Free Appendix - District Court of Delaware - Delaware

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 1 of 30

care

companies

other than but receives

the

Debtors
fee

Mr Crowley

generallyreceives

fee

from Cerberus for
the

such services Debtors

no

from Cerberus for any services

he provides respecting

Mr
September
since

Amaral served

as

Chainnªn

of the companys Board
Aniaral has served as

of Directors
director

from

1997

until

November 30 1999

Mi

of the company

October and

1995 Chief Executive
October

Officer

23 1999
through Healthcorp positions President

22

1999

through

of the company from October 1995 through April November 30 1999 and as President from Octojer 1995
President

December

1997 Previously he was
from April 1994 Health Ltd
to

and Chief Operating Officer of OrNda
served
in

OrNda
with Summit

August

1995 and
October 1991

various

executive

Summitfrom
Mr
Amarat
is

1989

to April

and Chief Executive Officerbetween
into

October
also

and April
the

1994 including 1994 Summit was
of Directors of

merged

OrNda

in

April

1994

member of

Board

CareMatrix

Corporation

Mr Mr
Casey management

Casey has served
as consultant hospital

as
in

director of

Coram

since

September

1997

Since

1983

has served

the healthcare

industry care

specializing

in hospital turnaround for services

evaluation
to

planning

managed
as

contracting

and

From

986

1997

Mi
to

Casey has also served Medical

Contract
its

Administrator

Emergency which
provide

Department
physician served
to

Physicians services

Group Inc and
facilities

affiliated

medical groups from 1988 which
to

non-governmental
for

In addition

1997

Mr

Casey has
services

as Contract

Administrator

NP

Medical Group
as

Inc

provides

physician

government

facilities

Mr

Casey

also serves

director

of TriCourities

Bank
1994 Between
served
in as

Mr
November 1993
the and

Peter July

Smith has served

as

director director

of Corain of Medisys was

since

July

1994

Mr

Smith was

Inc

Mr Smith

Managing

Partner

of AilCare Health Smith
is

Services Inc which

acquired

by Medisys

December of Ralin
serves

1992 Medical

Mr

also

Chief Executive Officer and
specializing
in

serves

on the Board of Directors

Inc

company

cardiac

disease

management
inc

Mr

Smith also
served

on the Board of Directors of Directors
filed

of Gateway inc and
Corporation

AMSYS

Mr

Smith previously August

on the Board
Sabratek

of Sabratek

from October
petition
is

1992

through

23 1999

Corporation

vluntarybarikruptcy

under Chapteril of the United States pending
before the

Code

on December
Court

17 1999
in

and

that

proceeding

presently

United States

Bankruptcy

Delaware

Ms
Smoley
care
to to is

Smoley and

was

elected

to

Corams Board of
Officer
in

Directors

on February 10 2000

Ms

the Chairman

Chief Executive

of The Sandra Smoley
California

and

local

government

consulting

firm based

Sacramento

company From October

health

1993

January 1999 she served
that

as the Secretary

of the California Health
State

and Welfare Agency Prior
Services

time she was Secretary 1993
to

of the California

and Consumer

Agency

from

January

October

1993

45

A601

Case 1:04-cv-01565-SLR

Document 125-3

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Page 2 of 30

Arrangements with Reorganized

Corams

Executives

Reorganized
highly

Corams

successful

implementation of
its

of

its

business
to its

strategies

will

be

dependent

upon

the continuing

commitment
to

key executives with

achieving

corporate in order

objectives to recruit

Reorganized

Coram

intends

enter into of

agreements

key executives
assure to the

where

necessary
skills

and retain the services

such executives

and
secure

availability

of their

for the benefit

of Reorganized
within

Coram
and

Reorganized and

Coram

freedom

from

competition

by such persons
benefits

reasonable

lawful

limits

provide and

appropriate other

base compensation

and

financial incentives

through bonus severance

employment-related

programs

The
from
the

senior

executive

officers annualized

of Coram and
rates

CHC

are currently

receiving

salary

Debtors

at

the following

NAME

SALARY

BASE

AGE

POSITIONS WITH

CORAM
Daniel Crowley

$650000

52

Chairman Chief Executive
Officer
Director President

and

Scott

Danitz

$200000

42

Senior Vice President Finance and Chief
Officer

Accounting

Scott

Larson

$185000

37

Senior Vice President General Counsel and
Secretary

Allen

Marabito

$3 10000

53

Executive Vice President

Vito Ponzio Jr

$165000

45

Senior

Vice President Resources

Human

Certain insurance

senior

executive

officers

also receive

medical

dental

disability

and

life

coverage

car allowances

and paid vacations

In

addition

to

base

salary
to

Corams
bonuses
benefits

senior

executives
voluntarily

as senior terminated certain

executives

of

Reorganized
without plans

Corarn
be

will continue

earn

or
in

if

or terminated

cause

provided with

severance

accordance

with

of the Debtors Court

that

are currently

the subject

of an application

for approval

with the Bankruptcy

46

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Case 1:04-cv-01565-SLR

Document 125-3

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Page 3 of 30

Specifically

the

Debtors have
is

obtained

Bankruptcy
at

Court approval IV.F.3

of

Key

Employee

Retention

Program which

described

above

section

Other

Administrative

Events
The Debtors
Compensation Compensation

also

have
applies

management
to

incentive

program

Executive
people

Program
Program

which

approximately base

thirty-five

35

The Executive
and
except

consists

of three components
intend
to

salaries short

term incentives

long term incentives
that

The Debtors

assume

Executive Compensation
to

Program
to

the

Executive Compensation with the provisions
will

Program

will

be modified

the extent

necessary

be
as

consistent

of the Plan
the

copy of the Executive Compensation

Program

modified

be included

in

Plan Supplement

Scott

Danitz has served

as the

companys Vice

President

and

Controller

from

January 1998 Accounting Corporation been

through Officer

December 1999 and
since January

as Senior

Vice President

Finance employed

and by

Chief
First

2000 Previously
1997 and

Mr

Danitz was
the

Data had

from 1989 and

through

held various

positions

most recent of which

Vice President

Controller

Payment

Instruments

division

Scott

Larson has served 1998 and was
elected

as the

companys
in April

Senior

Vice President

and General
served

Counsel
as the

since

July

Secretary

1999 Previously

Mr Larson
1998 and as

companys Vice

President

and Legal Counsel 1994
through

from March 1996 To July February 1996 Between and
later

Assistant July

General Counsel

from July

December

1991

and
for
as

1994

Mr Larson
Inc
with

served

T2
an

Medical

12 Medical
1999

as Corporate

Counsel

as Assistant

General Counsel

Before joining

T2

Medical Bird

Mr

Larson was employed

attorney

the Atlanta-based

law firm of Aiston

Allen President
President

Marabito joined
to

Coram

effective
in

November 30 1999
law practice
1991
to

as

Executive Vice Vice
as the Senior

From 1997

Mr

Marabilo was
Solutions

private

and

Senior

with Dynamic lealthcare
Secretary

LLC
of

From

1997 he served
Corporation

Vice President

and General

Counsel

Foundation

1-lealth

Vito

Ponzio

Jrhas

served

as the

companys

Senior
as

Vice President
the

Human

Resources of

since

September

1998 Previously
to

Mr

Ponzio served 1998 and

companys Vice President
of 1-luman

Human

Resources

from February 1996
to

September

as

Director

Resources

from February 1994

February 1996

Certificate

of

Incorporation

and

By-Laws

of the

Reorganized

Coram
Corarn will
the

Pursuant

to

the

Plan on the Effective of Incorporation

Date

the

Reorganized
Corain

file

Amended Amended Action

and

Restated

Certificate

of Reorganized

and will adopt

the

By-Laws of Reorganized The
description
set forth

Coram
below
is

See Implementation
intended
as

of the Plan-- Corporate
only

summary

and

is

qualified

in

its

47

A603

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 4 of 30

eritiretyby reference

to the

Amended

and

Restated

Certificate
in

of Incorporation

of Coram and

the

Amended

and Restated

By-Laws

which

are included

the

Plan Supplement

Pursuant to the Plan
canceled section

all

currently

outstanding will

capital stock

of the Debtors will be
In

and
11

all

rights thereunder

or relating thereto

be extinguished and
Restated

compliance of

with

23a6

of the Bankruptcy

Code
will

the

Amended

Certificate

Incorporation equity

of Reorganized

Coram

expressly

prohibit

the issuance

of any non-voting

securities

Board

of

Directors

The Amended
directors

By-Laws
shall

of

Reorganized
less

Coram provide
three
at

that

the

number of
and fixes the
that the

on the Board
directors as

of Directors

be no Date

than

nor more than

nine

number of
Board
in the

of the Effective

of the Plan
shall

The Plan
consist

provides

of Directors

of the Reorganized
In addition otherwise

Coram
the

initially

of the individuals
that unless
filled

identified

Plan Supplement Board

Amended

By-Laws provide
will

Reorganized

Coranis
vote

of Directors

determines any vacancies though
less

be

by the affirmative
the

of

majority

of the remaining directors

than

quorum

Under

Delaware by the

General Corporation
stockholders

Law

DGCL
cause

directors serving

on

board

may be removed

with or without

Limitation

of Liability

of

Directors

The Amended
will

and Restated

Certificate
liable

of Incorporation
for as

of Reorganized damages
to

Coram

provide
or
its

that

director will not for breach duty or

be personally
of fiduciary
to

monetary
director

the

Reorganized for

Coram

stockholders

duty

except or
its

for

liability

any breach
or

of the directors

of loyalty which

the

Reorganized
intentional repurchase

Coram

stockholders

ii acts
of

omissions not in good
dividend

faith

involve stock an

misconduct
in violation

or

knowing

violation

law iii paying
transaction

or approving

of law or

iv

any

from which

the director derived

improper personal

benefit

Indemnification

of Directors

and

Officers

Subject provide that

to

certain

limitations party

the

Amended
to

By-Laws of Reorganized
party

Coram

will or

any person made
suit

or threatened civil

be made

toa

threatened

pending

completed other than favor by

action
an

or

proceeding whether by or
that in

criminal

administrative

or investigative

action

or

suit fact is

the

right

of Reorganized
is

Coram

to

procure etnployee

judgment
or agent director or other

in

its

reason

ofhe
or

such

person
at

or

was

director

officer

of

Reorganized
officer

Coram

or

was

serving

the request

of Reorganized
joint

Coram

as

employee
shall

or agent

of another

corporation

partnership

venture

trust

enterprise

be indemnified
fines

by Reorganized
in

Comm

against actually
if

expenses including attorneys
and reasonably acted incurred
in

fees judgments
person
in in

and

amounts paid
such action

settlemenL or

by such
faith

connection

with

suit

proceeding be
in

such person
to

good

and

manner

which

he reasonably

believed

to

or not

opposed

the best

interests

of

48

A604

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 5 of 30

Reorganized cause
to

Coram and

with

respect to

any criminal

action

or

proceeding

had

no reasonable

believe

such his conduct

was unlawful

Director and

Officer

Insurance

Policy

The
aggregate

directors

and

officers

of the Debtors are insured
deductible types payable

in

such capacities
if

for an loss

of $25

million subject costs
results

to

$100000

by the Debtors

including defense which
policy
liability

from certain of insurance

defined

of actual or alleged
currently

acts or effective

omissions
insurance

occur

during

the period

coverage

The Debtors Reorganized

expires

on January
to

2001

The Debtors and/or
after

Coram

intend

to secure

insurance

be effective

January

2001

IX

NEW CORAM STOCK TO BE ISSUED PURSUANT TO THE PLAN
The
following description
is

of the terms and provisions
in
its

of

New Coram

Stock

does of

not purport the

to

be complete

and

qualified

entirety

by reference

to the pertinent or

sections

proposed which

form of the Amended
will

and Restated
the Plan

Certificate

of Incorporation

Reorganized

Coramn

be included

in

Supplement

Upon
Reorganized $.01
par

effectiveness

of the Amended

and Restated
10

Certificate

of Incorporation

of

Coram
Coram

Reorganized

Coram

will.authorize percent

million shares-of

New Coram common
and issue

Stock of

value

representing Pursuant

one hundred
to

100%

of the authorized
will

stock
all

Reorganized

the

Plan Reorganized
to

Corarn

allocate

of the See

common
General
InterestS

stock

of Reorganized Regarding

Coramn

the holders
--

of Allowed

Claims in Class Coram

Information

the Plan

Classification

and Treatment of Claims and

The holders of record be
entitled

of

New Comm
to

Stock

will

be

entitled

to

one

vote

for

each

share

held

on
to

all

matters

submitted

vote

of stockholders
as

Holders of

New Coram

Stock will

receive

ratably such

dividends

may be

declared
It

by the Reorganized
presently
to

Corams
that

Board

of Directors

out

of funds

legally available for

therefor
capital

is

intended

Reorganized accordingly

Coram

will

retain earnings

working

and

fund capital expenditures on

Reorganized
future convert

Coram does
Holders
their

not

anticipate

paying any
will

dividends

New Coram
there will

Stock

in the foreseeable

of

New Comm
Stock

Stock into

have

no preemptive rights and will and of be no

have

no rights

to

New Coram
to

any other securities
outstanding shares paid

redemption provisions
to

with
to

respect Plan

such shares upon
such

AU

New

Corani Stock

be issued pursuant and
Restated

he

will

issuance

be

fully

and nonassessable

The

Amended

Certificate

of Incorporation
Directors

of Reorganized

Corani will not authorize
to
its

and Reorganized
shareholders for
to

Coram Board of
approval

does not currently contemplate recommending of any shares
of preferred stock or other stock

the authorization Stock
in

ranking senior
assets

New Coram

respect

of the payment

of dividends

or the distribution

of

49

A605

Case 1:04-cv-01565-SLR

Document 125-3

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Page 6 of 30

NEW SECURED NOTES TO BE
The
not purport the
to

ISSUED P1JRSIJANT

TO THE PLAN
of

following

description

of the terms
in
its

arid

provisions reference ancillary

New

Secured

Notes

does of

be complete
form of

and

is

qualified

entirety

by

to the pertinent thereto that

sections

proposed

New

Secured

Note and

the

documents

will

be

included

in the

Plan Supplement

Pursuant to the Plan Reorganized
aggregate
interest at to

Coram

will issue

New

Secured have

Notes

in the

principal

amount

of $180 computed
ofinterest

million The on 360

New

Secured

Notes

will

fixed rate

of

9% per annum
make payments
after

day basis The Notes

will require

Reorganized
first

Corarn
four

only without

amortization ona quarterly basis for the
year following the Effective

years

the Effective

Date

At the end of the fourth
interest

Date

all

remaining outstanding of
its

principals and the

will

be due

Reorganized

Coram may pre-pay any

obligations

under

New

Secured

Notes without

penalty

The New Secured Notes
operating subsidiaries
all

will

be guaranteed
will

by

all

of Reorganized by
senior
lien

Corams
on
all

The New Secured Notes
held
that

be secured
its

assets

and

pledge of provided
the Exit

shares

by Reorganized

Coram and

non-debtor operating
will

subsidiaries priority to

however
Finance

such pledge and security $40
million secured

interests

be junior

in liquidation

Facility

revolver

The New Secured Notes
market terms
ability to

will afford benefit
if

Reorganized from reduced

Coram
interest

financing

on below and an enhanced

The Debtors

will therefore
in

expense

obtain

further financing

the future

necessary

XI EXIT FINANCE
The
is

FACILITY

following
is

descnption
in
its

of the terms

and provisions
to

of the Exit Finance
sections

Facility

not

complete
Facility

and

qualified will

entirety

by reference
in

the pertinent

of the Exit

Finance

documents

be included

the Plan

Supplement

Pursuant Plan Reorganized amount
the Plan

to

thePlan
will

and as

condition

prerequisite
in

to the Effective

Date

of the
principal
in

Corani

enter into financing

facility

the

approximate aggregate
in

of $40

million

with

one or more lenders
Exit Financing

that

will

be substantially of

the

form included
secured

Supplement The

Facility

will

consist

revolving

senior

loan

under

commercially

reasonable

terms

XII

DISCUSSION

OF STARK

II

Under
Reconciliation designated

the

ownership and

referral

provisions
for

of the Omnibus Budget
physician or
to

Act of 1993
services

Stark
reimbursable

it

is

unlawful the

refer patients

for certain an
entity

health

under

Medicare

Medicaid

program

to

50

A606

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 7 of 30

with which
financial Stark

the physician

or

the

physicians

innnediate

family
fits

members
an

--

broadly

defined

has in

relationship or regulations health

unless the financial relationship

within

exception

enumerated which
are

promulgated thereunder
for purposes

Aspects
II

of Coranfs business
outpatient

designated
parenteral health

services

of Stark

include

prescription

drugs and borne

and

enteral

nutrition

equipment

and supplies under
Stark

durable
II is

medical

equipment
as

services
interest

financial in the

relationship

defined

broadly

an ownership or which

investment

provider or any type of compensation
the physician

arrangement

in

remuneration flows between

and

the

provider

Under
or

Stark

II

an

entity

is

prohibited pursuant

from claiming
to

payment
referral

under and
is

the

Medicare

Medicaid

programs

for services pursuant

rendered

prohibited

liable for the
to civil

refund

of amounts

received

prohibited

claims
can

The

entity

can

also

be subject

penalties

of up to $15000 per improper claim and Medicaid programs
Suits

and

be excluded of Stark
11

from participation can also potentially
Stark

in the

Medicare

for violations

be brought
effectively

under the qui lam whisleblower imposes
intent

provisions

of the Federal False Claims Act
the

strict

liability
to

for

violations

Specifically lack

government
that states

need

not

prove

improper

in order

establish
is

liability

Moreover
in addition

of knowledge of the

physician in

has made Debtors

prohibited operate

referral

not

defense

number
self-referrals

which

the

have

similar prohibitions

on physician

with similar penalties

The
the

Stark

11

regnlations

broadly

define

immediate

family

members

to

include

following

or stepbrother brother-in-law

wife natural

or adoptive father-in-law

parent child

or sibling

stepparent

stepchild

or stepsister

mother-in-law son-in-law
or grandchild and

daughter-in-law grandparent or

or sister-in-law

grandparent

spouse of

grandchild

63 Fed
patients

Reg

at

1721-22

1998

proposed

42 C.F.R
health

411.351
and

Thus
has an
to

physician

who
as so

refers

to the

Debtors for the designated
or

services

who

any relative improper
Stark 11

defined under

who
Stark

is

CHC
unless

Reorganized

Coram
interest

shareholder

would

be making

referral

111

the investment subject the

were covered

by an exception

Any improper
of any

referrals

would

Debtors or Reorganized

Coram

to

liability that

irrespective

knowledge
shareholder

on the part of the Debtors or Reorganized
or
relative

Coram

the referring

physician

was

of

shareholder

The
entities

Debtors

have

and

require

relationships

with

physicians

and physician
to

owned

in the

form of medical
provides

director

agreements

and services
are

agreements pursuant

which

the

company

pharmacy had

products
interests

The Debtors
in

aware of certain referring
through

physicians

that

have

financial

the

company

ownership of shares

of the

compans common
Stark securities traded

stock

II

includes

an

exception an

for

physicians ownership of publicly-traded
interdealer quotation

under

among

others

automated

system operated

by

the

51

A607

Case 1:04-cv-01565-SLR

Document 125-3

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Page 8 of 30

National

Association
fiscal

of Securities
stockholder

Dealers
equity

if

the corporation

has

at

the

end

of the companys
during the

most recent
previous define

year
fiscal

exceeding
equity

$75000000

on

average

three

years stockholder

exceeding

$75000000
between

Proposed

regulations
total

the

term stockholder
total liabilities

equity has the difference
further elaboration

in value

corporations

assets and

without

As of December 31 1999
thereby protecting referrals as

CHC
the
in

complied with the requirements of
family methbers
in

this

exception

from physicians

who owned or whose
Debtors will
accordance
to

owned CHC
with
this

stock

However
absent

of December
successful

31 2000

be

compliance

exception
before

reorganization

with the provisions
million

of the Plan by or
capitalization patients

December 31 2000
it

Upon
to

CRCs

failure

qualif for the $75 of Medicare
shares or

exception
physicians

will

be forced

cease

accepting

referrals

Medicaid

from The

who own or whose
burdens
for

family

members
to

own

of Coramns on

common
case-by-case
it

stock

administrative

of attempting

make such

determinations

basis could
that

be prohibitive
efforts

both the Debtors and

the referring physicians
all

Moreover
and would

is

likely

such

would

be ineffective
to

in identifying

prohibited

referrals

deter

physicians

from referring patients

CHC

XIII RISK

FACTORS
not

Retention

of Claims if the Plan of Reorganized
those

is

confirmed
Plan

or investment
is to

in

New Coram
to in all

Stock

and

New

Secured Notes
risks

Coram if the below
consider

confirmed
deciding

are subject
to

number of
favor

material

including

described carefully

Prior

whether

vote with

of the Plan

each Claimant should
contained

the following

factors

together

the other

information

herein

Lack

of

Established

Market

for

New Coram Stock New Coram
in their if

Volatility

There
public

is

no existing market for Stock can

Stock

in addition future

it

is

unlikely

that

market for

New Coram

be developed and

the foreseeable family such

because of the
Stark II

restrictions
is

on ownership be referring physicians
to

members under

and

it

impossible

predict

the dejree can

of price

volatility

any

market should
will

develop be able
If such factors conditions
to sell

Accordingly

no

assurance
in

be given
to

that

bolder
at at

of New

Coram Stock

such securities were
to

the future

or as

the price trade

which
prices

any suchsale may occur which depend upon

market

exist the

New Coram
market price

Stock could

many

including the

for similar securities expectations

industry

and general

economic

and

performance

of and investor

for Reorganized

Coram

Reorganized on
National Securities

Coram

has

no plan

to

apply

for

the
will

listing

of the

New Coram
to

Stock
to

Exchange
Claims
hold

The New
and certain
shares

Coram Stock
of these

be issued pursuant

the Plan

cerlain holders

of Allowed
rather
that

Claimants

may

prefer

to

sell

their

New

Coram Stock
it

than the

to

their

as an

investment
will

on

long-term
at least

basis for an

Accordingly
initial

is

anticipated

market for

New

Corarn

Stock

be volatile

period

52

A608

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 9 of 30

after

the Effective for

Date

Moreover

while such

the Plan valuation

was developed
assumptions

based upon certain
prediction

valuation

assumptions
prices

New

Coram Stock
after

are not

of trading
if
it

of New

Coram Stock
lower prices

the Effective

Date

New Coram
as

Stock

may trade
herein

trades

at

substantially prices

because of
plan

number

of risk factors

set

forth
to

The

trading

of securities issued under and therefore to register

of reorganization

are subject

many
is

unforeseeable required

circumstances

cannot be predicted

Reorganized

Corani

not

to and

does not intend See Applicability

New

Corani

Stock under

the Securities

Act of 1933 as amended

Of Federal

Securities

Laws

Competitive

Position

Reorganized compete
infusion successfully therapy

Coram

will face

significant

competition

and may not be able compete
in

to site

Like the Debtors Reorganized
is

Coram would

the alternate

market which

highly

competitive

Some of Corams

current

and potential

competitors

include

integrated

providers

of alternate

site

health

care

services

ii

hospitals

iii

local site

providers health care

of multiple market and

products

and services

offered

for the alternate

iv

physicians practice

and physician and

owned

organizations

such as independent

associations

mulli-specialty

group practices

The Debtors have
physicians or offices physicians
that

experienced the

increased

competition offered

from hospitals
at

and
their facilities

have

sought services entered

to

increase similar
to

scope of services
offered

or through

including
that

those

by

the

company and from hospitals
care organizations

and
to

have

into

risk

relationships

with

managed

pursuant

which

they

have

taken

control-of

certain

medical services
in

including

the services

offered

by the

company
marketing providers indemnity

Certain

of the

Debtors

competitors

various

markets may have
or
strategic

superior

financial

or managerial
referral

resources size
such

purchasing

power
hospital

relationships

with
traditional

sources

as physicians

and

discharge

planners

and

and

managed

care

payers

There
regional others

are

relatively

few barriers

to

entry
in

in

the infusion

therapy

services

market

Local

or

companies

are currently

competing

may do
their its

so in the future service offerings
to result

Reorganized

many Coram would

of the markets served
expect
its

by

the

company and
to

competitors

continue also

to

improve
expect

and price competitiveness

Reorganized
with

Coram would
referral

competitors could

develop
in

new

strategic

relationships

providers

sources

and

payers which
services

increased

competition and

The
the

introduction

of new and
of
strategic

enhanced
relationships

acquisitions

and

industry

consolidation

development

53

A609

Case 1:04-cv-01565-SLR

Document 125-3

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Page 10 of 30

by Reorganized Reorganized
can

Corams

competitors

could

cause

decline or

in sales
its

loss

of market acceptance
less attractive against effect

of

Corams

services

or price

competition

make
to

services

There
current

be no

assurance competitors

that

Reorganized

Coram

will

be able

compete have

successfully adverse

or future

or that competitive

pressures

will not

material

on

Reorganized

Coranfs business financial condition

and

results

of operations

Loss

of

Key Personnel

The
its

success

of

Reorganized

Coram

will

be highly

dependent

upon

the services

of

key executives

The

loss of

key executives
ability is

of Reorganized

Coram could have
its

an adverse and

impact on Reorganized
achieve
its

Corams
There

to

implement successfully
that

business will

strategies

business

plans
current

no assurance
or
to

Reorganized
timely

Coram

be able to retain

the services

of

its

key executives
leave

effect

and cost-comparable replacement of

any

such

executives

who

Reorganized

Corarn

Capital

Requirements

The Reorganized While
the business plan of

Companys

businesses

are expected
that

to

require cash

working capital
to

Reorganized
capital

Coram

contemplates

sufficient

meet
will
either

Reorganized be generated
ability to

Corams working
by operations
to

and investment

needs for the foreseeable

future

or available

under the Exit Financing Facility Reorganized
if

Corams

gain access

additional

capital

needed

cannot

be assured

Relationships

With Third

Parties

The
with
ability third to

success

of

Reorganized

Coranis business

will

be dependent
will

on relationships
in

parties establish

The

profitability

of Reorganized

Corams

business

depend
care

part

on

its

and maintain

close

working relationships

with managed
physician

organizations

private

and governmental third-party payers hospitals
long-term and large care
facilities

physicians health

groups home health

agencies companies
strategy

and other employers
relationships
in

institutional

providers

and insurance

self-insured

feature

of Reorganized
third

Corams
in

business

would
and

be

to

improve

its

with such
but there

parties

general and with
that that

physicians

physician

groups
in

particular

can
such

be

no assurance

Reorganized
its

Coram

will

be successful
will

improving

and maintaining
or
that

relationships relationships loss

existing

relationships

be successfully
in

maintained

additional

will

be successfully

developed
or the

and
to

maintained continue
effect to

existing or future
arid

markets ongoing

The

of such existing relationships
in the future could
results

failure

develop

maintain

relationships

have of

material

adverse

on Reorganized

Coranis

business financial condition

and

Operations

54

A6 10

Case 1:04-cv-01565-SLR

Document 125-3

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Page 11 of 30

Health

Care Reform

The
various efforts to

health

care

industry

continues
efforts at

to

undergo

significant care

changes driven
trends

by

reduce

costs including Medicare
coverage

national

health

reform

toward of health

managed care
care distribution

limits in

and reimbursement levels
purchasing

consolidation office-based
to

companies

and collective
thirdparty

arrangements by

health

care

practitioners dramatically care

The impact of
reduced
profit health

pricing pressures care

and low barriers

entry have

margins for health
care providers care
to

providers continued

growth in managed
cost

have

pressured

find

ways of becoming
in

more

competitive

This

has also led to consolidation

of health

providers

the

Debtorsmarket

areas

In industry

addition political United States
in

economic
to

and regulatory and dynamic
state at

influences

are subjecting

the health

care

in the

extensive

change

and many

competing

proposals care

have

been

introduced possible

Congress
health

and various
care reform

legislatures to or
state

reform the present health
level

system
througl-i

It is

that

the federal or
state

whether

implemented would
require aspects

legislation

or through
to

action

by federal

administrative
it

agencies business

Reorganized of health
care

Comm
reform

make

significant

ch4nges in the way
reductions
in

conducts and

Certain

such as proposed

Medicare

Medicaid

payments
if

and

changes in methods developed business adopted

for calculating

the average could

wholesale prices have
material

of the drugs upon

succesfiilly

and

implemented

effect

Reorganized

Corarns

Other Risk Factors

Confirmation income
tax

and

implementation of

of the Plan

may

will

have

material

Federal to

consequences

to

holders

New

Corani

Stock and Tax

New

Secured Notes and of the Plan for

Reorganized
discussion

Coram
of such
tax

See Certain Federal Income consequences

Consequences

The Debtors
developed
limited for

projections

are

based upon

among

other

things

the business the

plan

Reorganized
history

Cram

in

its

present

configuration for
is

under

which

Debtors have

operating

See section XVII Projections

discussion
to

of the projections

The
and

success

of the Reorganized

Companys

business
that

plan

subject

number

of uncertainties
there
is

contingencies
that

Although the Debtors
will

believe

their

projections

are achievable

no

assurance

such projections

be achieved

XIV

CERTAIN
The

DERAL

INCOME TAX CONSEQUENCES
summarizes and
tax

OF TIlE PLAN
tax

following

discussion
to

certain

federal

income

consequences
following

of

the

implementation

of the Plan

the Debtors

certain

holders
to

of Claims
holders unimpaired

The

summary does not address
entitled to reinstatement or

the federal

income
in
full

consequences

whoe

Claims are

payment

in

cash

or are otherwise

under the Plan

55

A61

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 12 of 30

e.g

holders

of Administrative

Claims

Priority

Tax

Claims

Priority or

Non-Tax Claims certain

Secured

Claims and Allowed

Coram General Unsecured
without

Claims
in

iiholders whose
therefor

Equity of

Interests are or

may be

extinguished

distribution

exchange

e.g

holders

CHC

Equity Interests

The

following

summary

is

based on the Tax and published

Code

Treasury Regulations
rules

promulgated thereunder judicial decisions pronouncements Changes
in

administrative as in
effect

and hereof and
could

of the Internal Revenue

Service

IRS

on the date
effect

such rules or new interpretations
affect

thereof

may have

retroactive

significantly

the federal

income

tax

consequences

described

below

The
significant counsel

federal

income

tax

consequences

of the Plan are complex

and

are subject

to

uncertainties

The Debtors have

not requested

ruling from the IRS

or

an opinion
as

of
to

with respect to any of the tax aspects
that

of the Plan
this

Thus no

assurance

can be given

the interpretation
state

the

IRS

will

adopt

In addition
it

summary does
to

not address the federal

foreign

or local tax

consequences
-to

of the Plan nor does
classes

purport

address

income
broker-

tax

consequences
dealers

of the Plan

special

of taxpayers

such

as foreign

taxpayers
small

banks mutual funds

insurance

companies

financial institutions

business

investment companies
in pass-through entities

regulated

investment

companies

tax-exempt organizations

and

investors

ACCORDNGLY
CONSEQUENCES
SUBSTITUTE

THE FOLLOWING
IS

SUMMARY

FOR

INFORMATIONAL

OF CERTAIN FEDERAL INCOME TAX PURPOSES ONLY AND IS NOT

FOR

CAREFUL

TAX PLANNING

AN

ADVICE

BASED UPON THE

INDIVIDUAL CIRCUMSTANCES PERTAINING TO HOLDER OF CLAIM ALL HOLDERS OF CLAIMS OR EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR TIlE FEDERAL STATE LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN

Consequences

to

the

Debtors

According
subsidiaries can-yforwards subject

to

the audited

financial

statements

of

CHC

the

Debtors and

their

consolidated loss

the
for

CHC Group had
federal

approximately $214.7 purposes
as of

million

of net operating
portion

NOL
is

income

tax

December 31 1999
note 10 to the

of which

to existing

limitations for the
in

on use
fiscal

see
year

exhibit

Debtors Consolidated

Annual
to

Reports on Form 10-K
incur additional asset losses

ended

December before

31 1999
taking
into

The Debtors
account

expect

the current In

taxable

year the

any gains from and other

significant losses

dispositions
to

addition

amount

of such

NOL

carryforwards

remains subject and upon

adjustment other tax

by the IRS
attributes

As
be

discussed

below any remaining
or subject
to

NOL
in

carryforwards future years

certain the

may

reduced

severe

limitations

implementation of the Plan

56

A6 12

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Document 125-3

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Page 13 of 30

Cancellation

of

Debt

In
certain

general the Tax Code provides
attributes

that

debtor

in

bankruptcy case
year

must reduce

of

its

tax

such as

NOL

carrylorwards of

and current
debt

tax basis

in assets

by the amount
discharged

of any cancellation exceeds any

COD
given for in

NOLs tax credits and COD is the amount by
therefor

which
extent
is

the indebtedness the

consideration available the

exchange
the

To

the

amount

of

COD

exceeds the tax

attributes

reduction
that

remaining
in

COD
tax debtor

simply forgiven
generally

Based
should federal

on existing authorities
occur

Debtors believe

any reduction
the respective

attributes files in

on
tax

separate

company basis even though

consolidated

income

return however the Debtors are aware that the IRS Accordingly
basis there
is

has

certain

cases would

asserted occur

the contrary separate

position

no assurance

that

such

reduction

on

company

As
Allowed
extent

result

of the discharge

of Allowed

CHC
will

General Unsecured

Claims and

Coram Note

Claims pursuant and resulting tax of the

to the
attribute

Plan the Debtors will suffer significant
reduction

COD
Secured

The of

of such
the
fair

COD

depend

in

part

on the amount

cash Notes

market value Based

New Coram

Stock

and the issue price
value

of the

New

distributed

on the estimated

reorganization anticipated
in that

of Reorganized

Coram see

Section

XVII Projections
$58
million

below
of on

it

is

Reorganized

Comm

will incur

approximately carryforwards

COD

resulting

reduction basis to as

of the consolidated Reorganized

NOL
reducing year

attributable

separate
in its

company

Coram and

Reorganized
following

Corams

tax bases year
in

assets

effective

of the beginning of the taxable

the taxable

which

the Effective

Date

occurs

Limitations

on

NOL

Carryforwards

And

Other

Tax

Attributes

Following
carryforwards the Effective

the

implementation ofthe Plan any consolidated
tax attributes

NOLs and
to

thereof and certain other Date will be subject
to

of the Debtors allocable imposed by
Section

periods

prior

to

the limitations

382

of the Tax

Code

Under
corporation

Section

382
for

if

corporation out

undergoes
the special

an ownership

change

and

the

does not qualify amount of
to
its

or

elects

of

bankruptcy exception
to offset

discussed

below
in

the

pre-change annual

losses that

maybe

utilized

future
to

taxable

income

is

general subject which

an

limitation

Such

limitation also accrued

may

apply

certain
as

losses or

deductions the

are

builtin i.e economically
that

but unrecognized
issuance of the

of the date of
Stock

ownership change
to the

are subsequently of

recognized

The

New Coram
an

pursuant

Plan to holders

Allowed

Coram Note

Claims will constitute

ownership

change

of the Debtors and the other members of the CIIC

Group
which
the

In consolidated stock

general

the

amount

of the annual
is

limitation to

corporation
fair

or
of the

group would

be subject
the case

equal

to

the product

ofi

market value

of the corporation
before the

or in

of

consolidated

group

the

common parent
multiplied

immediately

ownership change

with

certain

adjustments

by ii the long-

57

A613

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 14 of 30

term tax-exempt rate ownership changes presumably
that

in

effect

for the
in

month

in

which For

the

ownership change
in

occurs

5.70%

for

occurring

August of the

2000

corporation the

bankruptcy
is

and
and
is

where
the

as in the case

CHC

Group
to

common

parent

in

bankruptcy

undergoes

ownership change
after

pursuant than

confinned plan the stpck
the

value generally
certain

determined immediately
that ordinarily

rather not

before

ownership change an

adjustments

would apply do

apply

Any unused
limitation
in

limitation taxable historic the

may be

carried

forward
if

thereby

increasing

the

annual

the

subsequent
its after

year

However
or

the corporation significant

or

the consolidated
its

group does not continue
business for

business

use

portion

of

assets in

new

two

years
is

ownership change

the annual

limitation resulting

from the

ownrship change

zero

As
subsequent

indicated

above

Section

382

can operate
if

to limit built-in losses

recognized

to the date

of the ownership change
at

loss corporation

or

consolidated

group has
most
assets

net unrealized

built-in loss

the

time of an

ownership change
then

taking

into

account

and

items

of built-in
five years losses

income
to the

and deductions amount

any built-in losses recognized during the
will

following pre-change
corporation

up

of the original built-in loss generally
to

be treated
if

as

and similarly will be subject

the annual

limitation
at

Conversely
the
to

the loss

or

consolidated

group has

net unrealized the following

built-in gain five years

time of an ownership
the

change any
original

built-in gains recognized

during

up

amount

of the

net built-in

gain

generally

will increase

the annual

limitation in the year

recognized
its

such

that

the loss corporation

or

consolidated
in

group would
to its

be permitted
annual gain

to

use

pre-change
In

losses loss

against

such built-in gain income

addition

regular
built-in

allowance
or loss will

general
to

corporations
it

or
is

consolidated than

groups

net unrealized

be deemed

be zero unless
its

greater

the lesser before

ofi
the

$10

million or

ii 15%

of the

fair

market value
that

of

assets

with
be

certain

adjustments

ownership change

The Debtors Date

believe

they

likely will

in

net unrealized

built-in

loss position

on the Effective

An
generally
least

exception

to

the foregoing so-called

annual

limitation

and

built-in

gain

and loss rules
receive
at

applies

where

qualified value

old and cold

creditors debtor

of the debtor
pursuant
to

50%
11

of the vote plan

and

of the stock
elects

of the reorganized Under
this

confirmed pre-change
deductions during the

chapter losses

unless

the deblor annual

otherwise

exception

debtors
interest

are not limited

on an

basis but are

reduced

by the amount

of any

claimed during the three years preceding
part into

the elThctive

date

of the reorganization
in

and

of the taxable
stock
in

year prior

to

and including

the reorganization
if this

respect

of the debt

converted

the reorganization within

Moreover
two-year

exception

applies the

any further ownership
utilization taxable

change change

of the debtor
losses
at

period

will preclude

debtors

of any pre

the

time of the subsequent

ownership change

against

future

income

The Debtor
Allowed
statute

anticipates
in

that

the receipt for

of

New Coram

Stock by the holders
for
this

of

Coram Note

Claims

exchange
this

such Claims would can be applied on

qualify

exception
basis

The

does not address

whether

exception
it

consolidated

oronly on
attributable

separate

company basis Accordingly

is

possible

that

only any pre-change

losses

58

A6 14

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 15 of 30

to

Reorganized from

Coram

itself

rather

than

to

the other

members of

the
to

CHC
the

Group

may be
Coram

able to
itself
it

benefit appears subject

this

exception pre-change

If the exception

were applicable
to

only

Reorganized

that the to the

losses attributable

the other

members of

CHC

Group would
Corarn had

be

annual limitation rules described
for
this

above

determined as if Reorganized

not qualified

exception

Even
desires elect not to

if

Reorganized
the exception

Coram

otherwise

qualifies

for

this

exception

it

may
in

if

it

so

have

apply

and

instead

remain subject would
year in

to the annual
to

limitation

and built-in gain and loss rules described Reorganized occurs Coranfs
federal

above
return

Such

election

have which

be made

income

tax

for the taxable

the reorganization

Alternative

Minimum Tax
minimum

in alternative

general

an

alternative

tax

AMT

is

imposed

on

corporations

minimum
regular

taxable federal

income income

at

20%

rate to the extent

that

such tax exceeds the
taxable

corporations purposes
particular
for

tax

For purposes

of computing
are
to

income
or

for

AMT
In

certain

tax deductions

and other beneficial
otherwise

allowances

modijied
all

eliminated

even
tax

though purposes

corporation

might be able

offset

of

its

taxable

income
taxable for

regular for

by available

NOL

carryfoiwards only

90%

of

corporations

income

AMT

purposes

may be

offset

by available

NOL

carryforwards

as computed

AMT

purposes

1n

addition

if

corporation

or
and

consolidated
is in

group undergoes

an

ownership on the

change
date

within

the

meaning

of section

382

net unrealized aggregate

built-in loss position tax basis
in
its

of the ownership change be reduced date
for certain

the corporations

or groups
to reflect to

assets
as

would
the

AMT
of

purposes
this

the

fair

market value

of such
is

assets

of

change

The

application

provision

Reorganized

Coram

unaffected
to

by
the

whether
annual

Reorganized
limitation
that

Coram
built-in

otherwise gain pays and

qualifies for the special

bankruptcy exception

and

loss rules of section
will

382
nonrefundable
the corporation
credit is

Any

AMT
to

corporation

generally
in

be allowed as
years

against

its

regular subject

federal the

income

tax

liability

future

taxable

when

no longer

AMT
Continuing

Tax

Status

of

CHC
CHCs

Group

Pursuant

to

the

Plan

all

of

equity

interests all

in

Coram

International assets the will

Holdings
transferred
to

Limited and
to

Corain representing

substantially will

of

CHCs

existing

be

Reorganized
that

Coram

and

CHC
with

be dissolved
Regulations

Accordingly governing

Debtors intend
groups

take

the position
that

in accordance

Treasury

affiliated

of

corporations
to

file

consolidated
for

federal

income
tax

tax returns

the

CHC

Group
that

will

be considered
itself is

remain
lii

in

existence

federal

income
to

purposes

notwithstanding

CHC
is

no
that

longer the

existence

However

due

the

complex

nature

of the Plan

there

no assurance

IRS

would

not take

contrary

position

59

A6 15

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 16 of 30

Consequences

to

Holders

of

Certain Claims

Pursuant to the Plan holders Class
their

of the Allowed one
or

CHC
cash

General Unsecured payments

Claims of
will

CHC

Claims
In

will

be entitled to receive of Allowed Stock and

more

in satisfaction

Claims

addition

holders

Coram Note

Claims Class Notes

Coram

Claims
of Allowed

be entitled to receive

New Coram

New

Secured

and

as holders

CHC Notes
Claims

Claims Class

CUC

Claims

potentially

may

receive

cash in satisfaction of their

Allowed

CHC

General Unsecured

Claims

In recognize received interest unpaid section

general each

holder

of an Allowed
to

CHC

General Unsecured between any Claim
the

Claims will of cash
but

gain or loss in

an amount

equal

the difference

amount

by
and

the holder

in

satisfaction adjusted

of itsClaim other than
tax basis
in its

for accrued

unpaid
but

ii the

holders

Claim other than

any Claim

for accrued interest see

interest For
Distributions

discussion in

of the tax consequences Interest

of Claims for accrued

Discharge of Accrued

below

See also Treatment

of the

Unsecured

Claims Reserve

below

Where
long-term or short-term factors

gain

or loss

is

recognized by

holder

the character

of such gain or loss as be determined by
capital
at

capital

gain or loss or as ordinary the tax status and

income whether

or loss will the

number of
asset

including

of the holder
it

Claim constitutes
the

in the

hands

of the holder and whether which

how
to

long

has been

held whether

Claim was acquired claimed bad
debt

market discount deduction
subject
to

and

what
its

extent

the holder

had previously
at

holder the

purchased
rules the

Claim from

prior holder those rules

market discount
that

may be
has

market discount
to

of the Code

Under
into

assuming
current

the holder

made no

election

amortize

market discount

income

on

basis

with respect to
to

any market discount
de minirnis

instrument any gain recognized on the exchange would
as

of such Claim subject
to

rule generally on such

be characterized of the date

as ordinary

income

the extent

of the accrued

market discount

Claim

of the exchange

Allowed

Coram Note

Claims

and CIIC Note

Claims

The
Note
in

federal

inLome

tax

consequences

of the Plan
the

to

holders

of Allowed

Coram
depend
for

Claims

and Allowed

CHC

Notes

Claims collectively
the

Allowed Note
Notes
in

Claims
in

part on

whether
tax

such Claims purposes The

and possibly

New
is

Secured
defined

constitute or

securities
the

federal

income

term security

not

he Code

Treasury

Regulations issued thereunder
determination evaluation

and has not been
particular debt

clearly defined

by judicial decisions depends
factors

The

of whether

constitutes the

security
significant original issuance

on an

overall in

of the nature

of the debt
particular debt

One of
is

most

considered In

determining whether
obligations issued with

security maturity

is its

term

general debt
less

weighted

average

at

of five years or

e.g

trade

60

A6 16

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 17 of 30

debt

and revolving
average

credit obligations maturity
that

do not constitute

securities

whereas

debt

obligations

with

weighted
discussion for federal

atissuance Series

often years or more constitute Notes
are

securities

The

following

assumes income

the

not whereas
discussion

the Series further

Notes

are securities

tax

purposes

The

following for federal

assumes that the Each
holder

New
of

Secured Note
the

Notes Claim

will not constitute
is

securities
its

income

tax

purposes of
its

urged

to

consult

tax

advisor

regarding

the status

Claim

and

as applicable

New

Secured

Notes

Note Claims That Do Not

Constitute

Securities

In not constitute respect

general each holder
for federal

of an Aflowed income
tax

Note

Claim

to the extent the extent equal

such

Claim does
is in

security

purposes
or loss

i.e
in

to

such Claim

of the Series
the

Notes
and

will recognize
in

gain

an amount

to the difference

between

amount

realized

satisfaction adjusted

of such Claim other than
tax basis
in its

any Claim for accrued any Claim for

but unpaid interest
accrued

ii the

holders

Claim

other than

but unpaid interest
the

Theaniount realized by
of any cash
the
fair

holder in satisfaction of such Claim of any

will equal

sum of

the

amount

market value
therefor

New Coram

Stock

and

the issue price

of any

New

Secured Notes received Notes

see

lnieSrest

and Original Issue of any

Discount on the

New

Secured

below

For

discussion
in

of the tax consequences Interest

Claims for accrued

interest
is

see section

Distributions

Discharge of Accrued

below
or

Where

gain

or loss
capital

recognized

by

holder the character income whether held

of such gain or loss as long-term be detemiined by
capital at

short-term factors

gain or loss or.as ordinary the tax status

or loss will the

number of
asset in the

including

of the holder
it

Claim constitutes
the

hands

of the holder

and how and
to

long

has

been

whether

Claim was acquired claimed

market deduction
subject to

discount holder the

and whether which

what

extent

the holder

had previously
at

bad debt

purchased
rules the

its

Claim from

prior holder those

market discount assuming
current
that

may be

market discount
to amortize

of the Code

Under
into

rules

the holder with respect

has
to

made no
any
to

election

market discount

income

on

basis

market discount

instrument any gain recognized would be characterized
as
in that

on the exchange
as ordinary

of such
to

claim subject

de

minimis rule generally market discount holders
in respect

income

the extent

of the accrued

on

such Claim
tax basis

of the date

of the exchange Stock and
in

aggregate

any

New Coram

any

New

Secured Notes
the
fair

received

of any Note
and the

Claim

does not constitute

security

will equal period for

market value and notes

of

such stock
generally

issue price of such notes and the holding
the

such stock

will begin

day following

the issuance

of such stock

and notes

Note

Claims That Constitute

Securities

To
for federal the receipt

the extent

that

an

Allowed

Coram Note

Claim constitutes
respect

security

income
of

lax

purposes
Stock

i.e

to

the extent

such Claim

is in

of the Series

Notes
of such

New Coram
for

in partial

satisfaction

of such Claim will constitute
in

recapitalization

federal loss
in

income upon
the

tax

purposes

Accordingly

general the holder
gain

Claim will not recognize same manner
as

such exchange section

but will recognize
if

computed

in the

described

preceding

any

to

the extent

of any non-stock

61

A6 17

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 18 of 30

consideration

received
in

by such holder

The

character

and
in

timing the

of any recognized gain will be For
discussion

determined

accordance

with the principles discussed of any Claim for accrued

preceding section
in

of the tax consequences Interest holders
constitutes

see Distributions

Discharge of Accrued

below
aggregate tax basis
in

the

New Coram
holders

Stock

received adjusted

in

respect basis

of any Claim
in

that

security any Claim
in

will equal for accrued

the but

aggregate

tax

such Claim

including
recognized received issue

unpaid interest increased

by any gain or interest income and
other

respect

of such Claim and decreased claimed in respect
the holders period for

by any

cash

non-stock consideration
interest or original will

and

any deductions
In

of any previously
for the

accrued

discount
the

general

holding period
its

New

Corain Stock received
that

include

holders
in

holdin
of

Claim
but

except

to the extent

the

New

Coram Stock

was

issued

respect

Claim for accrued

unpaid interest

Interest

And

Original

IssUe

Discount

OilOn The
New
Secured on the

New

Secured

Notes

Pursuant

to

the

Plan interest on the
Stated
interest

Notes

generally

will

be

payable quarterly
includable In
in

at

rate

of

9%

per
in

annum

New

Secured

Notes

should be

income

by

holder

accordance
holders

with such holders method of

of accounting
required to

addition under imputed
debt

certain
interest

circumstances
to

New

Secured Notes

Notes

may be

recognize in

the extent
is

such
as

New

Secured
to

are treated
its

as issued

with

OlD
at

general

instrument

treated

having

om
of

the extent

stated

redemption price
its

maturity

in

this

case

the stated principle the

amount

the

New
depend

Secured upon

Notes exceeds
whether
they are

issue

price The issue price of
considered traded

New

Secured Notes
securities

will

on an established

market during

the sixty

day period

ending on an

thirty

days

after

the Effective securities

Date
market

If as the

is

likely

the

New
of

Secured

Notes

are not traded will

established principal rate
for

issue price
interest

of the
rate

amount assuming
obligations
If

the stated
in effect

New Secured 9% is greater
Date

Notes
than

be

their

stated federal

the applicable

for four-year

on Ihe Confirmation Notes
are traded

6.33% compounded
Securities

annually
the

August

2000
will

the
their

New
fair

Secured

on an established

market

issue price

be

market value

Pursuant system of general
dealers

to

Treasury

Regulations

an established
listing to

securities
to

market

includes

circulation
that

including

computer
basis

disseminated
fair

subscribing

brokers

or traders

provides

reasonable quotations

determine
prices

market value

by

disseminating

either recent price

or actual

of recent sales transactions

In

general of

if

the

New

Secured would

Notes

are treated
to

as issued with the

more than
respect of
its

de

minimis amount Secured based on
include holders
in

OlD

each

holder

be required income

accrue

OlD

in

New

Notes and
the constant
in in

include
interest

such

amount

in gross

as interest holder

over the term of such notes would be required
to

method
in

Accordingly

each

generally
in

amounts
tax basis

gross income

advance

of the payment be increased

of cash

respect

of such income

New

Secured Note would payments

by the amount

of any OlD included

income
to

and reduced such

by any cash

other than

payment

of stated interest

made

with

respect

New

Secured Note

62

A6 18

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 19 of 30

Subsequent

Sale

of

New Comm
holder

Stock

Any New Coram
tax-free

gain recognized pursuant

by

upon
stock

subsequent
or property

taxable received

disposition for debt
it

of
later

Stock received
will

to the Plan

or any
to

in

exchange
to

be treated

as ordinary

income

the extent
its

ofi

any bad

deductions loss

or

additions

bad

debt

reserve claimed with respect to
satisfaction

Claim and

any ordinary
interest

deductions recognized

incurred

upon

of

its

Claim less any income
of
its

other than
respect to

income

by

the holder

upon
which
full

satisfaction

Claim and ii with
included in
its

cash-basis
if

holder

also

any amounts

would

have

been

gross

income

the

holders of

Claim had been accounting

satisfied in

but which

was

not included

by reason

of the cash

method

In
that

addition

the

Treasury Department

is

expected

to

promulgate regulations income upon
taxreceived

will provide

that any accrued

market discount
bonds
are

not treated

as ordinary

free

exchange exchange

of market discount
if

would

carry

over

to

the nonrecognition to the

property

in the

such regulations Claim
that

promulgated and security
carry over
that

applicable for federal

Plan any holder
tax

of an

Allowed which

Corarn Note

constitutes

income

purposes
to

and

has accrued

market discount
pursuant

would

such accrued

market discount

the

New

Corani Stock received subsequent
the extent will disposition

to the

Plan such
Stock

any gain recognized by the holder would be treated
in
after

upon
to claim
at

of such

New Coram

also

as ordinary
In

income

of any accrued accrued
to
its

market discount
if

not previously

included

income
its

general
issuance

have

market discount
issue

such claim was acquired

original

discount

adjusted

price

Distributions

in

Discharge

of

Accrued

Interest

Pursuant allocated accrued
first to

to

the

Plan

all

distributions

in

respect with

of Allowed

Claims will be
to

the principal

amount
is

of such

Claims
that to

any excess

allocated

unpaid by the whether
interest

interest

However
income
tax

there

no

assurance in general

such allocation
that

would

be respected
received

IRS

for federal

purposes

the extent
is

any amount

stock
during

cash or other property by
its

holder

of

debt

received to

in satisfaction as
interest

of accrued income

holding included
loss is to

period
in

suck amount holders

will

be taxable

the holder

if not

previously deductible

the

gross

income
interest

Conversely

holder

generally included

recognizes
in
its

the extent

any accrued Each

claimed was previously

gross

income
is

and
to

not paid in full
its for

holder

of

CHC

General

Unsecured

Claim or

Note

Claim

urged

consult
interest

tax advisor tax

regarding

the allocation

of consideration

and the deductibility

of unpaid

purposes

Treatment

of the

Unsecured

Claims Reserve

Pursuant

to

the

Plan any amounts not distributable
are

pending
aside
in

resolution an

of CIIC Claims

General Unsecured Reserve
in

Claims which
the

Disputed Claims will be have no interest

set

Unsecured

which

Debtors would

63

A6 19

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 20 of 30

Under
settlement Regulations

Section

468Bg
under

of the Tax Code
to

amounts tax

earned Although

by an escrow
certain

account

fund
have

or similar

fund must be subject
this

current

Treasury
as yet

been

issued

section

no Treasury Regulations have
in as

been

promulgated on
the facts treated

to address

the tax treatment possibly could

of accounts be treated

bankruptcy setting
separately taxable or

Thus depending
as grantor

such
as

accounts

trust

trust

owned

by the holders

of Claims or by the Debtors

otherwise

On
establish here
if

February
in its

1999

the

IRS

issued

proposed

Treasury Regulation of

that

would

finalized
that

current

form
after

the tax treatment such

of reserves

type similar to that In

involved

are established

the date tax

Treasury Regulation becomes final
reserve
et

general such Treasury Regulation governed
to

would
Section
to

such

as

qualified settlement
settlement or

fund

by Treasury Regulation
entity level

.468B-l

seq

Qualified accounts

funds are subject

separate

tax

As
that

previously the

established

reserves the proposed
consistently consistently

Treasury Regulation provides
applied applied

IRS

would

not challenge

any reasonable and

method method

of taxation
forreporting

for

income

earned

by the escrow

any reasonable

such

income

Pursuant competent
the receipt requests the jurisdiction

to

the

Plan and subject including of
private

to

definitive

guidance

from the IRS or

court

of

to

the contrary

the issuance
letter

of applicable
if

Treasury Regulations
so

by the Plan Administrator
or the receipt

ruling

the

Plan Administrator upon
audit
if

one

of an adverse

determination
shall

by the IRS
treat

not contested

by

Plan Administrator
trust in

Reorganized income
tax

Coram

the

Unsecured and
is et

Claims Reserve.as independent
shares to

discrete

for federal respect the

purposes
General

consisting

of separate Claim
that

be

established

of each
trust

CHC
report
all

Unsecured Code
for

Disputed Claim in

accordance
permitted addition

with

provisions

of the Tax
consistently

Sections
state

641

seq

and
tax

ii to

the extent In

by applicable
pursuant
to

law

and local income of

purposes

the

Plan

parties

including holders
to

CRC
with

General Unsecured such treatment
will report
to

Claims

which
subject

are
to

Disputed Claims are required
issuance earned year

report the

consistently

Accordingly
that

of definitive

guidance

Administrator and
gross

on the basis
during
is

any amounts

by the Unsecured
will

Claims Reserve
in

distributed

holder holder

the to

same

taxable
its tax

be includable
regarding

such holders

income

Each

urged

consult

advisor

he

potential tax

treatment

of the Unsecured

Claims Reserve

and

the resulting

consequences

tosuch holder

Information

Reporting

and

Withholding

All distributions applicable interest
to

to

holders

of Allowed
tax

Claims under the Plan

are subject

to

any

withholding dividends

including employment

withholding

Under
certain

federal

income

tax

law

and other reportable
at rate

payments Backup
or other
to

may

under

circumstances
applies
if

be subject
the holder

backup
to

withholding
its

of3l%
number

withholding
taxpayer

generally

fails

furnish an

social

security

identification or

number
or

TIN
undercertain
that

furnishes

incorrect
fails to

TIN
provide

fails

properly

report

interest

dividends

ci

circumstances

certified

statement signed

under penalty

of perjury

the

TN

64

A620

Case 1:04-cv-01565-SLR

Document 125-3

Filed 04/17/2007

Page 21 of 30

provided

is

its

correct not an
in

number and
additional an

that

it

is

not subject

to

backup

withholding which exempt

Backup
refunded
to

withholding the extent
it

is

tax but

merely an

advancepayment
persons are

may be

results

overpayment
in

of tax

Certain

from backup
institutions

withholding

including

certain

circumstances corporations

and financial

THE

PROVIDED FOR INFORMATIONAL OF CLAIMS AN EOUITY INTERESTS ARE uRGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL STATE LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER TIlE PLANS
PURPOSES

FOREGOING

SUMMARY HAS BEEN

ONLY ALL HOLDERS

XV

APPLICABILITY

OF FEDERAL
of Allowed Claims

AN
will

OTHER SECURITIES LAWS
securities

Certain

holders

receive

under

the

Plan

Section

1145

of the Bankruptcy of Federal
plan

Code
and

creates certain
securities

exemptions from the registration
laws with respect
to

and

licensing

requirements pursuant to

State

the distribution

of securities

of reorganization

Issuance

of Securities

Under

the

Plan

Section plan

1145

of the Bankruptcy

Code exempts

the issuance

of

securities

under the

of reorganization

from registration under the Securities
securities

Act of 1933 as amended
requirements or
its