantive consolidation of
the Debtors are easily met. Specifically, Debtors believe there is a substantial
identity between the entities to be consolidated, that consolidation is needed
to avoid harm to creditors and that the demonstrated benefits of consolidation
heavily outweigh any harm to an individual creditor. Moreover, the facts
surrounding Debtors' business clearly warrant substantive consolidation. Those
facts consist of the following:
- All but one of the corporate Debtors are wholly owned by Unison or
by a subsidiary of Unison. Unison holds a 75% equity interest in Quest.
- The directors and officers of Debtors are substantially the same
individuals. See "THE DEBTORS - Current Executive Officers and Directors."
- The Board of Directors of Unison Healthcare regularly meets and
discusses policy for all Debtors. The Boards of Directors of the
subsidiary Debtors do not hold regular meetings. These Boards only take
action by routinely signing resolutions that conform with those of the
Board of Directors of Unison Healthcare.
- Corporate policy is created and executed for all Debtors at the
direction of the management of Unison Healthcare. Operational decisions
are made and carried out for all Debtors by the management of Unison
Healthcare from the corporate headquarters located in Scottsdale. All
major capital projects must be approved in advance by an officer of Unison
Healthcare.
- None of Debtors operate independently of Unison Healthcare. Unison
Healthcare's corporate management team provides direction and oversight
for all Debtors in the areas of cash management, budgeting, accounting
controls, staffing, growth and marketing strategies, accounts receivable
management and the integration and quality of services between Debtors.
Unison Healthcare provides additional support in the areas of workers
compensation, liability and casualty insurance, legal services, risk
management, regulatory compliance, government reimbursement, management
information systems
52
<PAGE> 63
and purchasing. Moreover, a substantial number of Debtors' supply
contracts with major vendors are in the name of Unison Healthcare or are
negotiated by the senior management of Unison Healthcare.
- Consolidated books and records are maintained for all Debtors.
- Unison Healthcare prepares consolidated financial statements. The
Company, through Unison Healthcare, files consolidated reports with the
Securities and Exchange Commission and prepares consolidated tax returns.
Unison provides information on a consolidated basis to third parties for
the purpose of determining creditworthiness.
- Debtors have provided guarantees of each other's obligations.
- Even if Debtors undertook the time and expense necessary to attempt
to separate their assets and liabilities, such separation could not be
accomplished. The expense and effort required to undertake the impossible
task of separating Debtors' assets and liabilities would impair Debtors'
ability to operate and would diminish the possibility of Debtors'
successful reorganization.
The foregoing facts clearly evidence that the enmeshment of Debtors'
affairs and their operation as a single economic entity justify substantive
consolidation of Debtors' assets and liabilities. The foregoing facts also
clearly evidence that substantive consolidation is necessary because separating
Debtors' assets and liabilities is a practical impossibility and because the
time and expense of attempting such a futile task would seriously impair
Debtors' ability to reorganize.
As a result of the substantive consolidation of all Debtors, (i) the
Chapter 11 Cases will be deemed to be one consolidated case; (ii) all property
of any of Debtors will be deemed to be property of a consolidated entity
consisting of all Debtors, (iii) all Claims against any Debtor will be deemed to
be a Claim against a consolidated entity consisting of all Debtors, and any
proof of claim filed against one or more of Debtors will be deemed to have been
filed against the consolidated entity unless otherwise provided in the Plan,
(iv) all Equity Interests in any Debtor other than Unison Healthcare will be
deemed extinguished; (v) all intercompany Claims by and among Debtors will be
eliminated; (vi) all guarantees by one Debtor in favor of any other Debtors will
be eliminated; and (vii) for purposes of determining the availability of the
right of setoff under Section 553 of the Bankruptcy Code, Debtors will be
treated as one entity so that, subject to the other provisions of Section 553,
debts due to any of Debtors may be set off against the debts of any of Debtors.
Substantive consolidation will not merge or otherwise affect the separate legal
existence of each Debtor for licensing, regulatory or other purposes, other than
with respect to distribution rights under this Plan. Moreover, substantive
consolidation will have no effect on valid, enforceable and unavoidable liens,
except for liens that secure a Claim that is eliminated by virtue of substantive
consolidation and liens against collateral that ceases to exist by virtue of
substantive consolidation. Furthermore, substantive consolidation will not
create a Claim in a class different from the class in which a Claim would have
been placed in the absence of substantive consolidation. The substantive
consolidation contemplated under the Plan shall not effect any applicable
date(s) for purposes of pursuing any Avoidance Actions.
53
<PAGE> 64
DESCRIPTION OF REORGANIZED UNISON.
MANAGEMENT OF REORGANIZED UNISON. The following table identifies the
proposed officers and directors of Reorganized Unison on and after the
Effective Date:
REORGANIZED UNISON
Name Age Position
---- --- --------
Michael A. Jeffries 48 President, Chief Executive Officer,
Director
Clayton Kloehr 41 Senior Vice President-Finance,
Treasurer, Director
Nir E. Margalit 40 Executive Vice President, General
Counsel, Secretary, Director
Jimmy L. Fields 47 Senior Vice President and Chief
Financial Officer
Terry Troxell 47 Senior Vice President-Clinical
Operations
QUEST
Name Age Position
---- --- --------
L. Robert Oberfield 60 President
Michael A. Jeffries 48 Chief Executive Officer, Director
Clayton Kloehr 41 Chief Financial Officer, Treasurer,
Director
Nir E. Margalit 40 Secretary
Jimmy L. Fields 47 Vice President
SUNBELT THERAPY (ALABAMA)
Name Age Position
---- --- --------
Paul G. Henderson 42 President
Michael A. Jeffries 48 Chief Executive Officer, Director
Clayton Kloehr 41 Chief Financial Officer, Treasurer,
Director
Nir E. Margalit 40 Secretary
Jimmy L. Fields 47 Vice President
ALL OTHER DEBTORS
Name Age Position
---- --- --------
Michael A. Jeffries 48 President, Chief Executive Officer,
Director
Clayton Kloehr 41 Chief Financial Officer, Treasurer,
Director
Nir E. Margalit 40 Secretary
Jimmy L. Fields 47 Vice President
For information concerning the above-identified individuals, see "THE
DEBTORS -- Current Executive Officers and Directors."
54
<PAGE> 65
EXECUTIVE COMPENSATION.
PROSPECTIVE COMPENSATION OF MANAGEMENT. As more fully discussed in Article
7.8 of the Plan, the Board of Directors of Reorganized Unison (or such committee
of the Board as appropriate) will evaluate the Senior Management within three
(3) months after the Effective Date to determine: (a) which members of Senior
Management will be given employment contracts on a post-Effective Date basis
(the "New Contracts"); (b) the terms of those New Contracts; and (c) the terms
of participation in the Options and Cash Bonuses discussed below. Compensation
to senior officers of Reorganized Unison are set forth on the following table
together with the historic salary levels for such individuals.
<TABLE>
<CAPTION>
Pre-Reorganization Post-Reorganization
Name Annual Salary Annual Salary
---- ------------- -------------
<S> <C> <C>
Michael A. Jeffries $315,000 $315,000
L. Robert Oberfield $172,000 $172,000
Paul G. Henderson $175,000 $175,000
Jimmy L. Fields $170,000 $170,000
Nir E. Margalit $170,000 $170,000
Terry Troxell $135,000 $135,000
Clayton Kloehr $154,000 $154,000
</TABLE>
SEVERANCE PACKAGES. In order to induce senior and midlevel management
employees to remain in Debtors' employ and to continue to serve the Creditors'
interests during the pendency of these Chapter 11 Cases, Debtors intend to seek
Bankruptcy Court authorization to adopt and implement severance benefit packages
(the "Severance Packages") for their key management personnel.
- SENIOR SEVERANCE PACKAGES. The Debtors propose that the five (5)
senior management employees ("Senior Management") receive, subject to the
conditions below, a Senior Severance Package comprised of one year's salary
payable in the event of an involuntary termination without cause on or before
three months after the Effective Date.
The Board of Directors of Reorganized Unison (or a committee appointed by
the Board), as it exists after the Effective Date, will evaluate the Senior
Management within three months after the Effective Date to determine:
a) which members of Senior Management will be given employment
contracts ("New Contracts") after the Effective Date, which must be
in substantially the same form as the existing employment contracts
between the Debtors and Senior Management, at substantially similar
compensation terms as currently existing, and contain not less than
twelve months severance (specifically excluding any terms or
provisions contained in the executive severance agreements dated on
or about April 30, 1998 (the "April Severance Agreements");
b) the terms of those New Contracts; and
55
<PAGE> 66
c) the terms of participation in the Post Effective Date Options and
Cash Bonuses referenced below;
In addition to their Senior Severance Packages, the Debtors will
reimburse Mr. Jeffries (CEO) and Mr. Fields (CFO) the closing costs for their
homes in Albuquerque, New Mexico and Tucson, Arizona, respectively, not to
exceed $25,000 for Mr. Jeffries and $30,000 for Mr. Fields (the "Closing
Costs Reimbursement");
If any member of Senior Management declines to accept an offered New
Contract, that member may be terminated without a Severance Package.
Upon the Bankruptcy Court's approval of the Senior Severance Packages,
each member of Senior Management will have waived and released all other claims
for severance or other termination payments as may have existed before the
Petition Date other than the Closing Costs Reimbursement, and the terms of the
Senior Severance Packages as set forth here supersede and replace, in their
entirety, any prepetition severance or termination agreements or arrangements.
- MID-LEVEL SEVERANCE PACKAGES. Debtors propose that the approximately
eleven (11) individuals that comprise mid-level management ("Mid-Level
Management") receive, provided they agree to remain through the Interim Period,
the one-year's salary severance payment provided in their existing employment
contracts, which will remain in full force and effect in accordance with their
assumption under Section 365(a) of the Bankruptcy Code by Debtors.
A sale of Quest will not constitute an involuntary termination for
purposes of entitlement to Mid-Level Severance Package benefits for Mr.
Oberfield or Mr. Roberts. No severance payments will be made, and any
severance rights will expire: a) for Mr. Oberfield, on Unison's purchase of
the 25% interest in Quest from Mr. Oberfield; and b) for Mr. Henderson and
Mr. Plash, on the sale of Sunbelt Therapy Management Services, Inc.
Upon the Bankruptcy Court's approval of the Mid-Level Severance Packages,
each member of Mid-Level Management will have waived and released all other
claims for severance or any other termination payments (whether contained in
employment contracts or otherwise) as may have existed before the Petition Date,
and the terms of the Mid-Level Severance Packages supersede and replace, in
their entirety, any prepetition severance or termination agreements or
arrangements.
- OTHER MANAGEMENT. Debtors propose that other management ("Other
Management") receive, provided they agree to remain through the Interim Period,
a severance payment equal to a percentage of their annual salary.
- MAINTENANCE OF STATUS QUO. Other than the revisions to severance
rights as set forth above, the basic terms of employment of Senior Management,
Mid-Level Management and Other Management (such as compensation, insurance and
other benefits, etc.) will remain in full force and effect throughout the
Interim Period.
56
<PAGE> 67
POST EFFECTIVE DATE OPTIONS FOR SENIOR MANAGEMENT. The board of
Reorganized Unison, within three (3) months of the Effective Date, shall
allocate to Senior Management retained under New Contracts a five year option to
purchase New Common Stock and a five year option to purchase additional New
Common Stock subject to the Company achieving certain performance goals.
CASH BONUSES. In addition to the foregoing, the board of Reorganized
Unison, within six (6) months of the Effective Date, shall allocate and direct
to be paid to Senior Management retained under New Contracts an aggregate cash
bonus of $250,000.00, with the terms and conditions for such bonuses (such as
performance criteria) to be set by the board of Reorganized Unison.
PROVISIONS GOVERNING DISTRIBUTIONS.
The provisions for the timing and manner of making distributions under the
Plan are generally discussed below. All parties are referred to Article 6 of the
Plan for the operative language governing the distributions and payments to
specific Classes of Creditors. In the case of any inconsistency between this
Disclosure Statement and the Plan, the Plan will control.
GENERALLY. Except as otherwise provided in the Plan, Reorganized Unison,
or a Disbursing Agent on its behalf, will make the Cash payments and other
distributions provided for under the Plan. The Cash distributions required to be
made on account of Allowed Administrative Claims (excepting therefrom Allowed
Preserved Ordinary Course Claims), Allowed Priority Wage Claims, Allowed
Priority Benefit Plan Contribution Claims, Allowed Priority Tax Claims, and
Allowed Convenience Claims will be made upon the latest of: (i) the Effective
Date, or as soon thereafter as practicable; (ii) such date as may be fixed by
the Bankruptcy Court, or as soon thereafter as practicable; (iii) the tenth
(10th) Business Day after such Claim is Allowed, or as soon thereafter as
practicable; and (iv) such date as the holder of such Claims and Reorganized
Unison have agreed or shall agree.
DISTRIBUTIONS TO CLASS 9. The provisions governing distributions to
Creditors holding Allowed Claims in Class 9 are set forth in Article 6.5 of the
Plan. On the Effective Date, Reorganized Unison will execute and issue: (a) the
New Senior Notes; (b) the New Senior Notes Indenture; (c) the New Senior Notes
Security Documents; and (d) the New Senior Notes Guarantee. Each holder of an
Allowed Class 9 Claim, as of the Distribution Record Date, shall share Pro Rata
(subject to Articles 6.5.9 and 6.5.11 of the Plan) in the New Senior Notes and
related documents and instruments. The New Senior Notes received by the holders
of the Senior Notes will be entitled to the rights under the Sharing Agreement
set forth in Article 6.1.2(c) of the Plan.
With respect to each holder of an Allowed Notes Claim or Senior Notes
Claim, as of the Distribution Record Date, Reorganized Unison will distribute
such holder's Pro Rata share of New Common Stock to the Disbursing Agent, on the
Distribution Date. As soon as practicable after the New Senior Notes Indenture
Trustee receives the Debt Instruments pursuant to Article 6.5.4 of the Plan: (a)
the New Senior Notes Indenture Trustee will pay Pro Rata Share of the New Senior
Notes in accordance with the terms of the Plan and the New Senior Notes
Indenture; (b) the Disbursing Agent will issue the Pro Rata Share of the New
Common Stock; and (c) the Claims Litigation LLC will distribute the Pro Rata
Claims Litigation LLC Shares.
57
<PAGE> 68
With respect to each holder of an Allowed General Unsecured Claim other
than a Notes Claim or Senior Notes Claim, on the Distribution Date: (a) the New
Senior Notes Indenture Trustee will pay the Pro Rata Share of the New Senior
Notes as such payments come due; (b) the Disbursing Agent will issue the Pro
Rata share of the New Common Stock on the Distribution Date; and (c) the Claims
Litigation LLC will distribute the Pro Rata Claims Litigation LLC Shares.
If all of the Class 6 Reserved Stock and the Class 7 Reserved Stock is not
issued to the holders of the Class 6 and Class 7 Claims pursuant to Articles 6.2
and 6.3 of the Plan, after completion of the Claims resolution procedure
contemplated in the Plan, all of the unissued shares of the Class 6 and Class 7
Reserved Stock will be issued to the holders of Allowed Class 9 Claims, Pro
Rata, as set forth in Article 6.5.3 of the Plan.
DISTRIBUTIONS TO CLASS 11. The provisions governing distributions to
holders of Allowed Equity Interests in Class 11 are set forth in Article 12 of
the Plan. With respect to each holder of an Allowed Equity Interest as of the
Distribution Record Date, Reorganized Unison shall distribute such holder's Pro
Rata Share of the New Warrants to the Transfer Agent on the Distribution Date.
As soon as practicable after the Transfer Agent receives such holder's security
pursuant to Article 12.2 of the Plan, the Transfer Agent shall distribute the
New Warrants to such holder in accordance with the terms of this Plan and the
New Warrant Agreement.
OBJECTIONS TO CLAIMS. After the Effective Date, objections to Claims shall
be made and objections to Claims made previous thereto shall be pursued by
Reorganized Unison, the Claims Litigation LLC (as to the Litigation Claims), or
any other party properly entitled to do so after notice to Reorganized Unison
and approval by the Bankruptcy Court. Any objections made after the Effective
Date shall be filed and served not later than ninety (90) days after the
Effective Date; provided, however, that such period may be extended by order of
the Bankruptcy Court for good cause shown.
SETTLEMENT OF OBJECTIONS AFTER EFFECTIVE DATE. From and after the
Effective Date, Reorganized Unison and the Claims Litigation LLC (with respect
to the Litigation Claims) may litigate to judgment, propose settlements of, or
withdraw objections to, all pending or filed Disputed Claims or Disputed Equity
Interests, and Reorganized Unison and the Claims Litigation LLC, as applicable,
may settle or compromise any Disputed Claim, Disputed Equity Interest, and/or
Litigation Claim without notice and a hearing and without approval of the
Bankruptcy Court.
DISTRIBUTIONS TO DISPUTED CLAIMS. In order to facilitate distribution of
Pro Rata shares to holders of Allowed Claims, and if and to the extent there are
Disputed Claims in any Class, the Disbursing Agent will set aside in a separate
designated reserve account the payments or distributions applicable to such
Disputed Claims as if such Disputed Claims were Allowed Claims, pending the
allowance or disallowance of such Disputed Claims. All amounts applicable to
Disputed Claims in Class 9 shall be segregated in a separate interest bearing
account from which shall be deducted the reasonable costs, expenses, and fees
incurred by the: (a) Disbursing Agent in administering distributions; and (b)
Reorganized Unison in objecting to, litigating and settling on Disputed Claims
in Class 9. In the event that Reorganized Unison wishes to deposit or hold a
lesser amount than required herein and is unable to reach an agreement with the
holder of the Disputed
58
<PAGE> 69
Claim or the Disbursing Agent, as the case may be, on the amount to be deposited
or held, the Bankruptcy Court shall fix the amount after notice and hearing.
Upon Final Order with respect to a Disputed Claim, the holder of such Disputed
Claim, to the extent it has been determined to be an Allowed Claim, will receive
from the Disbursing Agent that payment or distribution to which it would have
been entitled if the portion of the Claim so Allowed had been Allowed as of the
Effective Date. Such payment or distribution will be made as soon as practical
after the order Allowing the Claim has become a Final Order. The balance of the
amount held by the Disbursing Agent after such payment applicable to a
previously Disputed Claim that has been disallowed in whole or in part, will be
returned to Reorganized Debtors, except with regard to a previously Disputed
Claim in Class 9, in which event, the balance will be distributed Pro Rata
amongst the holders of Allowed Claims in Class 9 or continue to be held by the
Disbursing Agent with regard to Disputed Claims not yet resolved.
MEANS FOR IMPLEMENTATION OF PLAN.
SIGNATURE SALE LEASEBACK TRANSACTION. On or before the Effective Date,
Debtors will consummate the Signature Sale Leaseback Transaction in which Omega
will purchase fee simple title to the Signature Facilities for a total amount of
up to $40 million (with the amount of $500,000.00 from those proceeds being used
as and for the Closing Allowance as set forth in Article 6.1.5 of the Plan). The
proceeds will be utilized as follows:
- SATISFACTION OF NHI SECURED CLAIMS. Approximately $19 million of the
Signature Sale Leaseback Transactions will be used to satisfy the
Allowed Class 4 NHI Secured Claims.
- EXERCISE OF OPTION. In conjunction with the Signature Sale Leaseback
Transaction, Reorganized Unison will exercise its option to purchase
The Arbors Health Care Center in Arizona for approximately $3.2
million.
- WORKING CAPITAL. The remainder of the Signature Sale Leaseback
Transaction Proceeds will be utilized for the working capital
requirements of Reorganized Unison.
- RENT FOR SIGNATURE FACILITIES UNDER OMEGA NEW MASTER LEASE. Upon the
closing of the Signature Sale Leaseback Transaction, the Signature
Facilities will be leased back to Reorganized Unison as part of the
Omega New Master Lease Facilities covered by the Omega New Master
Lease discussed in Article 7.2 of the Plan.
EXECUTION OF THE OMEGA NEW MASTER LEASE. As more fully described in
Article 7.2 of the Plan, on the Effective Date, the Indiana Master Lease and
Texas Master Lease shall be amended and restated by the Omega New Master Lease
which shall encompass the Omega New Master Lease Facilities, and be guaranteed
by the Omega New Master Lease Guarantors pursuant to the Omega New Master Lease
Guarantee. Some of the principal provisions of the Omega New Master Lease shall
be as follows:
59
<PAGE> 70
- INITIAL TERM/RENEWAL OPTION. The initial term of the Omega New
Master Lease will be fourteen (14) years commencing on the Effective
Date with one fourteen (14) year renewal option by the Omega New
Master Lessees. Any renewal must be on a global basis encompassing
all Omega New Master Lease Facilities.
- SECURITY DEPOSITS. A security deposit equal to three (3) months rent
on each of the Omega New Master Lease Facilities (including the
Signature Facilities), will be payable at the execution of the Omega
New Master Lease.
- COVENANTS. The Omega New Master Lease will contain customary
operating and creditors' rights covenants, all to be agreed upon
between Omega, the Omega New Master Lessees, and the Omega New
Master Lease Guarantors. Accounts receivable borrowing will be
permitted on the Omega New Master Lease Facilities only if certain
financial ratios are met by the Lessees. In addition, the Omega New
Master Lessees will be permitted to finance equipment with an annual
lease or finance payment not to exceed the aggregate amount existing
as of the Confirmation Date with the maximum aggregate amount to be
reduced over the three (3) years following the Effective Date to an
amount to be agreed upon by Reorganized Unison and Omega. No other
borrowings by the Omega New Master Lessees will be permitted.
- RENTAL ADJUSTMENT FOR INDIANA RETURNED FACILITIES. From and after
the Pro Forma Date (as defined in the Plan), the Debtors or
Reorganized Unison will have no further liability for rental
attributable to the Indiana Returned Facilities. Unison and BritWill
Indiana (as reorganized) will be responsible for all obligations of
the Indiana Returned Facilities arising or accrued on or prior to
the Pro Forma Date and with all of Omega's security securing such
obligations and Omega will be responsible for all obligations
arising or accruing after the Pro Forma Date.
SALE OF NEW PREFERRED STOCK TO OMEGA. On the Effective Date, Omega will
purchase, and Reorganized Unison shall issue, the New Preferred Stock as
described in Article 11 of the Plan, with the proceeds therefrom to be used by
Reorganized Unison for working capital purposes.
OBTAINING NEW LINE OF CREDIT. As more fully set forth in Article 13.2 of
the Plan, one of the conditions precedent to the occurrence of the Effective
Date is that Reorganized Unison has obtained a New Line of Credit and it is
ready to fund.
PURCHASE OF MINORITY INTEREST IN QUEST. On the Effective Date, the Quest
Purchase Option shall be assumed and consummated, thereby making Quest a wholly
owned affiliate of Reorganized Unison.
COUNSEL TO THE AD HOC COMMITTEE. As part of the distributions otherwise
distributable to the holders of Notes and Senior Notes pursuant to this Plan,
and as compensation in connection with making a substantial contribution to the
Chapter 11 Cases, on the Effective Date, legal counsel to the Ad Hoc Committee
shall be reimbursed for its reasonable fees and expenses incurred in connection
with the Chapter 11 Cases.
60
<PAGE> 71
EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Except as provided in Article 6.1 of the Plan relating to Omega (which
shall control as to any executory contract and/or unexpired leases between the
Debtors and Omega), the executory contracts and unexpired leases between the
Debtors and any Person shall be dealt with as provided below.
ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. All executory
contracts and unexpired leases set forth on the schedule of assumed executory
contracts filed with the Bankruptcy Court as part of the Plan Supplement that
exist between the Debtors and any Person will be deemed assumed by Reorganized
Unison as of the Effective Date, except for any executory contract or unexpired
lease: (a) that has been rejected pursuant to an order of the Bankruptcy Court
entered prior to the Confirmation Date; or (b) as to which a motion for approval
or rejection of such executory contract or unexpired lease, if applicable, has
been filed with the Bankruptcy Court prior to the Confirmation Date. The Texas
Master Lease and Indiana Master Lease shall be assumed, as modified and
supplemented pursuant to Articles 6.1 and 7.2 of this Plan and as more fully set
forth in the Omega New Master Lease, on the Effective Date.
REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. All executory
contracts and unexpired leases that exist between the Debtors and any Person and
are either set forth on the schedule of rejected executory contracts and
unexpired leases filed with the Bankruptcy Court as part of the Plan Supplement,
or which do not appear in the Plan Supplement will be deemed rejected as of the
Effective Date, except for any executory contract or unexpired lease that has
been assumed or rejected pursuant to an order of the Bankruptcy Court entered
prior to the Confirmation Date.
APPROVAL OF ASSUMPTION OR REJECTION. Entry of the Confirmation Order will
constitute: (a) the approval, pursuant to Section 365(a) of the Bankruptcy Code,
of the assumption of the executory contracts and unexpired leases assumed
pursuant to the Plan or otherwise during the Chapter 11 Cases; and (b) the
approval, pursuant to Section 365(a) of the Bankruptcy Code, of the rejection of
the executory contracts and unexpired leases rejected pursuant to the Plan or
otherwise during the Chapter 11 Cases. Notwithstanding anything contained herein
to the contrary, as part of the Plan Supplement the Debtors will have the right
to add or delete any executory contract or unexpired lease that is initially an
assumed executory contract or an assumed unexpired lease on the Schedules.
CURE OF DEFAULTS. On the Effective Date or as soon thereafter as is
practicable, Reorganized Unison will Cure any defaults under any executory
contract or unexpired lease assumed pursuant to this Plan in accordance with
Section 365(b)(1) of the Bankruptcy Code.
POST-PETITION DATE CONTRACTS AND LEASES. Executory contracts and unexpired
leases entered into and other obligations incurred after the Petition Date by
the Debtors, will be performed by the Debtors or Reorganized Unison, as
applicable, in the ordinary course of their business.
BAR DATE. All proofs of claims with respect to Claims arising from the
rejection of any executory contract or unexpired lease rejected pursuant to the
Plan must be filed with the
61
<PAGE> 72
Bankruptcy Court no later than THIRTY (30) DAYS after the Confirmation Date. Any
Claim not filed within such time will be forever barred. With respect to any
executory contract or unexpired lease that was rejected by the Debtors prior to
the Confirmation Date, the deadline for filing such Claims shall be as set forth
in the Bar Date Order.
INDEMNIFICATION OBLIGATIONS. Any obligations of the Debtors to indemnify
any Person serving as a fiduciary of any employee benefit plan or program of the
Debtors, pursuant to charter, by-laws, contract or applicable state law will be
deemed to be, and shall be treated as, an executory contract and assumed by
Reorganized Unison on the Confirmation Date. Any obligation of the Debtors to
indemnify, reimburse, or limit the liability of any Person, including but not
limited to any officer or director of any of the Debtors, any Broker Dealer, or
any agent, professional, financial advisor, or underwriter of any securities
issued by the Debtors which relate to any acts or omissions which occurred prior
to the Petition Date: (a) will be rejected, canceled, and discharged pursuant to
the Plan as of the Confirmation Date; and (b) any and all Claims resulting
therefrom will be disallowed pursuant to Section 502(e) of the Bankruptcy Code.
Notwithstanding any of the foregoing, nothing contained in the Plan shall
impact, impair or prejudice the rights of any Person covered by any applicable
directors and officers liability insurance policy and/or any applicable errors
and omissions policy (collectively, "D&O Policies") with respect to such policy
or policies. Moreover, Reorganized Unison will maintain in force for a period of
two (2) years following the Effective Date appropriate D&O Policies covering
pre-Effective Date directors and officers of the Debtors and containing
substantially the same provisions and limits of coverage as the policies that
were in force on the Petition Date, and Reorganized Unison will also be
responsible for paying the deductible or retention amounts under such policies
for such two-year period.
PRESERVATION AND PROSECUTION OF LITIGATION CLAIMS.
In accordance with Section 1123(b)(3) of the Bankruptcy Code, and except
as otherwise expressly provided in the Plan, all Litigation Claims and Related
Party Creditor Defenses will be retained and reserved for the benefit of
Reorganized Unison and the holders of Allowed Claims in Classes 6, 7, and 9.
ESTABLISHMENT OF CLAIMS LITIGATION LLC. On the Effective Date, Reorganized
Unison will establish the Claims Litigation LLC and cause all Related Party
Creditor Defenses and Litigation Claims to be assigned to the Claims Litigation
LLC as a representative or agent of the Debtors. In addition, on the Effective
Date the Claims Litigation LLC will be appointed, pursuant to Section
1123(b)(3)(B), as representative and agent of the Debtors to prosecute, or
compromise and/or abandon the Litigation Claims on behalf of, and with the
consent of, Reorganized Unison. At the request of the Claims Litigation LLC
Board of Managers, Reorganized Unison, from time to time, will advance sums, not
to exceed a cumulative total of $700,000 ($250,000 on the Effective Date) to the
Claims Litigation LLC for payment of reasonable expenses of the Claims
Litigation LLC as and when incurred as set forth in Article 10.2.1 of the Plan.
Please refer to Article 10 of the Plan for a complete discussion of the Claims
Litigation LLC.
62
<PAGE> 73
SPECIFIC CLAIMS PRESERVED. During the course of the Chapter 11 Cases, with
the assistance of their court-approved professionals, Debtors continue to
investigate causes of action available to them under the Bankruptcy Code and
applicable state law. The Plan preserves all causes of action available to
Debtors, including all objections to Claims and all other causes of action
arising under the Bankruptcy Code, unless the Plan specifically provides
otherwise.
Specifically reserved and preserved are all claims, rights or causes of
action arising out of or related to: (1) the BritWill Acquisition, (2) the
Signature Acquisition, (3) such further related transactions to (1) and (2)
above, including, but not limited to, an April 1997 loan and September 1997 loan
by Elk Meadows and BritWill Investments; (4) the business operation of Debtors
for the period July 1, 1992 to May 28, 1998, including as related to the
foregoing but not limited to, any claims for breach of contract, fraud,
misrepresentation, negligence, misappropriation of business opportunities or
trade secrets, corporate waste, fraudulent conveyance, constructive trust,
breach of fiduciary duty, self-dealing or any claims for indemnity, or any
claims arising from an employment relationship with any Debtors; (5) the Related
Party Avoidance Actions; (6) the Avoidance Actions; (7) the Related Party
Creditor Defenses; and (8) all other Litigation Claims (collectively, the
"Preserved Claims"). Each Debtor specifically reserves the Preserved Claims as
to: (a) each and every member of Kremser and Affiliates and Whitehead and
Affiliates; (b) any officer or director of any Debtor for the period July 1,
1992 to May 28, 1998; or (c) any entity or individual who is determined to be
(i) the alter-ego of the foregoing; (ii) any entity the aforementioned might
successfully claim are necessary parties for purposes of joinder under the
Federal Rules of Civil Procedure; or (iii) any entity in whose hands the
proceeds and benefit of any impermissible conduct has flowed.
SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN.
Reorganized Unison shall issue for distribution in accordance with the
provisions of the Plan the New Common Stock, the New Preferred Stock, the New
Warrants, the New Warrant Shares and the New Senior Notes required for
distribution or sale pursuant to the provisions of the Plan. Please refer to
Article 11 of the Plan for a complete discussion of the securities to be issued
in connection with the Plan.
COMMON STOCK. Principal provisions of the New Common Stock are
summarized as follows:
- AUTHORIZATION. The Reorganized Unison Certificate will authorize the
issuance of thirteen million (13,000,000) shares of New Common
Stock. On the Effective Date Reorganized Unison will issue five
million six hundred thirty-five thousand four hundred (5,635,400)
shares of such New Common Stock pursuant to Article 6.5 of the Plan
which will represent approximately seventy-five percent (75%) of the
equity in Reorganized Unison on a fully diluted basis if the Class 6
Reserved Stock and Class 7 Reserved Stock is issued in full to the
holders of Allowed Claims in Classes 6 and 7; and approximately
eighty-six percent (86%) of the equity in Reorganized Unison on a
fully diluted basis if the New Class 6 Reserved Stock and Class 7
Reserved Stock is not issued to holders of Claims in Classes 6 and
7.
63
<PAGE> 74
- PAR VALUE. The New Common Stock will have a par value of $.001 per
share.
- RIGHTS. The New Common Stock will have such rights with respect to
dividends, liquidation, voting and other matters as are set forth in
the Reorganized Unison Certificate and as provided under applicable
law, including, without limitation, the right to one vote per share.
- EXCHANGE LISTING. Reorganized Unison will use its reasonable best
efforts to register the New Common Stock on a national securities
exchange or automated quotation system prior to, or as soon as
practicable after, the distribution to holders of Allowed Claims
entitled to receive New Common Stock.
- REGISTRATION RIGHTS. Any Person who receives ten percent (10%) or
more of the New Common Stock on account of its Allowed Claim under
the Plan will be deemed to have entered into the New Common Stock
Registration Agreement with respect to that stock, and shall have
the rights afforded under that agreement.
NEW PREFERRED STOCK. Principal provisions of the New Preferred Stock are
summarized as follows:
- AUTHORIZATION. The Reorganized Unison Certificate will authorize the
issuance of three hundred and two thousand (302,000) shares of New
Preferred Stock which shall, upon conversion as provided in Article
11.2.5 of the Plan, represent four percent (4%) of the equity in
Reorganized Unison on a fully diluted basis.
- PAR VALUE. The New Preferred Stock will have a par value of $.001
per share.
- PURCHASE PRICE. The purchase price for the New Preferred Stock will
be $3.0 million, to be paid by Omega on or prior to the Effective
Date.
- RIGHTS. The New Preferred Stock will have such rights with respect
to dividends, liquidation, voting and other matters as are set forth
in the Certificate of Designation filed with the Delaware Secretary
of State and as provided under applicable law, including but not
limited to a preference over the New Common Stock upon liquidation
in the amount of $3.0 million and a five percent (5%) dividend
payable semi-annually.
- CONVERTIBILITY. Each share of New Preferred Stock will be
convertible, at the option of the holder, into one (1) share of New
Common Stock at any time on or prior to the fifth anniversary of the
Effective date.
NEW WARRANTS. Principal provisions of the New Warrants are as follows:
64
<PAGE> 75
- AUTHORIZATION. The Plan authorizes (subject to the provisions of
Article 6.7.2 of the Plan) the issuance of New Warrants to purchase
approximately three hundred seventy eight thousand (378,000) shares
of New Common Stock, which, if and to the extent exercised, will
represent up to approximately five percent (5%) of the equity of
Reorganized Unison on a fully diluted basis.
- EXERCISE PRICE. The New Warrants will have a per share exercise
price equal to 1.25 times the Initial Price.
- EXERCISE; EXPIRATION. The New Warrants will be exercisable by the
holder thereof at any time on or prior to the fifth anniversary of
the Effective Date, at which time all unexercised New Warrants will
expire.
- RIGHTS. The New Warrants will not be redeemable. The number of
shares purchasable upon exercise of the New Warrants will, in the
aggregate, equal a maximum of five percent (5%) of the equity in
Reorganized Unison on a fully diluted basis, and will be subject to
standard anti-dilution provisions. The holders of the New Warrants
will not have any voting or other rights as shareholders of
Reorganized Unison in respect thereof.
NEW SENIOR NOTES. Principal provisions of the New Senior Notes are as
follows:
- AUTHORIZATION. The Plan authorizes the issuance of the New Senior
Notes in the amount of $24.4 million less the Effective Date Excess
Cash payment set forth in Article 11.4.4(a) of the Plan, pursuant to
the New Senior Notes Indenture.
- SECURITY. The New Senior Notes will be secured by the New Senior
Notes Collateral.
- INTEREST RATE. The New Senior Notes will bear interest, payable as
set forth in Article 11.4.4, in arrears, at a fixed rate equal to
eleven percent (11%) per annum.
- MATURITY AND AMORTIZATION. The New Senior Notes will mature on the
fourth anniversary of the Effective Date, and will be payable as
follows:
(a) On the Effective Date, the Effective Date Excess Cash will be
paid to reduce the principal due and owing on the New Senior
Notes. Under no circumstances will Reorganized Unison be
required to access its New Line Of Credit or otherwise borrow
to make all or any portion of this Effective Date Payment;
(b) If and when the New Senior Notes Collateral or any portion
thereof is sold, the proceeds therefrom (less costs of sale)
will be used to prepay the New Senior Note, which payment will
be applied: (i) first to outstanding fees and costs under the
New Senior Note Indenture (if any); (ii) then to accrued
interest; and (iii) then to principal;
65
<PAGE> 76
(c) Interest only will be payable semi-annually for the first and
second years after issuance;
(d) On the third anniversary of the Effective Date, a payment
equal to accrued interest plus a principal reduction of $2.0
million will be made; and
(e) All unpaid interest, fees, costs and principal will be fully
due and payable on the fourth anniversary of the Effective
Date.
- PREPAYMENT PENALTY. The New Senior Notes will contain no prepayment
penalty.
- GUARANTEES. The New Senior Notes will be guaranteed by all
subsidiaries and Affiliates of Reorganized Unison pursuant to the
New Senior Notes Guarantee other than the Omega New Master Lessees.
- OTHER RIGHTS. The holders of the New Senior Notes received by the
holders of the Senior Notes will have those rights under the Sharing
Agreement with respect to the Indiana Returned Facility Note set
forth in Article 6.1.2(c) of the Plan.
SECTION 1145 EXEMPTION. It is the Company's position that, in accordance
with Section 1145 of the Bankruptcy Code, the issuance of the New Common Stock,
the New Preferred Stock, the New Senior Notes, and the Claims Litigation LLC
Shares under this Plan is exempt from the registration requirements of Section 5
of the Securities Act, as amended, and any state or local law requiring
registration for offer or sale of a security or registration or licensing of an
issuer of, underwriter of, or Broker Dealer in such securities and is deemed to
be a public offer of such securities. With respect to the issuance of the New
Warrants and the New Warrant Shares upon exercise of the New Warrants, the
issuance of such securities under the Plan shall be exempt from the registration
requirements of Section 5 of the Securities Act, as amended, and any state or
local law requiring registration of such securities only to the extent the
Bankruptcy Court determines, as part of the Confirmation Hearing and pursuant to
the Confirmation Order, that such issuance is exempt under the provisions of
Section 1145 of the Bankruptcy Code.
TITLE TO PROPERTY; DISCHARGE; INJUNCTION.
REVESTING OF ASSETS. Subject to the provisions of the Plan, the property
of the Estates of Debtors will vest in Reorganized Unison on the Effective Date.
As of the Effective Date, all such property of Debtors shall be free and clear
of all liens, Claims and Equity Interests of holders thereof, except as
otherwise provided herein. From and after the Effective Date, Reorganized Unison
may operate their business, and may use, acquire and dispose of their property
free of any restrictions of the Bankruptcy Code, including the employment of and
payment to professionals, except as otherwise provided in the Plan or the
Confirmation Order.
DISCHARGE. Except as provided in the Plan or the Confirmation Order, the
rights afforded under the Plan and the treatment of Claims and Equity Interests
under the Plan shall be in exchange for and in complete satisfaction, discharge
and release of all Claims, including any
66
<PAGE> 77
interest accrued on General Unsecured Claims from the Petition Date and
termination of all Equity Interests. Except as provided in the Plan or the
Confirmation Order, Confirmation shall: (a) discharge Debtors and Reorganized
Unison from all Claims or other debts that arose before the Confirmation Date,
and all debts of the kind specified in Sections 502(g), 502(h) or 502(i) of the
Bankruptcy Code, whether or not: (i) a proof of claim based on such debt is
filed or deemed filed pursuant to Section 501 of the Bankruptcy Code; (ii) a
Claim based on such debt is allowed pursuant to Section 502 of the Bankruptcy
Code; or (iii) the holder of a Claim based on such debt has accepted the Plan;
and (b) terminate all Equity Interests and other rights of Equity Interests in
Debtors except as expressly provided herein.
INJUNCTION. Except as provided in the Plan or the Confirmation Order, as
of the Confirmation Date, all entities that have held, currently hold or may
hold a Claim or other debt or liability that is discharged or an Equity
Interest, Equity Interest Related Claim, or other right of an equity security
holder that is terminated pursuant to the terms of the Plan are permanently
enjoined from taking any of the following actions on account of any such
discharged Claims, debts or liabilities or terminated Equity Interests or
rights: (a) commencing or continuing in any manner any action or other
proceeding against the Debtors or Reorganized Unison (including any officer or
director acting as a representative of Debtors or Reorganized Unison); (b)
enforcing, attaching, collecting or recovering in any manner any judgment,
award, decree or order against Debtors, Reorganized Unison, or their respective
property; (c) creating, perfecting or enforcing any lien or encumbrance against
Debtors, Reorganized Unison, or their respective property; (d) asserting a
setoff, right of subrogation or recoupment of any kind against any debt,
liability or obligation due to Debtors, Reorganized Unison, or their respective
property; and (e) commencing or continuing any action, in any manner, in any
place, that does not comply with or is inconsistent with the provisions of the
Plan or the Bankruptcy Code.
EXCULPATION. Neither Debtors, Reorganized Unison, the Creditors Committee,
the Ad Hoc Committee, Omega nor any of their respective officers, directors,
employees, financial advisors, attorneys, or agents, shall have or incur any
liability to any holder of a Claim or Equity Interest, including the holder of
any Equity Interest Related Claim, or any other party in interest, or any of
their respective members or former members, agents, employees, representatives,
financial advisors, attorneys, or Affiliates, or any of their successors or
assigns, for any act or omission in connection with, relating to, or arising out
of, the Chapter 11 Cases, the pursuit of confirmation of the Plan, or the
consummation of the Plan, except for their willful misconduct, and in all
respects shall be entitled to reasonably rely upon the advice of counsel with
respect to their duties and responsibilities under the Plan or in the context of
the Chapter 11 Cases. No holder of a Claim, Equity Interest or Equity Interest
Related Claim, or any other party in interest, including their respective
agents, employees, representatives, financial advisors, attorneys or Affiliates,
shall have any right of action against the Debtors, Reorganized Unison, the
Creditors Committee, the Ad Hoc Committee, Omega or any of their respective
officers, directors, employees, financial advisors, attorneys, or agents, for
any act or omission in connection with, relating to, or arising out of, the
Chapter 11 Cases, the pursuit of confirmation of the Plan, the consummation of
the Plan, or the administration of the Plan, except for their willful
misconduct.
67
<PAGE> 78
FEASIBILITY
GENERAL FEASIBILITY ANALYSIS.
Pursuant to Section 1129(a)(11) of the Bankruptcy Code, one of the
requirements for confirmation of a plan of reorganization is a determination by
the Bankruptcy Court that the plan is feasible -- that is, that confirmation of
the plan is not likely to be followed by liquidation or by the need for a
further financial restructuring, unless such is specifically provided for in the
plan. For purposes of determining whether the Plan meets this requirement,
Debtors have analyzed the Reorganized Unison's future prospects and its ability
to meet its obligations under the Plan. Debtors believe that confirmation is not
likely to be followed by the liquidation or the need for further financial
reorganization of Reorganized Unison.
A: (i) projected balance sheet as of the Effective Date of the Plan; (ii)
projected cash flows statement; and (iii) projected income statement, are set
forth below. These projections were prepared by the Company and include
projections of the expected results of operations of the Company assuming the
disposition of the Company's rehabilitation therapy subsidiary and the
Disposition Facilities.
BASED ON THE RESULTS OF OPERATIONS AND CASH FLOWS, DEBTORS BELIEVE THAT
THE PLAN COMPLIES WITH THE FINANCIAL FEASIBILITY STANDARDS FOR CONFIRMATION SET
FORTH IN SECTION 1129(a)(11) OF THE BANKRUPTCY CODE. DEBTORS BELIEVE THAT THE
ASSUMPTIONS ARE REASONABLE, THAT THE PROJECTIONS ARE ATTAINABLE BY REORGANIZED
UNISON ON AN OPERATIONAL BASIS AND THAT REORGANIZED UNISON WILL HAVE SUFFICIENT
FUNDS AVAILABLE TO MEET ITS OBLIGATIONS UNDER THE PLAN.
THE PROJECTIONS AND ANALYSES CONTAINED HEREIN SHOULD NOT BE REGARDED AS A
REPRESENTATION OR WARRANTY BY DEBTORS, REORGANIZED UNISON, OR ANY OTHER PERSON,
INCLUDING ANY PROFESSIONALS EMPLOYED BY, OR ANY OFFICERS, DIRECTORS, EMPLOYEES
OR OTHER REPRESENTATIVES OF SUCH PARTIES, THAT ANY PROJECTED RESULTS OF
OPERATIONS OR RECOVERIES WILL BE REALIZED. ACTUAL RESULTS ACHIEVED BY
REORGANIZED UNISON MAY VARY MATERIALLY FROM THE PROJECTED RESULTS. HOLDERS OF
CLAIMS AND EQUITY INTERESTS MUST MAKE THEIR OWN DETERMINATIONS AS TO THE
REASONABLENESS OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS IN REACHING THEIR
DECISIONS OF WHETHER TO ACCEPT OR REJECT THE PLAN.
KEY ASSUMPTIONS UNDERLYING THE OPERATING PLAN AND THE PROJECTIONS. The
projections assume that, after the Effective Date, Unison will operate 32
skilled nursing facilities with 3,284 licensed beds and 3 assisted living
facilities with 214 units. In addition, Unison will continue its pharmacy and
laboratory ancillary businesses. Unison's therapy business is assumed to be sold
by December 31, 1998, with the proceeds from this sale used to repay a portion
of the New Senior Note. No further acquisitions or dispositions have been
assumed.
For purposes of the projections, the common equity of Reorganized Unison
has been assumed to have a value of $65 million. This assumption is based upon
recent trading multiples
68
<PAGE> 79
of public companies comparable to Unison and recent transactions in the merger
market involving companies comparable to Unison.
The projections further assume inflation of 2-3% and that, after the
Effective Date, Unison gradually returns to levels of occupancy, quality mix and
working capital experienced prior to its financial difficulties.
Specifically:
- Occupancy levels are projected to increase from approximately 81.4%
in fiscal 1998 to approximately 88.3% in fiscal 2003.
- The Quality Mix (percentage of private pay and Medicare revenues) is
projected to improve from approximately 47.4% in fiscal 1998 to
approximately 48.8% in fiscal 2003.
The impact of implementation of PPS is assumed to be neutral. Medicare
reimbursement rates projected to be flat through fiscal 2000 and then increase
1% per annum thereafter. Reimbursement rates for Medicaid and private payors are
assumed to increase 3% and 5% per annum respectively.
Capital Expenditures over the projected period are assumed to be $.3
million for the two months from November 1, 1998 through December 31, 1998, $4.0
million for fiscal 1999, $2.7 million for fiscal 2000, $2.4 million for fiscal
2001, $1.5 million for fiscal 2002 and $1.5 million for fiscal 2003.
The rate for income taxes is assumed to be 40%.
As a result of the foregoing, earnings before interest, taxes,
depreciation and amortization as a percentage of revenues is expected to grow
from 6.27% in fiscal 1998 to 8.11% in 2003.
69
<PAGE> 80
UNISON HEALTHCARE CONSOLIDATED
PROJECTED BALANCE SHEET
($ 000'S)
<TABLE>
<CAPTION>
PRO FORMA
OCT-31-98 DEC-31-98 DEC-31-99 DEC-31-00 DEC-31-01 DEC-31-02 DEC-31-03
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash $ 5,976 $ 3,398 $ 2,657 $ 4,040 $ 4,762 $ 2,399 $ 7,224
Accounts Receivable (net) 33,687 31,056 22,018 22,965 23,787 24,741 25,545
Inventory 2,149 2,133 2,176 2,220 2,264 2,309 2,356
Prepaid Expenses & Other 8,676 8,998 10,998 10,998 10,998 10,998 10,998
-------- -------- -------- -------- -------- -------- --------
Total Current Assets 50,488 45,585 37,849 40,223 41,811 40,448 46,122
Property, Plant & Equipment (net) 6,898 6,419 8,342 9,253 9,864 9,596 9,329
Goodwill, Lse Op Rts & Oth Intang (net) 75,031 73,954 60,008 54,410 48,812 43,214 37,616
Other Assets 6,660 6,535 6,535 6,535 6,535 6,535 6,535
-------- -------- -------- -------- -------- -------- --------
Total Assets $139,076 $132,493 $112,735 $110,422 $107,023 $ 99,794 $ 99,603
======== ======== ======== ======== ======== ======== ========
Accounts Payable $ 3,140 $ 2,931 $ 2,711 $ 2,806 $ 2,888 $ 2,984 $ 3,065
Accrued Expenses 11,803 10,947 7,807 7,877 8,156 8,349 8,855
Reserves 3,329 2,540 0 0 0 0 0
Accrued Business Taxes 3,251 2,833 2,624 2,624 2,624 2,624 2,624
Notes Payable 0 0 0 0 0 1,499 0
Current Maturities of Long Term Debt 2,045 2,045 1,732 2,009 4,324 1,174 634
-------- -------- -------- -------- -------- -------- --------
Total Current Liabilities 23,567 21,296 14,874 15,315 17,992 16,630 15,177
Long Term Debt 32,246 28,465 16,733 14,232 7,908 1,012 378
Deferred Taxes 14,305 14,305 14,305 14,305 14,305 14,305 14,305
Other Long Term Liabilities 958 908 883 883 883 883 883
Liabilities Subject to Compromise 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Total Liabilities 71,076 64,973 46,795 44,735 41,088 32,830 30,743
Preferred Stock 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Common Stockholders' Equity 65,000 64,520 62,940 62,687 62,935 63,964 65,860
-------- -------- -------- -------- -------- -------- --------
Total Equity 68,000 67,520 65,940 65,687 65,935 66,964 68,860
Total Liabilities & Equity $139,076 $132,493 $112,735 $110,422 $107,023 $ 99,794 $ 99,603
======== ======== ======== ======== ======== ======== ========
</TABLE>
70
<PAGE> 81
UNISON HEALTHCARE CONSOLIDATED
PROJECTED CASH FLOWS
($ 000'S)
<TABLE>
<CAPTION>
TWO MONTHS FULL YEAR FULL YEAR FULL YEAR FULL YEAR FULL YEAR
DEC-31-98 DEC-31-99 DEC-31-00 DEC-31-01 DEC-31-02 DEC-31-03
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Income (455) (1,430) (103) 398 1,179 2,046
Depreciation & Amortization 1,405 7,411 7,411 7,411 7,411 7,411
------- ------- ------- ------- ------- -------
Gross Operating Cash Flow 950 5,981 7,308 7,810 8,590 9,457
(Increase) in Accounts Receivable 2,631 9,038 (947) (822) (954) (804)
(Increase) in Inventory 16 (43) (44) (44) (45) (46)
(Increase) in Prepaid Expenses & Other (322) (2,000) 0 0 0 0
Increase in Accounts Payable (209) (220) 95 83 96 81
Increase in Accrued Liabilities (1,269) (2,914) 234 204 236 199
Increase in Other Current Liabilities (1,207) (2,749) 0 0 0 0
------- ------- ------- ------- ------- -------
Cash Flow from Working Capital Cycle 589 7,094 6,647 7,229 7,923 8,886
(Increase) in Other Assets 124 0 0 0 0 (0)
Increase in Other Liabilities (50) (25) (0) (0) (0) (0)
Capital Expenditures (net of sales) 151 4,611 (2,724) (2,424) (1,546) (1,546)
------- ------- ------- ------- ------- -------
Cash Flow from Operations 814 11,680 3,923 4,805 6,377 7,341
Change in Debt (3,368) (12,271) (2,389) (3,933) (8,590) (2,367)
Liabilities ST Compromise 0 0 0 0 0 0
Interco Adjustments 0 0 0 (0) (0) 0
Dividends (25) (150) (150) (150) (150) (150)
Equity Adjustments 0 0 0 0 0 0
Change in Cash (2,578) (741) 1,383 722 (2,362) 4,824
Beginning Cash 5,976 3,398 2,657 4,040 4,762 2,399
Ending Cash 3,398 2,657 4,040 4,762 2,399 7,224
</TABLE>
71
<PAGE> 82
UNISON HEALTHCARE CONSOLIDATED
PROJECTED INCOME STATEMENT
($ IN 000'S EXCEPT PER SHARE)
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 195,740 $ 147,020 $ 153,625 $ 158,507 $ 164,864 $ 170,221
Wages and Related 98,808 64,037 66,136 68,110 70,699 72,874
Other Operating Expenses 69,582 58,404 60,635 62,615 65,115 67,315
--------- --------- --------- --------- --------- ---------
EBITDAR 27,351 24,580 26,854 27,782 29,050 30,032
EBITDAR% 13.97% 16.72% 17.48% 17.53% 17.62% 17.64%
Rent 15,071 14,870 15,209 15,504 15,913 16,231
--------- --------- --------- --------- --------- ---------
EBITDA 12,281 9,709 11,645 12,278 13,138 13,801
EBITDA % 6.27% 6.60% 7.58% 7.75% 7.97% 8.11%
Depreciation and Amortization 9,903 7,411 7,411 7,411 7,411 7,411
--------- --------- --------- --------- --------- ---------
EBIT 2,378 2,298 4,234 4,867 5,727 6,390
Impairment losses and Restructuring Costs 1,749 (0) 0 0 0 0
Interest Expense (net) 1,951 2,150 1,914 1,725 1,283 502
--------- --------- --------- --------- --------- ---------
Pre Tax Income (1,322) 148 2,321 3,142 4,444 5,888
Taxes 119 1,578 2,424 2,744 3,264 3,842
--------- --------- --------- --------- --------- ---------
Net Income (1,440) (1,430) (103) 398 1,179 2,046
Preferred Dividends 25 150 150 150 150 150
Available for Common (1,465) (1,580) (253) 248 1,029 1,896
Earnings per Share (based on 6,500,000 shares) $ (0.23) $ (0.24) $ (0.04) $ 0.04 $ 0.16 $ 0.29
Skilled Nursing Facilities 32 32 32 32 32 32
Licensed Beds 3,284 3,284 3,284 3,284 3,284 3,284
Assisted Living Facilities 3 3 3 3 3 3
Number of Units 214 214 214 214 214 214
Sources of Patient Revenues
Medicare 31.61% 32.08% 31.63% 31.44% 31.16% 30.84%
Private Pay 15.77% 16.28% 16.76% 17.22% 17.57% 17.92%
--------- --------- --------- --------- --------- ---------
Quality Mix 47.37% 48.36% 48.39% 48.66% 48.74% 48.76%
Medicaid 52.63% 51.64% 51.61% 51.34% 51.26% 51.24%
--------- --------- --------- --------- --------- ---------
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Occupancy % 81.35% 85.10% 87.00% 87.31% 88.20% 88.30%
</TABLE>
72
<PAGE> 83
RISK FACTORS
The restructuring of Unison involves a degree of risk, and this
Disclosure Statement and certain of the documents incorporated herein by
reference contain forward-looking statements that involve risks and uncertainty.
Reorganized Unison's actual results could differ materially from those
anticipated in such forward-looking statements as a result of a variety of
factors, including those set forth in the following risk factors and elsewhere
in this Disclosure Statement. Creditors should consider carefully the following
factors, in addition to the other information contained in this Disclosure
Statement, prior to submitting a vote to accept or reject the Plan.
REORGANIZATION FACTORS.
As with any plan of reorganization or other financial transaction,
there are certain risk factors that must be considered. It should be noted that
all risk factors cannot be anticipated, that some events will develop in ways
that were not foreseen and that many or all of the assumptions which have been
used in connection with this Disclosure Statement and the Plan will not be
realized exactly as assumed. Some or all of such variations may be material.
While efforts have been made to be reasonable in this regard, there can be no
assurance that subsequent events will bear out the analyses set forth herein.
Under the Plan, some of the principal risks that holders of Claims should be
aware of are as follows.
- - There is a risk that one or more of the required conditions or
obligations under the Plan will not occur, be satisfied or waived, as the case
may be, resulting in the inability to confirm the Plan.
- - The total amount of all Claims filed in these Chapter 11 Cases may be
materially in excess of the estimated final amounts of Allowed Claims assumed in
the development of the Plan and in the valuation estimates provided herein. The
actual amount of all Allowed Claims in any Class may differ significantly from
the estimates provided herein. Accordingly, the amount and timing of the
distributions that will ultimately be received by any particular holder of an
Allowed Claim in any Class may be materially and adversely affected should the
estimates be exceeded as to any Class.
- - A number of other uncertainties may adversely impact Reorganized
Unison's future operations including, but not necessarily limited to, economic
recession, increased competition, adverse regulatory agency actions, acts of
God, or similar circumstances. Many of these factors will be substantially
beyond the control of Reorganized Unison, and a change in any factor or
combination of factors could have a material adverse effect on Reorganized
Unison's financial condition, cash flows and results of operations.
- - There can be no assurance that Reorganized Unison will be able to
continue to generate sufficient funds to meet its obligations and necessary
capital expenditures, notwithstanding the significant improvements in
Reorganized Unison's operations and financial condition. Although Reorganized
Unison's financial projections assume that Reorganized Unison will generate
sufficient funds to meet its working capital needs for the foreseeable future,
its ability to gain access to additional capital, if needed, cannot be assured,
particularly in view of possible competitive factors and industry conditions.
73
<PAGE> 84
In addition to risks associated with the restructuring process, the
following risks affecting the Company's business should be considered:
LIMITED OPERATING HISTORY; HISTORY OF LOSSES AND ACCUMULATED DEFICIT.
Unison began operations in 1992. Since then, except for a small net
profit in the fourth quarter of 1995 (and the pooling effect of the Ampro
Acquisition completed in October 1996, described more fully at "THE
DEBTORS--Acquisitions"), it has reported net losses for every period,
culminating in losses of $23.4 million for 1996, $47.2 million for 1997 and $9.8
million for the six months ended June 30, 1998. The Company's future
profitability will depend on many factors, including its ability to control
costs, occupancy levels, government regulation and reimbursement policies,
competition, its ability to attract and retain qualified personnel at
competitive rates, and general economic conditions. While the Company has
instituted revenue enhancement and cost containment programs and has completed
the integration of recent acquisitions, there can be no assurance that the
Company will be profitable in the future.
MANAGEMENT RESIGNATIONS AND DEPENDENCE ON SKILLED PERSONNEL.
Three of Unison's executive officers, including its Chief Executive
Officer, Chief Financial Officer and Executive Vice President of Acquisitions,
resigned in April 1997 and its Chief Operating Officer resigned in October 1997.
In addition, the Company's prior General Counsel and several facility
administrators resigned during 1997. The Company hired a CEO in September 1997
and replaced its CFO and General Counsel in 1998. Although the pre-petition
resignations of senior managers is not expected to have a material adverse
impact on Unison's future results of operations, the loss of certain other key
personnel could adversely affect Unison's results of operations and its efforts
to rebuild its financial health. Unison's business strategy also depends on its
ability to attract and retain qualified clinical management, marketing and other
personnel. Unison competes with general acute care hospitals, rehabilitation
facilities, nursing homes, ambulatory care facilities and other healthcare
providers for the services of physicians, registered nurses, therapists and
other clinical personnel. Such clinical personnel are in high demand and are
often subject to competing offers. There can be no assurance that Unison will be
able to attract and retain the qualified personnel necessary for its business
and planned growth.
RELIANCE ON REIMBURSEMENT FROM GOVERNMENT SOURCES.
The Company is reimbursed under the Medicare program for its actual
allowable direct and indirect costs of services based on the submission of an
annual cost report. Each facility is also subject to limits on reimbursement for
routine costs. Exceptions to these limits are available for, among other things,
the provision of atypical services. Due in part to the provision of subacute
services, Unison's costs for the care delivered to Medicare patients in certain
of its nursing facilities have exceeded the routine cost limits in the aggregate
amount of $1.8 million and $2.3 million and $2.7 million in 1995, 1996 and 1997,
respectively. The Company has filed 18 exception requests with HCFA with respect
to 1995, requesting reimbursement for excess costs. Unison was granted interim
(pending audit) routine cost limit exceptions for 16 of the 18 facilities in the
aggregate amount of approximately $1.5 million. However, in the fourth quarter
74
<PAGE> 85
of 1997, the fiscal intermediary audited the Company's 1995 Medicare cost
reports and, as a result, the Company recorded a provision for potential audit
adjustments of approximately $1.2 million. The Company is currently in the
process of filing exception requests related to 1996 and 1997. Although
management believes that the Company will recover these routine cost limit
exceptions, failure to obtain such exceptions could adversely affect the
Company's results of operations.
Governmental payors and their paying agencies and private third-party
payor sources have instituted cost containment measures of various kinds
designed to limit payments made for long-term care and ancillary services, and
there can be no assurance that future measures will not materially and adversely
affect reimbursement to the Company. Revenues received from the Medicare program
for services provided in Unison's facilities represented approximately 32.1% and
34.2% of Unison's 1997 actual and pro forma long-term care revenues. The
Medicare program is subject to statutory and regulatory changes, retroactive and
prospective rate adjustments, complex reimbursement audits, paying agency
discretion and interpretations, administrative rulings and funding restrictions,
all of which could have the effect of limiting or reducing reimbursement levels
for Unison's services. Any significant decrease in Medicare reimbursement
levels, or the imposition of significant restrictions on participation in the
Medicare program, could have a material adverse effect on Unison. There can be
no assurance that the Company's facilities will continue to satisfy the
requirements for participation in the Medicare program.
Revenues received from state Medicaid programs for services provided in
the Company's facilities represented approximately 51.7% and 49.8% of Unison's
1997 actual and pro forma long-term care revenues. The Company's facilities are
subject to risks of changes in Medicaid reimbursement and payment delays
resulting from budgetary shortfalls of state Medicaid programs. Many states have
enacted or are considering enacting measures that are designed to reduce their
Medicaid expenditures and to make certain changes to private healthcare
insurance. There are also a number of legislative proposals including cost caps
and the establishment of Medicaid prospective payment systems for nursing
facilities. Indiana and Colorado will adopt case-mix prospective payment systems
effective October 1, 1998 and January 1, 1999, respectively. Unison is unable to
predict what other changes may occur to state reimbursement policies or what
effect any such changes would have on the Company. There can be no assurance
that any changes to the Medicaid program would not have a material adverse
impact on the Company's financial condition or results of operations.
HEALTH CARE REFORM.
The Balanced Budget Act, signed into law on August 5, 1997, is intended
to reduce Medicare payments by $115 billion over the next five years and makes
numerous changes to Medicare and Medicaid programs. The Balanced Budget Act
mandates the establishment of a PPS for Medicare skilled nursing facility
services, under which facilities will be paid a fixed fee for virtually all
covered services. PPS will be phased in over a four-year period, effective for
the Company's facilities on January 1, 1999. During the first three years,
payments will be based on a blend of the facility's historical costs and
calculated federal rates. Thereafter, the per diem rates will be based 100% on
federal rates. In addition, effective January 1, 1999, there will be an
75
<PAGE> 86
annual per-patient cap of $1,500 on reimbursement for combined Part B and
outpatient physical and speech therapy services and an annual cap of $1,500 on
reimbursement for Part B and outpatient occupational therapy services. There can
be no assurance that payments under PPS will be comparable to current levels and
that PPS will not have a material adverse impact on the Company's results of
operations or financial condition.
The Balanced Budget Act also contains changes to the Medicaid program,
the most significant of which is the repeal of the Boren Amendment. The Boren
Amendment required state Medicaid programs to pay rates that are reasonable and
adequate to meet the costs that must be incurred by a nursing facility in order
to provide care and services in compliance with applicable standards. Effective
October 1, 1997, states have more flexibility in establishing payment rates. The
State of Indiana is changing its Medicaid program to a prospective payment
system effective October 1, 1998 and Colorado is implementing a prospective
payment system effective January 1, 1999. The Company does not believe that the
change in Indiana's reimbursement system will negatively impact Unison's results
of operations or financial condition, and has not yet determined the impact of
the change in Colorado's system. Unison is unable to predict whether any other
states will change their reimbursement policies and, if so, what effect such
changes would have on the Company. There can be no assurance that any changes to
the Medicaid program will not have a material adverse impact on the Company.
In an attempt to limit the federal budget deficit, there have been, and
Unison expects that there will continue to be, a number of other proposals to
limit Medicare and Medicaid payments for services. Unison cannot predict whether
any of these proposals will be adopted or, if adopted, the effect, if any, such
proposals would have on Unison. There can be no assurance that the rates paid to
Unison by Medicare, Medicaid or other payors will be adequate to reimburse
Unison for the cost of providing services. In addition, cost increases due to
inflation without corresponding increases in reimbursement would adversely
affect the Company's business.
EXTENSIVE GOVERNMENT REGULATIONS.
The operation of skilled nursing facilities is subject to federal,
state and local laws relating to, among other things, the number of beds, the
provision of ancillary services, the adequacy of medical care, distribution of
pharmaceuticals, equipment, personnel, operating policies, fire prevention and
compliance with building codes, as well as those relating to other businesses,
such as those mandating fair employment practices and prohibiting damage to the
environment. Skilled nursing facilities are also subject to periodic inspection
by governmental and other authorities to assure compliance with various
standards and to maintain continued licensing under state law and certification
under the Medicare and Medicaid programs. As of July 6, 1998, Unison had no
outstanding deficiencies for substandard care. Although the Company generally
has been able to secure necessary approvals or licenses in the past, it
voluntarily closed one facility in 1996 and one in 1997 due to violations of
Medicare regulations, and the failure to obtain or renew any required regulatory
approvals or licenses could adversely affect Unison's ability to offer existing
or additional services, to receive Medicaid and Medicare payments, and to expand
the scope of its operations, any of which could materially adversely affect the
Company's business. See "THE DEBTORS--Operations-Quality Management".
76
<PAGE> 87
In May 1996, HCFA announced the first year results of its "Operation
Restore Trust" initiative, designed to combat Medicare and Medicaid fraud, waste
and abuse by home health agencies, nursing homes and durable medical equipment
suppliers. Operation Restore Trust originally focused on five states and is now
extended to all states and is focused on problems with claims for services not
rendered or not provided as claimed and claims falsified to circumvent coverage
limitations on medical supplies. In addition, HCFA certification, survey and
enforcement regulations impose significant burdens on long-term care facilities.
The regulations may require state survey agencies to take aggressive enforcement
actions, such as imposing fines, decertifying facilities, banning admission or
revoking necessary licenses and closing facilities. Additional remedies are
available. Published reports indicate that in the initial surveys conducted, as
many as 70% of the facilities surveyed were not in compliance with the new
rules. There can be no assurance that these rules, or future rules or
legislation, will not have a material adverse effect on the Company.
COMPETITION FOR PATIENTS AND EMPLOYEES.
The industries in which Unison operates are highly competitive. Unison
competes with general acute care hospitals, skilled nursing facilities,
rehabilitation hospitals, long-term care hospitals, assisted living facilities,
home care providers and other subacute and specialty care providers, both for
patients and for nurses and other key personnel. Many of these companies have
greater financial and other resources than Unison. A number of states in which
Unison operates do not have "certificate of need" or similar laws restricting
the construction of competing facilities. No assurance can be given that Unison
will have the resources to compete successfully with such companies.
CERTAIN FEDERAL TAX CONSEQUENCES
The following discussion sets forth the material federal income tax
consequences of the Plan to the Debtors and holders of certain Claims. This
discussion is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Tax Code"), final, temporary, and proposed Treasury regulations
thereunder, and administrative and judicial interpretations thereof, all as in
effect as of the date hereof. There can be no assurance that the Internal
Revenue Service (the "Service") will not take a contrary view, and no ruling
from the Service or opinion of counsel has been or will be sought as to the
federal income tax consequences of the Plan.
The description that follows does not include all matters that may be
relevant to any particular holder and could be affected by the specific facts
and circumstances pertaining to such holder. Certain holders, including
financial institutions, broker-dealers, tax-exempt entities, insurance
companies, and foreign persons may be subject to special rules not discussed
below.
ALL HOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISERS AS TO
THEIR PARTICULAR TAX CONSEQUENCES ASSOCIATED WITH THE PLAN, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS, OR ANY
PROPOSED LEGISLATION. FURTHER, THERE CAN BE NO ASSURANCE THAT THE TAX
CONSEQUENCES TO THE DEBTORS WILL BE AS
77
<PAGE> 88
DISCUSSED, SINCE SUCH TAX CONSEQUENCES WILL BE SUBJECT TO FUTURE EVENTS THAT
CANNOT BE PREDICTED WITH CERTAINTY.
CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS.
IMPORTANCE OF WHETHER CERTAIN DEBT INSTRUMENTS CONSTITUTE "SECURITIES".
As discussed below with respect to the various Classes of Claims, the federal
income tax consequences to the Claim holders of the exchanges provided for by
the Plan will depend, in part, on whether such exchanges qualify as a
recapitalization or other "reorganization" as defined in the Tax Code. This, in
turn, will depend, in part, on whether the Claims and certain debt instruments
constitute "securities" for federal income tax purposes ("Securities" or
"Security"). The term "security" is not defined in the Tax Code or in the
regulations, and has not been clearly defined in court decisions. Although there
are a number of factors that may affect the determination of whether a debt
instrument is a Security, one of the most important factors is the original term
of the instrument, i.e., the length of time between the issuance of the
instrument and its maturity. In general, instruments with an original term of
more than ten years are likely to be treated as Securities and instruments with
a term of less than five years are likely not to be treated as Securities.
Debtors are not rendering federal income tax advice as to whether any of the
debt instruments discussed below are, or are not, Securities. ACCORDINGLY,
DEBTORS RECOMMEND THAT THE CLAIM HOLDERS CONSULT WITH THEIR TAX ADVISERS AS TO
THE PROPER TREATMENT OF THE RESPECTIVE DEBT INSTRUMENTS.
CLASS 1 AND CLASS 2 PRIORITY CLAIMS. Under the Plan, holders of Allowed
Priority Wage and Benefit Plan Contribution Claims generally will be paid in
full in cash on the Effective Date, or as soon as reasonably practicable
thereafter. Such holders must include such amounts in their gross income in the
taxable year in which such amounts are actually or constructively received by
them. Amounts of income tax and employment tax will be deducted and withheld
form such payments as required by law.
CLASS 4 MISCELLANEOUS SECURED CLAIMS. Holders of Allowed Class 4
Miscellaneous Secured Claims will receive one of the four following treatments:
(1) they will have their Claims paid in full in cash on the Effective Date; (2)
they will receive a one-time cash payment to cure past defaults and have their
Claims otherwise paid in accordance with their original contractual terms; (3)
they will have the collateral securing such Claims released to them; or (4) they
will be treated in accordance with terms of the Debt Instruments evidencing such
Claims and the legal, equitable and contractual rights to which the holders of
such Claims are entitled will not be altered. Holders of Allowed Class 4
Miscellaneous Secured Claims who receive Cash (in full payment of their Claims
or to cure past defaults in their reinstated Claims) or who receive collateral
for their Claims will recognize gain or loss measured by the difference between
the amount of Cash or the fair market value of the collateral (other than any
portion of such cash or collateral attributable to accrued but unpaid interest)
and the adjusted tax basis in the Claims (other than any portion of such basis
allocable to accrued but unpaid interest). To the extent that the remainder of a
Claim evidenced by a Debt Instrument is reinstated without causing a
"significant modification" (as such term is defined and used in Section 1.1001-3
of the Treasury Regulations) of the Claim, there should be no additional federal
income tax
78
<PAGE> 89
consequences to the holder of such Claim Similarly, there should be no federal
income tax consequences to the holder of a Claim whose contractual rights with
respect to such Claim remain unaltered by the Plan.
If a Claim evidenced by a Debt Instrument is reinstated or modified in
a way that is considered a significant modification of the Debt Instrument, the
holder of such Claim will be treated for federal income tax purposes as having
exchanged the Debt Instrument for a new Debt Instrument. The holder of such
Claim will realize gain or loss on the deemed exchange measured by the
difference between: (i) the issue price of the new Debt Instrument (or if the
holder is a cash basis taxpayer the fair market value of the new Debt
Instrument) (other than any portion of such Debt Instrument allocable to accrued
but unpaid interest); and (ii) the holder's adjusted basis in the original Debt
Instrument. Gain or loss realized generally will be recognized unless the both
the original and new Debt Instruments constitute Securities. See "CERTAIN
FEDERAL TAX CONSEQUENCES --Consequences to Creditors - Class 6 and Class 7
Britwill and Signature Acquisition Claims and Class 9 General Unsecured Claims."
CLASS 5 OMEGA SECURED CLAIMS. The holder of the Class 5A Omega Mortgage
Guarantee Claims will receive the New Omega Guarantee in exchange for such
Claims. The Class 5A Omega Mortgage Guarantee Claims relate to a certain debt
obligation owing from Brit-Texas to Omega. If the New Omega Guarantee
constitutes a "significant modification" of the debt obligation, then Omega will
be treated for federal income tax purposes as if it had exchanged such debt
obligation for a new modified debt obligation. Such deemed exchange of debt
obligations will be a taxable exchange, in which case Omega would recognize gain
or loss measured by the difference between the issue price of the new debt
obligation (other than any portion of the new debt obligation attributable to
accrued but unpaid interest) and Omega's adjusted basis in the original debt
obligation (other than any portion of the such basis attributable to accrued but
unpaid interest). The New Omega Guarantee will likely result in a significant
modification of the debt obligation if the debt obligation is a nonrecourse debt
obligation. If the debt obligation is a recourse debt obligation, however, the
New Omega Guarantee will result in a significant modification of the debt
obligation only if there is a change in payment expectations.
Under the Plan: (1) the holder of the Class 5B Omega Indiana Rejection
Claim will receive a Cash payment and the Indiana Returned Facility Note on the
Effective Date in exchange for such Claim; and (2) the holder of the Class 5C
Omega Hasmark Facilities Claim will receive a Cash payment in exchange for such
Claim. The Cash, and the issue price of the Indiana Returned Facility Note, will
likely trigger ordinary income to the holder of each such Claim for the year in
which the Cash and Note is received.
The holder of the Class 5D Omega Miscellaneous Secured Claim will be
paid in full in Cash on the Effective Date in exchange for the Claim, or be
provided such other treatment as agreed to between the holder of such Claim and
Debtors. If the Class 5D Omega Miscellaneous Secured Claim is paid in full in
Cash, the holder of such Claim will recognize gain or loss measured by the
difference between (i) the amount of Cash received (other than any portion of
the Cash allocable to accrued but unpaid interest) and (ii) the holder's
adjusted tax basis in such Claim (other than any portion of such basis allocable
to accrued but unpaid interest).
79
<PAGE> 90
CLASS 6 AND CLASS 7 BRITWILL AND SIGNATURE ACQUISITION CLAIMS; CLASS 9
GENERAL UNSECURED CLAIMS. Under the Plan: (1) holders of Allowed Class 6
Britwill Acquisition Claims and Class 7 Signature Acquisition Claims will
receive New Common Stock; and (2) holders of Allowed Class 9 General Unsecured
Claims will receive New Common Stock, New Senior Notes and Claims Litigation LLC
Shares. Gain or loss will be realized to the extent that the sum of the fair
market value of the New Common Stock, plus the fair market value of any Claims
Litigation LLC Shares received by the Claim holder, plus the issue price of any
New Senior Notes (or, if the holder is a cash basis taxpayer, the fair market
value of such Notes) (other than any portion of consideration allocable to
accrued but unpaid interest) received by the Claim holder exceeds (or is less
than) the adjusted basis of the Allowed Class 6, Class 7 or Class 9 Claims
(other than any portion of the basis in such Claims allocable to accrued by
unpaid interest). The amount of gain recognized, if any, for federal income tax
purposes depends (in part), however, on whether the Class 6, Class 7 or Class 9
Claims and New Senior Notes constitute Securities.
If the holder's Allowed Britwill Acquisition Claim constitutes a
Security, then the exchange of such Claim for New Common Stock may constitute a
tax-free reorganization exchange under Section 354(a) of the Tax Code. If so,
the holder will not recognize gain or loss on the exchange. If the holder's
Allowed Britwill Acquisition Claim is not a Security, then the holder of such
Claim will recognize gain or loss on the exchange of such Claim for New Common
Stock equal to the amount of gain or loss realized.
If the holder's Allowed Signature Acquisition Claim constitutes a
Security, then the exchange of such Claim for New Common Stock may constitute a
tax-free exchange under Section 354(a) of the Tax Code. If so, the holder will
not recognize gain or loss on the exchange. If the holder's Allowed Signature
Acquisition Claim is not a Security, then the holder of such Claim will
recognize gain or loss on the exchange of such Claim for New Common Stock equal
to the amount of gain or loss realized.
If the holder's Allowed General Unsecured Claim constitutes a Security,
then the exchange of the Allowed General Unsecured Claim for New Common Stock,
New Senior Notes and Claims Litigation LLC Shares may constitute a partially
tax-free reorganization exchange under Sections 354(a) and 356(a) of the Tax
Code. If so, any realized loss will not be recognized for federal income tax
purposes and the amount of realized gain that will be recognized will depend on
whether the New Senior Notes also constitute Securities. If the New Senior Notes
constitute Securities, a holder's realized gain will be recognized in an amount
equal to the lesser of (i) the amount of gain realized or (ii) the sum of (A)
the fair market value of Claims Litigation LLC Shares received (other than any
portion of such Shares allocable to accrued but unpaid interest) and (B) the
fair market value of the excess, if any, of the principal amount of the New
Senior Notes (other than any portion of such Notes allocable to accrued but
unpaid interest) over the principal amount of Allowed General Unsecured Claims
(other than any portion of such Claims allocable to accrued but unpaid
interest). If the New Senior Notes are not Securities, any realized gain will be
recognized in an amount equal to the lesser of (i) the amount of gain realized
or (ii) the sum of (A) the fair market value of the Claims Litigation LLC Shares
(other than any portion of such Shares allocable to accrued but unpaid interest)
and the fair
80
<PAGE> 91
market value of the New Senior Notes (other than any portion of such Notes
allocable to accrued but unpaid interest).
If the holder's Allowed Class 9 General Unsecured Claim does not
constitute a Security, then the holder of such Claim will recognize gain or loss
on the exchange of such Claim for New Common Stock, New Senior Notes and Claims
Litigation LLC Shares in an amount equal to the gain or loss realized on the
exchange.
CLASS 8 CONVENIENCE CLAIMS. Holders of Allowed Class 8 Convenience
Claims will receive a one time Cash payment on the Effective Date in exchange
for their Claims. The exchange of Class 8 Convenience Claim for Cash will be a
taxable exchange. As a result, a holder of an Allowed Class 8 Convenience Claim
will recognize gain or loss on the exchange measured by the difference between:
(i) the amount of Cash received (other than any portion of the ash allocable to
accrued but unpaid interest); and (ii) the holder's adjusted tax basis in such
Claim (other than any portion of the basis allocable to accrued but unpaid
interest).
CLASS 10 NOTES SECURITIES CLAIMS. The holders of Allowed Class 10 Notes
Securities Claims will receive no distributions under the Plan. The holders of
such Claims may claim a loss for federal income tax purposes equal to their
adjusted basis in their Claims. The loss generally will be a capital loss unless
the holder did not hold such Claim as a capital asset, in which case the loss
will be an ordinary loss.
CLASS 12 EQUITY INTERESTS AND EQUITY INTEREST RELATED CLAIMS. Under the
Plan, the holders of Allowed Class 12 Equity Interests and Equity Interest
Related Claims may receive New Warrants to purchase shares of New Common Stock
for 1.25 times the Initial Price in exchange for such Claims. If so, gain or
loss generally will be realized to the extent that the fair market value of the
New Warrants exceeds (or is less than) the adjusted basis of the Allowed Equity
Interest or Equity Interest Related Claim. Any gain or loss realized by the
holder of an Allowed Equity Interest will not be recognized. In addition, if a
holder's Allowed Equity Interest Related Claim constitutes a Security, any gain
or loss realized on the exchange will not be recognized. However, if the
holder's Equity Interest Related Claim is not a Security, the holder of such
Claim will recognize gain or loss on the exchange of the Allowed Equity Interest
Related Claim for the New Warrants equal to the amount of gain or loss realized
on the exchange.
Alternatively, under certain circumstances, the Equity Interests will
be canceled and extinguished and the holders of Equity Interests and Equity
Interest Related Claims will not receive any distributions under the Plan. The
holders of Equity Interests and Equity Interest Related Claims generally will be
entitled to claim a loss for federal income tax purposes equal to their adjusted
basis in their Equity Interests and Equity Interest Related Claims. The loss
will be a capital loss unless the holder did not hold the Equity Interest or
Equity Interest Related Claim as a capital asset, in which case the loss will be
an ordinary loss.
CHARACTER OF GAIN, BASIS, AND HOLDING PERIOD. The character of the
various potential gains, losses, and income described above as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors. These factors include
81
<PAGE> 92
whether the particular Claim constitutes a capital asset in the hands of the
Claim holder, whether the Claim has been held for more than one year, whether
the Claim was purchased at a discount, and whether and to what extent the Claim
holder has previously claimed a bad debt deduction with respect to such Claim.
In the case of any exchange described above that constitutes a
reorganization, the Claim holder's basis in the Security received will equal the
Claim holder's adjusted tax basis in the Security surrendered, decreased by the
amount of Cash and the value of any additional property or rights received, and
increased by any gain recognized in respect of the Claim. The Claim holder's
holding period for the Security received will include the Claim holder's holding
period for the Security surrendered, provided such Security was held as a
capital asset. The Claim holder's basis in any non-Security property or rights
received in the exchange will be equal to the fair market value of such property
or rights, and the holding period of such property or rights will begin on the
day after receipt thereof.
In the case of any exchange described above that does not constitute a
reorganization, the Claim holder's basis in all property and rights received
will be equal to the fair market value of such property or rights. The Claim
holder's holding period of such property or rights will begin on the day after
receipt thereof.
TREATMENT OF ACCRUED BUT UNPAID INTEREST. Holders of Claims that have
not previously included in their taxable income accrued but unpaid interest on a
Claim may be treated as receiving taxable interest to the extent any
consideration they receive under the Plan is allocable to such accrued but
unpaid interest. Holders of Claims that have previously included in their
taxable income accrued but unpaid interest on a Claim may be entitled to
recognize a deductible loss to the extent such accrued but unpaid interest is
not satisfied under the Plan. The proper allocation between principal and
interest of amounts received in exchange for a Claim is unclear and may be
affected by, among other things, the rules in the Tax Code relating to imputed
interest, original issue discount, market discount, and bond issuance premium.
Thus, it is possible that the Service may take the position that a pro rata
portion of the consideration received by a holder of an interest bearing
obligation must be allocated to interest, or that consideration must be
allocated first to accrued but unpaid interest and then to principal. In this
regard, holders of Claims should consult their own tax advisors.
ORIGINAL ISSUE DISCOUNT. The New Senior Notes are not expected to have
original issue discount because they are not expected to have "issue prices"
less than their "stated redemption prices at maturity." (Original issue discount
must be recognized as income over the term of the debt instrument pursuant to
Sections 1271 through 1275 of the Tax Code.) Where a debt instrument (such as
the New Senior Notes) is issued in exchange for another debt instrument (such as
the Notes Claims and Senior Notes Claims, which are included in the Class 9
General Unsecured Claims), and neither the newly issued debt instrument nor the
prior debt instrument is traded on an established securities market, the issue
price of the new debt instrument is its stated principal amount if the
instrument bears "adequate stated interest."
The General Unsecured Claims have not been, and it is expected that New
Senior Notes will not be, traded on an established securities market It is
further expected that the New
82
<PAGE> 93
Senior Notes, which bear interest at a fixed rate equal to 11% per annum, will
have adequate stated interest. Accordingly, the issue price and the stated
redemption price at maturity of the New Senior Notes should be equal to the
principal amounts thereof, and thus the New Senior Notes should have no original
issue discount.
BACKUP WITHHOLDING. All distributions under the Plan, including
distributions by the Claims Litigation LLC, are subject to applicable
withholding. Under the Tax Code, interest, dividends and other reportable
payments may, under certain circumstances, be subject to backup withholding at a
31% rate. Backup withholding generally applies if the holder (a) fails to
furnish its social security number or other taxpayer identification number
("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to report interest
or dividends, or (d) under certain circumstances, fails to provide a certified
statement, signed under penalty of perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding. Backup withholding is
not an additional tax but merely an advance payment, which may be refunded to
the extent it results in an overpayment of tax. Certain persons are exempt from
backup withholding, including corporations and financial institutions.
CONSEQUENCES TO DEBTORS.
SIGNATURE SALE LEASEBACK TRANSACTION. The Plan contemplates the
consummation, on or before the Effective Date, of a transaction in which Debtors
will sell the Signature Facilities and leaseback certain of the Signature
Facilities. Debtors would recognize gain (or loss) on the sale of the Signature
Facilities measured by the difference between (i) the sum of (A) cash and the
fair market value of property received by Debtors and (B) any liabilities of
Debtors that are assumed by the purchaser of the Signature Facilities, and (ii)
Debtors' adjusted basis in the Signature Facilities. To the extent that Debtors
recognize gain on the sale of the Signature Facilities, that gain will be able
to be offset to the extent that Debtors would otherwise have a net operating
loss for the taxable year that includes the sale leaseback transaction or have
available net operating loss carryovers ("NOLs") from prior taxable years to the
taxable year that includes the sale leaseback transaction. If the sale of the
Signature Facilities occurs within the taxable year of Debtors that includes the
Effective Date (or in any prior taxable year), the NOLs available to offset any
gain recognized by Debtors on such sale will be determined without regard to any
reduction that may be required as a result of the exclusion from Debtors' income
of any discharge of indebtedness income. See "CERTAIN FEDERAL TAX CONSEQUENCES
- --Consequences to Debtors - Discharge of Indebtedness and Reduction of Tax
Attributes." If, for the taxable year that includes the sale of the Signature
Facilities, Debtors have positive taxable income (prior to any offset by NOLs),
Debtors may be subject to the alternative minimum tax. See "CERTAIN FEDERAL TAX
CONSEQUENCES --Consequences to Debtors - Alternative Minimum Tax."
DISCHARGE OF INDEBTEDNESS AND REDUCTION OF TAX ATTRIBUTES. The
principal amount of Debtors' aggregate outstanding indebtedness will be
substantially reduced under the Plan. Generally, the cancellation or other
discharge of indebtedness triggers ordinary income to a debtor unless payment of
the liability would have given rise to a deduction. The amount of such discharge
of indebtedness income generally will equal the excess of the principal amount
(as determined for federal income tax purposes) of the indebtedness discharged
over the aggregate value of cash and other property (including stock of Debtors)
transferred in satisfaction of the debt. If debt is
83
<PAGE> 94
discharged in a case under the Bankruptcy Code, however, no ordinary income to
the debtor generally results. Instead, certain tax attributes otherwise
available to the debtor are reduced, in most cases by the amount that would
otherwise be included as ordinary income.
Tax attributes are subject to reduction generally in the following
order: (i) NOLs from prior taxable years or from the year in which the discharge
occurs; (ii) general business credit carryovers; (iii) minimum tax credits; (iv)
capital losses and capital loss carryovers; (v) the tax basis of the debtor's
depreciable and non-depreciable assets, including inventory; (vi) passive
activity loss and credit carryovers; and (vii) foreign tax credit carryovers.
Attribute reduction is calculated only after the tax for the year of discharge
has been determined, and asset basis reduction applies to property held by the
debtor at the beginning of the taxable year following the taxable year in which
the discharge occurs. Asset basis reduction is generally not required in an
amount greater than the excess of the aggregate tax bases of the property held
by the debtor immediately after the discharge over the aggregate of the debtor's
liabilities immediately after the discharge. In very general terms, the basis of
property other than inventory and notes and accounts receivable is reduced
before the basis of inventory and notes and accounts receivable.
Debtors believe that the amount of the discharge of indebtedness income
realized as a result of the Plan will result in a substantial reduction of
Debtors' tax attributes. It is anticipated that Debtors' NOLs will be eliminated
and that Debtors will be required to reduce the basis in their depreciable
assets to a significant extent. These attribute reductions will likely have the
effect of subjecting Debtors to greater federal income tax liabilities in
taxable years subsequent to the year in which the discharge occurs than would
occur absent the attribute reductions.
LIMITATION ON USE OF NOLS. Debtors, which are a group of corporations
filing consolidated federal income tax returns (a "Consolidated Group"), will
very likely experience an "ownership change" for purposes of Section 382 of the
Tax Code upon consummation of the Plan. In general, a Consolidated Group
experiences an ownership change if the percentage of stock of the parent
corporation of such group owned by one or more stockholders that each own at
least five percent of the stock of such corporation (or certain specified groups
of stockholders) increases by more than 50 percentage points within a prescribed
time period. In general, after a Consolidated Group of corporations experiences
an ownership change, the amount of NOLs (and "built-in losses," if any, as
defined for this purpose) arising before the ownership change that the group is
permitted to use each year after the ownership change may not exceed a specified
amount, referred to as the "Section 382 Limitation" and described below.
Assuming that the Consolidated Group experiences an ownership change,
it may qualify for the so-called "Bankruptcy Exception" from the Section 382
Limitation under Tax Code Section 382(l)(5); however, the effect on the NOLs
required under the Bankruptcy Exception may impose a greater tax burden on the
Consolidated Group than the alternative of being subject to the Section 382
Limitation. This might be the case, for example, if, within two years after the
ownership change resulting from consummation of the Plan, Reorganized Unison
experiences another ownership change If the Bankruptcy Exception is utilized and
another ownership change occurs within the two-year period referred to above,
then Reorganized Unison's Section 382 Limitation for any year thereafter would
be zero and Reorganized Unison would not be permitted to reduce otherwise
taxable income by any NOLs attributable to pre-ownership change years.
84
<PAGE> 95
If the Consolidated Group anticipates that the Bankruptcy Exception
will impose a tax burden on it greater than that resulting from application of
the Section 382 Limitation, the Consolidated Group will likely elect not to have
the Bankruptcy Exception apply. The Consolidated Group would then be subject to
the Section 382 Limitation, which, pursuant to Tax Code Section 382(l)(6), would
be calculated by multiplying the "long-term tax-exempt rate" (which is a rate
announced monthly by the Service and is 5.15% for the month of August 1998) by
the sum of (i) the value of the outstanding stock of the members of the
Consolidated Group (other than such stock owned by a Consolidated Group member)
immediately before consummation of the Plan plus (ii) the increase in the value
of the Debtors resulting from the discharge of creditor claims pursuant to the
Plan.
As indicated above, it is anticipated that Debtors' NOLs attributable
to the pre-ownership change years will be eliminated as a result of Debtors'
realization of discharge of indebtedness income. In that case, Debtors' NOLs
attributable to pre-ownership change years will not be impacted by the ownership
change rules of Tax Code Section 382.
ALTERNATIVE MINIMUM TAX. A corporation is required to pay alternative
minimum tax to the extent that 20% of alternative minimum taxable income
("AMTI") exceeds the corporation's regular tax liability for the year. AMTI
generally is equal to a corporation's regular taxable income with certain
adjustments to eliminate or limit the availability of certain deductions or
other beneficial allowances and to include in income certain amounts not
generally included in computing regular income tax liability. Of special
importance is a rule that limits the availability of loss carryovers under the
alternative minimum tax. For purposes of computing AMTI, a corporation may
offset not more than 90% of its AMTI with available NOLs. This limitation may
result in alternative minimum tax liability for Debtors for the taxable year
that includes the sale of the Signature Facilities, regardless of the amount of
NOLs that are available. Accordingly, although Debtors may have sufficient NOLs
to offset any gain on the sale of the Signature Facilities, the corporate
alternative minimum tax may cause Debtors to have some federal income tax
liability for the taxable year including such sale.
TAXATION OF CLAIMS LITIGATION LLC.
On the Effective Date, Reorganized Unison will establish the Claims
Litigation LLC for litigation and/or resolution of all Litigation Claims
(including the Related Party Creditor Defenses) and paying all related expenses.
Claims Litigation LLC Shares, evidencing the right to receive a pro rata
distribution from the Claims Litigation LLC, will be distributed to the holders
of Allowed Class 9 General Unsecured Claims on the Effective Date, or as soon as
practicable after the Effective Date. (Certain holders of Allowed Class 9
General Unsecured Claims who are required to surrender their Debt Instruments
evidencing their Claims, and who fail to do so by the Effective Date, or as soon
as reasonably practicable after the Effective Date, generally will not receive a
distribution of Claims Litigation LLC Shares until they in fact surrender such
Debt Instruments. The tax consequences to the holders of Allowed Class 9 General
Unsecured Claims upon receiving the Claims Litigation LLC Shares are discussed
under the heading "FEDERAL TAX CONSEQUENCES -- Consequences to Creditors - Class
6 and Class 7 Britwill and Signature Acquisition Claims and Class 9 General
Unsecured Claims." In is anticipated that the Claims
85
<PAGE> 96
Litigation LLC will be taxed as a partnership for federal income tax purposes,
in which case the holders of the Claims Litigation LLC Shares will be taxable on
their distributive share of the items of income, gain, loss, deduction or credit
of the Claims Litigation LLC.
CERTAIN SECURITIES LAWS MATTERS
GENERAL DISCUSSION.
The Confirmation Order will authorize the issuance of the New Common
Stock, the New Preferred Stock, the New Senior Notes, the Claims Litigation LLC
Shares, the New Warrants and the New Warrant Shares issuable upon exercise of
the New Warrants. These instruments will be issued without registration under
the Securities Act, or under any state or local law, generally in reliance on
the exemptions set forth in Section 1145 of the Bankruptcy Code.
In order for the issuance of securities to be exempt from registration
under Section 1145(a) of the Bankruptcy Code, three principal requirements must
be satisfied: (a) the securities must be issued "under a plan" of reorganization
by a debtor, its successor under a plan of reorganization, or an affiliate
participating in a joint plan of reorganization with the debtor; (b) each
recipient of the securities must hold a claim against the debtor, an interest in
the debtor, or a claim or an administrative expense against the debtor; and (c)
the securities be issued entirely in exchange for the recipient's claim against
or interest in the debtor, or "principally" in such exchange and "partly" for
cash or other property.
The Company believes that the issuance of the New Common Stock, the New
Preferred Stock, the New Senior Notes, the Claims Litigation LLC Shares, the New
Warrants and the New Warrant Shares issuable upon exercise of the New Warrants
will be eligible for the exemption provided by Section 1145(a) of the Bankruptcy
Code because the issuance satisfies the exemption's requirements: (a) the
securities to be issued will be securities of the Company, which is a Debtor,
and the issuance of the securities is specifically mandated under the Plan; (b)
the recipients of the securities hold claims against or interests in the
Company; and (c) the recipients will receive the securities in exchange for
their claims against and interest in the Debtors.
RESALE CONSIDERATIONS.
Pursuant to Section 1145 of the Bankruptcy Code, the resale or
disposition by the recipients of the New Common Stock, the New Preferred Stock,
the New Senior Notes, the Claims Litigation LLC Shares, the New Warrants and the
New Warrant Shares to be issued upon exercise of the New Warrants will also be
exempt from registration under the Securities Act and state and local securities
laws, unless the recipient is deemed to be an "underwriter" under Bankruptcy
Code Section 1145(b). Bankruptcy Code Section 1145(b) defines four types of
underwriters:
86
<PAGE> 97
a. a person who purchases a claim against, interest in
or claim for administrative expense in the case concerning a debtor,
with a view to distributing any security received in exchange for that
claim or interest;
b. a person who offers to sell securities offered or
sold under a plan for the holders of those securities;
c. a person who offers to buy those securities from the
holders of such securities, if the offer is (i) made with a view to
distribution of the securities, or (ii) made under an agreement made in
connection with the plan, its consummation or the offer or sale of
securities under the plan;
d. a person who is an "issuer" with respect to the
securities as the term "issuer" is defined in Section 2(11) of the
Securities Act.
Under Section 2(11) of the Securities Act, an "issuer" includes any
person directly or indirectly controlling or controlled by the issuer of the
securities, or any person under direct or indirect common control with the
issuer of the securities (an "affiliate"). Any person or group of persons who
act in concert, who receive a substantial amount of securities pursuant to the
Plan, may be deemed to be an "issuer" under the foregoing definition and,
therefore, an "underwriter" under Section 1145(b) of the Bankruptcy Code.
Whether a person would be deemed to be an issuer and therefore an underwriter
with respect to the securities to be issued pursuant to the Plan for purposes of
the Bankruptcy Code will depend on a number of factors. These factors include:
(a) the person's equity interest in the Company; (b) the distribution and
concentration of other equity interests in the Company; (c) whether the person
is an officer or director of the Company; (d) whether the person, either alone
or acting in concert with others, has a contractual or other relationship giving
that person power over management policies and decisions of the Company; and (e)
whether the person actually has such power notwithstanding the absence of formal
indicia of control. Accordingly, the Company expresses no view on whether any
person would be an "underwriter" or an "affiliate" with respect to the
securities to be issued pursuant to the Plan.
To the extent that a person receiving securities under the Plan is
deemed to be an "underwriter" of the securities of the Company, resales by that
person likely would not be exempted by Section 1145 from registration under the
Securities Act, or other applicable law, except in "ordinary trading
transactions" (within the meaning of Section 1145(b)(1) of the Bankruptcy Code).
The Bankruptcy Code does not define the term "ordinary trading
transactions," and the Securities and Exchange Commission ("SEC") has not given
definitive guidance with respect to the proper construction of the term.
However, the Company believes that a transaction will be an "ordinary trading
transaction" if it is carried out on an exchange or in the over-the-counter
market at a time when the Company is a reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and does NOT involve any
of the following:
87
<PAGE> 98
(i) either (x) concerted action by two or more recipients of
securities issued under a plan of reorganization in connection
with the sale of those securities, or (y) concerted action by
distributors on behalf of one or more of such recipients in
connection with sales, or (z) both;
(ii) the preparation or use of informational documents concerning
the offering of the securities to assist in the resale of the
securities, other than the disclosure statement approved in
connection with the plan (and any supplement thereto) and
documents filed with the SEC by the debtors or the reorganized
company pursuant to the Exchange Act; or
(iii) special compensation to brokers or dealers in connection with
the sale of the securities designed as a special incentive to
resell the securities, other than compensation that would be
paid pursuant to arms-length negotiations between a seller and
a broker or dealer, each acting unilaterally, not greater than
the compensation that would be paid for a routine
similar-sized sale or similar securities of a similar issuer.
In addition, a person deemed to be an "underwriter" under Bankruptcy
Code Section 1145 solely because he is an affiliate (as defined in the
Securities Act) may be able to sell securities received under the Plan without
registration, in accordance with Rule 144 under the Securities Act, which
permits public sales of securities received pursuant to a plan by statutory
underwriters subject to the availability to the public of current information
regarding the Company, volume limitations, and certain other conditions (without
complying with the holding period requirement of Rule 144(d)).
The Company will execute registration rights agreements in favor of
those persons who, on the Effective Date, receive in exchange for their Allowed
Claims more than ten percent (10%) of the New Common Stock ("Restricted
Holders"). The registration rights agreement grants such Restricted Holders
certain registration rights with respect to their shares of New Common Stock.
See "OTHER SIGNIFICANT PROVISIONS OF THE PLAN Securities to be issued in
connection with the Plan."
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A
PARTICULAR HOLDER MAY BE AN UNDERWRITER OR AN AFFILIATE, THE COMPANY MAKES NO
REPRESENTATION CONCERNING THE RIGHT OF ANY PERSON TO TRANSFER THE NEW CLASS A
COMMON STOCK, THE NEW COMMON STOCK, THE NEW PREFERRED STOCK, THE NEW SENIOR
NOTES, THE CLAIMS LITIGATION LLC SHARES, THE NEW WARRANTS AND THE NEW SHARES
ISSUABLE UPON EXERCISE OF THE NEW WARRANTS. THE DEBTOR RECOMMENDS THAT POTENTIAL
RECIPIENTS OF SECURITIES UNDER THE PLAN CONSULT WITH THEIR OWN COUNSEL
CONCERNING LIMITATIONS ON THEIR RIGHT TO TRANSFER THOSE SECURITIES.
88
<PAGE> 99
TRUST INDENTURE ACT.
Issuance of the New Senior Notes requires compliance with the Trust
Indenture Act of 1939. The indenture for the New Senior Notes will be qualified
under the Trust Indenture Act of 1939.
DELIVERY OF DISCLOSURE STATEMENT.
Under Bankruptcy Code Section 1145(a)(4), "stockbrokers" (as that term
is defined in the Bankruptcy Code) wishing to sell securities received under the
Plan qualify for the exemption from registration under Bankruptcy Code Section
1145 for sales during the first 40 days after the Effective Date of the Plan,
provided that they deliver a copy of this Disclosure Statement (and any
supplement to it ordered by the Bankruptcy Court) at or before the time of sale
of any security issued under the Plan. The requirement specifically applies to
trading and other after-market transactions in the securities issued under the
Plan.
ALTERNATIVES TO THE PLAN
If the Plan is not confirmed or consummated, the alternatives include:
(i) liquidation of Debtors under Chapter 7 of the Bankruptcy Code; or (ii)
confirmation of an alternative Chapter 11 plan.
LIQUIDATION UNDER CHAPTER 7.
In evaluating the Plan, Debtors have considered the alternative of a
liquidation of Debtors' assets under Chapter 7 of the Bankruptcy Code. Debtors
believe that the Plan will significantly enhance the prospects for recovery
which may be achieved under the Chapter 11 Plan as opposed to a Chapter 7
liquidation.
In a Chapter 7, an independent trustee would be appointed to liquidate
the estate. The Chapter 7 trustee would make all of his or her own decisions
with respect to the liquidation of the estate, the hiring of professionals, the
pursuit of any claims or litigation, the payment of or objection to Claims, and
the distribution of any ultimate dividend. The Chapter 7 trustee would be paid
pursuant to the provisions of the Bankruptcy Code, although, in certain
circumstances, a Chapter 7 trustee can apply to the Bankruptcy Court for a
different type of compensation.
It is difficult to compare with any certainty what Creditors might
receive under a Chapter 7 liquidation versus what Creditors will receive under
the Plan. Debtors believe, however, that the Plan will result in a more timely
and greater ultimate recovery to Creditors than would be the case under Chapter
7.
As demonstrated by the Liquidation Analysis discussed and set forth
below, Debtors strongly believe that in a Chapter 7 liquidation, the holders of
Allowed General Unsecured Claims would receive, at best, a minimal distribution.
Debtors do not believe that liquidation under Chapter 7 offers an even remotely
competitive alternative to the Plan.
89
<PAGE> 100
ALTERNATIVE PLANS.
If the Plan is not confirmed, Debtors could attempt to formulate a
different plan of reorganization. Debtors believe, however, that significant
additional costs, risks and delays would be incurred in connection with any
alternative plan, and that no party in interest has more incentive to create the
best possible plan for Creditors than Debtors.
With this in mind, Debtors believe that it is highly unlikely that any
alternative plan could be developed which would provide greater value or
certainty of closure than the Plan prepared by Debtors.
LIQUIDATION ANALYSIS
In order for the Plan to be confirmed by the Bankruptcy Court, Section
1129(a)(7) of the Bankruptcy Code requires Creditors receive under the Plan as
much or more than such Creditors would receive if Debtors were liquidated under
Chapter 7. This is the so-called best interest of creditors test. Specifically,
Debtors believe that the members of each impaired Class will receive more under
the Plan than they would in a liquidation. The liquidation analysis set forth
below was prepared by Debtors.
90
<PAGE> 101
LIQUIDATION ANALYSIS
<TABLE>
<CAPTION>
EST. BOOK VALUE EST. PERCENTAGE
AT OCTOBER 31, RECOVERY
1998
-------------- -----------
<S> <C> <C> <C>
Current Assets
Cash $ 2,967 100% $ 2,967
Accounts Receivable $ 33,687 25% $ 8,422
Inventory $ 2,149 0% $ -
Prepaid expenses and other assets $ 8,676 0% $ -
Total Current Assets $ 47,479 $ 11,389
Property and equipment $ 25,365 90% $ 22,829
Lease operating rights and other intangible assets $ 80,237 25% $ 20,059
Goodwill $ 27,796 0% $ -
Other assets $ 8,989 10% $ 899
Total assets $ 189,866 $ 55,175
Less:
Liquidation Expenses $ (2,000)
Professional Fees $ (1,000)
Trustee Fees $ (1,655)
TOTAL AVAILABLE FOR DISTRIBUTION $ 50,520
LESS
Post-petition Payables and Expenses $ 18,194
Secured Claims $ 26,120
Tax Claims $ 1,517
TOTAL AVAILABLE FOR UNSECURED CLAIMS $ 4,689
TOTAL UNSECURED CLAIMS $ 168,499
Percentage Recovery 2.78%
</TABLE>
91
<PAGE> 102
VOTING AND CONFIRMATION
VOTING PROCEDURES.
GENERALLY. Only those Classes which are impaired under the Plan are
entitled to vote to accept or reject the Plan. In that regard, Classes 5, 6, 7,
8 and 9 are the only Classes impaired under the Plan and entitled to vote.
Classes 10 and 12 are deemed to reject the Plan and need not vote. Ballots will
be sent to the known holders of Claims and Equity Interests whether or not such
Claims and Equity Interests are disputed. Only the holders of Allowed Claims and
Equity Interests, or Claims and Equity Interests that have been temporarily
allowed or have been estimated by the Bankruptcy Court, which are impaired are
entitled to vote on the Plan. Any Claims and Equity Interests as to which an
objection has been timely filed and has not been withdrawn or dismissed, or
which has been scheduled as disputed, contingent, or unliquidated, is not
entitled to vote, unless the Bankruptcy Court, pursuant to Bankruptcy Rule
3018(a), upon application by the holder of such Claims or Equity Interests,
temporarily allows the Claim or Equity Interest in an amount that the Bankruptcy
Court deems proper for the purposes of voting on the Plan.
SUBMISSION OF BALLOTS. A Ballot for accepting or rejecting the Plan is
enclosed for use by those Classes entitled to vote on the Plan. Holders of
Claims and Equity Interests entitled to vote should carefully read the
instructions contained on the Ballot and complete, date, make an appropriate
election, sign the Ballot, and transmit the Ballot in the enclosed, self
addressed envelope or via facsimile to the Claims Agent. The Claims Agent may be
contacted at:
Claims Agent
PricewaterhouseCoopers
2901 North Central Avenue
Suite 1000
Phoenix, Arizona 85012-2755
Attn: Michael A. Tucker
Ted M. Burr
Telephone: (602) 280-1800
Facsimile: (602) 280-1985
TO BE COUNTED, BALLOTS MUST BE RECEIVED BY THE CLAIMS AGENT BY 12:00 MIDNIGHT,
PHOENIX TIME, ON _________, 1998 (THE "EXPIRATION DATE").
CONFIRMATION.
REQUIREMENTS FOR CONFIRMATION. In order to confirm the Plan, Section
1129 of the Bankruptcy Code requires that the Bankruptcy Court make a series of
findings concerning the Plan and Debtors, including: (i) that the Plan has
classified Claims and Equity Interests in a permissible manner; (ii) that the
Plan complies with the applicable provisions of the Bankruptcy Code; (iii) that
Debtors have complied with the applicable provisions of the Bankruptcy Code;
(iv) that Debtors
92
<PAGE> 103
have proposed the Plan in good faith and not by any means forbidden by law; (v)
that the Plan has been accepted by the requisite votes of Creditors (except to
the extent that Confirmation is available under Section 1129(b) of the
Bankruptcy Code); (vi) that the Plan is feasible and that Confirmation is not
likely to be followed by the liquidation or the need for further financial
reorganization of Reorganized Unison; (vii) that the Plan is in the "best
interest" of Creditors and the holders of Equity Interests, by providing all
parties with distributions in an amount not less than such parties would receive
if Debtors were liquidated under Chapter 7; (viii) that all fees and expenses
payable under 28 U.S.C. Section 1930, as determined by the Bankruptcy Court at
the hearing on Confirmation, have been paid or the Plan provides for the payment
of such fees on the Effective Date; and (ix) that the Plan provides for the
continuation after the Effective Date of all retiree benefits, if any, as
defined in Section 1114 of the Bankruptcy Code, at the level established at any
time prior to Confirmation pursuant to Section 1114(e)(1)(B) or 1114(g) of the
Bankruptcy Code, for the duration of the period and since the time at which the
debtor became obligated to provide such benefits.
THE CRAM DOWN ALTERNATIVE. In the event that any impaired Class of
Claims or Equity Interests does not accept the Plan, Debtors will nevertheless
seek to confirm the Plan under the so-called "cram down" provisions of Section
1129(b) of the Bankruptcy Code.
Section 1129(b) of the Bankruptcy Code provides that a plan can be
confirmed even if the plan is not accepted by all impaired classes, as long as
at least one impaired class of claims has accepted it. The Bankruptcy Court may
confirm the Plan at the request of Debtors if the Plan "does not discriminate
unfairly" and is "fair and equitable" as to each impaired Class that has not
accepted the Plan. A plan does not discriminate unfairly within the meaning of
the Bankruptcy Code if a dissenting class is treated equally with respect to
other classes of equal rank.
A plan is fair and equitable as to a class of secured claims that
rejects such plan if the plan provides: (a)(i) that the holders of claims
included in the rejecting class retain the liens securing those claims whether
the property subject to those liens is retained by the debtor or transferred to
another entity, to the extent of the allowed amount of such claims, and (ii)
that each holder of a claim of such class receive on account of that claim
deferred cash payments totaling at least the allowed amount of that claim of a
value as of the effective date of the plan, of at least the value of the
holders' interest in the estate's interest in such property; (b) for the sale,
subject to Section 363(k) of the Bankruptcy Code, of any property that is
subject to the liens securing the claims included in the rejecting class, free
and clear of the liens, with the liens to attach to the proceeds of the sale,
and the treatment of the liens or proceeds under clause (a) or (b) of this
subparagraph; or (c) for the realization by such holders of the indubitable
equivalent of such claims.
A plan is fair and equitable as to a class of unsecured claims which
rejects a plan if the plan provides (a) for each holder of a claim included in
the rejecting class to receive or retain on account of that claim property that
has a value, as of the effective date of the plan, equal to the allowed amount
of such claim, or (b) that the holder of any claim or interest that is junior to
the claims of such class will not receive or retain on account of such junior
claim or interest any property at all.
93
<PAGE> 104
A plan is fair and equitable as to a class of equity interests that
rejects a plan if the plan provides (a) that each holder of an interest included
in the rejecting class receive or retain on account of that interest property
that has a value, as of the effective date of the plan, equal to the greatest of
the allowed amount of any fixed liquidation preference to which such holder is
entitled, any fixed redemption price to which such holder is entitled, or the
value of such interest, or (b) that the holder of any interest that is junior to
the interest of such class will not receive or retain under the plan on account
of such junior interest any property at all.
CONFIRMATION HEARING. Section 1128(a) of the Bankruptcy Code requires
the Bankruptcy Court, after notice, to hold a hearing on Confirmation of the
Plan. Section 1128(b) provides that any party in interest may object to
Confirmation of the Plan. The Bankruptcy Court has scheduled a hearing on
confirmation of the Plan on __________, 1998, commencing at ______ o'clock
a.m./p.m., Arizona time. The hearing on confirmation may be continued from time
to time or adjourned as announced in open court. The location of the hearing on
confirmation is as follows:
UNITED STATES BANKRUPTCY COURT
The Honorable George B. Nielsen
Courtroom 4
10th Floor
2929 N. Central Avenue
Phoenix, Arizona 85012
OBJECTIONS. Any objections to confirmation of the Plan must be in
writing, state with specificity both the legal and factual basis of any such
objection, and be filed with the Bankruptcy Court at the location set forth
above, and served by hand-delivery or facsimile to the following parties on or
before _____ p.m., Arizona time, on __________, 1998.
Thomas J. Salerno
Craig D. Hansen
Christopher D. Johnson
Kathleen T. Tobin
SQUIRE, SANDERS & DEMPSEY L.L.P.
Two Renaissance Square
40 North Central, Suite 2700
Phoenix, Arizona 85004
Telephone: (602) 528-4000
Facsimile: (602) 253-8129
Counsel to Debtors
94
<PAGE> 105
CONCLUSION AND RECOMMENDATION
Debtors, Omega and the Ad Hoc Committee believe that confirmation of
the Plan is in the best interests of Debtors and their Creditors. The Plan
provides for an equitable distribution to Creditors. ACCORDINGLY, DEBTORS
RECOMMEND THAT CREDITORS VOTE TO ACCEPT THE PLAN.
Dated: Respectfully submitted,
August 10, 1998
UNISON HEALTHCARE CORPORATION
By: /s/ Michael A. Jeffries
---------------------------
Its CEO and President
SQUIRE, SANDERS & DEMPSEY L.L.P.
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
(602) 528-4000
By: /s/ Kathleen Tobin
----------------------------
Thomas J. Salerno
Craig D. Hansen
Christopher D. Johnson
Kathleen Tobin
Counsel to Unison Debtors
GALLAGHER & KENNEDY
2600 North Central Avenue
Phoenix, Arizona 85004
(602) 530-8000
By: /s/ Charles R. Sterbach
----------------------------
Charles R. Sterbach
Joseph E. Cotterman
Counsel to Britwill Debtors
95
<PAGE> 106
EXHIBIT 99.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA
In re: ) In Proceedings Under Chapter 11
)
UNISON HEALTHCARE CORPORATION, a ) Case Nos. B-98-06583-PHX-GBN
Delaware corporation, and related proceedings, ) Through B-98-06612-PHX-GBN
)
Debtors. )
- -----------------------------------------------)
)
In re: )
) Case Nos. B-98-0173-PHX-GBN
BRITWILL INVESTMENTS-I, INC., a Delaware ) Through B-98-0175-PHX-GBN
Corporation, and related proceedings, )
) (Jointly Administered)
Debtors. )
- -----------------------------------------------)
DEBTORS' JOINT PLAN OF REORGANIZATION
DATED AUGUST 10, 1998
SQUIRE, SANDERS & DEMPSEY L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
(602) 528-4000
Attorneys: Thomas J. Salerno
Craig D. Hansen
Christopher D. Johnson
Kathleen T. Tobin
Counsel to Unison Debtors
GALLAGHER & KENNEDY
2600 North Central Avenue
Phoenix, Arizona 85004-3020
(602) 530-8000
Attorneys: Charles R. Sterbach
Joseph E. Cotterman
Counsel to BritWill Debtors
<PAGE> 107
APPLICABLE DEBTORS
UNISON HEALTHCARE CORPORATION [X]
(Case No. 98-06583-PHX-RGM)
BRITWILL INVESTMENTS-I, INC. [X]
(Case No. 98-0173-PHX-GBN)
BRITWILL INVESTMENTS-II, INC. [X]
(Case No. 98-0174-PHX-GBN)
BRITWILL INDIANA PARTNERSHIP [X]
(Case No. 98-0175-PHX-GBN)
SUNQUEST SPC, INC. [X]
(Case No. 98-06584-PHX-SSC)
BRITWILL HEALTHCARE COMPANY [X]
(Case No. 98-06585-PHX-SSC)
BRITWILL FUNDING CORPORATION [X]
(Case No. 98-06602-PHX-CGC)
MEMPHIS CLINICAL LABORATORY, INC. [X]
(Case No. 98-06588-PHX-CGC)
AMERICAN PROFESSIONAL HOLDINGS, INC. [X]
(Case No. 98-06587-PHX-GBN)
AMPRO MEDICAL SERVICES, INC. [X]
(Case No. 98-06609-PHX-GBN)
GAMMA LABORATORIES, INC. [X]
(Case No. 98-06611-PHX-SSC)
SIGNATURE HEALTH CARE CORPORATION [X]
(Case No. 98-06591-PHX-SSC)
BROOKSHIRE HOUSE INC. [X]
(Case No. 98-06608-PHX-RGM)
CHRISTOPHER NURSING CENTER, INC. [X]
(Case No. 98-06596-PHX-JMM)
AMBERWOOD COURT, INC. [X]
(Case No. 98-06597-PHX-RGM)
THE ARBORS HEALTH CARE CORPORATION [X]
(Case No. 98-06598-PHX-CGC)
LOS ARCOS, INC. [X]
(Case No. 98-06603-PHX-RGM)
PUEBLO NORTE, INC. [X]
(Case No. 98-06604-PHX-RTB)
RIO VERDE NURSING CENTER, INC. [X]
(Case No. 98-06606-PHX-CGC)
SIGNATURE MANAGEMENT GROUP, INC. [X]
(Case No. 98-06605-PHX-GBN)
CORNERSTONE CARE CENTER, INC. [X]
(Case No. 98-06595-PHX-RTB)
ARKANSAS, INC. [X]
(Case No. 98-06590-PHX-GBN)
DOUGLAS MANOR, INC. [X]
(Case No. 98-06589-PHX-CGC)
SAFFORD CARE, INC. [X]
(Case No. 98-06593-PHX-RTB)
REHABWEST, INC. [X]
(Case No. 98-06594-PHX-CGC)
QUEST PHARMACIES, INC. [X]
(Case No. 98-06586-PHX-RGM)
SUNBELT THERAPY MANAGEMENT SERVICES, INC. (ALABAMA) [X]
(Case No. 98-06607-PHX-RTB)
DECATUR SPORTS FIT & WELLNESS CENTER, INC. [X]
(Case No. 98-06601-PHX-SSC)
THERAPY HEALTH SYSTEMS, INC. [X]
(Case No. 98-06600-PHX-GBN)
HENDERSON & ASSOCIATES REHABILITATION, INC. [X]
(Case No. 98-06599-PHX-SSC)
SUNBELT THERAPY MANAGEMENT SERVICES, INC. (ARIZONA) [X]
(Case No. 98-06592-PHX-RGM)
CEDAR CARE, INC. [X]
(Case No. 98-06612-PHX-GBN)
SHERWOOD HEALTHCARE CORP. [X]
(Case No. 98-06610-PHX-SSC)
-2-
<PAGE> 108
UNISON HEALTHCARE CORPORATION, and its affiliates and subsidiaries, the
debtors and debtors-in-possession in the above-referenced jointly administered
Chapter 11 cases (including the BRITWILL DEBTORS, as defined below), hereby
jointly propose the following plan of reorganization. All creditors and holders
of equity interests should refer to the Disclosure Statement (as that term is
defined herein) for a discussion of the Debtors' history, business, properties,
results of operations and financial projections for future operations and for a
summary and analysis of the plan of reorganization and certain related matters.
ALL HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS ARE
ENCOURAGED TO READ THE PLAN OF REORGANIZATION, THE DISCLOSURE STATEMENT
AND THE RELATED SOLICITATION MATERIALS IN THEIR ENTIRETY BEFORE VOTING
TO ACCEPT OR REJECT THE PLAN.
Subject to the restrictions on modifications set forth in Section 1127
of the Bankruptcy Code and Bankruptcy Rule 3019, and those restrictions on
modifications set forth in Article 15 to this Plan, the Debtors expressly
reserve the right to alter, amend or modify the plan of reorganization, one or
more times before its substantial consummation.
-3-
<PAGE> 109
TABLE OF CONTENTS
<TABLE>
<S> <C>
FOR THE DISTRICT OF ARIZONA................................................ 1
TABLE OF CONTENTS.......................................................... I
ARTICLE 1 DEFINITIONS, RULES OF INTERPRETATION AND COMPUTATION OF TIME..... 4
A. DEFINITIONS........................................................ 4
1.1 Ad Hoc Committee.............................................. 4
1.2 Administrative Claim.......................................... 4
1.3 Administrative Claim Bar Date................................. 5
1.4 Affiliate..................................................... 5
1.5 Allowed Claim................................................. 5
1.6 Amberwood..................................................... 6
1.7 American Professional......................................... 6
1.8 Ampro......................................................... 6
1.9 Arbors........................................................ 6
1.10 Arkansas...................................................... 6
1.11 Avoidance Actions............................................. 6
1.12 Bankruptcy Code............................................... 6
1.13 Bankruptcy Court.............................................. 6
1.14 Bankruptcy Rules.............................................. 7
1.15 Bar Date...................................................... 7
1.16 Brit-Texas.................................................... 7
1.17 Brit-Texas Facilities......................................... 7
1.18 Brit-Acquisition.............................................. 7
1.19 BritWill Acquisition Claims................................... 7
1.20 BritWill Debtors.............................................. 7
1.21 BritWill Funding.............................................. 7
1.22 BritWill Healthcare........................................... 7
1.23 BritWill I.................................................... 7
1.24 BritWill II................................................... 8
1.25 BritWill Indiana.............................................. 8
1.26 Broker Dealer................................................. 8
1.27 Brookshire.................................................... 8
1.28 Business Day.................................................. 8
1.29 Cash.......................................................... 8
1.30 Cedar Care.................................................... 8
1.31 Chapter 11 Cases.............................................. 8
1.32 Christopher................................................... 8
1.33 Claim......................................................... 8
1.34 Claims Resolution Procedure................................... 9
1.35 Claims Litigation LLC......................................... 9
1.36 Claims Litigation LLC Board of Managers....................... 9
1.37 Claims Litigation LLC Members Agreement....................... 9
1.38 Claims Litigation LLC Shares.................................. 9
1.39 Class......................................................... 9
1.40 Class 6 Reserved Stock........................................ 10
1.41 Class 7 Reserved Stock........................................ 10
1.42 Confirmation.................................................. 10
1.43 Confirmation Date............................................. 10
1.44 Confirmation Hearing.......................................... 10
1.45 Confirmation Order............................................ 10
1.46 Consenting Noteholders........................................ 10
</TABLE>
-i-
<PAGE> 110
<TABLE>
<S> <C>
1.47 Consolidated Estates.......................................... 10
1.48 Contingent Claim.............................................. 10
1.49 Convenience Claims............................................ 11
1.50 Cornerstone................................................... 11
1.51 Creditor...................................................... 11
1.52 Creditor Ballot............................................... 11
1.53 Creditors' Committee.......................................... 11
1.54 Cure.......................................................... 11
1.55 Debt Instrument............................................... 12
1.56 Debtors....................................................... 12
1.57 Decatur....................................................... 12
1.58 DIP Financing Orders.......................................... 12
1.59 Disbursing Agent.............................................. 12
1.60 Disclosure Statement.......................................... 13
1.61 Disputed Claim................................................ 13
1.62 Disputed Equity Interest...................................... 14
1.63 Distribution Date............................................. 14
1.64 Distribution Record Date...................................... 14
1.65 Douglas....................................................... 14
1.66 EBITDA........................................................ 14
1.67 EBITDARM...................................................... 15
1.68 Effective Date................................................ 15
1.69 Effective Date Cash........................................... 15
1.70 Effective Date Excess Cash.................................... 15
1.71 Equity Interest............................................... 15
1.72 Equity Interest Related Claim................................. 15
1.73 Estate or Estates............................................. 16
1.74 Exchange Act.................................................. 16
1.75 Filkoski Claims............................................... 16
1.76 Final Order................................................... 16
1.77 Forbearance Agreement......................................... 16
1.78 GAAP.......................................................... 16
1.79 Gamma......................................................... 16
1.80 General Unsecured Claim....................................... 16
1.81 Hasmark Facilities............................................ 17
1.82 HCFP.......................................................... 17
1.83 HCFP DIP Loan Claims.......................................... 17
1.84 Henderson..................................................... 17
1.85 Indiana Master Lease.......................................... 17
1.86 Indiana Returned Facilities................................... 17
1.87 Indiana Returned Facility Note................................ 17
1.88 Initial Price................................................. 18
1.89 IRS........................................................... 18
1.90 Kremser And Affiliates........................................ 18
1.91 Litigation Claims............................................. 18
1.92 Los Arcos..................................................... 18
1.93 Management Options............................................ 18
1.94 Memphis Clinical.............................................. 18
1.95 New Common Stock.............................................. 19
1.96 New Common Stock Registration Agreement....................... 19
1.97 New Line of Credit............................................ 19
1.98 New Line of Credit Agreement.................................. 19
1.99 New Line of Credit Promissory Note............................ 19
1.100 New Omega Guarantee......................................... 19
1.101 New Omega Guarantee Collateral.............................. 19
1.102 New Omega Guarantee Security Documents...................... 20
</TABLE>
-ii-
<PAGE> 111
<TABLE>
<S> <C>
1.103 New Preferred Stock......................................... 20
1.104 New Senior Notes............................................ 20
1.105 New Senior Notes Allocation Schedule........................ 20
1.106 New Senior Notes Collateral................................. 21
1.107 New Senior Notes Guarantee.................................. 21
1.108 New Senior Notes Indenture.................................. 21
1.109 New Senior Notes Indenture Trustee.......................... 21
1.110 New Senior Notes Security Documents......................... 21
1.111 New Unison Stock............................................ 21
1.112 New Warrants................................................ 21
1.113 New Warrant Shares.......................................... 22
1.114 NHI......................................................... 22
1.115 NHI Secured Claims.......................................... 22
1.116 Non-Consenting Noteholders.................................. 22
1.117 Notes....................................................... 22
1.118 Notes Indenture............................................. 22
1.119 Notes Indenture Trustee..................................... 22
1.120 Notes Securities Claims..................................... 22
1.121 Notes Subordination Agreement............................... 22
1.122 Notice and a Hearing........................................ 23
1.123 Omega....................................................... 23
1.124 Omega Effective Date Payment................................ 23
1.125 Omega Hasmark Facilities Rejection Claim.................... 23
1.126 Omega Indiana Facilities.................................... 23
1.127 Omega Indiana Leasehold Mortgage Facilities................. 23
1.128 Omega Indiana Rejection Claim............................... 23
1.129 Omega Indiana Returned Facilities........................... 24
1.130 Omega Miscellaneous Secured Claim........................... 24
1.131 Omega Mortgage Guarantee Claims............................. 24
1.132 Omega New Master Lease...................................... 24
1.133 Omega New Master Lease Collateral........................... 24
1.134 Omega New Master Lease Facilities........................... 25
1.135 Omega New Master Lease Guarantee............................ 25
1.136 Omega New Master Lease Guarantors........................... 25
1.137 Omega New Master Lessees.................................... 25
1.138 Omega Secured Claims........................................ 25
1.139 Omega Subordination Rights.................................. 25
1.140 Omega Texas Facilities...................................... 25
1.141 Person...................................................... 26
1.142 Petition Date............................................... 26
1.143 Plan........................................................ 26
1.144 Plan Distributed Cash....................................... 26
1.145 Plan Supplement............................................. 26
1.146 Preserved Ordinary Course Administrative Claim.............. 26
1.147 Priority Benefit Plan Contribution Claim.................... 27
1.148 Priority Tax Claim.......................................... 27
1.149 Priority Wage Claim......................................... 27
1.150 Pro Rata.................................................... 27
1.151 Professional Fee Bar Date................................... 27
1.152 Professional Fees........................................... 27
1.153 Pueblo Norte................................................ 27
1.154 Quest....................................................... 28
1.155 Quest Purchase Option....................................... 28
1.156 Reclamation Claims.......................................... 28
1.157 Rehab....................................................... 28
1.158 Reinstated or Reinstatement................................. 28
</TABLE>
-iii-
<PAGE> 112
<TABLE>
<S> <C>
1.159 Related Party Avoidance Action.............................. 29
1.160 Related Party Creditors..................................... 29
1.161 Related Party Creditor Claims............................... 29
1.162 Related Party Creditor Defenses............................. 29
1.163 Reorganized Unison.......................................... 29
1.164 Reorganized Unison By-Laws.................................. 30
1.165 Reorganized Unison Certificate.............................. 30
1.166 Rio Verde................................................... 30
1.167 Safford..................................................... 30
1.168 Schedules................................................... 30
1.169 SEC......................................................... 30
1.170 Secured Claim............................................... 30
1.171 Secured Tax Claims.......................................... 30
1.172 Securities Act.............................................. 30
1.173 Senior Management........................................... 30
1.174 Senior Notes................................................ 31
1.175 Senior Notes Indenture...................................... 31
1.176 Senior Notes Indenture Trustee.............................. 31
1.177 Sherwood.................................................... 31
1.178 Signature Acquisition....................................... 31
1.179 Signature Acquisition Claims................................ 31
1.180 Signature Health............................................ 31
1.181 Signature Facilities........................................ 31
1.182 Signature Management........................................ 32
1.183 Signature Sale Leaseback Transaction........................ 32
1.184 Subordinated Claim.......................................... 32
1.185 Subsidiary And Affiliate Equity Interests................... 32
1.186 Sunbelt Therapy (Alabama)................................... 32
1.187 Sunbelt Therapy (Arizona)................................... 32
1.188 Sunquest.................................................... 33
1.189 Taxes....................................................... 33
1.190 Texas Master Lease.......................................... 33
1.191 Therapy Health.............................................. 33
1.192 Transfer Agent.............................................. 33
1.193 Unison...................................................... 33
1.194 Unison Debtors.............................................. 33
1.195 Voting Record Date.......................................... 33
1.196 Whitehead And Affiliates.................................... 33
B. COMPUTATION OF TIME................................................ 34
C. RULES OF INTERPRETATION............................................ 34
ARTICLE 2 SUBSTANTIVE CONSOLIDATION OF DEBTORS' ESTATES.................... 34
2.1 Request for Substantive Consolidation......................... 34
2.2 Effect of Substantive Consolidation........................... 35
2.3 Exceptions To Substantive Consolidation....................... 36
ARTICLE 3 TREATMENT OF UNCLASSIFIED CLAIMS................................. 36
3.1 Treatment of Administrative Claims............................ 36
3.2 Preserved Ordinary Course Administrative Claims............... 37
3.3 HCFP DIP Loan Claims.......................................... 37
3.4 Allowed Priority Tax Claims................................... 37
3.5 Allowed Reclamation Claims.................................... 38
ARTICLE 4 DESIGNATION OF CLASSES OF CLAIMS AND EQUITY INTERESTS............ 38
4.1 Summary of Classification..................................... 39
4.2 Specific Classification....................................... 41
</TABLE>
-iv-
<PAGE> 113
<TABLE>
<S> <C>
ARTICLE 5 DESIGNATION OF AND PROVISIONS FOR TREATMENT OF
CLASSES OF CLAIMS NOT IMPAIRED BY THE PLAN....................... 43
5.1 Class 1 - Priority Wage Claims................................ 43
5.2 Class 2 - Priority Benefit Plan Contribution Claims........... 43
5.3 Class 3 - Secured Tax Claims.................................. 44
5.4 Class 4 - Miscellaneous Secured Claims........................ 44
5.5 Class 11 - Subsidiary And Affiliate Equity Interests.......... 45
ARTICLE 6 DESIGNATION OF AND PROVISIONS FOR TREATMENT OF................... 45
6.1 Class 5 - Omega Secured Claims................................ 45
6.2 Class 6 - BritWill Acquisition Claims......................... 53
6.3 Class 7 - Signature Acquisition Claims........................ 54
6.4 Class 8 - Convenience Claims.................................. 55
6.5 Class 9 - General Unsecured Claims............................ 55
6.6 Class 10 - Notes Securities Claims............................ 62
6.7 Class 12 - Equity Interests And Equity Interests Related
Claims ............................................ 62
ARTICLE 7 MEANS FOR IMPLEMENTATION OF PLAN................................. 63
7.1 Signature Sale Leaseback Transaction.......................... 63
7.2 Execution Of The Omega New Master Lease....................... 64
7.3 Sale Of New Preferred Stock To Omega.......................... 66
7.4 Issuance Of New Common Stock And New Warrants................. 66
7.5 Corporate Structure........................................... 66
7.6 New Certificate Of Incorporation And Bylaws................... 66
7.7 No Corporate Action Required.................................. 67
7.8 Directors And Officers........................................ 68
7.9 Post-Effective Date Financing................................. 71
7.10 Duties Of Indenture Trustees.................................. 71
7.11 Name Change................................................... 71
7.12 Purchase Of Minority Interest In Quest........................ 71
7.13 New Line of Credit............................................ 71
7.14 Counsel to Ad Hoc Committee................................... 72
ARTICLE 8 EXECUTORY CONTRACTS AND UNEXPIRED LEASES......................... 72
8.1 Assumption or Rejection of Executory Contracts and Unexpired
Leases........................................................ 72
ARTICLE 9 CONFIRMATION WITHOUT ACCEPTANCE BY ALL IMPAIRED CLASSES.......... 75
ARTICLE 10 PRESERVATION AND PROSECUTION OF LITIGATION CLAIMS............... 75
10.1 Preservation Of Litigation Claims............................. 75
10.2 Establishment of Claims Litigation LLC........................ 75
10.3 Distribution Of Claims Litigation LLC Funds................... 77
10.4 Preservation Of Insurance..................................... 77
ARTICLE 11 SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN............. 77
11.1 Common Stock.................................................. 77
11.2 New Preferred Stock........................................... 78
11.3 New Warrants.................................................. 79
11.4 New Senior Notes.............................................. 80
11.5 Section 1145 Exemption........................................ 82
ARTICLE 12 PROVISIONS GOVERNING DISTRIBUTIONS TO HOLDERS OF ALLOWED EQUITY
INTERESTS IN CLASS 11........................................... 82
12.1 Transfer Agent................................................ 82
12.2 Surrender Of Securities....................................... 83
</TABLE>
-v-
<PAGE> 114
<TABLE>
<S> <C>
12.3 Distribution Record Date...................................... 83
12.4 Delivery Of Distributions..................................... 84
12.5 Fees And Expenses............................................. 84
ARTICLE 13 TITLE TO PROPERTY; DISCHARGE; INJUNCTION........................ 85
13.1 Conditions To Confirmation.................................... 85
13.2 Conditions To Effectiveness................................... 87
13.3 Waiver Of Conditions.......................................... 88
ARTICLE 14 NON-ALLOWANCE OF PENALTIES AND FINES............................ 88
ARTICLE 15 TITLE TO PROPERTY; DISCHARGE; INJUNCTION........................ 89
15.1 Revesting of Assets........................................... 89
15.2 Discharge..................................................... 89
15.3 Injunction.................................................... 89
15.4 Exculpation................................................... 90
ARTICLE 16 RETENTION OF JURISDICTION....................................... 91
16.1 Jurisdiction.................................................. 91
ARTICLE 17 MODIFICATION, AMENDMENT, AND WITHDRAWAL OF PLAN................. 93
ARTICLE 18 MISCELLANEOUS................................................... 94
18.1 Filing of Objections to Claims................................ 94
18.2 Settlement of Objections After Effective Date................. 94
18.3 Distributions................................................. 95
18.4 Effectuating Documents; Further Transactions; Timing.......... 96
18.5 Exemption From Transfer Taxes................................. 96
18.6 Revocation or Withdrawal of the Plan.......................... 97
18.7 Binding Effect................................................ 97
18.8 Governing Law................................................. 97
18.9 Modification of Payment Terms................................. 97
18.10 Providing For Claims Payments............................... 97
18.11 Set Offs.................................................... 98
18.12 Notices..................................................... 99
18.13 Statutory Committee......................................... 101
18.14 Severability................................................ 101
18.15 Withholding And Reporting Requirements...................... 102
18.16 Quarterly Fees To The United States Trustee................. 102
18.17 Fractional Shares; Odd Lots; De Minimis Distributions....... 102
18.18 Method Of Payment........................................... 103
18.19 Payment Dates............................................... 103
</TABLE>
-vi-
<PAGE> 115
ARTICLE 1
DEFINITIONS, RULES OF INTERPRETATION AND COMPUTATION OF TIME
A. DEFINITIONS.
For purposes of this Plan of Reorganization (the "Plan"), except as
expressly provided or unless the context otherwise requires, all capitalized
terms not otherwise defined shall have the meanings ascribed to them in Article
1 of this Plan. Any term used in this Plan that is not defined herein, but is
defined in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning
ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules. Whenever
the context requires, such terms shall include the plural as well as the
singular, the masculine gender shall include the feminine, and the feminine
gender shall include the masculine.
As used in this Plan, the following terms shall have the meanings
specified below:
1.1 AD HOC COMMITTEE. The ad hoc committee of holders of the Notes, the
members of which are set forth in the Plan Supplement.
1.2 ADMINISTRATIVE CLAIM. A Claim for any cost or expense of
administration of the Chapter 11 Cases allowed under Sections 503(b), 507(b) or
546(c)(2) of the Bankruptcy Code and entitled to priority under Section
507(a)(1) of the Bankruptcy Code, including, but not limited to: (i) fees
payable pursuant to Section 1930 of Title 28 of the United States Code; (ii) the
actual and necessary costs and expenses incurred after the Petition Date of
preserving the Debtors' Estates, including wages, salaries, or commissions for
services rendered after the commencement of the Chapter 11 Cases; and (iii) all
Professional Fees approved by the Bankruptcy Court pursuant to interim and final
allowances. To the extent that a Claim is allowed as an administrative claim
pursuant to Section 365(d)(3) of the Bankruptcy Code, such Claim shall also be
deemed an "Administrative Claim" under this section.
-4-
<PAGE> 116
1.3 ADMINISTRATIVE CLAIM BAR DATE. The date or dates established by the
Bankruptcy Court for the filing of Administrative Claims, excepting, therefrom
claims for Professional Fees and Preserved Ordinary Course Administrative
Claims.
1.4 AFFILIATE. This term will refer to and mean with respect to any
specified Person, any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such Person and,
with respect to any specified natural Person, any other Person having a
relationship by blood, marriage or adoption not more remote than first cousins
with such natural Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise.
1.5 ALLOWED CLAIM. Any Claim, or any portion thereof, against the
Debtors: (a) proof of which, requests for payment of which, or application for
allowance of which, was filed or deemed to be filed on or before the Bar Date,
Administrative Claim Bar Date or the Professional Fee Bar Date, as the case may
be, for filing proofs of claim or requests for payment for Claims of such type
against the Debtors; (b) if no proof of claim is filed, which has been or
hereafter is listed by the Debtors in the Schedules as liquidated in amount and
not disputed or contingent; or (c) a Claim that is allowed under the Plan or in
any contract, instrument, indenture or other agreement entered into in
connection with the Plan and, in any case of a Claim described in subsections
(a) or (b) only, the portion of any such Claim as to which no objection to the
allowance thereof has been interposed within the applicable period of limitation
fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy
Court. The term "Allowed," when used to modify a reference in the Plan to
-5-
<PAGE> 117
any Claim or Class of Claims, shall mean a Claim (or any Claim in any such
Class) that is so allowed, e.g. an "Allowed Secured Claim" is a Claim that has
been allowed to the extent of the value, as determined by the Bankruptcy Court
pursuant to Section 506(a) of the Bankruptcy Code, of any interest in property
of the Estate of the Debtor securing such Claim.
1.6 AMBERWOOD. Amberwood Court, Inc., a Colorado corporation, and its
successors and assigns.
1.7 AMERICAN PROFESSIONAL. American Professional Holding, Inc., a Utah
corporation, and its successors and assigns.
1.8 AMPRO. Ampro Medical Services, Inc., a Texas corporation, and its
successors and assigns.
1.9 ARBORS. The Arbors Health Care Center, Inc., an Arizona
corporation, and its successors and assigns.
1.10 ARKANSAS. Arkansas, Inc., a Colorado corporation, and its
successors and assigns.
1.11 AVOIDANCE ACTIONS. This term refers to and means all statutory
causes of actions preserved for the Estates under Sections 510, 542, 543, 544,
545, 547, 548, 549 and 550 of the Bankruptcy Code.
1.12 BANKRUPTCY CODE. The Bankruptcy Reform Act of 1978, Title 11,
United States Code, as applicable to the Chapter 11 Cases, as now in effect or
hereafter amended, 11 U.S.C. Sections 101 et seq.
1.13 BANKRUPTCY COURT. The Bankruptcy Court for the District of Arizona
or such other court as may have jurisdiction over the Chapter 11 Cases.
-6-
<PAGE> 118
1.14 BANKRUPTCY RULES. Collectively the Federal Rules of Bankruptcy
Procedure, the local rules of the Bankruptcy Court and the Federal Rules of
Civil Procedure, as applicable to the Chapter 11 Cases, as now in effect or
hereinafter amended.
1.15 BAR DATE. The date or dates established by the Bankruptcy Court
for the filing of proofs of claim for all Creditors, excepting therefrom,
Administrative Claims, Preserved Ordinary Course Administrative Claims, and
Claims for Professional Fees.
1.16 BRIT-TEXAS. BritWill Investments Texas, Ltd., a Texas limited
partnership, and its successors and assigns.
1.17 BRIT-TEXAS FACILITIES. Collectively Colonial Pines Healthcare,
West Place Nursing Center, South Place Nursing Center and the Hasmark
Facilities. The Brit-Texas Facilities are more fully described in the Plan
Supplement.
1.18 BRIT-ACQUISITION. The August 1995 stock purchase transaction in
which Unison acquired BritWill Healthcare from Whitehead And Affiliates.
1.19 BRITWILL ACQUISITION CLAIMS. Collectively the Claims, including
any such Claims that are Disputed Claims, held by Whitehead And Affiliates
resulting from the BritWill Acquisition. The BritWill Acquisition Claims are
described more fully in the Plan Supplement.
1.20 BRITWILL DEBTORS. Collectively BritWill I, BritWill II and
BritWill Indiana.
1.21 BRITWILL FUNDING. BritWill Funding Corporation, a Delaware
corporation, and its successors and assigns.
1.22 BRITWILL HEALTHCARE. BritWill HealthCare Company, a Delaware
corporation, and its successors and assigns.
1.23 BRITWILL I. BritWill Investments-I, Inc., a Delaware corporation,
and its successors and assigns.
-7-
<PAGE> 119
1.24 BRITWILL II. BritWill Investments-II, Inc., a Delaware
corporation, and its successors and assigns.
1.25 BRITWILL INDIANA. BritWill Indiana Partnership, an Arizona General
Partnership, and its successors and assigns.
1.26 BROKER DEALER. Any Person registered as a securities dealer under
the Exchange Act.
1.27 BROOKSHIRE. Brookshire House, Inc., a Colorado corporation, and
its successors and assigns.
1.28 BUSINESS DAY. Any day other than a Saturday, Sunday or other day
on which commercial banks in Arizona are authorized or required by law to close.
1.29 CASH. Currency, checks, negotiable instruments and wire transfers
of immediately available funds.
1.30 CEDAR CARE. Cedar Care, Inc., an Indiana corporation, and its
successors and assigns.
1.31 CHAPTER 11 CASES. The cases under Chapter 11 of the Bankruptcy
Code in which the Unison Debtors and the BritWill Debtors are the debtors and
debtors-in-possession pending before the Bankruptcy Court, including all
adversary proceedings pending in connection therewith.
1.32 CHRISTOPHER. Christopher Nursing Center, Inc., a Colorado
corporation, and its successors and assigns.
1.33 CLAIM. Any right to payment from the Debtors, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
arising at any time before the Effective Date or relating to any event that
occurred before the Effective Date; or any right to an equitable remedy for
breach of
-8-
<PAGE> 120
performance if such breach gives rise to a right of payment from the Debtors,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
1.34 CLAIMS RESOLUTION PROCEDURE. The procedure set forth in Article 10
of the Plan for resolving Disputed Claims, including, but not limited to, the
BritWill Acquisition Claims and the Signature Acquisition Claims.
1.35 CLAIMS LITIGATION LLC. The [Arizona/Delaware] limited liability
company established pursuant to and in accordance with Article 10 of the Plan
and the Claims Litigation LLC Members Agreement for litigation and/or resolution
of all Litigation Claims (including the Related Party Creditor Defenses), and
paying all related expenses and for holding, liquidating and distributing the
assets of the Claims Litigation LLC pursuant to the Claims Litigation LLC
Members Agreement with no objective to engage in the conduct of a trade or
business.
1.36 CLAIMS LITIGATION LLC BOARD OF MANAGERS. Three (3) individuals who
shall administer the Claims Litigation LLC pursuant to the terms of the Claims
Litigation LLC Members Agreement.
1.37 CLAIMS LITIGATION LLC MEMBERS AGREEMENT. The Agreement
substantially in the form attached to the Plan Supplement as Exhibit "L"
governing the operations of the Claims Litigation LLC.
1.38 CLAIMS LITIGATION LLC SHARES. The membership units issued pursuant
to this Plan and the Claims Litigation LLC Members Agreement evidencing the
right to receive a Pro Rata distribution from the Claims Litigation LLC,
pursuant to the terms and conditions set forth in the Claims Litigation LLC
Members Agreement, which units shall be freely transferable.
1.39 CLASS. A category of holders of Claims or Equity Interests as
classified in the Plan.
-9-
<PAGE> 121
1.40 CLASS 6 RESERVED STOCK. The approximately six hundred thousand
(600,000) shares of New Common Stock escrowed by Reorganized Unison for the
Class 6 Claims.
1.41 CLASS 7 RESERVED STOCK. The approximately two hundred fifty
thousand (250,000) shares of New Common Stock escrowed by Reorganized Unison for
the Class 7 Claim.
1.42 CONFIRMATION. The entry by the Bankruptcy Court of the
Confirmation Order.
1.43 CONFIRMATION DATE. The date upon which the Bankruptcy Court enters
the Confirmation Order confirming this Plan.
1.44 CONFIRMATION HEARING. The duly noticed hearing held by the
Bankruptcy Court on confirmation of the Plan pursuant to Section 1128 of the
Bankruptcy Code. The Confirmation Hearing may be adjourned by the Bankruptcy
Court from time to time without further notice other than the announcement of
the adjourned date at the Confirmation Hearing.
1.45 CONFIRMATION ORDER. An order entered by the Bankruptcy Court
confirming the Plan containing, among other things, the provisions as set forth
in Article 13.
1.46 CONSENTING NOTEHOLDERS. The holders of the Notes bearing Cusip No.
909199 AB9, which are subject to subordination to the Senior Notes pursuant to
the Notes Subordination Agreement.
1.47 CONSOLIDATED ESTATES. The Estates of the Unison Debtors and the
BritWill Debtors resulting from the substantive consolidation of the Debtors
pursuant to and in accordance with Article 2 of the Plan.
1.48 CONTINGENT CLAIM. A Claim which is either contingent or
unliquidated on or immediately before the Confirmation Date.
-10-
<PAGE> 122
1.49 CONVENIENCE CLAIMS. An Allowed General Unsecured Claim in an
amount of $1,000.00 or less, or any General Unsecured Claim in excess of
$1,000.00 that is reduced to $1,000.00 by election of the holder thereof as
provided on the Ballot; provided that, for purposes hereof, all such General
Unsecured Claims held by an entity or by an entity and any Affiliate of such
entity shall be aggregated and treated as one such General Unsecured Claim; and
provided further that, for purposes hereof, if all or any part of a General
Unsecured Claim was or is assigned, the General Unsecured Claim held by all
assignees of such General Unsecured Claim shall be treated collectively as one
such General Unsecured Claim for purposes of this definition.
1.50 CORNERSTONE. Cornerstone Care Center, Inc., a Colorado
corporation, and its successors and assigns.
1.51 CREDITOR. Any holder of a Claim, whether or not such Claim is an
Allowed Claim, encompassed within the statutory definition set forth in Section
101(a) of the Bankruptcy Code.
1.52 CREDITOR BALLOT. The ballot or ballots that will be distributed
with the Disclosure Statement to holders of Claims entitled to vote under the
Plan in connection with solicitation of acceptances of the Plan.
1.53 CREDITORS' COMMITTEE. Any Official Committee or Committees of
General Unsecured Creditors appointed by the United States Trustee in the
Chapter 11 Cases pursuant to Section 1102(a)(1) of the Bankruptcy Code.
1.54 CURE. The distribution on the Effective Date or as soon thereafter
as practicable of Cash, or such other property as may be agreed upon by the
parties or ordered by the Bankruptcy Court, with respect to the assumption of an
executory contract or unexpired lease, pursuant to Section 365(b) of the
Bankruptcy Code, in an amount equal to all unpaid monetary obligations, or such
other amount as may be agreed upon by the parties, under such executory contract
or
-11-
<PAGE> 123
unexpired lease, to the extent such obligations are enforceable under the
Bankruptcy Code and applicable bankruptcy law.
1.55 DEBT INSTRUMENT. A physical debenture, bond, promissory note, note
or other transferable instrument or document evidencing any payment obligation.
1.56 DEBTORS. Collectively Unison, BritWill-I, BritWill-II, BritWill
Indiana, Sunquest, BritWill Healthcare, BritWill Funding, Memphis Clinical,
American Professional, Ampro, Gamma, Signature Health, Brookshire, Christopher,
Amberwood, Arbors, Los Arcos, Pueblo Norte, Rio Verde, Signature Management,
Cornerstone, Arkansas, Douglas, Safford, Rehab, Quest, Sunbelt Therapy
(Alabama), Decatur, Therapy Health, Henderson, Sunbelt Therapy (Arizona), Cedar
Care and Sherwood.
1.57 DECATUR. Decatur Sports Fit & Wellness Center, Inc., an Alabama
corporation, and its successors and assigns.
1.58 DIP FINANCING ORDERS. Collectively: (a) the "Final Order: (I)
Authorizing Debtors To Obtain Post-Petition Financing From HCFP Funding, Inc.
Pursuant To 11 U.S.C. Sections 364(c)(1) And (d); (II) Granting Senior
Liens And Security Interests; (III) Granting Authority To Make Payments To
Lender; And (IV) Granting Other Requested Relief" entered on January 29, 1998,
as such Order may be extended, amended or otherwise modified in the context of
the BritWill Debtors' Chapter 11 Cases; and (b) the "Stipulated Order
Authorizing Debtors to Obtain Postpetition Financing from HCFP Funding, Inc.
Pursuant to 11 U.S.C. Sections 364(c)(1) and (d)" entered on May 28, 1998,
as such Order may be extended, amended, or otherwise modified in the context of
the Unison Debtors' Chapter 11 Cases.
1.59 DISBURSING AGENT. Reorganized Unison, or such other Person as may
be retained by Reorganized Unison and approved by the Bankruptcy Court, to hold
and distribute certain
-12-
<PAGE> 124
consideration to the holders of Allowed Claims in Classes 1, 2, 3, 4, 5, and 8
of the Plan. With respect to distributions of the New Senior Notes to the
holders of the Allowed Claims in Class 9, the New Senior Notes Indenture Trustee
shall be the Disbursing Agent. With respect to distributions of New Common Stock
and other property to the holders of the Allowed Claims in Class 9, the Transfer
Agent shall be the Disbursing Agent. With respect to the distribution of the New
Warrants to the Equity Interests and Equity Interest Related Claims, the
Transfer Agent shall be the Disbursing Agent.
1.60 DISCLOSURE STATEMENT. The written disclosure statement that
relates to the Plan, as approved by the Bankruptcy Court pursuant to Section
1125 of the Bankruptcy Code and Bankruptcy Rule 3017, as such disclosure
statement may be amended, modified or supplemented from time to time, which
disclosure statement will be used to solicit votes to accept or reject the Plan
by Creditors and holders of Equity Interests entitled to vote on such Plan.
1.61 DISPUTED CLAIM. A Claim which is: (a) subject to timely objection
interposed by the Debtors, or any party in interest entitled to file and
prosecute such objection in the Chapter 11 Case, if at such time such objection
remains unresolved; (b) a Claim that is listed by the Debtors as disputed,
unliquidated or contingent in the Schedules; or (c) if no objection has been
timely filed, a Claim which has been asserted in a timely filed proof of claim
in an amount greater than or in a Class different than that listed by the
Debtors in the Schedules as liquidated in amount and not disputed or contingent;
provided, however, that the Bankruptcy Court may estimate a Disputed Claim for
purposes of allowance pursuant to Section 502(c) of the Bankruptcy Code. The
term "Disputed", when used to modify a reference in the Plan to any Claim or
Class of Claims, shall mean a Claim (or any Claim in such Class) that is a
Disputed Claim as defined herein. In the event there is a dispute as to
classification or priority of a Claim, it shall be considered a Disputed Claim
-13-
<PAGE> 125
in its entirety. Until such time as a Contingent Claim becomes fixed and
absolute, such Claim shall be treated as a Disputed Claim and not an Allowed
Claim for purposes related to voting, allocations, and distributions under the
Plan. The BritWill Acquisition Claims and the Signature Acquisition Claims are
Disputed Claims. In addition, any Claim held by any entity from which property
is recoverable under Section 542, 543, 550 or 553 of the Bankruptcy Code or that
is a transferee of a transfer avoidable under Section 522(f), 522(h), 544, 545,
547, 548, 549 or 724(a) of the Bankruptcy Code shall be a Disputed Claim unless
and until such entity or transferee has paid the amount, or turned over any such
property for which such entity or transferee is liable under Section 522(i),
542, 543, 550 or 553 of the Bankruptcy Code.
1.62 DISPUTED EQUITY INTEREST. An Equity Interest which is the subject
of a timely objection interposed by the Debtors, or any party in interest
entitled to file and prosecute any such objection in the Chapter 11 Cases, if at
such time such objection remains unresolved.
1.63 DISTRIBUTION DATE. The date, occurring as soon as practicable
after the Effective Date, upon which distributions are made to holders of
Allowed Claims and Equity Interests under the Plan.
1.64 DISTRIBUTION RECORD DATE. The date or dates established by the
Bankruptcy Court, which shall be the record date or dates for determining the
holders of Senior Notes, Notes and Equity Interests entitled to receive the New
Senior Note, New Common Stock, or New Warrants, as the case may be, pursuant to
Article 6 of the Plan.
1.65 DOUGLAS. Douglas Manor, Inc., a Colorado corporation, and its
successors and assigns.
1.66 EBITDA. Earnings before interest, taxes, depreciation and
amortization.
-14-
<PAGE> 126
1.67 EBITDARM. Earnings before interest, taxes, depreciation,
amortization, rent and management fees.
1.68 EFFECTIVE DATE. The last to occur of: (a) the first Business Day
that is at least eleven (11) days after the Confirmation Date and on which no
stay of the Confirmation Order is in effect; and (b) the Business Day on which
all of the conditions set forth in Article 13 to the Plan shall have been
satisfied or waived.
1.69 EFFECTIVE DATE CASH. All Cash and/or cash equivalents of the
Debtors on the Effective Date prior to distribution or reservation of any
amounts payable under this Plan.
1.70 EFFECTIVE DATE EXCESS CASH. The Cash available for payment on the
New Senior Note on the Effective Date pursuant to Article 11.4 hereof in an
amount equal to Effective Date Cash less the sum (without duplication) of: (i)
the amount necessary for the payment (or reserve) for outstanding Administrative
Claims; (ii) the reserve for accrued Preserved Ordinary Course Administrative
Claims, as of the Effective Date; (iii) the amount necessary for the payment of
the Omega Effective Date Payment; (iv) the amount necessary for the consummation
of the Quest Purchase Option; (v) the amount necessary for the payment (or
reserve) for Allowed Convenience Claims; and (vi) the amount necessary for the
payment (or reserve) for Reclamation Claims.
1.71 EQUITY INTEREST. Any interest in Unison, including any right to
purchase or otherwise acquire any such Equity Interests.
1.72 EQUITY INTEREST RELATED CLAIM. Any Claim arising from the
rescission of a purchase or sale of an Equity Interest, or for damages arising
from the purchase or sale of an Equity Interest, or any Claim by any Person that
asserts equitable or contractual rights of reimbursement, contribution or
indemnification arising from such Claim.
-15-
<PAGE> 127
1.73 ESTATE OR ESTATES. The estates created for the Debtors in the
Chapter 11 Cases pursuant to Section 541 of the Bankruptcy Code.
1.74 EXCHANGE ACT. The Securities Exchange Act of 1934, as amended, and
the regulations promulgated thereunder.
1.75 FILKOSKI CLAIMS. Collectively those Claims held by John D.
Filkoski, Michael F. Filkoski, Lisa M. Filkoski, and/or David D. Filkoski (and
their respective successors and assigns) relating to the Signature Acquisition
as set forth in the Plan Supplement.
1.76 FINAL ORDER. An order or judgment which has not been reversed,
stayed, modified or amended and is no longer subject to appeal, certiorari
proceeding or other proceeding for review or rehearing, and as to which no
appeal, certiorari proceeding, or other proceeding for review or rehearing shall
then be pending.
1.77 FORBEARANCE AGREEMENT. The "Forbearance Agreement" dated December
1, 1997 between Unison and the Related Party Creditors pursuant to which the
holders of the Senior Notes are stated third party beneficiaries.
1.78 GAAP. The generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and Statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
1.79 GAMMA. Gamma Laboratories, Inc., a Missouri corporation, and its
successors and assigns.
1.80 GENERAL UNSECURED CLAIM. A Claim not secured by a charge against,
security interest, lien, encumbrance or interest in property in which the
Debtors' Estate has an interest.
-16-
<PAGE> 128
1.81 HASMARK FACILITIES. Collectively Four States Care Center, Heritage
Oaks and Texarkana Nursing Center as more specifically identified in the Plan
Supplement.
1.82 HCFP. HCFP Funding, Inc., a Delaware corporation, and its
successors and assigns.
1.83 HCFP DIP LOAN CLAIMS. The Allowed Claims for debtor-in-possession
financing of HCFP pursuant to the DIP Financing Orders.
1.84 HENDERSON. Henderson & Associates Rehabilitation, Inc., an Alabama
corporation, and its successors and assigns.
1.85 INDIANA MASTER LEASE. The "Master Lease" dated November 1, 1992
between Omega and BritWill I relating to the Omega Indiana Facilities
1.86 INDIANA RETURNED FACILITIES. Collectively English Estates, English
Senior Living, Capital Care Healthcare Center, Sunset Manor, Lockerbie
Healthcare Center and Parkview Manor as more specifically described in the Plan
Supplement.
1.87 INDIANA RETURNED FACILITY NOTE. The promissory note made payable
to Omega, which will be executed and delivered to Omega on the Effective Date of
the Plan pursuant to Article 6.1 hereof. The Indiana Returned Facility Note
shall: (a) be in the principal amount of THREE MILLION DOLLARS ($3,000,000.00);
(b) bear interest at the rate of seven percent (7%) per annum; (c) fully
amortize over a seven (7) year period, with principal and interest payments made
quarterly commencing with the first last day of the calendar quarter following
the Effective Date; (d) be guaranteed by Unison and BritWill Healthcare; (e) be
secured by all of the collateral held by Omega as of the Petition Date, as well
as the Omega New Master Lease Collateral; and (f) shall be cross-defaulted with
and to the Omega New Master Lease. The Indiana Returned Facility Note shall be
substantially in the form set forth in the Plan Supplement.
-17-
<PAGE> 129
1.88 INITIAL PRICE. The value per share derived from a total equity
value of $65,000,000.00 subject to adjustment should the Debtors (on or before
the Effective Date) issue or incur debt more than $3,800,000.00 over $34.3
million (exclusive of any obligations resulting from the Signature Sale
Leaseback Transaction).
1.89 IRS. The Internal Revenue Service.
1.90 KREMSER AND AFFILIATES. Collectively David A. Kremser, Bernice E.
Kremser, Michael P. Kremser, Stanley A. Kremser, Holly M. Kremser, Elk Meadows
Investments, LLC, all Affiliates of the foregoing and each of their respective
successors and assigns.
1.91 LITIGATION CLAIMS. All rights, claims, torts, liens, liabilities,
obligations, actions, causes of action, Avoidance Actions (including the Related
Party Avoidance Action), avoiding powers, proceedings, debts, contracts,
judgments, offsets, damages and demands whatsoever in law or in equity, whether
known or unknown, contingent or otherwise, that the Debtors, the Estates or the
Consolidated Estates may have against any Person, including but not limited to,
those listed in the Plan Supplement and the Related Party Creditor Defenses.
Failure to list a Litigation Claim in the Plan Supplement shall not constitute a
waiver or release by the Debtors and/or Reorganized Unison of such Litigation
Claim.
1.92 LOS ARCOS. Los Arcos, Inc., a Colorado corporation, and its
successors and assigns.
1.93 MANAGEMENT OPTIONS. The options to be allocated and issued by the
board of directors of Reorganized Unison pursuant to Article 7 of the Plan
which, when issued and exercised, will represent approximately five percent (5%)
of the equity in Reorganized Unison on a fully diluted basis.
1.94 MEMPHIS CLINICAL. Memphis Clinical Laboratory, Inc., a Tennessee
corporation, and its successors and assigns.
-18-
<PAGE> 130
1.95 NEW COMMON STOCK. The thirteen million (13,000,000) authorized
shares of common stock in Reorganized Unison described in Article 11,
approximately six million five hundred thousand (6,500,000) of which are to be
issued on the Effective Date pursuant to and in accordance with Articles 6.2,
6.3, and 6.5 of the Plan to, inter alia, the holders of Allowed Claims in
Classes 6, 7 and 9.
1.96 NEW COMMON STOCK REGISTRATION AGREEMENT. The agreement to be
entered into on the Effective Date by Reorganized Unison and any holder of an
Allowed General Unsecured Claim that will receive more than ten percent (10%) of
the Common Stock issued under this Plan. The New Common Stock Registration
Rights Agreement shall be substantially in the form in the Plan Supplement.
1.97 NEW LINE OF CREDIT. The working capital line of credit evidenced
by the New Line Of Credit Agreement and New Line Of Credit Promissory Note.
1.98 NEW LINE OF CREDIT AGREEMENT. The agreement between Reorganized
Unison and a working capital lender to be determined providing Reorganized
Unison with a secured working line of credit of approximately FIFTEEN MILLION
DOLLARS ($15,000,000.00) under terms and conditions agreeable to Reorganized
Unison, Omega and the Ad Hoc Committee.
1.99 NEW LINE OF CREDIT PROMISSORY NOTE. The promissory note or notes
evidencing the New Line of Credit.
1.100 NEW OMEGA GUARANTEE. The guarantee to be provided to Omega on the
Effective Date pursuant to Article 6.1.1 of the Plan substantially in the form
in the Plan Supplement.
1.101 NEW OMEGA GUARANTEE COLLATERAL. Collectively: (a) a leasehold
mortgage on the Omega Indiana Leasehold Mortgage Facilities; (b) the security
deposits to be provided under the
-19-
<PAGE> 131
Omega New Master Lease; and (c) a junior lien on accounts receivable generated
by the Omega New Master Lease Facilities.
1.102 NEW OMEGA GUARANTEE SECURITY DOCUMENTS. Collectively the
documents evidencing the lien on the New Omega Guarantee Collateral
substantially in the form in the Plan Supplement.
1.103 NEW PREFERRED STOCK. The three hundred two thousand (302,000)
authorized shares of Series A preferred stock in Reorganized Unison described in
Article 11 to be issued to Omega pursuant to Article 6.1 of the Plan on the
Effective Date representing approximately four percent (4%) of the equity in
Reorganized Unison on a fully diluted basis.
1.104 NEW SENIOR NOTES. The 11% Senior Notes of Reorganized Unison in
the original principal sum of TWENTY-FOUR MILLION FOUR HUNDRED THOUSAND DOLLARS
($24,400,000.00) to be issued and distributed pursuant to Article 6.5 of the
Plan on the Distribution Date for the benefit of Allowed Claims in Class 9 and
governed by the terms of the New Senior Notes Indenture contained in the Plan
Supplement. A sample form of the New Senior Notes is set forth in the Plan
Supplement.
1.105 NEW SENIOR NOTES ALLOCATION SCHEDULE. The Schedule set forth in
the Plan Supplement which sets forth: (i) the allocation to the holders of the
Senior Notes of New Senior Notes otherwise distributable to the Consenting
Noteholders, pursuant to Article 6.5.1 hereof; and (ii) the allocation to the
Consenting Noteholders of New Common Stock and Claims Litigation Notes, pursuant
to Article 6.5.1 hereof, in order to give effect, in each case, to the rights of
the holders of the Senior Notes under the Notes Subordination Agreement so as to
provide the holders of Senior Notes with New Senior Notes having an aggregate
original principal amount on the
-20-
<PAGE> 132
Effective Date equal to the Allowed Senior Note Claims plus the amount of
accrued and unpaid interest for the period from the Unison Debtors Petition Date
to the Effective Date.
1.106 NEW SENIOR NOTES COLLATERAL. All of the stock and assets of
Quest, Sunbelt Therapy (Arizona) and their respective subsidiaries.
1.107 NEW SENIOR NOTES GUARANTEE. The guarantee of obligations of
Reorganized Unison under the New Senior Notes, which guarantee shall be set
forth in the New Senior Notes Indenture or in a separate guarantee agreement to
be filed with the Bankruptcy Court as part of the Plan Supplement.
1.108 NEW SENIOR NOTES INDENTURE. The Indenture to be entered into by
Reorganized Unison and the New Senior Notes Indenture Trustee under which the
New Senior Notes will be issued, which indenture shall be substantially the form
of the indenture filed with the Bankruptcy Court as part of the Plan Supplement.
1.109 NEW SENIOR NOTES INDENTURE TRUSTEE. IBJ Schroder Bank & Trust
Company or its successor.
1.110 NEW SENIOR NOTES SECURITY DOCUMENTS. Collectively the security
agreement, pledge agreement, each substantially in the form set forth in the
Plan Supplement, and any other documents evidencing or relating to the lien on
the New Senior Notes Collateral to secure the New Senior Notes.
1.111 NEW UNISON STOCK. Collectively the New Common Stock, the New
Preferred Stock, the New Warrants and the New Warrant Shares.
1.112 NEW WARRANTS. The warrants for the purchase of New Common Stock
described in Article 11 to be made available to holders of Class 12 Equity
Interests and Equity Interest Related Claims pursuant to and in accordance with
Articles 6.7 and 12 of this Plan.
-21-
<PAGE> 133
1.113 NEW WARRANT SHARES. The New Common Stock issuable by Reorganized
Unison upon exercise of the New Warrants.
1.114 NHI. National Health Investors, Inc., a Maryland corporation.
1.115 NHI SECURED CLAIMS. The Allowed Secured Claims of NHI secured by,
inter alia, the Signature Facilities.
1.116 NON-CONSENTING NOTEHOLDERS. The holders of the Notes bearing
Cusip No. 909196 AA 5 which are not subject to subordination to the Senior Notes
pursuant to the Note Subordination Agreement.
1.117 NOTES. Collectively, the 12 1/4% Senior Notes due 2006 held by
Consenting Noteholders and/or Non-Consenting Noteholders, originally issued in
the aggregate principal amount of $100 million pursuant to the Notes Indenture.
The Notes Claims are hereby allowed in the amount of $107,965,000.00.
1.118 NOTES INDENTURE. The "Indenture" dated as of October 31, 1996,
between Unison, the other Debtors and the Notes Indenture Trustee, pursuant to
which the Notes were issued.
1.119 NOTES INDENTURE TRUSTEE. First National Bank Association, or any
other successor trustee under the Notes Indenture.
1.120 NOTES SECURITIES CLAIMS. All Claims, if any, whether asserted
prior to or after the Petition Date based on alleged violations of applicable
federal or state securities laws: (a) arising from the rescission of a purchase
or sale, or offer to purchase or sell, any Notes or Senior Notes; and (b) for
damages arising from the purchase or sale of any such Notes or Senior Notes.
1.121 NOTES SUBORDINATION AGREEMENT. That "Subordination Agreement"
entered into on or about December 1, 1997 in which the Consenting Noteholders
only agreed to subordinate to
-22-
<PAGE> 134
the Senior Notes, to the extent set forth therein, pursuant to the consent
solicitation by Unison dated November 23, 1997.
1.122 NOTICE AND A HEARING. This phrase shall have the same meaning as
provided for in Section 102(1) of the Bankruptcy Code.
1.123 OMEGA. Omega HealthCare Investors, Inc., a Maryland corporation.
1.124 OMEGA EFFECTIVE DATE PAYMENT. Collectively: (a) the Cash payment
in the amount of ONE MILLION DOLLARS ($1,000,000.00) as satisfaction of the
Omega Hasmark Facilities Rejection Claim; and (b) the Cash payment of an
additional ONE MILLION DOLLARS ($1,000,000.00) as partial satisfaction of the
Omega Indiana Rejection Claims, as provided in Article 6.1 of the Plan; (c) any
amounts due prior to the Effective Date, pursuant to Article 6.1.5, for rent
under the existing Indiana Master Lease and Texas Master Lease; and (d) to the
extent not paid, the Closing Allowance.
1.125 OMEGA HASMARK FACILITIES REJECTION CLAIM. The Allowed Claim of
Omega based upon the release of the Hasmark Facilities from the Texas Master
Lease.
1.126 OMEGA INDIANA FACILITIES. Collectively Wellington Manor,
Cloverleaf of Knightsville and Kendalville Manor as more specifically described
in the Plan Supplement.
1.127 OMEGA INDIANA LEASEHOLD MORTGAGE FACILITIES. Collectively
Owensville Convalescent, Boonville Convalescent, Holiday Manor and Willow Manor
Convalescent as more specifically described in the Plan Supplement.
1.128 OMEGA INDIANA REJECTION CLAIM. The Claims of Omega relating to
the release of the Omega Indiana Returned Facilities from the Indiana Master
Lease as treated in Article 6.1.2 of the Plan.
-23-
<PAGE> 135
1.129 OMEGA INDIANA RETURNED FACILITIES. Collectively English Estates,
English Senior Living, Capital Care Healthcare Center, Sunset Manor, Lockerbie
Healthcare Center and Parkview Manor.
1.130 OMEGA MISCELLANEOUS SECURED CLAIM. The Allowed Secured Claim of
Omega as evidenced by a promissory note dated April 29, 1996 in the original
principal amount of $152,000.00 secured by the personality contained in Pine
Haven Care Center located in Texarkana, Texas.
1.131 OMEGA MORTGAGE GUARANTEE CLAIMS. The Claims amounting to
approximately $10.2 million, plus accrued and unpaid interest and costs of
collection; of Omega pursuant to a "Mortgage Note" dated November 30, 1993
between Omega and Brit-Texas secured by, inter alia: (a) mortgages on Heritage
Oaks, Colonial Pines Healthcare, and West Place Nursing Center; and (b)
leasehold mortgages on Four States Care Center, South Place Nursing Center, and
Texarkana Nursing Center (all of which facilities are located in Texas) which
Claims have been guaranteed by Unison and BritWill II.
1.132 OMEGA NEW MASTER LEASE. That form of Master Lease covering the
Omega Indiana Facilities, Omega Texas Facilities, the Signature Facilities, and
potentially those Brit-Texas Facilities as set forth in Article 6.1 of the Plan,
substantially in the form contained in the Plan Supplement.
1.133 OMEGA NEW MASTER LEASE COLLATERAL. Collectively all existing
collateral and all personal property owned or leased by the Omega New Master
Lessees (which interest will be subordinate to the lessor's interest),
including, without limitation: (a) to the extent permitted by law a security
interest in licenses and permits; and (b) a subordinate security interest in
accounts
-24-
<PAGE> 136
receivable of the Omega New Master Lease Facilities owned by or mortgaged to
Omega with an intercreditor agreement with the lender of the New Line of Credit
reasonably satisfactory to Omega.
1.134 OMEGA NEW MASTER LEASE FACILITIES. Collectively the Omega Indiana
Facilities, the Omega Texas Facilities, the Signature Facilities, and
potentially those Brit-Texas Facilities described in Article 6.1.1 of the Plan.
1.135 OMEGA NEW MASTER LEASE GUARANTEE. The unconditional guarantee of
payment obligations by the Omega New Master Lease Guarantors with respect to the
Omega New Master Lease substantially in the form contained in the Plan
Supplement.
1.136 OMEGA NEW MASTER LEASE GUARANTORS. Collectively Unison, Signature
Health, BritWill Healthcare, BritWill I, Cedar Care and Sherwood.
1.137 OMEGA NEW MASTER LESSEES. Jointly and severally and collectively
Amberwood, Arbors, BritWill II, BritWill Indiana, Brookshire, Christopher, Los
Arcos, Pueblo Norte, and Rio Verde.
1.138 OMEGA SECURED CLAIMS. Collectively the Omega Mortgage Guarantee
Claims, the Omega Indiana Rejection Claims and the Omega Hasmark Facilities
Rejection Claims. The Omega Secured Claims are allowed, in an unliquidated
amount, and will be treated as provided in Article 6 herein.
1.139 OMEGA SUBORDINATION RIGHTS. The rights asserted or assertable by
Omega relating to subordination of all Claims of Whitehead And Affiliates to all
Claims of Omega pursuant to contractual and other agreements between Omega and
Whitehead And Affiliates.
1.140 OMEGA TEXAS FACILITIES. Collectively Heritage Plaza, Pine Haven
Care Center, Reunion Plaza, Pine Grove Nursing Center, Pleasant Manor Living
Center, and, to the extent
-25-
<PAGE> 137
Omega obtains fee title to such facilities, the Brit-Texas Facilities, all as
more specifically described in the Plan Supplement.
1.141 PERSON. An individual, a corporation, a limited liability
company, a partnership, an association, a joint stock company, a joint venture,
an estate, a trust, an unincorporated organization or a government, governmental
unit or any subdivision thereof or any other entity.
1.142 PETITION DATE. As to the BritWill Debtors, January 7, 1998. As to
the Unison Debtors, May 28, 1998. If not otherwise specified herein, Petition
Date shall refer to January 7, 1998.
1.143 PLAN. This Plan of Reorganization, either in its present form or
as it may be amended, supplemented or modified from time to time, including all
exhibits and schedules annexed hereto or referenced herein and the Plan
Supplement.
1.144 PLAN DISTRIBUTED CASH. The Cash to be paid pursuant to this Plan
to the holders of Allowed Claims in all Classes and Allowed Unclassified Claims
hereunder.
1.145 PLAN SUPPLEMENT. The supplement filed with the Bankruptcy Court
with the Plan or thereafter (but in all events no later than ten (10) days prior
to the Confirmation Hearing) which contains all of the exhibits to the Plan as
such exhibits may be subsequently amended, modified or supplemented. The Plan
Supplement shall be a part of this Plan as if such exhibits were set forth more
fully herein.
1.146 PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIM. Administrative
Claims that are based on liabilities incurred by the Debtors in the purchase,
lease or use of goods and services in the ordinary course of its business,
including, but not limited to, Administrative Claims due on account of services
provided to the Debtors after the Petition Date by its employees, as well as
-26-
<PAGE> 138
security deposits which may need to be posted as part of the Cure of any assumed
executory contract and/or unexpired lease.
1.147 PRIORITY BENEFIT PLAN CONTRIBUTION CLAIM. Any Claim entitled to
priority in payment under Section 507(a)(4) of the Bankruptcy Code.
1.148 PRIORITY TAX CLAIM. Any Claim entitled to priority in payment
under Section 507(a)(8) of the Bankruptcy Code.
1.149 PRIORITY WAGE CLAIM. Any Claim entitled to priority in payment
under Section 507(a)(3) of the Bankruptcy Code.
1.150 PRO RATA. The ratio of an Allowed Claim or Allowed Equity
Interest in a particular class to the aggregate amount of all such Allowed
Claims or Allowed Equity Interests in any such Class.
1.151 PROFESSIONAL FEE BAR DATE. The date, as set by order of the
Bankruptcy Court, on or before which applications for compensation or expense
reimbursement, including Professional Fees receivable pursuant to Section
503(b), must be filed with the Bankruptcy Court, and served on Reorganized
Unison and its counsel.
1.152 PROFESSIONAL FEES. The Administrative Claims for compensation and
reimbursement submitted pursuant to Sections 328, 330, 331 or 503(b) of the
Bankruptcy Code of Persons: (a) employed pursuant to an order of the Bankruptcy
Court under Sections 327, 328 or 1103 of the Bankruptcy Code; or (b) for whom
compensation and reimbursement has been allowed by the Bankruptcy Court pursuant
to Section 503(b) of the Bankruptcy Code.
1.153 PUEBLO NORTE. Pueblo Norte, Inc., a Colorado corporation, and its
successors and assigns.
-27-
<PAGE> 139
1.154 QUEST. Quest Pharmacies, Inc., an Arizona corporation, and its
successors and assigns.
1.155 QUEST PURCHASE OPTION. The "Agreement" dated May 19, 1998,
between Unison and L. Robert Oberfield relating to the purchase of the
twenty-five percent (25%) interest in Quest held by L. Robert Oberfield for a
total purchase price of $4 million.
1.156 RECLAMATION CLAIMS. Any Claim against the Debtors by any Person
arising out of the sale of goods to the Debtor, in the ordinary course of such
Person's business, provided that such Person has otherwise satisfied the
requirements of Section 546(c) of the Bankruptcy Code and the Uniform Commercial
Code, as applicable.
1.157 REHAB. RehabWest, Inc., a Colorado corporation, and its
successors and assigns.
1.158 REINSTATED OR REINSTATEMENT. These terms shall mean: (a) leaving
unaltered the legal, equitable, and contractual rights of the holder of a Claim
so as to leave such Claim unimpaired in accordance with Section 1124 of the
Bankruptcy Code; or (b) notwithstanding any contractual provision or applicable
law that entitles the holder of such Claim to demand or receive accelerated
payment of such Claim after the occurrence of a default: (i) Curing any such
default that occurred before or after the Petition Date, other than a default of
a kind specified in Section 365(b)(2) of the Bankruptcy Code; (ii) reinstating
the maturity of such Claim as such maturity existed before such default; (iii)
compensating the holder of such Claim for any damages incurred as a result of
any reasonable reliance by such holder on such contractual provision or such
applicable law; and (iv) not otherwise altering the legal, equitable, or
contractual rights to which such Claim entitles the holder of such Claim;
provided, however, that any contractual right that does not pertain to the
payment when due of principal and interest on the obligation on which such Claim
is based, including, but not limited to, financial covenant ratios, negative
pledge covenants, covenants or
-28-
<PAGE> 140
restrictions on merger or consolidation, and affirmative covenants regarding
corporate existence prohibiting certain transactions or actions contemplated by
the Plan, or conditioning such transactions or actions on certain factors, shall
not be required in order to accomplish Reinstatement.
1.159 RELATED PARTY AVOIDANCE ACTION. Adversary Proceeding No. 98-540
pending as of the Confirmation Date against Elk Meadows Investments, LLC;
BritWill Investments Company, Ltd.; UNHC Real Estate Holdings Ltd. (fka
Brit-Texas), Bruce H. Whitehead; David A. Kremser; Bernice E. Kremser; Michael
P. Kremser; Stanley A. Kremser and Holly M. Kremser brought pursuant to
Sections 544 and 547 of the Bankruptcy Code (as amended or otherwise
modified from time to time) and any other adversary proceeding which may be
filed against the Related Party Creditors prior to the Effective Date.
1.160 RELATED PARTY CREDITORS. Collectively Whitehead And Affiliates
and Kremser And Affiliates.
1.161 RELATED PARTY CREDITOR CLAIMS. Collectively the Claims of
Whitehead And Affiliates and Kremser And Affiliates.
1.162 RELATED PARTY CREDITOR DEFENSES. Those Litigation Claims, claims
and defenses relating to the Related Party Creditors in the nature of the
Related Party Avoidance Action, other preferences, breaches of fiduciary duties,
fraudulent conveyances, equitable subordination, breach of contract, the
Forbearance Agreement and any and all other claims, defenses, and offsets
asserted or assertable against the Related Party Creditors by the Debtors and/or
an appropriate estate representative pursuant to Section 1123(b)(3)(B) of the
Bankruptcy Code.
1.163 REORGANIZED UNISON. Collectively the Debtors, as reorganized and
reconstituted, pursuant to the Plan on the Effective Date.
-29-
<PAGE> 141
1.164 REORGANIZED UNISON BY-LAWS. The Restated By-Laws of Reorganized
Unison, which shall be substantially in the form set forth in the Plan
Supplement.
1.165 REORGANIZED UNISON CERTIFICATE. The Restated Certificate of
Incorporation, which shall be substantially in the form set forth in the Plan
Supplement.
1.166 RIO VERDE. Rio Verde Nursing Center, Inc., a Colorado
corporation, and its successors and assigns.
1.167 SAFFORD. Safford Care, Inc., a Colorado corporation, and its
successors and assigns.
1.168 SCHEDULES. The schedules of assets and liabilities and any
amendments thereto filed by the Debtors with the Bankruptcy Court in accordance
with Section 521(1) of the Bankruptcy Code.
1.169 SEC. The United States Securities and Exchange Commission.
1.170 SECURED CLAIM. The Claim to the extent of the value of any
interest in property of the Debtors Estate securing such Claim or to the extent
of the amount of such Claim subject to setoff in accordance with Section 553 of
the Bankruptcy Code, in either case as determined pursuant to Section 506(a) of
the Bankruptcy Code.
1.171 SECURED TAX CLAIMS. The Claim of any state or local governmental
unit which is secured by a lien upon property owned by the Debtors by operation
of applicable law, including, but not limited to, every such Claim for unpaid
real and personal property taxes.
1.172 SECURITIES ACT. The Securities Act of 1933, as amended, and the
regulations promulgated thereunder.
1.173 SENIOR MANAGEMENT. Collectively those Persons holding the offices
as of the Confirmation Date of: (a) President/Chief Executive Officer; (b)
Executive Vice President/General
-30-
<PAGE> 142
Counsel; (c) Senior Vice President/Finance/Treasurer; (d) Executive Vice
President/Chief Financial Officer; and (e) Senior Vice President/Clinical
Operations.
1.174 SENIOR NOTES. The 13% Senior Notes due 1999 (Cusip No. 909196 AB
3) originally issued on or about December 1, 1997 in the original principal
amount of $20 million pursuant to the Senior Notes Indenture. The Senior Notes
Claims are hereby Allowed in the amount of $21,298,000.00
1.175 SENIOR NOTES INDENTURE. The "Indenture" dated as of December 1,
1997 pursuant to which the Senior Notes were issued.
1.176 SENIOR NOTES INDENTURE TRUSTEE. IBJ Schroder Bank & Trust
Company, or such other successor trustee under the Senior Notes Indenture.
1.177 SHERWOOD. Sherwood HealthCare Corporation, an Indiana
corporation, and its successors and assigns.
1.178 SIGNATURE ACQUISITION. The October 31, 1996 stock purchase
transaction in which Unison acquired Signature Health and four affiliated
companies--Douglas, Safford, Arkansas and Cornerstone.
1.179 SIGNATURE ACQUISITION CLAIMS. Collectively the purported secured
obligations against the Debtors resulting from the Signature Acquisition as
described more fully in the Plan Supplement.
1.180 SIGNATURE HEALTH. Signature HealthCare Corporation, a Delaware
corporation, and its successors and assigns.
1.181 SIGNATURE FACILITIES. Collectively the facilities located in
Colorado and Arizona known as Amberwood Court Care Center; The Arbors Health
Care Center; Brookshire House; Los
-31-
<PAGE> 143
Arcos Health Care Center; Pueblo Norte Nursing Center; Rio Verde Nursing Center;
and Christopher House.
1.182 SIGNATURE MANAGEMENT. Signature Management Group, Inc., a
Colorado corporation, and its successors and assigns.
1.183 SIGNATURE SALE LEASEBACK TRANSACTION. The sale leaseback
transaction involving the Signature Properties, to be consummated on or before
the Effective Date, as more fully described in Article 7 of the Plan.
1.184 SUBORDINATED CLAIM. Any Claim or Equity Interest subordinated,
for purposes of distribution or otherwise, pursuant to Section 510 of the
Bankruptcy Code (including Section 510(a)).
1.185 SUBSIDIARY AND AFFILIATE EQUITY INTERESTS. All of the common
stock or other equity interests issued by Amberwood, American Professional,
Ampro, Arbors, Arkansas, BritWill Funding, BritWill Healthcare, BritWill I,
BritWill II, BritWill Indiana, Brookshire, Cedar Care, Christopher, Cornerstone,
Decatur, Douglas, Gamma, Henderson, Los Arcos, Memphis Clinical, Pueblo Norte,
Quest, Rehab, Rio Verde, Safford, Sherwood, Signature Health, Signature
Management, Sunbelt Therapy (Alabama), Sunbelt Therapy (Arizona), Sunquest, and
Therapy Health, and held by Unison or a Unison subsidiary or Affiliate,
including, if applicable, any warrants, options, or rights to purchase any such
stock or equity interests.
1.186 SUNBELT THERAPY (ALABAMA). Sunbelt Therapy Management Services,
Inc., an Alabama corporation, and its successors and assigns.
1.187 SUNBELT THERAPY (ARIZONA). Sunbelt Therapy Management Services,
Inc., an Arizona corporation, and its successors and assigns.
-32-
<PAGE> 144
1.188 SUNQUEST. SunQuest, SPC., Inc., an Arizona corporation, and its
successors and assigns.
1.189 TAXES. All income, franchise, excise, sales, use, employment,
withholding, property, payroll or other taxes, assessments, or governmental
charges, together with any interest, penalties, additions to tax, fines, and
similar amounts relating thereto, imposed or collected by any federal, state,
local or foreign governmental authority.
1.190 TEXAS MASTER LEASE. Collectively: (a) the "Master Lease" dated
November 30, 1993 between Omega and BritWill II; and (b) the "Master Lease"
dated December 31, 1994 between Omega and BritWill II, both of which relate to
the Omega Texas Facilities.
1.191 THERAPY HEALTH. Therapy Health Systems, Inc., a Mississippi
corporation, and its successors and assigns.
1.192 TRANSFER AGENT. Any qualified national transfer agent selected by
Unison.
1.193 UNISON. Unison HealthCare Corporation, a Delaware corporation,
and its successors and assigns.
1.194 UNISON DEBTORS. All of the Debtors other than the BritWill
Debtors.
1.195 VOTING RECORD DATE. The date established by the Bankruptcy Court
prior to the approval of the Disclosure Statement for purposes of determining
the holders of record of the Senior Notes, Notes and Equity Interests entitled
to vote on the Plan.
1.196 WHITEHEAD AND AFFILIATES. Collectively Bruce H. Whitehead;
Whitehead Family Investments, Ltd.; Brit-Texas; and BritWill Investments
Company, Ltd., all Affiliates of the foregoing, and each of their respective
successors and assigns.
-33-
<PAGE> 145
B. COMPUTATION OF TIME.
In computing any period of time prescribed or allowed by the Plan, unless
otherwise expressly provided, the provisions of Bankruptcy Rule 9006(a) shall
apply.
C. RULES OF INTERPRETATION.
For purposes of the Plan: (a) any reference in the Plan to a contract,
instrument, release, indenture, or other agreement or documents being in
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions; (b) any reference in the Plan to an existing document or exhibit
filed or to be filed means such document or exhibit as it may have been or may
be amended, modified, or supplemented; (c) unless otherwise specified, all
references in the Plan to Sections, Articles, Schedules and Exhibits are
references to Sections, Articles, Schedules and Exhibits of or to the Plan; (d)
the words "herein," "hereof," "hereto," and "hereunder" refer to the Plan in its
entirety rather than to a particular portion of the Plan; (e) captions and
headings to Articles and Sections are inserted for convenience of reference only
and are not intended to be a part of or to affect the interpretation of the
Plan; and (f) the rules of construction set forth in Section 102 of the
Bankruptcy Code and in the Bankruptcy Rules shall apply.
ARTICLE 2
SUBSTANTIVE CONSOLIDATION OF DEBTORS' ESTATES
FOR DISTRIBUTION PURPOSES
2.1 REQUEST FOR SUBSTANTIVE CONSOLIDATION. This Plan constitutes a motion
for substantive consolidation of the liabilities and properties of all Debtors
for purposes of distributions hereunder, and the confirmation of the Plan shall
constitute approval of the motion by the
-34-
<PAGE> 146
Bankruptcy Court. The Confirmation Order shall contain findings supporting and
conclusions providing for substantive consolidation for purposes of distribution
on the terms set forth in Article 2.2 of this Plan.
2.2 EFFECT OF SUBSTANTIVE CONSOLIDATION. Except as expressly set forth in
Article 2.3, below, as a result of the substantive consolidation of the
liabilities and properties of all Debtors: (a) the Chapter 11 Cases shall be
consolidated into the case of Unison as a single consolidated case; (b) all
property of the Estate of each Debtor shall be deemed to be property of the
Consolidated Estates; (c) all Claims against each Estate shall be deemed to be
Claims against the Consolidated Estates, any proof of claim filed against one or
more of Debtors shall be deemed to be a single claim filed against the
Consolidated Estates, and all duplicate proofs of claim for the same claim filed
against more than one Debtor shall be deemed expunged; (d) unless otherwise
provided in the Plan, all Equity Interests in any Debtor other than Unison shall
be deemed extinguished for purposes of distributions under this Plan, and no
distributions under this Plan shall be made on account of any such Equity
Interests; (e) all intercompany obligations by and against Debtors shall be
eliminated, and no distributions under this Plan shall be made on account of
Claims based upon such intercompany obligations; (f) except as specifically
provided herein, all guarantees by one Debtor in favor of any other Debtors
shall be eliminated, and no distributions under this Plan shall be made on
account of Claims based upon such guarantees; and (g) for purposes of
determining the availability of the right of setoff under section 553 of the
Bankruptcy Code, Debtors shall be treated as one consolidated entity so that,
subject to the other provisions of section 553, debts due to any of Debtors may
be set off against the debts of any other of Debtors. Substantive consolidation
shall not merge or otherwise affect the separate legal existence of each Debtor
for licensing, regulatory or other purposes, other than with respect to
distribution rights under this Plan. Moreover, substantive
-35-
<PAGE> 147
consolidation shall have no effect on valid, enforceable and unavoidable liens,
except for liens that secure a Claim that is eliminated by virtue of substantive
consolidation and liens against collateral that are extinguished by virtue of
substantive consolidation; and substantive consolidation shall not have the
effect of creating a Claim in a class different from the class in which a Claim
would have been placed in the absence of substantive consolidation. The
substantive consolidation contemplated herein shall not effect any applicable
date(s) for purposes of pursuing any Avoidance Actions.
2.3 EXCEPTIONS TO SUBSTANTIVE CONSOLIDATION. Notwithstanding the
foregoing, the substantive consolidation shall not impact or otherwise affect
provisions in this Plan which provide that specific entities comprising the
Debtors or Reorganized Unison shall be liable on specific obligations under this
Plan.
ARTICLE 3
TREATMENT OF UNCLASSIFIED CLAIMS
The Claims against the Debtors set forth in this Article 3 are not
designated as Classes pursuant to Section 1123(a)(1) of the Bankruptcy Code. The
holders of such Claims are not entitled to vote on the Plan. The treatment of
the Claims set forth below is consistent with the requirements of Section
1129(a)(9)(A) of the Bankruptcy Code.
3.1 TREATMENT OF ADMINISTRATIVE CLAIMS.
3.1.1 GENERALLY. Each Allowed Administrative Claim (including all
accrued U.S. Trustee quarterly fees), other than Preserved Ordinary Course
Administrative Claims and Reclamation Claims, shall be paid in full in Cash (or
otherwise satisfied in accordance with its terms) upon the latest of: (a) the
Effective Date, or as soon thereafter as practicable; (b) such date as may be
fixed by the Bankruptcy Court, or as soon thereafter as practicable; (c) the
10th Business
-36-
<PAGE> 148
Day after such Claim is Allowed, or as soon thereafter as practicable; and (d)
such date as the holder of such Claim and Reorganized Unison have agreed or
shall agree.
3.1.2 REQUESTS FOR PAYMENT. All requests for payment of
Administrative Claims (except for Professional Fees and Preserved Ordinary
Course Administrative Claims) must be filed by the Administrative Claims Bar
Date or the holders thereof shall be forever barred from asserting such
Administrative Claims against the Debtors and Reorganized Unison. All final
applications for allowance and disbursement of Professional Fees must be filed
by the Professional Fee Bar Date. All such applications must be in compliance
with all of the terms and provisions of any applicable order of the Bankruptcy
Court, including the Confirmation Order, and all other orders governing payment
of Professional Fees. Such applications may be later amended to include any fees
and costs incurred after the Confirmation Date.
3.2 PRESERVED ORDINARY COURSE ADMINISTRATIVE CLAIMS. Each Allowed
Preserved Ordinary Course Administrative Claim shall be paid by Reorganized
Unison pursuant to either: (a) the terms and conditions under which such Claim
arose; or (b) in the ordinary course of Reorganized Unison's business. Such
payments shall be made by Reorganized Unison without further action by the
holder of such Claim.
3.3 HCFP DIP LOAN CLAIMS. The HCFP DIP Loan Claims shall be Allowed Claims
and paid pursuant to the terms of the DIP Financing Orders, but in all events no
later than the Effective Date.
3.4 ALLOWED PRIORITY TAX CLAIMS. Each Allowed Priority Tax Claim, if any,
will be paid in full in Cash on the Effective Date; provided, however, that
Reorganized Unison may elect to pay such Claims through deferred Cash payments
over a period not exceeding six (6) years after the date of assessment of such
Claim, of a value as of the Effective Date, equal to the amount of such
-37-
<PAGE> 149
Allowed Claim. In that event, such payments shall be made in equal annual
installments of principal, plus interest accruing from the Effective Date at the
rate on the unpaid portion of Allowed Priority Tax Claim set forth in Internal
Revenue Code Sections 6621 and 6622. The first such payment shall be payable on
the latest of: (a) the Effective Date; (b) the tenth (10th) Business Day after
the date on which an order allowing such Claim becomes a Final Order; and (c)
such other time as is agreed upon by the holder of such Claim and Reorganized
Unison, provided, however, that Reorganized Unison shall have the right to
prepay any such Allowed Priority Tax Claim, or any remaining balance of such
Claim, in full or in part, at any time on or after the Effective Date, without
premium or penalty.
3.5 ALLOWED RECLAMATION CLAIMS. All requests for payment of Reclamation
Claims must be filed by the Bar Date or the holders thereof shall be forever
barred from asserting such Reclamation Claim against the Debtors and Reorganized
Unison. Each Allowed Reclamation Claim shall be paid in full in Cash upon the
latest of: (a) the Effective Date, or as soon thereafter as practicable; (b)
such date as may be fixed by the Bankruptcy Court, or as soon thereafter as
practicable; (c) the 10th Business Day after such Claim is Allowed during the
Chapter 11 Cases, or as soon thereafter as practicable; and (d) such date as the
holder of such Reclamation Claim and Reorganized Unison have agreed or shall
agree.
ARTICLE 4
DESIGNATION OF CLASSES OF CLAIMS AND EQUITY INTERESTS
Pursuant to this Plan and in accordance with Section 1123(a)(1) of the
Bankruptcy Code, all Claims of Creditors and the holders of Equity Interests
(except Administrative Claims, Priority Tax Claims, Reclamation Claims, and
Preserved Ordinary Course Administrative Claims) are placed in the Classes
described below. A Claim or Equity Interest is classified in a particular Class
only to
-38-
<PAGE> 150
the extent that the Claim or Equity Interest qualifies within the description of
that Class and is classified in other Classes only to the extent that any
remainder of the Claim or Equity Interest qualifies within the description of
such other Classes. A Claim is also classified in a particular Class only to the
extent that such Claim has not been paid, released or otherwise satisfied prior
to the Effective Date.
4.1 SUMMARY OF CLASSIFICATION.
- --------------------------------------------------------------------------------
CLASS 1: Unimpaired
Priority Wage Claims - no solicitation required
- --------------------------------------------------------------------------------
CLASS 2: Unimpaired
Priority Benefit Plan - no solicitation required
Contribution Claims
- --------------------------------------------------------------------------------
CLASS 3: Unimpaired
Secured Tax Claims - no solicitation required
- --------------------------------------------------------------------------------
CLASS 4: Unimpaired
Miscellaneous Secured Claims - no solicitation required
(including the NHI Secured Claims)
- --------------------------------------------------------------------------------
-39-
<PAGE> 151
- --------------------------------------------------------------------------------
CLASS 5: Impaired
Omega Secured Claims - entitled to vote
- CLASS 5A Omega Mortgage
Guarantee Claims
- CLASS 5B Omega Indiana Rejection
Claims
- CLASS 5C Omega Hasmark
Facilities Claims
- CLASS 5D Omega Miscellaneous
Secured Claim
- --------------------------------------------------------------------------------
CLASS 6: Impaired
BritWill Acquisition Claims - entitled to vote
- --------------------------------------------------------------------------------
CLASS 7: Impaired
Signature Acquisition Claims - entitled to vote
- --------------------------------------------------------------------------------
CLASS 8: Impaired
Convenience Claims -entitled to vote
- --------------------------------------------------------------------------------
CLASS 9: Impaired
General Unsecured Claims -entitled to vote
- --------------------------------------------------------------------------------
CLASS 10: Impaired
Notes Securities Claims -deemed rejected
- --------------------------------------------------------------------------------
-40-
<PAGE> 152
- --------------------------------------------------------------------------------
CLASS 11: Unimpaired
Subsidiary And Affiliate Equity -not entitled to vote
Interests
- --------------------------------------------------------------------------------
CLASS 12: Impaired
Equity Interests And Equity Interest - deemed rejected
Related Claims
- --------------------------------------------------------------------------------
4.2 SPECIFIC CLASSIFICATION.
4.2.1 CLASS 1 - PRIORITY WAGE CLAIMS. Class 1 consists of all Claims
that are entitled to priority under Section 507(a)(3) of the Bankruptcy Code.
4.2.2 CLASS 2 - PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS. Class 2
consists of all Claims that are entitled to priority under Section 507(a)(4) of
the Bankruptcy Code.
4.2.3 CLASS 3 - SECURED TAX CLAIMS. Class 3 consists of all Secured
Tax Claims. Each holder of a Secured Tax Claim shall be considered to be in its
own separate subclass within Class 3, and each such subclass shall be deemed to
be a separate Class for purposes of this Plan.
4.2.4 CLASS 4 - MISCELLANEOUS SECURED CLAIMS. Class 4 consists of
all Secured Claims (including the NHI Secured Claims) other than Secured Claims
in Classes 3, 5, 6 and 7. Each holder of a Miscellaneous Secured Claim shall be
considered to be in its own separate subclass within Class 4, and each such
subclass shall be deemed to be a separate Class for purposes of this Plan.
4.2.5 CLASS 5 - OMEGA SECURED CLAIMS. Class 5 consists of: (a) the
Omega Mortgage Guarantee Claims (Class 5A); (b) the Omega Indiana Rejection
Claim (Class 5B); (c) the Omega Hasmark Facilities Claims (Class 5C); and (d)
the Omega Miscellaneous Secured Claims
-41-
<PAGE> 153
(Class 5D). Each of the foregoing Claims shall be considered a separate subclass
within Class 5, and each subclass shall be deemed a separate class for purposes
of the Plan.
4.2.6 CLASS 6 - BRITWILL ACQUISITION CLAIMS. Class 6 consists of the
BritWill Acquisition Claims. The BritWill Acquisition Claims are Disputed by the
Debtors. Each BritWill Acquisition Claim shall be considered a separate subclass
within Class 6, and each subclass shall be deemed a separate class for purposes
of the Plan.
4.2.7 CLASS 7 - SIGNATURE ACQUISITION CLAIMS. Class 7 consists of
the Signature Acquisition Claims. The Signature Acquisition Claims are Disputed
by the Debtors. Each Signature Acquisition Claim shall be considered a separate
subclass within Class 7, and each subclass shall be deemed a separate class for
purposes of the Plan.
4.2.8 CLASS 8 - ALLOWED CONVENIENCE CLAIMS. Class 8 consists of any
Allowed General Unsecured Claim, other than any Claim evidenced by a Note or
Senior Note, against the Debtors that is $1,000.00 or less, or that is greater
than $1,000.00, but is voluntarily reduced by the holders thereof to $1,000.00.
The option to reduce an Allowed General Unsecured Claim to the sum of $1,000.00,
and to have such Allowed General Unsecured Claim treated as a Class 8 Claim must
be made in the manner prescribed in the Ballot.
4.2.9 CLASS 9 - GENERAL UNSECURED CLAIMS. Class 9 consists of all
General Unsecured Claims not otherwise classified herein, including, without
limitation, the Claims of: (a) the Consenting Noteholders; (b) the
Non-Consenting Noteholders; (c) the Filkoski Claims; and (d) the holders of the
Senior Notes.
4.2.10 CLASS 10 - NOTES SECURITIES CLAIMS. Class 10 consists of any
Notes Securities Claims which, pursuant to this Plan and Section 510 of the
Bankruptcy Code, shall be subordinated to the Claims of all other Creditors.
-42-
<PAGE> 154
4.2.11 CLASS 11 - UNISON SUBSIDIARY AND AFFILIATE STOCK. Class 11
consists of the Subsidiary And Affiliate Equity Interests held by Unison.
4.2.12 CLASS 12 - EQUITY INTERESTS AND EQUITY INTERESTS RELATED
CLAIMS. Class 12 consists of the Equity Interests and the Equity Interest
Related Claim.
ARTICLE 5
DESIGNATION OF AND PROVISIONS FOR TREATMENT OF
CLASSES OF CLAIMS NOT IMPAIRED BY THE PLAN
5.1 CLASS 1 - PRIORITY WAGE CLAIMS. Each Allowed Priority Wage Claim, if
any, shall be paid in full in Cash upon the latest of: (a) the Effective Date,
or as soon thereafter as practicable; (b) such date as may be fixed by the
Bankruptcy Court, or as soon thereafter as practicable; (c) the 10th Business
Day after such Claim is allowed, or as soon thereafter as practicable; and (d)
such date as the holder of such Claim and Reorganized Unison have agreed or
shall agree. Class 1 is unimpaired under the Plan; and holders of Allowed Claims
in Class 1 are not entitled to vote on the Plan.
5.2 CLASS 2 - PRIORITY BENEFIT PLAN CONTRIBUTION CLAIMS. Each Allowed
Priority Benefit Plan Contribution Claim, if any, shall be paid in full in Cash
upon the latest of: (a) the Effective Date, or as soon thereafter as
practicable; (b) such date as may be fixed by the Bankruptcy Court, or as soon
thereafter as practicable; (c) the 10th Business Day after such Claim is
Allowed, or as soon thereafter as practicable; and (d) such date as the holder
of such Claim and Reorganized Unison have agreed or shall agree. Class 2 is
unimpaired under the Plan; and holders of Allowed Claims in Class 2 are not
entitled to vote on the Plan.
-43-
<PAGE> 155
5.3 CLASS 3 - SECURED TAX CLAIMS. Each Allowed Secured Tax Claim shall be
paid in full in Cash upon the latest of: (a) the Effective Date, or as soon
thereafter as practicable; (b) such date as may be fixed by the Bankruptcy
Court, or as soon thereafter as practicable; (c) the 10th Business Day after
such Claim is Allowed, or as soon thereafter as practicable; (d) the date on
which such Secured Tax Claim is scheduled to be paid in the ordinary course of
business under applicable law or regulation; and (e) such date as the holder of
such Claims and Reorganized Unison have agreed or shall agree. Class 3 is
unimpaired under the Plan; and holders of Allowed Claims in Class 3 are not
entitled to vote on the Plan.
5.4 CLASS 4 - MISCELLANEOUS SECURED CLAIMS. On the Effective Date, at
Reorganized Unison's option, the holder of any Allowed Secured Claims in Class 4
shall receive one of the following alternative treatments:
(a) The holder of such Claim shall be treated in accordance with the
terms and conditions of all Debt Instruments evidencing such Claim and the
legal, equitable, or contractual rights to which each holder of such Claim is
entitled shall not otherwise be altered;
(b) (i) Any default, other than a default of the kind specified in
Section 365(b)(2) of the Bankruptcy Code, shall be Cured or Reinstated;
(ii) The maturity of the Claims shall be Reinstated as such
maturity existed before any default;
(iii) The other legal, equitable or contractual rights to which
the holder of the Claim is entitled shall not otherwise be altered, provided,
however, that as to any Allowed Secured Claim which is a nonrecourse claim and
exceeds the value of the collateral securing the Claim, the collateral may be
sold at a sale at which the holder of such Claim has an opportunity to bid; or
-44-
<PAGE> 156
(c) On the Effective Date, or on such other date thereafter as may
be agreed to by Reorganized Unison and the holder of such Claim, the Estates
shall abandon the collateral securing such Claim to the holder thereof in full
satisfaction and release of such Claim; or
(d) On the Effective Date, the holder of such Claim shall receive,
on account of such Claim, Cash equal to its Allowed Secured Claim, or such
lesser amount to which the holder of such Claim shall agree, in full
satisfaction and release of such Claim.
Class 4 is unimpaired under the Plan; and the holders of Allowed
Claims in Class 4 are not entitled to vote on the Plan.
5.5 CLASS 11 - SUBSIDIARY AND AFFILIATE EQUITY INTERESTS. On the Effective
Date, Reorganized Unison (and its subsidiaries, as applicable) shall continue to
hold and own the Subsidiary And Affiliate Equity Interests, and those entities
shall continue as subsidiaries or Affiliates (as the case may be) of Reorganized
Unison. Class 11 is unimpaired under this Plan. The holders of the Class 11
Subsidiary And Affiliate Equity Interests are not entitled to vote on this Plan.
ARTICLE 6
DESIGNATION OF AND PROVISIONS FOR TREATMENT OF
CLASSES OF CLAIMS AND EQUITY INTERESTS IMPAIRED BY THE PLAN
6.1 CLASS 5 - OMEGA SECURED CLAIMS. The Allowed Omega Secured Claims shall
be satisfied as follows:
6.1.1 OMEGA MORTGAGE GUARANTEE CLAIMS. As and for full satisfaction
of the Omega Mortgage Guarantee Claims, on the Effective Date Unison and
BritWill II shall execute and
-45-
<PAGE> 157
deliver to Omega the New Omega Guarantee which shall be an absolute and
unconditional guarantee of payment to supersede and replace any and all of the
Debtors' guarantees of Brit-Texas obligations.
(a) PROVISIONS OF THE NEW OMEGA GUARANTEE. The New Omega
Guarantee shall have the following provisions and terms:
(i) The New Omega Guarantee shall be in an amount not to
exceed THREE MILLION DOLLARS ($3,000,000.00) and interest after
default thereon, plus reasonable fees and costs for collection if
called upon;
(ii) The New Omega Guarantee shall be secured by the New
Omega Guarantee Collateral;
(iii) The New Omega Guarantee shall not be
cross-defaulted with either the Omega New Master Lease or any other
obligations of the Debtors to Omega under the Plan;
(iv) If called upon, any amounts due thereunder shall be
payable on a four (4) year, fully amortizing basis with no interest,
except after default as provided above;
(v) Reorganized Unison shall retain any and all rights
of subrogation, contribution, reimbursement and/or offset with
respect to Whitehead And Affiliates relating to the New Omega
Guarantee and any of the obligations to Omega covered thereby; and
(vi) The Omega Hasmark Rejection Claim has been paid.
(b) PROVISIONS REGARDING CERTAIN BRIT-TEXAS FACILITIES. If
Omega obtains, through foreclosure or otherwise, the fee and leasehold
interests in and to the
-46-
<PAGE> 158
Brit-Texas Facilities free and clear of liens and underlying encumbrances
except for customary permitted exceptions and other than the underlying
leases on the leasehold Facility (other than the Hasmark Facilities,
discussed in Article 6.1.3 below) at any time prior to the expiration of
the Omega New Master Lease, Omega agrees to add those facilities to the
Omega New Master Lease with rent and rent increases to provide Omega with
the same payments which Omega is contractually entitled to receive under
the Omega Mortgage Guarantee Claims under the same terms and conditions
(and for the remaining term of) as the Omega New Master Lease.
(c) RESERVATION OF RIGHTS. Notwithstanding any of the
foregoing, Omega shall be entitled to pursue any and all claims it has or
may have against Whitehead And Affiliates, whether such claims are based
on guarantees, the Omega Subordination Rights, fraud, misrepresentation or
otherwise.
(d) ABILITY TO CAUSE RELEASE. If, on or after the Confirmation
Date: (i) Omega has obtained fee and leasehold interests in and to the
Brit-Texas Facilities (other than the Hasmark Facilities) as provided in
this Article, and free and clear of liens and underlying encumbrances
except for customary permitted exceptions and other than the underlying
leases on those facilities; and (ii) Colonial Pines Healthcare, South
Place Nursing Center and West Place Nursing Center have remained fully
licensed and operational; and (iii) the Brit-Texas Facilities (other than
the Hasmark Facilities) are added to the Omega New Master Lease as set
forth herein; and (iv) Omega is reimbursed for its reasonable legal fees
and costs incurred from and after June 15, 1998 in pursuing Whitehead And
Affiliates (which shall not exceed $250,000.00 without the consent of the
Debtors or Reorganized Unison); and (v) Reorganized Unison is otherwise
current in its
-47-
<PAGE> 159
obligations under this Plan to Omega, then Reorganized Unison shall be
entitled to cause Omega to grant a full release to Whitehead And
Affiliates except for any continuing obligations of Brit-Texas and/or
Whitehead And Affiliates under any settlement between Brit-Texas and Omega
or under any conveyance documents given by Brit-Texas to Omega.
6.1.2 OMEGA INDIANA REJECTION CLAIM. The Omega Indiana Rejection
Claim shall be satisfied as follows:
(a) SURRENDER OF INDIANA RETURNED FACILITIES. The Indiana
Returned Facilities shall be turned over to Omega on the Effective Date if
not surrendered prior to that time. The Indiana Returned Facilities shall
then be deleted from the Indiana Master Lease, with a rent reduction
attributable to the Indiana Returned Facilities as set forth in Article
7.2.4 of the Plan. If Omega desires the Debtors or Reorganized Unison to
operate the Indiana Returned Facilities for a transition period after
surrender of those facilities, the Debtor or Reorganized Unison will do
so, for the account of Omega, at a five percent (5%) of gross revenue
management fee pursuant to a management agreement acceptable in form and
substance to Unison.
(b) DISTRIBUTIONS. In full satisfaction of the Claims
resulting from the revision to the Indiana Master Lease as set forth
above, on the Effective Date Omega shall receive:
(i) ONE MILLION DOLLARS ($1,000,000.00) in Cash as part
of the Omega Effective Date Payment; and
(ii) The Indiana Returned Facility Note.
-48-
<PAGE> 160
(c) SHARING AGREEMENT. The Indiana Returned Facility Note
shall be treated as follows with respect to the New Senior Notes:
(i) If by the second anniversary after the Effective
Date, the holders of the Senior Notes receiving New Senior Notes
have not had their Claims reduced in principal by at least fifty
percent (50%) (including by virtue of the Effective Date Excess Cash
payment as referenced in Article 11.4.4(a) of the Plan) or
otherwise, then thereafter and until such time as the New Senior
Notes received by the holders of the Senior Notes are paid in full,
the Indiana Returned Facility Note shall share pari passu with such
New Senior Notes received by the holders of the Senior Notes
notwithstanding the original amortization or terms of the Indiana
Returned Facility Note (the "Sharing Agreement");
(ii) The Sharing Agreement shall only be applicable as
to payment of Cash, and shall not constitute a sharing or assignment
of collateral securing the Indiana Returned Facility Note or the New
Senior Note, respectively;
(iii) The Sharing Agreement shall only apply if there is
no continuing default by Reorganized Unison on the obligations to
Omega under the Plan (including under the documents executed in
connection with the Plan);
(iv) Any principal deferred on the Indiana Returned
Facility Note as a result of the Sharing Agreement shall bear
interest at the rate of ten percent (10%) per annum from the date of
deferral until paid;
(v) Notwithstanding any other provision in the Indiana
Returned Facility Note, if the Sharing Agreement becomes operative,
the deferral of the
-49-
<PAGE> 161
principal on the Indiana Returned Facility Note shall not be a
default under that note or other obligations of Reorganized Unison
to Omega; and
(vi) Notwithstanding any of the foregoing, no one other
than the holders of the New Senior Notes received by the holders of
the Notes shall have any rights with respect to the Sharing
Agreement. The provisions of this Article 6.1.2(c) is a voluntary
accommodation by Omega for the benefit of the New Senior Notes
received by the holders of the Senior Notes. The New Senior Notes
received by other Creditors under Article 6.5.1 shall not share in
the benefits of this accommodation and intercreditor agreement. To
the extent that holders of the Senior Notes receive payments that
Omega would otherwise have received but for this Article 6.1.2(c),
Omega shall be subrograted to the rights of the holders of the
Senior Notes with regard to their interest in the New Senior Notes.
6.1.3 OMEGA HASMARK FACILITIES CLAIMS. The Omega Hasmark Facility
Claim shall be satisfied as follows:
(a) DELETION FROM TEXAS MASTER LEASE. On the Effective Date,
the Hasmark Facilities shall be deleted from the Texas Master Lease; and
Omega shall be paid ONE MILLION DOLLARS ($1,000,000.00) in Cash as part of
the Omega Effective Date Payment in full satisfaction of any Claims
resulting from such deletion.
(b) REDUCTION IN RENT. Upon payment of the amount set forth
above, the rent under the Omega New Master Lease shall be reduced ONE
HUNDRED TWENTY THOUSAND DOLLARS ($120,000.00) per year, commencing with a
pro rata reduction on the Effective Date upon payment of the amount set
forth above.
-50-
<PAGE> 162
(c) TRANSFER OF HASMARK FACILITIES TO REORGANIZED Unison.
Provided Omega has been paid the amount set forth above,
if Omega acquires fee and leasehold interests in the
Hasmark Facilities after the Effective Date (or before
the Effective Date provided the Debtors or Reorganized
Unison pays the amount set forth above), Omega shall
promptly quit claim to Reorganized Unison or its
assignee its interests in such Hasmark Facilities, which
transfer shall be without any representations, express
or implied, with respect to the nature of title being
transferred. Notwithstanding the foregoing, the Debtors
and Reorganized Unison acknowledge and agree that the
amount, if any, which Omega bids for the Hasmark
Facilities (or any portion thereof) at any foreclosure
sale relating to those facilities will be, and is,
within the sole discretion of Omega, and that Omega may
not acquire fee or leasehold interest to the Hasmark
Facilities. In the event that Omega does not acquire fee
or leasehold interests in the Hasmark Facilities, Omega
will have no obligations under this Article 6.1.3(c).
6.1.4 OMEGA MISCELLANEOUS SECURED CLAIMS. The Allowed Omega
Miscellaneous Secured Claim shall be paid in Cash on the Effective Date, or be
provided such other treatment as agreed to between Omega and the Debtors.
6.1.5 EXECUTION OF OMEGA NEW MASTER LEASE. On the Effective Date,
Reorganized Unison shall execute the Omega New Master Lease, which shall act as
an assumption (as amended and supplemented) of the Indiana Master Lease and
Texas Master Lease, as provided
-51-
<PAGE> 163
in Article 7.2 of the Plan. As a condition to the execution of the Omega New
Master Lease, all amounts due prior to the Effective Date for rent under the
existing Indiana Master Lease and Texas Master Lease must be brought or paid
current, except as expressly set forth in the Plan.
6.1.6 FEES AND EXPENSES OF OMEGA. Any and all fees and costs of
Omega relating to the Omega Secured Claims shall be paid to Omega upon the
closing of the Signature Sale Leaseback Transaction, which fees and costs shall
be Allowed in the amount of $500,000.00 (the "Closing Allowance"), which amount
shall cover (irrespective of the actual amount thereof): (a) any and all
commitment fees associated with the Signature Sale Leaseback Transaction as
discussed in Article 7.1; (b) any and all past and prospective legal fees and
other costs and expenses owed to Omega relating to the Omega Secured Claims or
otherwise; (c) all closing costs for the Signature Sale Leaseback Transaction
and the Omega New Master Lease, including but not limited to legal costs and
expenses incurred by Omega, title insurance costs, transfer and recording taxes
(if any), Phase I environmental costs, and any and all other closing costs. The
$500,000.00 shall not include the security deposits required under the Omega New
Master Lease.
6.1.7 NO PREJUDICE. Notwithstanding any of the foregoing, no
provision in this Plan or the Term Sheet shall be construed as or otherwise
deemed to prejudice, impair or otherwise adversely effect any rights Omega has
or may have against any Person other than Unison and Reorganized Unison,
including but not limited to Whitehead And Affiliates and the Omega
Subordination Rights.
6.1.8 ADHERENCE TO OMEGA SUBORDINATION AGREEMENTS. Except as to the
treatment in this Plan with respect to payments of any Allowed Claims in Classes
8 and 9, and unless ordered otherwise by a court of competent jurisdiction,
Reorganized Unison shall abide by
-52-
<PAGE> 164
and not otherwise prejudice the Omega Subordination Rights, and will
not pay any Cash or other property to Whitehead And Affiliates until all
obligations of Brit-Texas to Omega are paid in full.
6.1.9 IMPAIRMENT. The Allowed Omega Secured Claims are impaired
under the Plan.
6.1.10 TREATMENT OF OMEGA SECURED CLAIMS BASED ON ACCEPTANCE OF EACH
OMEGA SUBCLASS. The treatment of the Allowed Omega Secured Claims set forth in
this Section 6.1 is based on the acceptance of the Plan by each subclass in
Class 5.
6.2 CLASS 6 - BRITWILL ACQUISITION CLAIMS. The Disputed BritWill
Acquisition Claims will be satisfied and otherwise treated as follows:
6.2.1 CLAIMS RESOLUTION PROCEDURE. The BritWill Acquisition Claims
are Disputed Claims, and constitute some of the Litigation Claims, Related Party
Avoidance Action, and Related Party Creditor Defenses to be assigned to the
Claims Litigation LLC under the provisions of Article 10 of this Plan. The
adjudication as to the Allowed amounts (if any) of the BritWill Acquisition
Claims shall be determined pursuant to Article 10 hereof, and shall be
prosecuted (or compromised) by the Claims Litigation LLC. The Disputed BritWill
Acquisition Claims shall not be entitled to any distributions under this Plan
until the Class 6 Claims are Allowed. The Class 6 Claims shall be Allowed as and
when (and in such amounts) set forth in a Final Order entered in accordance with
Article 10 of the Plan.
6.2.2 ISSUANCE OF NEW COMMON STOCK. Upon entry of a Final Order
Allowing the BritWill Acquisition Claims, the holder(s) of such Allowed Claims
shall, subject to the Forbearance Agreement and Omega Subordination Rights,
receive a number of shares of the Class 6 Reserved Stock equal to the percentage
of the Class 6 Reserved Stock which the amount of such Allowed Claims represents
of $12,589,000.00.
-53-
<PAGE> 165
6.2.3 NO PREJUDICE TO OMEGA SUBORDINATION RIGHTS. Notwithstanding
any of the foregoing, nothing contained in this Article 6.2 is intended to, nor
shall it, impair or prejudice the Omega Subordination Rights or any other rights
held by Omega against a holder or holders of the Disputed Class 6 BritWill
Acquisition Claims. In accordance with Section 6.5.10, Omega has agreed to waive
and/or assign the Omega Subordination Rights to the extent necessary to give
effect to the treatment of the holders of the Senior Notes in Class 9 provided
in this Plan only after payment of all amounts owing to Omega with respect to
the Brit-Texas Facilities. To the extent that Omega would be entitled to the
receipt of such New Common Stock on account of the Omega Subordination Rights,
all such stock will be deemed assigned to the holders of Senior Notes and then
immediately reassigned to the Consenting Noteholders on account or the New
Senior Notes allocated to the holders of the Senior Notes in accordance with the
New Senior Notes Allocation Schedule.
6.2.4 IMPAIRMENT. The holders of the Disputed Class 6 BritWill
Acquisition Claims are impaired under the Plan.
6.3 CLASS 7 - SIGNATURE ACQUISITION CLAIMS. The Disputed Signature
Acquisition Claims will be satisfied and otherwise treated as follows:
6.3.1 CLAIMS RESOLUTION PROCEDURE. The Signature Acquisition Claims
are Disputed Claims, and constitute some of the Litigation Claims and Related
Party Creditor Defenses to be assigned to the Claims Litigation LLC under the
provisions of Article 10 of the Plan. The adjudication as to the Allowed amounts
(if any) of the Signature Acquisition Claims shall be determined pursuant to
Article 10 hereof, and shall be prosecuted (or compromised) by the Claims
Litigation LLC. The Disputed Signature Acquisition Claims shall not be entitled
to any
-54-
<PAGE> 166
distributions under this Plan until the Class 7 Claims are Allowed. The Class 7
Claims shall be Allowed as and when (and in such amounts) set forth in
accordance with Article 10 of the Plan.
6.3.2 ISSUANCE OF NEW CLASS A COMMON STOCK. Upon entry of a Final
Order Allowing the Signature Acquisition Claims, the holder(s) of such Allowed
Claims shall, subject to the Forbearance Agreement, receive a number of shares
of Class 7 Reserved Stock equal to the percentage of the Class 7 Reserved Stock
which the amount of such Allowed Claims represents of $5,095,000.00.
6.3.3 IMPAIRMENT. The holders of the Disputed Class 7 Signature
Acquisition Claims are impaired under the Plan.
6.4 CLASS 8 - CONVENIENCE CLAIMS. Each Allowed Convenience Claim shall be
paid in Cash the lesser of: (a) the amount of such Allowed Claim; or (b) the sum
of $1,000.00. All such Allowed Convenience Claim shall be paid upon the latest
of: (i) the Effective Date, or as soon thereafter as practicable; (ii) such date
as may be fixed by the Bankruptcy Court, or as soon thereafter as practicable;
(iii) the tenth (10th) Business Day after such Claim is allowed, or as soon
thereafter as practicable; and (iv) such date as the holder of such Claim and
Reorganized Unison have agreed. The holders of Convenience Claims are impaired
under the Plan.
6.5 CLASS 9 - GENERAL UNSECURED CLAIMS. The Allowed General Unsecured
Claims will be satisfied and otherwise treated as follows:
6.5.1 THE NEW SENIOR NOTE; NEW COMMON STOCK; CLAIMS LITIGATION LLC
SHARES. In full satisfaction (subject to Article 6.5.7, below) of the Allowed
Class 9 General Unsecured Claims, on the Effective Date, each holder of an
Allowed Class 9 General Unsecured Claim as of the Distribution Record Date shall
receive (subject to Article 6.5.2, below): (a) its Pro Rata distribution of five
million six hundred thirty-five thousand (5,635,000) shares of the New
-55-
<PAGE> 167
Common Stock; (b) from the Claims Litigation LLC its Pro Rata distribution of
Claims Litigation LLC Shares; and (c) its Pro Rata share of the New Senior Note.
The New Senior Notes, New Common Stock and Claims Litigation LLC Shares
distributed on a Pro Rata basis pursuant to the preceding sentence shall be
reallocated as amongst the holders of the Senior Notes and the Consenting Notes
Holders as set forth in the New Senior Notes Allocable Schedule.
6.5.2 THE NEW SENIOR NOTES. On the Effective Date, Reorganized
Unison shall execute and issue: (a) the New Senior Notes; (b) the New Senior
Notes Indenture; (c) the New Senior Notes Security Documents; and (d) the New
Senior Notes Guarantee. Each holder of an Allowed Class 9 Claim as of the
Distribution Record Date shall share Pro Rata (subject to Articles 6.5.9 and
6.5.11) in the New Senior Notes and related documents and instruments. The
holders of Senior Notes Claims receiving New Senior Notes shall be entitled to
the rights under the Sharing Agreement set forth in Article 6.1.2(c) of the
Plan. On or before ten (10) days before the Confirmation Date, the Debtors shall
file the New Senior Notes Allocation Schedule with the Bankruptcy Court.
6.5.3 DISBURSING AGENT. With respect to each holder of an Allowed
Notes Claim or Allowed Senior Notes Claim, as of the Distribution Record Date
Reorganized Unison shall distribute such holder's Pro Rata share of New Common
Stock to the Disbursing Agent, on the Distribution Date. As soon as practicable
after the New Senior Notes Indenture Trustee receives the Debt Instruments
pursuant to Article 6.5.4, below: (a) the New Senior Notes Indenture Trustee
shall distribute the Pro Rata Share of the New Senior Notes in accordance with
the terms of this Plan and the New Senior Notes Indenture; (b) the Disbursing
Agent shall issue and distribute the Pro Rata Share of the New Common Stock; and
(c) the Claims Litigation LLC shall issues and distribute the Pro Rata Claims
Litigation LLC Shares. With respect to each holder of an Allowed
-56-
<PAGE> 168
General Unsecured Claim other than a Notes Claim or Senior Notes Claim, on the
Distribution Date: (a) the New Senior Notes Indenture Trustee shall pay the Pro
Rata Share of the New Senior Notes as such payments come due; (b) the Disbursing
Agent shall issue and distribute the Pro Rata share of the New Common Stock on
the Distribution Date; and (c) the Claims Litigation LLC shall issue and
distribute the Pro Rata Claims Litigation LLC Shares.
6.5.4 SURRENDER OF SECURITIES OR DEBT INSTRUMENTS. On or before the
Distribution Date, or as soon as practicable thereafter, each holder of a Debt
Instrument evidencing an Allowed Claim on account of the Notes or the Senior
Notes shall surrender or cause the surrender of such Debt Instrument to the New
Senior Notes Indenture Trustee. No distribution of property hereunder shall be
made to or on behalf of any such holder unless and until such Debt Instrument is
received by the New Senior Notes Indenture Trustee, or the unavailability of
such Debt Instrument is reasonably established to the satisfaction of the New
Senior Notes Indenture Trustee, and, with regard to New Common Stock,
Reorganized Unison. In the event any holder of an Allowed Notes Claim or Senior
Notes Claim seeks to establish the unavailability of the Debt Instrument
evidencing such Claim, the New Senior Notes Indenture Trustee shall, within the
first Business Day thirty (30) days after receipt of the holders evidence of
unavailability and statement of indemnity of Reorganized Unison and the New
Senior Notes Indenture Trustee: (a) provide the holder, in writing, with a
detailed description regarding the unacceptability of such evidence and
statement of indemnity; or (b) deliver to the Senior Notes Indenture Trustee,
the Notes Indenture Trustee and Reorganized Unison a notice of compliance and
distribute to such holder its Pro Rata Share of the New Senior Notes and Claims
Litigation LLC Shares. Any such holder who fails to surrender or cause to be
surrendered such Debt Instrument or fails to execute and deliver an affidavit of
loss and indemnity reasonably satisfactory to the New Senior Notes Indenture
Trustee
-57-
<PAGE> 169
and Reorganized Unison prior to the first anniversary of the Effective Date
shall be deemed to have forfeited all rights and Claims in respect of such Debt
Instrument and shall not participate in any distribution hereunder, and all
property in respect of such forfeited distribution, including interest accrued
thereon, shall revert to Reorganized Unison notwithstanding any federal or state
escheat laws to the contrary.
6.5.5 DISTRIBUTION RECORD DATE. At the close of business on the
Distribution Record Date, the transfer ledgers of the Senior Notes Indenture
Trustee and the Notes Indenture Trustee shall be closed, and there shall be no
further changes in the record holders of the Senior Notes or Notes. Reorganized
Unison, the New Senior Notes Indenture Trustee, the Disbursing Agent, the Claims
Litigation LLC Board of Managers, the Senior Notes Indenture Trustee and the
Notes Indenture Trustee shall have no obligation to recognize any transfer of
such Senior Notes or Notes occurring after the Distribution Record Date.
Reorganized Unison, the Senior Notes Indenture Trustee, the Notes Indenture
Trustee, the New Senior Notes Indenture Trustee (subject to the New Senior Notes
Indenture), the Disbursing Agent and Claims Litigation LLC Board of Managers
(subject to the Claims Litigation LLC Members Agreement) shall be entitled
instead to recognize and deal for all purposes hereunder with only those record
holders stated on the transfer ledgers as of the close of business on the
Distribution Record Date.
6.5.6 DELIVERY OF DISTRIBUTIONS. Distributions of the New Senior
Notes will be made by the New Senior Notes Indenture Trustee to the holders of
Allowed Notes Claims and Senior Notes Claims in accordance with the Plan at the
address contained in the records of the Senior Notes Indenture Trustee, Notes
Indenture Trustee, and/or the New Senior Notes Indenture Trustee. Distributions
of New Common Stock will be made by the Disbursing Agent, and distribution of
Claims Litigation LLC Shares shall be made by the Claims Litigation LLC, to
-58-
<PAGE> 170
holders of Senior Notes and Notes in accordance with the Plan at the addresses
contained in the official records of the Senior Notes Indenture Trustee, the
Notes Indenture Trustee and/or the New Senior Notes Indenture Trustee. If any
holder's distribution is returned as undeliverable, no further distributions to
such holder shall be made unless and until Reorganized Unison, the Disbursing
Agent, the New Senior Notes Indenture Trustee, the Notes Indenture Trustee and
Claims Litigation LLC are notified of such holder's then current address, at
which time all missed distributions shall be made to such holder without
interest. Undeliverable distributions shall be returned to Reorganized Unison,
until such distributions are claimed. All claims for undeliverable distributions
shall be made on or before the first anniversary of the Effective Date. After
such date, all unclaimed property shall revert to Reorganized Unison and the
Claim of any holder or successor to such holder with respect to such property
shall be discharged and forever barred notwithstanding any federal or state
escheat laws to the contrary.
6.5.7 ADDITIONAL DISTRIBUTIONS. If any or all of the Class 6
Reserved Stock and the Class 7 Reserved Stock is not issued to the holders of
the Class 6 and Class 7 Claims pursuant to Articles 6.2 and 6.3 of the Plan
after completion of the Claims resolution procedure contemplated in the Plan,
such unissued shares of the Class 6 and Class 7 Reserved Stock shall be issued
to the holders of Allowed Class 9 Claims, Pro Rata, as set forth in Articles
6.5.3 of the Plan.
6.5.8 FEES AND EXPENSES. All unpaid reasonable fees, costs, charges,
and any other expenses incurred under the Senior Notes Indenture and the Notes
Indenture from and after the Unison Debtors' Petition Date, including any
reasonable fees and expenses of professionals retained by the Senior Notes
Indenture Trustee and the Notes Indenture Trustee as of the Effective Date,
shall be paid by the Debtors or Reorganized Unison, as the case may be, to the
Senior Notes
-59-
<PAGE> 171
Indenture Trustee and the Notes Indenture Trustee upon approval of the
Bankruptcy Court. After the Effective Date, all reasonable fees, costs, charges
and expenses payable to the Senior Notes Indenture Trustee and the Notes
Indenture Trustee (if any) and/or Transfer Agent under the Senior Notes
Indenture and the Notes Indenture including any such items incurred by the
Senior Notes Indenture Trustee or the Notes Indenture Trustee or Transfer Agent
in their capacity as Disbursing Agent under this Plan, shall be paid by
Reorganized Unison in accordance with the Senior Notes Indenture, the Notes
Indenture or Transfer Agent agreement without further Bankruptcy Court approval.
6.5.9 TREATMENT OF RIGHTS UNDER NOTES SUBORDINATION AGREEMENT. The
Treatment set forth in Article 6.5 in respect of the Senior Notes and the Notes
held by the Consenting Noteholders (including the allocations of New Senior
Notes, New Common Stock and Claims Litigation LLC Shares pursuant to the New
Senior Notes Allocation Schedule) represents a negotiated settlement of all
subordination and other rights of the Senior Notes with respect to the
Consenting Notes. In consideration of the treatment provided herein, on the
Effective Date, all holders of Senior Notes Claims shall be deemed to have
waived as against the Notes Indenture Trustee and the Consenting Noteholders any
and all contractual subordination right pursuant to the Notes Subordination
Agreement which they may otherwise have with respect to the distributions to be
made to the Consenting Noteholders pursuant to this Plan and shall be deemed
permanently enjoined from enforcing, or attempting to enforce any such
contractual subordination rights with respect to such distributions.
Accordingly, distributions to be made pursuant to this Plan on account of Notes
Claims will not be subject to levy, garnishment, attachment or other legal
process by any holder of Senior Notes Claims or any other Person by reason of
claimed contractual subordination rights under the Notes Subordination Agreement
or otherwise. In addition, but without limitation of
-60-
<PAGE> 172
the foregoing, a vote by a majority in principal amount of the holders of the
Senior Notes for acceptance of the Plan shall further constitute consent to a
modification of the Senior Notes Indenture and the Senior Notes pursuant to
Section 8.2 and a direction by such majority to the Senior Notes Indenture
Trustee to the extent necessary to fully give effect to the waiver of the Notes
Subordination Agreement. Nothing in this Plan shall effect the subrogation
rights of the Consenting Noteholders on account of the allocation, pursuant to
the New Senior Notes Allocation Schedule, of property distributable to the
Consenting Noteholders, but for the enforcement of the Notes Subordination
Agreement provided for herein.
6.5.10 ASSIGNMENT OF SUBORDINATION RIGHTS. On the Effective Date,
Omega shall be deemed to have waived and/or assigned its rights to assert
subordination of the Claims of Whitehead And Affiliates (without representation
or warranty) only to the extent necessary to give effect to the treatment of the
New Senior Notes as contained in this Plan and Article 6.2.3, and except as
those rights relate to amounts owed by BritWill II to Brit-Texas, which rights
shall be retained by Omega until all obligations owing to Omega with respect to
the Brit-Texas Facilities are satisfied.
6.5.11 RESERVATION OF RIGHTS UNDER FORBEARANCE AGREEMENT. If and to
the extent that the Class 6 BritWill Acquisition Claims and Class 7 Signature
Acquisition Claims are determined to be Allowed Claims in accordance with
Articles 6.2.1 and 6.3.1, the holders of Allowed Senior Notes Claims reserve and
any and all rights under the Forbearance Agreement. All such rights shall be
subject to the subrogation rights of the Consenting Noteholders.
6.5.12 IMPAIRMENT. The holders of the Allowed General Unsecured
Claims are impaired under the Plan.
-61-
<PAGE> 173
6.6 CLASS 10 - NOTES SECURITIES CLAIMS. The holders of Notes Securities
Claims will receive no distributions under the Plan, and any and all such Claims
will be discharged under this Plan.
6.7 CLASS 12--EQUITY INTERESTS AND EQUITY INTERESTS RELATED CLAIMS. The
Allowed Equity Interests and Equity Interest Related Claims shall be satisfied
as follows:
6.7.1 ISSUANCE OF NEW WARRANTS. In full satisfaction of all Allowed
Equity Interests and Equity Interest Related Claims, subject to the provisions
of Article 6.7.2 below, on the Effective Date each holder of an Equity Interest
and Equity Interest Related Claim shall receive its Pro Rata portion of the New
Warrants from the Disbursing Agent pursuant to Article 12 of the Plan.
6.7.2 ALTERNATIVE TREATMENT. In the event that: (a) the Bankruptcy
Court determines that the treatment of, and distributions to, Class 12 under the
Plan violates the provisions of Section 1129(b) of the Bankruptcy Code (to the
extent such provisions may be applicable); or (b) the SEC asserts that the New
Warrants or the New Warrant Shares must be registered pursuant to the Securities
Act or otherwise; or (c) the Bankruptcy Court determines that the issuance of
the New Warrants is not covered by the exemptions provided in Section 1145 of
the Bankruptcy Code, then the Equity Interests shall be cancelled and
extinguished on the Confirmation Date without further act or action under any
applicable agreement, law, regulation, order or rule, and neither the holders of
Equity Interests nor the holders of Allowed Equity Interest Related Claims shall
receive or retain any rights, property or distributions on account of their
Equity Interests or Equity Interest Related Claims, as the case may be.
6.7.3 IMPAIRMENT. The holders of Equity Interests and Equity
Interests Related Claims are impaired under the Plan.
-62-
<PAGE> 174
ARTICLE 7
MEANS FOR IMPLEMENTATION OF PLAN
7.1 SIGNATURE SALE LEASEBACK TRANSACTION. On or before the Effective Date,
the Debtors shall consummate the Signature Sale Leaseback Transaction in which
Omega shall purchase fee simple title to the Signature Facilities for a total
amount of up to FORTY MILLION DOLLARS ($40,000,000.00), with the amount of
$500,000.00 from those proceeds being used as and for the Closing Allowance as
set forth in Article 6.1.5, resulting in net proceeds to the Debtors of up to
$39,500,000.00. The proceeds shall be utilized as follows:
7.1.1 SATISFACTION OF NHI SECURED CLAIMS. Approximately $19 million
of the Signature Sale Leaseback Transactions shall be used to satisfy the
Allowed Class 4 NHI Secured Claims.
7.1.2 EXERCISE OF OPTION. In conjunction with the Signature Sale
Leaseback Transaction, Reorganized Unison shall exercise its option to purchase
The Arbors Health Care Center in Arizona for approximately $3.2 million, which
shall be subject to the Signature Sale/Leaseback Transaction.
7.1.3 WORKING CAPITAL. The remainder of the Signature Sale Leaseback
Transaction Proceeds shall be utilized for the working capital requirements of
Reorganized Unison.
7.1.4 RENT FOR SIGNATURE FACILITIES UNDER OMEGA NEW MASTER LEASE.
Upon the closing of the Signature Sale Leaseback Transaction, the Signature
Facilities shall be leased back to Reorganized Unison as part of the Omega New
Master Lease Facilities covered by the Omega New Master Lease discussed in
Article 7.2 below. The rent on the Signature Facilities under the Omega New
Master Lease will commence at nine percent (9%) (the "Investment Yield") of the
purchase price of each facility and will increase by 1.425% of the initial rent
each year over the fourteen (14) year initial term and over any fourteen (14)
year renewal lease term as contained in
-63-
<PAGE> 175
the Omega New Master Lease. This rent is based on the transaction closing on or
before November 30, 1998. If a closing occurs later, to the extent that the
yield on U.S. Treasury Notes maturing fourteen (14) years after closing (the
"Treasury Yield") has increased or decreased from the Treasury Yield in effect
on June 15, 1998, there will be a corresponding upward or downward adjustment;
provided, however, that any upward adjustment will be limited to the increase in
the Treasury Yield less twenty-five (25) basis points. By way of example, if the
Treasury Yield decreases 30 basis points, the Investment Yield will be 8.7%; if
the Treasury Yield increases 20 basis points, the Investment Yield will remain
9%; and if the Treasury Yield increases 30 basis points, the Investment Yield
will be 9.05%.
7.2 EXECUTION OF THE OMEGA NEW MASTER LEASE. On the Effective Date, the
Indiana Master Lease and Texas Master Lease shall be amended and restated by the
Omega New Master Lease which shall encompass the Omega New Master Lease
Facilities, and be guaranteed by the Omega New Master Lease Guarantors pursuant
to the Omega New Master Lease Guarantee. Some of the principal provisions of the
Omega New Master Lease shall be as follows:
7.2.1 INITIAL TERM/RENEWAL OPTION. The initial term of the Omega New
Master Lease shall be fourteen (14) years commencing on the Effective Date with
one fourteen (14) year renewal option by the Omega New Master Lessees. Any
renewal must be on a global basis encompassing all Omega New Master Lease
Facilities.
7.2.2 SECURITY DEPOSITS. There shall be paid a security deposit
equal to three (3) months rent on each of the Omega New Master Lease Facilities
(including the Signature Facilities), payable at the execution of the Omega New
Master Lease. Security deposits in excess of the above stated amount (if any)
currently held by Omega pursuant to the Indiana Master Lease and the Texas
-64-
<PAGE> 176
Master Lease shall be remitted to Reorganized Unison upon closing of the Omega
New Master Lease; any deficiency shall be paid by Reorganized Unison.
7.2.3 COVENANTS. The Omega New Master Lease shall contain customary
operating and creditors' rights covenants, including reasonable limitations on
restricted payments to Unison, all to be agreed upon between Omega, the Ad Hoc
Committee, the Omega New Master Lessees, and the Omega New Master Lease
Guarantors. Accounts receivable borrowing will be permitted on the Omega New
Master Lease Facilities only if the ratio of the Omega New Master Lessees' cash
flow (i.e. EBITDARM) to debt service (i.e. all fixed charges including estimated
payments of accounts receivable financing) exceeds 1.55 to 1.00. Notwithstanding
the foregoing, the calculation of EBITDARM shall not include the contingent
liability based on the New Omega Guarantee. The Omega New Master Lessees will be
permitted to finance equipment with an annual lease or finance payment not to
exceed the aggregate amount existing as of the Confirmation Date with the
maximum aggregate amount to be reduced over the three (3) years following the
Effective Date to an amount to be agreed upon by Reorganized Unison and Omega.
No other borrowings by the Omega New Master Lessees will be permitted.
7.2.4 RENTAL ADJUSTMENT FOR INDIANA RETURNED FACILITIES. From and
after the Pro Forma Date (defined below), the Debtors or Reorganized Unison will
have no further liability for rental attributable to the Indiana Returned
Facilities. Unison and BritWill Indiana (as reorganized) will be responsible for
all obligations of the Indiana Returned Facilities arising or accrued on or
prior to the Pro Forma Date and with all of Omega's security securing such
obligations; and Omega will be responsible for all obligations arising or
accruing after the Pro Forma Date.
-65-
<PAGE> 177
(a) At the closing of the Omega New Master Lease, adjustment
will be made among Omega and the Omega New Master Lessees so that rental
payments on the Indiana Returned Facilities will be pro forma, based on
transfer of the Indiana Returned Facilities to Omega as of the later of
June 30, 1998 or the last day of a month 45 days after the Debtors, the Ad
Hoc Committee and Omega jointly petition the Bankruptcy Court for an order
permitting a Person designated by Omega to become manager of the Indiana
Returned Facilities (the "Pro Forma Date").
7.3 SALE OF NEW PREFERRED STOCK TO OMEGA. On the Effective Date, Omega
shall purchase, and Reorganized Unison shall issue, the New Preferred Stock as
described in Article 11, with the proceeds therefrom to be used by Reorganized
Unison for working capital purposes.
7.4 ISSUANCE OF NEW COMMON STOCK AND NEW WARRANTS. The Plan will satisfy
a substantial portion of the Class 9 General Unsecured Claims, the Allowed Class
6 and 7 Claims, as well as Allowed Equity Interests and Equity Interest Related
Claims (subject to Article 6.7.2 of the Plan), pursuant to the issuance of the
New Common Stock and the New Warrants as described in Articles 6 and 11.
7.5 CORPORATE STRUCTURE. At and after the Effective Date, Reorganized
Unison shall have the ability to modify its corporate structure (such as by
consolidation of subsidiaries and Affiliates, or otherwise), and the Reorganized
Unison Certificate and Reorganized Unison Bylaws shall authorize such action;
provided, however, that no such restructuring may impair or prejudice the rights
of any holders of Allowed Claims as provided in the Plan.
7.6 NEW CERTIFICATE OF INCORPORATION AND BYLAWS. As of the Effective Date,
the certificates of incorporation and bylaws of the Debtors shall be amended and
restated substantially in the forms of the Reorganized Unison Certificate and
Reorganized Unison Bylaws, which provide
-66-
<PAGE> 178
for, among other things, the authorization of any and all acts necessary to
effectuate this Plan including, without limitation, the issuance of the New
Common Stock, New Common Stock, New Preferred Stock, New Warrants and the New
Warrant Shares. Such restated certificates of incorporation and bylaws shall
also provide (to the extent required by Section 1123(a) and (b) of the
Bankruptcy Code), for a provision prohibiting the issuance of non-voting equity
securities. The initial members of the board of directors of Reorganized Unison
shall serve until such directors, or their successors, are elected at a properly
noticed and constituted stockholders' meeting of Reorganized Unison. After the
Effective Date, Reorganized Unison may amend and restate the Reorganized Unison
Certificate and Reorganized Unison Bylaws as permitted by applicable law.
7.7 NO CORPORATE ACTION REQUIRED. As of the Effective Date: (a) the
adoption of the Reorganized Unison Certificate and Reorganized Unison Bylaws or
similar constituent documents for Reorganized Unison; (b) the initial selection
of directors and officers for Reorganized Unison; (c) the adoption, execution,
delivery and implementation of all contracts, leases, instruments, releases and
other agreements related to or contemplated by this Plan; and (d) the other
matters provided for under or in furtherance of this Plan involving corporate
action to be taken by or required of the Debtors or Reorganized Unison shall be
deemed to have occurred and be effective as provided herein, and shall be
authorized and approved in all respects without further order of the Bankruptcy
Court or any requirement of further action by the stockholders or directors of
the Debtors and Reorganized Unison. As of the Effective Date, the term of each
of the officers and directors of the Debtors not continuing in office, if any,
shall terminate pursuant to the Confirmation Order without any further action by
the stockholders or directors of the Debtors or Reorganized Unison.
-67-
<PAGE> 179
7.8 DIRECTORS AND OFFICERS. The initial directors of Reorganized Unison
shall be selected by the holders of the Notes as of the Effective Date, which
directors shall be satisfactory to Omega. Reorganized Unison shall provide all
directors with indemnification rights and officers and directors liability
insurance and shall compensate its directors in accordance with practices
customary for public entities of its type. On the Effective Date, the operation
of Reorganized Unison shall become the general responsibility of the respective
boards of directors, who shall thereafter have responsibility for the
management, control and operation of Reorganized Unison in accordance with the
Plan, applicable law, the Reorganized Unison Certificate and the Reorganized
Unison Bylaws. The names of the initial members of the board of directors, and
the Senior Management will be as set forth in the Disclosure Statement. All such
directors and executive officers of Reorganized Unison shall be deemed to have
been elected or appointed as the case may be, pursuant to the Confirmation
Order, but shall not take office until the Effective Date. Those directors and
officers serving immediately before the Effective Date and not continuing in
office after the Effective Date, if any, shall be deemed removed therefrom
without cause as of the Effective Date pursuant to the Confirmation Order and
shall be indemnified by Reorganized Unison for all actions taken by such
directors and officers while acting as directors and officers for the Debtors in
accordance with the respective charters, bylaws or contracts of Unison or
applicable state law on account of services provided by such officers and
directors to the Debtors from the Petition Date through and including the
Effective Date. The existing directors of Unison, should they choose to do so,
will continue to serve as directors of Unison from and after the Confirmation
Date until the Effective Date. During the period from the Confirmation Date
until the Effective Date, but not beyond the Effective Date, each of the
non-officer existing directors of Unison will be compensated at $1,000.00 per
meeting of the board of directors for so long as they continue to serve as
directors of Unison.
-68-
<PAGE> 180
7.8.1 SENIOR MANAGEMENT EVALUATION BY BOARD OF REORGANIZED UNISON.
The board of Reorganized Unison (or such committee of the board as appropriate)
will evaluate the Senior Management within three (3) months after the Effective
Date to determine: (a) which members of Senior Management will be given
employment contracts on a post-Effective Date basis (the "New Contracts"); (b)
the terms of those New Contracts; and (c) the terms of participation in the
Options and Cash Bonuses referenced in Articles 7.8.2 and 7.8.3, below. The New
Contracts must be in substantially the same form as the employment agreements
held by Senior Management as of the Petition Date, at substantially similar
compensation terms as currently existing and contain not less than twelve (12)
months severance (but specifically excluding any terms or provisions contained
in the executive severance agreements held by certain Senior Management on or
about April 30, 1998).
7.8.2 POST EFFECTIVE DATE OPTIONS FOR SENIOR MANAGEMENT. The board
of Reorganized Unison, within three (3) months of the Effective Date, shall
allocate to Senior Management retained under New Contracts options to purchase
New Common Stock as follows:
(a) EFFECTIVE DATE OPTIONS. Five-year options to purchase up
to three percent (3%) of the New Common Stock on a fully diluted basis, at
a per share exercise price equal to the Initial Price, which shall vest as
to one third (1/3) of the shares on each of the first three (3)
anniversaries of the date of issuance.
(b) PERFORMANCE BASED OPTIONS. Five-year options to purchase
up to an additional 2% of the New Common Stock on a fully diluted basis,
at a per share exercise price equal to the Initial Price, which shall vest
as to one third (1/3) of the shares on each of the first three (3)
anniversaries of the date of issuance, subject to the following additional
vesting conditions:
-69-
<PAGE> 181
(i) If the EBITDA of Reorganized Unison (on a
consolidated basis) for any fiscal year up to and including the
fiscal year ending more than two years after the Effective Date
exceeds THIRTEEN MILLION DOLLARS ($13,000,000.00) (without taking
into consideration any obligations under the New Omega Guarantee) by
TWO MILLION DOLLARS ($2,000,000.00) or more, such options shall vest
in full. For purposes of EBITDA calculations for this Article
7.8.2(b)(i) and (ii) only, the Signature Sale Leaseback Transaction
and obligations created thereby will be treated as secured debt.
(ii) If such EBITDA exceeds such currently projected
amount by ONE MILLION DOLLARS ($1,000,000.00) or more but less than
TWO MILLION DOLLARS ($2,000,000.00), such options shall vest ratably
in the proportion that such EBITDA in excess of one million dollars
bears to one million dollars.
(iii) Any of such options (including those issued to
Senior Management who are no longer employed at the end of the two
(2) year measurement period) which do not vest as provided above
shall expire.
(c) MISCELLANEOUS. All options issued under this Article 7.8.2
shall include customary provisions for acceleration of vesting in the
event of termination without cause or a change of control of Reorganized
Unison.
7.8.3 CASH BONUSES. In addition to the foregoing, the board of
Reorganized Unison, within six (6) months of the Effective Date, shall allocate
and direct to be paid to Senior Management retained under New Contracts an
aggregate cash bonus of TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000.00),
with the terms and conditions for such bonuses (such as performance criteria) to
be set by the board of Reorganized Unison.
-70-
<PAGE> 182
7.9 POST-EFFECTIVE DATE FINANCING. From and after the Effective Date,
Reorganized Unison shall have sole and complete discretion to raise capital for
any purpose authorized by the Reorganized Unison Articles in any manner
consistent with the restrictions (if any) contained in this Plan.
7.10 DUTIES OF INDENTURE TRUSTEES. Following the Effective Date, the
Senior Notes Indenture and the Notes Indenture shall remain in effect to the
extent required under this Plan and the Claims Litigation LLC. Except as set
forth in this Plan with respect to the function as Disbursing Agent, the Notes
Indenture Trustee and Senior Notes Indenture Trustee shall take only those
actions (if any) as from time to time requested by the Claims Litigation LLC
Board of Managers on behalf of the Claims Litigation LLC, in accordance with the
Notes Indenture or Senior Notes Indenture. On the Effective Date, the indemnity
obligations to the Notes Indenture Trustee and the Senior Notes Indenture
Trustee shall become the obligations of Reorganized Unison, except that the
Claims Litigation LLC shall in turn indemnify and hold harmless Reorganized
Unison for all actions taken by the Notes Indenture Trustee and/or the Senior
Notes Indenture Trustee (if any) at the request of the Claims Litigation LLC
Board of Managers.
7.11 NAME CHANGE. On or before the Effective Date, Unison shall
effectuate a corporate name change to "Raintree HealthCare Corp."
7.12 PURCHASE OF MINORITY INTEREST IN QUEST. On the Effective Date, the
Quest Purchase Option shall be assumed and consummated, thereby making Quest a
wholly owned affiliate of Reorganized Unison.
7.13 NEW LINE OF CREDIT. On or prior to the Effective Date, Reorganized
Unison shall execute the New Line of Credit Agreement and New Line of Credit
Promissory Note evidencing the New Line of Credit for working capital purposes.
-71-
<PAGE> 183
7.14 COUNSEL TO AD HOC COMMITTEE. As part of the distributions otherwise
distributable to the holders of Notes and Senior Notes pursuant to this Plan,
and as compensation in connection with making a substantial contribution to the
Chapter 11 Cases, on the Effective Date, legal counsel to the Ad Hoc Committee
shall be reimbursed for its reasonable fees and expenses incurred in connection
with the Chapter 11 Cases.
ARTICLE 8
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1 ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Except as provided in Article 6.1 of the Plan relating to Omega (which shall
control as to any executory contract and/or unexpired leases between the Debtors
and Omega) the executory contracts and unexpired leases between the Debtors and
any Person shall be dealt with as provided below.
8.1.1 ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. All
executory contracts and unexpired leases set forth on the schedule of assumed
executory contracts filed with the Bankruptcy Court as part of the Plan
Supplement that exist between the Debtors and any Person shall be deemed assumed
by Reorganized Unison as of the Effective Date, except for any executory
contract or unexpired lease: (a) that has been rejected pursuant to an order of
the Bankruptcy Court entered prior to the Confirmation Date; or (b) as to which
a motion for approval or rejection of such executory contract or unexpired
lease, if applicable, has been filed with the Bankruptcy Court prior to the
Confirmation Date. The Texas Master Lease and Indiana Master Lease shall be
assumed, as modified and supplemented pursuant to Articles 6.1 and 7.2 of this
Plan and as more fully set forth in the Omega New Master Lease, on the Effective
Date.
-72-
<PAGE> 184
8.1.2 REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. All
executory contracts and unexpired leases that exist between the Debtors and any
Person and are either set forth on the schedule of rejected executory contracts
and unexpired leases filed with the Bankruptcy Court as part of the Plan
Supplement, or which do not appear in the Plan Supplement shall be deemed
rejected as of the Effective Date, except for any executory contract or
unexpired lease that has been assumed or rejected pursuant to an order of the
Bankruptcy Court entered prior to the Confirmation Date.
8.1.3 APPROVAL OF ASSUMPTION OR REJECTION. Entry of the
Confirmation Order shall constitute: (a) the approval, pursuant to Section
365(a) of the Bankruptcy Code, of the assumption of the executory contracts and
unexpired leases assumed pursuant to the Plan or otherwise during the Chapter 11
Cases; and (b) the approval, pursuant to Section 365(a) of the Bankruptcy Code,
of the rejection of the executory contracts and unexpired leases rejected
pursuant to the Plan or otherwise during the Chapter 11 Cases. Notwithstanding
anything contained herein to the contrary, as part of the Plan Supplement the
Debtors shall have the right to add or delete any executory contract or
unexpired lease that is initially an assumed executory contract or an assumed
unexpired lease on the Schedules.
8.1.4 CURE OF DEFAULTS. On the Effective Date or as soon thereafter
as is practicable, Reorganized Unison shall Cure any defaults under any
executory contract or unexpired lease assumed pursuant to this Plan in
accordance with Section 365(b)(1) of the Bankruptcy Code.
8.1.5 POST-PETITION DATE CONTRACTS AND LEASES. Executory contracts
and unexpired leases entered into and other obligations incurred after the
Petition Date by the Debtors, shall be performed by the Debtors or Reorganized
Unison, as applicable, in the ordinary course of their business.
-73-
<PAGE> 185
8.1.6 BAR DATE. All proofs of claims with respect to Claims
arising from the rejection of any executory contract or unexpired lease rejected
pursuant to the Plan shall be filed with the Bankruptcy Court no later than
THIRTY (30) DAYS after the Confirmation Date. Any Claim not filed within such
time shall be forever barred. With respect to any executory contract or
unexpired lease that was rejected by the Debtors prior to the Confirmation Date,
the deadline for filing such Claims shall be as set forth in the Bar Date Order.
8.1.7 INDEMNIFICATION OBLIGATIONS. Any obligations of the Debtors
to indemnify any Person serving as a fiduciary of any employee benefit plan or
employee benefit program of the Debtors, pursuant to charter, by-laws, contract
or applicable state law shall be deemed to be, and shall be treated as, an
executory contract and assumed by Reorganized Unison on the Confirmation Date.
Any obligation of the Debtors to indemnify, reimburse, or limit the liability of
any Person, including but not limited to any officer or director of any of the
Debtors, any Broker Dealer, or any agent, professional, financial advisor, or
underwriter of any securities issued by the Debtors which relate to any acts or
omissions which occurred prior to the Petition Date: (a) shall be rejected,
canceled, and discharged pursuant to the Plan as of the Confirmation Date; and
(b) any and all Claims resulting therefrom shall be disallowed pursuant to
Section 502(e) of the Bankruptcy Code. Notwithstanding any of the foregoing,
nothing contained in the Plan shall impact, impair or prejudice the rights of
any Person covered by any applicable directors and officers liability insurance
policy and/or any applicable errors and omissions policy (collectively, "D&O
Policies") with respect to such policy or policies. Moreover, Reorganized Unison
shall maintain in force for a period of two (2) years following the Effective
Date appropriate D&O Policies covering pre-Effective Date directors and officers
of the Debtors and containing substantially the same provisions and limits of
coverage as the policies that were in force on the Petition Date, and
Reorganized
-74-
<PAGE> 186
Unison shall also be responsible for paying the deductible or retention amounts
under such policies for such two-year period.
ARTICLE 9
CONFIRMATION WITHOUT ACCEPTANCE BY ALL IMPAIRED CLASSES
In the event that any impaired Class is determined to have rejected the
Plan in accordance with Section 1126 of the Bankruptcy Code, the Debtors may use
the provisions of Section 1129(b) of the Bankruptcy Code to satisfy the
requirements for confirmation of the Plan.
ARTICLE 10
PRESERVATION AND PROSECUTION OF LITIGATION CLAIMS
10.1 PRESERVATION OF LITIGATION CLAIMS. In accordance with Section
1123(b)(3) of the Bankruptcy Code, and except as otherwise expressly provided
herein, all Litigation Claims and Related Party Creditor Defenses shall be
retained and reserved for the benefit of Reorganized Unison and the holders of
Allowed Claims in Classes 6, 7, and 9. For the avoidance of doubt, the holders
of the Notes, the Notes Indenture Trustee, the holders of the Senior Notes and
the Senior Notes Indenture Trustee shall retain all independent rights of action
against Whitehead And Affiliates and Kremser And Affiliates, including, without
limitations, claims for breach of contract and tortuous interference with
contract by such Persons in connection with the BritWill Acquisition Claims and
the Signature Acquisition Claims.
10.2 ESTABLISHMENT OF CLAIMS LITIGATION LLC. On the Effective Date,
Reorganized Unison shall: (a) execute the Claims Litigation LLC Members
Agreement; (b) take all other steps necessary to establish the Claims Litigation
LLC; and (c) cause all Related Party Creditor Defenses
-75-
<PAGE> 187
and Litigation Claims to be assigned to the Claims Litigation LLC as a
representative or agent of the Debtors. In addition, on the Effective Date the
Claims Litigation LLC shall be appointed pursuant to Section 1123(b)(3)(B) as
representative and agent of the Debtors to prosecute, or compromise and/or
abandon the Litigation Claims on behalf of, and with the consent of, Reorganized
Unison in accordance with the Claims Litigation LLC Members Agreement. At the
request of the Claims Litigation LLC Board of Managers, Reorganized Unison, from
time to time, shall advance sums, not to exceed a cumulative total of SEVEN
HUNDRED THOUSAND DOLLARS ($700,000.00), to the Claims Litigation LLC for payment
of reasonable expenses of the Claims Litigation LLC as and when incurred as set
forth in Article 10.2.1 below. Except as otherwise provided in this Article 10,
the provisions of Articles 18.1, 18.2 and 18.3 hereof are applicable.
10.2.1 CLAIMS LITIGATION LLC FUNDING. On the Effective Date, the
Claims Litigation LLC shall be funded with TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) in Cash as an initial funding. Thereafter, if additional funds are
needed for the reasonable and necessary expenses for the Claims Litigation LLC,
Reorganized Unison shall loan up to an additional FOUR HUNDRED FIFTY THOUSAND
DOLLARS ($450,000.00) to the Claims Litigation LLC (the "Loan"), which Loan is
to be repaid only if and when the Claims Litigation LLC obtains affirmative
monetary recoveries as a result of prosecution or settlement of the Litigation
Claims, and after reasonable and necessary expenses of the Claims Litigation LLC
are deducted therefrom. The Loan shall have a first priority security interest
in all assets of the Claims Litigation LLC. If the reasonable and necessary fees
and costs of the Claims Litigation LLC exceed $700,000.00, they shall be paid
only from monetary recoveries (if any) received by the Claims Litigation LLC
after repayment of the Loan.
-76-
<PAGE> 188
10.3 DISTRIBUTION OF CLAIMS LITIGATION LLC FUNDS. All funds received by
the Claims Litigation LLC shall be applied and distributed in accordance with
the Claims Litigation LLC Members Agreement.
10.4 PRESERVATION OF INSURANCE. The Debtors' discharge and release from
Claims as provided herein, except as necessary to be consistent with this Plan,
shall not diminish or impair the enforceability of any insurance policy that may
cover Claims against the Debtors or any other Person.
ARTICLE 11
SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN
Reorganized Unison shall issue for distribution, in accordance with the
provisions of the Plan, the New Common Stock, the New Preferred Stock, the New
Warrants, the New Warrant Shares and the New Senior Notes required for
distribution or sale pursuant to the provisions of the Plan.
11.1 COMMON STOCK. Principal provisions of the New Common Stock are
summarized as follows:
11.1.1 AUTHORIZATION. The Reorganized Unison Certificate shall
authorize the issuance of thirteen million (13,000,000) shares of New Common
Stock. On the Effective Date Reorganized Unison shall issue approximately five
million six hundred thirty-five thousand four hundred (5,635,400) shares of such
New Common Stock pursuant to Article 6.5 which will represent approximately
seventy-five percent (75%) of the equity in Reorganized Unison on a fully
diluted basis if the Class 6 Reserved Stock and Class 7 Reserved Stock is issued
in full to the holders of Allowed Claims in Classes 6 and 7; and approximately
eighty-six percent (86%)
-77-
<PAGE> 189
of the equity in Reorganized Unison on a fully diluted basis if the New Class 6
Reserved Stock and Class 7 Reserved Stock is not issued to holders of Claims in
Classes 6 and 7.
11.1.2 PAR VALUE. The New Common Stock shall have a par value of
$.001 per share.
11.1.3 RIGHTS. The New Common Stock shall have such rights with
respect to dividends, liquidation, voting and other matters as are set forth in
the Reorganized Unison Certificate and as provided under applicable law,
including, without limitation, the right to one vote per share.
11.1.4 EXCHANGE LISTING. Reorganized Unison will use its
reasonable best efforts to register the New Common Stock on a national
securities exchange or automated quotation system prior to, or as soon as
practicable after, the distribution to holders of Allowed Claims entitled to
receive New Common Stock.
11.1.5 REGISTRATION RIGHTS. Any Person who receives ten percent
(10%) or more of the New Common Stock on account of its Allowed Claim under this
Plan will be deemed to have entered into the New Common Stock Registration
Agreement with respect to that stock, and shall have the rights afforded under
that agreement.
11.2 NEW PREFERRED STOCK. Principal provisions of the New Preferred
Stock are summarized as follows:
11.2.1 AUTHORIZATION. The Reorganized Unison Certificate shall
authorize the issuance of three hundred and two thousand (302,000) shares of New
Preferred Stock which shall, upon conversion as provided in Article 11.2.5,
represent four percent (4%) of the equity in Reorganized Unison on a fully
diluted basis.
-78-
<PAGE> 190
11.2.2 PAR VALUE. The New Preferred Stock shall have a par value
of $.001 per share.
11.2.3 PURCHASE PRICE. The purchase price for the New Preferred
Stock shall be THREE MILLION DOLLARS ($3,000,000.00) to be paid by Omega on or
prior to the Effective Date.
11.2.4 RIGHTS. The New Preferred Stock shall have such rights with
respect to dividends, liquidation, voting and other matters as are set forth in
the Certificate of Designation filed with the Delaware Secretary of State and as
provided under applicable law, including but not limited to a preference over
the New Common Stock upon liquidation in the amount of THREE MILLION DOLLARS
($3,000,000.00) and a five percent (5%) dividend payable semi-annually.
11.2.5 CONVERTIBILITY. Each share of New Preferred Stock shall be
convertible, at the option of the holder, into one (1) share of New Common Stock
at any time on or prior to the fifth anniversary of the Effective date.
11.3 NEW WARRANTS. Principal provisions of the New Warrants are as
follows:
11.3.1 AUTHORIZATION. The Plan hereby authorizes (subject to the
provisions of Article 6.7.2 of the Plan) the issuance of New Warrants to
purchase approximately three hundred seventy eight thousand (378,000) shares of
New Common Stock, which, if and to the extent exercised, shall represent up to
approximately five percent (5%) of the equity of Reorganized Unison on a fully
diluted basis.
-79-
<PAGE> 191
11.3.2 EXERCISE PRICE. The New Warrants shall have a per share
exercise price equal to 1.25 times the Initial Price.
11.3.3 EXERCISE; EXPIRATION. The New Warrants shall be exercisable
by the holder thereof at any time on or prior to the fifth anniversary of the
Effective Date, at which time all unexercised New Warrants shall expire.
11.3.4 RIGHTS. The New Warrants will not be redeemable. The number
of shares purchasable upon exercise of the New Warrants will, in the aggregate
equal a maximum of five percent (5%) of the equity in Reorganized Unison on a
fully diluted basis, and will be subject to standard anti-dilution provisions.
The holders of the New Warrants will not have any voting or other rights as
shareholders of Reorganized Unison in respect thereof.
11.4 NEW SENIOR NOTES. Principal provisions of the New Senior Notes are
as follows:
11.4.1 AUTHORIZATION. The Plan hereby authorizes the issuance of
the New Senior Notes in the approximate amount of TWENTY FOUR MILLION FOUR
HUNDRED THOUSAND DOLLARS ($24,400,000.00), less the Effective Date Excess Cash
payment set forth in Article 11.4.4(a), pursuant to the New Senior Notes
Indenture.
11.4.2 SECURITY. The New Senior Notes shall be secured by the New
Senior Notes Collateral.
11.4.3 INTEREST RATE. The New Senior Notes will bear interest,
payable as set forth in Article 11.4.4, in arrears, at a fixed rate equal to
eleven percent (11%) per annum.
-80-
<PAGE> 192
11.4.4 MATURITY AND AMORTIZATION. The New Senior Notes will mature on
the fourth anniversary of the Effective Date, and will be payable as follows:
(a) On the Effective Date, the Effective Date Excess Cash shall
be paid to reduce the principal due and owing on the New Senior Notes.
Under no circumstances will Reorganized Unison be required to access
its New Line Of Credit or otherwise borrow to make all or any portion
of this Effective Date Payment;
(b) If and when the New Senior Notes Collateral or any portion
thereof is sold, the proceeds therefrom (less costs of sale) shall be
used to prepay the New Senior Note, which payment shall be applied: (i)
first to outstanding fees and costs under the New Senior Note Indenture
(if any); (ii) then to accrued interest; and (iii) then to principal;
(c) Interest only will be payable semi-annually for the first
and second years after issuance;
(d) On the third anniversary of the Effective Date, a payment
equal to accrued interest plus a principal reduction of TWO MILLION
DOLLARS ($2,000,000.00) shall be made; and
(e) All unpaid interest, fees, costs and principal shall be
fully due and payable on the fourth anniversary of the Effective Date.
11.4.5 PREPAYMENT PENALTY. The New Senior Notes shall contain no
prepayment penalty.
11.4.6 GUARANTEES. The New Senior Notes shall be guaranteed by all
subsidiaries and Affiliates of Reorganized Unison pursuant to the New Senior
Notes Guarantee other than the Omega New Master Lessees.
-81-
<PAGE> 193
11.4.7 OTHER RIGHTS. The holders of the New Senior Notes received
by the holders of the Senior Notes shall have those rights under the Sharing
Agreement with respect to the Indiana Returned Facility Note set forth in
Article 6.1.2(c) of the Plan.
11.5 SECTION 1145 EXEMPTION. In accordance with Section 1145 of the
Bankruptcy Code, the issuance of the New Common Stock, the New Preferred Stock,
the New Senior Notes, and the Claims Litigation LLC Shares under this Plan is
exempt from the registration requirements of Section 5 of the Securities Act, as
amended, and any state or local law requiring registration for offer or sale of
a security or registration or licensing of an issuer of, underwriter of, or
Broker Dealer in such securities and is deemed to be a public offer of such
securities. With respect to the issuance of the New Warrants and the New Warrant
Shares upon exercise of the New Warrants, the issuance of such securities under
the Plan shall be exempt from the registration requirements of Section 5 of the
Securities Act, as amended, and any state or local law requiring registration of
such securities only to the extent the Bankruptcy Court determines, as part of
the Confirmation Hearing and pursuant to the Confirmation Order, that such
issuance is exempt under the provisions of Section 1145 of the Bankruptcy Code.
ARTICLE 12
PROVISIONS GOVERNING DISTRIBUTIONS TO HOLDERS OF ALLOWED
EQUITY
INTERESTS IN CLASS 11
12.1 TRANSFER AGENT. With respect to each holder of an Allowed Equity
Interest as of the Distribution Record Date, Reorganized Unison shall distribute
such holder's Pro Rata Share of the New Warrants to the Transfer Agent on the
Distribution Date. As soon as practicable after the
-82-
<PAGE> 194
Transfer Agent receives such holder's security pursuant to Article 12.2 below,
the Transfer Agent shall distribute the New Warrants to such holder in
accordance with the terms of this Plan and the New Warrant Agreement.
12.2 SURRENDER OF SECURITIES. On or before the Distribution Date, or as
soon thereafter as practicable, each holder of a security evidencing an Allowed
Equity Interest shall surrender such security to the Transfer Agent. No
distribution of property hereunder shall be made to or on behalf of any such
holder unless and until such security is received by the Transfer Agent or the
unavailability of such security is reasonably established to the satisfaction of
the Transfer Agent and Reorganized Unison. In the event any holder of Allowed
Equity Interests seeks to establish the unavailability of such security
evidencing such Equity Interests, the Transfer Agent shall, within the first
Business Day thirty (30) days after receipt of the holders' evidence of
unavailability and statement of indemnity of the Transfer Agent and Reorganized
Unison: (a) provide the holder, in writing, with a detailed description
regarding the unacceptability of such evidence and statement of indemnity; or
(b) deliver to Reorganized Unison a notice of compliance and distribute to such
holder its Pro Rata Share of the New Warrants. Any such holder who fails to
surrender or cause to be surrendered such security or fails to execute and
deliver an affidavit of loss and indemnity reasonably satisfactory to the
Transfer Agent and Reorganized Unison prior to the first anniversary of the
Effective Date shall be deemed to have forfeited all rights in respect of such
security and shall not participate in any distribution hereunder, and all
property in respect of such forfeited distribution, including dividends accrued
thereon, shall revert to Reorganized Unison notwithstanding any federal or state
escheat laws to the contrary.
12.3 DISTRIBUTION RECORD DATE. At the close of business on the
Distribution Record Date, the stock transfer ledgers of Unison shall be closed,
and there shall be no further changes
-83-
<PAGE> 195
in the record holders of Equity Interests. Reorganized Unison and the Transfer
Agent shall have no obligation to recognize any transfer of such Equity
Interests occurring after the Distribution Record Date. Reorganized Unison and
the Transfer Agent shall be entitled to recognize and deal for all purposes
hereunder with only those record holders stated on the stock transfer ledgers as
of the close of business on the Distribution Record Date.
12.4 DELIVERY OF DISTRIBUTIONS. Distributions of the New Warrants will
be made by the Transfer Agent to holders of the Allowed Equity Interests in
accordance with the Plan at the addresses contained in the official stock
transfer records of Reorganized Unison. If any holder's distribution is returned
as undeliverable, no further distributions to such holder shall be made unless
and until the Transfer Agent is notified of such holder's then current address,
at which time all required distributions shall be made to such holder.
Undeliverable distributions shall be returned to Reorganized Unison until such
distributions are claimed. All claims for undeliverable distributions shall be
made on or before the first anniversary of the Effective Date. After such date,
all unclaimed New Warrants shall revert to Reorganized Unison and the Claim of
any holder of an Allowed Equity Interest or successor to such holder with
respect to such New Warrants shall be discharged and forever barred
notwithstanding any federal or state escheat laws to the contrary.
12.5 FEES AND EXPENSES. All unpaid reasonable fees, costs, charges, and
any other expenses incurred by the Transfer Agent from and after the Unison
Debtors' Petition Date, including any reasonable fees and expenses of
professionals retained by the Transfer Agent as of the Effective Date shall be
paid by the Debtors or Reorganized Unison, as the case may be, to the Transfer
Agent upon approval of the Bankruptcy Court. After the Effective Date, all
reasonable fees, costs, charges and expenses payable to the Transfer Agent,
including any such items incurred
-84-
<PAGE> 196
by the Transfer Agent in its capacity as Disbursing Agent for the New Warrants
under this Plan, shall be paid by Reorganized Unison without further Bankruptcy
Court approval.
ARTICLE 13
TITLE TO PROPERTY; DISCHARGE; INJUNCTION
13.1 CONDITIONS TO CONFIRMATION. The following are conditions precedent
to confirmation of this Plan:
13.1.1 APPROVAL OF DISCLOSURE STATEMENT. The Bankruptcy Court
shall have entered a Final Order approving the Disclosure Statement with respect
to this Plan.
13.1.2 FORM OF CONFIRMATION ORDER. The Confirmation Order shall
have been entered and be in form and substance reasonably acceptable to the
Debtors, the Ad Hoc Committee and Omega. In the event that Debtors, the Ad Hoc
Committee, or Omega are unable to reach an agreement with regard to the form and
substance of the Confirmation Order, the Bankruptcy Court shall resolve all such
disputes between the parties.
13.1.3 SUBSTANCE OF CONFIRMATION ORDER. The Confirmation Order
contains the following:
(a) The provisions of the Confirmation Order are nonseverable and
mutually dependent;
(b) All executory contracts or unexpired leases assumed by
Reorganized Unison during the Chapter 11 Cases or under this Plan shall
remain in full force and effect for the benefit of Reorganized Unison
notwithstanding any provision in such contract or lease (including
those described in Sections 365(b)(2) and (f) of the Bankruptcy Code)
that prohibits such assignment or transfer or that enables, permits or
requires termination of such contract or lease;
-85-
<PAGE> 197
(c) Except as expressly provided in this Plan, the Debtors are
discharged effective upon the Effective Date from all Claims and any
"debt" (as that term in defined in Section 101(12) of the Bankruptcy
Code) that arose on or before the Effective Date, and the Debtors'
liability in respect thereof is extinguished completely, whether
reduced to judgment or not, liquidated or unliquidated, contingent or
noncontingent, asserted or unasserted, fixed or unfixed, matured or
unmatured, disputed or undisputed, legal or equitable, or known or
unknown, or that arose from any agreement of the Debtors that has
either been assumed or rejected in the Chapter 11 Cases or pursuant to
this Plan, or obligation of the Debtors incurred before the Effective
Date, or from any conduct of the Debtors prior to the Effective Date,
or that otherwise arose before the Effective Date, including, without
limitation, all interest, if any, on any such debts, whether such
interest accrued before or after the Petition Date;
(d) The Plan does not provide for the liquidation of all or
substantially all of the property of the Debtors and its confirmation
is not likely to be followed by the liquidation of Reorganized Unison
or the need for further financial reorganizations;
(e) The Confirmation Order, pursuant to Section 1123(b)(3)(B) of
the Bankruptcy Code, specifically appoints the Claims Litigation LLC as
a representative and agent of the Debtors to prosecute, compromise
and/or abandon the Litigation Claims in accordance with the Plan and
the Claim Litigation LLC Members Agreement; and
(f) The Bankruptcy Court has made the following findings of fact
and conclusions of law in the Confirmation Order: (i) the Omega New
Master Lease is a true lease and not any type of financing or joint
venture device; (ii) the Omega New Master Lease covers the facilities
subject to the lease and may not be severed; (iii) there is fair and
-86-
<PAGE> 198
adequate consideration under any fraudulent conveyance or transfer
statutes for each of the Omega New Master Lessees to be jointly and
severally liable for all of the obligations of the other lessees under
the Omega New Master Lease and for the obligations of Unison and
BritWill Healthcare under the New Omega Guarantee; and (iv) the Omega
New Master Lease and the New Omega Guarantee are made in good faith and
not with any actual intent to hinder, delay or defraud either present
or future creditors of any lessee under the Omega New Master Lease, or
otherwise.
13.2 CONDITIONS TO EFFECTIVENESS. The following are conditions
precedent to the occurrence of the Effective Date:
13.2.1 The Confirmation Date shall have occurred;
13.2.2 The Confirmation Order shall be a Final Order, except that
Debtors reserve the right to cause the Effective Date to occur notwithstanding
the pendency of an appeal of the Confirmation Order, under circumstances that
would moot such appeal;
13.2.3 No request for revocation of the Confirmation Order under
Section 1144 of the Bankruptcy Code shall have been made, or, if made, shall
remain pending;
13.2.4 The Bankruptcy Court in the Confirmation Order shall have
approved the retention of jurisdiction provisions in Article 17 of this Plan;
13.2.5 All documents necessary to implement the transactions
contemplated by this Plan shall be made in form and substance reasonably
acceptable to the Debtors, Omega and the Ad Hoc Committee;
13.2.6 Sufficient Effective Date Cash exists to make required
distributions to holders of Allowed Claims required on the Distribution Date;
and
-87-
<PAGE> 199
13.2.7 The New Line Of Credit has been obtained and is ready to
fund, and the New Line Of Credit Agreement and New Line Of Credit Promissory
Note have been executed by all necessary parties.
13.3 WAIVER OF CONDITIONS. The conditions to Confirmation and the
Effective Date may be waived in whole or in part by the unanimous consent of
each of the Debtors and both Omega and the Ad Hoc Committee at any time without
notice, an order of the Bankruptcy Court or any further action other than
proceeding to Confirmation and consummation of the Plan. In the event that
Debtors, Omega, and the Ad Hoc Committee are unable to reach an agreement with
regard to Articles 13.1.2; 13.1.3 (other than 13.1.3(f)); 13.2.4; or 13.2.6
above, the Bankruptcy Court shall resolve all such disputes between the
parties).
ARTICLE 14
NON-ALLOWANCE OF PENALTIES AND FINES
Except as expressly provided for herein, no distribution shall be made
under this Plan on account of, and no Allowed Claim (whether Secured, Unsecured,
priority or Administrative), will include any fine, penalty, exemplary or
punitive damages relating to or arising from any default or breach by the
Debtors, and any claim on account thereof shall be deemed disallowed, whether or
not objection is filed to it.
-88-
<PAGE> 200
ARTICLE 15
TITLE TO PROPERTY; DISCHARGE; INJUNCTION
15.1 REVESTING OF ASSETS. Subject to the provisions of this Plan, the
property of the Estates of the Debtors shall vest in Reorganized Unison on the
Effective Date. As of the Effective Date, all such property of the Debtors shall
be free and clear of all liens, Claims and Equity Interests of holders thereof,
except as otherwise provided herein. From and after the Effective Date,
Reorganized Unison may operate their business, and may use, acquire and dispose
of their property free of any restrictions of the Bankruptcy Code, including the
employment of and payment to professionals, except as otherwise provided in the
Plan or the Confirmation Order.
15.2 DISCHARGE. Except as provided in the Plan or the Confirmation
Order, the rights afforded under the Plan and the treatment of Claims and Equity
Interests under the Plan shall be in exchange for and in complete satisfaction,
discharge and release of all Claims, including any interest accrued on General
Unsecured Claims from the Petition Date and termination of all Equity Interests.
Except as provided in the Plan or the Confirmation Order, Confirmation shall:
(a) discharge the Debtors and Reorganized Unison from all Claims or other debts
that arose before the Confirmation Date, and all debts of the kind specified in
Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or not: (i) a
proof of claim based on such debt is filed or deemed filed pursuant to Section
501 of the Bankruptcy Code; (ii) a Claim based on such debt is allowed pursuant
to Section 502 of the Bankruptcy Code; or (iii) the holder of a Claim based on
such debt has accepted the Plan; and (b) terminate all Equity Interests and
other rights of Equity Interests in the Debtors except as expressly provided
herein.
15.3 INJUNCTION. Except as provided in the Plan or the Confirmation
Order, as of the Confirmation Date, all entities that have held, currently hold
or may hold a Claim or other debt or
-89-
<PAGE> 201
liability that is discharged or an Equity Interest, Equity Interest Related
Claim, or other right of an equity security holder that is terminated pursuant
to the terms of the Plan are permanently enjoined from taking any of the
following actions on account of any such discharged Claims, debts or liabilities
or terminated Equity Interests or rights: (a) commencing or continuing in any
manner any action or other proceeding against the Debtors or Reorganized Unison
(including any officer or director acting as a representative of the Debtors or
Reorganized Unison); (b) enforcing, attaching, collecting or recovering in any
manner any judgment, award, decree or order against the Debtors, Reorganized
Unison, or their respective property; (c) creating, perfecting or enforcing any
lien or encumbrance against the Debtors, Reorganized Unison, or their respective
property; (d) asserting a setoff, right of subrogation or recoupment of any kind
against any debt, liability or obligation due to the Debtors, Reorganized
Unison, or their respective property; and (e) commencing or continuing any
action, in any manner, in any place, that does not comply with or is
inconsistent with the provisions of the Plan or the Bankruptcy Code.
15.4 EXCULPATION. Neither the Debtors, Reorganized Unison, the
Creditors Committee, the Ad Hoc Committee, Omega nor any of their respective
officers, directors, employees, financial advisors, attorneys, or agents, shall
have or incur any liability to any holder of a Claim or Equity Interest,
including the holder of any Equity Interest Related Claim, or any other party in
interest, or any of their respective members or former members, agents,
employees, representatives, financial advisors, attorneys, or Affiliates, or any
of their successors or assigns, for any act or omission in connection with,
relating to, or arising out of, the Chapter 11 Cases, the negotiation and
pursuit of confirmation of the Plan, or the consummation of the Plan, or the
administration of the Plan except for their acts or omissions constituting
willful misconduct, as finally determined by a court of competent jurisdiction
and in all respects shall be entitled to reasonably rely upon the advice of
-90-
<PAGE> 202
counsel with respect to their duties and responsibilities under the Plan or in
the context of the Chapter 11 Cases. No holder of a Claim, Equity Interest or
Equity Interest Related Claim, or any other party in interest, including their
respective agents, employees, representatives, financial advisors, attorneys or
Affiliates, shall have any right of action against the Debtors, Reorganized
Unison, the Creditors Committee, the Ad Hoc Committee, Omega or any of their
respective officers, directors, employees, advisors, attorneys, or agents, for
any act or omission in connection with, relating to, or arising out of, the
Chapter 11 Cases, the negotiation and pursuit of confirmation of the Plan, the
consummation of the Plan, or the administration of the Plan, except for their
acts or omissions constituting willful misconduct as finally determined by a
court of competent jurisdiction.
ARTICLE 16
RETENTION OF JURISDICTION
16.1 JURISDICTION. Notwithstanding the entry of the Confirmation Order
and the occurrence of the Effective Date, the Bankruptcy Court shall retain such
jurisdiction over the Chapter 11 Cases after the Effective Date as is legally
permissible, including jurisdiction to:
16.1.1 Allow, disallow, determine, liquidate, classify, estimate
or establish the priority or secured or unsecured status of any Claim, including
the resolution of any request for payment of any Administrative Claim and the
resolution of any and all objections to the allowance or priority of Claims;
16.1.2 Grant or deny any applications for allowance of
compensation or reimbursement of expenses authorized pursuant to the Bankruptcy
Code or the Plan;
16.1.3 Resolve any matters related to the assumption, assumption
and assignment or rejection of any executory contract or unexpired lease to
which the Debtors are a party and to
-91-
<PAGE> 203
hear, determine and, if necessary, liquidate, any Claims arising therefrom or
cure amounts related thereto;
16.1.4 Ensure that distributions to holders of Allowed Claims are
accomplished pursuant to the provisions of the Plan;
16.1.5 Decide or resolve any motions, adversary proceedings,
contested or litigated matters and any other matters and grant or deny any
applications or motions involving the Debtors that may be pending on the
Effective Date;
16.1.6 Enter such orders as may be necessary or appropriate to
implement or consummate the provisions of the Plan and all contracts,
instruments, releases and other agreements or documents created in connection
with the Plan or the Disclosure Statement, except as otherwise provided herein;
16.1.7 Resolve any cases, controversies, suits or disputes that
may arise in connection with the consummation, interpretation or enforcement of
the Plan or any Person's obligations incurred in connection with the Plan;
16.1.8 Modify the Plan before or after the Effective Date pursuant
to Section 1127 of the Bankruptcy Code or modify the Disclosure Statement or any
contract, instrument, release or other agreement or document created in
connection with the Plan or the Disclosure Statement; or remedy any defect or
omission or reconcile any inconsistency in any Bankruptcy Court order, the Plan,
the Disclosure Statement, the Plan Supplement, or any contract, instrument,
release or other agreement or document created in connection with the Plan, the
Disclosure Statement, or the Plan Supplement, in such manner as may be necessary
or appropriate to consummate the Plan, to the extent authorized by the
Bankruptcy Code;
-92-
<PAGE> 204
16.1.9 Issue injunctions, enter and implement other orders or take
such other actions as may be necessary or appropriate to restrain interference
by any entity with consummation or enforcement of the Plan, except as otherwise
provided herein;
16.1.10 Enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any reason modified, stayed,
reversed, revoked or vacated;
16.1.11 Determine any other matters that may arise in connection
with or relate to the Plan, the Disclosure Statement, the Confirmation Order or
any contract, instrument, release or other agreement or document created in
connection with the Plan, the Disclosure Statement or the Confirmation Order
except as otherwise provided herein;
16.1.12 Enter an order closing the Chapter 11 Cases; and
16.1.13 Adjudicate the Avoidance Actions, the Related Party
Avoidance Action, and Litigation Claims (including those to be initiated and
prosecuted by the Claims Litigation LLC), and any other cause of action or
claims of the Debtors, including, but not limited to, the Related Party Creditor
Defenses.
ARTICLE 17
MODIFICATION, AMENDMENT, AND WITHDRAWAL OF PLAN
Prior to the Confirmation Date, the Debtors may alter, amend, or modify
the Plan or the Plan Supplement under Section 1127(a) of the Bankruptcy Code at
any time provided that such modification does not materially adversely affect
the treatment and rights of Omega, the Senior Notes or holders of General
Unsecured Claims (including holders of the Notes) under this Plan. After the
Confirmation Date and prior to substantial consummation of the Plan as defined
in Section 1101(2) of the Bankruptcy Code, the Debtors may, under Section
1127(b) of the Bankruptcy Code,
-93-
<PAGE> 205
institute proceedings in the Bankruptcy Court to remedy any defect or omission
or reconcile any inconsistencies in the Plan, the Disclosure Statement, the Plan
Supplement, or the Confirmation Order, and such matters as may be necessary to
carry out the purposes and effects of the plan so long as such proceedings do
not materially adversely affect the treatment of holders of Claims or holders of
Equity Interests under the Plan; provided, however, that prior notice of such
proceedings shall be served in accordance with the Bankruptcy Rules or order of
the Bankruptcy Court.
ARTICLE 18
MISCELLANEOUS
18.1 FILING OF OBJECTIONS TO CLAIMS. After the Effective Date,
objections to Claims shall be made and objections to Claims made previous
thereto shall be pursued by Reorganized Unison, the Claims Litigation LLC (as to
the Litigation Claims), or any other party properly entitled to do so after
notice to Reorganized Unison and approval by the Bankruptcy Court. Any
objections made after the Effective Date shall be filed and served not later
than NINETY (90) DAYS after the Effective Date; provided, however, that such
period may be extended by order of the Bankruptcy Court for good cause shown.
18.2 SETTLEMENT OF OBJECTIONS AFTER EFFECTIVE DATE. From and after the
Effective Date, Reorganized Unison and the Claims Litigation LLC (with respect
to the Litigation Claims) may litigate to judgment, propose settlements of, or
withdraw objections to, all pending or filed Disputed Claims or Disputed Equity
Interests, and Reorganized Unison and the Claims Litigation LLC, as applicable,
may settle or compromise any Disputed Claim, Disputed Equity Interest, and/or
Litigation Claim without notice and a hearing and without approval of the
Bankruptcy Court.
-94-
<PAGE> 206
18.3 DISTRIBUTIONS. In order to facilitate distribution of Pro Rata
shares to holders of Allowed Claims, and if and to the extent there are Disputed
Claims in any Class, the Disbursing Agent shall set aside in a separate
designated reserve account the payments or distributions applicable to such
Disputed Claims as if such Disputed Claims were Allowed Claims, pending the
allowance or disallowance of such Disputed Claims. All amounts applicable to
Disputed Claim in Class 9 shall be segregated in a separate interest bearing
account from which shall be deducted the reasonable costs, expenses, and fees
incurred by the: (a) Disbursing Agent in administering distributions; and (b)
Reorganized Unison in objecting to, litigating and settling on Disputed Claims
in Class 9. In the event that Reorganized Unison wishes to deposit or hold a
lesser amount than required herein and is unable to reach an agreement with the
holder of the Disputed Claim or the Disbursing Agent, as the case may be, on the
amount to be deposited or held, the Bankruptcy Court shall fix the amount after
notice and hearing. Upon Final Order with respect to a Disputed Claim, the
holder of such Disputed Claim, to the extent it has been determined to be an
Allowed Claim, shall receive from the Disbursing Agent that payment or
distribution to which it would have been entitled if the portion of the Claim so
Allowed had been Allowed as of the Effective Date. Such payment or distribution
shall be made as soon as practical after the order Allowing the Claim has become
a Final Order. The balance of the amount held by the Disbursing Agent after such
payment applicable to a previously Disputed Claim that has been disallowed in
whole and in part, shall be returned to Reorganized Debtors, except with regard
to a previously Disputed Claim in Class 9, in which event, the balance shall be
distributed Pro Rata amongst the holders of Allowed Claims in Class 9 or
continue to be held by the Disbursing Agent with regard to Disputed Claims not
yet resolved.
-95-
<PAGE> 207
18.4 EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS; TIMING. Each of the
Debtors is hereby authorized and directed, as the case may be, to execute,
deliver, file or record such contracts, instruments, releases and other
agreements or documents and to take such actions as may be necessary or
appropriate to effectuate and further evidence the terms and conditions of the
Plan, the Plan Supplement and any securities issued pursuant to the Plan. All
transactions that are required to occur on the Effective Date under the terms of
the Plan shall be deemed to have occurred simultaneously. The Debtors and
Reorganized Unison are authorized and directed to do such acts and execute such
documents as are necessary to implement the Plan.
18.5 EXEMPTION FROM TRANSFER TAXES. Pursuant to Section 1146(c) of the
Bankruptcy Code: (a) the issuance, distribution, transfer or exchange of the New
Common Stock, the New Preferred Stock, the New Warrants, the New Senior Notes,
the Omega Master Lease, the Signature Sale/Leaseback Transaction or other Estate
property; (b) the creation, modification, consolidation or recording of any deed
of trust or other security interest, the securing of additional indebtedness by
such means or by other means in furtherance of, or connection with this Plan or
the Confirmation Order; (c) the making, assignment, modification or recording of
any lease or sublease; or (d) the making, delivery or recording of a deed or
other instrument of transfer under, in furtherance of, or in connection with,
this Plan, Confirmation Order or any transaction contemplated above, or any
transactions arising out of, contemplated by or in any way related to the
foregoing shall not be subject to any document recording tax, stamp tax,
conveyance fee, intangibles or similar tax, mortgage tax, stamp act or real
estate transfer tax, mortgage recording tax or other similar tax or governmental
assessment and the appropriate state or local government officials or agents
shall be, and hereby are, directed to forego the collection of any such tax or
assessment and to accept for
-96-
<PAGE> 208
filing or recordation any of the foregoing instruments or other documents
without the payment of any such tax or assessment.
18.6 REVOCATION OR WITHDRAWAL OF THE PLAN. The Debtors reserve the
right to revoke or withdraw this Plan at any time prior to the Confirmation
Date. If the Plan is withdrawn or revoked, then the Plan shall be deemed null
and void and nothing contained herein shall be deemed to constitute a waiver of
any Claims by or against the Debtors or any other Person in any further
proceedings involving the Debtors. In the event this Plan is withdrawn or
revoked, nothing set forth herein shall be deemed an admission of any sort and
this Plan and any transaction contemplated thereby shall not be admitted into
evidence in any proceeding.
18.7 BINDING EFFECT. The Plan shall be binding upon, and shall inure to
the benefit of, the Debtors, the holders of all Claims and Equity Interests,
including the holders of Equity Interest Related Claims, and their respective
successors and assigns.
18.8 GOVERNING LAW. Except to the extent that the Bankruptcy Code or
other federal law is applicable or as provided in any document contained in the
Plan Supplement, the rights, duties and obligations of the Debtors and any other
Person arising under the Plan shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Arizona, without giving
effect to Arizona's choice of law provisions.
18.9 MODIFICATION OF PAYMENT TERMS. Reorganized Unison reserves the
right to modify the treatment of any Allowed Claim or Equity Interest in any
manner adverse only to the holder of such Claim or Equity Interest at any time
after the Effective Date upon the prior written consent of the holder whose
Allowed Claim or Equity Interest treatment is being adversely affected.
18.10 PROVIDING FOR CLAIMS PAYMENTS. Distributions to holders of
Allowed Claims shall be made by the Disbursing Agent: (a) at the addresses set
forth on the proofs of Claim filed by such
-97-
<PAGE> 209
holders (or at the last known addresses of such holders if no proof of Claim is
filed or if the Debtors have been notified or a change of address); (b) at the
addresses set forth in any written notices of address changes delivered to the
Disbursing Agent after the date of any related proof of Claim; or (c) at the
addresses reflected in the Schedules if no proof of Claim has been filed and the
Disbursing Agent has not received a written notice of a change of address. If
any holder's distribution is returned as undeliverable, no further distributions
to such holder shall be made unless and until the Disbursing Agent is notified
of such holder's then current address, at which time all missed distributions
shall be made to such holder without interest. Amounts in respect of
undeliverable distributions made through the Disbursing Agent shall be returned
to Reorganized Unison until such distributions are claimed. All claims for
undeliverable distributions shall be made on or before the first anniversary of
the Effective Date. After such date, all unclaimed property shall revert to
Reorganized Unison and the Claim of any holder or successor to such holder with
respect to such property shall be discharged and forever barred notwithstanding
any federal or state escheat laws to the contrary. Nothing contained in this
Plan shall require the Debtors, Reorganized Unison or the Disbursing Agent to
attempt to locate any holder of an Allowed Claim.
18.11 SET OFFS. The Debtor and Reorganized Unison may, but shall not be
required to, set off or recoup against any Claim or Equity Interest and the
payments or other distributions to be made pursuant to the Plan in respect of
such Claim, claims of any nature whatsoever that arose prior to the Petition
Date which the Debtors may have against the holder of such Claim or Equity
Interest to the extent such Claims may be set off or recouped under applicable
law, but neither the failure to do so nor the Allowance of any Claim or Equity
Interest hereunder shall constitute a waiver or release by the Debtors or
Reorganized Unison of any such claim that it may have against such holder.
-98-
<PAGE> 210
18.12 NOTICES. Any notice required or permitted to be provided under
the Plan shall be in writing and served by either: (a) certified mail, return
receipt requested, postage prepaid; (b) hand delivery; (c) reputable overnight
courier service, freight prepaid; or (d) by telecopy or teletransmission, to be
addressed as follows:
If to the Debtors: UNISON HEALTHCARE CORPORATION
15300 North 90th Street
Suite 100
Scottsdale, Arizona 85260
Attn: Nir E. Margalit, Esq.
Telephone: (602) 423-1954
Fax: (602) 607-4113
with a copy to:
SQUIRE SANDERS & DEMPSEY L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Attn: Thomas J. Salerno, Esq.
Telephone: (602) 528-4000
Fax: (602) 253-8129
If to the Transfer Agent: [to be provided]
If to Omega: OMEGA HEALTHCARE INVESTORS, INC.
905 West Eisenhower Circle
Suite 110
Ann Arbor, Michigan 48103
Attn: F. Scott Kellman
Telephone: (734) 747-9790
Fax: (734) 996-0020
-99-
<PAGE> 211
with a copy to:
DYKEMA GOSSETT PLLC
1577 North Woodward Avenue
Suite 300
Bloomfield Hills, Michigan 48304-2820
Attn: Fred J. Fechheimer, Esq.
Telephone: (248) 203-0700
Fax: (248) 203-0763
If to the Notes Indenture
Trustee: FIRST NATIONAL BANK ASSOCIATION
c/o First Trust National Association
180 East 5th Street
St. Paul Minnesota 55101
Attn: Christine Robinette
Telephone: (612) 244-8386
Fax: (612) 244-0711
If to the New Senior
Notes Indenture
Trustee or The
Senior Notes
Indenture Trustee: IBJ SCHRODER BANK & TRUST COMPANY
One State Street, 11th Floor
New York, New York 10004
Attn: Corporate Finance Trust Services
Telephone: (212) 858-2529
Fax: (212) 858-2952
If to the Ad Hoc
Committee: THE AD HOC COMMITTEE OF NOTEHOLDERS OF UNISON
HEALTHCARE CORPORATION
c/o Wachtell Liption Rosen and Katz
51 West 52nd Street
New York, New York 10019
Attn: Chaim J. Fortgang, Esq.
Telephone: (212) 403-1000
Fax: (212) 403-2000
18.12.1 DELIVERY OF NOTICES. If personally delivered, such
communication shall be deemed delivered upon actual receipt; if electronically
transmitted pursuant to this Plan, such communication shall be deemed delivered
by the next noon at point of arrival occurring on a
-100-
<PAGE> 212
Business Day following transmission; if sent by overnight courier pursuant to
this Plan, such communication shall be deemed delivered within twenty-four (24)
hours of deposit with such courier or noon of the first Business Day following
such deposit, whichever first occurs; and if sent by U.S. Mail pursuant to this
Plan, such communications shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service; or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Any party to this Plan may change their address for the purposes of
this Plan by giving notice thereof in accordance with this section.
18.13 STATUTORY COMMITTEE. Any statutory committee or committees
appointed in the Chapter 11 Cases and the Ad Hoc Committee shall terminate on
the Effective Date and shall thereafter have no further responsibilities in
respect of the Chapter 11 Cases, except with respect to preparation of filing of
applications for compensation and reimbursement of expenses.
18.14 SEVERABILITY. If any provision of this Plan is found by the
Bankruptcy Court to be invalid, illegal or unenforceable or that this Plan is
found by the Bankruptcy Court to be invalid, illegal or unenforceable or that
this Plan is not confirmable pursuant to Section 1129 of the Bankruptcy Code,
the Bankruptcy Court, at the request of the Debtors, shall have the power to
alter and interpret such term to make it valid or enforceable to the maximum
extent practicable, consistent with the original purpose of the term or
provision held be invalid, void or unenforceable, and such term or provision
shall then be applicable as altered or interpreted. The Confirmation Order shall
constitute a judicial determination and shall provide that each term and
provision of this Plan, as it may have been altered or interpreted in accordance
with the foregone, is valid and enforceable pursuant to its terms. If a
provision which effects the rights of or conditions imposed on Omega is found to
be void or unenforceable, Omega shall not be bound to close its obligations and
-101-
<PAGE> 213
agreements under the Plan unless Omega provides a waiver of the provision found
to be void or unenforceable.
18.15 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with this
Plan and all instruments and securities issued in connection therewith and
distributions thereon, Reorganized Unison, the Disbursing Agent, the Notes
Indenture Trustee and the New Senior Note Indenture Trustee, as the case may be,
shall comply with all withholding and reporting requirements imposed by any
federal, state, local or foreign taxing authority, and all distributions
hereunder shall be subject to any such withholding and reporting requirements.
Reorganized Unison, the Disbursing Agent, the Notes Indenture Trustee, and the
New Senior Note Indenture Trustee, as the case may be, shall be authorized to
take any and all action that may be necessary to comply with such withholding
and recording requirements. Notwithstanding any other provision of this Plan,
each holder of an Allowed Claim that has received a distribution of New Common
Stock, New Preferred Stock, New Warrants or Cash pursuant to this Plan, shall
have sole and exclusive responsibility for the satisfaction or payment of any
tax obligation imposed by any governmental unit, including income, withholding
and other tax obligation on account of such distribution.
18.16 QUARTERLY FEES TO THE UNITED STATES TRUSTEE. Reorganized Unison
shall pay all quarterly fees payable to the Office of the United States Trustee
for the Debtors after Confirmation, consistent with applicable provisions of the
Bankruptcy Code, Bankruptcy Rules, and 28 U.S.C. Section 1930(a)(6).
18.17 FRACTIONAL SHARES; ODD LOTS; DE MINIMIS DISTRIBUTIONS. No
fractional shares of New Common Stock or New Warrants shall be issued. The
number of shares or warrants issuable under this Plan to any holder of an
Allowed Claim, Equity Interest, and/or Equity Interest Related
-102-
<PAGE> 214
Claim, as the case may be, will be rounded to the nearest whole number with
shares representing less than one-half a share being rounded down, and one-half
or more being rounded up.
18.18 METHOD OF PAYMENT. Payments of Cash required to be made pursuant
to the Plan shall be made by check drawn on a domestic bank or by wire transfer
from a domestic bank at the election of the Person making such payment.
18.19 PAYMENT DATES. Whenever any payment or distribution to be made
under the Plan shall be due on a day other than a Business Day, such payment or
distribution shall instead be made, without interest, on the immediately
following Business Day.
-103-
<PAGE> 215
DATED: Phoenix, Arizona
August 10th, 1998
Respectfully submitted,
UNISON HEALTHCARE CORPORATION,
a Delaware corporation, and its Subsidiaries
and Affiliates (including the BritWill Debtors)
By /s/ Michael A. Jeffries
-----------------------------------------------
Michael A. Jeffries
Its: CEO and President
SQUIRE, SANDERS & DEMPSEY L.L.P.
By: /s/ Kathleen T. Tobin
------------------------------------------------
Thomas J. Salerno
Kathleen T. Tobin
attorneys for
The UNISON DEBTORS,
Co-Proponent of the Plan
GALLAGHER & KENNEDY
By: /s/ Charles R. Sterbach
------------------------------------------------
Charles R. Sterbach, one of the attorneys for
the BRITWILL DEBTORS,
Co-Proponent of the Plan
-104-
<PAGE> 216
PLAN SUPPLEMENT TABLE OF EXHIBITS
---------------------------------
Exhibit "1" Members of Ad Hoc Committee Of Noteholders
Exhibit "2" BritWill Acquisition Claims
Exhibit "3" Signature Acquisition Claims
Exhibit "4" Filkoski Claims
Exhibit "5" New Senior Notes Security Documents
Exhibit "6" New Senior Notes Guarantee
Exhibit "7" New Senior Notes Indenture
Exhibit "8" Omega New Master Lease
Exhibit "9" Omega New Master Lease Guarantee
Exhibit "10" New Omega Guarantee And New Omega
Guarantee Security Documents
Exhibit "11" Indiana Returned Facility Note
Exhibit "12" Litigation Claims
Exhibit "13" Claims Litigation LLC Members Agreement
Exhibit "14" Reorganized Unison Certificate
Exhibit "15" Reorganized Unison By-Laws
Exhibit "16" Term Sheet
Exhibit "17" Assumed Executory Contracts/Unexpired Leases
Exhibit "18" Rejected Executory Contracts/Unexpired Leases
Exhibit "19" New General Unsecured Note
Exhibit "20" Identification Of Certain Facilities
Exhibit "21" New Common Stock Registration Agreement
-105-
<PAGE> 217
Exhibit "22" Warrant Agreement
Exhibit "23" Series A Preferred Stock Certificate of Designation
-106-
<PAGE> 218
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA
In re: ) In Proceedings Under Chapter 11
)
UNISON HEALTHCARE CORPORATION, a )
Delaware corporation, and related ) Case Nos. B-98-06583-PHX-GBN
proceedings, ) Through B-98-06612-PHX-GBN
)
Debtors. )
)
)
- -------------------------------------- )
)
In re: )
)
BRITWILL INVESTMENTS-I, INC., a )
Delaware Corporation, and related ) Case Nos. B-98-0173-PHX-GBN
proceedings, ) Through B-98-0175-PHX-GBN
)
Debtors. ) (Jointly Administered)
)
- --------------------------------------
SUPPLEMENT TO DEBTORS'
JOINT PLAN OF REORGANIZATION
DATED AUGUST 10, 1998
SQUIRE, SANDERS & DEMPSEY L.L.P. GALLAGHER & KENNEDY
Two Renaissance Square 2600 North Central Avenue
40 North Central Avenue, Suite 2700 Phoenix, Arizona 85004-3020
Phoenix, Arizona 85004 (602) 530-8000
(602) 528-4000
Attorneys: Thomas J. Salerno Attorneys: Charles R. Sterbach
Craig D. Hansen Joseph E. Cotterman
Christopher D. Johnson
Kathleen T. Tobin
Counsel to Unison Debtors Counsel to BritWill Debtors
<PAGE> 219
APPLICABLE DEBTORS
------------------
UNISON HEALTHCARE CORPORATION /X/
(Case No. 98-06583-PHX-RGM)
BRITWILL INVESTMENTS-I, INC. /X/
(Case No. 98-0173-PHX-GBN)
BRITWILL INVESTMENTS-II, INC. /X/
(Case No. 98-0174-PHX-GBN)
BRITWILL INDIANA PARTNERSHIP /X/
(Case No. 98-0175-PHX-GBN)
SUNQUEST SPC, INC. /X/
(Case No. 98-06584-PHX-SSC)
BRITWILL HEALTHCARE COMPANY /X/
(Case No. 98-06585-PHX-SSC)
BRITWILL FUNDING CORPORATION /X/
(Case No. 98-06602-PHX-CGC)
/X/
MEMPHIS CLINICAL LABORATORY, INC.
(Case No. 98-06588-PHX-CGC)
AMERICAN PROFESSIONAL HOLDINGS, INC. /X/
(Case No. 98-06587-PHX-GBN)
AMPRO MEDICAL SERVICES, INC. /X/
(Case No. 98-06609-PHX-GBN)
GAMMA LABORATORIES, INC. /X/
(Case No. 98-06611-PHX-SSC)
SIGNATURE HEALTH CARE CORPORATION /X/
(Case No. 98-06591-PHX-SSC)
BROOKSHIRE HOUSE INC. /X/
(Case No. 98-06608-PHX-RGM)
CHRISTOPHER NURSING CENTER, INC. /X/
(Case No. 98-06596-PHX-JMM)
AMBERWOOD COURT, INC. /X/
(Case No. 98-06597-PHX-RGM)
THE ARBORS HEALTH CARE CORPORATION /X/
(Case No. 98-06598-PHX-CGC)
LOS ARCOS, INC. /X/
(Case No. 98-06603-PHX-RGM)
PUEBLO NORTE, INC. /X/
(Case No. 98-06604-PHX-RTB)
RIO VERDE NURSING CENTER, INC. /X/
(Case No. 98-06606-PHX-CGC)
SIGNATURE MANAGEMENT GROUP, INC. /X/
(Case No. 98-06605-PHX-GBN)
CORNERSTONE CARE CENTER, INC. /X/
(Case No. 98-06595-PHX-RTB)
ARKANSAS, INC. /X/
(Case No. 98-06590-PHX-GBN)
DOUGLAS MANOR, INC. /X/
(Case No. 98-06589-PHX-CGC)
SAFFORD CARE, INC. /X/
(Case No. 98-06593-PHX-RTB)
REHABWEST, INC. /X/
(Case No. 98-06594-PHX-CGC)
QUEST PHARMACIES, INC. /X/
(Case No. 98-06586-PHX-RGM)
SUNBELT THERAPY MANAGEMENT SERVICES,
INC. (ALABAMA) /X/
(Case No. 98-06607-PHX-RTB)
DECATUR SPORTS FIT & WELLNESS CENTER,
INC. /X/
(Case No. 98-06601-PHX-SSC)
THERAPY HEALTH SYSTEMS, INC. /X/
(Case No. 98-06600-PHX-GBN)
HENDERSON & ASSOCIATES REHABILITATION,
INC. /X/
(Case No. 98-06599-PHX-SSC)
SUNBELT THERAPY MANAGEMENT SERVICES,
INC. (ARIZONA) /X/
(Case No. 98-06592-PHX-RGM)
CEDAR CARE, INC. /X/
(Case No. 98-06612-PHX-GBN)
SHERWOOD HEALTHCARE CORP. /X/
(Case No. 98-06610-PHX-SSC)
2
<PAGE> 220
This Supplement is filed in connection with the "Joint Plan Of
Reorganization Dated August 10, 1998" (the "Plan) filed by the Unison Debtors
and the BritWill Debtors (as defined therein), as that Plan may be supplemented
and modified.
This Plan Supplement will be supplemented as set forth in Article 1 of
the Plan. RESPECTFULLY SUBMITTED this 10th day of August, 1998.
SQUIRE, SANDERS & DEMPSEY L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004-4441
and
GALLAGHER & KENNEDY
2600 North Central Avenue
Phoenix, Arizona 85004-3020
By /s/ Kathleen T. Tobin
---------------------------------------
Thomas J. Salerno
Kathleen T. Tobin
One of the Attorneys for the Debtors
<PAGE> 221
PLAN SUPPLEMENT TABLE OF EXHIBITS
---------------------------------
Exhibit "1" Members of Ad Hoc Committee Of Noteholders
Exhibit "2" BritWill Acquisition Claims
Exhibit "3" Signature Acquisition Claims
Exhibit "4" Filkoski Claims
Exhibit "5" New Senior Notes Security Documents
Exhibit "6" New Senior Notes Guarantee
Exhibit "7" New Senior Notes Indenture
Exhibit "8" New Senior Notes Allocation Schedule
Exhibit "9" Omega New Master Lease
Exhibit "10" Omega New Master Lease Guarantee
Exhibit "11" New Omega Guarantee And New Omega
Guarantee Security Documents
Exhibit "12" Indiana Returned Facility Note
Exhibit "13" Litigation Claims
Exhibit "14" Claims Litigation LLC Members Agreement
Exhibit "15" Reorganized Unison Certificate
Exhibit "16" Reorganized Unison By-Laws
Exhibit "17" Assumed Executory Contracts/Unexpired Leases
Exhibit "18" Rejected Executory Contracts/Unexpired Leases
Exhibit "19" Identification Of Certain Facilities
Exhibit "20" New Common Stock Registration Agreement
Exhibit "21" Warrant Agreement
<PAGE> 222
Exhibit "22" Series A Preferred Stock Certificate of Designation
ii
<PAGE> 223
EXHIBIT "1"
MEMBERS OF AD HOC COMMITTEE OF NOTEHOLDERS
<PAGE> 224
EXHIBIT "1"
MEMBERS OF AD HOC COMMITTEE OF NOTEHOLDERS
1. Merrill Lynch Phoenix Fund, Inc.
2. Capital Research And Management Company
3. Morgan Stanley Dean Witter Advisors, Inc.
The members of the Ad Hoc Committee hold, collectively, approximately eighty
percent (80%) of the outstanding dollar amount of the Notes.
<PAGE> 225
EXHIBIT "2"
BRITWILL ACQUISITION CLAIMS
<PAGE> 226
EXHIBIT "2"
BRITWILL ACQUISITION CLAIMS
No. Entity Date Amount
1 Unison, f/k/a SunQuest 8/15/95 $9,588,394.00 as
HealthCare Corporation Converted Fixed
(Buyer); Obligation
Bruce Whitehead as agent
For former shareholders of
BritWill HealthCare Co.
(Seller)
2 Unison (Borrower); 4/21/97 $1,475,000.00
Elk Meadows Investment
And BritWill Investments
Company (Lender)
3 Unison (Borrower); 9/25/97 $500,000
BritWill Investments
Company, Ltd. (Lender)
4. BritWill Investments-II, Inc. 11/93 $1,400,000
(Maker);
BritWill Investments-TX,
Ltd. (Lender)
5 Any and all indemnification claims relating to any of the foregoing
<PAGE> 227
EXHIBIT "3"
SIGNATURE ACQUISITION CLAIMS
<PAGE> 228
EXHIBIT "3"
SIGNATURE ACQUISITION CLAIMS
No. Entity Date Amount
1 Unison (Borrower); 4/21/97 $1,475,000.00
Elk Meadows Investment
And BritWill Investments
Company (Lender)
2 Unison (Borrower); 9/25/97 $500,000.00
Elk Meadows Investments,
L.L.C. (Lender)
3 Unison (Maker); 10/31/96 Notes in General
(David Kremser & John Account in escrow
Filkoski (Payee)) totaling $500,000
Notes in Special
Account in escrow
Totaling $645,967
4 Unison (Borrower); 3/17/97 $1,028,188.07
David A. Kremser (Lender)
5 Unison (Borrower); 3/17/97 $131,626.25
Bernice E. Kremser (Lender)
6 Unison (Borrower); 3/17/97 $131,626.25
Michael P. Kremser (Lender)
7 Unison (Borrower); 3/17/97 $131,626.25
Stanley A. Kremser (Lender)
8 Unison (Borrower); 3/17/97 $131,626.25
Holly M. Kremser (Lender)
9 Any and all indemnification claims relating to any of the foregoing
<PAGE> 229
EXHIBIT "4"
FILKOSKI CLAIMS
[TO COME]
<PAGE> 230
EXHIBIT "5"
NEW SENIOR NOTES SECURITY DOCUMENTS
[TO COME]
<PAGE> 231
EXHIBIT "6"
NEW SENIOR NOTES GUARANTEE
[TO COME]
<PAGE> 232
EXHIBIT "7"
NEW SENIOR NOTES INDENTURE
[TO COME]
<PAGE> 233
EXHIBIT "8"
NEW SENIOR NOTES ALLOCATION SCHEDULE
[TO COME]
<PAGE> 234
EXHIBIT "9"
OMEGA NEW MASTER LEASE
[TO COME]
<PAGE> 235
EXHIBIT "10"
OMEGA NEW MASTER LEASE GUARANTEE
[TO COME]
<PAGE> 236
EXHIBIT "11"
NEW OMEGA GUARANTEE AND
NEW OMEGA GUARANTEE SECURITY DOCUMENTS
[TO COME]
<PAGE> 237
EXHIBIT "12"
INDIANA RETURNED FACILITY NOTE
[TO COME]
<PAGE> 238
EXHIBIT "13"
LITIGATION CLAIMS
<PAGE> 239
LITIGATION CLAIMS
Specifically reserved and preserved are all claims, rights or causes of
action arising out of or related to: (1) the BritWill Acquisitions; (2) the
Signature Acquisition; (3) such further related transactions to (1) and (2)
above, including an April 1997 loan and September 1997 loan by Elk Meadows
Investments LLC and BritWill Investments, Ltd.; (4) the business operation of
the Debtors for the period July 1, 1992 to May 28, 1998, including as related to
the foregoing but not limited to any claims for breach of contract, fraud,
misrepresentation, negligence, misappropriation of business opportunities or
trade secrets, corporate waste, fraudulent conveyance, constructive trust,
breach of fiduciary duty, self-dealing or any claims for indemnity, or any
claims arising from an employment relationship with any Debtors; (5) the Related
Party Avoidance Action; (6) the Avoidance Actions; (7) the Related Party
Creditor Defenses; and (8) all other Litigation Claims (collectively, the
"Preserved Claims"). Each Debtor specifically reserves the Preserved Claims as
to: (a) each and every member of Kremser And Affiliates and Whitehead And
Affiliates; (b) any officer or directors of any of the Debtors for the period
July 1, 1992 to May 28, 1998, or any entity or individual who is determined to
be: (i) the alter-ego of the foregoing; or (ii) any entity the aforementioned
might successfully claim are necessary parties for purposes of joinder under the
Federal Rules of Civil Procedure; or (iii) any entity in whose hands the
proceeds and benefit of any impermissible conduct has flowed.
<PAGE> 240
EXHIBIT "14"
CLAIMS LITIGATION LLC
MEMBERS AGREEMENT
[TO COME]
<PAGE> 241
EXHIBIT "15"
REORGANIZED UNISON CERTIFICATE
[TO COME]
<PAGE> 242
EXHIBIT "16"
REORGANIZED UNISON BYLAWS
[TO COME]
<PAGE> 243
EXHIBIT "17"
ASSUMED EXECUTORY CONTRACTS/UNEXPIRED LEASES
[TO COME]
<PAGE> 244
EXHIBIT "18"
REJECTED EXECUTORY CONTRACTS/UNEXPIRED LEASES
[TO COME]
<PAGE> 245
EXHIBIT "19"
IDENTIFICATION OF CERTAIN FACILITIES
<PAGE> 246
EXHIBIT "S"
IDENTIFICATION OF CERTAIN FACILITIES
1. HASMARK FACILITIES
a. FOUR STATES CARE CENTER
# 8 East Midway Street
Texarkana, TX 75501
b. HERITAGE OAKS
210 North Kenwood Street
Texarkana, TX 75501
c. TEXARKANA NURSING CENTER
4920 North Elizabeth Street
Texarkana, TX 75001
2. INDIANA RETURNED FACILITIES
a. ENGLISH ESTATES
1585 Perryworth Road
Lebanon, IN 46052
b. ENGLISH SENIOR LIVING/ENGLISH ASSISTED LIVING
1015 North Lebanon Street
Lebanon, IN 46052
c. CAPITAL CARE HEALTHCARE CENTER
2115 North Central Avenue
Indianapolis, IN 46202
d. SUNSET MANOR
1109 South Indiana Street
Greencastle, IN 46135
e. LOCKERBIE HEALTHCARE CENTER
1626 North College Drive
Indianapolis, IN 46202
f. PARKVIEW MANOR
2424 East 46th Street
Indianapolis, IN 46205
<PAGE> 247
3. OMEGA INDIANA FACILITIES
a. WELLINGTON MANOR
1924 Wellesley Boulevard
Indianapolis IN 46219
b. CLOVERLEAF OF KNIGHTSVILLE
700 South Crawford Street
Knightsville, IN 47857
c. KENDALVILLE MANOR
1802 East Dowling Street
Kendalville, IN 46755
4. OMEGA INDIANA LEASEHOLD MORTGAGE FACILITIES
a. BOONVILLE CONVALESCENT
725 South 2nd Street
Boonville, IN 47601
b. HOLIDAY MANOR
305 North 6th Street
Princeton, IN 47670
c. OWENSVILLE CONVALESCENT
Highway 165 west P.O. Box 369
Owensville, IN 47665
d. WILLOW MANOR CONVALESCENT
1321 Willow Street
Vincennes, IN 46591
5. OMEGA TEXAS FACILITIES
a. HERITAGE PLAZA
600 West 52nd
Texarkana, TX 75501
b. PINE HAVEN CARE CENTER
4808 North Elizabeth Street
Texarkana, TX 755501
c. REUNION PLAZA
1401 Hampton Drive
Texarkana, TX 75503
<PAGE> 248
d. PINE GROVE NURSING CENTER
Rt. 1, Box 1965
Center, TX 75935
e. PLEASANT MANOR LIVING CENTER
3650 S Highway 35-E
Waxahachie, TX 75165
f. COLONIAL PINES HEALTHCARE
1203 FM 1277 San Augustine, TX 75972
g. WEST PLACE NURSING CENTER
Highway 31 W, Box 232
Athens, TX 75751
h. SOUTH PLACE NURSING CENTER
150 Gibson Road
Athens, TX 75751
6. SIGNATURE FACILITIES
a. AMBERWOOD COURT CARE CENTER
4686 East Asbury Circle
Denver, CO 80222
b. THE ARBORS HEALTHCARE CENTER
15 East Highway 260
Camp Verde, AZ 86322
c. BROOKSHIRE HOUSE
4660 East Asbury Circle
Denver, CO 80222
d. LOS ARCOS HEALTHCARE CENTER
800 West University Avenue
Flagstaff, AZ 86001
e. PUEBLO NORTE NURSING CENTER
2401 East Hunt Street
Show Low, AZ 85901
f. RIO VERDE HEALTHCARE CENTER
197 South Willard Street
Cottonwood, AZ 86326
<PAGE> 249
g. CHRISTOPHER HOUSE NURSING CENTER
6270 West 38th Avenue
Wheat Ridge, CO 80333
7. BRIT-TEXAS FACILITIES
a. COLONIAL PINES HEALTHCARE
(see 5(f), above)
b. FOUR STATES CARE CENTER
(see 1(a), above)
c. HERITAGE OAKS
(see 1(b), above)
d. TEXARKANA NURSING CENTER
(see 1(c), above)
e. SOUTH PLACE NURSING CENTER
(see 5(h), above)
f. WEST PLACE NURSING CENTER
(see 5(g), above)
<PAGE> 250
EXHIBIT "20"
NEW COMMON STOCK REGISTRATION AGREEMENT
[TO COME]
<PAGE> 251
EXHIBIT "21"
WARRANT AGREEMENT
[TO COME]
<PAGE> 252
\
EXHIBIT "22"
SERIES A PREFERRED STOCK
CERTIFICATE OF DESIGNATION
[TO COME]
<PAGE> 253
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Unison HealthCare Corporation
We have audited the accompanying consolidated balance sheets of Unison
HealthCare Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the consolidated financial statements of American Professional
Holding, Inc. (Ampro) and Memphis Clinical Laboratory, Inc. (Memphis), which
statements reflect net operating revenues constituting approximately 11% and net
income constituting approximately 123% of the consolidated total revenues for
the period ended December 31, 1995. Those statements relating to Ampro and
Memphis for the year ended December 31, 1995 were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the data included for Ampro and Memphis, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and, for 1995, the report of other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Unison HealthCare
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that Unison
HealthCare Corporation and subsidiaries will continue as a going concern. As
discussed in Note 2 of the consolidated financial statements, on May 28, 1998,
Unison HealthCare Corporation filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code. This matter raises substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Phoenix, Arizona
July 14, 1998
<PAGE> 254
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................ $ 5,295 $ 17,409
Accounts receivable (Notes 2,3, 10 and 13) ....................................... 32,855 28,608
Prepaid expenses and other current assets (Note 6) ............................... 7,768 5,885
--------- ---------
Total current assets .......................................................... 45,918 51,902
Property and equipment, net (Notes 7 and 13) ....................................... 25,588 30,830
Lease operating rights and other intangible assets, net (Note 8) ................... 84,487 113,781
Goodwill, net (Note 3) ............................................................. 28,357 28,431
Security deposits and other assets (Note 9) ........................................ 7,817 5,977
--------- ---------
$ 192,167 $ 230,921
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable (Note 11) ....................................................... $ 7,592 $ 10,505
Accrued expenses (Note 12) ....................................................... 24,617 21,437
Current portion of notes payable and long-term debt due to
related parties (Notes 2, 13 and 17) .......................................... 20,500 12,312
Current portion of other notes payable and long-term debt (Notes 2, 10, 13 and 16) 144,277 21,603
--------- ---------
Total current liabilities ..................................................... 196,986 65,857
Notes payable and long-term debt due to related parties, less
current portion (Notes 2, 13 and 17) ............................................. -- 15,882
Other notes payable and long-term debt (Notes 2, 10, 13 and 16) .................... 8,020 107,341
Deferred taxes (Note 18) ........................................................... 16,013 24,791
Leasehold liability, net (Note 16) ................................................. 4,246 4,434
Other liabilities .................................................................. 936 927
--------- ---------
Total liabilities ............................................................. 226,201 219,232
Stockholders' equity (deficit) (Notes 14 and 15):
Preferred stock, $.001 par value; authorized 1,000,000 shares;
no shares issued or outstanding ............................................... -- --
Common stock, $.001 par value; authorized 25,000,000 shares;
6,422,096 and 6,078,498 shares issued and outstanding in 1997 and 1996 ......... 5 5
Additional paid-in capital ....................................................... 36,211 34,723
Accumulated deficit .............................................................. (70,250) (23,039)
--------- ---------
Net stockholders' equity (deficit) ............................................ (34,034) 11,689
--------- ---------
$ 192,167 $ 230,921
========= =========
</TABLE>
See accompanying notes.
2
<PAGE> 255
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT COMMON SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues:
Net patient service revenues ................ $ 222,090 $ 146,379 $ 64,947
Other operating revenues .................... 2,276 2,295 3,541
----------- ----------- -----------
Total operating revenues ............ 224,366 148,674 68,488
Expenses:
Wages and related ........................... 116,137 85,789 35,047
Other operating ............................. 84,566 64,771 24,032
Rent ........................................ 16,119 15,658 6,673
Interest .................................... 20,076 5,824 1,176
Depreciation and amortization ............... 9,974 4,561 1,311
Impairment losses and other charges (Note 22) 27,185 3,865 --
----------- ----------- -----------
Total expenses ...................... 274,057 180,468 68,239
----------- ----------- -----------
Income (loss) before income taxes ............. (49,691) (31,794) 249
Income tax expense (benefit) .................. (2,480) (8,356) 132
----------- ----------- -----------
Net income (loss) ............................. $ (47,211) $ (23,438) $ 117
=========== =========== ===========
Net income (loss) per share ................... $ (7.41) $ (5.01) $ 0.05
Common shares used in per share calculation ... 6,370,834 4,676,037 2,280,213
</TABLE>
See accompanying notes.
3
<PAGE> 256
<TABLE>
<CAPTION>
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK RETAINED
-------------------------- ADDITIONAL EARNINGS
NUMBER OF PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ................. 1,789,497 $ 1 $ 453 $ 282 $ 736
Sale of common stock in public offering,
net of stock issuance costs .............. 2,000,000 2 14,612 -- 14,614
Conversion of debenture .................... 424,251 -- 5,286 -- 5,286
Stock warrants issued ...................... -- -- 150 -- 150
Net income ................................. -- -- -- 117 117
--------- --------- --------- --------- ---------
Balance at December 31, 1995 ............... 4,213,748 3 20,501 399 20,903
Costs of initial public offering ........... -- -- (93) -- (93)
Stock warrants exercised ................... 178,503 -- -- -- --
Conversion of debenture .................... 137,564 -- 1,714 -- 1,714
Common stock issued for acquisitions ....... 1,537,376 2 12,701 -- 12,703
Stock options exercised .................... 11,307 -- 102 -- 102
Tax benefit associated with exercise of
stock options ............................ -- -- 11 -- 11
Repurchase of stock warrants ............... -- -- (213) -- (213)
Net loss ................................... -- -- -- (23,438) (23,438)
--------- --------- --------- --------- ---------
Balance at December 31, 1996 ............... 6,078,498 5 34,723 (23,039) 11,689
Common stock issued for acquisition ........ 238,052 -- 685 -- 685
Conversion of Sunbelt notes payable ........ 105,196 -- 800 -- 800
Stock options exercised .................... 350 -- 3 -- 3
Net loss ................................... -- -- -- (47,211) (47,211)
--------- --------- --------- --------- ---------
Balance at December 31, 1997 ............... 6,422,096 $ 5 $ 36,211 $ (70,250) $ (34,034)
========= ========= ========= ========= =========
See accompanying notes.
4
</TABLE>
<PAGE> 257
<TABLE>
<CAPTION>
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ......................................................... $ (47,211) $ (23,438) $ 117
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Impairment losses and other charges ..................................... 27,185 3,865 --
Depreciation and amortization ........................................... 9,974 4,561 1,311
Provision for doubtful accounts ......................................... 2,039 2,742 29
Change in deferred taxes ................................................ (3,286) (9,238) (21)
Minority interest expense ............................................... 299 138 21
Leasehold liability amortization ........................................ (188) (188) (78)
Other charges and credits, net .......................................... 41 (69) --
Changes in operating assets and liabilities, net of acquisitions:
Increase in net accounts receivable .................................. (8,263) (5,310) (8,694)
(Increase) decrease in prepaids and other ............................ (136) 825 (607)
Increase in accounts payable and accrued expenses .................... 1,238 2,454 6,990
--------- --------- ---------
Net cash used in operating activities ..................................... (18,308) (23,658) (932)
--------- --------- ---------
INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements .......................... (1,535) (3,587) (1,333)
Increase in intangibles and other assets .................................. (205) (2,707) (1,397)
Increase in lease and insurance deposits .................................. (1,840) (1,204) (272)
Acquisitions, net of cash acquired ........................................ (659) (41,225) (677)
--------- --------- ---------
Net cash used in investing activities ..................................... (4,239) (48,723) (3,679)
--------- --------- ---------
FINANCING ACTIVITIES:
Net increase (decrease) in revolving line of credit ....................... 7,117 (789) (2,916)
Proceeds from sale of accounts receivable ................................. -- -- 2,515
Proceeds from long-term borrowings ........................................ 23,950 113,567 2,448
Payments on long-term borrowings .......................................... (16,868) (24,808) (6,187)
Repayment of other long-term liabilities .................................. -- (2,779) --
Proceeds from initial public stock offering ............................... -- -- 14,614
Change in bank overdrafts ................................................. (780) 3,043 --
Repurchase of stock warrants .............................................. -- (213) --
Exercise of stock options ................................................. 3 102 --
Increase in deferred financing costs ...................................... (2,989) (4,502) --
--------- --------- ---------
Net cash provided by financing activities ................................. 10,433 83,621 10,474
--------- --------- ---------
Net (decrease) increase in cash ......................................... (12,114) 11,240 5,863
Cash and cash equivalents at beginning of period .......................... 17,409 6,169 306
--------- --------- ---------
Cash and cash equivalents at end of period ................................ $ 5,295 $ 17,409 $ 6,169
========= ========= =========
See accompanying notes
5
</TABLE>
<PAGE> 258
UNISON HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT COMMON SHARE AND PER SHARE AMOUNTS)
1. DESCRIPTION OF BUSINESS
Unison HealthCare Corporation, ("Unison" or "the Company") is a provider of
long-term and specialty healthcare services. At December 31, 1997, Unison
operated 55 facilities, including long-term care and specialty care and
independent/assisted living facilities. Unison's operations are located in 11
states, principally in the Midwest and southwest regions of the United States.
Unison changed its name from SunQuest HealthCare Corporation in November
1995. In August 1995, Unison acquired all of the common stock of BritWill
HealthCare Company ("BritWill"). In March 1996, Unison acquired 90% of the
common stock of four rehabilitation therapy centers (collectively "Sunbelt
Therapy") and in November 1996 retroactively acquired the remaining 10%. In
October 1996, Unison acquired all of the common stock of Signature Health Care
Corporation and four affiliated companies ("Signature") (the "Signature
Acquisition"). In October 1996, Unison completed a merger with two clinical
laboratory companies, American Professional Holding, Inc. ("Ampro") and Memphis
Clinical Laboratory, Inc. ("Memphis") (Note 4). Unison also operates
institutional pharmacies and a Medicare Part B billing and supply company.
2. SUBSEQUENT EVENT
On January 7, 1998, three of Unison's subsidiaries with operations in Texas
and Indiana filed voluntary petitions for reorganization (the "Filings") under
Chapter 11 ("Chapter 11") of Title 11 of the United States Code in the United
States Bankruptcy Court. On May 28, 1998 Unison and all of its other
subsidiaries also filed for reorganization under Chapter 11. Under Chapter 11,
Unison will continue to manage its affairs and operate its business as a
debtor-in-possession while it develops a reorganization plan that will
restructure the Company and allow its emergence from Chapter 11. As a
debtor-in-possession in Chapter 11, the Company may not engage in transactions
outside of the ordinary course of business without approval, after notice and
hearing, of the Bankruptcy Court.
The Company is currently in default of substantially all of its debt and
lease agreements (Notes 13 and 16). Accordingly, all unpaid principal of, and
accrued prepetition interest on, such debt became immediately due and payable
and is classified as a current liability in the accompanying consolidated
balance sheet.
The accompanying consolidated financial statements have been prepared on a
going concern basis of accounting and do not reflect any adjustments that might
result should the Company be unable to continue as a going concern. The recent
losses from operations and the related Filings raise substantial doubt about the
Company's ability to continue as a going concern. The appropriateness of using
the going concern basis is dependent upon, among other things: (i) the Company's
ability to obtain and comply with debtor-in-possession financing agreements;
(ii) confirmation of a plan of reorganization under the Bankruptcy Code; (iii)
the Company's ability to achieve profitable operations after such confirmation;
and (iv) the Company's ability to generate sufficient cash from operations to
meet its obligations.
In accordance with the Bankruptcy Code, the Company can seek court approval
for the rejection of executory contracts, including real property leases. Any
such rejection may give rise to a pre-petition unsecured claim for breach of
contract. In connection with the Chapter 11 proceedings, a review is being
undertaken of all obligations under executory contracts, including real property
leases. To date, the Company has received permission from the Bankruptcy Court
to reject the leases of 13 nursing facilities and two regional offices.
As a result of the reorganization proceedings, Unison may sell or otherwise
realize assets and liquidate or settle liabilities for amounts other than those
reflected in the accompanying consolidated financial statements. Further, a
6
<PAGE> 259
2. SUBSEQUENT EVENT (CONTINUED)
plan of reorganization could materially change the amounts currently recorded in
the financial statements. The financial statements do not give effect to any
adjustments to the carrying value of assets, or amounts and classification of
liabilities that might be necessary as a consequence of these matters.
Restructuring Plan (unaudited)
Unison has reached an agreement in principle (the "Term Sheet") with
respect to restructuring of the Company's debt and equity, with Omega HealthCare
Investors, Inc. ("Omega") and representatives of the 13% Senior Notes due 1999
(the "13% Senior Notes") and the 12-1/4% Senior Notes due 2006 (the "12-1/4%
Senior Notes"). The Company also has secured a continuation of its accounts
receivable line of credit with HealthCare Financial Partners ("Health Partners")
(Note 10) in the amount of $11,000, which will be available to the Company for
vendor payments and to meet working capital requirements during the Chapter 11
process. Unison has not reached an agreement in principle with Messrs. David A.
Kremser and Bruce H. Whitehead, former directors of the Company (Notes 4, 13 and
17).
Under the Term Sheet, the treatment of approximately $18,000 of disputed
claims of entities related to Messrs. Whitehead and Kremser would depend upon
the results of anticipated litigation over the possible disallowance or
equitable subordination of such claims. If such claims are not disallowed or
equitably subordinated to the claims of general unsecured creditors, the
Whitehead and Kremser related entities would receive in full satisfaction of
such claims 100% of the Class A Common Stock, representing approximately 11% of
the fully diluted equity, of the reorganized Company. The Class A Common Stock
would have rights identical to those of other common stockholders in the
reorganized Company except that the Class A Common Stock would have an $18,000
liquidation preference over the remaining common stock. If such claims are
disallowed or equitably subordinated, they would be canceled and receive nothing
in the reorganization. In either event, the holders of the 13% Senior Notes
would receive approximately $21,000 in new promissory notes of the Company in
full satisfaction of their claims, and the Company's trade creditors and holders
of the 12-1/4% Senior Notes would receive pro rata distributions of
approximately $4,600 in new promissory notes and all of the Class B Common Stock
of the reorganized Company. The Class B Common Stock will represent
approximately 75% of the fully diluted equity of the reorganized Company if the
Class A Common Stock is issued to the Whitehead and Kremser related entities,
and approximately 86% of the fully diluted equity if the claims of the Whitehead
and Kremser related entities are disallowed or equitably subordinated and
canceled. Up to 5% of the fully diluted equity of the reorganized entity would
be allocated to management incentive options. The Company's currently
outstanding equity would be canceled and current stockholders would receive a
pro rata distribution of warrants to purchase up to 5% of the fully diluted
equity of the reorganized Company.
The Term Sheet also provides for resolution of all claims of Omega against
the Company under lease and mortgage arrangements affecting 20 of the Company's
healthcare facilities. Omega would purchase seven facilities owned and operated
by the Company for up to $40,000, yielding net cash proceeds to the Company of
up to $18,000 after payment in full of transaction costs and indebtedness
currently collateralized by such facilities. The facilities would then be leased
back to Union at an initial lease rate of 9%. These facilities and 10 other
facilities currently leased by Omega to the Company or subject to mortgage loans
in favor of Omega would be combined into a single master lease at lease rates
which are comparable to those currently in effect under the existing facility
leases. Six leased facilities would be returned to Omega, and three additional
facilities subleased by the Company to another operator would be excluded from
the master lease, for which Omega would receive $2,000 in cash and a $3,000,
seven-year promissory note as compensation. In addition, Omega would purchase
$3,000 of the Company's new 5% cumulative preferred stock, convertible into 4%
of the Company's fully diluted equity. All prepetition rent and mortgage
payments due to Omega would be paid. The agreements set forth in the Term Sheet
will be incorporated into an overall reorganization plan which will be subject
to approval by the Bankruptcy Court and the Company's creditors.
7
<PAGE> 260
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Unison and its subsidiaries. Significant intercompany transactions and balances
have been eliminated in consolidation.
Revenues and expenses related to the operations acquired from BritWill,
Sunbelt Therapy, Signature and other acquisitions (Note 4) are included in
Unison's results of operations for periods subsequent to the date of
acquisition. The merger with Ampro and Memphis has been accounted for as a
pooling of interests. Accordingly, the consolidated financial statements of
Unison include the accounts of Ampro and Memphis for all periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. Estimates
are used when accounting for, among other things, the collectibility of
receivables and third party settlements, depreciation and amortization, employee
benefit plans, taxes, contingencies and evaluation of impairment of long-lived
assets.
Net Operating Revenues
Revenues are recognized when services are provided and products are
delivered. Unison's revenues are derived primarily from providing long-term
healthcare services. Contractual adjustments resulting from agreements with
various organizations to provide services for amounts which differ from billed
charges, including services under Medicare and Medicaid, are recorded as
deductions from gross patient service revenue. The estimated third-party payor
settlements under Medicare and Medicaid programs are recorded in the period the
related services are rendered and are subject to audit and final settlement by
the fiscal intermediary. Differences between the net amounts accrued and
subsequent settlement, if any, are recorded in operations at the time the final
settlement is determined.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. Unison believes that it is substantially
in compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing which would have a material impact on Unison's consolidated financial
condition or results of operations. While no such regulatory inquiries have been
made, compliance with such laws and regulations can be subject to future
government review and interpretation as well as significant regulatory action
including fines, penalties and exclusion from the Medicare and Medicaid
programs.
The Company has submitted to the Health Care Financing Administration
("HCFA") various requests for exceptions to the Medicare established routine
cost limitations for reimbursement ("RCLs"). These exceptions are permitted
under the Medicare regulations to allow providers reimbursement for treating
higher acuity patients. For the years ended December 31, 1997 and 1996, Unison
recorded approximately $2,722 and $2,260, respectively, of Medicare RCL
exception revenues which are subject to audit and final approval by the fiscal
intermediary. Based on consultation with outside reimbursement specialists,
management believes that the ultimate resolution of third-party payor
settlements will not have a material adverse impact on the consolidated
financial position or results of operations of Unison.
Unison receives fees for the management of long-term care facilities on
behalf of the owners. Other operating revenues include management fees amounting
to $1,725, $1,200 and, $1,730 in 1997, 1996 and 1995 respectively.
Provision for doubtful accounts is made when the related revenue is
recorded and is included in other operating expense. The provisions totaled
$2,039, $2,742 and $29 in 1997, 1996 and 1995 respectively. Accounts, when
determined to be uncollectible, are charged against the allowance for doubtful
accounts. The allowance for doubtful accounts is determined by management using
estimates of potential losses based on an analysis of current and past
8
<PAGE> 261
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
due accounts, collection experience in relation to amounts billed, prior
settlements experience and other relevant information. The allowance for
doubtful accounts totaled $7,423 and $3,776 at December 31, 1997 and 1996,
respectively.
Cash and cash equivalents
Cash and cash equivalents include amounts held in demand deposits at
financial institutions and all highly liquid investments that have an original
maturity of three months or less.
Inventories
Inventories are comprised primarily of nursing facility supplies and
pharmaceutical products and are stated at the lower of cost (first-in,
first-out) or market.
Property and Equipment
Property and equipment are stated at cost. Major renewals or improvements
are capitalized, whereas ordinary maintenance and repairs are expensed as
incurred. Depreciation and amortization is computed using the straight-line
method for the lesser of the lease term or the estimated useful life of the
respective asset.
Intangible Assets
Certain costs incurred in the acquisition of facilities such as assembled
workforce and covenants not to compete are amortized on a straight-line basis
over five years. Lease operating rights (net of leasehold liabilities) have been
recorded in connection with the acquisitions of BritWill and Signature (Note 4)
and represent the difference between the aggregate consideration given for all
of the acquired companies' assets, less the value of those assets which were
identified and discretely valued as defined by an independent valuation. Lease
operating rights are being amortized on a straight-line basis over the
respective initial lease term, including probable renewal periods, not to exceed
thirty years.
Management believes that goodwill related to nursing home acquisitions has
an unlimited useful life and, therefore, assigned a forty-year amortization
period to goodwill resulting from such acquisitions. In determining its
unlimited useful life, management considered factors such as policies of similar
public healthcare and long-term care companies, nature of the long-term care
industry which is positively impacted by the increasing age of the American
population as well as the continual transfer of patients from a high cost acute
care setting to a lower cost long-term care setting, profitability of companies
in the long-term care industry, and the fact that nursing care services provided
in nursing home facilities will be continuously needed in the future and are not
subject to obsolescence.
Goodwill resulting from various acquisitions is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION -------------------------------------
PERIOD (YEARS) 1997 1996
------------------ --------- --------
<S> <C> <C> <C>
BritWill .............................. 40 $ 7,000 $ 7,000
Pharmacies ............................ 20 1,402 1,197
Gamma Labs ............................ 15 1,087 1,087
Sunbelt ............................... 20 5,425 5,425
Signature ............................. 40 9,300 9,300
RehabWest ............................. 20 5,029 5,029
Spine Rehab ........................... 20 845 --
-------- --------
30,088 29,038
Amortization .......................... (1,731) (607)
-------- --------
$ 28,357 $ 28,431
======== ========
</TABLE>
9
<PAGE> 262
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Costs incurred in obtaining long-term financing are amortized on a
straight-line basis over the terms of the related indebtedness. Unison
periodically assesses the recoverability of intangible assets by comparing the
carrying amount of the intangible assets to the future benefits or undiscounted
cash flows derived from that asset. Impairments are recognized in operating
results if it is probable that the carrying value of the asset will not be
recovered from future cash flows derived from that asset. The Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"), on January 1, 1996. Under SFAS 121, an impairment loss is
recognized if the sum of the expected long-term cash flows is less than the
carrying amount of the goodwill and other assets being evaluated (Note 22).
Income Taxes
Unison accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Deferred income taxes represent the impact of temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes and
such amounts recognized for tax purposes.
Net Income (Loss) Per Share
Net income (loss) per share is calculated by dividing net income (loss) by
the weighted average number of common and dilutive equivalent shares
outstanding.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 replaces the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings per share is computed
by dividing income available to common stockholders by the weighted average
number of common shares actually outstanding during the period. Diluted earnings
per share include the dilutive effect of options, warrants and convertible
securities. The implementation of SFAS 128 has no impact on Unison's net income
(loss) per share for 1997 and prior years because the Company's options,
warrants and convertible notes are antidilutive.
Reclassifications
Certain reclassifications have been made to the 1995 and 1996 financial
statements to conform to the 1997 presentation.
Recently Issued Pronouncements
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"), was issued in June 1997. This statement
establishes standards for reporting and displaying comprehensive income and its
components in financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131"), was also
issued in June 1997. This statement requires that public business enterprises
report certain information about operating segments and related disclosures
about products and services, geographic areas and major customers.
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Post-retirement Benefits" ("SFAS No. 132"),
was issued in February 1998. This statement standardizes disclosure requirements
for pension and other post retirement benefits, requires additional information
on changes in benefit obligations and fair values of plan assets, and eliminates
certain existing disclosure requirements.
10
<PAGE> 263
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS Nos. 130, 131 and 132 will be effective for Unison's fiscal year
ending December 31, 1998. The adoption of these statements is not expected to
have an impact on the Company's consolidated results of operations, financial
position or cash flows and should not require any significant changes in current
disclosures.
4. SIGNIFICANT BUSINESS TRANSACTIONS, ACQUISITIONS AND DISPOSITIONS
In August 1995, Unison acquired all of the common stock of BritWill,
another long-term care company operating approximately 28 facilities located in
Texas and Indiana (the "BritWill Acquisition"). The terms of the BritWill
Acquisition were modified in April 1996, effective August 10, 1995, such that
Unison acquired all of the outstanding stock of BritWill for a total fixed
purchase amount of $20,600 plus, to the extent applicable, monthly contingent
payments if Unison's monthly consolidated net patient revenues exceeded
specified monthly amounts ranging from $8,000 to $11,989 for the period from
September 9, 1995 through July 31, 2000. An additional lump sum contingent
payment was payable on the earlier of: (i) August 9, 2000 if Unison had
consolidated net patient revenues of not less than $150,000 for the twelve-month
period ended June 30, 2000 or (ii) the sale by Unison of debt or equity
securities exceeding $10,000. The purchase price was comprised of a $5,602 term
note, an $8,000 subordinated promissory note (the "Subordinated Note"), and a
$7,000 non-interest bearing convertible subordinated debenture (Note 13). The
majority shareholder of BritWill, Bruce H. Whitehead, was the Chairman of
Unison's Board of Directors from the time of the BritWill Acquisition until May
1998.
During August 1996, as a result of the proposed acquisition of the common
stock of Signature, the contingent payments became reasonably assured and Unison
accrued the present value of the remaining contingent payments related to the
BritWill Acquisition in an amount totaling $11,500 (the "Additional Payment
Obligation") (Note 13). As a result of the recent Filing, the Additional Payment
Obligation converted to a Converted Fixed Obligation. In connection with the
BritWill Acquisition, Unison paid a financial advisory fee to Trouver Capital
Partners, L.P. ("Trouver") amounting to $675. One of Unison's directors is a
partner in Trouver. The acquisition was accounted for as a purchase. The
contingent portions of the purchase price were initially added to lease
operating rights when paid, and then in August 1996 when accrued. At December
31, 1997 and 1996, contingent payments and accruals amounting to $19,523 had
been added to lease operating rights.
Effective February 1, 1996, Unison acquired 90% of the common stock of
Sunbelt Therapy, paying $800 in cash and issuing term notes aggregating $1,000
(the "Notes") and subordinated convertible debentures aggregating $1,800 (the
"Debentures"). The transaction was accounted for as a purchase. In November
1996, Unison purchased the remaining 10% of Sunbelt Therapy effective February
1, 1996. The aggregate purchase price amounted to $1,418 plus a guaranteed
payment amounting to $709. Consideration for the purchase was comprised of
promissory notes in the aggregate amount of $1,876 and 27,942 shares of Unison
common stock (Note 13).
On October 31, 1996, Unison simultaneously completed mergers with Ampro and
Memphis for aggregate consideration of $4,942. The outstanding shares of Ampro
common stock were converted into the right to receive 521,000 shares of Unison
common stock. Three shareholders who owned approximately 35% of the outstanding
shares of Memphis received pro rata portions of 19,000 shares of Unison common
stock and the holder of the remaining shares of Memphis received cash in the
amount of $237 and a promissory note in the amount of $250. The total amount
assigned to the 540,000 shares of Unison Common Stock issued was $4,455, based
on the closing market price on October 31, 1996 of $8.25. The transaction has
been recorded as a pooling of interests.
On October 31, 1996, Unison acquired Signature, which operates 13 long-term
care facilities in Colorado and Arizona. The initial aggregate purchase price of
Signature amounted to approximately $50,653, comprised of cash and promissory
notes totaling approximately $38,200 and 1,509,434 shares of Unison Common
Stock. The amount assigned to the shares of Unison Common Stock issued was
$12,453, based on the closing market price on October 31, 1996 of $8.25. 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, paid in convertible
promissory notes of $1,827 (the "Convertible Notes") and 238,052 shares of
Unison Common Stock with a market value of $2.875 per share or $685 (Note 13).
The adjustment was recorded as an addition to the purchase price of Signature
and added to lease operating rights. In connection with the Signature
11
<PAGE> 264
4. SIGNIFICANT BUSINESS TRANSACTIONS, ACQUISITIONS AND DISPOSITIONS (CONTINUED)
acquisition, Unison also acquired all of the outstanding stock of RehabWest,
Inc. ("RehabWest"), a related rehabilitation services company, for a cash
purchase price of $6,100. These acquisitions were accounted for as purchases.
Mr. David A. Kremser, Signature's majority shareholder, was a director of Unison
from the time of the Signature acquisition until May 1998.
Effective January 1, 1997, Unison, through its Sunbelt Therapy subsidiary,
purchased the assets of a rehabilitation therapy services company located in
Mississippi. Consideration for the purchase was comprised of cash amounting to
$600 and a $300 promissory note. Interest on the note bears interest at 10.0%,
payable quarterly, and the principal balance is due January 2, 2002.
On September 30, 1996, Unison announced a disposition plan designed to
improve its long-term financial strength and operating performance. The original
plan included the disposition of seven nursing facilities and was subsequently
modified to include an aggregate of eight facilities (the "Disposition
Facilities"). On March 1, 1997, Unison subleased four of the Disposition
Facilities to an unrelated party. In 1998, Unison's disposition plan was
expanded in connection with its restructuring program to include an additional
13 facilities. The provision for losses on disposal of the Disposition
Facilities is included in impairment losses and other charges in the
consolidated statement of operations (Note 22). Revenues and expenses related to
the Disposition Facilities are included in the 1997 consolidated statement of
operations in the aggregate amount of $12,539 and $12,792, respectively. In the
first and second quarters of 1998, Unison disposed of nine facilities (leased or
managed) via management agreements or lease terminations. As of July 10, 1998,
eight facilities remain held for disposition.
5. STATEMENTS OF CASH FLOWS
Supplemental information related to the statements of cash flows is set
forth below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
Cash paid during year ended December 31 for :
<S> <C> <C> <C>
Interest ............................................... $19,377 $ 3,014 $ 1,179
Income taxes ........................................... 799 124 92
</TABLE>
The Company's acquisitions involved the following noncash activities for
the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets acquired ....................... $ 1,100 $122,420 $ 59,421
Liabilities assumed and incurred .................... 441 68,492 58,744
Common stock issued ................................. -- 12,703 --
-------- -------- --------
$ 659 $ 41,225 $ 677
======== ======== ========
</TABLE>
Other noncash financing activities for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Conversion of debentures into shares of common stock ............... $ 800 $1,174 $5,286
Property and equipment purchased under capital leases .............. 729 7,205 --
Accounts payable converted to debt ................................. 3,206 -- --
Common stock warrants issued ....................................... -- -- 150
</TABLE>
12
<PAGE> 265
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets as of December 31 are summarized
as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Prepaid expenses ............................................... $ 870 $ 938
Deferred taxes (Note 18) ....................................... 5,079 3,332
Inventories .................................................... 1,819 1,615
------ ------
$7,768 $5,885
====== ======
</TABLE>
7. PROPERTY AND EQUIPMENT
Property and equipment as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
LIFE (YEARS) 1997 1996
--------------- -------- --------
<S> <C> <C> <C>
Land and building ................................. 15-25 $ 17,863 $ 21,757
Equipment ......................................... 5-15 11,652 11,806
Leasehold improvements ............................ 12-15 3,066 2,386
-------- --------
32,581 35,949
Less accumulated depreciation ..................... (6,993) (5,119)
-------- --------
$ 25,588 $ 30,830
======== ========
</TABLE>
Property and equipment includes assets acquired under capitalized leases of
approximately $4,477 and $7,965 at December 31, 1997 and 1996, respectively.
Accumulated depreciation related to capital leases amounted to $1,170 and $498
at December 31, 1997 and 1996, respectively.
8. LEASE OPERATING RIGHTS AND OTHER INTANGIBLE ASSETS
Lease operating rights and other intangible assets as of December 31 are
summarized as follows:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD (YEARS) 1997 1996
------------------ --------- ---------
<S> <C> <C> <C>
Lease operating rights ............................. 25-30 $ 79,723 $ 108,050
Capitalized assembled workforce .................... 3 1,845 1,845
Debt and bond issue costs .......................... 3-10 7,882 5,200
Covenants not to compete ........................... 2-5 850 850
Other .............................................. 5-20 956 1,076
--------- ---------
91,256 117,021
Less amortization .................................. (6,769) (3,240)
--------- ---------
$ 84,487 $ 113,781
========= =========
</TABLE>
The increase in debt and bond issue costs from 1996 to 1997 is primarily
due to issue costs capitalized in connection with the 13% Senior Notes described
in Note 13.
The reduction in lease operating rights from 1996 to 1997 is primarily a
result of the Company's evaluation of its long-lived assets for impairment in
accordance with SFAS 121 (Note 22).
9. SECURITY DEPOSITS AND OTHER ASSETS
Security deposits and other assets as of December 31 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Security deposits ............................................ $7,817 $5,077
Other ........................................................ -- 900
------ ------
$7,817 $5,977
====== ======
</TABLE>
13
<PAGE> 266
9. SECURITY DEPOSITS AND OTHER ASSETS (CONTINUED)
In connection with certain lease agreements with Omega, Unison is required
to maintain security deposits. Deposits held by Omega amounted to $3,739 at
December 31, 1997 and 1996.
10. LINE OF CREDIT
In March 1996, Unison's revolving lines of credit were replaced by a
$10,000 revolving credit facility. Borrowings under this credit facility bear
interest at the prime rate plus 2.0%, mature in 1998 and are collateralized by
Unison's eligible accounts receivable. A commitment fee of .5% is payable on the
unused portion. The agreement requires Unison to comply with certain financial
and operational covenants including limitations on additional borrowings and
sale of assets and alteration of Unison's existing capital structure. At
December 31, 1997, Unison was fully drawn on this line of credit based on the
amount of available collateral. In July 1998, as part of the restructuring plan
(Note 2) Unison obtained a continuation of its line of credit in the amount of
$11,000 with interest at the prime rate plus 3%, which will be available to the
Company for working capital requirements during the Chapter 11 process. Although
this line of credit expires in 1998, management has the intent and ability to
renew or replace this line of credit and has therefore classified the
outstanding balance of $7,117 at December 31, 1997 as long-term.
11. ACCOUNTS PAYABLE
Accounts payable as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Trade payables ....................................................... $ 5,329 $ 7,462
Checks drawn in excess of bank balances .............................. 2,263 3,043
------- -------
$ 7,592 $10,505
======= =======
</TABLE>
12. ACCRUED EXPENSES
Accrued expenses as of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued compensation and benefits .................................. $ 9,843 $ 8,487
Purchase accounting liabilities .................................... -- 2,688
Accrued interest ................................................... 3,603 2,879
Accrued professional fees .......................................... 1,585 1,090
Income and gross receipt taxes ..................................... 3,340 3,106
Reserve for dispositions ........................................... 2,023 --
Other .............................................................. 4,223 3,187
------- -------
$24,617 $21,437
======= =======
</TABLE>
The purchase accounting liabilities at December 31, 1996 represent
additional consideration payable to the former shareholders of Signature
amounting to $2,511 (Note 4) and an accrual of $177 for severance, exit and
lease terminations.
14
<PAGE> 267
13. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt due to related parties is summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1997 1996
-------- --------
<S> <C> <C>
Additional Payment Obligation ........................................ $ 9,588 $ 11,500
Subordinated Note .................................................... -- 8,000
Working capital notes ................................................ 3,950 --
Notes in escrow ...................................................... 1,146 1,146
Convertible Notes .................................................... 1,826 --
Subordinated notes payable to a related party ........................ 2,320 2,767
Other notes .......................................................... 1,670 4,781
-------- --------
20,500 28,194
Less current portion ................................................. (20,500) (12,312)
-------- --------
$ -- $ 15,882
======== ========
</TABLE>
In connection with the BritWill Acquisition (Note 4), Unison incurred the
Subordinated Note in the amount of $8,000 and the Additional Payment Obligation
of $11,500. The Subordinated Note was repaid in January 1997 with proceeds from
the 12-1/4% Senior Notes. The Additional Payment Obligation represents the
present value of the remaining monthly payments, ranging from $117 to $166 at
interest rates ranging from 12% to 14% through the term of the obligation with a
balloon payment of $8,146 due August 9, 2000. Unison is in arrears of monthly
payments on the Additional Payment Obligation and has, therefore, classified
this obligation as a current liability at December 31, 1997.
On April 21, 1997, Unison obtained a $2,950 loan for general working
capital purposes from affiliates of Messrs. Kremser and Whitehead. This loan
matured on August 1, 1997. On September 25, 1997, Unison borrowed an additional
$1,000 from Messrs. Whitehead and Kremser which was due on October 7, 1997. The
loans bear interest at prime plus 2.0% and are collateralized by a pledge of
certain accounts receivable and the stock of certain Unison subsidiaries. Unison
is currently in default on its obligations to repay these loans. In addition to
the foregoing, the loan documents state that the collateral pledged for the
working capital loans also collateralizes all other obligations which may be due
those individuals and/or entities which they control; and further that all such
obligations are in default due to cross default provisions in these loan and
security documents. These obligations are classified as current liabilities.
A portion of the purchase consideration for Signature was comprised of
promissory notes totaling $1,146, which were placed in escrow. Of this amount,
$500 was due to be paid to Mr. Kremser and the other former shareholders of
Signature on October 31, 1997. The remaining $646, subject to any outstanding
claims, is due and payable on October 31, 1998. The notes in escrow are
classified as current liabilities at December 31, 1997.
In accordance with an adjustment provision of the Signature merger
agreements related to stockholders' equity, in March 1997 the former
shareholders of Signature received additional consideration of $2,511, paid in
the form of the Convertible Notes amounting to $1,826 and 238,052 shares of
Unison common stock at a conversion price of $2.875 per share. The Convertible
Notes bear interest at 12.0% and were due on December 31, 1997. The Convertible
Notes are classified as current liabilities at December 31, 1997.
Subordinated notes payable to a related party are payable to BritWill
Investments Texas, Ltd. ("BritWill Texas"), an affiliate of Mr. Whitehead. The
notes are payable monthly with interest at 9% to 10% with the balance due in
October 2004. Unison had made all required payments on these notes as of
December 31, 1997 but is in arrears with respect to payments due subsequent to
this date in the aggregate amount of approximately $195 as of June 30, 1998. The
subordinated notes are classified as current liabilities as of December 31,
1997.
Other notes include obligations of $1,626 to the former owners of Sunbelt
Therapy. In connection with the purchase of Sunbelt Therapy (Note 4), Unison
issued the Notes and Debentures in the aggregate amount of $2,800. In accordance
with the terms of the Notes, the conversion price ($7.61) was equal to 85% of
the average closing
15
<PAGE> 268
13. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
price of Unison's common stock ($8.95) for the 20-day trading period preceding
notice of conversion on November 27, 1996. In January 1997, the Notes and
Debentures were converted into 105,196 shares of Unison common stock with the
balance of $2,000 paid in cash. Effective February 1, 1996, Unison purchased the
remaining 10% minority ownership in Sunbelt Therapy (Note 4). The purchase price
included notes payable in the aggregate amount of $1,876. Interest on the notes
is payable quarterly beginning January 1997 at a rate of 9.0% per year, with
scheduled principal reductions due annually through January 1999. Unison has not
made the principal payment due in January 1998 in the amount of $918 and has
therefore classified the entire obligation as a current liability at December
31, 1997.
Other notes payable and long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1996
--------- ---------
<S> <C> <C>
12-1/4% Senior Notes ........................................... $ 100,000 $ 100,000
13% Senior Notes ............................................... 20,000 --
Mortgage Note .................................................. 18,422 18,640
Capital lease obligations (Note 16) ............................ 3,429 7,759
Notes payable to trade vendors ................................. 1,100 52
11.5% notes payable to Omega ................................... 283 283
Line of Credit (Note 10) ....................................... 7,117 --
Term loans and other ........................................... 1,946 2,210
--------- ---------
152,297 128,944
Less current portion ........................................... (144,277) (21,603)
--------- ---------
$ 8,020 $ 107,341
========= =========
</TABLE>
On October 31, 1996, Unison completed the private placement of $100,000 of
its 12-1/4% Senior Notes. The net proceeds of $94,550 were used to: (i) complete
the acquisitions of Signature and RehabWest (Note 4); (ii) repay certain debt
and contingent obligations; and (iii) for general corporate purposes. In January
1997, a portion of the proceeds from the 12-1/4% Senior Notes was used to repay
the Subordinated Note and prepay $1,750 of the Additional Payment Obligation.
Interest on the 12-1/4% Senior Notes is payable semiannually. The stated
interest rate of 12 -1/4% per annum was subject to temporary increase if the
12-1/4% Senior Notes were not registered with the Securities and Exchange
Commission (the "SEC") within specified time periods. The interest rate on the
12-1/4% Senior Notes was 13.75% and 14-1/4% (the maximum rate) as of December
31, 1997 and June 30, 1998, respectively. The 12-1/4% Senior Notes indenture
contains certain covenants, including limitations on additional indebtedness,
investments, transactions with affiliates, asset sales, payment of dividends and
certain other transactions. The 12-1/4% Senior Notes are guaranteed by all of
the Company's current and future subsidiaries on a full, unconditional, joint
and several basis. All of Unison's subsidiaries are wholly owned with the
exception of Quest Pharmacies, Inc., of which Unison owns 75%. As of June 30,
1998, Unison had not made the scheduled payment of interest on the 12-1/4%
Senior Notes in the amount of $6,876 which was due May 1, 1998. The grace period
with respect to such payment expired on May 31, 1998. The 12-1/4% Senior Notes
are therefore in default and have been classified as a current liability as of
December 31, 1997.
On December 1, 1997, Unison completed the private placement of $20,000 of
its 13% Senior Notes. The net proceeds to Unison in the amount of $19,200 were
used for debt service and other working capital requirements. Commencing on
March 1, 1998, interest is payable quarterly in arrears. Commencing on June 1,
1998 and each September 1, December 1, March 1 and June 1 thereafter until the
maturity date of December 1, 1999, the rate of interest accruing on the 13%
Senior Notes will increase by 0.50%. The interest rate is subject to additional
temporary increases ("Additional Interest") if the 13% Senior Notes (or Exchange
Notes with the same terms) are not registered with the SEC within specified time
periods. On March 1, 1998, the interest rate increased to 13.25% and the rate of
Additional Interest is subject to further increases of 0.25% every 90 days
thereafter (up to a maximum rate of 15.0%) until such registration becomes
effective. As of July 1, 1998, the interest rate on the 13% Senior Notes was
14.0%. Other terms and conditions of the 13% Senior Notes are essentially the
same as those of the 12-1/4 % Senior Notes. As of June 30, 1998, Unison had not
made scheduled payments of interest on the 13%
16
<PAGE> 269
13. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
Senior Notes in the aggregate amount of $1,298. The grace periods with respect
to such payments have expired and the 13% Senior Notes are in default. The
13.25% Senior Notes are classified as a current liability as of December 31,
1997.
In connection with the Signature acquisition (Note 4), Unison assumed a
10.5% mortgage loan (the "Mortgage Note") collateralized by property and
equipment of six of the Signature facilities. Principal and interest of $180 is
payable monthly with a balloon payment due in April 2004. The Mortgage Note
requires Unison to maintain consolidated net worth of at least $39,000 and a
specified minimum current ratio. The Company is 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 $18,422 as of December 31, 1997
as a current liability.
In 1997, Unison converted the balances of certain of its trade accounts
payable to promissory notes. The notes bear interest at 8.5% to 11.0% and are
payable in monthly installments through September 1999. As of December 31, 1998,
Unison was in arrears of payments on these notes and has therefore classified
these obligations as current liabilities as of December 31, 1997.
In April 1996, Unison issued 11.5% promissory notes to Omega related to
capital improvements on two of its nursing facilities. The notes were due in
full on September 30, 1996 and have therefore been classified as current
liabilities as of December 31, 1997.
Future maturities of notes payable and long-term debt at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
Years ending December 31,
<S> <C>
1998..................................... $164,777
1999..................................... 7,612
2000..................................... 44
2001..................................... 47
2002..................................... 317
------------
$172,797
</TABLE>
14. STOCKHOLDER'S EQUITY
In December 1995 and January 1996, Unison completed its initial public
offering (the "IPO") resulting in the issuance of 2,000,000 shares of common
stock at $9.00 per share. Proceeds from the IPO amounted to $14,614, net of
expenses, of which $9,727 was used to repay debt (Notes 13 and 17). In
connection with the IPO, Unison issued warrants to the representatives of the
underwriters to purchase up to 120,000 shares of common stock, at an exercise
price of $11.70 per share (market value at the date of grant), which
approximates the fair value of consideration received at the date of issuance,
in exchange for certain advisory services to be provided to Unison during the
twelve-month period following the IPO. The warrants are exercisable for a
five-year period beginning in December 1996.
On August 10, 1995, Unison entered into a stock purchase warrant agreement
with HealthPartners. The agreement entitled HealthPartners to purchase shares of
Unison's common stock with an aggregate market value of $150, or approximately
16,667 shares based on the IPO price of $9.00 per share. The $150 was
capitalized as a deferred financing cost and amortized over two years. In
December 1996, HealthPartners exercised its option to require Unison to
repurchase the warrants for $213 in cash, which was recorded as a reduction of
additional paid-in capital.
Effective December 31, 1994, Unison completed a stock purchase warrant
agreement to satisfy amounts due to an individual who actively negotiated
several of Unison's management and operating lease agreements. The warrants were
exercised in 1996, whereby 178,000 shares of Unison common stock were purchased
for two hundred dollars. Since the warrants were granted at less than fair
market value, leasehold rights totaling $43 have been capitalized and are being
amortized over the respective initial lease term.
17
<PAGE> 270
14. STOCKHOLDER'S EQUITY (CONTINUED)
In August and October 1996, warrants to purchase an aggregate of 300,464
shares of common stock were issued to a commercial bank in connection with a
short-term loan agreement. The exercise prices of the warrants are $12.80 and
$13.00 (market value at the date of grant), which approximates the fair value of
consideration received at the date of issuance, and the warrants expire on
October 31, 2001.
Unison's common stock was traded on The Nasdaq Stock Market's National
Market System from December 19, 1995 to August 21, 1997. Effective August 22,
1997, Nasdaq moved Unison's securities to its SmallCap Market because the
Company did not satisfy the minimum tangible net asset requirement for the
listing of its stock on the National Market System. On February 23, 1998, new,
more stringent quantitative maintenance requirements for continued listing on
the Nasdaq SmallCap Market went into effect. Unison does not currently meet
these requirements, and on April 15, 1998, Nasdaq delisted the Company's
securities.
15. STOCK OPTIONS
In July 1995, the Board of Directors approved the 1995 Stock Option Plan
(the "1995 Plan"). The 1995 Plan offers two types of options: (i) a
discretionary option grant program (the "Discretionary Program") under which
eligible individuals may, at the discretion of the Board of Directors, be
granted options to purchase shares of common stock at an exercise price
determined by the Board of Directors; and (ii) the automatic option grant
program (the "Automatic Program") under which grants of options will
automatically be made at periodic intervals to eligible non-employee Board
members to purchase shares of common stock at an exercise price equal to 100% of
their fair market value on the grant date. Each grant under the Automatic
Program vests over two years and is exercisable for ten years. Options granted
in 1995 under the Discretionary Program vest over periods of two to four years.
In January 1996, the 1995 Plan was amended by the Board of Directors to change
the exercise price of all outstanding options from $10.00 to $9.00 per share,
which was the IPO price (Note 14). The 1995 Plan was further amended: (i) in
October 1996 to increase the number of shares of common stock authorized for
issuance under the 1995 Plan from 511,046 to 800,000, and (ii) in August 1997 to
1,500,000.
Unison has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of
Unison's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if Unison had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997, 1996 and 1995, respectively: risk-free interest rates of
5.0%, 5.0% and 5.0%; dividend yields of 0%, 0% and 0%; volatility factors of the
expected market price of the Company's common stock of 1.32, .64 and .64 and a
weighted-average expected life of the option of eight years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because Unison's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
18
<PAGE> 271
15. STOCK OPTIONS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Unison's pro
forma information follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Pro forma net loss ............................. $ 48,415 $ 24,157 $ 72
Pro forma net loss per share ................... $ 7.60 $ 5.16 $ 0.03
</TABLE>
Information regarding the 1995 Plan is as follows:
<TABLE>
<CAPTION>
DISCRETIONARY PROGRAM AUTOMATIC PROGRAM
-------------------------------- ------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
OF OPTIONS EXERCISE PRICE OF OPTIONS EXERCISE PRICE
<S> <C> <C> <C> <C>
Shares under option:
Outstanding at January 1, 1995
Granted ........................................ 261,520 $9.00 47,480 $9.00
Cancelled ...................................... (8,684) 9.00 -- 9.00
-------- ------
Outstanding at December 31, 1995 ............... 252,836 9.00 47,480 9.00
Granted ........................................ 412,412 9.47 92,500 9.50
Canceled ....................................... (40,664) 9.24 --
Exercised ...................................... (11,307) 9.00 --
-------- -------
Outstanding at December 31, 1996 ............... 613,277 9.30 139,980 9.33
Granted ........................................ 913,466 2.63 122,500 2.44
Canceled ....................................... (696,730) 8.06 (139,980) 9.33
Exercised ...................................... (350) 9.00 --
-------- -------
Outstanding at December 31, 1997 ................. 829,663 3.13 122,500 2.44
======== =======
Exercisable at December 31,
1995 ........................................... -- --
1996 ........................................... 127,998 9.00 23,740 9.00
1997 ........................................... 198,138 3.79 61,250 2.44
Weighted-average fair value of options
granted:
1995 ........................................... $6.18
1996 ........................................... 6.39
1997 ........................................... 2.38
</TABLE>
Exercise prices for options outstanding at December 31, 1997 ranged from
$2.44 to $9.50. The weighted-average remaining contractual life of those options
is 9.6 years.
At December 31, 1997, 536,180 shares of common stock were available under
the 1995 Plan for future awards.
16. LEASES
As of December 31, 1997, Unison operated 42 facilities under noncancelable
operating leases with lease terms ranging from five to twenty years plus renewal
options. The lease agreements provide for either scheduled rent increases or
contingent rent based on increases in the Consumer Price Index ("CPI"), Medicaid
reimbursement rates, and number of licensed beds. Certain of the leases have
purchase options determined by a specified formula. Unison is responsible for
all taxes, maintenance and other executory costs.
Unison leases 14 facilities from Omega of which nine facilities are in
Indiana and five are in Texas, under three master lease agreements. Each of the
Omega leases expires in 2005 and allows Unison up to three five-year renewal
options. The Omega leases require Unison to pay stated rent, with annual
increases based upon the greater of 5% of incremental revenues or the CPI, but
limited to a maximum annual increase of 5%. The Omega leases grant Unison
19
<PAGE> 272
16. LEASES (CONTINUED)
the right, but not the obligation, to purchase the Omega facilities upon the
expiration of the initial lease term. At December 31, 1997, the aggregate
minimum rent under these master leases was approximately $30,900 (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 ratio and tangible net worth. 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 lease agreement
with BritWill Texas requires the Company to pay to Omega monthly amounts equal
to: (i) the amount of loan payments due to Omega from BritWill Texas pursuant to
a loan agreement between those parties, which provided the financing for
BritWill Texas' acquisition of the facilities, and (ii) lease payments on the
facilities that are subleased by BritWill Texas to Unison. 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. As of December 31, 1997 Unison
was not in compliance with these covenants and had not obtained waivers of the
covenant defaults from Omega or BritWill Texas.
The Company leases six facilities formerly affiliated with Signature with
monthly payments of $142 for an initial term that expires in 2005. The leases
allow Unison the option to renew for three additional 10-year terms and the
option to purchase the facilities through the end of the initial term or any
renewal periods. The leases provide for certain restrictions on the maintenance
and operation of the facilities and an annual 2.5% increase in rent.
In connection with the BritWill Acquisition (Note 4), Unison recorded a
leasehold liability in the amount of $4,700. This adjustment was based on an
independent appraisal that valued the present value of the BritWill lease
obligations based on market lease rates. The leasehold liability is being
amortized over the aggregate lease term of approximately 25 years.
Future minimum lease payments at December 31, 1997, by year and in the
aggregate, under noncancelable lease arrangements with initial or remaining
terms of one year or more consist of the following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, CAPITAL OPERATING
------------------------ -------- ---------
<S> <C> <C>
1998 ................................................................ $ 1,203 $ 15,447
1999 ................................................................ 1,172 15,059
2000 ................................................................ 827 14,442
2001 ................................................................ 704 13,697
2002 ................................................................ 126 13,532
Thereafter .......................................................... 292 73,553
-------- --------
Total minimum lease payments ........................................ 4,324 $145,730
========
Less amount representing interest ................................... (895)
--------
Present value of net minimum lease payments ......................... 3,429
Less current portion ................................................ (850)
--------
Long-term obligations ............................................... $ 2,579
========
</TABLE>
Unison's lease payments are senior to all unsecured debt.
17. RELATED PARTY TRANSACTIONS
The Term Note, Subordinated Note, Convertible Debenture and Additional
Payment Obligation issued as consideration for the BritWill Acquisition were
issued to the former shareholders of BritWill (Note 13). The majority
shareholder of BritWill was Whitehead Family Investments, Ltd. ("WFI"), which
owned 81.5% of the stock of BritWill prior to the BritWill Acquisition. Mr.
Whitehead is the president of the general partner of WFI and, together with a
family trust, owns 100% of WFI.
In connection with the BritWill Acquisition, a note payable to WFI in the
amount of $3,375 was repaid with the proceeds from the IPO. Subsequent to the
BritWill Acquisition, Unison also incurred notes payable to WFI in the aggregate
amount of $750 bearing interest at the rate of 12%. These notes were repaid with
the proceeds from the
20
<PAGE> 273
17. RELATED PARTY TRANSACTIONS (CONTINUED)
IPO. With the BritWill Acquisition, Unison also assumed unsecured subordinated
notes payable to BritWill Texas with an aggregate balance at December 31, 1997
of $2,320 (Note 13).
In connection with the acquisition of Signature, Unison incurred debt
obligations to Mr. Kremser and the other shareholders of Signature. A portion of
the purchase consideration for Signature was comprised of promissory notes
totaling $1,146 that were placed in escrow. In accordance with an adjustment
provision of the Signature merger agreements related to stockholders' equity, in
March 1997 the former shareholders of Signature received additional
consideration of $2,511, comprised of the Convertible Notes amounting to $1,827
and 238,052 shares of Unison common stock (Note 4). In 1997, Unison obtained
working capital loans in the aggregate amount of $3,950 from affiliates of Mr.
Kremser and Mr. Whitehead (Note 13).
As discussed in Note 13, Unison is in default with respect to its
obligations to Messrs. Whitehead and Kremser and their affiliates in the
aggregate amount of $17,327, as of December 31, 1997. Unison recorded interest
expense on obligations to Mr. Kremser and affiliates in the amount of $348 and
$15 in 1997 and 1996, respectively. Interest expense related to obligations to
Mr. Whitehead and affiliates amounted to $1,327 in 1997 and $1,215 in 1996.
In connection with the sale of the 13% Senior Notes, Unison paid an
advisory fee of $350,000 to Woodhill Capital. One of Unison's directors is a
partner of Woodhill Capital.
Unison's lease payments to Omega, the owner of 14 facilities that the
Company leases in Indiana and Texas, are personally guaranteed to $13,500 by Mr.
Whitehead as well as collateralized by substantially all of the personal
property of Unison. Unison also leases six facilities in Texas from BritWill
Texas. Lease expense on the BritWill Texas facilities for the year ended
December 31, 1997 and 1996 and the five months ended December 31, 1995 amounted
to $1,241, $2,661 and $505, respectively (Note 16).
18. INCOME TAXES
The components of the income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal ............................ $ 596 $ 698 $ 153
State .............................. 210 61 --
Deferred:
Federal ............................ (2,828) (7,777) (28)
State .............................. (458) (1,338) 7
------- ------- -------
$(2,480) $(8,356) $ 132
======= ======= =======
</TABLE>
The difference between Unison's effective income tax rates and statutory
rates are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax expense (benefit) ................. $(16,895) $(10,810) $ 85
Increases (decreases) resulting from:
Change in effective tax rate ................................. (495) --
Amortization of intangibles and nondeductible expenses ....... 413 1,060 91
State tax expense (benefit), net of federal benefit .......... (1,873) (876) 5
Change in valuation allowance ................................ 16,024 1,528 (56)
Current federal income taxes of subsidiaries not consolidated
for tax purposes ............................................ 596 698 --
Adjustments to tax bases of acquired companies .............. (539)
Other ........................................................ (206) 539 7
-------- -------- --------
Income tax expense (benefit) ................................... $ (2,480) $ (8,356) $ 132
======== ======== ========
</TABLE>
21
<PAGE> 274
18. INCOME TAXES (CONTINUED)
Significant components of deferred taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1997 1996
-------------------------- --------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Deferred liabilities:
Intangibles .................................... $-- $(15,547) $-- $(31,165)
Accelerated depreciation ....................... -- (466) -- 171
Cash to accrual adjustment ..................... (224) -- (208) --
-------- -------- -------- --------
Total liabilities ................................ (224) (16,013) (208) (30,994)
-------- -------- -------- --------
Deferred assets:
Allowance for doubtful accounts ................ 2,796 -- 1,388 --
Reserve for loss on disposition of assets ...... 1,953 -- 1,460 --
Vacation accruals .............................. 516 -- 692 --
Net operating loss carryforward ................ -- 17,552 -- 7,604
Valuation allowance ............................ -- (17,552) -- (1,528)
Other, net ..................................... 38 -- -- 127
-------- -------- -------- --------
Total assets ..................................... 5,303 -- 3,540 6,203
-------- -------- -------- --------
Total net asset (liability) ...................... $ 5,079 $(16,013) $ 3,332 $(24,791)
======== ======== ======== ========
</TABLE>
SFAS No. 109 requires that a valuation allowance be recorded against tax
assets that are not likely to be realized. Management has determined that its
net operating loss carryforwards amounting to $46,470 are not likely to be
realized in future periods. Specifically, the Internal Revenue Service Code
provides that, in a Chapter 11 bankruptcy case, income normally arising from the
discharge of indebtedness is excluded from taxable income. However, to the
extent that income from discharge of indebtedness is excluded from income,
taxpayers must reduce specified tax attributes which include net operating
losses. The Company anticipates that, in connection with the implementation of
its restructuring plan (Note 2), its net operating losses will be eliminated as
a result of the restructuring of its debt obligations. Therefore, a valuation
allowance has been established against the full amount of the Company's net
operating loss carryforward benefits.
19. FAIR VALUES OF FINANCIAL INSTRUMENTS
The aggregate carrying amount and fair value of Unison's financial
instruments as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
------------ --------------
<S> <C> <C>
Notes payable and long-term debt, excluding capital lease
obligations........................................................... $ 169,369 $ 155,446
</TABLE>
The carrying amounts reported in the consolidated balance sheet for cash,
accounts receivable, lease deposits, accounts payable and accrued expenses
approximate their fair value. The fair value of Unison's borrowings is estimated
by discounting future cash flows at current rates offered to Unison for debt of
comparable types and maturities. Because no market exists for certain of these
obligations, considerable judgment is necessary in interpreting the data to
develop estimates of fair value. The use of different market assumptions may
have a material effect on the estimated fair value amounts.
The fair value amount set forth above was calculated as of December 31, 1997.
The Company has not attempted to quantify the impact of the Chapter 11
proceedings on the fair value of its financial instruments.
20. INSURANCE
Health care companies are subject to medical malpractice, personal injury
and other liability claims that are customary risks inherent in the operation of
health facilities and are generally covered by insurance. Unison
22
<PAGE> 275
20. INSURANCE (CONTINUED)
maintains property, liability and professional malpractice insurance policies
through commercial carriers on a claims made basis in amounts and with such
coverages and deductibles that are deemed appropriate by management, based upon
historical claims, industry standards and the nature and risks of its business.
There can be no assurance that a future claim will not exceed available
insurance coverages or that such coverages will continue to be available for the
same scope of coverages at reasonable premium rates. Any substantial increase in
the cost of such insurance or the unavailability of any such coverage could have
an adverse effect on Unison's business. However, based upon the evaluation of
Unison's historical asserted and unasserted claim experience, management does
not believe that the Company has a material, estimable and probable liability,
regardless of insurance coverage, at December 31, 1997.
In 1997, approximately 25% of employees enrolled in Company sponsored
health plans were covered under a self-insured plan. Unison's liability for
losses under this plan is capped at $25 per claim and $2,500 per person through
a contract with an insurance company. The Company is also insured for Workers'
Compensation. The Company's liability for losses is capped at $250 per claim
through a contract with an insurance company. Unison has a cash deposit of
$1,200 with this insurance company which is held as collateral.
Unison is insured for professional and general liability claims under a
claims made, retrospective insurance policy. The Company's liability for losses
is capped at $2,500, in aggregate. Unison is, from time to time, subject to
malpractice and related claims and lawsuits, which arise in the normal course of
business and which could have a significant effect on Unison. Management
believes that adequate provision for these items has been made in the
accompanying consolidated financial statements and that their ultimate
resolution will not have a material effect on the consolidated financial
statements.
21. COMMITMENTS AND CONTINGENCIES
Impact of the Year 2000 Issue (unaudited)
Some of Unison's information systems have time-sensitive software that will
not properly recognize the year 2000. This could result in a system failure or
miscalculations causing disruption of the Company's operations. Unison is
currently completing an assessment and developing a plan to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The Company expects to
incur internal staff costs, external consulting costs and other expenses related
to infrastructure and facility enhancement necessary to prepare the systems for
the year 2000. Although the total cost to the Company of achieving year 2000
compliant systems is not expected to be material to the Company's operations or
financial condition, there can be no assurance that the costs will be as
expected or that the date change from 1999 to 2000 will not materially adversely
affect the Company's business, financial condition and the results of
operations. The ability of third parties with which Unison transacts business to
adequately address their year 2000 issues is outside the Company's control.
Although the Company will seek alternative vendors, where its current vendors
are unwilling or unable to become year 2000 compliant in a timely manner, there
can be no assurance that the Company's operations will not be materially
adversely affected by the ability of third parties dealing with the Company,
including Medicare and Medicaid, to also manage the effect of the 2000 date
change.
Regulatory Environment
The health care industry is subject to numerous laws and regulations of
federal, state and local governments. Compliance with these laws and regulations
can be subject to future government review and interpretation as well as
regulatory actions unknown or unasserted at this time. Recently, government
activity has increased with respect to investigations and allegations concerning
possible violations by health care providers which creates a possibility of
significant repayments for reimbursement of patient services previously billed.
The Company believes that it is in substantial compliance with the applicable
laws and regulations. However, if the Company is ever found to have engaged in
improper practices, it could be subjected to civil, administrative or criminal
fines, penalties or restitutionary relief.
23
<PAGE> 276
21. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Healthcare Reform Legislation
The Balanced-Budget Act enacted in August 1997 (the "Budget Act"), contains
extensive changes to the Medicare and Medicaid programs intended to reduce the
projected amount of increase in payments under those programs over the next five
years. The Budget Act also requires the establishment of a prospective payment
system for nursing centers for cost reporting periods beginning on or after July
1, 1998. During the first three years, the per diem rates for nursing facilities
will be based on a blend of facility-specific costs and Federal costs.
Thereafter, the per diem rates will be based solely on Federal costs. The
payments received under the new prospective payment system will cover all
services for Medicare patients, including all ancillary services, such as
respiratory therapy, physical therapy, occupational therapy, speech pathology
and certain covered drugs. Management has not completed the analysis to
determine the impact that the Budget Act will have on future operations.
However, the Company is actively implementing strategies and operational
modifications to address changes in the Federal reimbursement system.
There also continues to be state legislative proposals that would impose
more limitations on government and private payments to providers of healthcare
services such as Unison. Many states have enacted or are considering enacting
measures that are designed to reduce their Medicaid expenditures including cost
caps and the establishment of Medicaid prospective payment systems for nursing
facilities.
Approximately 84% in 1997 and 83% in 1996 and 1995 of Unison's long-term
care net patient service revenues were derived from reimbursement under Medicare
and Medicaid programs, and approximately 88% and 84% of Unison's patient
accounts receivable at December 31, 1997 and 1996, respectively, are due from
such programs.
There can be no assurance that the Budget Act or future healthcare
legislation will not have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
22. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 -- ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
In 1996, Unison incurred operating losses and shortfalls of cash from
operations. The Company also announced the planned disposition of eight nursing
facilities whose performance did not meet Unison's operational or financial
criteria (Note 4). Of these Disposition Facilities, one was closed in June 1996
and three others, which had incurred operating losses since the Company had
acquired them in August 1995, where disposed of in March 1997. These events, as
well as a history of operating losses at certain facilities, raised the
possibility of continuing losses associated with the Company's income producing
assets. Consequently, Unison evaluated its long-lived assets, including property
and equipment, goodwill, lease operating rights and other intangible assets, for
impairment in accordance with SFAS No. 121. In 1997, the Company continued to
incur operating losses and cash shortfalls from operations and identified
additional facilities for disposition. In addition, in 1998, Unison filed for
reorganization under Chapter 11 (Note 2). Accordingly, the Company reevaluated
its long-lived assets for impairment.
To evaluate assets for impairment, Unison estimated the undiscounted net
cash flows from all business units and determined that the carrying value of
certain of Unison's long-lived assets exceeded such undiscounted cash flows.
Unison then compared the fair value of the assets based on the present value of
the estimated future cash flows for the facilities (which were estimated based
on the remaining weighted average useful lives of the assets, earnings history,
and a discount rate commensurate with the risks involved and market conditions
and assumptions reflecting internal operating plans and strategies) with the
carrying value. Unison determined that the fair value of certain facilities was
less than their carrying value and estimated the costs to sublease and exit from
the Disposition Facilities (Note 4). Accordingly, Unison recorded impairment
losses and other charges of $27,185 in 1997 and $3,865 in 1996 in the
accompanying consolidated statements of operations.
24
<PAGE> 277
23. LITIGATION
Various suits and claims arising in the ordinary course of business are
pending against the Company. Management believes that adequate provision for
these items has been made in the accompanying consolidated financial statements
and that their ultimate resolution will not have a material effect on the
consolidated financial statements (Note 23).
Unison and certain of its current and former directors and officers are
named as defendants in seven consolidated securities class action lawsuits in
United States District Court in Phoenix, Arizona (the "Federal Action"), and a
securities class action lawsuit pending in California Superior Court (the "State
Action") (collectively, the "Actions"). The Actions arise following Unison's
announcement in March 1997 that it would be restating its financial statements
for the nine-month period ended September 30, 1996. A consolidated amended class
action complaint in the Federal Action was filed on January 6, 1998. While the
purported class periods and named defendants vary, the broadest class period is
that alleged in the Federal Action from December 18, 1995 (the date of the IPO)
to May 30, 1997 (when Unison announced the amount of the restatement for the
first nine months of 1996). The Federal and State Actions assert that Unison
made material misrepresentations regarding its ability to accurately report
financial information and made material misstatements in reporting such
information. This proceeding is stayed as a result of the Chapter 11
proceedings. Management believes that the costs of the ultimate disposition of
these matters will be substantially covered by insurance.
25
<PAGE> 278
EXHIBIT C
COMPARISON OF NEW COMMON STOCK ALLOCATIONS AS A
FUNCTION OF RESOLUTION OF THE BRITWILL ACQUISITION CLAIMS ("BAC")
AND SIGNATURE ACQUISITION CLAIMS ("SAC")
(All amounts are approximate)
<TABLE>
<CAPTION>
BAC and SAC BAC Allowed BAC Disallowed BAC and SAC
Allowed SAC Disallowed SAC Allowed Disallowed
$17,684 $12,589 $5,095 $0
------------------------------------------------------------------------------
Claim Fully Fully Fully Fully
Amount Shares Diluted % Shares Diluted % Shares Diluted % Shares Diluted %
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class 6 - BritWill Acquisition
Claims 12,589 615 8.14% 640 8.47% 0 0.00% 0 0.00
Class 7 - Signature Acquisition
Claims 5,095 249 3.30% 0 0.00% 275 3.64% 0 0.00
Class 9 - General Unsecured
Claims 118,538 5,635 74.56% 55,860 77.53% 6,225 82.36% 6,500 86.00
----------------------------------------------------------------------------------------
Total Primary Shares 6,500 86.00% 6,500 86.00% 6,500 86.00% 6,500 86.00
Warrants, Options and Preferred
Stock Conversion Shares 1,058 14.00% 1,058 14.00% 1,058 14.00% 1,058 14.00
Total Fully Diluted Shares 7,558 100.00% 7,558 100.00% 7,558 100.00% 7,558 100.00
</TABLE>
